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Financial Highlights


FY 2004 Performance and Accountability Highlights
Bureau of Resource Management
November 2004
Report
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The Department's financial statements, which appear in the Financial Section of this Report, received for the eighth straight year an unqualified 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).

 

FINANCIAL AND PERSONNEL HIGHLIGHTS
(Dollars in Thousands)

  % Change
2004 over 2003
2004 2003 2002

AT END OF YEAR:

Condensed Balance Sheet Data:

Investments, Net

 +4% $ 12,846,060  $ 12,301,173  $ 11,750,737 

Fund Balances With Treasury

+20%   11,926,434     9,953,197     8,937,139 

Property and Equipment, Net

 +6%    6,323,916     5,996,493     5,499,850 

Other

+30%      833,465 
single underline
     643,783 
single underline
     652,431 
single underline

Total Assets

+11% $ 31,929,875 
double underline
$ 28,894,646 
double underline
$ 26,840,157 
double underline

Foreign Service Retirement ActuarialRead Footnote 11

 +2% $ 13,317,900  $ 13,093,800  $ 12,211,800 

Liability to International Organizations

 -2%      897,381       919,428     1,065,172 

Other

+21%    2,142,779 
single underline
   1,767,908 
single underline
   1,547,431 
single underline

Total Liabilities

 +4%   16,358,060 
single underline
  15,781,136 
single underline
  14,824,403 
single underline

Unexpended Appropriations

+22%    9,279,214     7,608,996     7,154,023 

Cumulative Results of Operations

+14%    6,292,601 
single underline
   5,504,514 
single underline
   4,861,731 
single underline

Total Net Position

+19%   15,571,815 
single underline
  13,113,510 
single underline
  12,015,754 
single underline

Total Liabilities and Net Position

+11% $ 31,929,875 
double underline
$ 28,894,646 
double underline
$ 26,840,157 
double underline

Full-time Personnel:

Civil Service

 +1%       7,831        7,731        6,999 

Foreign Service

 +4%      10,988       10,579        9,931 

Foreign Service National

-15%       8,419 
single underline
      9,897 
single underline
      9,526 
single underline

Total Full-time Personnel

 -3%      27,238 
double underline
     28,207 
double underline
     26,456 
double underline

Foreign Service AnnuitantsRead Footnote 22

 +1%      14,668       14,581       14,392 

FOR THE YEAR:

Total Cost

+13% $ 13,761,645  $ 12,222,640  $ 10,837,835 

Total Earned Revenue

 -1%   (3,121,078)
single underline
  (3,163,023)
single underline
  (2,499,096)
single underline

Total Net Cost of Operations

+17% $ 10,640,567 
double underline
$  9,059,617 
double underline
$  8,338,739 
double underline

On-Time Payments (%)

 +2%         94%         92%         96%

Electronic Funds Transfer Payments (%)

 +1%         80%         79%         77%

Notes

  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). (Back to Text)
  2. 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). (Back to Text)


OVERVIEW OF FINANCIAL POSITION

Assets. The Consolidated Balance Sheet shows the Department had total assets of $31.9 billion at the end of 2004. This represents an increase of $3.0 billion (10.4%) over the previous year's total assets of $28.9 billion. The increase is primarily the result of increases of $2.0 billion in Fund Balances with Treasury, $327.4 million in property and equipment, and $544.9 million in investments in the Foreign Service Retirement and Disability Fund (FSRDF). The increase in Fund Balances with Treasury primarily resulted from a $1.7 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 2004
(Dollars in Thousands)

  2004 2003 2002
Investment, Net $12,846,060 $12,301,173 $11,750,737
Fund Balances with Treasury  11,926,434   9,953,197   8,937,139
Property and Equipment, Net   6,323,916   5,996,493   5,499,850
Accounts, Loans & Interest Receivable, Net     711,414     584,230     552,508
Other Assets
single underline
    122,051
single underline
     59,553
single underline
     99,923
single underline
Total Assets
double underline
$31,929,875
double underline
$28,894,646
double underline
$26,840,157
double underline

 

Investments, Fund Balances with Treasury and Property and Equipment comprise approximately 97% of total assets for 2004, 2003, and 2002. Investments consist almost entirely of U.S. Government Securities held in the FSRDF.

Assets by Type

Type of Asset Percentage
Investments 40.2%
Fund Balances with Treasury 37.4%
Property and Equipment 19.8%
Receivables  2.2%
Other Assets  0.4%

 

Liabilities. The Department had total liabilities of $16.4 billion at the end of 2004, which is reported on the Consolidated Balance Sheet and summarized in the following table (dollars in thousands):

 

Liabilities at the End of FY 2004
(Dollars in Thousands)

  2004 2003 2002
Foreign Service Retirement Actuarial Liability $13,317,900 $13,093,800 $12,211,800
Liability to International Organizations     897,381     919,428   1,065,172
Accounts Payable   1,276,007   1,058,514     784,799
Other Liabilities
single underline
    866,772
single underline
    709,394
single underline
    762,632
single underline
Total Liabilities
double underline
$16,358,060
double underline
$15,781,136
double underline
$14,824,403
double underline

 

The Foreign Service Retirement Actuarial (FSRA) Liability of $13.3 billion and the Liability to International Organizations of $897.4 million comprise 87% of the Department's total liabilities at the end of 2004.

 

Of the total liabilities, $1.80 billion were unfunded, i.e., budgetary resources were not available to cover these liabilities. The $1.80 billion is primarily comprised of the $897.4 million Liability to International Organizations, and the unfunded portion of the FSRA Liability of $345.8 million, which represents the amount by which the $13.3 billion FSRA Liability exceeds the FSRDF's net assets available to pay the liability. The $345.8 million unfunded portion of the FSRA Liability is $308.0 million less than the $653.8 million unfunded FSRA Liability at the end of 2003.

Liabilities by Type

Type of Liability Percentage
FSRA Liability 81.4%
Liability to International Organizations  5.5%
Accounts Payable  7.8%
Other Liabilities  5.3%

 

The $897.4 million Liability to International Organizations consists of $837.4 million in calendar year 2004 annual assessments, and $60.0 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, 2004, 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.

Ending Net Position. The Department's Net Position at the end of 2004 on the Consolidated Balance Sheet and the Consolidated Statement of Changes in Net Position is $15.6 billion, a $2.5 billion (18.7%) 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 is due principally to the continued increase in budget authority received to provide funding for Iraq and the Global HIV/AIDS initiative. The increase in Cumulative Results of Operations resulted mainly from the $327 million increase in property and equipment. The Cumulative Results of Operations also increased as a result of the reduction in the FSRDF unfunded pension liability of $308 million.

 

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.

 

The Department's total net cost of operations for 2004, after intra-departmental eliminations, was $10.6 billion. The strategic objective to "Achieve Peace and Security" represents the largest investment for the Department at 46.5% of the Department's net cost of operations. The net cost of operations for the remaining strategic objectives varies from 13.2% to 23.3%.

Where Funds Go - Net Program Costs
(Dollars in Thousands)

Strategic Objective Cost
Achieve Peace and Security $ 4,946,016
Advance Sustainable Development and Global Interests $ 2,510,429
Promote International Understanding $ 1,421,063
Executive Direction and other Costs not Assigned $ 1,763,059
Total Net Cost $10,640,567

 

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 $11.9 billion, comprising 90.2% of the Department's total revenues and financing sources after considering intra-departmental eliminations of $1.9 billion. The charts on this page reflect the funds that the Department received during 2004 and how these funds were used.

 

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 $21.3 billion, an increase of 21% from 2003 levels. Budget Authority of $14.8 billion - which consists of $13.6 billion for appropriations (direct, related, and supplemental) and transfers, and $1.2 billion financed from trust funds - comprise 70% of the total budgetary resources. The Department incurred obligations of $17.9 billion for the year, a 20% increase over the $14.9 billion of obligations incurred during 2003. Outlays reflect the actual cash disbursed against the Department's obligations.

Where Funds Come From
(Dollars in Thousands)

Resource Funding
Appropriations and Transfers $13,569,648
Reimbursements Earned $ 3,462,993
Trust Funds $ 1,187,038
Other $ 3,112,542
Total Budget Resoures
$21,332,221

 

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 POSITION

 

The FY 2004 budget for the Department of State totaled $9.164 billion, including appropriations for the administration of foreign affairs ($7.334 billion), contributions to international organizations and peacekeeping activities ($1.695 billion), international commissions ($57 million), and related programs ($78 million). Appropriations for the administration of foreign affairs support the people and programs required to conduct American diplomacy at more than 260 posts worldwide. They also build, maintain, and secure the infrastructure of the diplomatic platform from which most U.S. Government agencies overseas operate.

In addition to regular funding from the Consolidated Appropriations Act, 2004, the Department's budget included supplemental funding received through the Emergency Supplemental Appropriations Act for Defense and for the Reconstruction of Iraq and Afghanistan, 2004, and the Department of Defense Appropriations Act, 2005. The Department also 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, as well as to invest in modern information technology systems. All of these resources are essential to accomplish two overriding objectives of the President's foreign policy: winning the war on terrorism and protecting Americans at home and abroad.

For FY 2004, the Department's principal operating appropriation - Diplomatic and Consular Programs (D&CP) - was funded at $5.197 billion. This funding met new requirements for missions in Afghanistan and Iraq. It also supported the third year of the Diplomatic Readiness Initiative (DRI) to recruit, hire, train, and deploy additional professionals around the world. The appropriation and transfers, along with MRV fees, made it possible to hire a total of 556 new employees (above anticipated attrition), including 310 for DRI positions, 68 Foreign Service officers to enhance the security of U.S. borders through visa adjudication at posts overseas, 93 consular hires to address workload increases in the Border Security Program, and
85 security professionals.

Within the D&CP appropriation, the Department received $640 million for the Worldwide Security Upgrades program. This funding continued security enhancements begun with the FY 1999 Emergency Supplemental, including guard protection, physical security equipment and technical support, information and systems security, and personnel and training.

The Federal Government Dollar

Program Type Percentage
Medicaid, Medicare, Other Entitlements & Mandatory Programs 38%
International Affairs  1%
Social Security 21%
Non-Defense Discretionary 14%
National Defense 19%
Net Interest  7%

Source: Mid-Session Review, Budget of the United States Government, Fiscal Year 2005.

 

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 Embassy Security, Construction, and Maintenance appropriation was funded at $1.441 billion to manage the Department's real estate portfolio, which exceeds $12 billion and includes over 15,000 properties, and to provide U.S. diplomatic and consular missions with secure, safe, and functional facilities. This funding included $852 million for capital security construction and compound security projects, $64 million for other high-priority construction projects, and $524 million for ongoing operations.

The Department's funding for information technology ($79 million in the Capital Investment Fund and $40 million in D&CP for Worldwide IT Infrastructure) helped provide modern information technology to every Department employee. This funding supported completion of OpenNet Plus, a modernized unclassified system with Internet access to over 43,000 desktops, and the deployment of a modernized classified computing capability at more than 220 eligible posts worldwide.

For FY 2005, the Department's budget request (at this date still pending before Congress) includes resources to continue to meet the priorities of supporting the war on terrorism and sustaining diplomatic readiness. The request includes $1.571 billion for enhanced security and the war on terrorism, including $912 million for design and/or construction of secure facilities, additional site acquisitions, and compound security projects; and $659 million to strengthen the security of diplomatic personnel and facilities in the face of terrorism, including upgrades of security equipment and technical support, information and systems security, perimeter security, and security training.

The request also includes funds to hire 377 additional Americans, including 183 staff to answer needs beyond those anticipated by DRI (such as staffing for embassies in Kabul and Baghdad), 71 security professionals, 63 Foreign Service officers to replace consular associates, and 60 consular officers funded by fees. The Department's request of $155 million for the Capital Investment Fund allows for continued investment in state-of-the-art IT systems worldwide, including the State Messaging and Archive Retrieval Toolset (SMART) initiative, which will replace outdated systems for cables and messages with a unified and more secure system to serve inter-agency information needs.

 

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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