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Financial Highlights


FY 2005 Performance and Accountability Report
Bureau of Resource Management
November 2005
Report
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The Department's financial statements, which appear in the Financial Section of this Report, are audited 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).

AUDIT RESULTS

The Department has a proud tradition of unqualified opinions on our annual financial statements from our independent auditors for the better part of the last decade. However, late in FY 2005, the Department became aware of potentially material amounts of Department-owned personal property held by host countries and contractors, including aircraft and spare parts inventories, which had not been reflected in our financial statements. Due to the need for a complete and thorough analysis, the complexity of the matters involved, and the accelerated financial reporting requirements, the Department was unable to satisfy our independent auditors with regard to the presentation of personal property by November 15, 2005.

As a result, and as more fully explained in the Independent Auditor's Report, the independent auditors issued a qualified opinion on our FY 2005 and FY 2004 financial statements released on November 15, 2005. Since then, the independent auditors satisfied themselves about the amounts presented as personal property in the Department's FY 2005 and FY 2004 financial statements, and issued an unqualified opinion thereon, dated December 14, 2005, which has cleared the way for updating this Report.

The Department is committed to resolving these personal property issues as quickly as possible and strengthening our controls in this area. In October 2005, the Department's Management Control Steering Committee (MCSC) - the body charged with overseeing the Department's management control program under the Federal Managers' Financial Integrity Act (FMFIA) -- created a Department-wide subcommittee to address the identified weaknesses in personal property. This subcommittee will report to the MCSC in December 2005 and propose a corrective action plan to resolve these issues.

OVERVIEW OF FINANCIAL POSITION

Assets. The Consolidated Balance Sheet shows the Department had total assets of $35.7 billion at the end of 2005. This represents an increase of $3.8 billion (11.9%) over the previous year's total assets of $31.9 billion. The increase is primarily the result of increases of $2.1 billion in Fund Balances with Treasury, $921 million in property and equipment, and $543 million in investments in the Foreign Service Retirement and Disability Fund (FSRDF). The increase in Fund Balances with Treasury primarily resulted from a $2.2 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 2005
(Dollars in Thousands)
  2005 2004 2003
Investment, Net $13,389,090 $12,846,060 $12,301,173
Fund Balances with Treasury  14,023,542  11,900,569   9,953,197
Property and Equipment, Net   7,244,965   6,323,916   5,996,493
Accounts, Loans & Interest Receivable, Net     854,315     730,951     584,230
Other Assets
single underline
    225,434
single underline
    122,051
single underline
     59,553
single underline
Total Assets
double underline
$35,737,346
double underline
$31,923,547
double underline
$28,894,646
double underline

 

Investments, Fund Balances with Treasury and Property and Equipment comprise approximately 97% of total assets for 2005, 2004, and 2003. Investments consist almost entirely of U.S. Government Securities held in the FSRDF.

Information on Heritage Assets, which consists of art furnishings held for public exhibition, education and official entertainment, is provided in the RSSI section of this report.

Assets by Type
Type of Asset Percentage
Investments 37.5%
Fund Balances with Treasury 39.2%
Property and Equipment 20.3%
Receivables  2.4%
Other Assets  0.6%

 

Liabilities. The Department had total liabilities of $17.1 billion at the end of 2005, which is reported on the Consolidated Balance Sheet and summarized in the following table (dollars in thousands):

Liabilities at the End of FY 2005
(Dollars in Thousands)
  2005 2004 2003
Foreign Service Retirement Actuarial Liability $13,429,300 $13,317,900 $13,093,800
Liability to International Organizations   1,178,130     897,381     919,428
Accounts Payable   1,269,794   1,250,142   1,058,514
Other Liabilities
single underline
  1,202,774
single underline
    866,772
single underline
    709,394
single underline
Total Liabilities
double underline
$17,079,998
double underline
$16,332,195
double underline
$15,781,136
double underline

 

Liabilities by Type
Type of Liability Percentage
FSRA Liability 78.6%
Liability to International Organizations  6.9%
Accounts Payable  7.4%
Other Liabilities  7.1%

The Foreign Service Retirement Actuarial (FSRA) Liability of $13.4 billion and the Liability to International Organizations of $1.2 billion comprise 85% of the Department's total liabilities at the end of 2005.

Of the total liabilities, $1.85 billion were unfunded, i.e., budgetary resources were not available to cover these liabilities. The $1.85 billion is primarily comprised of the $1.2 billion Liability to International Organizations, and the unfunded portion of the Environmental Liabilities of $392.3 million.

The $1.2 billion Liability to International Organizations consists of $1.1 billion in calendar year 2005 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, 2005, 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 2005 on the Consolidated Balance Sheet and the Consolidated Statement of Changes in Net Position is $18.7 billion, a $3.1 billion (20%) 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, embassy security, international narcotics control, and the Global HIV/AIDS initiative. The increase in Cumulative Results of Operations resulted mainly from the $921 million increase in property and equipment.

 

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.

Where Funds Go - Net Program Costs
(Dollars in Thousands)
Strategic Objective Cost
Achieve Peace and Security $ 5,354,671
Advance Sustainable Development and Global Interests $ 2,993,713
Promote International Understanding $ 1,664,412
Executive Direction and other Costs not Assigned $ 1,969,981
Total Net Cost $11,982,777

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 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 2005, after intra-departmental eliminations, was $12 billion. The strategic objective to "Achieve Peace and Security" represents the largest investment for the Department at 44.7% of the Department's net cost of operations. The net cost of operations for the remaining strategic objectives varies from 13.9% to 25%.

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 $13.6 billion, comprising 90.1% of the Department's total revenues and financing sources after considering intra-departmental eliminations of $2.0 billion. The charts on this page reflect the funds that the Department received during 2005 and how these funds were used.

Where Funds Come From
(Dollars in Thousands)
Resource Funding
Appropriations and Transfers $15,533,171
Reimbursements Earned $ 4,340,245
Trust Funds $ 1,220,753
Other $ 3,863,485
Total Budget Resources
$24,957,654

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 $25 billion, an increase of 17% from 2004 levels. Budget Authority of $16.8 billion - which consists of $15.6 billion for appropriations (direct, related, and supplemental) and transfers, and $1.2 billion financed from trust funds - comprise 67% of the total budgetary resources. The Department incurred obligations of $20.7 billion for the year, a 16% increase over the $17.9 billion of obligations incurred during 2004. 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 POSITION

The FY 2005 budget for the Department of State totaled $10.134 billion. It included appropriations for the Administration of Foreign Affairs ($7.691 billion), contributions to international organizations and peacekeeping activities ($2.280 billion), international commissions ($63 million), and related programs ($99 million). It does not include funds for foreign operations.

In addition to regular funding provided by the Consolidated Appropriations Act, 2005, the Department's FY 2005 budget reflected supplemental funding provided through the Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Tsunami Relief Act, 2005. This supplemental funding was required to address the extraordinary security and operating costs of the U.S. Missions in Iraq and Afghanistan, as well as U.S. assessments for international peacekeeping.

The Department continued to rely on Machine Readable Visa (MRV), Expedited Passport, and other user fee collections for the Border Security Program to strengthen protection of America's borders. This revenue helped support increased consular workloads and meet the national security mandate to collect biometric data for U.S. passports and visas.

Appropriations under Administration of Foreign Affairs provide the Department's core funding. They support the people and programs required to carry out U.S. foreign policy and advance American interests 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 operate overseas.

In FY 2005, the Department's principal operating appropriation - Diplomatic and Consular Programs (D&CP) - was funded at $4.906 billion. Together with MRV fees, this funding sustained critical diplomatic and consular operations and enabled the Department to meet new requirements in the post-September 11 environment. The funding included $650 million for Worldwide Security Upgrades to increase security for diplomatic personnel and facilities under threat from terrorism and $316 million for vigorous public diplomacy to inform foreign opinion and gain support for U.S. policies abroad. The funding also included resources to further the government-wide reforms of the President's Management Agenda.

The Federal Government Dollar
Program Type Percentage
Social Security 21.1%
National Defense 19.9%
Medicaid, Health, Other Entitlements 36.4%
Net Interest  7.4%
International Affairs  1.3%
All Other Functions 13.9%

Source: Mid-Session Review, Budget of the United States Government, Fiscal Year 2006.


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 appropriations for information technology initiatives totaled $128 million - $51 million in the Capital Investment Fund (CIF) and $77 million in the Centralized Information Technology Modernization Program. FY 2005 investments helped modernize the Department's global IT infrastructure and provide ready access to foreign affairs applications and information. The Department's infrastructure and mission-oriented application systems supported approximately 50,000 users at over 390 locations worldwide for both classified and unclassified processing.

The Embassy Security, Construction, and Maintenance (ESCM) appropriation was funded at $2.096 billion (regular appropriations plus supplemental funding). This funding helped provide U.S. missions overseas with secure, safe, and functional facilities. The funding also supported management of the Department's real estate portfolio, which exceeds $12 billion and includes over 15,000 properties. From the appropriation total, $900 million supported capital security construction and compound security projects and $592 million was for construction of the new embassy in Iraq. Under the Capital Security Cost Sharing program, all agencies with overseas staff under Chief of Mission authority contributed to the construction costs of new embassy compounds.

The Educational and Cultural Exchange Programs appropriation was funded at $356 million. These strategic activities engaged foreign audiences to develop mutual understanding and build foundations for international cooperation. Aligned with public diplomacy efforts, they reached out to wider and younger audiences, especially in the Muslim world. This funding provided $204 million for academic exchanges with foreign participants and U.S. citizens, notably through the Fulbright program. Funding also provided $121 million for professional and cultural exchanges, including the International Visitor Leadership Program and Citizen Exchanges.

For FY 2006, the Department's budget request (at this date still pending before Congress) totals $9.283 billion. It includes resources to address ongoing foreign policy priorities, particularly to support the global war on terror and maintain the operational readiness of American diplomacy. The request for D&CP is $4.473 billion, including $690 million for upgrades of physical security equipment and technical support, information and systems security, perimeter security, and security training. The request provides $133 million in CIF for information technology investments worldwide. Finally, the request for ESCM totals $1.526 billion, including $910 million for design and/or construction of secure facilities, additional site acquisitions, and compound security projects.

 

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 OMB Circular A-136, Financial Reporting Requirements, 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.

 


 

Financial Performance Metrics

Below is a year-end summary provided to senior managers of the Department's performance relative to the Chief Financial Officers (CFO) Council financial metrics.  Because of the unique aspects of operating in both a domestic and overseas environment, the Department adjusts these metrics were appropriate to reflect a measure for domestic operations and a separate indicator for overseas performance.  A good example of this would be Percent of Vendor Payments Made by EFT where the domestic percentage target would be higher than the overseas target to convey the differences in the overseas banking systems ability to handle EFT transactions.

For FY 2005, the Department's financial metrics improved to green in two categories and slipped to yellow in four categories.

The Department's Financial Metrics
Measure
and Frequency
Why Is It
Important
State
Sept 2004
State
Sept 2005
Governmentwide
Sept 2005
Governmentwide
Performance Standards
Actual Rating Actual Rating Actual Rating Fully Successful
Fully Successful
Minimally Successful
Minimally Successful
Unsuccessful
Unsuccessful
Fund Balance With Treasury - Net Percent Unreconcil-ed [Monthly] Smaller reconciliation differences translate to greater integrity of financial reports and budget results. 0.21% Fully Successful 2.90% Minimally Successful 0.21% Fully Successful < = 2% > 2%
to
< = 10%
> 10%
Percent of Amount in Suspense (Absolute) Greater than 60 Days Old [Quarterly] Timely reconciliation
supports clean audits
and accurate financial information.
No Data Unsuccessful 83.10% Unsuccessful 28.49% Unsuccessful < = 10% > 10%
to
< = 20%
> 20%
Percent of Accounts Receivable from Public Delinquent Over 180 Days [Quarterly] Actively collecting debt improves management accountability and reduces Treasury borrowing. 51.10% Unsuccessful 27.20% Unsuccessful 15.49% Minimally Successful < = 10% > 10%
to
< = 20%
> 20%
Percent of Vendor Payments made Electronically [Monthly] Use of electronic funds transfer saves money, reduces paperwork, and improves cash management. 65.20% Unsuccessful 96.00% Fully Successful 89.76% Unsuccessful > = 96% > = 90%
to
< 96%
< 90%
Percent Non-Credit Card Invoices Paid On-Time [Monthly] Timely payment reduces interest charges and reflects a high degree of accountability and integrity. 85.00% Unsuccessful 90.00% Unsuccessful 95.70% Unsuccessful > = 98% > = 97%
to
< 98%
< 97%
Interest Penalties Paid as a Percent of Total Payments [Monthly] Smaller percentages of interest paid shows that an agency is paying its bills on time which saves money and allows funds to be used for their intended purpose. 0.0204% Minimally Successful 0.0163% Fully Successful 0.0104% Fully Successful < = .02% > .02
to
< = .03%
> .03%
Travel Card Delinquency Rates - Individually Billed Accounts [Monthly] Reducing outstanding travel card balances helps increase rebates to agencies. 2.00% Fully Successful 2.30% Minimally Successful 4.15% Unsuccessful < = 2% > 2%
to
< = 4%
> 4%
Travel Card Delinquency Rates - Centrally Billed Account [Monthly} Reducing outstanding travel card balances helps increase rebates to agencies. 0.00% Fully Successful 0.90% Minimally Successful 1.96% Unsuccessful = 0% > 0%
to
< = 1.5%
> 1.5%
Purchase Card Delinquency Rate [Monthly] Reducing outstanding purchase card balances helps increase rebates to agencies and reduces interest payments. 0.00% Fully Successful 0.88% Minimally Successful 3.30% Unsuccessful = 0% > 0%
to
< = 1.5%
> 1.5%

 

 


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