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Diplomacy in Action

Financial Statements and Results


FY 2006 Performance and Accountability Report
Bureau of Resource Management
November 2006
Report
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The Government Management Reform Act (GMRA) of 1994 amended the requirements of the Chief Financial Officers (CFO) Act of 1990 by requiring an annual preparation and audit of agency-wide financial statements from the 24 major executive departments and agencies. The statements are to be audited by the Inspector General (IG), or an independent auditor at the direction of the IG. An audit report on the principal financial statements, internal controls, and compliance with laws and regulations is prepared after the audit is completed.

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 the 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. Late in FY 2005, the Department became aware of large amounts of personal property, including aircraft and vehicles held by host countries and contractors, which had not been reflected in our financial statements. In December 2005, the independent auditors were able to satisfy themselves about the amounts presented as personal property in our FY 2005 and FY 2004 financial statements and issued an unqualified opinion thereon, dated December 14, 2005. In their report, the independent auditor cited the accounting for personal property, along with information systems security, as material weaknesses in internal controls.

The Department recognizes the importance of effective internal controls and committed to resolve the material weaknesses in 2006. Working closely with the independent auditor throughout the year, the Department took a number of corrective actions to address the most serious deficiencies in controls for the material weaknesses. As a result, and as reflected in their Report, the Independent Auditor downgraded these items to a reportable condition in connection with the audit of the Department's 2006 Principal Financial Statements.

To further strengthen internal controls in 2006, the Department also committed to fully implement the requirements of Appendix A, Internal Control Over Financial Reporting, of OMB Circular A-123. During the implementation of Appendix A specifically, and other work during FY 2006, Department management identified a material weakness related to accounting for real property construction-in-progress. The Department's controls related to the recording of real property and related depreciation expense and accumulated depreciation, during the majority of FY 2006 and all of FY 2005, were inadequate, resulting in (1) significant amounts of construction costs being expensed rather than capitalized, and (2) costs of completed projects not being moved from construction-in-progress on a timely basis.

Recognizing the severity of the deficiency, the Department developed detailed procedural guidance for establishing projects to ensure construction costs are properly capitalized and implemented monitoring controls for both project establishment and project completion. As a result of the corrective actions taken, the material weakness was resolved by September 30, 2006. However, due to complexity of the matters involved, and the accelerated financial reporting requirements, the Department was unable to provide timely financial statements or documentation on the appropriateness of the associated restatement to satisfy our Independent Auditor with regard to the presentation of real property in time to meet the November 15, 2006 deadline required by OMB. As a result, and as more fully explained in the Independent Auditor's Report, the Independent Auditor issued a disclaimer of opinion on our FY 2006 and restated FY 2005 financial statements. Since then, with the cooperation of the Independent Auditor and OIG, our efforts continued, and the Department satisfied the Independent Auditor about the amounts presented and have therefore received an unqualified ("clean") opinion thereon, dated December 12, 2006.

In relation to internal control, the Independent Auditor's Report cites as reportable conditions the recording and related depreciation of personal property and Department's security of information systems networks. The report also cites as reportable conditions: (1) the inadequacy of the Department's financial management systems, (2) the management of unliquidated obligations, (3) the implementation of Managerial Cost Accounting Standards, and (4) the recording and related depreciation for real property. The Department's financial management systems are also reported as noncompliant with laws and regulations, including the Federal Financial Management Improvement Act of 1996 (FFMIA).

The following tables summarize the weaknesses in internal control and compliance with laws and regulations cited in the FY 2006 Independent Auditor's Report, as well as the actions taken or planned to resolve the problems. All of the findings relate to the Department's strategic goal for Management and Organizational Excellence.

 

SUMMARY OF INDEPENDENT AUDITOR'S REPORT FINDINGS
(Refer to Independent Auditor's Report Section)
Reportable Condition Corrective Actions Target Correction Date

Information System Security

Information system networks for domestic operations are vulnerable to unauthorized access. Consequently, systems, including the Department's financial management system, that process data using these networks may also be vulnerable. These deficiencies were cited as a material weakness in the Independent Auditor's Report on the Department's 2005 Financial Statements.

The Department remains acutely aware of the value and sensitivity of its information and information systems and is dedicated to the vigilance required to ensure their adequate protection. In response, the Department initiated a program to assess its information systems security on a comprehensive and continuing basis, and developed a Corrective Action Plan to address the material weakness identified in the FY 2005 financial statement audit. The 2006 FISMA Report presents major accomplishments, as well as specific metrics upon which performance is assessed.

For FY 2006, the Information Security Program (ISP) focused on addressing identified shortfalls in assessing information system security. Actions included creating an Information Security Steering Committee, creating a certification and accreditation working group, enhancing the Site Evaluation and Verification Program, improved contractor oversight, implementing Personnel Identity Verification, and integrating information security costs into the IT investment process. In addition, the Department accelerated the use of an internal bureau scorecard, which highlights each bureau's needed improvements in the areas of systems authorization, role based training, patch management, and Plans of Actions and Milestones (POA&M). As a result, the Independent Auditor downgraded this deficiency to a reportable condition in connection with the audit of the Department's 2006 Principal Financial Statements. In FY 2007, efforts will continue to strengthen the ISP along with addressing new OMB and NIST system requirements.

2007
Recording of Personal Property

The Department does not have a system of controls to account for personal property. Deficiencies exist in the controls over accounting for contractor-held property, aircraft, vehicles, and other personal property. These deficiencies were identified as a material weakness in the Independent Auditor's Report on the Department's 2005 Financial Statements.

In recognition of the deficiencies with respect to personal property, the Department's Management Control Steering Committee (MCSC) created a subcommittee to address these weaknesses. The subcommittee developed a Corrective Action Plan to address each of the matters identified in the Independent Auditor's Report on the FY 2005 financial statements. In 2006, improvements were implemented in the methods used to identify and report armored vehicle costs, aircraft, property held by contractors, and Department-owned vehicles. As a result, the Independent Auditor downgraded this deficiency to a reportable condition in connection with the audit of the Department's 2006 Principal Financial Statements. In FY 2007, efforts will continue to strengthen the controls over the accounting for personal property.

2007
Recording of Real Property

The Department's controls related to the recording of real property and related depreciation expense and accumulated depreciation, during the majority of FY 2006 and all of FY 2005, were inadequate, resulting in (1) significant amounts of construction costs being expensed rather than capitalized, and (2) costs of completed projects not being moved from construction-in-progress on a timely basis.

During the implementation of OMB Circular A-123, Appendix A, and other work during FY 2006, Department management noted problems related to accounting for construction-in-progress. As a result, the Department developed more detailed procedural guidance for establishing projects to ensure construction costs are properly capitalized and implemented monitoring controls for both project establishment and project completion. In FY 2007, the Senior Assessment team will continue to monitor this issue and test the controls to ensure they are operating effectively. The Department will also look for opportunities to further strengthen controls over accounting for real property.

2007

Management of Unliquidated Obligations

The Department's internal control process related to managing undelivered orders is inadequate. It lacks a structured process for reconciling and deobligating funds in a timely manner, which may result in the loss of those funds.

Strengthening the management of unliquidated obligations (UDOs) is an important financial management initiative, and the Independent Auditor's Report notes that there have been improvements in this area. New capabilities were installed in the Department's Central Financial Management System that allow for the automatic deobligation of UDOs based on a wide range of criteria (e.g., age, object class, dollar amount). The new capabilities were used to deobligate funds totaling over $200 million.

As part of the President's Management Agenda Initiative for Improved Financial Performance, the Department prepares quarterly reports for OMB and senior management. Beginning with the March 2005 report, and all subsequent reports, the quarterly reports include a chart that identifies by bureau the percentage of UDOs with no activity for the past 12 months. This analysis is used to focus improvement efforts on those bureaus with the higher percentages of no activity.

The Department will continue to develop reports and processes to improve the management of UDOs.

2007

Compliance with Managerial Cost Accounting Standards

While the Department complies with certain aspects of the Statement of Federal Financial Accounting Standards #4, it does not have an effective process to routinely collect managerial cost accounting information, establish outputs for each responsibility segment, or allocate all support costs.

To address MCAS requirements, the Department developed an automated Statement of Net Cost that enables reporting of cost information by strategic objects and goals, along with responsibility center. It also allows for the allocation of support costs. In FY 2005, the Department established a project team, which includes consultants with experience implementing Cost Accounting Systems, and project plan to implement the MCA initiative. The team:

  • surveyed other agencies and organizations for lessons learned and best practices;
  • conducted an assessment of offices to determine business needs for cost information, current cost accounting practices, outputs and outcomes, and unmet needs;
  • evaluated a managerial cost software module and confirmed usability; and
  • developed a strategic approach and implementation strategy.

In 2007, the team will conduct several pilots to test strategy, to be followed by a phased implementation Departmentwide.

2008

Financial and Accounting Systems

(See Nonconformance below)

See discussion below.

2007
Nonconformance with Laws and Regulations Corrective Actions Target Correction Date

Financial and Accounting Systems

The Department's financial and accounting system, as of September 30, 2006, was inadequate. Certain elements of the financial statements, including, but not limited to, personal property, capital leases, and certain accounts payable, are developed from sources other than the general ledger. During 2006, the Department used several systems for the management of grants and other types of financial assistance. The Department's financial system (1) does not provide effective control over personal property, and (2) is unable to issue year-end financial data to be included in its PAR in a timely manner.

Significant progress has been made over the past few years to improve financial management systems worldwide. The Department has reduced the number of financial systems from six to two, and the number of post-level financial systems from nine to two.

In 2005, the overseas Regional Financial Management System was upgraded to the most current version of commercial off-the-shelf (COTS) software used by this system. In 2006, the Department expanded the number of on-line overseas users, and added and enhanced a number of interfaces. Also in 2006, improvements were made to enhance the usefulness of financial information through the implementation of improved reporting capabilities for overseas users. In 2007, domestic users will be converted to the same platform and software services overseas users thereby establishing the Global Financial Management System (GFMS). As part of the GFMS implementation, the most up-to-date module for accounting for fixed assets will be installed, and a new data warehouse is being built that will provide for better reporting capabilities for users.

To improve the management of grants and other types of financial assistance, the Department is developing, in collaboration with USAID, the Joint Assistance Management System (JAMS). Once implemented, JAMS will provide the capability to centrally track and manage Federal financial assistance issued by the Department. The Department plans to conduct a pilot phase in 2007, followed by deployment through 2008.

2007

 

Restatements

The FY 2006 and FY 2005 financial statements, which appear in the Financial Section of this report, have been restated as described below. Additional information on the restatements is provided in Note 20, Restatements, of the accompanying FY 2006 and FY 2005 financial statements.

The Department provides portions of its budget authority to various agencies to conduct activities in support of the Department's mission. For example, the Department allocates monies to the Department of Health and Human Services, USAID, and others for global HIV/AIDS activities. For FY 2006, the Department received notification of changes to amounts previously reported by recipient agencies after issuance of our FY 2006 Financial Statements on November 15, 2006 (to meet OMB's deadline), but prior to the issuance of these financial statements. The net effect of the corrections on the Department's FY 2006 financial statements is to decrease Other Assets, Total Assets, Unexpended Appropriations, and Total Net position by $104.5 million; and to increase Appropriations Used, Total Cost and Net Cost by $104.5 million. The restatement had no effect on the Statement of Budgetary Resources.

The FY 2005 financial statements, have been restated to correct errors with respect to the accounting for certain real property transactions. The effect of the restatement was to decrease Total Net Cost for 2005 by $160.7 million, and increase Property and Equipment, Total Assets, Cumulative Results of Operations and Total Net Position by $617.6 million. Cumulative Results of Operations at the beginning of 2005 has been adjusted by $457 million for the effects of the restatement on prior years. The restatement had no effect on the Statement of Budgetary Resources or the President's Budget. Additional information on the restatement is provided in Note 20, Restatements, of the accompanying FY 2006 and FY 2005 financial statements.

In the course of the Department's first-year efforts to implement Appendix A, Internal Control Over Financial Reporting, of OMB's Circular A-123, Management's Responsibility for Internal Control, we identified errors in previously reported amounts for real property and associated depreciation and operating expenses as follows.

  • Not identifying and adjusting completed capital projects in a timely manner.
    • Amounts reported as construction-in-progress where the projects had been completed and should have been reclassified to Buildings and Structures and the associated depreciation expense recorded.
  • Expensing capital project costs.
    • Amounts reported as expense for capital projects that should have been recorded to construction-in-progress.

Significant awareness was raised about the importance of the internal controls related to these activities, and a number of actions were taken to strengthen processes and controls to preclude future errors of this nature. For example, procedural guidance was developed, documented and implemented. In addition, processes were established to monitor outstanding projects on a periodic basis for the purpose of identifying any projects that are being improperly expensed, or that are complete but not reclassified to buildings and structures. Also, as part of the Department's on-going A-123 Appendix A program, the controls related to these activities will be tested annually to ensure they are in place and operating effectively.

 

Overview of Financial Position

Assets. The Consolidated Balance Sheet shows the Department had total assets of $40.0 billion at the end of 2006. This represents an increase of $3.6 billion (10%) over the previous year's total assets of $36.4 billion. The increase is primarily the result of increases of $2.1 billion in Fund Balances with Treasury, $1.3 billion in property and equipment, and $528 million in investments in the Foreign Service Retirement and Disability Fund (FSRDF). The increase in Fund Balances with Treasury primarily resulted from a $1.8 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 2006 and FY 2005
  2006
Restated
2005
Restated
Investment, Net $14,101,765 $13,389,090
Fund Balances with Treasury  16,170,761  14,023,542
Property and Equipment, Net   9,175,917   7,862,612
Accounts, Loans & Interest Receivable, Net     378,357     854,315
Other Assets
single underline
    131,154
single underline
    225,434
single underline
Total Assets
double underline
$39,957,954
double underline
$36,354,993
double underline

 

Investments, Fund Balances with Treasury and Property and Equipment comprise approximately 98% of total assets for 2006 and 2005. Investments consist almost entirely of U.S. Government Securities held in the FSRDF.

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

Assets by Type
Type of Asset Percentage
Investments 35.2%
Fund Balances with Treasury 40.4%
Property and Equipment 22.9%
Receivables  0.9%
Other Assets  0.6%

 

Liabilities. The Department had total liabilities of $17.9 billion at the end of 2006, which is reported on the Consolidated Balance Sheet and summarized in the following table (dollars in thousands):

Liabilities at the End of FY 2006 and FY 2005
  2006 2005
Foreign Service Retirement Actuarial Liability $14,215,300 $13,429,300
Liability to International Organizations   1,155,344   1,178,130
Accounts Payable   1,253,677   1,269,794
Other Liabilities
single underline
  1,268,726
single underline
  1,202,774
single underline
Total Liabilities
double underline
$17,893,047
double underline
$17,079,998
double underline

 

Liabilities by Type
Type of Liability Percentage
FSRA Liability 79.4%
Liability to International Organizations  6.4%
Accounts Payable  7.1%
Other Liabilities  7.1%

The Foreign Service Retirement Actuarial (FSRA) Liability of $14.2 billion and the Liability to International Organizations of $1.2 billion comprise 86% of the Department's total liabilities at the end of 2006.

Of the total liabilities, $2.1 billion were unfunded, i.e., budgetary resources were not available to cover these liabilities. The $2.1 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 2006 annual assessments, and $60 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.

Ending Net Position. The Department's Net Position at the end of 2006 on the Consolidated Balance Sheet and the Consolidated Statement of Changes in Net Position is $22.1 billion, a $2.9 billion (15%) 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 embassy security, international narcotics control, and the Global HIV/AIDS initiative. The increase in Cumulative Results of Operations resulted mainly from the $1.3 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 (Restated)
(Dollars in Thousands)
Strategic Objective Cost
Achieve Peace and Security $ 5,017,593
Advance Sustainable Development and Global Interests $ 3,747,810
Promote International Understanding $ 1,473,197
Executive Direction and other Costs not Assigned $ 2,254,063
Total Net Cost $12,492,663

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 2006, after intra-departmental eliminations, was $12.5 billion. The strategic objective to "Achieve Peace and Security" represents the largest investment for the Department at 40.2% of the Department's net cost of operations. The net cost of operations for the remaining strategic objectives varies from 11.7% to 30.0%.

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 $14.3 billion, comprising 93% of the Department's total budgetary financing sources.

These two tables reflect the funds that the Department received during 2006 and how these funds were used.

Where Funds Come From
(Dollars in Thousands)
Resource Funding
Appropriations and Transfers $16,132,605
Reimbursements Earned $ 4,434,957
Trust Funds $ 1,246,621
Other $ 4,618,778
Total Budget Resources
$26,432,961

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 $26.4 billion, an increase of 5.9% from 2005 levels. Budget Authority of $21.8 billion - which consists of $16.1 billion for appropriations (direct, related, and supplemental) and transfers, and $1.3 billion financed from trust funds - comprise 65.9% of the total budgetary resources. The Department incurred obligations of $21.1 billion for the year, a 1.9% increase over the $20.7 billion of obligations incurred during 2005. 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 2006 budget for the Department of State totaled $10.468 billion. It included appropriations for the Administration of Foreign Affairs ($7.985 billion), contributions to international organizations and international peacekeeping activities ($2.303 billion), international commissions ($67 million), and related programs ($113 million). These amounts do not include foreign assistance funding.

The Department's FY 2006 budget was funded through the Science, State, Justice, Commerce, and Related Agencies Appropriations Act, 2006. The budget also reflected supplemental funding provided through the Emergency Supplemental Appropriations Act to Address Hurricanes in the Gulf of Mexico and Pandemic Influenza, 2006 and the Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Hurricane Recovery, 2006. Supplemental funding was required primarily to address the extraordinary costs of security and operations of the U.S. Missions in Iraq and Afghanistan, as well as the U.S. assessed costs of United Nations peacekeeping missions.

In addition to appropriated funds, the Department continued to rely on revenue from user fees - Machine Readable Visa fees, Enhanced Border Security Program fees, the Western Hemisphere Travel Surcharge, and other fees - for the Border Security Program. The fee revenue supported program requirements to protect American citizens and safeguard the nation's borders. These requirements included increased consular workloads and 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 foreign policy and advance U.S. national security, political, and economic interests at more than 260 posts around the world. They also build, maintain, and secure the infrastructure of the diplomatic platform from which most U.S. Government agencies operate overseas.

For FY 2006, the Department's principal operating appropriation - Diplomatic and Consular Programs (D&CP) - was funded at $5.711 billion. This funding sustained critical diplomatic and consular operations and enabled the Department to meet the new demands of transformational diplomacy. D&CP funding included $731 million for Worldwide Security Upgrades to increase security for diplomatic personnel and facilities under threat from terrorism and $330 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 and agency-specific initiatives on rightsizing the U.S. Government presence overseas and Federal real property asset management.

The Department's appropriations for information technology (IT) initiatives totaled $126 million - $58 million in the Capital Investment Fund (CIF) and $68 million in the Centralized Information Technology Modernization Program. Revenue from Expedited Passport fees provided additional funding for IT Central Fund investments. These investments helped modernize the Department's global IT infrastructure and provide ready access to foreign affairs applications and information. FY 2006 investments in IT also supported e-Government initiatives of the President's Management Agenda. The Department's infrastructure and mission-oriented application systems supported approximately 46,000 users, at over 390 locations worldwide, for both classified and unclassified processing.

The Embassy Security, Construction, and Maintenance (ESCM) appropriation was funded at $1.490 billion. 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 $14 billion in value and includes over 15,000 properties. From the appropriation total, $899 million supported capital security construction and compound security projects. Under the Capital Security Cost Sharing program, all agencies with overseas staff under Chief of Mission authority contributed an additional $200 million to the construction costs of new diplomatic facilities.

The Educational and Cultural Exchange Programs (ECE) appropriation was funded at $431 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 younger and more diverse audiences, especially in the Muslim world. The funding included $243 million for academic exchanges of foreign participants and U.S. citizens, notably through the J. William Fulbright Scholarship Program. The funding also included $150 million for professional and cultural exchanges, such as Citizen Exchanges and the International Visitor Leadership Program, which inaugurated the Edward R. Murrow Journalism Program.

For FY 2007, the Department's budget request (at this date still pending before Congress) totals $9.504 billion. It includes resources to address ongoing foreign policy priorities, particularly to support the global war on terror and advance transformational diplomacy. The request for D&CP is $4.652 billion, including $795 million for upgrades of physical security equipment and technical support, information and systems security, perimeter security, and security training. The request provides $68 million in CIF for information technology investments worldwide. The request for ESCM totals $1.540 billion, including $899 million for design and/or construction of secure facilities, additional site acquisitions, and compound security projects. Finally, the request provides $474 million for ECE to increase the number of participants in exchange programs of proven value, engage key influencers in overseas publics, and support the National Security Language Initiative.

The Federal Government Dollar
Program Type Percentage
Social Security 20.5%
National Defense 19.8%
Medicaid, Health, Other Entitlements 35.5%
Net Interest  8.1%
International Affairs  1.2%
All Other Functions 14.9%

Source: Mid-Session Review, Budget of the United States Government, Fiscal Year 2007.

 

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 Foreign Service Retirement and Disability Fund (FSRDF), International Cooperative Administrative Support Services (ICASS) and the International Boundary and Water Commission (IBWC). The complete, separately-issued FSRDF, 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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