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Financial Highlights


FY 2006 Performance and Accountability Highlights
Bureau of Resource Management
November 2006
Report
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The Department's financial statements, which appear in the Financial Section of the FY 2006 Performance and Accountability Report (PAR), are audited by an independent accounting firm. 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 the FY 2006 PAR have been prepared from the accounting records of the Department of State which, as a Federal entity, must be in conformity with generally accepted accounting principles (GAAP).  For Federal entities, GAAP are the standards prescribed by the Federal Accounting Standards Advisory Board (FASAB).

FINANCIAL AND PERSONNEL HIGHLIGHTS
(Dollars in Thousands)
  % Change
2006 over 2005
2006
Restated
2005
Restated

AT END OF YEAR:

Condensed Balance Sheet Data:

Fund Balances With Treasury

+15% $16,170,761  $14,023,542 

Investments, Net

 +5% $14,101,765  $13,389,090 

Property and Equipment, Net

+17%   9,175,917    7,862,612 

Other

-53%     509,511 
single underline
  1,079,749 
single underline

Total Assets

+10% $39,957,954 
double underline
$36,354,993 
double underline

Foreign Service Retirement Actuarial1

 +6% $14,215,300  $13,429,300 

Liability to International Organizations

 -2%   1,155,344    1,178,130 

Other

 +2%   2,522,403 
single underline
  2,472,568 
single underline

Total Liabilities

 +5%  17,893,047 
single underline
 17,079,998 
single underline

Unexpended Appropriations

+15%  13,095,268   11,430,639 

Cumulative Results of Operations

+14%   8,969,639 
single underline
  7,844,356 
single underline

Total Net Position

+15%  22,064,907 
single underline
 19,274,995 
single underline

Total Liabilities and Net Position

+10% $39,957,954 
double underline
$36,354,993 
double underline

Full-time Personnel:

Civil Service

 +2%      8,270       8,092 

Foreign Service

 +1%     11,397      11,238 

Foreign Service National

 -9%      8,189 
single underline
     8,964 
single underline

Total Full-time Personnel

 -2%     27,856 
double underline
    28,294 
double underline

Foreign Service Annuitants1

 +6%     15,759      14,842 

FOR THE YEAR:

Total Cost

 +7% $17,082,939  $15,953,921 

Total Earned Revenue

+11%  (4,590,276)
single underline
 (4,131,816)
single underline

Total Net Cost of Operations

 +6% $12,492,663 
double underline
$11,822,105 
double underline

On-Time Payments (%)

 -2%          94%          96%

Electronic Funds Transfer Payments (%)

 +2%          87%          85%

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)

 

Overview of Financial Position

 

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%

 

Total assets were $40.0 billion at the end of FY 2006, an increase of $3.6 billion (10%) over the previous year's total assets of $36.4 billion. Investments, Funds Balance with Treasury, and Property, Plant and Equipment comprise 98% of total assets for both FY 2006 and FY 2005. Investments consist almost entirely of U.S. Government Securities.

 

Total liabilities were $17.9 billion at the end of FY 2006. The Foreign Service Retirement Actuarial Liability and the Liability to International Organizations comprise 86% of the Department's total liabilities. Of the total liabilities of $17.9 billion, $2.1 billion were unfunded, of which $1.2 billion was the liability to International Organizations.

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%

 

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 Department's total budgetary resources of $26.4 billion represents an increase of 5.9% from FY 2005 levels. Budget authority of $21.8 billion, consisting of $16.1 billion for appropriations and transfers and $1.3 billion from the trust funds, comprise 65.9% of total budgetary resources. The Department incurred obligations of $21.1 billion for the year, a 1.9% increase over FY 2005 obligations of $20.7 billion.

 

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

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 (Restated) $12,492,663

 

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 a decade. In our efforts to further strengthen internal controls in 2006, the Department committed to resolving the material weaknesses reported by the Independent Auditors in the FY 2005 Independent Auditor's Report, and fully implement the requirements of Appendix A, Internal Control Over Financial Reporting, of OMB Circular A-123. During implementation of Appendix A, Department management identified a material weakness related to accounting for real property construction-in-progress. As a result of corrective actions taken during FY 2006, including the development of more detailed procedural guidance, this material weakness was resolved. However, due to the complexity of the matters discussed above, and the accelerated financial reporting requirements established by OMB, the Department was unable to provide timely financial statements or documentation on the appropriateness of the restatement for real property to satisfy our independent auditors by OMB's November 15, 2006 submission date.

As a result, and as more fully explained in the Independent Auditor's Report included in the FY 2006 PAR, the independent auditors issued a disclaimer opinion on our FY 2006 and FY 2005 financial statements released on November 15, 2006. Since then, the independent auditors satisfied themselves about the amounts presented as real property and related depreciation expense and accumulated depreciation in the Department's FY 2006 and FY 2005 financial statements, and issued an unqualified opinion thereon, dated December 12, 2006, which has cleared the way for updating the FY 2006 PAR. The auditor's opinion and agency comments are contained in the FY 2006 PAR's Financial Section.

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, an improvement over what was previously reported in the FY 2005 PAR as material weaknesses. 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 Department is committed to resolving these reportable conditions and has corrective action plans underway to resolve many of these reportable conditions in 2007. During FY 2007, the MCSC and Senior Assessment Team will continue to monitor these issues and test the controls to ensure they are operating effectively.

 

Restatements

The FY 2006 and FY 2005 financial statements, included in the FY 2006 PAR, have been restated as follows:

  • The Department was notified of changes to amounts previously reported by agencies who are recipients of portions of the Department's budget authority to conduct activities in support of the Department's mission after the financial statements were issued on November 15, 2006. The FY 2006 financial statements were restated accordingly.
  • The FY 2005 financial statements have been restated to correct errors with respect to the accounting for certain real property transactions.

The effect of these restatements on the Department's financial statements is provided in the FY 2006 PAR.

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.

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 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 Diplomatic and Consular Programs 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.

 


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