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Diplomacy in Action

Summary Analysis of Financial Condition


FY 2008 Financial Report
Bureau of Resource Management
December 2008
Report
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Overview of Financial Position

 
Assets by Type
Type of Asset Percentage
Investments 29%
Fund Balances with Treasury 48%
Property and Equipment 21%
Receivables  1%
Other Assets  1%

Assets. The Department’s total assets were $52 billion at September 30, 2008, an increase of 15 percent over the 2007 total of $45 billion. Fund balances with Treasury were up $5.4 billion primarily due to an increase in appropriations received but not yet obligated. Investments were up $479 million because contributions and appropriations received to support the Foreign Service Retirement and Disability Fund were greater than benefit payments; the excess is required to be invested for future benefit payments. Property and equipment increased $879 million due to continued emphasis on the construction of new embassies and necessary security upgrades at existing embassies.

Fund Balances, Investments and Property and Equipment comprise 98 percent of total assets for 2008 and 2007. Investments consist almost entirely of U.S. government securities held in the Foreign Service Retirement and disability Fund; government agencies are, for the most part, precluded from making any other type of investment.

Many Heritage Assets, including art, historic American furnishings, rare books and cultural objects, are not reflected in assets on the Department’s Balance Sheet. Federal accounting standards attempt to match costs to accomplishments in operating performance, and have deemed that the allocation of historical cost through depreciation of a national treasure or other priceless item intended to be preserved forever as part of our American heritage would not contribute to performance cost measurement. Standards require only the maintenance cost of these heritage assets be expensed, since it is part of the government’s role to maintain them forever in good condition. All of the embassies and other properties on the Secretary of State’s Register of Culturally Significant Property, however, do appear as assets on the Balance Sheet, since they are used in the day-to-day operations of the Department. See the Required Supplementary Information here as well as the report at www.state.gov/documents/organization/66242.pdf for further details.

 
Assets as of September 30, 2008 and 2007
(Dollars in Millions)
Line Item 2008 2007
Fund Balances with Treasury $25,151 $19,779
Investment, Net  14,891  14,412
Property and Equipment, Net  11,077  10,198
Receivables, Net     671     620
Other Assets
single underline
    326
single underline
    225
single underline
Total Assets
double underline
$52,116
double underline
$45,234
double underline

 

 
Liabilities by Type
Type of Liability Percentage
Foreign Service Retirement Fund Actuarial Liability 71%
Liability to International Organizations—Unfunded  7%
Accounts Payable 13%
Other Liabilities  9%

Liabilities. The Department’s total liabilities were up eight percent between 2008 and 2007, to $21 billion from $20 billion. The liability for future benefits payments to retired foreign service officers shown as the Foreign Service Retirement Actuarial Liability, 71 percent of the total, was up $410 million (three percent) due to increasing participation in the benefit plan. Cost assumptions did not change. The remainder of the increase in liabilities was due to increases in funded accounts payable, up $928 million, 48 percent, in 2008 compared to 2007. Accounts payable for liabilities to International Organizations are 40 percent of the total accounts payable, and they were up 44 percent, due to increases in dues assessments and timing of payments.

 

 
Liabilities as of September 30, 2008 and 2007
(Dollars in Millions)
Line Item 2008 2007
Foreign Service Retirement Actuarial Liability $15,139 $14,729
Liability to International Organizations   1,507   1,477
Accounts Payable   2,878   1,950
Other Liabilities
single underline
  1,959
single underline
  1,738
single underline
Total Liabilities
double underline
$21,483
double underline
$19,894
double underline

Ending Net Position. The Department’s net position, comprised of both unexpended appropriations and the cumulative results of operations, increased 21 percent between 2007 and 2008. Unexpended appropriations was up $3.5 billion, primarily due to appropriations still available in the new Global Health and Child Survival fund. Cumulative Results of Operations was up $1.9 billion, primarily due to resources used to purchase property and equipment, $1.8 billion, which are capitalized on the Balance Sheet rather than presented in Net Cost as expenses.

Results of Operations

The following two tables illustrate the sources of funds received by the Department in 2008 and the results of operations by net program costs reported on the Statement of Net Cost.

 
Sources of Funds
(Dollars in Millions)
Resource Funding
Appropriations and Transfers, Net $25,186
Earned Reimbursements $ 6,892
Unobligated Balance Forward from Prior Years $ 6,310
Other $   437
Total Budget Resources $38,825
 
Net Cost by Strategic Goal
(Dollars in Millions)
Strategic Objective Cost Percentage
Achieving Peace and Security $ 5,848 33%
Governing Justly and Democratically $   742  4%
Investing in People $ 3,237 18%
Promoting Economic Growth and Prosperity $ 1,213  7%
Providing Humanitarian Assistance $ 1,153  7%
Promoting International Understanding $ 2,082 12%
Strengthening Consular and Management Capabilities $ 1,015  6%
Executive Direction $ 2,451 13%
Total Net Cost $17,741 100%

The Combined Statement of Budgetary Resources details what budgetary resources were available to the Department for the year and the status of those resources at year-end. Total Budgetary Resources were up $7.3 billion, 23 percent, in 2008 over 2007. Most of that increase, $5.7 billion, came from increased budget authority from appropriations and spending authority from offsetting collections granted by Congress and authorized by the Office of Management and Budget (OMB). Appropriations and offsetting collections comprised 83% of year-end resources. The remainder was transfers, recoveries of prior-year unpaid obligations, and unobligated balances brought forward. The Department obligated $30.7 billion of the $38.8 billion total resources in 2008, an increase of $5.5 billion, 22 percent, over 2007. Percent of total resources obligated remained stable at 79 percent in 2008 versus 81 percent in 2007.

The Consolidated Statement of Net Cost presents the Department’s costs by strategic goal. These strategic goals were determined by the Department’s current State-USAID Joint Strategic Plan for 2007 – 2012 established pursuant to the Government Performance and Results Act of 1993. Cost by goal is net of earned revenue by goal. Revenue to the Department from other federal agencies must be established and billed based upon actual costs only, without profit, per statute. Revenue from the public, in the form of fees for service, such as visa issuance, is also to be cost-recovery only, without profit, at the Department. Therefore, the net cost per goal measures actual cost to the American taxpayer after fees and agreements with other federal agencies that should net to zero. Note 15 to the financial statements presents further breakdown of costs by responsibility segments, per under-secretary.

Total net cost of $17.7 billion is an increase of 30 percent or $4.1 billion over 2007. The two goals of Achieving Peace and Security and Investing in People, along with an increase in costs for security account for most of this increase. As seen in the Net Cost by Strategic Goal table above, the goal of Achieving Peace and Security is the largest representing 33 percent of 2008 net costs. Net costs for this goal increased $1 billion in 2008, primarily due to an increase of $652 million for International Organizations (IO). Our IO costs include annual assessments for peacekeeping missions and assessments from the United Nations. Our second largest goal, Investing in People, accounted for $936 million of the net costs increase. This was primarily the result of initiatives this year with the new fund established for Global Health and Child Survival. Support costs for Diplomatic Security and Diplomatic Readiness functions are distributed to all strategic goals and accounted for $1.6 billion of the increase in net costs. Additionally, passport and visa issuance included in the goal of Strengthening Consular and Management Capabilities received increased focus in 2008 contributing to $465 million of the net costs increase attributable to this goal.

Budgetary Position

The FY 2008 budget for the Department of State totaled $12.8 billion. It included State Operations appropriations for Administration of Foreign Affairs ($9.1 billion), contributions to international organizations and international peacekeeping activities ($3.5 billion), international commissions ($155 million), and related programs ($36 million). These amounts do not include foreign assistance funding, which was provided through Foreign Operations appropriations.

The Department’s FY 2008 budget was funded by the FY 2008 Omnibus Appropriations Act under Division J – Department of State, Foreign Operations, and Related Programs Appropriation Act. The budget also included supplemental funding provided through the Supplemental Appropriations Act, 2008. Supplemental funding was required primarily to address the extraordinary costs for security and operations of the U.S. Missions in Iraq and Afghanistan, as well as the U.S. share of costs for 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 revenue from these fees supported program requirements to protect American citizens and safeguard the nation’s borders. FY 2008 requirements included consular workloads in connection with renewals of Border Crossing Cards and passport demand associated with implementation of the Western Hemisphere Travel Initiative.

Appropriations for Administration of Foreign Affairs constitute the Department’s core funding. They support the people and programs required to carry out U.S. foreign policy and advance U.S. national security, political, and economic interests at more than 260 posts in over 180 countries around the world. They also build, maintain, and secure the infrastructure of the American diplomatic platform, from which most U.S. Government agencies operate overseas.

 
The Federal Government Dollar – Outlays in 2008
Program Type Percentage
Social Security   21%
National Defense   20%
Medicaid, Health, Other Entitlements   33%
Net Interest    8%
International Affairs  1.3%
All Other Functions 16.7%

Source: FY 2009 Mid-Session Review, Budget of the U.S. Government, Estimates for FY 2008

For FY 2008, the Department’s principal operating appropriation – Diplomatic and Consular Programs (D&CP) – was funded at $6.8 billion. Total D&CP funding included $1.7 billion to support operations of the U.S. Mission in Iraq, $1.2 billion for the Worldwide Security Protection program to strengthen security for diplomatic personnel and facilities under threat from terrorism, and $361 million for vigorous public diplomacy to counter extremist misinformation and secure 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’s overseas presence and Federal real property asset management.

The Department’s IT Central Fund for FY 2008 investments in information technology totaled $347 million. The Fund total included $60 million from the Capital Investment Fund (CIF) appropriation and $287 million in revenue from Expedited Passport fees. Investment priorities included modernization of the Department’s global IT infrastructure to assure reliable access to foreign affairs applications and information and projects to facilitate collaboration and data sharing internally and with other agencies. IT investments also supported E-Government initiatives of the President’s Management Agenda.

The Embassy Security, Construction, and Maintenance (ESCM) appropriation was funded at $1.5 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. The ESCM funding included $747 million to support 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 $361 million to the construction costs of new diplomatic facilities.

The Educational and Cultural Exchange Programs (ECE) appropriation was funded at $501 million. Aligned with public diplomacy efforts, these strategic activities engaged foreign audiences to develop mutual understanding and build foundations for international cooperation. The funding included $286 million for academic programs of proven value, such as the J. William Fulbright Scholarship Program and English language teaching. It also included $164 million for professional and cultural exchanges, notably the International Visitor Leadership Program and Citizen Exchange Program.

Photo showing members of a pantomime theater performing at the 17th International AIDS Conference in Mexico City in August 2008.

Members of a pantomime theater perform at the 17th International AIDS Conference in Mexico City in August 2008. Speaking at the Conference was Ambassador Mark R. Dybul, the U.S. Global AIDS Coordinator. His mission is to lead implementation of the U.S. President’s Emergency Plan for AIDS Relief (PEPFAR). PEPFAR is the largest commitment ever by a single nation toward an international health initiative — a comprehensive approach to combating HIV/AIDS around the world. PEPFAR employs the most diverse prevention, treatment and care strategy in the world.

The success of the Emergency Plan is firmly rooted in partnerships between the American people and the people of the countries in which we are privileged to serve — governments, non-governmental organizations including faith- and community-based organizations, and the private sector. Under PEPFAR, the U.S. Government has committed $18.8 billion to the fight against global HIV/AIDS. AFP Photo/Ronaldo Schemidt

For FY 2009, the Department’s budget request (at this date still pending before the Congress) totals $11.5 billion. It includes resources to address ongoing national security and foreign policy priorities, particularly supporting the global war on terror and advancing transformational diplomacy. The request for D&CP is $5.4 billion, including $1.2 billion for Worldwide Security Protection to meet new demands in all regions. The request provides $71 million for CIF for further investments in IT infrastructure and collaborative tools. The request for ESCM totals $1.8 billion, including $948 million for design and/or construction of secure facilities, additional site acquisitions, and compound security projects. Further, the request provides $522 million for ECE to strengthen the exchanges component of public diplomacy, expand the National Security Language Initiative, and bring key influencers to America.

The Department has received FY 2009 bridge supplemental funding for State Operations totaling $1 billion. This funding was provided to support operational requirements in Iraq, Afghanistan, and Pakistan as well as new security requirements and overseas construction. Additionally, supplemental funds were appropriated for Contributions to International Organizations and for U.N. Peacekeeping Missions.

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 U.S. 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, and other applicable authority, these statements are in addition to the financial reports, prepared from the same books and records, used to monitor and control the budgetary resources. These statements should be read with the understanding that they are for a component of the U.S. government, a sovereign entity.

The Department also issues financial statements for its Foreign Service Retirement and Disability Fund, the International Cooperative Administrative Support Services Fund that operates embassies, and the International Boundary and Water Commission. These complete, separately-issued financial reports are available annually from the Department’s Bureau of Resource Management, Office of Financial Policy, Reporting and Analysis, at 2401 E Street NW, Room 1500, Washington DC 20037. Telephone (202) 261-8620.

 


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