|James L. Millette|
The Agency Financial Report (AFR) remains the cornerstone of our efforts to disclose the Department’s financial status and provide transparency and accountability to the American people; both our successes and challenges. It is a comprehensive view of the Department’s financial activities set against the backdrop of global issues and engagements we face as an institution working to carry out U.S. foreign policy and advance U.S. interests abroad. It is also a snapshot in time of the immense financial work that occurs behind the scenes every day by Department financial personnel as we operate in more than 270 locations, 172 countries, and in over 150 currencies and foreign languages, often in the most challenging environments.
This is my second opportunity to provide perspective on the AFR and annual audit results as the Department’s Acting Chief Financial Officer. It is a long and exacting march to reach the annual financial statements as part of the AFR by November 15. We have worked smarter and with unity of purpose this year to meet the demands and paces of the external audit process in order to demonstrate the strong financial management work that is conducted on a daily basis in the Department. I would like to express my sincere thanks and appreciation to the Department’s financial professionals, whose consistent efforts to plan, execute, and account for the Department’s global resources is the foundation of any success and our stewardship of public dollars. It has been a concerted and dedicated effort by all stakeholders involved.
The scale and complexity of the Department’s activities and corresponding financial management requirements have grown significantly in the face of a wide range of global and regional issues. Secretary Clinton has challenged the Department to increase its capacity to utilize “Smart Power” by intelligently leveraging our diplomatic and development tools to reinvigorate our leadership around the world and amplify all facets of Civilian Power. The upcoming results of the first ever Quadrennial Diplomatic and Development Review (QDDR) will help further define and shape how we accomplish this goal.
Fundamentally, we understand that strong financial management and internal controls provide the building blocks to support the transparency of operations and accountability to effectively manage our resources and support these efforts. In today’s fiscal climate, this financial role will have added significance and an even brighter spotlight as we work to squeeze the most value from our limited resources and execute investment decisions that support our most critical needs. We continue to work diligently to embrace the broadening landscape of financial compliance and reporting requirements and proactively incorporate them into our ongoing budgetary and financial operations. We recognize that the Annual Financial Reporting process is an essential discipline that has provided valuable benefit in the past and will continue in the future. At the same time, we want to be cognizant to strike the right balance between data driven compliance and reasoned practice tied to outcomes. The ultimate goal of course is to support a strong and efficient financial platform that furthers the Department’s global operations and mission as well as provide accurate and high-value financial information for decision-makers and transparency and confidence for the American public.
We were extremely disappointed last year with the outcome of the independent audit, as we engaged a new audit firm to conduct our annual review. While I did not believe the end result truly reflected the status of the Department’s financial program, we committed ourselves fully to address the items cited by the independent auditor and to improve the audit process for this year.
As a result, I am very pleased to report to you that the Department has received an unqualified “clean” opinion from the independent auditor for FY 2010. Material weaknesses identified during the FY 2009 audit in property and financial reporting were downgraded to significant deficiencies this year, based on the considerable work conducted in collaboration with the independent auditor and the Department’s Office of Inspector General to address their concerns in these areas throughout the 2010 fiscal year. The Department also maintains a robust system of internal controls overseen and validated by senior leadership and administered by the Bureau of Resource Management. For FY 2010, the Secretary was able to provide an overall unqualified statement of assurance about the Department’s internal controls in accordance with the Federal Managers’ Financial Integrity Act, as well as an unqualified statement of assurance for internal controls over financial reporting.
While we are pleased with these improvements, we recognize that there are a number of significant items identified in the audit that require our continued attention and diligence. And, it will take focused resolve to both maintain our position and address these items in the coming years. Given the global and complex nature of our operations, there will always be areas of concern and opportunities for improvement. But, we are committed to meeting these challenges. I have confidence in the Department’s dedicated financial professionals as we plan for and garner vitally needed resources; budget, manage and account for the Department’s funds on behalf of America’s taxpayers in support our nation’s diplomatic affairs.
James L. Millette
Chief Financial Officer, Acting
November 15, 2010