Strategic Goals and Government-wide Management Initiatives
Performance Summary and Highlights
Financial Summary and Highlights
Analysis of Systems, Control, and Legal Compliance
About the Department
Our Mission and History
The U.S. Department of State leads America’s foreign policy through diplomacy, advocacy, and assistance by advancing the interests of the American people, their safety and economic prosperity.
The U.S. Department of State (the Department) is the lead U.S. foreign affairs agency within the Executive Branch and the lead institution for the conduct of American diplomacy. Established by Congress in 1789, the Department is the nation’s oldest and most senior cabinet agency.
The Department is led by the Secretary of State, who is nominated by the President and confirmed by the U.S. Senate. The Secretary of State is the President’s principal foreign policy advisor and a member of the President’s Cabinet. The Secretary carries out the President’s foreign policies through the State Department and its employees.
The Department of State and the United States Agency for International Development (USAID) work together to harmonize the administration and structure of assistance programs to ensure maximum impact and efficient use of taxpayer funds. Each agency is responsible for its own operations and produces a separate AFR.
Antony J. Blinken has visited more than 20 countries during his 8 months as Secretary of State. He travels to all corners of the world to do his job. His duties as Secretary include acting as the President’s representative at all international forums, negotiating treaties and other international agreements, and conducting everyday, face-to-face diplomacy.
The Department of State advances U.S. objectives and interests in the world through its primary role in developing and implementing the President’s foreign policy worldwide. The Department also supports the foreign affairs activities of other U.S. Government entities including USAID. USAID is the U.S. Government agency responsible for most non-military foreign aid and it receives overall foreign policy guidance from the Secretary of State. The State Department carries out its foreign affairs mission and values in a worldwide workplace, focusing its energies and resources wherever they are most needed to best serve the American people and the world.
The Department is headquartered in Washington, D.C. and has an extensive global presence, with more than 270 embassies, consulates, and other posts in over 180 countries. A two-page map of the Department’s locations appears in Appendix B. The Department also operates several other types of offices, mostly located throughout the United States, including 23 passport agencies, six passport centers, two foreign press centers, one reception center, five logistic support offices for overseas operations, 30 security offices, and two financial service centers.
The Foreign Service officers and Civil Service employees in the Department and U.S. missions abroad represent the American people. They work together to achieve the goals and implement the initiatives of American foreign policy. The Foreign Service is dedicated to representing America and to responding to the needs of American citizens living and traveling around the world. They are also America’s first line of defense in a complex and often dangerous world. The Department’s Civil Service corps, most of whom are headquartered in Washington, D.C., is involved in virtually every policy and management area – from democracy and human rights, to narcotics control, trade, and environmental issues. Civil Service employees also serve as the domestic counterpart to Foreign Service consular officers who issue passports and assist U.S. citizens overseas.
Host country Foreign Service National (FSN) and other Locally Employed (LE) staff contribute to advancing the work of the Department overseas. Both FSNs and other LE staff contribute local expertise and provide continuity as they work with their American colleagues to perform vital services for U.S. citizens. At the close of 2021, the Department was comprised of nearly 77,000 employees.
The U.S. Department of State, with just over one percent of the entire Federal budget, has an outsized impact on Americans’ lives at home and abroad. For a relatively small investment, the Department yields a large return in a cost-effective way by advancing U.S. national security, promoting our economic interests, creating jobs, reaching new allies, strengthening old ones, and reaffirming our country’s role in the world. The Department’s mission impacts American lives in multiple ways.
These impacts include:
We support American citizens abroad. We provide emergency assistance to U.S. citizens in countries experiencing natural disasters or civil unrest. We assist with intercountry adoptions and work on international parental child abductions. In 2020, there were 1,622 adoptions to the United States, and 42 adoptions from the United States to other countries. In calendar year 2020, there were 896 children reported abducted to and from the United States, and we assisted in the return of 182 children to the United States.
We create American jobs. We directly support millions of U.S. jobs by promoting new and open markets for U.S. firms, protecting intellectual property, negotiating new U.S. airline routes worldwide, and helping American companies compete for foreign government and private contracts.
We promote democracy and foster stability around the world. Stable democracies are less likely to pose a threat to their neighbors or to the United States. We partner with the public and private sectors in countries in conflict to foster democracy and peace.
We help to make the world a safer place. Under the New Strategic Arms Reduction Treaty, we are reducing the number of deployed nuclear weapons to levels not seen since the 1950s. The Department has helped over 40 post-conflict countries clear millions of square meters of landmines and unexploded ordnance. We also work with foreign partners to strengthen international aviation and maritime safety and security.
We save lives. Strong bipartisan support for U.S. global health investments has led to worldwide progress against HIV/AIDS, tuberculosis, malaria, and polio. Better health abroad reduces the risk of instability and enhances our national security.
We help countries feed themselves. We help other countries plant the right seeds in the right way and get crops to markets to feed more people. Strong agricultural sectors lead to more stable countries.
We help in times of crisis. From natural disasters to famine to epidemics, our dedicated emergency professionals deliver assistance to those who need it most.
We promote the rule of law and protect human dignity. We help people in other countries find freedom and shape their own destinies. We advocate for the release of prisoners of conscience, prevent political activists from suffering abuse, train police officers to combat sex trafficking, and equip journalists to hold their governments accountable.
We help Americans see the world. The Department’s Bureau of Consular Affairs supports and protects the American public. In 2021, we issued 15.5 million passports and passport cards for Americans to travel abroad. We facilitate the lawful travel of international students, tourists, and business people to the United States, adding greatly to our economy. We provide information to help U.S. citizens assess risks of international travel and learn about steps to take to ensure their safety when traveling abroad.
We are the face of America overseas. Our diplomats, development experts, and the programs they implement are the source of American leadership around the world. They are the embodiments of our American values abroad and a force for good in the world.
The Secretary of State is supported by two Deputy Secretaries, the Executive Secretariat, the Office of Foreign Assistance, the Counselor and Chief of Staff, six Under Secretaries, and over 30 functional and management bureaus and offices. The Deputy Secretary of State (D) serves as the principal deputy, adviser, and alter ego to the Secretary of State. The Deputy Secretary of State for Management and Resources (D-MR) serves as the Department’s Chief Operating Officer. The Under Secretaries have been established for Political Affairs; Economic Growth, Energy and Environment; Arms Control and International Security Affairs; Public Diplomacy and Public Affairs; Management; and Civilian Security, Democracy and Human Rights. The Under Secretary for Management (M) also serves as the CFO for the Department. The Comptroller has delegated authority for many of the activities and responsibilities mandated as CFO functions, including preparation of the AFR.
Six regional bureaus support the Department’s political affairs mission – each is responsible for a specific geographic region of the world. These include:
Bureau of African Affairs,
Bureau of European and Eurasian Affairs,
Bureau of East Asian and Pacific Affairs,
Bureau of Near Eastern Affairs,
Bureau of South and Central Asian Affairs, and
Bureau of Western Hemisphere Affairs.
The Department also includes the Bureau of International Organization Affairs. This Bureau develops and implements U.S. policy in the United Nations, its specialized and voluntary agencies, and other international organizations. The Department’s organization chart can be found at https://www.state.gov/department-of-state-organization-chart.
DID YOU KNOW?
Daniel Webster served two terms as Secretary of State. He was the 14th and 19th Secretary of State. He served under Presidents Harrison, Tyler, and Fillmore.
At home, the passport process is often the primary contact most U.S. citizens have with the Department of State. There are 29 domestic passport agencies and centers, and approximately 7,600 public and 600 Federal and military passport acceptance facilities. The Department designates many post offices, clerks of court, public libraries and other state, county, township, and municipal government offices to accept passport applications on its behalf.
Overseas, in each Embassy, the Chief of Mission (COM) (usually an Ambassador) is responsible for executing U.S. foreign policy aims, as well as coordinating and managing all U.S. Government functions in the host country. The President appoints each COM, who is then confirmed by the Senate. The COM reports directly to the President through the Secretary of State. The U.S. Mission is also the primary U.S. Government point of contact for Americans overseas and foreign nationals of the host country.
The Mission serves the needs of Americans traveling, working, and studying abroad, and supports Presidential and Congressional delegations visiting the country.
Every diplomatic mission in the world operates under a security program designed and maintained by the Department’s Bureau of Diplomatic Security (DS). In the United States, DS investigates passport and visa fraud, conducts personnel security investigations, and protects the Secretary of State and high-ranking foreign dignitaries and visiting officials. See Collection of Sidebars for an “In Focus” view of our global visa fraud investigations.
Additionally, the Department utilizes a wide variety of technology tools to further enhance its effectiveness and magnify its efficiency. Today, most offices increasingly rely on digital video conferences, virtual presence posts, and websites to support their missions. The Department also leverages social networking Web tools to engage in dialogue with a broader audience. See Department websites of interest.
Strategic Goals and Government-wide Management Initiatives
Managing for Results: Planning, Budgeting, Managing, and Learning
The Department of State advanced the Administration’s policy priorities by strengthening program and project design, tracking key performance metrics, and using strategic reviews to assess progress. The Managing for Results framework fosters enterprise-wide linkages between strategic planning, budgeting, managing, and learning. Bureaus and missions achieved more successful outcomes using evidence to inform policy, resource, and program decisions.
Joint State-USAID Strategic Goals
The Department’s strategic planning is implemented at three organizational levels:
The State/USAID Joint Strategic Plan (JSP) – a four-year Agency level strategic plan that outlines State and USAID’s overarching goals and objectives for U.S. diplomacy and development, guides bureau and mission planning, and informs annual budget decisions.
Joint Regional Strategies – the four-year strategic plan for each geographic region that sets joint State and USAID priorities and guides partnered planning at the bureau and mission level.
Functional Bureau Strategies – the four-year strategic plan that sets priorities for each State functional bureau and guides bureau- and mission-level planning with key partners.
Integrated Country Strategies – the four-year strategic plan for each overseas diplomatic mission that articulates policy priorities through a whole-of-government approach.
The FY 2018-2022 JSP contains four goals and 16 strategic objectives that directly support objectives of the 2017 National Security Strategy. These are found in the “State-USAID Joint Strategic Goal Framework” in the Performance Summary and Highlights section, along with a discussion of 2020 performance results for each strategic goal. The JSP was developed through policy guidance from the Secretary of State, USAID Administrator, and the National Security Council. The FY 2018-2022 JSP further guided annual performance reporting in the Department’s 2021 Agency Financial Report and serves as the final year of reporting for this JSP cycle.
The Department of State and USAID are currently developing the FY 2022-2026 JSP, which will establish new strategic goals, strategic objectives, performance goals, metrics, and targets to advance the Administration’s foreign policy and foreign assistance priorities. Scheduled for release in February 2022, the JSP’s goals and objectives will provide a roadmap for the policies and strategic planning that inform the new Joint Regional Strategy, the Functional Bureau and Independent Office Strategies, and Integrated Country Strategies. Current bureaus and country strategies are available to the public through the Department’s website at https://www.state.gov/plans-performance-budget/.
Agency Priority Goals
Agency Priority Goals (APG) are a performance accountability component of the Government Performance Results Modernization Act of 2010. They serve to focus leadership priorities, set outcomes, and measure results, especially where agencies need to drive significant progress and change. APGs are intended to demonstrate quarterly progress on near-term results or achievements the agency seeks to accomplish within 24 months. State’s FY 2020-2021 APGs included:
Data Informed Diplomacy:By September 2021, we will align and augment a data and analytics cadre that can harness data and apply cutting-edge analytics processes and products to foreign policy and operational challenges and fulfill the requirements of the Federal Data Strategy to include building the first Department Data Strategy and enterprise Data Catalog.
IT Modernization: By September 30, 2021, the Department will satisfy Field Enabling IT baseline levels for capability and performance at all field locations; modernize its suite of core, mission-aligned IT systems incorporating a Cloud Smart approach that enables the Department to share resources and measure efficiencies gained via common cloud platform environments; and achieve a continuous cyber risk diagnostics and monitoring capability that embeds security equities throughout the full lifecycle of all IT systems within every sponsored environment.
Enhancing Security Monitoring Solutions: By September 30, 2021, upgrade 20 percent of Department of State facilities’ security monitoring solutions.
Category Management: By September 30, 2021, meet or exceed Federal targets for managed spending (identifying and proactively managing key vendors and contracts) as determined by the President’s Management Agenda.
The Department will publish FY 2022-2023 APG goal statements concurrent with the 2023 President’s Budget in February 2022 and first quarter progress in April 2022, on Performance.gov.
Cross-Agency Priority Goals
The President’s Management Agenda lays out a long-term vision for modernizing the Federal Government in areas where implementation requires active collaboration amongst multiple agencies. To drive these management priorities, the Administration leverages Cross-Agency Priority (CAP) goals to coordinate and publicly track implementation across Federal agencies. Because CAP goals are updated and/or revised every four years with each presidential Administration term, public reporting on the previous Administration’s CAP goals was discontinued in February 2021. Once the Biden-Harris Administration releases the new President’s Management Agenda and its associated CAP Goals, the Department will publish progress updates on Performance.gov at https://www.performance.gov/.
Performance Summary and Highlights
The Department of State reports annual progress and results toward achieving the strategic objectives and performance goals articulated in the JSP via the Annual Performance Plan/Annual Performance Report (APP/APR).
The latest reporting on the JSP – including performance goals, performance indicators, and a narrative explanation of progress – can be found in the 2020 APR at https://www.state.gov/plans-performance-budget/performance-plans-and-reports/. Because the annual performance data for 2021 is collected in the first and second quarters of 2022, the summary that represents State and USAID’s joint progress results reflects 2020. These are the most complete results to date. The 2021 APR will reflect our interagency progress and results against the FY 2018-2022 JSP and will be published on state.gov no later than March 31, 2022.
The Department of State continually reviews performance progress against the JSP’s strategic objectives in a variety of complementary fora throughout the year, including the Data Quality Assessment and the annual strategic reviews with Office of Management and Budget (OMB). The Department leverages data and evidence from these reviews to continually improve planning, performance, evaluation, and budgeting processes. These cumulative reviews foster a culture of continuous learning and improvement.
The next section provides an overview of major program areas that are aligned with the four strategic goals of the FY 2018-2022 State-USAID Joint Strategic Plan. These programs are also included in the Financial Section, Section II of this AFR, on the Consolidated Statement of Net Cost.
State-USAID Joint Strategic Goal Framework
Goal 1: Protect America’s Security at Home and Abroad
1.1: Counter the Proliferation of Weapons of Mass Destruction (WMD) and their Delivery Systems
1.2: Defeat ISIS, al-Qa’ida and other Transnational terrorist organizations, and counter state-sponsored, regional, and local terrorist groups that threaten U.S. national security interests
1.3: Counter instability, transnational crime, and violence that threaten U.S. interests by strengthening citizen-responsive governance, security, democracy, human rights, and rule of law
1.4: Increase capacity and strengthen resilience of our partners and allies to deter aggression, coercion, and malign influence by state and non-state actors
1.5: Strengthen U.S. border security and protect U.S. citizens abroad
Goal 2: Renew America’s Competitive Advantage for Sustained Economic Growth and Job Creation
2.1: Promote American prosperity by advancing bilateral relationships and leveraging international institutions and agreements to open markets, secure commercial opportunities, and foster investment and innovation to contribute to U.S. job creation
2.2: Promote healthy, educated and productive populations in partner countries to drive inclusive and sustainable development, open new markets and support U.S. prosperity and security objectives
2.3: Advance U.S. economic security by ensuring energy security, combating corruption, and promoting market-oriented economic and governance reforms
Goal 3: Promote American Leadership through Balanced Engagement
3.1: Transition nations from assistance recipients to enduring diplomatic, economic, and security partners
3.2: Engage international fora to further American values and foreign policy goals while seeking more equitable burden sharing
3.3: Increase partnerships with the private sector and civil society organizations to mobilize support and resources and shape foreign public opinion
3.4: Project American values and leadership by preventing the spread of disease and providing humanitarian relief
Goal 4: Ensure Effectiveness and Accountability to the American Taxpayer
4.1: Strengthen the effectiveness and sustainability of our diplomacy and development investments
4.2: Provide modern and secure infrastructure and operational capabilities to support effective diplomacy and development
4.3: Enhance workforce performance, leadership, engagement, and accountability to execute our mission efficiently and effectively
4.4: Strengthen security and safety of workforce and physical assets
Major Program Areas
Strategic Goal 1: Protect America’s Security at Home and Abroad
The United States faces ever evolving and multi-dimensional security challenges. To meet these challenges, we support and collaborate with both new and old partners to defend shared interests and to adapt to the changing international environment.
In 2020, out of 28 performance metrics, 50 percent achieved or exceeded their targets, 39 percent fell behind their targets and no performance data was available on 11 percent of metrics at the time of 2020 APR publication.
State conducted 300 enhanced diplomatic engagements on cybersecurity issues, surpassing the 2020 target by 175 engagements.
U.S. Government programs trained 2,179 criminal justice personnel in antitrafficking techniques.
21,067 women participated in U.S. supported peacebuilding processes in 2020, a substantial increase from 4,422 in 2019.
Strategic Goal 2: Renew America’s Competitive Advantage for Sustained Economic Growth and Job Creation
American national security requires sustained economic prosperity. As new challenges and opportunities emerge in a changing international landscape, our economic engagement with the world must be comprehensive, forward-looking, and flexible.
In 2020, out of 37 performance metrics, 65 percent achieved or exceeded their targets and 35 percent fell short.
Reduced climate risk through better management practices over 5.7 hectares.
Created 173 legal instruments improving prevention and response to sexual and gender-based violence, an increase from 77 in 2019.
Engaged with 65 countries to address air pollution, a 30 percent increase over the established target.
Strategic Goal 3: Promote American Leadership through Balanced Engagement
America First does not mean America alone. The United States is a beacon of liberty, freedom, and opportunity. Since the conclusion of the Second World War, the United States has led the development of a rules-based international order that allows nations to compete peacefully and cooperate more effectively with one another.
In 2020, out of 27 performance metrics, 63 percent achieved or exceeded their targets, 26 percent fell behind their targets and no performance data was available on 11 percent of metrics at the time of 2020 APR publication.
Provided government funding to 7,012 civil society organizations promoting advocacy interventions.
Hosted 37.7 million exchange program visitors at American spaces.
Non-government entities committed $56.364 billion in support of U.S. foreign policy goals.
Strategic Goal 4: Ensure Effectiveness and Accountability to the American Taxpayer
The Federal Government can and should operate more effectively, efficiently, and securely. As such, the Administration set goals in areas that are critical to improving the Federal Government’s effectiveness, efficiency, cybersecurity, and accountability.
In this strategic goal, the Department made significant investments in advancing the use of data as a tool for decision making. At the strategic planning level, Department developed performance metrics to measure progress in support of these strategic objectives: strengthen the effectiveness and sustainability of our diplomacy and development investments; provide modern and secure infrastructure and operational capabilities to support effective diplomacy and development; enhance workforce performance, leadership, engagement, and accountability to execute our mission effectively and efficiently; strengthen security and safety of workforce and physical assets.
In 2020, out of 40 performance metrics, 45 percent achieved or exceeded their targets, 40 percent fell behind their targets and no performance data was available on 15 percent of metrics at the time of 2020 APR publication.
State achieved $15.702 million in supply chain cost savings, an increase by $5 million in savings between 2019 and 2020.
Enrolled 62 key mission data sets, a major increase from target of 24, into the Enterprise Data Catalog that supports Department’s data strategy.
Trained 2,135 employees in State’s in-house and partner-endorsed data analytics courses that teaches cadre in how to apply the cutting-edge analytics processes and products.
Program and Project Design, Monitoring, and Evaluation Policy
The Department is committed to using data and evidence to ensure we are using best practices in program and project design, monitoring, evaluation, and data analysis to achieve the most effective U.S. foreign policy outcomes for, and greater accountability to, the American people.
In response to requirements contained in the Foreign Aid Transparency and Accountability Act, the Foundations for Evidence-Based Policymaking Act and the Program Management Improvement and Accountability Act, the Department updated its evaluation policy to encompass the full spectrum of performance management and evaluation activities including program design, monitoring, evaluation, analysis, and learning. The Department established guidance for implementing the updated policy and is working with bureaus and offices to complete program and project design steps for their major lines of effort. Bureaus responded to this updated and expanded policy by putting in place performance management documents and practices, including the use of logic models, theories of change, performance metrics, monitoring structures, and other foundational components.
Maximizing America’s Investments Through Analysis and Evidence
Evidence and Evaluation
The Department supports the analysis and use of evidence in policymaking by training staff, creating groups for knowledge sharing, establishing, and monitoring evaluation requirements, providing funding opportunities to gather better evidence, and maintaining a central database to manage and share evaluations. The Department continues efforts to strengthen the use of data and evidence to drive better decision making, achieve greater impacts, and more effectively and efficiently achieve U.S. foreign policy objectives.
One of the efforts includes the Department of State’s internal annual Strategy and Resource reviews. These strategic discussions allow Department leadership to monitor progress against strategic priorities, consider emerging challenges, and inform resource decisions.
Other examples of ongoing efforts to bolster the Department’s ability to plan, execute, monitor, and evaluate programs and projects in a way that encourages learning and adapting include:
Evidence Act Implementation
In summer 2021, the Department actively engaged the performance and evaluation professionals across the Department, working under the co-Evaluation Officers’ leadership, to implement Title 1 of the Foundations for Evidence-Based Policymaking Act (Evidence Act; Public Law No. 115-435) to develop the Learning Agenda, Capacity Assessment, and Annual Evaluation Plan. These documents, which catalogue plans for research relevant to the Department’s mission and assess the Department’s ability to carry out evidence-building activities are due to be published in February 2022 along with the Department’s FY 2022-2026 JSP.
As stakeholder and leadership input are key to effective Evidence Act implementation, as well as required by law, the Department carried out an extensive stakeholder analysis and developed a stakeholder engagement plan. This ensured transparent engagement with stakeholders throughout the enterprise and across leadership and working level staff. The Department’s Performance Improvement Officer, Director of Foreign Assistance, Chief Data Officer, and Statistical Official are an integral part of the Evidence Act implementation activities through frequent consultations and meetings with the co-Evaluation Officers in implementing the required deliverables of the Evidence Act.
The Department is also implementing Title 2 of the Evidence Act, Open Government Data Act, and Title 3 of the Evidence Act the Confidential Information Protection and Statistical Efficiency Act which cover data and privacy activities.
Financial Summary and Highlights
The financial summary and highlights that follow provide an overview of the 2021 financial statements of the Department of State (the Department). The independent auditor, Kearney & Company, audited the Department’s Consolidated Balance Sheet for the fiscal years ending September 30, 2021 and 2020, along with the Consolidated Statements of Net Cost and Changes in Net Position, and the Combined Statement of Budgetary Resources1. The Department received an unmodified (“clean”) audit opinion on both its 2021 and 2020 financial statements. A summary of key financial measures from the Balance Sheet and Statements of Net Cost and Budgetary Resources is provided in the table below. The complete financial statements, including the independent auditor’s reports, notes, and required supplementary information, are presented in Section II: Financial Information.
Summary Table of Key Financial Measures (dollars in billions)
Summary Consolidated Balance Sheet Data
Fund Balance with Treasury
General Property and Equipment, Net
Cash, Advances, Receivables, and Other Assets
Federal Employee and Veteran Benefit Liability
International Organizations Liability
Cumulative Results of Operations
Total Net Position
Total Liabilities and Net Position
Summary Consolidated Statement of Net Cost Data
Total Cost and Loss on Assumption Changes
Less Total Revenue
Total Net Cost
Summary Combined Statement of Budgetary Resources Data
Unobligated Balance from Prior Year Budget Authority, Net
Spending Authority from Offsetting Collections
Total Budgetary Resources
To help readers understand the Department’s principal financial statements, this section is organized as follows:
1 Hereafter, in this section, the principal financial statements will be referred to as: Balance Sheet, Statement of Net Cost, Statement of Changes in Net Position, and Combined Statement of Budgetary Resources. (back to text)
Balance Sheet: Overview of Financial Position
The Balance Sheet provides a snapshot of the Department’s financial position. It displays, as of a specific time, amounts of current and future economic benefits owned or managed by the reporting entity (Assets), amounts owed (Liabilities), and amounts which comprise the difference (Net Position) at the end of the fiscal year.
Real Property Projects – 2021 Cost Capitalized(dollars in millions)
Mexico City, Mexico
Guatemala City, Guatemala
Assets. The Department’s total assets were $111.9 billion at September 30, 2021, an increase of $2.0 billion (2 percent) over the 2020 total. Fund Balance with Treasury increased $1.2 billion (2 percent). Property and Equipment increased by $992 million (4 percent) from September 30, 2020. New buildings, structures, and improvements accounted for most of this increase with the top 10 New Embassy Compound projects accounting for $726 million of the increase. The six-year trend in the Department’s total assets is presented in the “Trend in Total Assets” bar chart.
Many Heritage Assets, including art, historic American furnishings, rare books and cultural objects, are not reflected as 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. Thus the acquisition cost of heritage assets is expensed not capitalized. The maintenance costs of these heritage assets are expensed as incurred, since it is part of the government’s role to maintain them 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.
Liabilities. The Department’s total liabilities were $35.8 billion at September 30, 2021, an increase of $2.8 billion (8 percent) between 2020 and 2021. Federal Employee and Veteran Benefits Liability increased $2.5 billion (9 percent) from 2020. The six-year trend in the Department’s total liabilities is presented in the “Trend in Total Liabilities” bar chart.
Ending Net Position. The Department’s net position, comprised of Unexpended Appropriations and the Cumulative Results of Operations, decreased $592 million (1 percent) between 2020 and 2021. Cumulative Results of Operations increased $356 million and Unexpended Appropriations were down $948 million due in part to the budgetary financing sources used to purchase property and equipment.
Statement of Net Cost: Yearly Results of Operations
The Statement of Net Cost presents the Department’s net cost of operations by strategic goal. Net cost is the total program cost incurred less any exchange (i.e., earned) revenue. The presentation of program results is based on the Department’s major goals established pursuant to the Government Performance and Results Act (GPRA) of 1993 and the GPRA Modernization Act of 2010. The total net cost of operations in 2021 equaled $38.4 billion, an increase of $5.8 billion (18 percent) from 2020. This increase of net costs was mainly due to increases in costs for global health programs to combat the global coronavirus pandemic and increases in spending for humanitarian efforts. In addition, actuarial costs increased in the Foreign Service Retirement and Disability Fund (FSRDF) due to actuarial assumption changes.
The six-year trend in the Department’s net cost of operations is presented in the “Trend in Net Cost of Operations” bar chart. There is an increase from 2016 to 2021 of $11 billion. Increases from 2016 generally reflect costs associated with new program areas related to countering security threats, sustaining stable states, and the coronavirus pandemic, as well as the higher cost of day-to-day operations such as inflation and increased global presence.
The “Net Cost of Operations by Strategic Goal” pie chart illustrates the results of operations by strategic goal, as reported on the Statement of Net Cost. As shown, net costs associated with two of the strategic goals (Strategic Goal 3: Promote American Leadership through Balanced Engagement) and (Strategic Goal 4: Ensure Effectiveness and Accountability to the American Taxpayer) represents the largest net costs in 2021 – a combined $30.7 billion (80 percent). The largest increase was in Strategic Goal 3: Promote American Leadership through Balanced Engagement. The net cost increased $5.2 billion resulting from an increase in spending on humanitarian relief and global health programs due to the coronavirus pandemic.
Earned revenues occur when the Department provides goods or services to another Federal entity or the public. The Department reports earned revenues regardless of whether it is permitted to retain the revenue or remit it to Treasury. Revenue from other Federal agencies must be established and billed based on actual costs, without profit. Revenue from the public, in the form of fees for service (e.g., visa issuance), is also without profit. Consular fees are established on a cost-recovery basis and determined by periodic cost studies. Certain fees, such as the machine readable Border Crossing Cards, are determined statutorily. Revenue from reimbursable agreements is received to perform services overseas for other Federal agencies. The FSRDF receives revenue from employee/employer contributions, a U.S. Government contribution, and investment interest. Other revenues come from ICASS billings and Working Capital Fund earnings.
Earned revenues totaled $7.4 billion in 2021, and are depicted, by program source, in the “Earned Revenues by Program Source” pie chart. The major sources of revenue were from consular fees ($2.9 billion or 39 percent), reimbursable agreements ($2.2 billion or 30 percent), and ICASS earnings ($1.1 billion or 15 percent). These revenue sources totaled $6.2 billion (84 percent). Overall, revenue increased by 9 percent – $.6 billion from 2020 to 2021. This increase is primarily a result of an increase in revenue from consular fees due to an increase in travel as a result of restrictions easing from the coronavirus pandemic.
Statement of Changes in Net Position: Cumulative Overview
The Statement of Changes in Net Position identifies all financing sources available to, or used by, the Department to support its net cost of operations and the net change in its financial position. The sum of these components, Cumulative Results of Operations and Unexpended Appropriations, equals the Net Position at year-end. The Department’s net position at the end of 2021 was $76.0 billion, a $592 million (.77 percent) decrease from the prior fiscal year. This change resulted from the $948 million decrease in Unexpended Appropriations and a $356 million increase in Cumulative Results of Operations.
DID YOU KNOW?
Abel Parker Upshur, the 15th Secretary of State, served both as the Secretary of the Navy (1841-1843) and the Secretary of State (1843-1844).
The Combined Statement of Budgetary Resources (SBR) summarizes budgetary resources available to the Department at the fiscal year-end.
The Department’s budgetary resources consist primarily of appropriations, spending authority from offsetting collections, and unobligated balances brought forward from prior years. The “Trend in Total Budgetary Resources” bar chart highlights the budgetary trend over the fiscal years 2016 through 2021. A comparison of the two most recent years shows a $3.0 billion (4 percent) increase in total resources since 2020. This change resulted from a decrease in unobligated balances from prior year budget authority ($2.8 billion) and increases in offsetting collections ($0.7 billion) and appropriations ($5.1 billion).
The Department's Budgetary Position
Secretary Blinken and Secretary of Defense Lloyd Austin participate in a North Atlantic Council meeting in Brussels, Belgium, April 14, 2021. Department of State
The Department’s budgetary resources are drawn from two broad categories – Diplomatic Engagement and Foreign Assistance. The budgetary position descriptions and tables in this section provide a detailed discussion of the two categories of funding.
For 2021, $76.6 billion of the Department’s $109.6 billion in total funding was provided by the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2021 (Division K, Public Law No. 116-260) (the “FY 2021 Act”) enacted on December 27, 2020. Of that total funding amount, a net $33.0 billion remained available for obligation in 2021 from prior years, and $10.8 billion for Coronavirus response was provided by the American Rescue Plan (ARP) Act of 2021 (Public Law No. 117-2). The Bureau of Budget and Planning manages the Diplomatic Engagement portion of the budget ($38.6 billion, including $14.8 billion in prior year funding that remained available for obligation in 2021), and the Office of Foreign Assistance manages foreign assistance funds ($71.0 billion, including $18.2 billion in prior year funding that remained available for obligation in 2021).
The 2021 Department of State Budget funded the Administration’s highest foreign policy priorities by positioning America to address challenges such as terrorism, international health and humanitarian disasters, bolster support for the Indo-Pacific region, and counter malign Chinese, Russian, and Iranian influence. The Department’s Budget advanced a range of strategic goals and objectives, including to:
Protect America’s Security at home and abroad by supporting and collaborating with both new and old partners to defend shared interests and to adapt to the changing international environment;
Renew America’s competitive advantage for sustained economic growth and job creation with comprehensive, forward-looking, and flexible economic engagement with the world;
Promote American leadership through balanced engagement that allows nations to compete peacefully and cooperate more effectively with one another; and
Ensure effectiveness and accountability to the American taxpayer by making significant investments in advancing the use of data as a tool for decision making.
Budgetary Position for Diplomatic Engagement
New 2021 funding enacted for Diplomatic Engagement totaled $23.8 billion, which included: $12.0 billion in appropriated Enduring funds and $3.5 billion in appropriated Overseas Contingency Operations (OCO) funds included in Title I of the FY 2021 Act, $158.9 million in mandatory appropriations for the Foreign Service Retirement and Disability Fund, pursuant to the Foreign Service Act of 1980; a cumulative $504 million for Coronavirus response ($300 million in Title IX of the 2021 bill for Consular Border and Security Programs (CBSP), and $204 million in ARP funding); and a one-time appropriation of $150 million in Title IX emergency funding that will remain available for up to 10 years to provide compensation to the individuals specified in section 7(b)(1) of the Sudan Claims Resolution Act (Public Law No. 116-260, Division FF, Title XVII). In addition, $7.6 billion non-appropriated funds were also included in the new funding available for obligation in 2021. This includes $2.2 billion in non-appropriated retained fee revenue collected in the CBSP account, $1.7 billion in the Working Capital Fund, and $3.7 billion for International Cooperative Administrative Support Services (ICASS). These funds support the people and programs that carry out U.S. foreign policy, advancing U.S. national security, political, and economic interests at 276 posts in 195 countries around the world. These funds also maintain and secure the U.S. diplomatic infrastructure platform from which U.S. Government agencies operate overseas.
In addition to the $23.8 billion in new 2021 funding, $14.8 billion in prior year Diplomatic Engagement funding remained available for obligation in 2021.
As noted above, in 2021, the Department earned and retained $2.2 billion in new user fee revenue derived from passport and visa processing, including Machine Readable Visa fees, Immigrant Visa fees, the Western Hemisphere Travel Initiative surcharge, Visa Fraud Prevention and Detection fees, and other fee and surcharge revenues for the Consular and Border Security Program. CBSP funds support programs that provide protection to U.S. citizens overseas and contribute to national security and economic growth. These programs are a core element of the national effort to deny individuals who threaten the country entry into the United States while assisting and facilitating the entry of legitimate travelers and promoting tourism. As noted above, the CBSP program received $300 million in emergency appropriations in 2021 to sustain consular operations impacted by the plummet in global travel and the loss of passport, visa, and other revenues due to the Coronavirus pandemic. In addition, $150 million from the ARP was made available for consular activities through the Diplomatic Programs account.
2022 Diplomatic Engagement Request
The total projected available funding for 2022 is $26.5 billion, of which $17.3 billion is requested appropriated funding and $9.2 billion is the projected revenue total ($1.6 billion in the Working Capital Fund, $4.0 billion in ICASS, and $3.6 billion in CBSP). The 2022 estimate for consular fee revenue to support CBSP has been revised upwards to $3.6 billion, an increase of $0.8 billion from the 2022 President’s Budget request due to continued recovery from the pandemic resulting in increased visa and passport demand.
Budgetary Position for Foreign Assistance
For 2021, foreign assistance funding for the Department of State and USAID totaled $52.8 billion, provided through two laws: $42.2 billion in the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2021 (Division K, Public Law No. 116-260) (the “FY 2021 Act”) enacted on December 27, 2020, and $10.6 billion in the American Rescue Plan (ARP) Act of 2021 (Public Law No. 117-2). Title IX of the 2021 appropriations bill included a one-time appropriation of $4.7 billion in emergency funding for Sudan and Gavi, the Vaccine Alliance.
As of October 2021, the carryover of unobligated 2020 foreign assistance balances into 2021 totaled $18.2 billion.
Foreign Assistance Accounts Fully Implemented by the Department of State
Of the 2021 funds provided by Congress, the foreign assistance accounts fully managed by the Department of State totaled $19.8 billion, approximately a third of the foreign assistance budget. State fully implements the following security assistance accounts: Foreign Military Financing (FMF); International Military Education and Training; International Narcotics Control and Law Enforcement; Nonproliferation, Antiterrorism, Demining, and Related Programs; and Peacekeeping Operations. Of the $9.0 billion security assistance total provided by Congress in 2021, $6.2 billion in FMF was for countries in the Middle East and North Africa, including $3.3 billion for Israel.
In 2021, the portion of humanitarian assistance managed by the Department through the Migration and Refugee Assistance (MRA) and U.S. Emergency Refugee and Migration Assistance accounts totaled $3.9 billion, of which $1.7 billion was Overseas Contingency Operations (OCO) funding and $500 million was provided in the ARP. These funds provided humanitarian assistance and resettlement opportunities for refugees and conflict victims around the globe and contributed to key multilateral and non-governmental organizations that address pressing humanitarian needs overseas. Additionally, MRA funding provided in the ARP will be used to help prevent, prepare for, and respond to COVID-19 in existing complex emergency responses, and to address the potential humanitarian consequences of the pandemic.
In 2021, the portion of the Global Health Programs appropriation managed by the Department totaled $5.9 billion. This is the primary source of funding for the President’s Emergency Plan for AIDS Relief. These funds are used to control the epidemic through data-driven investments that strategically target geographic areas and population where the initiative can achieve the most impact for its investments.
The 2021 International Organizations and Programs (IO&P) totaled $967.5 million, $387.5 million in enduring funding and $580.0 million provided in the ARP. It provided international organizations voluntary contributions that advanced U.S. strategic goals by supporting and enhancing international consultation and coordination. This approach is required in transnational areas where solutions to problems are best addressed globally, such as protecting the ozone layer or safeguarding international air traffic. In other areas, the United States can multiply its influence and effectiveness through support for international programs.
Foreign Assistance Accounts Fully Implemented by USAID
USAID fully implements the following accounts: Global Health Programs-USAID, International Disaster Assistance, Food for Peace, Development Assistance, Transition Initiatives, Complex Crises Fund, and USAID Administrative accounts, including Operating Expenses, the Capital Investment Fund, and the Office of the Inspector General. The 2021 appropriated total for those accounts is $19.6 billion.
Jointly Implemented Foreign Assistance Accounts
The Department and USAID jointly implement funds from the Assistance for Europe, Eurasia, and Central Asia and the Economic Support Fund (ESF) accounts. Congress provided $13.3 billion for these two accounts in 2021 to advance national security and support programs focused on democracy, anti-corruption, and rule of law. This total includes $8.7 billion in funding under ESF authorities in the ARP for COVID response. This funding also helps countries of strategic importance meet near- and long-term political, economic, development, and security needs.
Another jointly managed account is the Democracy Fund account. The Democracy Fund appropriation totaled $290.7 million in 2021; the funds are split and made available for both the Department and USAID. Funding in this account promotes democracy in priority countries where egregious human rights violations occur, democracy and human rights advocates are under pressure, governments are not democratic or are in transition, where there is growing demand for human rights and democracy, and for programs promoting Internet Freedom.
2022 Foreign Assistance Request
The President’s 2022 Request for foreign assistance for the Department of State and USAID is currently under congressional consideration. The State and USAID request for foreign assistance is $43.0 billion to support all core programs; no OCO funding is requested. The total includes $1.8 billion in continuing resolution anomalies for disaster relief for Afghan evacuees. Taken together, the Department of State fully managed accounts sum to $21.1 billion or roughly half of the total request.
Department of State and USAID Budget by Account for Diplomatic Engagement1
ii. International Narcotics Control and Law Enforcement
iii. International Military Education and Training
iv. Nonproliferation, Antiterrorism, and Demining
v. Peacekeeping Operations
d. Humanitarian Assistance
i. Migration and Refugee Assistance
ii. Emergency Refugee and Migration Assistance
iii. International Disaster Assistance
iv. Food for Peace, Title II
e. USAID Administrative Expenses
i. USAID Operating Expense
ii. USAID Capital Investment Fund
iii. USAID Inspector General
f. Foreign Assistance Rescission or Cancellation of Prior Year Balances
1 The numbering hierarchy is provided for illustrative purposes of the AFR. (back to text)
2 Total New Budget Authority includes revenue generated for Non-Appropriated accounts. (back to text)
3 Amounts are shown for informational purposes only and are not included in the totals presented. (back to text)
Impact of COVID-19
In 2021, the Department of State maintained its focus on response and recovery related to the COVID-19 global pandemic. The Department marshalled resources to inform and safeguard U.S. citizens overseas and advance the Administration’s commitment to end the COVID-19 pandemic, mitigate its wider harms to people and societies, and strengthen the global recovery and readiness for future pandemic threats.
The Department’s 2021 funding included supplemental resources for COVID-19 response. For Diplomatic Engagement, this included a cumulative $504 million ($300 million in Title IX of the 2021 appropriations bill for CBSP, and $204 million in ARP funding). The CBSP funds maintained consular operations, including services to American citizens, offsetting the impact of reduced visa and passport revenues that remained well below pre-pandemic levels. A portion of the ARP funding strengthened the Department’s global capacity for medical response, diagnosis, and treatment of its workforce, including provision of COVID-19 vaccines. ARP funding also mitigated the profound impact of the COVID-19 pandemic on the Department’s permanent change of station costs for employees traveling to and/or from post. Internally, in September 2021, the Department replaced its Diplomacy Strong framework, a phased approach and methodology for COVID-19 mitigation in our domestic and overseas operations and facilities, with the COVID-19 Mitigation Process as the Department’s framework for determining an appropriate onsite work posture and correlated mitigation actions.
In 2021, visa and passport fee-based revenue continued to recover from the precipitous decline in 2020 but remained below pre-pandemic levels. In addition to the funding noted above, Congress renewed expanded expenditure authority for the passport security surcharge and the immigrant visa security surcharge, and enacted temporary expanded expenditure authority for the Western Hemisphere Travel Initiative surcharge and fraud prevention and detection fees. These expenses have previously been covered by Machine Readable Visa fees generated from non-immigrant visa applications, but there were insufficient collections available in 2021.
Department of State-led foreign assistance programming has played a key role in mitigating COVID-19 impacts among vulnerable populations, including migrants and host communities; and addressed urgent HIV/AIDS anti-retroviral commodities-related needs of clients exacerbated by COVID-19 disruptions. The Department also strengthened the capacity of international organizations to help end the COVID-19 pandemic and provide urgent relief in line with the priorities and objectives of the UN Global Humanitarian Response Plan for COVID-19.
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 FASAB standards using OMB Circular A-136, Financial Reporting Requirements, revised, 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.
Analysis of Systems, Control, and Legal Compliance
The Department’s Management Control policy is comprehensive and requires all Department managers to establish cost-effective systems of management controls to ensure U.S. Government activities are managed effectively, efficiently, economically, and with integrity. All levels of management are responsible for ensuring adequate controls over all Department operations.
Federal Managers' Financial Integrity Act
The Department of State’s (the Department’s) management is responsible for managing risks and maintaining effective internal control to meet the objectives of Sections 2 and 4 of the Federal Managers’ Financial Integrity Act. The Department conducted its assessment of risk and internal control in accordance with OMB Circular No. A-123, Management’s Responsibility for Enterprise Risk Management and Internal Control. Based on the results of the assessment, the Department can provide reasonable assurance that internal control over operations, reporting, and compliance was operating effectively as of September 30, 2021.
As a result of its inherent limitations, internal control over financial reporting, no matter how well designed, cannot provide absolute assurance of achieving financial reporting objectives and may not prevent or detect misstatements. Therefore, even if the internal control over financial reporting is determined to be effective, it can provide only reasonable assurance with respect to the preparation and presentation of financial statements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
Antony J. Blinken Secretary of State November 15, 2021
Management Control Program
The Federal Managers’ Financial Integrity Act (FMFIA) requires the head of each agency to conduct an annual evaluation in accordance with prescribed guidelines, and provide a Statement of Assurance (SoA) to the President and Congress. As such, the Department’s management is responsible for managing risks and maintaining effective internal control.
The FMFIA requires the Government Accountability Office (GAO) to prescribe standards of internal control in the Federal Government, which is titled GAO’s Standards for Internal Control in the Federal Government (Green Book). Commonly known as the Green Book, these standards provide the internal control framework and criteria Federal managers must use in designing, implementing, and operating an effective system of internal control. The Green Book defines internal control as a process effected by an entity’s oversight body, management, and other personnel that provides reasonable assurance that the objectives of an entity are achieved. These objectives and related risks can be broadly classified into one or more of the following categories:
Effectiveness and efficiency of operations,
Compliance with applicable laws and regulations, and
Reliability of reporting for internal and external use.
OMB Circular A-123, Management’s Responsibility for Enterprise Risk Management and Internal Control provides implementation guidance to Federal managers on improving the accountability and effectiveness of Federal programs and operations by identifying and managing risks, establishing requirements to assess, correct, and report on the effectiveness of internal controls. OMB Circular A-123 implements the FMFIA and GAO’s Green Book requirements. FMFIA also requires management to include assurance on whether the agency’s financial management systems comply with Government-wide requirements. The financial management systems requirements are directed by Section 803(a) of the FFMIA and Appendix D to OMB Circular A-123, Compliance with the Federal Financial Management Improvement Act of 1996. The 2021 results are discussed in the section titled “Federal Financial Management Improvement Act.”
The Secretary of State’s 2021 Statement of Assurance for FMFIA is provided on the previous page. We have also provided a Summary of Financial Statement Audits and Management Assurances as required by OMB Circular A-136, Financial Reporting Requirements, revised, in the Other Information section of this report. In addition, there are no individual areas for the Department currently on GAO’s bi-annual High-Risk List.
The Department’s Management Control Steering Committee (MCSC) oversees the Department’s management control program. The MCSC is chaired by the Comptroller, and is comprised of eight Assistant Secretaries, in addition to the Chief Information Officer, the Deputy Comptroller, the Deputy Legal Adviser, the Director for the Office of Budget and Planning, the Director for Global Talent Management, the Director for Management Strategy and Solutions, the Director for the Office of Overseas Buildings Operations, and the Inspector General (non-voting). Individual SoAs from Ambassadors assigned overseas and Assistant Secretaries in Washington, D.C. serve as the primary basis for the Department’s FMFIA SoA issued by the Secretary. The SoAs are based on information gathered from various sources including managers’ personal knowledge of day-to-day operations and existing controls, management program reviews, and other management-initiated evaluations. In addition, the Office of Inspector General, the Special Inspector General for Afghanistan Reconstruction, and the Government Accountability Office conduct reviews, audits, inspections, and investigations that are considered by management.
The Senior Assessment Team (SAT) provided oversight during 2021 for the internal controls over reporting program in place to meet Appendix A to OMB Circular A-123 requirements. The SAT reports to the MCSC, is chaired by the Deputy Comptroller, and is comprised of 12 senior executives from bureaus that have significant responsibilities relative to the Department’s financial resources, processes, and reporting. The SAT also includes executives from the Office of the Legal Adviser and the Office of Inspector General (non-voting). The Department employs a risk-based approach in evaluating internal controls over reporting on a multi-year rotating basis, which has proven to be efficient. Due to the broad knowledge of management involved with the Appendix A assessment, along with the extensive work performed by the Office of Management Controls, the Department evaluated issues on a detailed level.
The Department’s management controls program is designed to ensure full compliance with the goals, objectives, and requirements of the FMFIA and various Federal laws and regulations. To that end, the Department has dedicated considerable resources to administer a successful management control program. The Department’s Office of Management Controls employs an integrated process to perform the work necessary to meet the requirements of OMB Circular A-123’s Appendix A and Appendix C (regarding Payment Integrity), the FMFIA, and the GAO’s Green Book. Green Book requirements directly relate to testing entity-level controls, which is a primary step in operating an effective system of internal control. Entity-level controls reside in the control environment, risk assessment, control activities, information and communication, and monitoring components of internal control in the Green Book, which are further required to be analyzed by 17 underlying principles of internal control.
For the Department, all five components and 17 principles were operating effectively and supported the Department’s FY 2021 unmodified Statement of Assurance. The 2021 Circular A-123 Appendix A assessment did not identify any material weaknesses in the design or operation of the internal control over reporting. The assessment did identify several significant deficiencies in internal control over reporting that management is closely monitoring. The Department complied with the requirements in OMB Circular A-123 during 2021 while working to evolve our existing internal control framework to be more value-added and provide for stronger risk management for the purpose of improving mission delivery.
The Department also places emphasis on the importance of continuous monitoring. It is the Department’s policy that any organization with a material weakness or significant deficiency must prepare and implement a corrective action plan to fix the weakness. The plan combined with the individual SoAs and Appendix A assessments provide the framework for monitoring and improving the Department’s management controls on a continuous basis. Management will continue to direct and focus efforts to resolve significant deficiencies in internal control identified by management and auditors.
During 2021, the Department continued taking important steps to advance its Enterprise Risk Management (ERM) program. The Enterprise Governance Board (EGB), which is comprised of the Deputy Secretary and all Under Secretaries, serves as the Enterprise Risk Management Council. In this capacity, the EGB reviews the Department’s risk profile at least once per year. The Department’s Office of Management Strategy and Solutions serves as the Executive Secretariat to the EGB and manages the Department’s overall risk management program. It is the Department’s policy that advancement of U.S. foreign policy objectives inherently involves diverse types of risk, and the Department recognizes that taking considered risks can be essential to creating value for our stakeholders.
In October 2021, the Secretary stated as part of his Modernizing American Diplomacy agenda that “a world of zero risk is not a world in which American diplomacy can deliver. We have to accept risk, and manage it smartly.” The Enterprise Governance Board reviewed the Department’s risk management processes and risk posture during 2021. The EGB sets the tone and direction for risk management policies, communications, and training throughout the organization, and is considering ways to advance the Department’s risk culture through improved policies and procedures; and employee engagement. The EGB affirmed that Bureaus have risk management activities built into a wide range of existing procedures and manage risk in a variety of ways, and incorporate mitigation strategies into strategic planning processes. The Department looks forward to continued development of risk management processes in 2022.
Federal Financial Management Improvement Act
The Federal Financial Management Improvement Act of 1996 (FFMIA) requires agencies to implement and maintain financial management systems that are in substantial compliance with Federal financial management system requirements, Federal accounting standards, and the U.S. Standard General Ledger at the transaction level. The Department conducted its evaluation of financial management systems for compliance with FFMIA in accordance with OMB Circular A‐123, Appendix D. Based on the results of this assessment, the Department can provide reasonable assurance that its overall financial management systems substantially comply with principles, standards, and requirements prescribed by the FFMIA as of September 30, 2021.
Antony J. Blinken Secretary of State November 15, 2021
Federal Financial Management Improvement Act
The purpose of the Federal Financial Management Improvement Act of 1996 (FFMIA) is to advance Federal financial management by ensuring that Federal financial management systems generate timely, accurate, and useful information with which management can make informed decisions and to ensure accountability on an ongoing basis.
OMB Circular A-123, Appendix D, Compliance with the Federal Financial Management Improvement Act of 1996, provides guidance the Department used in determining compliance with FFMIA. The Department considered results of OIG and GAO audit reports, annual financial statement audits, and other relevant information. The Department’s assessment also relies upon evaluations and assurances under the Federal Managers’ Financial Integrity Act of 1982 (FMFIA), including assessments performed to meet the requirements of OMB Circular A-123 Appendix A. When applicable, particular importance is given to any reported material weakness and material non-conformance identified during these internal control assessments. The Department has made it a priority to meet the objectives of the FFMIA.
In its Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements, the Independent Auditor identified instances of substantial noncompliance with Federal financial management systems requirements. The Independent Auditors asserted that the Department’s financial management systems inherit certain controls from the overall information security program as identified in the FISMA audit, and that these weaknesses support a non-compliance finding. The Department acknowledges these weaknesses in our financial management systems that were described in the FISMA report. OMB’s Appendix D provides a revised compliance model that entails a risk-and outcome-based approach to assess FFMIA compliance. In our assessments and evaluations, the Department identified similar weaknesses, e.g., the Department has multiple low value financial systems that do not have current Authorizations-to-Operate on file. However, applying the guidance and the assessment framework noted in Appendix D to OMB Circular A-123, the Department considers them deficiencies versus substantial non-conformances relative to substantial compliance with the requirements of the FFMIA. Nonetheless, the Department is committed to continuing to work to address all identified financial management system deficiencies that are beneficial and cost-effective use of government funds.
Federal Information Security Modernization Act
The Federal Information Security Modernization Act of 2014 (FISMA) requires Federal agencies to develop, document, and implement an agency-wide program to protect government information and information systems that support the operations and assets of the agency. FISMA authorized the Department of Homeland Security (DHS) to take a leadership and oversight role in this effort, created cyber breach notification requirements, and modified the scope of reportable information from primarily policies and financial information to specific information about threats, security incidents, and compliance with security requirements.
The Department remains committed to adopting the best cybersecurity practices and embedding them into the agency’s culture. As a result, the agency continues to improve its cybersecurity posture and provide transparency internally and with external partners in other Federal agencies.
The Department’s 2021 Annual FISMA Report demonstrates the Department’s continued efforts to improve IT security by prioritizing and aligning initiatives with Executive Order 14028. The Department is investing in a Zero Trust architecture, expanding the number of systems utilizing secure cloud capabilities, and implementing Multi-Factor Authentication and encryption of data-at-rest and data-in-transit across the enterprise. The Department is also establishing the National Institute of Standards and Technology Supply Chain Risk Management Framework to identify critical software and secure IT hardware and software purchases to further enhance its IT security environment. The Department plans to continue refining and implementing risk management indicators, developing cybersecurity governance policies, and collaborating with partners across the Federal Government to guide investment and leadership decisions and enhance the overall cybersecurity posture.
The Department is pleased to point out that out of 10 Cross-Agency Priority Goal Evaluations, the Department maintains good statistics in 8 areas including Software Access Management, Hardware Access Management, Mobile Device Management, Privileged Network Access Management, Automated Access Management, Intrusion Detection and Prevention, Exfiltration and Enhanced Defenses, and Data Protection. There are two areas requiring attention including System Authorization and HVA Access Management.
Focus areas for improvement that will need additional support in the coming fiscal year include both short-term (one year effort) and long-term (multi-year effort) authorization remediation actions. The Department has authorized 87 percent of High Value Asset (HVA) systems at this time and expects to have this metric at 100 percent by April 2022.
Other areas of focus include improving (1) authorization of moderate impact systems currently at 63 percent, (2) HVA encrypted data-at-rest currently at 37 percent encryption, and (3) HVAs reconfigure or disable upon detection of a security violation currently at 23 percent. While improvements in statistics are likely to occur in the next fiscal year, these efforts will require multi-year attention.
Resource Management Systems Summary
Other Information, Section III of this AFR, provides an overview of the Department’s current and future resource management systems framework and systems critical to effective agency-wide financial management operations, financial reporting, internal controls, and interagency administrative support cost sharing. This summary presents the Department’s resource management systems strategy and how it will improve financial and budget management across the agency. This overview also contains a synopsis of critical projects and remediation activities that are planned or currently underway. These projects are intended to modernize and consolidate Department resource management systems.
The Anti-Deficiency Act (ADA) was enacted to prevent Federal agencies from incurring obligations or making expenditures in excess or in advance of amounts made available through appropriations or from accepting voluntary services.
The Department accounts and reports on 530 Treasury Account Fund Symbols (TAFS) annually. In addition, the Department operates in a complex financial environment with cash transactions processed all over the world in multiple foreign currencies. Consequently, there are instances where a Department TAFS has a negative Fund Balance with Treasury. These situations are considered potential violations of the ADA until fully investigated by the Department. Since 2009, 24 TAFS have been reported with negative balances. Of these, 19 have been resolved with no ADA violation and 5 remain under investigation at the end of 2021. Amounts outstanding and reported as negative TAFS at the end of 2021 were immaterial to the Department’s financial statements. The Department is committed to strengthening existing controls and reconciliation efforts around the use of appropriated funds and that any violation of the ADA, if confirmed, will be reported to Congress, GAO, and the President.
Prompt Payment Act
The Prompt Payment Act (PPA) requires Federal agencies to make payments in a timely manner, pay interest penalties when payments are late, and take discounts only when payments are made within the discount period. While the Department maintains a high PPA compliance rate for domestic vendor payments, it does not consistently calculate or pay interest penalties for overdue payments to overseas vendors. This is due to the complexity and challenges that the Department faces as we operate in over 270 locations in over 180 countries, often in hostile environments, while conducting business in over 135 currencies. Regardless, the Department will make efforts in 2022 and beyond to achieve the highest standard of PPA compliance with overseas vendors while working to accommodate host country and local laws and conventions as well as critical mission needs.
Management Challenges: Providing an Independent Statement of the Agency
In the 2021 annual statement, the Department’s Office of Inspector General (OIG) identified the most serious management and performance challenges for the Department. These challenges were identified in the areas of: protection of people and facilities; management and oversight of contracts, grants, and foreign assistance; information security and management; financial and property management; operating in contingency and critical environments; workforce management; and promoting accountability through internal coordination and clear lines of authority.
The OIG statement may be found in the Other Information section of this report. In response to the OIG’s recommendations, the Department took a number of corrective actions. Information on management’s assessment of the challenge and a summary of actions taken may also be found in the Other Information section.
President Biden has declared combating the global climate crisis as one of the four “historic” crises confronting the United States, and reasserting U.S. leadership on climate as one of his highest international priorities. On January 27, 2021, he issued Executive Order 14008 on Tackling the Climate Crisis at Home and Abroad, which committed the Administration to “put the climate crisis at the center of foreign policy and national security.”
Under this Order, the President created the position of the Special Presidential Envoy for Climate (SPEC). He named former Secretary of State John Kerry to hold the position with a mandate to lead diplomatic engagement on the climate crisis, exercise climate leadership in international fora, increase international climate ambition and ensure that climate change is integrated into all elements of the Administration’s foreign policy-making processes. The SPEC office is playing a leadership and coordinating role across all relevant U.S. agencies and elements of the Department, including the Department’s existing climate diplomacy structures, to execute the climate diplomacy mission.
The Bureau of Oceans and International Environmental and Scientific Affairs (OES) Office of Global Change (OES/EGC) has been the Department’s long-running permanent program office for climate issues. SPEC Kerry, the SPEC staff office, and OES/EGC staff are fully integrated and coordinated in advancing the Administration’s international climate policy strategy.
In response to Executive Order 14008, the Department also created the Climate Adaptation and Resilience Plan (CARP) to be reviewed and updated annually. Under this plan, the Department has three overarching climate adaptation and resilience goals: (1) protect the health and safety of personnel; (2) adapt Department facilities, operations, and mission-critical services to be more resilient to the impacts of climate change; and (3) lead by example through showcasing climate adaptation and resilience solutions.
The CARP identifies five priority areas for action over the course of the next fiscal year to meet these overarching goals: (1) enabling mobility in the workforce; (2) incorporating climate hazards into emergency planning and training; (3) building programs to support climate-ready sites and facilities; (4) evaluating climate risks in supply chain and procurement; and (5) improving local infrastructure through host country engagement. The Department is well under way in terms of making the workforce more mobile and thus resilient to the impacts of climate change. Staff are equipped with mobile software and hardware and these programs are expanding, while telework policies have been modified and updated. Under priority 3, the Department will conduct an initial overseas portfolio baseline screening to identify at-risk facilities that are at-risk to natural hazards, using the output to prioritize the most vulnerable facilities for greater assessment and/or adaptation efforts. Under priority 4, the Department will leverage the General Service Administration’s Supply Chain Climate Risk Management Framework to assess mission critical supply chains for vulnerabilities and update guidance for procurement specialists and program offices. The 2021 CARP can be found at https://www.state.gov/office-of-management-strategy-and-solutions/reports-and-scorecards/.
Impact of the Suspension of Operations in Afghanistan
The U.S. Embassy in Kabul suspended all operations on August 31, 2021. Now that American staff have departed Afghanistan, a new chapter of America’s engagement with Afghanistan has begun. The Department will use every diplomatic, economic, political, and assistance tool at our disposal to uphold the basic rights of all Afghans; support continued humanitarian access to the country; and ensure the Taliban honors its commitments. The Department of State has no higher priority than the safety and security of U.S. citizens overseas. The United States is also taking every available measure to assist Afghans who are at risk, particularly those who worked for or with the United States or have supported international efforts, utilizing established mechanisms to help Afghans at risk receive protection from potential retaliation or harm.
The suspension of operations meant the Department had to review all active contracts and grants, unliquidated obligations, and personal and real property including some leased properties in order to determine what, if any, impact the suspension would have on the Department’s financial position as stated in the AFR. The Department undertook a challenging and labor-intensive process to evaluate the appropriate scope of contracts and grants, focusing on which items to de-obligate. Additionally, the Department focused on the possible effects of any disposals and impairments to property. Appropriate adjusting accounting entries were made to personal property that was disposed as a result of suspension of operations. At this time, the Department has not made a decision to dispose of or abandon real property assets in Kabul as the Department intends to resume its diplomatic functions in the future (these functions are currently being performed from another location). The Department did analyze the present risks to Kabul real property and concluded that a revision in its useful life was appropriate. As conditions change, the Department will re-evaluate Embassy property and adjust accounting treatment as appropriate.
The Future of Data for Diplomacy
The Department endeavors to adapt to an ever-evolving global landscape, and the need for data-driven insights and increase in technological innovation is key in this effort. The Department’s first-ever Enterprise Data Strategy (EDS) represents the dedicated efforts of a diverse team across the Department of State that will guide our digital transformation efforts in the years to come. The Enterprise Data Council led the year-long effort to develop the first EDS which involved more than 20 bureaus across the Department and 25 Chief Data Officers from other Federal agencies as well as the private sector. In order to ensure the EDS is actionable and relevant to the core priorities of the Department, the Enterprise Data Council will oversee the implementation of the EDS over the next three years. This approach will bolster data analytics and management with a focus on two major themes (Diversity, Equity, Inclusion, and Accessibility and Strategic Competition) every six months. The Deputy Secretary of State for Management and Resources Brian P. McKeon sees this strategy as a catalyst for cultural change in the Department toward harnessing the power of data for diplomacy. Not only does the EDS ensure data is used as an instrument of diplomacy, it also fulfills mandates in Federal Data Strategy and Evidence Act. The full EDS can be found at https://www.state.gov/the-department-unveils-its-first-ever-enterprise-data-strategy/.