Statement of Net Cost: Yearly Results of Operations

Bureau of the Comptroller and Global Financial Services
Report
November 17, 2014




Commencing this year, the Statement of Net Cost presents the Department's net cost of operations by major program instead of strategic goal. The Department believes this is more consistent and transparent with its Congressional Budget submissions. 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 programs related to the major goals established pursuant to the Government Performance and Results Act (GPRA) of 1993, the GPRA Modernization Act of 2010, and the Department's Quadrennial Diplomacy and Development Review. As discussed in the Strategic Goals and Government-wide Management Initiatives section, the Department established new strategic goals and strategic priorities for 2014. Prior year costs from 2013 were reclassified for comparability. The total net cost of operations in 2014 equaled $25 billion, a decrease of $100 million (1 percent) from 2013. This reduction of net costs was mainly due to decreases in the FSRDF actuarial liability due to pension assumption changes. This is offset by increases in spending for global health programs, humanitarian efforts and security.

The figure below shows the relationship between the Department's strategic goals described in the Strategic Plan and the major programs used to present the Statement of Net Cost and related disclosures.

 Diagram showing the relationship between strategic goals and major programs.
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Bar chart summarizing the trend in net cost of operations for fiscal years 2009 to 2014. Values are as follows: 

FY 2009: $21.6 billion.
FY 2010: $21.5 billion.
FY 2011: $23.2 billion.
FY 2012: $26.5 billion.
FY 2013: $25.1 billion.
FY 2014: $25.0 billion.

The six-year trend in the Department's net cost of operations from 2009 through 2014 is presented in the figure to the right. The $3.4 billion (16 percent) overall increase since 2009 generally reflects costs associated with new program areas related to countering security threats and sustaining stable states, as well as the higher cost of day-to-day operations.

The figure below illustrates the comparative results of operations by major program, as reported on the Statement of Net Cost. As shown, net costs associated with major programs three (Health, Education and Social Services) and six (Diplomatic and Consular Programs) represents the largest net costs in 2014 - a combined $16.6 billion (66 percent). These net costs are comparable; though up slightly from 2013 amounts for these two programs - $15.4 billion (61 percent).

Pie chart summarizing net cost of operations by major program for 2014. Values as follows (dollars in billions):
MP1: Peace and Security: $1.9, 7%.
MP2: Democracy, Human Rights and Governance: $0.7, 3%.
MP3: Health, Education and Social Services: $8.3, 33%.
MP4: Humanitarian, Economic Development and Environment: $3.2, 13%.
MP5: International Organizations and Commissions: $3.2, 13%.
MP6: Diplomatic and Consular Programs: $8.3, 33%.
MP7: Administration of Foreign Affairs: -$0.6, -2%.
Total Net Cost: $25.0.

Earned Revenues

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. The FSRDF receives revenue from employee/employer contributions, a U.S. Government contribution, and investment interest. Other revenues come from International Cooperative Administrative Support Services (ICASS) billings and Working Capital Fund earnings.

Pie chart summarizing earned revenues by program as of September 30, 2014. Values are as follows:

Consular Fees: $3.7 billion, 53%.
Foreign Service Retirement and Disability Fund: $0.7 billion, 10%.
International Cooperative Administrative Support Services: $0.9 billion, 13%.
Other Reimbursable Agreements: $1.5 billion, 21%.
Other: $0.2 billion, 3%.

Total Earned Revenues: $7.0 billion.

Earned revenues totaled $7 billion for the fiscal year ending September 30, 2014, and are depicted, by program source, in the figure to the right. The major sources of revenue were from consular fees ($3.7 billion or 53 percent), reimbursable agreements ($1.5 billion or 21 percent) and ICASS earnings ($0.9 billion or 13 percent). These revenue sources totaled $6.1 billion (87 percent). Overall, revenue declined by less than 1 percent - $45 million from 2013 to 2014. This decrease is primarily a result of a reduction in property disposition gains offset by an increase in fees from machine readable visas and other consular fees.