Message from the Comptroller

Bureau of the Comptroller and Global Financial Services
Report
November 21, 2017


 

 

The Department of State is committed to delivering the highest standard of financial accountability. As noted in the Secretary’s Message, “if accountability does not start with ourselves, we cannot achieve the aims of our foreign policy nor credibly extend it to our friends or our adversaries.” To this end, it is my sincere privilege to present the Department’s Fiscal Year (FY) 2017 Agency Financial Report (AFR), including this year’s audited Financial Statements. The AFR is the cornerstone of our efforts to disclose our financial status and reflect the dedicated stewardship over the assets and resources entrusted to us. It speaks to our commitment to the American public to transparently demonstrate effective management and accountability. It also represents and portrays the challenging work and diligence performed on a daily basis by dedicated professionals around the world, in some of the most difficult operating environments. Last year, in recognition of the exceptional quality of our AFR, the Association of Government Accountants awarded the Department the prestigious Certificate of Excellence in Accountability Reporting.

The scale and complexity of the Department’s global mission and operations, and corresponding financial activities, is the central setting and context for our financial performance and challenges. Despite these complexities, the Department pursues a commitment to integrity, transparency and accountability. The Department operates in over 270 embassies and consulates, located in more than 180 countries around the world. We conduct business on a 24/7 basis in over 135 currencies; account for more than $100 billion in assets in over 500 separate fiscal accounts; maintain 227 bank accounts around the world; and manage real and personal property assets with historical costs of more than $34 billion. We provide the shared administrative operating platform for more than 45 other U.S. Government entities overseas; and pay more than 100,000 Foreign and Civil Service, overseas local employees, and Foreign Service annuitants. These financial activities support our ability to advance America’s interests on a broad range of foreign policy challenges and engagements that demand our attention.

In delivering our financial programs, the Bureau of the Comptroller and Global Financial Services (CGFS), the Department’s corporate finance bureau, is committed to providing world-class financial services. Our strong commitment to quality financial services is backed by our ISO-9001 certified operations and Capability Maturity Model Integration (CMMI) standard for financial systems development. In addition, we continue to prioritize, manage, and implement vital investments in modern, transformative financial systems and operations. These investments facilitate standardized and economical enterprise-wide financial business processes, and meeting the large scope of audit and compliance requirements. They also facilitate accurate and timely financial data and improving the reporting to the American public on how the Department spends their tax dollars. To that end, the Digital Accountability and Transparency Act of 2014 (DATA Act) requires agency financial and payment information to be reported to the public using USASpending.gov, and as required under the Act, on April 30, 2017, the Department made its first submission of the requisite data on Department spending for the second quarter of FY 2017.

Our strong commitment to effective internal controls is fundamental to our business. The Department maintains a robust system of internal controls that are validated by senior leadership. For FY 2017, no material weaknesses in internal controls were identified by senior leadership and no material weaknesses in internal controls over financial reporting were identified by the Senior Assessment Team or the Management Control Steering Committee. As a result, the Secretary was able to provide reasonable assurance on the effectiveness of the Department’s overall internal controls and the internal controls over financial reporting in accordance with the Federal Managers’ Financial Integrity Act. As highlighted in the AFR, the Department does not have any programs at risk for making significant improper payments. This past year we implemented new initiatives for conducting payment risk assessments and recapture audits, as well as verifications against Treasury’s Do Not Pay databases. In their annual assessment, the OIG found the Department’s improper payments program to be in compliance with Improper Payments Information Act (IPIA), as amended.

The external annual audit process is another essential part of our commitment to strong corporate governance and effective internal controls. The audited Financial Statements in the AFR represent the culmination of a year-round rigorous process with our partners, the Office of the Inspector General (OIG) and the Independent Auditor, Kearney & Company. While we may not always agree on all points with our audit partners, we fully recognize and appreciate the importance of this annual practice. I would like to thank all parties for their collaborative and professional efforts throughout the audit process. I am pleased to report that the Department has received an unmodified (“clean”) audit opinion on its FY 2017 Financial Statements, with no material weaknesses in internal controls over financial reporting identified by the Independent Auditor. I am also pleased to report that, working collaboratively with the OIG and Kearney, we were able to implement corrective actions and downgrade the previously reported significant deficiency in internal control for financial reporting.

Going forward, we will continue our transformation efforts that allow us to more effectively and efficiently deliver financial programs that support the Department’s vital mission. Over the next several years, there is no doubt that the use of data as a resource will be central to the Department’s transformation efforts and our ability to measure performance and enhance data-informed decision making. Our support of these efforts, together with the continuous assessment and enhancement of the cybersecurity for our financial systems and data, will be key tasks.

While we are pleased with what has been accomplished this year, we fully recognize and appreciate that there are a number of items noted in the AFR and the Independent Auditor’s Report that will require our continued attention. Having been a part of the Department’s financial management team and financial audit process for more than two decades, I know there are new requirements, initiatives, issues, and opportunities for improvement right around the corner. This is particularly true given the global and complex nature of our financial operations and the daily uncertainty of the world in which we operate. I also know that the outstanding team of financial professionals around the world and in CGFS is up to the task of meeting these challenges. In closing, I would like to extend my sincere appreciation and call attention to the Department’s financial professionals, globally, who form the foundation for our success and strong financial stewardship. It is my honor and privilege to serve this great Nation and Department with you.

Sincerely,

Signature of Christopher H. Flaggs.
Christopher H. Flaggs
Comptroller
November 17, 2017