Message From the Assistant Secretary and Chief Financial Officer

For the sixth consecutive year the independent CPA firm, selected by our Inspector General, has issued an unqualified ("clean") opinion on the Department's consolidated financial statements for fiscal year 2002. This is the best possible audit result, and should give confidence to the reader that the financial statements contain reliable information about the Department's accounts. Last year, in recognition of the exceptional quality of these statements along with the full Accountability Report, the Association of Government Accountants awarded the Department the prestigious Certificate of Excellence in Accountability Reporting.

This year for the first time ever, the Accountability Report is combined with the Department's Performance Report to form the Performance and Accountability Report for Fiscal Year 2002 (Report). Within this document we present the accomplishments of the Department's greatest assets—its people. Working frequently in hostile environments on the forward edge of American foreign policy, these men and women face challenges ranging fromprotecting our nation's vital interests and securing peace to the new priority of combating and defeating terrorism. From the Report you will not only be able to see how we spend the money of our shareholders—the taxpayers of America--but also how effectively we spend this precious commodity.

Within President Bush's five-point Management Agenda is an aggressive strategy for improving the Federal government's financial management, integrating budget, strategy and performance, and ensuring the careful fiduciary stewardship of the people's money. In support of this, in January of 2002, Secretary Powell established the Resource Management Bureau (RM). Moving quickly, RM is building a new global financial and accounting system with full implementation planned at over 170 embassies worldwide by the end of fiscal year 2003. Financial operations from around the world are being consolidated in new State Department facilities in Charleston, South Carolina. By 2004 the Charleston Financial Service Center will serve as the Department's central location for all global financial operations. RM also has created the Office of Strategic and Performance Planning, with the primary goal of budget and performance integration. Under the leadership of that office, later this year, State and USAID will issue their first ever joint Strategic Plan for fiscal years 2004 to 2009.

The Department also maintains an effective management controls program, which includes clearly defined lines of responsibility, and requires annual assurance statements from our overseas Ambassadors and all Assistant Secretaries. A Management Control Steering Committee (MCSC) made up of senior leadership from the Department, oversees the program. This year the MCSC resolved the remaining three material weaknesses--a first for the Department since the passage of the Federal Managers' Financial Integrity Act. The MCSC did establish a reportable condition regarding the Department's visa process. The Department is working daily to improve all processes associated with the issuance of visas. The creation of a reportable condition around that process reflects our complete commitment that management controls will continue to be a positive catalyst for change.

The Department has continued to address aggressively the information systems security material weakness reported by the Inspector General's office in the auditor's opinion. During 2003 the Department will keep an aggressive certification and accreditation schedule, have a remediation process in place, and implement an independent security-testing program. We are committed to computer security and believe that this material weakness will be resolved in 2003.

Secretary Powell has set a bold course for responsibility and effectiveness in Government. This first-ever Performance and Accountability Report is the measure of that effort to date.

Christopher B. Burnham
Assistant Secretary for Resource Management
and Chief Financial Officer
February 1, 2003