Message from the Secretary

FY 2007 Financial Report
Bureau of Resource Management
November 2007

Photo of Condoleezza Rice, Secretary of State

I am pleased to present the U.S. Department of State's Financial Report for Fiscal Year 2007. The Financial Report provides crucial financial and performance information for Congress and the American people, and highlights our efforts to manage taxpayer dollars responsibly in support of our mission to support partners worldwide who are working to build democratic and well- governed states that reflect their people's aspirations for freedom, security, and prosperity for all.

These ideals lie at the core of the Department's mission to "Advance freedom for the benefit of the American people and the international community by helping to build and sustain a more democratic, secure, and prosperous world composed of well-governed states that respond to the needs of their people, reduce widespread poverty, and act responsibly within the international system."

The joint Department of State and U.S. Agency for International Development Strategic Plan for 2007-2012 articulates a shared vision for meeting our global diplomatic and development challenges and advancing our national interests. Our two agencies work closely together to build and maintain strong bilateral and multilateral relationships with nations in all regions to address common international problems, like fighting terrorism and extremism, stemming the spread of weapons of mass destruction, reducing dire poverty, and promoting the development of democratic institutions that support civil society and keep citizens safe and secure. Our global agenda in public diplomacy, humanitarian assistance, and regional stability is providing the foundation for sustainable economic growth and human development, reinforcing effective democratic governance, and encouraging states to engage responsibly in the international system.

Supporting the President's commitment to enhance the effectiveness of American diplomacy, we have examined staffing and resource needs and taken steps to realign overseas positions to better reflect current foreign policy priorities. I remain dedicated to eliminating shortages of essential skills among our diplomatic corps, particularly in the areas of critical languages and reconstruction and stabilization expertise.

We have worked aggressively to resolve significant management control matters as they arise. When we underestimated the number of applicants for passports, we reassigned a large number of staff to New Orleans and New Hampshire and established a new facility in Arkansas to address the problem. We are strengthening controls over private security contractors by implementing recommendations of a special panel to improve accountability and control, working closely with our colleagues at the Defense Department to improve coordination and investigating instances of possible wrongdoing. We continue to monitor our overseas construction program to ensure success.

We have improved significantly our controls over accounting for property and information systems security. Our financial systems have improved and will continue to improve with the rollout of our Global Financial Management System this past Spring. We have, however, seen an increase in the value of older unliquidated obligations. While this condition does not expose the Department to the risk of waste or fraud, we acknowledge it needs improvement, and have designated the management of unliquidated obligations as a material weakness. In doing so, we will ensure that the appropriate management attention is applied to this weakness so that it is quickly resolved. While there are no other material weaknesses, in light of this weakness in unliquidated obligations, I am providing a qualified assurance regarding the Department's management controls. The financial and summary performance data in this report, except for the deficiency identified, are complete and reliable in keeping with the guidance from the Office of Management and Budget.

Since 2002, the State Department has submitted to Congress and the American public an annual Performance and Accountability Report. This year, the Department is honored to be one of the Federal agencies participating in a pilot program under the auspices of the Office of Management and Budget to explore different ways to report budget, performance, and financial information. Additional comprehensive performance information will be included in the Department of State's Annual Performance Report, to be incorporated into the FY 2009 Congressional Budget Justification, which will be available in February 2008, at

I am proud to represent the Department of State's 28,000 American and Foreign Service National employees at more than 260 posts worldwide. These men and women are doing vital work for the American people, and in this mission, they have the honor and respect of a grateful nation.

Signature of Condoleezza Rice
Condoleezza Rice
Secretary of State
November 15, 2007


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