Summary Analysis of Financial Condition
Overview of Financial Position
Assets. The Consolidated Balance Sheet shows the Department had total assets of $45.2 billion at the end of 2007. This represents an increase of $5.2 billion (13%) over the previous year's total assets of $40.0 billion. The increase is primarily the result of increases of $3.6 billion in Fund Balances with Treasury, $1.0 billion in property and equipment, and $.5 billion in investments in the Foreign Service Retirement and Disability Fund (FSRDF). The increase in Fund Balances with Treasury primarily resulted from the increased appropriations received for HIV/AIDS initiatives of $1.3 billion, supplemental appropriations of over $2 billion, and increased reimbursements for international narcotics control from DOD and Justice of $404 million. The increase in property and equipment is due to the increase in construction of new embassies and capital construction projects to upgrade embassy security.
The Department's assets reflected in the Consolidated Balance Sheet are summarized in the following table (dollars in thousands):
|Fund Balances with Treasury||$19,778,998||$16,170,761|
|Property and Equipment, Net||10,198,455||9,175,917|
|Accounts, Loans & Interest Receivable, Net||618,799||570,538|
Investments, Fund Balances with Treasury and Property and Equipment comprise approximately 98% of total assets for 2007 and 2006. Investments consist almost entirely of U.S. Government Securities held in the FSRDF.
Information on Heritage Assets, which consist of art furnishings held for public exhibition, education and official entertainment, is provided in the Required Supplementary Information section of this report..
Liabilities. The Department had total liabilities of $19.9 billion at the end of 2007, which is reported on the Consolidated Balance Sheet and summarized in the following table (dollars in thousands):
|Foreign Service Retirement Actuarial Liability||$14,728,700||$14,215,300|
|Liability to International Organizations||1,476,596||1,155,344|
The Foreign Service Retirement Actuarial (FSRA) Liability of $14.7 billion and the Liability to International Organizations of $1.5 billion comprise 82% of the Department's total liabilities at the end of 2007.
The Department's total liabilities of $19.9 billion at September 30, 2007, represents an increase of $2.0 billion (11%) over the total liabilities of $17.9 billion for the same period last fiscal year. This increase was due in large part to the $513 million increase in the Foreign Service Retirement Actuarial Liability, a $321 million increase in the Liability to International Organizations, and a $369 million increase in deferred revenue for international narcotics control services from DOD and Justice. Of the total liabilities, $2.4 billion were unfunded, i.e., budgetary resources were not available to cover these liabilities, and primarily comprised of the $1.5 billion Liability to International Organizations, and the unfunded portion of the Environmental Liabilities of $392 million.
The $1.5 billion Liability to International Organizations consists of $1.4 billion in annual assessments, and $60 million in accumulated arrears assessed by the UN, its affiliated agencies and other international organizations. These financial commitments mature into obligations only when funds are authorized and appropriated by Congress.
Ending Net Position. The Department's Net Position at the end of 2007 on the Consolidated Balance Sheet and the Consolidated Statement of Changes in Net Position is $25.3 billion, a $3.3 billion (15%) increase from the previous fiscal year. Net Position is the sum of the Unexpended Appropriations and Cumulative Results of Operations.
The $1.4 billion growth in Unexpended Appropriations is due principally to $1.0 billion and $333 million increases in the Global HIV/AIDS and Democracy Fund accounts, respectively. The $1.8 billion increase in Cumulative Results of Operations resulted mainly from the $1.0 billion increase in property and equipment, net, and $493 million revenue from the sale of real property in London.
Results of Operations
The two tables that follow reflect the funds that the Department received during FY 2007 and how these funds were used.
The Combined Statement of Budgetary Resources provides information on how budgetary resources were made available to the Department for the year and their status at fiscal year-end. For the fiscal year, the Department had total budgetary resources of $31.0 billion, an increase of $4.5 billion (17%) from 2006 levels. Budget Authority of $25.8 billion - which consists of $17.7 billion for appropriations (direct, related, and supplemental) and transfers, $6.8 billion for spending authority from providing goods and services, and $1.3 billion financed from trust funds - comprise 83% of the total budgetary resources. The Department incurred obligations of $25.2 billion for the year, a 19% increase over the $21.2 billion of obligations incurred during 2006. Outlays reflect the actual cash disbursed against the Department's obligations.
The results of operations are reported in the Consolidated Statement of Net Cost and the Consolidated Statement of Changes in Net Position.
The Consolidated Statement of Net Cost presents the Department's gross and net cost for its strategic goals. The net cost of operations is the gross (i.e., total) cost incurred by the Department, less any exchange (i.e., earned) revenue. The Consolidating Schedule of Net Cost (Footnote 16 of the Financial Statements) categorizes costs and revenues by strategic goal and responsibility segment. A responsibility segment is the component that carries out a mission or major line of activity, and whose managers report directly to top management. For the Department, a Bureau (e.g., Bureau of African Affairs) is considered a responsibility segment. For presentation purposes, Bureaus have been summarized and reported at the Under Secretary level (e.g., Under Secretary for Political Affairs). The presentation of program results by strategic goals is based on the Department's current State-USAID Joint Strategic Plan for 2007 - 2012 established pursuant to the Government Performance and Results Act of 1993.
The Department's total net cost of operations for 2007, after intra-departmental elimina-tions, was $13.6 billion. The strategic objective to "Achieve Peace and Security" represents the largest investment for the Department at 36% of the Department's net cost of operations.
The FY 2007 budget for the Department of State totaled $10.216 billion. It included State Operations appropriations for Administration of Foreign Affairs ($7.420 billion), contributions to international organizations and international peacekeeping activities ($2.620 billion), international commissions ($67 million), and related programs ($108 million). These amounts do not include foreign assistance funding, which was provided through Foreign Operations appropriations.
The Department's FY 2007 budget was funded through the Revised Continuing Appropriations Resolution, 2007, which held appropriations to FY 2006 levels with limited adjustments. The budget also included supplemental funding provided through the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007. Supplemental funding was required primarily to address the extraordinary costs for security and operations of the U.S. Missions in Iraq and Afghanistan, as well as the U.S. share of costs for United Nations peacekeeping missions.
In addition to appropriated funds, the Department continued to rely on revenue from user fees - Machine Readable Visa fees, Enhanced Border Security Program fees, the Western Hemisphere Travel Surcharge, and other fees - for the Border Security Program. The revenue from these fees supported program requirements to protect American citizens and safeguard the nation's borders. FY 2007 requirements included heavier consular workloads in connection with renewals of Border Crossing Cards and dramatically increased passport demand associated with implementation of the Western Hemisphere Travel Initiative.
Appropriations for Administration of Foreign Affairs constitute the Department's core funding. They support the people and programs required to carry out U.S. foreign policy and advance U.S. national security, political, and economic interests at more than 260 posts in over 180 countries around the world. They also build, maintain, and secure the infrastructure of the American diplomatic platform, from which most U.S. Government agencies operate overseas.
For FY 2007, the Department's principal operating appropriation - Diplomatic and Consular Programs (D&CP) - was funded at $5.258 billion. Within the restricted level imposed by the full-year Continuing Resolution, the Department reprogrammed funds to sustain critical diplomatic and consular operations and meet foreign policy priorities. Total D&CP funding included $716 million to support operations of the U.S. Mission in Iraq, $778 million for the Worldwide Security Upgrades program to strengthen security for diplomatic personnel and facilities under threat from terrorism, and $351 million for vigorous public diplomacy to counter extremist misinformation and secure support for U.S. policies abroad. The funding also included resources to further the Government-wide reforms of the President's Management Agenda and agency-specific initiatives on rightsizing the U.S. Government's overseas presence and Federal real property asset management.
The Department's IT Central Fund for FY 2007 investments in information technology totaled $260 million. The Fund total included $58 million from the Capital Investment Fund (CIF) appropriation and $202 million in revenue from Expedited Passport fees. Investment priorities included modernization of the Department's global IT infrastructure to assure reliable access to foreign affairs applications and information and projects to facilitate collaboration and data sharing internally and with other agencies. IT investments also supported E-Government initiatives of the President's Management Agenda.
The Embassy Security, Construction, and Maintenance (ESCM) appropriation was funded at $1.491 billion. This funding helped provide U.S. missions overseas with secure, safe, and functional facilities. The funding also supported management of the Department's real estate portfolio, which exceeds $14 billion in value and includes over 15,000 properties. The ESCM funding included $899 million to support capital security construction and compound security projects. Under the Capital Security Cost Sharing program, all agencies with overseas staff under Chief of Mission authority contributed $363 million to the construction costs of new diplomatic facilities.
The Educational and Cultural Exchange Programs (ECE) appropriation was funded at $466 million. Aligned with public diplomacy efforts, these strategic activities engaged foreign audiences to develop mutual understanding and build foundations for international cooperation. The funding included $273 million for academic programs of proven value, such as the J. William Fulbright Scholarship Program and English language teaching. It also included $156 million for professional and cultural exchanges, notably the International Visitor Leadership Program and Citizen Exchange Program.
For FY 2008, the Department's budget request (at this date still pending before the Congress) totals $10.014 billion. It includes resources to address ongoing national security and foreign policy priorities, particularly supporting the global war on terror and advancing transformational diplomacy. The request for D&CP is $4.943 billion, including $965 million for Worldwide Security Upgrades to meet new demands in all regions. The request provides $71 million for CIF for further investments in IT infrastructure and collaborative tools. The request for ESCM totals $1.599 billion, including $807 million for design and/or construction of secure facilities, additional site acquisitions, and compound security projects. Further, the request provides $486 million for ECE to strengthen the exchanges component of public diplomacy, expand the National Security Language Initiative, and bring key influencers to America.
The Department has also requested FY 2008 supplemental funding for State Operations totaling $3.220 billion. The FY 2008 President's Budget originally included a supplemental request of $1.935 billion focused on emergency requirements for the U.S. Mission in Iraq. A request for additional FY 2008 supplemental funding of $1.285 billion was presented to the Congress to address new requirements for U.S. diplomatic operations in Iraq and Afghanistan and for international peacekeeping efforts in Darfur.
|Medicaid, Health, Other Entitlements||35.6%|
|All Other Functions||14.9%|
Source: FY 2008 Mid-Session Review, Budget of the U.S. Government, Estimates for FY 2007
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 United States Code section 3515(b). While these statements have been prepared from the books and records of the Department in accordance with OMB Circular A-136, Financial Reporting Requirements, these statements are in addition to the financial reports used to monitor and control the budgetary resources that are prepared from the same books and records. These statements should be read with the understanding that they are for a component of the U.S. Government, a sovereign entity.
The Department also issues financial statements for its Foreign Service Retirement and Disability Fund (FSRDF), International Cooperative Administrative Support Services (ICASS) and the International Boundary and Water Commission (IBWC). The complete, separately-issued FSRDF, ICASS and IBWC Annual Financial Reports are available from the Department's Bureau of Resource Management, Office of Financial Policy, Reporting and Analysis, 2401 E Street, Room H1500, Washington, DC, 20037; (202) 261-8620.
Other Accompanying Information
Refer to the Other Accompanying Information section of this report for summary data on the following:
- Financial Management Plans and Reports (Overview and Financial Management Systems)
- Management of Obligations to the Department (Civil Monetary Penalties and Debt Management)
- Management of Payments (Prompt Payment Act and Electronic Payments)
- Improper Payments Information Act
- OIG FY 2007 Management and Performance Challenges
- Summary of Financial Audit and management Assurances
- Financial Performance Metrics