Message from the Chief Financial Officer
Accountability to the citizens of the United States, the President, Congress, our employees, as well as our customers and constituents is among the Department of State's highest priorities. The Annual Financial Report (Report) for Fiscal Year 2007 remains a cornerstone of our efforts to annually disclose the Department's successes and shortcomings. It is a comprehensive review of the Department's activities against the backdrop of the global challenges presented by a complex world. In the 2007 Report, as in past years, what remains apparent and should be inspirational to all Americans is the inextricable link between the Department's accomplishments and the unwavering commitment of our employees serving around the world, in turmoil as well as tranquility, dedicated to our mission and the very best interests of our nation.
For the past seven years, the President has challenged us to improve the management of key processes through the President's Management Agenda (PMA). The Department made a major commitment to achieving the goals of the PMA and currently has three "green" and two "yellow" status ratings for the five USG-wide Presidential initiatives and two "green" ratings for two other PMA initiatives. This is a significant accomplishment considering the challenging nature of conducting business in our global, foreign affairs environment. In addition, the Department has achieved the best record of all large agencies in evaluation of programs using the OMB-led Program Assessment Rating Tool evaluation process. The Department has a high number of programs rated Effective or Moderately Effective - the highest ratings - and no programs rated Ineffective or Results Not Demonstrated. In addition, the Department has demonstrated innovation and leadership in performance management by improving performance systems and coordinating strategic planning with other foreign affairs agencies.
Very few agencies or corporations have the level of complexity and variety of challenges that the men and women of the Department face daily. The Department operates in over 260 locations in 188 countries, frequently in hostile environments, while conducting business in 150 currencies and an even larger number of languages. Thousands of financial professionals around the globe plan, budget, allocate, obligate, disburse, and account for billions of dollars in annual resources. Despite our worldwide geographic dispersion, the Department operates as one team distinguished by its dedication to strong ethics and corporate governance.
Our strong commitment to corporate governance is evidenced by the priority we place on improving our internal controls. To that end, we continued to make considerable progress in 2007. One of our most important achievements this fiscal year was the implementation of our new core financial system - Global Financial Management System (GFMS). GFMS replaces our twenty year old legacy system with a state-of-the-art system that operates on the same platform as our overseas regional financial system. GFMS is also fully integrated with our procurement system. The next step will be to combine GFMS with our overseas system so that for the first time the Department will operate on one global integrated financial system. Although we experienced a few of the challenges normally associated with a conversion of such a massive scale, which resulted in a delay in submitting our financial statements to the Independent Auditor, we are confident that the Department now has a system that in addition to complying with regulatory requirements provides the accurate and timely data we need to manage the resources of the Department. We also continued our efforts on areas reported as material weaknesses in recent years and which were downgraded last year to significant deficiencies - IT Security, Accounting for Real Property, and Accounting for Personal Property. As a result of our efforts, the Independent Auditor further downgraded the IT Security and Accounting for Real Property to deficiencies (from a significant deficiency).
In summary, we have taken major steps to improve the Department's financial management in 2007, which we believe will provide significant dividends going forward. However we have had a set back with the material weakness with our handling of Unliquidated Obligations, and while not hampering the operations of the Department, no material weakness is acceptable, and we are committed to resolving this shortfall in the coming year along with the issues identified by the Independent Auditor. We also hope that the Independent Auditor will continue their review so that they will be able to reach a conclusion on the accuracy of our financial statements. We remain strong in our view that it is in the best interests of Congress and the American public to receive complete and accurate reports that they can rely on in contrast to a disclaimer.