U.S. Department of State Fiscal Year 2019 Agency Financial Report

1 1701 Duke Street, Suite 500, Alexandria, VA 22314 PH: 703.931.5600, FX: 703.931.3655, www.kearneyco.com INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE WITH LAWS, REGULATIONS, CONTRACTS, AND GRANT AGREEMENTS To the Secretary of the U.S. Department of State and the Inspector General We have audited, in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards , issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Bulletin No. 19-03, “Audit Requirements for Federal Financial Statements,” the consolidated financial statements, and the related notes to the consolidated financial statements, of the U.S. Department of State (Department) as of and for the year ended September 30, 2019, and we have issued our report thereon dated January 17, 2020. Compliance As part of obtaining reasonable assurance about whether the Department’s consolidated financial statements are free from material misstatement, we performed tests of the Department’s compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts, including the provisions referred to in Section 803(a) of the Federal Financial Management Improvement Act of 1996 (FFMIA), 1 that we determined were applicable. We limited our tests of compliance to these provisions and did not test compliance with all laws, regulations, contracts, and grant agreements applicable to the Department. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests, exclusive of those related to FFMIA, disclosed instances of noncompliance or potential noncompliance that are required to be reported under Government Auditing Standards and OMB Bulletin No. 19-03 and which are summarized as follows: • Antideficiency Act . 2 This act prohibits the Department from (1) making or authorizing an expenditure from, or creating or authorizing an obligation under, any appropriation or fund in excess of the amount available in the appropriation or fund unless authorized by law; (2) involving the Government in any obligation to pay money before funds have been appropriated for that purpose, unless otherwise allowed by law; or (3) making obligations or expenditures in excess of an apportionment or reapportionment, or in excess of the amount permitted by agency regulations. Our audit procedures identified Department of the Treasury account fund symbols with negative balances that were potentially in violation of the Antideficiency Act. We also identified systemic issues in the Department’s use of allotment overrides to exceed available allotment authority. Establishing obligations that exceed available 1 Federal Financial Management Improvement Act of 1996, Pub. L. No. 104-208, 110 STAT. 3009 (September 30, 1996). 2 Antideficiency Act, Pub. L. No. 97-258, 96 STAT. 923 (September 13, 1982). 2019 A gency F inancial R eport U nited S tates D epartment of S tate | 59 INDEPENDENT AUDITOR’S REPORT | FINANCIAL SECTION