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

2 allotment authority increases the risk of noncompliance with the Antideficiency Act. Conditions impacting the Department’s compliance with the Antideficiency Act have been reported annually since our FY 2009 audit. • Prompt Payment Act . 3 This act requires Federal agencies to make payments in a timely manner, pay interest penalties when payments are late, and take discounts only when payments are made within the discount period. We found that the Department did not consistently calculate or pay interest penalties for overdue payments to utility vendors, overseas vendors, or international organizations. The Department was unable to provide legal justification exempting the Department from paying interest penalties for payments to these types of entities. Conditions impacting the Department’s compliance with the Prompt Payment Act have been reported annually since our FY 2009 audit. Under FFMIA, 4 we are required to report whether the Department’s financial management systems substantially comply with Federal financial management systems requirements, applicable Federal accounting standards, and the U.S. Standard General Ledger (USSGL) at the transaction level. Although we did not identify any instances of substantial noncompliance with Federal accounting standards or with the application of the USSGL at the transaction level, we identified instances, when combined, in which the Department’s financial management systems and related controls did not comply substantially with certain Federal financial management system requirements. Federal Financial Management Systems Requirements • The Department has long-standing weaknesses in its financial management systems regarding its capacity to account for and record financial information. For instance, the Department has significant deficiencies relating to property and equipment, budgetary accounting, unliquidated obligations, intragovernmental revenue, and financial reporting. • During its annual evaluation of the Department’s information security program, as required by the Federal Information Security Modernization Act (FISMA), 5 the Department’s Office of Inspector General reported control weaknesses in all eight FY 2019 Inspector General FISMA metric domains. 6 • The Department did not maintain effective administrative control of funds. Specifically, obligations were not created in a timely manner or were recorded in advance of an executed obligating document. In addition, there were systemic issues identified in the Department’s use of allotment overrides that allowed officials to exceed allotments. • The Department did not always minimize waste, loss, unauthorized use, or misappropriation of Federal funds. For example, the Office of Inspector General 3 31 U.S.C. § 39, “Prompt Payment.” 4 Pub. L. No. 104-208 (1996). 5 Federal Information Security Modernization Act of 2014, Public L. No. 113-283, 128 STAT. 3079-3080 (December 18, 2014). 6 OIG, Audit of the Department of State Information Security Program (AUD-IT-20-04, October 2019). 60 | U nited S tates D epartment of S tate 2019 A gency F inancial R eport FINANCIAL SECTION | INDEPENDENT AUDITOR’S REPORT