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

United States Department of State Comptroller Washington D.C. 20520 January 16, 2020 UNCLASSIFIED MEMORANDUM TO: OIG – Steve A. Linick FROM: CGFS – Jeffery C. Mounts, Acting SUBJECT: Draft Report on the Department of State’s Fiscal Year 2019 Financial Statements This memo is in response to your request for comments on the Draft Report of the Independent Auditor’s Report on Internal Control Over Financial Reporting, and Report on Compliance With Applicable Provisions of Laws, Regulations, Contracts, and Grant Agreements. As the OIG is aware, the Department operates in over 270 locations and 180 countries in some of the most challenging environments. The scale and complexity of Department activities and corresponding financial management operations and requirements are immense. We understand and take this dynamic into account as we pursue an efficient, accountable, and transparent financial management platform that supports the Department’s and broader U.S. Government’s foreign affairs mission. Part of our accountability is the essential discipline of the annual external audit process and the issuance of the Department’s annual audited financial statements. Few outside the financial community likely realize the time and effort that go into producing the audit and the Agency Financial Report (AFR), as we all work to demonstrate our commitment to strong financial management and to producing meaningful financial statements. It is a rigorous process, and this year was no exception. It has been a concerted and dedicated effort this year by all stakeholders involved. While we may not agree on every aspect of the process and findings, we certainly appreciate and extend our sincere thanks for the professionalism and commitment by all parties, including the Office of the Inspector General and Kearney & Company, to work together in a constructive manner, in a concentrated timeframe, to complete the comprehensive audit process. We know there will always be new challenges and concerns given our global operating environment and scope of compliance requirements. Nonetheless, we believe the overall results of the audit reflect the continuous improvement we strive to achieve in the Bureau of the Comptroller and Global Financial Services and across the Department’s financial management community. As expressed in the Independent Auditor’s Report, we are pleased that the Department has received an unmodified (“clean”) audit opinion on its FY 2018 and FY 2019 principal financial statements; with no material weaknesses reported by the Independent Auditor. We remain committed to strong corporate governance and internal controls as demonstrated by our robust system of internal controls overseen by our Senior Assessment Team (SAT), Management Control Steering Committee (MCSC), and validated by senior leadership. We appreciate the OIG’s participation in both the SAT and MCSC forums. For FY 2019, no material management control issues or material weaknesses in internal controls over financial reporting were identified by senior leadership. As a result, the Secretary was able to provide an unqualified Statement of Assurance for the Department’s overall internal controls and internal controls over financial reporting in accordance with the Federal Managers’ Financial Integrity Act. We fully recognize that there is more to be done and that the items identified in the Draft Report will require our continued attention, action, and improvement. We look forward to working with you, Kearney & Company, and other stakeholders on addressing these issues in the coming year. Appendix A United States Department of State Comptroller Washington, D.C. 20520 January 16, 2020 62 | U nited S tates D epartment of S tate 2019 A gency F inancial R eport FINANCIAL SECTION | COMPTROLLER RESPONSE TO THE OIG