U.S. Department of State Fiscal Year 2020 Agency Financial Report

2 exceed available allotment authority. Establishing obligations that exceed available 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 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, and financial reporting. • During its FY 2019 evaluation of the Department’s information security program, as required by the Federal Information Security Modernization Act (FISMA), the Office of Inspector General (OIG) reported control weaknesses and deficiencies in all eight FY 2019 Inspector General FISMA metric domains. 5 During FY 2020, we assessed the Department’s actions to address deficiencies reported in the FY 2019 FISMA audit report that we considered to be significant to the FY 2020 financial statements. We found that the Department did not remediate known FISMA deficiencies. We considered the unremediated issues to be a significant deficiency within the scope of the FY 2020 financial statements audit. • 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, systemic issues were 3 31 U.S.C. § 39, “Prompt Payment.” 4 Pub. L. No. 104-208, 110 STAT. 3009. 5 OIG, Audit of the Department of State Information Security Program (AUD-IT-20-04, October 2019). 2020 A gency F inanci al R eport U ni ted S tates D epartment of S tate | 59 INDEPENDENT AUDITOR’S REPORT | FINANCIAL SECTION