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Analysis of USAID’s Financial Statements

USAID’s financial statements, which appear in the Financial Section of this report, received for the fourth consecutive year an unqualified audit opinion issued by the USAID Office of the Inspector General (OIG). Preparing these statements is part of the Agency’s goal to improve financial management and provide accurate and reliable information useful for assessing performance and allocating resources. Agency management is responsible for the integrity and objectivity of the information presented in these financial statements.

USAID prepares consolidated financial statements that include a Balance Sheet, a Statement of Net Cost, a Statement of Changes in Net Position, a Statement of Budgetary Resources, and a Statement of Financing. These statements summarize the financial activity and position of the Agency. Highlights of the financial information presented on the principal statements are provided below.

Overview of Financial Position

ASSETS. The Consolidated Balance Sheet shows the Agency had Total Assets of $25.1 billion at the end of 2006. This represents a two percent increase over the previous year’s Total Assets of $24.7 billion. This is primarily the result of increased fund balances during the year as well as an increase in the USAID Foreign Currency balances.

Table 1: The Agency’s assets reflected in the Consolidated Balance Sheet are summarized in the following table (dollars in thousands):

Fund Balance with Treasury and Loans Receivable, Net, comprise the majority of USAID’s assets, and together they account for over 90 percent of total assets. USAID maintains funds with Treasury to pay its operating and program expenses. These funds increased by $1.8 billion (10.5 percent). The $1.8 billion increase in Fund Balance with Treasury is primarily due to a liquidation of an outstanding receivable with the Commodity Credit Corporation. During 2006, the Commodity Credit Corporation changed their business practice and will provide funding simultaneously when granting obligational authority. In addition, the Commodity Credit Corporation decided to liquidate the outstanding receivable by transferring $1 billion to USAID’s Treasury account. Consequently, the intragovermental accounts receivable decreased by $1 billion.

Loans Receivable experienced a six percent decrease from FY 2005. This is primarily due to collections made in 2006 as well as changes in the yearly credit program allowance calculations.

The chart below presents USAID’s asset type by percentage for FY 2006.

Chart 1: Percentage of Assets by Type, FY 2006.

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LIABILITIES. As presented on the Consolidated Balance Sheet, the Agency had $9.5 billion in Total Liabilities at the end of 2006. This amount represents a $1.5 billion, or 14 percent decrease in Total Liabilities from the prior year.

Table 2: The Agency’s Liabilities reflected in the Consolidated Balance Sheet are summarized in the following table (dollars in thousands):

As reflected in Table 2, Liabilities comprised of Debt and Due to U.S. Treasury and the Accounts Payable asset type represent most of USAID’s Total Liabilities. Debt and Due to Treasury combined represented 52.5 percent of Total Liabilities for FY 2006, and Accounts Payable comprised 24.7 percent of Total Liabilities for FY 2006.

Debt and Due to Treasury combined decreased by 19.2 percent, or $769 million, from FY 2005. Accounts Payable decreased by 27.3 percent or by $875 million from FY 2005. Many factors are attributable to this decrease, such as a $551 million adjustment to reduce subsidy payable to the credit program financing fund in FY 2006.

As part of intergovernmental transactions, debt that resulted from the Bureau of Public Debt (BPD) debt restructuring program increased by 12 percent, which is the result in borrowing from the Treasury. The Due to U.S. Treasury account reflecting the result of activities in pre-credit reform liquidating funds decreased by 15 percent or $821 million.

The largest percentage change in Liabilities occurred in the non-federal line items. Specifically, Accounts Payable program funds increased $600 million, a 24 percent increase from FY 2005. This change is primarily the result of an increase of accounts payable accruals at year end.

The chart below presents USAID’s percentage of liabilities by type for FY 2006 (dollars in thousands):

Chart 2: Percentage of Liabilities by Type, FY 2006

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ENDING NET POSITION. Net Position is the sum of the Unexpended Appropriations and Cumulative Results of Operations. USAID’s Net Position at the end of 2006 on the Consolidated Balance Sheet and the Consolidated Statement of Changes in Net Position was $15.7 billion, a $1.9 billion increase from the previous fiscal year. Unexpended Appropriations of $14.3 billion or 91 percent represent funds appropriated by Congress for use over multiple years that were not expended by the end of FY 2006.

Results of Operations

The results of operations are reported in the Consolidated Statement of Net Cost and the Consolidated Statement of Changes in Net Position.

The Consolidated Statement of Net Cost presents the Agency’s gross and net cost for its strategic goals. The net cost of operations is the gross (i.e., total) cost incurred by the Agency, less any exchange (i.e., earned) revenue. The accompanying notes to the Statement of Net Cost disclose costs by strategic goals and responsibility segments, and by intergovernmental costs and exchange revenues separately from those with the public for each strategic goal and responsibility segment. A responsibility segment is the component that carries out a mission or major line of activity, and whose managers report directly to top management. For the Agency, the pillar and regional bureaus are considered a responsibility segment. Information on the bureaus can be found in Note 18 and in the section titled “Mission Organization and Structure.”

The presentation of program results by strategic goals is based on the Agency’s current Joint State-USAID Strategic Plan established pursuant to the Government Performance and Results Act (GPRA) of 1993.

The Agency’s total net cost of operations for 2006, after intra-agency eliminations, was $10.4 billion. The strategic goal, Social and Environmental Issues, represents the largest investment for the Agency at 35 percent of the Agency’s net cost of operations. The net cost of operations for the remaining goals ranges from less than one percent to 29.2 percent. The following is a breakout of net cost by strategic goal.

Chart 3: Net Program Costs by Strategic Goal, FY 2006 (dollars in thousands):

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The Consolidated Statement of Changes in Net Position presents the accounting items that caused the net position section of the balance sheet to change since the beginning of the fiscal year. The statement comprises two major components: Unexpended Appropriations and Cumulative Results of Operations.

Cumulative Results of Operations amount to $1.4 billion as of September 30, 2006, an increase of 84 percent from the $760 million balance a year earlier. This balance is the cumulative difference, for all previous fiscal years through 2006, between funds available to USAID from all financing sources and the net cost of USAID.

The Combined Statement of Budgetary Resources provides information on how budgetary resources were made available to the Agency for the year and their status at fiscal year-end. For the year 2006, USAID had total budgetary resources of $14.5 billion, a decrease of 2.1 percent from 2005. Budget authority of $10.4 billion, consisted mostly of $10.3 billion for actual appropriations and $1.3 billion in collections. USAID incurred obligations of $9.5 billion for the year, a small percent decrease from the $9.8 billion of obligations incurred during 2005.

Chart 4 below, reflects Budgetary Resources that the Agency received in 2006 (dollars in thousands):

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The Combined Statement of Financing reconciles the resources available to the Agency to finance operations with the net costs of operating the Agency’s programs. Some operating costs, such as depreciation, do not require direct financing sources.

Limitations to the Financial Statements

The financial statements have been prepared to report the financial position and results of operations of USAID, pursuant to the requirements of 31 U.S.C. 3515(b). While the statements have been prepared from the books and records of USAID, in accordance with generally accepted accounting principles (GAAP) for federal entities and the formats prescribed by the Office of Management and Budget (OMB), the statements are in addition to the financial reports used to monitor and control budgetary resources which are prepared from the same books and records. The statements should be read with the realization that USAID is a component of the U.S. government, a sovereign entity.

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