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Analysis of USAID's Financial Statements

Overview of Financial Position

USAID’s financial statements and footnotes are shown on pages 61 through 101 of this report. The financial statements received an unqualified audit opinion from the USAID Office of the Inspector General for the fifth consecutive year. The principal statements include a Consolidated Balance Sheet, a Consolidated Statement of Net Cost, a Consolidated Statement of Changes in Net Position, and a Combined Statement of Budgetary Resources. These statements summarize the financial activity and net position of the Agency. The table below presents the resources available to use (assets) against the amounts owed (liabilities) and the amounts that comprise the difference (net position). The net cost represents the gross cost of operating USAID’s lines of business less earned revenue. Budgetary resources represent funds made available to the Agency.

Balance Sheet Summary

Assets. The Consolidated Balance Sheet reflects total assets of $24.6 billion, a 2.0 percent decrease from the previous year. Approximately 78 percent of assets are Fund Balance with Treasury. These funds decreased 1.0 percent ($202.0 million) from 2006 and allow the Agency to pay accrued liabilities and finance authorized commitments relative to goods, services, and benefits. Approximately 18 percent of assets are Loans Receivable. Loans Receivable decreased 8.3 percent ($399.9 million) from the previous year due to normal loan collection operations during the year, in addition to year-end changes to allowances against loans receivable amounts. The overall decrease in total assets is primarily the result of the Agency not reporting on its statements financial activity related to budget authority allocations from other federal agencies (commonly called parent agencies), pursuant to the Office of Management and Budget’s (OMB) financial reporting requirement effective this year. USAID received budget authority from three parent agencies: Millennium Challenge Corporation (MCC), U.S. Department of Agriculture (USDA) Commodity Credit Corporation (CCC), and the Department of State. USAID is only required to submit a full U.S. Standard General Ledger (USSGL) trial balance to these parents to enable them to include the Agency’s activity in its financial statements.

Table 1 below provides the dollar amount of USAID’s asset types between 2004 and 2007. Chart 1 accompanies the table and displays the percentage of total assets that each asset type represents. As the data shows, each asset type has maintained a similar proportion of total assets over the past four years with Fund Balance with Treasury consistently representing the largest share.

Table 1: USAID’s amount of assets by type between 2004 and 2007 (dollars in thousands):

Chart 1: USAIiD’s percentage of total assets by type between 2004 and 2007

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Liabilities. The Consolidated Balance Sheet reflects total liabilities of $9.4 billion, a less than 1 percent decrease from the previous year. Liabilities reduced marginally in 2007 mainly because of increases in liabilities with other federal agencies offset by decreases in benefits due and amounts owed to Treasury. Almost half of our liabilities, $4.5 billion (48.2 percent), are reported as Debt and Due to Treasury and represent funds borrowed from Treasury to carry out the Agency’s Credit Reform program activities. Table 2 below presents the dollar amount of USAID’s liability types between 2004 and 2007, while Chart 2 depicts the share of total liabilities that each type represents. The data reveals a trend that Debt and Due to U.S. Treasury combine to share about half of the total liabilities for each of the past four years.

Table 2: USAID’s amount of liabilities by type between 2004 and 2007 (dollars in thousands):

Chart 2: USAID's percentage of total liabilities by type between 2004 and 2007

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Net Position. Net Position as shown on the Consolidated Balance sheet decreased $494.5 million (3.2 percent) from the previous year as a result of a $452.4 million (3.2 percent) increase in Unexpended Appropriations and a $946.9 billion (69.5 percent) decrease in Cumulative Results of Operations. The overall decrease in net position is mostly attributable to the Agency not reporting on its statements the financial activity related to the budget authority it received from its parent agencies. Specifically, the increase in Unexpended Appropriations reflects the increase in funds appropriated by Congress that the Agency did not use by the end of the year. The decrease in Cumulative Results of Operations is a result of a change in accounting treatment for budgetary authority transferred from the Agency’s reciprocal trading partner, USDA CCC. Prior to 2007, the Agency recorded budgetary authority received from USDA CCC as an accounts receivable. In 2007, we recorded the receipt of this authority as a non-reimbursable transfer and reported it as a component of net position. We will continue this new accounting practice in the future.

Net Cost Summary

As shown on the Consolidated Statement of Net Cost, net costs of operations decreased 10.2 percent or $1.1 billion from $10.4 billion in 2006 to $9.3 billion in 2007. For the most part, this decrease is because USAID excluded reporting the net cost of operations related to budget authority transferred from its parent agencies. The chart to the right shows the total cost incurred to carry out each of the Agency’s six objectives. The objectives Investing in People and Economic Growth represent the largest investments at 32.6 percent and 32.3 percent of net cost of operations, respectively. The Agency invested between 1.3 percent and 14.9 percent of its net cost of operations in the remaining four objectives.

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In 2007, USAID and the Department of State developed and implemented a new Foreign Assistance Framework to standardize reporting of net cost of operations. As a result, net cost data for 2006 was recast to enable 2006 and 2007 data to be equally compared. The recast amounts are presented in the 2006 column of the Consolidated Statement of Net Cost.

Budgetary Resources Summary

The Combined Statement of Budgetary Resources shows that USAID had $16.8 billion in budgetary resources of which $4.8 billion remained unobligated at year-end. USAID recorded total net outlays of $7.8 billion by the end of the year, and 99.4 percent of its outlays were disbursed on time according to contracted terms. Budgetary resources grew $2.3 billion, or 15.8 percent, from 2006, while net outlays increased $1.1 billion, or 16.5 percent. The chart below presents the status of budgetary resources comparatively between 2006 and 2007.

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Limitations to the Financial Statements

The principal 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 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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