FINANCIAL STATEMENTS AND NOTES (RESTATED)

NOTES TO THEFINANCIAL STATEMENTSNOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESA. BASIS OF PRESENTATIONProgramsThe accompanying principal financialstatements report USAID’s financialposition and results of operations.They have been prepared using USAID’sbooks and records in accordance withAgency accounting policies, the mostsignificant of which are summarized inthis note. The statements are presentedin accordance with the guidance andrequirements of the Office of Management and Budget (OMB) Circular A-136,Financial Reporting Requirements.The statements present the financial activityof various programs and accounts managedby USAID. The programs include Assistance for Europe, Eurasia, and CentralAsia; Civilian Stabilization Initiative;Capital Investment Fund; EconomicSupport Fund; Development Assistance;International Disaster Assistance; GlobalHealth and Child Survival; Complex CrisisFund; Transition Initiatives; and Direct andGuaranteed Loan Programs. This classification is consistent with the Budget of theUnited States.USAID accounting policies follow generallyaccepted accounting principles for theFederal government, as established by theFederal Accounting Standards AdvisoryBoard (FASAB). The FASAB has beenrecognized by the American Institute ofCertified Public Accountants (AICPA) asthe official accounting standard settingauthority for the Federal government.These standards have been agreed to, andpublished by the Director of the OMB, theSecretary of the Treasury, and theComptroller General.B. REPORTING ENTITYEstablished in 1961 by President JohnF. Kennedy, USAID is the independentU.S. Government agency that provideseconomic development and humanitarianassistance to advance United Stateseconomic and political interests overseas.8Assistance for Europe, Eurasia,and Central AsiaFunds appropriated under this heading areconsidered to be economic assistance underthe Foreign Assistance Act of 1961.This account provides funds for a programof assistance to the independent states thatemerged from the former Soviet Union.These funds support the U.S. foreign policygoals of improved U.S. security; building alasting partnership with the new independent states; and providing access to eachother’s markets, resources, and expertise.Civilian Stabilization InitiativeThis fund provides support for thenecessary expenses needed to establish,support, maintain, mobilize, and deployUSAID RESTATED FY 2012 AGENCY FINANCIAL REPORT FINANCIAL SECTIONa civilian response corps in coordinationwith the USAID. This fund is also usedfor related reconstruction and stabilization assistance to prevent or respond toconflict or civil strife in foreign countriesor regions, or to enable transition fromsuch strife.Capital Investment FundThis fund provides for the necessaryexpenses for overseas construction andrelated costs, and for the procurementand enhancement of information technology and related capital investments.Specifically, this fund provides assistancein supporting the GLAAS system.Economic Support FundThe Economic Support Fund (ESF)supports U. S. foreign policy objectives byproviding economic assistance to allies andcountries in transition to democracy.Programs funded through this accountpromote stability and U.S. security interestsin strategic regions of the world.Development AssistanceThis program provides economic resourcesto developing countries with the aim ofbringing the benefits of development tothe poor. The program promotes broadbased, self-sustaining economic growth,opportunity, and supports initiatives

intended to stabilize population growth,protect the environment and fosterincreased democratic participation indeveloping countries. The program isconcentrated in those areas in which theUnited States has special expertise andwhich promise the greatest opportunity forthe poor to better their lives.International Disaster AssistanceFunds for the International DisasterAssistance Program provide relief,rehabilitation, and reconstructionassistance to foreign countries struckby disasters such as famines, floods,hurricanes and earthquakes. Theprogram also provides assistance indisaster preparedness, prevention andmitigation; providing emergencycommodities and services forimmediate healthcare and nutrition.Additionally, this fund supports thecapability to provide timelyemergency response to disastersworldwide.Global Health and Child SurvivalThis fund provides economic resources todeveloping countries to support programsto improve infant and child nutrition, withthe aim of reducing infant and childmortality rates; to reduce HIV transmission and the impact of the HIV/AIDSpandemic in developing countries; toreduce the threat of infectious diseases ofmajor public health importance such aspolio, and malaria; and to expand access toquality basic education for girls andwomen.Complex Crisis FundThis fund provides for necessary expensesto carry out the provisions of the ForeignAssistance Act of 1961 to enable USAIDto support programs and activities toprevent or respond to emerging or unforeseen complex crises overseas.Transition InitiativesThis fund provides for humanitarianprograms that provide post-conflictassistance to victims of both natural andman-made disasters. The program supportsU.S. foreign policy objectives by helpinglocal partners advance peace and democracyin priority countries in crisis. Seizingcritical windows of opportunity, the Officeof Transition Initiatives (OTI) works on theground to provide fast, flexible, short-termassistance targeted at key political transitionand stabilization needs.Direct and Guaranteed Loans Direct Loan ProgramThese loans are authorized under theForeign Assistance Acts, variouspredecessor agency programs, and otherforeign assistance legislation. DirectLoans are issued in both U.S. dollars andthe currency of the borrower. Foreigncurrency loans made “with maintenanceof value” place the risk of currencydevaluation on the borrower, and arerecorded in equivalent U.S. dollars.Loans made “without maintenance ofvalue” place the risk of devaluation onthe U.S. Government, and are recordedin the foreign currency of the borrower. Urban and EnvironmentalProgramThe Urban and Environmental (UE)Program, formerly the HousingGuarantee Program, extends guaranties toU.S. private investors who make loans todeveloping countries to assist them informulating and executing soundhousing and community developmentpolicies that meet the needs of lowerincome groups. Micro and Small EnterpriseDevelopment ProgramThe Micro and Small EnterpriseDevelopment (MSED) Program wasdesigned to support private sectoractivities in developing countries byproviding direct loans and loan guarantees to support local micro and smallenterprises. The MSED program issubstantially inactive and will be closed;the bulk of USAID’s new credit activityis handled through the DevelopmentCredit Authority (DCA) Program. Israel Loan Guarantee ProgramCongress authorized the Israel LoanGuarantee Program in Section 226 ofthe Foreign Assistance Act to supportthe costs for immigrants resettling toIsrael from the former Soviet Union,Ethiopia, and other countries. Underthis program, the U.S. Governmentguaranteed the repayment of up to 10billion in loans from commercialsources. Borrowing was completedunder the program during FY 1999,with approximately 9.2 billion beingguaranteed, of which 7.2 billion iscurrently outstanding. Guarantees weremade by USAID on behalf of the U.SGovernment.In FY 2003, Congress authorized asecond Israel Loan Guarantee Programof up to 9.0 billion to support Israel’scomprehensive economic program toovercome economic difficulties andcreate conditions for higher andsustainable growth. 4.1 billion hasbeen borrowed under this program, ofwhich the entire 4.1 billion iscurrently outstanding. Development Credit AuthorityThe first obligations for USAID’sDevelopment Credit Authority (DCA)were made in FY 1999. The DCAallows missions and other offices to useloans and loan guarantees to achievetheir development objectives whenit can be shown that (1) the projectgenerates enough revenue to cover thedebt service including USAID fees,(2) there is at least 50% risk-sharingwith a private-sector institution, andUSAID RESTATED FY 2012 AGENCY FINANCIAL REPORT FINANCIAL SECTION9

(3) the DCA guarantee addresses afinancial market failure in-country anddoes not “crowd-out” private sectorlending. The DCA can be used in anysector and by any USAID operatingunit whose project meets the DCAcriteria. DCA projects are approved bythe Agency Credit Review Board andthe Chief Financial Officer. Loan Guarantees to EgyptProgramThe Loan Guarantees to EgyptProgram was established underthe Emergency Wartime Supplemental Appropriations Act of 2003.Under this program, the U.S. Government was authorized to issue anamount not to exceed 2 billion inloan guarantees to Egypt during theperiod beginning March 1, 2003 andending September 30, 2005. New loanguarantees totaling 1.25 billion wereissued in FY 2005 before the expirationof the program. Loan Guarantee to TunisiaProgramThe Loan Guarantee to TunisiaProgram was established under TitleIII of the Department of State, ForeignOperations, and Related ProgramsAppropriations Act, 2012, DivisionI of Public Law 112-74, to providesupport for the Republic of Tunisiathrough a loan guarantee. Under thisprogram, the U.S. Government wasauthorized to issue guarantees withrespect to the payment obligations ofTunisia for notes, for which USAID’sbudget cost, calculatedin accordancewith Federal Credit Reform Act of1990, would not exceed 30 million.Using this budget cost as a basis fordetermining the loan guarantee, Tunisiaissued Notes totaling 485 million inFY 2012.10C. BASIS OF ACCOUNTINGFund TypesThe consolidated financial statementsinclude the accounts of all funds underUSAID’s control. Most of the fundaccounts relate to general fund appropriations. USAID also has special funds,revolving funds, trust funds, depositfunds, a capital investment fund, receiptaccount, and budget clearing accounts.General fund appropriations and theSpecial fund are used to record financialtransactions under Congressional appropriations or other authorization to spendgeneral revenue.Revolving funds are established by law tofinance a continuing cycle of operations,with receipts derived from such operations usually available in their entirety foruse by the fund without further action byCongress.Trust funds are credited with receiptsgenerated by the terms of the trustagreement or statute. These receiptsmay be either unavailable for collection,or immediately available for collectiondepending upon the statutory requirements governing establishment of thetrust.The capital investment fund contains noyear (non-expiring) funds to provide theAgency with greater flexibility to manageinvestments in technology systems andfacility construction that the annualappropriation for Operating Expensesdoes not allow.Deposit funds are established for(1) amounts received for which USAIDis acting as a fiscal agent or custodian,(2) unidentified remittances, (3) monieswithheld from payments for goods orservices received, and (4) monies heldawaiting distribution on the basis of legaldetermination.USAID RESTATED FY 2012 AGENCY FINANCIAL REPORT FINANCIAL SECTIONTransactions are recorded on both anaccrual and budgetary basis. Under theaccrual basis, revenues are recognized whenearned and expenses are recognized when aliability is incurred, without regard to receiptor payment of cash. Budgetary accountingfacilitates compliance with legal constraintson, and controls of, the use of federalfunds. The accompanying Balance Sheet,Statement of Net Cost, and Statement ofChanges in Net Position have been preparedon an accrual basis.The Statement of Budgetary Resources hasbeen prepared in accordance withbudgetary accounting rules.D. BUDGETS AND BUDGETARYACCOUNTINGThe components of USAID’s budgetary resources include current budgetaryauthority (that is, appropriations andborrowing authority) and unobligatedbalances remaining from multi-year andno-year budget authority received in prioryears. Budget authority is the authorization provided by law to enter into financialobligations that result in immediate orfuture outlays of federal funds. Budgetaryresources also include reimbursement andother income (that is, spending authorityfrom offsetting collections credited to anappropriation of fund account) and adjustments (that is, recoveries of prior yearobligations).Unobligated balances associated withappropriations that expire at the end ofthe fiscal year remain available forobligation adjustments, but not newobligations, for five additional years untilthe account is canceled. Any amountsremaining in canceled accounts are notavailable for obligations or expenditurefor any purpose, and are returned to theU.S. Treasury.

The “Consolidated Appropriations Act”signed into law as P.L. 112-74 provides toUSAID extended authority to obligatefunds. USAID’s appropriations haveconsistently provided essentially similarauthority, now known as “7011/511”authority. Under this authority, fundsshall remain available for obligation foran extended period if such funds areinitially obligated within their initialperiod of availability.E. REVENUES AND OTHERFINANCING SOURCESUSAID receives the majority of its fundingthrough congressional appropriations– annual, multi-year, and no-year (nonexpiring) appropriations – that may beused within statutory limits. Appropriations are recognized as a financing source(i.e. Appropriations used) on the Statementof Change in Net Position at the time therelated program or administrative expensesare incurred. Appropriations expended forcapitalized property and equipment arenot recognized as expenses. In addition tofunds warranted directly to USAID, theagency also receives allocation transfersfrom the U.S. Department of Agriculture(USDA) Commodity Credit Corporation,the Executive Office of the President, theDepartment of State, and MillenniumChallenge Corporation (MCC).Additional financing sources for USAID’svarious credit programs and trust fundsinclude amounts obtained throughcollection of guaranty fees, interest incomeon rescheduled loans, penalty interest ondelinquent balances, permanent indefinite borrowing authority from the U.S.Treasury, proceeds from the sale of overseasreal property acquired by USAID, andadvances from foreign governments andinternational organizations.Revenues are recognized as financingsources to the extent that they are receivedby USAID from other agencies, othergovernments and the public. Imputedrevenues are reported in the financial statements to offset imputed costs. Amountsreceived from other Federal agencies underreimbursable agreements are recognized asrevenue as related expenditures are incurred.F. FUND BALANCE WITHTHE U.S. TREASURYCash receipts and disbursements areprocessed by the U.S. Treasury. The fundbalances with Treasury are primarilyappropriated funds that are available topay current liabilities and finance authorized purchase commitments, but they alsoinclude revolving, deposit, and trust funds.G. FOREIGN CURRENCYThe Direct Loan Program has foreigncurrency funds, which are used to disburseloans in certain countries. Those balancesare reported at U.S. dollar equivalentsusing the exchange rates prescribed by theU.S. Treasury. A gain or loss on conversionis recognized for the change in valuationof foreign currencies at year-end.Additionally, some USAID host countriescontribute funds for the overheadoperation of the host mission and theexecution of USAID programs.These funds are held in trust and reportedin U.S. dollar equivalents on the BalanceSheet and Statement of Net Costs.H. ACCOUNTS RECEIVABLEAccounts receivable consist of amountsdue mainly from foreign governmentsbut also from other Federal agencies andprivate organizations. USAID regardsamounts due from other Federal agenciesas 100 percent collectible. The Agencyestablishes an allowance for uncollectible accounts receivable for non-loan orrevenue generating sources based on ahistorical analysis of collectability.I. DIRECT LOANS AND LOANGUARANTEESLoans are accounted for as receivables afterfunds have been disbursed. For loansobligated before October 1, 1991 (thepre-credit reform period), loan principal,interest, and penalties receivable are reducedby an allowance for estimated uncollectibleamounts. The allowance is estimated basedon a net present value method prescribed byOMB that takes into account country riskand projected cash flows.Loans obligated on or after October 1,1991 are reduced by an allowance equal tothe net present value of the cost to theU. S. Government of making the loan.This cost, known as “subsidy”, takes intoaccount all cash inflows and outflowsassociated with the loan, including theinterest rate differential between the

CONSOLIDATED BALANCE SHEET as of September 30, 2012 and 2011(In Thousands) 2012 (Restated) 2011. ASSETS: Intragovernmental: Fund Balance with Treasury (Notes 2, 15 and 20) Accounts Receivable (Note 3) Other Assets (Note 4) 28,946,169 30 85,396 27,758,936 : 220 . 96,219 .