FY 2012 Agency Financial Report     3

Table of Contents

Message from the Secretary of Labor.......................................................................................................5

Management’s Discussion and Analysis...................................................................................................7

Program Performance Overview............................................................................................................................ 11

American Recovery and Reinvestment Act of 2009 ............................................................................................... 24

Financial Performance Overview............................................................................................................................ 24

Management Assurances ....................................................................................................................................... 31

Financial Section ....................................................................................................................................33

Message from the Chief Financial Officer .............................................................................................................. 35

Independent Auditors’ Report................................................................................................................................ 36

Annual Financial Statements.................................................................................................................................. 59

Principal Financial Statements and Notes........................................................................................................ 61

Required Supplementary Stewardship Information ...................................................................................... 119

Required Supplementary Information ........................................................................................................... 125

Other Accompanying Information........................................................................................................155

Top Management Challenges............................................................................................................................... 157

Summary of Financial Statement Audit and Management Assurances............................................................... 168

Improper Payments Reporting Details................................................................................................................. 169

Schedule of Spending ........................................................................................................................................... 194

Open Government Links....................................................................................................................................... 195

Acronyms.............................................................................................................................................................. 196

This report can be found on the Internet at www.dol.gov/dol/aboutdol/.

If you have questions or comments regarding this report, contact:

Office of the Chief Financial Officer

U.S. Department of Labor

200 Constitution Avenue, NW, Room S‐4030

Washington, DC  20210

202‐693‐6800

The photographs in this publication were furnished by numerous individuals. All photographs are proprietary and

prior permission from the photographer is required for any use or reproduction of the photographs.  All references

to non‐governmental companies or organizations, their services, products or resources in this report are offered for

informational purposes and should not be construed as an endorsement by the Department of Labor of any of the

companies or organizations, or their services, products or resources.  The Department of Labor does not endorse,

takes no responsibility for, and exercises no control over non‐governmental organizations’ Web sites mentioned in

this report, or their views or contents; nor does it vouch for the accuracy of the information contained on other

organizations’ Web sites.

FY 2012 Agency Financial Report     5

Message from the Secretary of Labor

November 16, 2012

I am pleased to present the U.S. Department of

Labor’s Fiscal Year 2012 Agency Financial Report

(AFR).  This is our annual publication to Congress and

the American public about our operational record and

financial stewardship of public funds.  The information

in this report explains how we manage our resources,

highlights our major accomplishments and outlines

our plans to address the challenges ahead.  

Excellent financial management yields excellent

results for the working people of our nation.   The

integrity of our business practices is critical to our

ability to achieve our important   mission:  to foster,

promote and develop the welfare of the wage earners,

job seekers and retirees of the United States; improve

working conditions; advance opportunities for profitable employment; and assure work‐related benefits and rights.

It is with tremendous pride that I report that we have once again received a clean opinion on our financial

statements.  This is a clear reflection of our remarkable employees, who every day demonstrate talent, dedication,

and professionalism in their service to the American people.  

I am also proud of the efforts we have initiated that help us work better and smarter.  The Department’s worker

protection agencies continue to develop improved strategies focused on evaluation, innovation, and improved

implementation in an effort to reform how they operate.    Central to the responsibility of securing worker

protections is an increased emphasis on the enforcement of laws and regulations that protect workers.  Worker

protection agencies are improving performance measures to account to the public how well we are performing the  

crucial worker protection responsibilities and using data to better leverage resources.

Through the Workforce Innovation Fund, the Department continues to promote high‐quality training in high‐growth

industries to help workers become more competitive and equip them with the credentials and skills needed to

compete in the global labor market.    The innovative approaches to the design and delivery of employment and

training services generate long‐term improvements in the performance of the public workforce system, both in

terms of employment and training outcomes and cost‐effectiveness.

I am also pleased to provide an unqualified statement of assurance regarding the department’s internal controls, as

required by the Federal Managers Financial Integrity Act (FMFIA) of 1982 and Office of Management and Budget

Circular No. A‐123, Management’s Responsibility for Internal Control.    I am confident that the financial and

summary performance data included in this AFR are complete and reliable in accordance with federal

requirements.

The Department is committed to working on deficiencies identified in internal controls concerning financial

reporting noted by the Inspector General and the auditors.  Further information on this, as well as the results of

management’s assessment of internal controls and compliance of financial management systems, pursuant to

FMFIA and the Federal Financial Management Improvement Act of 1996, are discussed in the Management’s

Discussion and Analysis section of this report.
Message from the Secretary of Labor

6    United States Department of Labor   

In 2013, the Department of Labor will celebrate its 100th Anniversary.    As we reflect on a past filled with

extraordinary accomplishments, we look to a future in which sound financial and managerial stewardship will allow

us to do even more for working families across our nation.  

HILDA L. SOLIS

U.S. Secretary of Labor
FY 2012 Agency Financial Report     7

Management’s Discussion and Analysis
   
(Unaudited)

FY 2012 Agency Financial Report     9

Agency Financial Report

The Department of Labor's (DOL) annual Agency Financial Report (AFR) provides fiscal and high‐level performance

results that enable the President, Congress, and American people to assess the Department’s accomplishments for

each fiscal year (October 1 through September 30). This report provides an overview of programs,

accomplishments, challenges, and management’s accountability for the resources entrusted to the Department.

The report is prepared in accordance with the requirements of Office of Management and Budget (OMB) Circular A‐

136, Financial Reporting Requirements.

Mission Statement and Organizational Structure1

DOL’s mission remains as relevant today as at the Department’s founding in 1913: to foster, promote, and develop

the welfare of the wage earners, job seekers, and retirees of the United States; improve working conditions; advance

opportunities for profitable employment; and assure work‐related benefits and rights.  

To accomplish this mission, DOL is organized into the program agencies and offices depicted in the chart below,

which administer the various statutes and programs for which the Department is responsible. The major program

agencies, each headed by an Assistant Secretary, Commissioner, or Director, are:

Employment and Training Administration (ETA) Office of Labor‐Management Standards (OLMS) 2

Veterans’ Employment and Training Service (VETS) Women’s Bureau (WB)

Office of Federal Contract Compliance Programs (OFCCP) 2 Office of Disability Employment Policy (ODEP)

Occupational Safety and Health Administration (OSHA) Bureau of International Labor Affairs (ILAB)

Wage and Hour Division (WHD) 2 Office of Workers' Compensation Programs (OWCP) 2

Employee Benefits Security Administration (EBSA) Bureau of Labor Statistics (BLS)

Mine Safety and Health Administration (MSHA)

Bureau 

 

1 The Pension Benefit Guaranty Corporation (PBGC), a Federal corporation under the chairmanship of the Secretary of Labor, is designated by the Office of

Management and Budget (OMB) as a separate reporting entity for financial statement purposes, and is not included as part of the DOL reporting entity in this

AFR.

2 In FY 2010, DOL dissolved the Employment Standards Administration (ESA) and established its four component offices/divisions: the Office of Federal

Contract Compliance Programs, the Office of Labor‐Management Standards, the Office of Workers’ Compensation Programs, and the Wage and Hour Division,

as stand‐alone agencies reporting directly to the Office of the Secretary. This reorganization was reflected in DOL’s FY 2011 and 2012 budgets, in which funding

previously requested for ESA was requested separately for these four component agencies, and was acted upon by Congress in FY 2012.  Presentation of the

financial data for FY 2012 reflects the four component agencies and the FY 2011 presentation was reclassified to conform to the FY 2012 presentation.
Management’s Discussion and Analysis

(Unaudited)

10    United States Department of Labor   

________bbb__ ______ 

United States Department of Labor

For text links and additional information, see our Find It! By Organization site at

www.dol.gov/dol/organization.htm
(Unaudited)

FY 2012 Agency Financial Report     11

Program Performance Overview

The Program Performance Overview offers an opportunity to present DOL performance goals, objectives and

results and to provide a discussion of key performance measures.  This section includes performance of measures

that can be related to spending as reported in the following Financial Section.  Outcome data reported under the

Government Performance and Results Act are included in the Annual Performance Report, which will be

published in February 2013 with the FY 2014 Congressional Budget Justification.  A third report, the Summary of

Performance and Financial Information for Fiscal Year 2012, will be available on February 15, 2013.

In Fiscal Year (FY) 2010, the Department updated its five‐year Strategic Plan‐ http://www.dol.gov/_sec/stratplan/

through a comprehensive effort guided by five strategic goals and 14 outcome goals supporting the Secretary’s

vision of good jobs for everyone.  These goals are presented in the following table:

STRATEGIC GOAL 1: Prepare workers for good jobs and ensure fair compensation.

1.1. Increase workers’ incomes and narrow wage and income inequality.

1.2. Assure skills and knowledge that prepare workers to succeed in a knowledge‐based economy,  

including high growth and emerging industry sectors like “green” jobs.

1.3. Help workers who are in low‐wage jobs or out of the labor market find a path into middle‐class jobs.

1.4. Help middle‐class families remain in the middle class.

1.5. Secure wages and overtime.

1.6. Foster acceptable work conditions and respect for workers’ rights in the global economy to provide

workers with a fair share of productivity and protect vulnerable people.

STRATEGIC GOAL 2: Ensure workplaces are safe and healthy.

2.1. Secure safe and healthy workplaces, particularly in high‐risk industries.

STRATEGIC GOAL 3: Assure fair and high quality work‐life environments.

3.1. Break down barriers to fair and diverse work‐places so that every worker’s contribution is

respected.

3.2. Provide workplace flexibility for family and personal care‐giving.

3.3. Ensure worker voice in the workplace.

STRATEGIC GOAL 4: Secure health benefits and, for those not working, provide income security.

4.1. Facilitate return to work for workers experiencing work‐place injuries or illnesses who are able to

work.

4.2. Ensure income support when work is impossible or unavailable.

4.3. Improve health benefits and retirement security for all workers.

STRATEGIC GOAL 5: Produce timely and accurate data on the economic conditions of workers and their

families.

5.1. Provide sound and impartial information on labor market activity, working conditions and price

changes in the economy for decision making, including support for the formulation of economic and

social policy affecting virtually all Americans.

This goal framework signals the Secretary’s commitment to leading a stronger, more effective Department of

Labor.  An important innovation of the goal structure is the Department’s commitment to measuring activities

intended to positively impact the day‐to‐day lives of working families and use them to track progress in

implementation of the outcome and strategic goals listed above.    The table below organizes DOL program

agencies into five categories.    This report provides FY 2012 performance data for activities that support the
Management’s Discussion and Analysis

(Unaudited)

12     United States Department of Labor

Secretary’s vision from each agency listed here.  The Department’s mission is also supported by administrative,

policy, legal, public affairs, and congressional liaison offices.

Employment and Training

Employment and Training Administration (ETA)

Veterans’ Employment and Training Service (VETS)

Worker Protection

Office of Federal Contract Compliance Programs (OFCCP)

Occupational Safety and Health Administration (OSHA)

Wage and Hour Division (WHD)

Employee Benefits Security Administration (EBSA)

Mine Safety and Health Administration (MSHA)

Office of Labor‐Management Standards (OLMS)

Policy

Women’s Bureau (WB)

Office of Disability Employment Policy (ODEP)

Bureau of International Labor Affairs (ILAB)

Benefits

Office of Workers’ Compensation Programs (OWCP)

Federal‐State Unemployment Insurance (UI) Program (administered by ETA)

Statistics

Bureau of Labor Statistics (BLS)

The section that follows presents a brief description of the programs administered by each agency and the most

recent results for key output measures.  The Department tracks performance using over 200 such measures; the

measures highlighted here were selected as most representative of agencies’ activities from resource allocation

and strategic perspectives.

EMPLOYMENT & TRAINING

Employment and Training Administration (ETA)

ETA provides high‐quality employment assistance, labor market information and job training through the

administration of programs authorized by the Workforce Investment Act of 1998 (WIA) for adults, youth,

dislocated workers and other targeted populations.  ETA also administers Job Corps; Trade Adjustment Assistance

for Workers (TAA); Employment Services (ES) authorized under the Wagner‐Peyser Act; Foreign Labor

Certification activities; the Community Service Employment for Older Americans program (CSEOA); and

Apprenticeship programs.  TAA helps achieve the Secretary’s Strategic Goal 1, to prepare workers for good jobs

and ensure fair compensation and the associated Outcome Goals.  Numerous measures help ETA track outputs

for these programs; below are descriptions and available data for just a few:

 Percent of Initial Risk Assessments Conducted for New Grants Managed by Regional Offices within 45 Days

of Award1 – Federal staff conduct risk assessments of grantee work plans and award documents to

ensure procedures and performance expectations are clearly outlined and to assess grantees’ ability to

 

1 Prior to FY 2012, ETA reported the Number of Risk Assessments Conducted for Grant Programs (WIA, ES, and CSEOA).   In FY 2012, ETA

began tracking progress on this activity as a percentage, rather than as a count – to capture workload and production.  
    Program Performance Overview

(Unaudited)

FY 2012 Agency Financial Report     13

carry out all tasks.   Risk assessments are conducted at the onset of a grant and documented in ETA’s

Grants Electronic Management System (GEMS).  ETA conducted 3,004 risk assessments in FY 2011 and

2,006 risk assessments in FY 2012 – a 33% decrease that corresponds to the Department’s expired grants

and new investments for this period.

 Average petition processing time in days for TAA – The Trade Adjustment Assistance for Workers (TAA)

program provides benefits and services to workers who become unemployed due to the impact of

international trade. This measure represents the average number of days it takes staff to process TAA

petitions from initial filing to final determination during the applicable year.    ETA made significant

progress from FY 2011 as the Average Processing Time was reduced by approximately 13 days.    The

measure’s projected annual average target of 54 days was surpassed in FY 2012.  Over the last 3 years the

Office of Trade Adjustment Assistance has dealt with external factors such as an unstable labor market

and recessionary business cycle shocks, three legislative changes that substantially altered the framework

through which TAA operated and was administered, and large fluctuations and turnover of experienced

staff. The steady output that has been reported over the past several quarters of FY 2012 reflects

enhanced procedures that improved timeliness and efficiency of investigations and provided better data

integrity methods.  Petition filings have moderately declined over the last year.

Measure FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Average Petition Processing Time (in days) 33 35 48 143 65 52

 Number of regional office desk audits and Contractor Past Effectiveness Ratings (CPER) updates completed

for Job Corps – Regional Office Desk Audits are conducted monthly using Job Corps reports to assess

contract operations.  CPERs are updated every six months within the contract period and are included in

each Option Year package  ‐ a request to extend the contract.   In FY 2011, Job Corps conducted 5,089

regional office desk audits and CPER updates; and in FY 2012, ETA  conducted 2,334 regional office desk

audits and CPER updates.   Beginning in FY 2012, desk audits were standardized to provide a

comprehensive monthly review of all contract operations; this accounts for the decrease in the number

of audits from FY 2011.

By September 30, 2013, DOL will improve opportunities for America’s workers to succeed in a knowledge‐based

economy through industry‐recognized credentials by increasing the percent of training program exiters who earn

industry‐recognized credentials by 10 percent.   

Veterans’ Employment and Training Service (VETS)

VETS helps veterans obtain positive employment outcomes through services provided at American Job Centers

and other locations.    VETS helps achieve the Secretary’s Strategic Goal 1, prepare workers for good jobs and

ensure fair compensation.    Grants are provided to State Workforce Agencies and other service providers to

support staff dedicated to serving veterans, including those who require special assistance due to disabilities or

other barriers to employment.   VETS also protects the employment and reemployment rights of veterans and

other service members under the provisions of the Uniformed Services Employment and Reemployment Rights

Act (USERRA) program so that they can serve in the uniformed services without harm to their civilian

employment; and by assuring that veterans who seek Federal employment obtain the preferential hiring

consideration to which they are entitled.   

VETS tracks two timeliness measures related to its USERRA program.    To provide prompt resolution for both

claimants and employers, VETS strives to complete USERRA investigations within 90 days.  Upon conclusion of

VETS’ investigation, a USERRA claimant has the right to ask VETS to refer his or her case to the Department of
Management’s Discussion and Analysis

(Unaudited)

14     United States Department of Labor

Justice (if the case involves a non‐Federal employer) or to the Office of Special Council (if the case involves a

Federal employer), for consideration of legal representation.  The Veterans’ Benefits Improvement Act of 2008

requires VETS to complete those referrals within 60 days, unless the claimant agrees to an extension of time.  

VETS' response to this 2008 legislation has improved case timeliness, compared to prior years.   

Measure FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Percent of USERRA Investigations

Completed within 90 Days

78% 78% 86% 84% 87% 89%

Percent of USERRA Referrals Made within

60 Days ‐‐ ‐‐ 56% 62% 57% 83%

By the end of 2013, the Transition Assistance Program (TAP), with redesigned curriculum and facilitated solely by

contract staff, will be fully implemented at all 188 domestic and 50 international sites.  Based on consultations

with the Department of Defense, in FY 2013, VETS is planning approximately 5,700 TAP DOL Employment

Workshops with 200,000 transitioning service members expected to participate.  Due to the combination of an

increased number of separations, and the implementation of mandatory attendance requirements by the military

services, FY 2013 will be a period of peak demand for workshops.  VETS is implementing a redesigned curriculum

and transitioning to contract facilitators to improve workshop quality.    It will also aim to achieve improved

experiential learning by limiting the number of participants per workshop.

WORKER PROTECTION

Office of Federal Contractor Compliance Programs (OFCCP)

OFCCP is a worker protection agency that ensures that employers doing business with the Federal Government

comply with their obligations to recruit, hire, promote, train, terminate, and compensate America’s workers in a

fair and equitable manner.  OFCCP enforces three legal authorities that apply to federal contractors:  Executive

Order 11246, as amended, which prohibits employment discrimination on the basis of race, religion, color,

national origin and sex; Section 503 of the Rehabilitation Act of 1973, as amended, which prohibits employment

discrimination against individuals with disabilities; and the Vietnam Era Veterans’ Readjustment Assistance Act

of 1974, as amended, which prohibits employment discrimination against certain protected veterans.   OFCCP

supports the Secretary’s Strategic Goal 3, assure fair and high quality work‐life environments and the associated

Outcome Goal 3.1, break down barriers to fair and diverse work places so that every worker's contribution is

respected.  The compliance evaluations and investigations conducted by OFCCP play a critical role in measuring

Federal contractor compliance with their legal obligations under these authorities.  

In FY 2011, OFCCP reduced the target goal of compliance evaluations to increase the focus on audit quality, and

this helped, in part, the agency to achieve a 36.7% increase from FY 2010 cases closed with a financial remedy.  

The target also was held steady in FY 2012 to help continue a strong quality focus.  FY 2012 was a year of

measure development for OFCCP in terms of establishing new measures to represent the important work of the

agency, collecting data on contextual measures to diagnose and learn from quarterly results, and benchmarking

measures for setting meaningful future targets. OFCCP made progress in establishing measures to capture many

facets of the program, understanding and improving the validity and reliability of the measures, and balancing

quality and quantity.
    Program Performance Overview

(Unaudited)

FY 2012 Agency Financial Report     15

Measure FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Compliance Evaluations 4,923 4,333 3,917 4,960 4,014 4,017

In FY 2013, OFCCP will place greater emphasis on enforcement and focusing on identifying and resolving both

individual and systemic discrimination.    OFCCP will provide increased attention to countering discrimination

against individuals with disabilities and covered veterans.   

Occupational Safety and Health Administration (OSHA)

OSHA was established by the Occupational Safety and Health Act of 1970 with the mission to assure, so far as

possible, that every working man and woman in the American workplace has safe and healthful working

conditions.  OSHA ensures the safety and health of America's workers by setting and enforcing workplace safety

and health standards;    delivering    effective    enforcement; providing training, outreach, and education; and

encouraging continual improvement in workplace safety and health.  Through these efforts, OSHA aims to reduce

the number of worker illnesses, injuries, and fatalities and contribute to the broader goals aimed at promoting

economic recovery and the competitiveness of our nation's workers.   OSHA supports the Secretary’s Strategic

Goals 2, 3 and 4, specifically as relates to Outcome Goals 2.1, secure safe and healthy workplaces, particularly in

high‐risk industries; 3.3, ensure worker voice in the workplace; and 4.1, facilitate return to work for workers

experiencing workplace injuries or illnesses who are able to work.    The most recent data for key measures of

OSHA’s activity – the number of safety, health, and construction industry inspections – are presented in the table

below.

Safety inspections in general industry encompass a variety of high‐hazard industries, such as the chemical and

refinery industries, oil and gas well drilling, manufacturing, maintenance, arborist and logging work, power

distribution and generation, coal manufacturing, telecommunications, green industries such as the windmill

industry, forging, steel manufacturing, food manufacturing, and grain handling.  Workers in these industries are

exposed to a multitude of serious safety hazards.   

Health inspections are conducted by industrial hygienists and address hazards such as chemical hazards,

biological hazards (e.g., bloodborne pathogens and tuberculosis), physical hazards (e.g., noise, radiation, and heat

and cold stress), and ergonomic hazards (e.g., patient handling, repetitive motion, excessive force, and awkward

postures). Although the number of health inspections declined from FY 2005 through FY 2008, there were

increases in FY 2009 through FY 2011, and OSHA maintained the upward trend in FY 2012.

OSHA tracks safety and health inspections of construction worksites separately because construction is a large

industry that exposes workers to serious hazards, such as falling from rooftops, unguarded machinery, being

struck by heavy construction equipment, electrocutions, silica dust, and asbestos.   According to recent OSHA

data, the industry’s fatality rate is almost eight times the rate for all workers.   The number of construction

inspections fell in FY 2011 and FY 2012 due to a reprioritization of Agency resources to more effectively target

inspections across a variety of occupational hazards. Because OSHA carries out more than half of its inspections

in the construction industry, the total number of safety inspections also decreased over the same period. Health

inspections continued to increase but not enough to offset the decline in safety inspections; they are more

complex and time‐consuming than safety inspections, on average.       
Management’s Discussion and Analysis

(Unaudited)

16     United States Department of Labor

Measure FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012*

Total Number of Safety Inspections Conducted 33,063 33,074 33,221 34,320 34,293 33,449

Total Number of Health Inspections Conducted 6,316 5,517 5,783 6,649 7,202 7,269

Number of Safety and Health Inspections    

Conducted in Construction Industry   23,192 23,062 23,754 24,326 23,520 22,398

*Preliminary data.  Complete annual performance results for FY 2012 will not be available before late November 2012.

By September 30, 2013, in accordance with DOL’s agency priority goals, OSHA will seek to reduce worker fatalities

resulting from common causes by two percent in OSHA‐covered workplaces and to reduce total and lost time

injury and illness rates by at least four percent per year.  

Wage and Hour Division (WHD)

WHD is responsible for administering and enforcing laws that establish the minimum standards for wages and

working conditions in the United States.  The Fair Labor Standards Act (FLSA) minimum wage provisions and the

prevailing wage laws provide a floor for the payment of fair wages; overtime provisions are intended to fairly

compensate workers for long hours of work and to broaden work opportunities and promote employment.  The

Migrant and Seasonal Agricultural Worker Protection Act and the immigration programs establish working

conditions intended both to protect the wages and the safety and health of vulnerable workers and to ensure

that the labor force is not displaced by lower‐paid foreign or migrant labor.    The prevailing wage programs

provide protection to local middle class workers who may be disadvantaged by competition from outside labor

who offer their services at wages lower than those in the locality.  The Family and Medical Leave Act was enacted

to help workers balance family and work responsibilities, and the child labor provisions of the FLSA ensure the

safe employment of young workers, encourage their educational endeavors, and provide a path to future

employment. WHD’s enforcement responsibilities directly contribute to the Secretary’s Strategic goals 1, 2 and 3

and related Outcome Goals 1.1, increase workers’ incomes and narrow wage and income inequality; 1.5, secure

wages and overtime; 2.1, secure safe and healthy workplaces, particularly in high‐risk industries; 3.2, provide

workplace flexibility for family and personal care giving; and 3.3, ensure worker voice in the workplace.

The agency uses directed investigations to increase WHD presence in high‐risk, fissured industries and among

vulnerable worker populations.  Fissured industries rely on subcontracting, franchising, temporary employment,

and independent contracting which creates a distance between the beneficiary of labor and the workers who

actually provide that labor.  Vulnerable workers are those who are at risk of exploitation at work because they

are reluctant to complain when they are subject to violations for fear of retaliation.  Directed investigations have

a higher rate of return when measured as the number of workers helped for every enforcement hour expended;

and, when undertaken as part of a planned initiative, have the effect of producing a positive ripple effect on

compliance within the same industry and geographic area.1

  The first measure below is directed investigations as

a percentage of all compliance actions conducted.    In FY 2012, WHD continued moving resources to directed

investigations and prioritizing complaints that point to systemic violations.  The second measure reflects WHD’s

commitment to maintaining an increased presence in those industries where the misclassification of employees

as independent contractors is prevalent – as more and more industries are moving to the fissured business

model.  The investigations WHD planned for FY 2012 did not include the janitorial industry, which was the focus

in FY 2011 (WHD cannot investigate establishments two years in a row).    This reduced the opportunity for

directed misclassification investigations.    As American Recovery and Reinvestment Act funded construction

ended, in FY 2012, WHD shifted resources from directed Davis Bacon construction investigations to Service

Contract Act investigations, which also reduced the number of directed misclassification investigations.  These

shifts impacted the FY2012 result.

 

1 Paper by David Weil:  Improving Workplace Conditions Through Strategic Enforcement (May 1, 2010). Boston U. School of Management

Research Paper No. 2010‐20.  Available at: http://ssrn.com/abstract=1623390 or http://dx.doi.org/10.2139/ssrn.1623390 
    Program Performance Overview

(Unaudited)

FY 2012 Agency Financial Report     17

Measure FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Percent of Directed Investigations* 35% 36% 35% 27% 29% 40.63%

Percent of Directed Investigations in Industries

with a High Prevalence of Employees

Misclassified as Independent Contractors

9% 13% 10% 17% 21% 19.98%

*WHD has revised this measure to exclude conciliations, which are largely a customer service function performed by WHD technicians,

not WHD investigators. Prior year data reflects this change.   

In FY 2013, WHD will increase outreach activities in support of the Department’s We Can Help nationwide

campaign, which will connect workers with a broad array of services offered by the agency and address such

topics as rights in the workplace and how to file a complaint with WHD.   

Employee Benefits Security Administration (EBSA)

EBSA protects workers and their families’ retirement, health, and other welfare benefits security through

administration, including regulatory work, and enforcement of the Employee Retirement Income Security Act of

1974 (ERISA).   EBSA provides proactive enforcement, outreach and education programs that protect the most

vulnerable populations while ensuring broad compliance with ERISA and related laws.    EBSA is charged with

protecting more than 141 million workers, retirees, and their families that are covered by over 707,000 private

retirement plans, 2.3 million health plans, and similar numbers of other welfare benefit plans which together

hold estimated assets in excess of $6 trillion.  As such, EBSA supports the Secretary’s Strategic Goal 4, to secure

health benefits and, for those not working, provide income security and the specific Outcome Goal 4.3, improve

health benefits and retirement security for all workers.

Historical data for two key performance measures, “Number of Criminal Investigations Processed” and “Number

of Civil Investigations Processed” are shown in the table below.   EBSA’s investigation program is designed to

deter and correct violations of ERISA.  In FY 2012, EBSA continued to focus on a high priority national criminal

enforcement project.  EBSA also devoted significant investigative resources to high profile, complex, document

intensive, and team oriented investigations involving Employee Stock Ownership Programs (ESOPs), financial

institutions, and investment managers, which contributed to an increase in civil investigations processed.  The

number of criminal and civil cases that EBSA investigates each year is also influenced by other unforeseeable

factors, such as policy direction and economic changes in the regulated community.

Measure FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Number of Criminal Investigations Processed 188 212 287 281 302 318

Number of Civil Investigations Processed 3,236 3,570 3,669 3,112 3,472 3,566

In FY 2013, EBSA will develop investigative approaches for conducting health care investigations that focus on

identifying systematic denials of promised health benefits and supporting EBSA’s outcome goal of improving

health benefits security for all workers.   

Mine Safety and Health Administration (MSHA)

MSHA protects the safety and health of the nation’s miners under the provisions of the Federal Mine Safety and

Health Act of 1977, as amended by the Mine Improvement and New Emergency Response (MINER) Act of 2006.

The purpose of MSHA is to prevent death, disease, and injury from mining and to promote safe and healthful

workplaces for the nation’s miners through the enactment and enforcement of mandatory safety and health

standards.  MSHA supports the Secretary’s Strategic Goal 2, ensure workplaces are safe and healthy and Strategic

Goal 3, assure fair and high quality work‐life environments, and related Outcome Goals 2.1, secure safe and

healthy workplaces, particularly in high‐risk industries and 3.3, ensure worker voice in the workplace.   MSHA’s
Management’s Discussion and Analysis

(Unaudited)

18     United States Department of Labor

mandated inspections require four complete inspections annually at active underground mines and two

complete inspections annually at active surface mines, and miner training and compliance assistance. A key

measure for MSHA is “Total Number of Regular Mandated Inspections.”    The mining industry is influenced by

economic and product need causing continual fluctuations in the number of mines operating during any given

time period.

Measure FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Coal Safety and Health 4,822 5,385 5,526 5,121 5,139 5,117

Metal and Nonmetal Safety and Health 15,945 18,235 17,168 16,127 16,269 16,620

By September 30, 2013, DOL will reduce worker fatalities rates in mining by five percent per year based on a

rolling five‐year average.

Office of Labor‐Management Standards (OLMS)

OLMS administers the Labor‐Management Reporting and Disclosure Act (LMRDA) and related laws.  These laws

establish safeguards for union democracy and union financial integrity and require public disclosure reporting by

unions and other entities.  OLMS supports the Secretary’s Strategic Goal 3, assure fair and high quality work‐life

environments, and specific Outcome Goal 3.3, ensure worker voice in the workplace.  For OLMS, key measures are

“Percent of Audits Resulting in a Criminal Case (Fallout Rate),” “Number of Days to Resolve Union Officer Election

Complaints,” and the “Percent of LMRDA Required Forms Filed Electronically.”

OLMS conducts criminal investigations to determine if criminal violations of the LMRDA have occurred.   Most

OLMS criminal investigations involve embezzlement of union funds.   Evidence of suspected embezzlement is

obtained through a variety of sources, including the OLMS compliance audit program.  OLMS uses advanced audit

targeting techniques to bolster the number of criminal investigations by focusing reduced audit resources on

unions most likely to be in violation of the law.  The success of audit targeting strategies is measured by “Percent

of Audits that Resulting in a Criminal Case (Fallout Rate).”

The LMRDA allows a union member to file a complaint with the Secretary of Labor challenging the conduct of a

union officer election.  The LMRDA provides for the Secretary to investigate each complaint and, if necessary, to

file suit to overturn the election within 60 days.    This requires OLMS to investigate expeditiously.    Although

waivers to the 60‐day requirement can be obtained, OLMS believes that adherence to the 60‐day rule promotes

union democracy.  OLMS established a goal to reduce the time taken to investigate and resolve complaints.  Since

2008, OLMS has dramatically reduced the average number of elapsed days per case.   

Lastly, financial transparency is enhanced when union members and other interested parties have swift and easy

access to financial reports.    Electronic filing of these reports reduces costs, increases the accuracy of the

reported information through checks built into the electronic filing system, and eases access to the filed reports

as the reports become available via the Internet almost immediately upon e‐filing.    To promote transparency,

OLMS has established a goal of increasing the percent of forms filed electronically.    OLMS has been able to

increase electronic filing since the establishment of this measure.   
    Program Performance Overview

(Unaudited)

FY 2012 Agency Financial Report     19

Measure FY

2007

FY

2008

FY

2009

FY

2010

FY

2011

FY

2012

Percent of Audits Resulting in a Criminal Case (Fallout

Rate) ‐‐ ‐‐ ‐‐  ‐‐  14.9% 13.8%

Number of Days to Resolve Union Officer Election

Complaints 86 92 70 81 79 71

Percent of LMRDA Reports Filed Electronically  ‐‐ ‐‐ ‐‐  ‐‐  21.4% 37.8%

POLICY

Women’s Bureau (WB or Bureau)

The Bureau is the only Federal office dedicated to serving and promoting the interests of women in the workforce.

As such, it develops promising policies and standards and conducts inquiries to safeguard the interests of working

women; advocates for their equality and economic security for themselves and their families; and promotes

quality work environments.  The Bureau supports the Secretary’s Strategic Goal 1, to prepare workers for good

jobs and ensure fair compensation and Strategic Goal 3, assure fair and high quality work‐life environments and

their associated Outcome Goals.   In FY 2012, the Bureau collected baseline data on its two new outcome

measures: the percent of active collaborators who implement recommended policies/strategies and the percent of

active collaborators who take an action to increase awareness and education on WB’s behalf.

An active collaborator is an external entity that is receiving technical assistance (e.g. guidance, support, and

feedback) from the Bureau to implement recommended policies, strategies, or practices that improve working

women’s employment opportunities, economic security, and working conditions.   Collaborators include DOL

agencies; other Federal, state, or local government agencies; community‐based organizations; service providers;

industry associations; labor organizations; women’s organizations; and educational institutions.    In FY 2012, these

collaborators included DOL sister agencies, such as the ETA and VETS; other Federal agencies, such as the

Department of Veterans Affairs and the Equal Employment Opportunity Commission (EEOC); as well as service

organizations, such as the National Association of State Women Veterans Coordinators.

Office of Disability Employment Policy (ODEP)

ODEP was established to bring a permanent focus within the U.S. Department of Labor and across the Federal

government to the development, evaluation, and dissemination of policy strategies that address the significant

barriers to employment faced by individuals with disabilities.   ODEP supports the Secretary’s Strategic Goal

1, prepare workers for good jobs and ensure fair compensation and Strategic Goal 3, assure fair and high quality

work‐life environments and associated Outcome Goals, specifically Goal 3.1, to break down barriers to fair and

diverse work places so that every worker’s contribution is respected.  Although many people with disabilities are

prepared, willing, and able to work, they remain a largely untapped labor pool.  ODEP brings together Federal

agencies, private and public sector employers, labor organizations, and other stakeholders to develop policy

solutions that expand physical and programmatic access to One‐Stop Career Centers and the workforce system in

general.    ODEP improves employer organizational practices, makes workplaces more inclusive, and increases

access to employment support for workers with a disability.

ODEP develops, evaluates and disseminates policy strategies and effective practices to reduce the employment

disparity that exists between people with and without disabilities.  As such, ODEP’s initiatives seek to increase the

labor market participation rate of people with disabilities. ODEP’s key measures are “Policy Outputs,” “Effective

Practices” and “Formal Agreements”.   Policy outputs are recommendations for significant policy change or an
Management’s Discussion and Analysis

(Unaudited)

20     United States Department of Labor

interpretation of existing policy related to disability employment.   Examples of policy outputs are legislation,

regulations, policy guidance and Executive Orders or Memoranda.   Effective Practices are ODEP developed

strategies, models or theories that lead directly to an identified outcome and have a documented record of

success or validated effectiveness.   Formal Agreements are collaborations that are formalized through a

Memoranda of Understanding, Inter/Intra‐Agency Agreements, Public Private Partnership Agreements or Alliance

Agreements.  

As indicated by the table, Policy Outputs and Effective Practices rose from FY 2006‐2008 as ODEP's policies and

strategies were developed based on its initial investments in demonstration projects and research from ODEP's

first five years (FY 2001‐2005).  The number of Policy Outputs and Effective Practices dropped in FY 2009 as ODEP

worked to cultivate new approaches that promote the employment of people with disabilities.  In FY 2011, ODEP

maintained its investment in developing innovative approaches that leads to the adoption and implementation of

policy that increases the participation of people with disabilities in the labor market.  The result, in FY 2012 ODEP

greatly exceeded its Effective Practices performance target.  ODEP uses formal agreements to support projects

and initiatives which produce and implement its policy strategies and effective practices.  ODEP began collecting

data on its formal agreements in FY 2008.  While there was a 16 percent decrease in results and targets between

FY 2008 and 2009 and an increase of 29 percent between FY 2009 and 2010, ODEP only slightly exceeded its

annual target in FY 2011 and achieved its annual target for FY 2012.  

Measure FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

Policy Outputs 34 44 39 35 42 39

Effective Practices 24 27 15 23 44 131

Formal Agreements ‐‐ 36 17 30 29 30

In FY 2013, ODEP will focus on three priority areas:    countering employer’s low expectations and negative

perceptions of people with disabilities; increasing exposure to role models and access to training, employment and

transition services; and expanding access to employment supports and accommodations.

Bureau of International Labor Affairs (ILAB)

ILAB works to ensure that global markets are governed by fair market rules that protect vulnerable people,

including women and children, and provide workers a fair share of their productivity and voice in their work lives.  

In order to carry out these strategic objectives, responsibilities, and mandates, ILAB collaborates with other U.S.

government agencies to formulate international economic, trade, and labor policies, including the formulation

and implementation of the labor aspects of international trade and investment agreements; coordinates U.S.

government participation in international organizations relative to labor issues; oversees and implements

technical assistance programs; and conducts research, analysis and publishes reports on international labor

issues.  Through these activities, ILAB supports the Secretary’s Strategic Goals 1 and 3, specifically as they relate

to Outcome Goals 1.6, foster acceptable work conditions and respect for workers’ rights in the global economy to

provide workers with a fair share of productivity and protect vulnerable people and 3.3, ensure worker voice in the

workplace.

ILAB tracks the number of countries engaged in policy dialogue or negotiation as a measure of its scope of

influence and opportunities to 1) improve labor rights and living standards of workers in the global economy, and

2) reduce the prevalence of the worst forms of child labor and forced labor.    In prior years, ILAB measured

engagement through policy dialogue, negotiation and collaboration. This past year, ILAB finished its first year in

reporting on new output measures for policy dialogue and negotiation, distinct from collaborative activities to

better capture the elements of its core mission.    In FY 2012, ILAB engaged 38 countries in policy dialogue or

negotiation.
    Program Performance Overview

(Unaudited)

FY 2012 Agency Financial Report     21

In FY 2013, ILAB will support current Free Trade Agreements through monitoring and reporting of conditions and

engaging in technical assistance projects.   

BENEFITS

Office of Workers’ Compensation Programs (OWCP)

OWCP is comprised of four separate programs which provide workers’ compensation benefits.   The Federal

Employees' Compensation Act (FECA) program provides monetary wage‐loss compensation and medical benefits

to civilian employees of the Federal Government injured at work, and to certain other designated groups, as well

as survivor benefits for a covered employee’s employment‐related death.  The Longshore and Harbor Workers'

Compensation Act program provides similar benefits to injured private sector workers engaged in certain

maritime and related employment, certain other employment covered by extensions such as the Defense Base

Act, and also provides monetary benefits to the survivors of deceased workers.  The Black Lung Benefits program

provides monetary and medical benefits to totally disabled miners suffering from coal mine pneumoconiosis

stemming from mine employment, and monetary benefits to their dependent survivors.  The Energy Employees

Occupational Illness Compensation Program Act (EEOICPA) provides monetary compensation and/or medical

benefits to employees or survivors of employees of the Department of Energy (DOE) and certain contractors or

subcontractors with DOE who have been diagnosed with cancer or other occupational diseases due to exposure

to radiation or toxic substances at covered facilities.  OWCP supports the Secretary’s Strategic Goal 4, secure

health benefits and, for  those not  working, provide income security, and Outcome Goals 4.1, facilitate return to

work for workers experiencing workplace injuries or illnesses who are able to work and 4.2, ensure income support

when work is impossible or unavailable.

Key measures for OWCP are Lost Production Day rates (LPD), expressed as days of lost production and wages in

the first year following injury per 100 employees in Federal Government agencies, and return to work (RTW)

rates, expressed as the share of injured workers returned to work within two years of injury. Together, the LPD

and RTW rates provide valuable measures of the overall incidence and severity of workplace injuries for Federal

employees and the effectiveness of OWCP’s and Federal employers’ return to work.  OWCP uses field nurses to

provide early assistance in more severe injury cases to coordinate medical care and return to work assistance

services.  OWCP also assists Federal employers with accommodation and reemployment of their injured workers.  

These strategies have contributed to a greater than 30% reduction in the Government‐wide LPD rate since FY

2006.   During this period, successive initiatives jointly directed by OWCP and OSHA, the “Safety, Health and

Return to Employment” initiative, and the “Protecting Our Workforce and Ensuring Re‐employment (POWER)”

also contributed significantly to this success by assigning performance goals to Federal employers to reduce

injuries and improve their compensation case handling and return to work activities.  

To support DOL Outcome Goal 4.2, the Longshore and Harbor Workers’ Compensation Act program focuses on

employer performance to ensure that injury reports and first payment of benefits are timely and that disputed

claims are resolved as quickly as possible.    The timeliness of notice of injury and payment of compensation

directly impact the delivery of benefits and the quality of customer service.    The Percent of First Payment of

Compensation for Defense Base Act cases is key measure that monitors the improvement of insurance carriers

and providers in providing compensation to workers injured on the job.  Since FY 2009, the performance of this

program has steadily improved and the program expects performance to continue to improve in FY 2013.  

The Black Lung program’s performance improvement priority is to reduce the average time it takes to process

Black Lung claims, monitored through a key measure, Average time to render Proposed Decision and Order (PDO)

on Black Lung (BL) claims.    The Patient Protection and Affordable Care Act (PPACA) of 2010 had a significant

effect on the workload for the Black Lung Program, as it reinstated two provisions in the Black Lung Benefits Act

that had been removed in 1981 for claims filed on or after 1/1/82.  As a result of these provisions, there has been
Management’s Discussion and Analysis

(Unaudited)

22     United States Department of Labor

an increase in claims received.  Compared to the pre‐PPACA level of 4,354 claims filed in FY 2009, claims filings

increased by 62% (7,044 claims) in FY 2010, increased by 42% (6,181 claims) in FY 2011, and increased by an

estimated 22% (5,300 claims) in FY 2012.    These increases in claims filings caused a backlog of the aged case

inventory that has directly impacted results for this performance measure.  Average processing time increased

from 210 days in FY 2010 to 238 days in FY 2011 and to 262 days in FY 2012.  As aged claims are processed in FY

2013, the program expects the average PDO timeliness to decrease.   

Measure FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012*

Government‐Wide LPD Rate in Non‐Postal

Agencies 46.3 41.3 35.8 34.6 33.4 34.6

Government‐Wide Share of Injured Workers

Returned to Work within two years of injury ‐‐ ‐‐ ‐‐ 89.7% 91.6% 91.5%

Percent of First Payment of Compensation issued

within 30 days for Defense Base Act cases ‐‐ ‐‐ 43% 55% 56% 63%

Average time to render Proposed Decision and

Order (PDO) on Black Lung (BL) claims (days) ‐‐ 205 201 210 238 262

*Preliminary data.  Complete annual performance results for FY 2012 will not available before late November 2012.

DOL is working to reduce the time lost to injury and illness for federal workers.  DOL will create a model return‐

to‐work program to reduce lost production day rates by one percent per year by September 30, 2013.  

Federal‐State Unemployment Insurance (UI) Program (administered by ETA)

The Federal‐state UI program, authorized under the Federal Unemployment Tax act and Title III of the Social

Security Act, provides temporary, partial wage replacement for unemployed workers, providing them with

income support when suitable work is unavailable.  To be eligible for benefits, unemployed workers must meet

eligibility requirements established by state laws that conform to federal law, including that they have worked

recently, be involuntarily unemployed, and be able and available for work.   One of the key measures for this

program is “Percent of All Intrastate First Payments Made within 21 Days after the Last Day of the First

Compensable Week.”    The table below provides historical data, along with unemployment statistics, that

illustrate the impact of claims volume on program performance during the recession that began in FY 2008.  The

Total Unemployment Rate, calculated by using Bureau of Labor Statistics data, is the sum of the not seasonally

adjusted unemployment level for October through September divided by the sum of the not seasonally adjusted

labor force level for October through September.

Measure FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012

First Payment Timeliness* 88.4% 86.8% 83.8% 82.2% 84.0% 83.7%

Total Unemployment Rate 4.5% 5.3% 8.5% 9.7% 9.2% 8.3%

*Years ending June 30th.

In FY 2013, UI will place a priority on program integrity, especially improper payments, and claimant

reemployment.  
    Program Performance Overview

(Unaudited)

FY 2012 Agency Financial Report     23

STATISTICS

Bureau of Labor Statistics (BLS)

In support of the Secretary’s Strategic Goal 5, to produce timely and accurate data on the economic conditions of

workers and their families, BLS produces timely, accurate, and relevant statistics reflecting labor market activity,

working conditions, and price changes in the economy.   Statistics produced by BLS support the formulation of

economic and social policy affecting virtually all Americans.  In 2012, BLS reached 100 percent of the underlying

timeliness, accuracy and relevance targets for all but one of its Principal Federal Economic Indicators.  Prices and

Living Conditions reached 100 percent of its underlying timeliness and accuracy targets, but missed one of its

underlying relevance targets because of the transition to an updated industry classification system that had fewer

industries.    Results for the Labor Force Statistics as well as the Prices and Living Conditions Principal Federal

Economic Indicators (PFEIs) are indicated in the table below.

BLS uses the American Customer Satisfaction Index (ACSI) to measure customer satisfaction with its website, since

most users access BLS data through bls.gov, which averages more than 8 million user sessions each month.  The

ACSI survey prompts users while they are on the website for feedback regarding the extent to which the website

meets their needs.  BLS uses these results to improve the website to better serve its stakeholders and as a measure

of mission achievement.

Measure FY 2009 FY 2010 FY 2011 FY 2012

Percent of timeliness targets achieved for the Labor Force Statistics Principal

Federal Economic Indicators (PFEIs)

‐‐ 100% 100% 100%

Percent of accuracy targets achieved for the Labor Force Statistics PFEIs  ‐‐ 100% 100% 100%

Percent of relevance targets achieved for the Labor Force Statistics PFEIs  ‐‐ 100% 100% 100%

Percent of timeliness targets achieved for the Prices and Living Conditions PFEIs ‐‐ 100% 100% 100%

Percent of accuracy targets achieved for the Prices and Living Conditions PFEIs  ‐‐ 100% 100% 100%

Percent of relevance targets achieved for the Prices and Living Conditions PFEIs ‐‐ 100% 100% 83%

Customer Satisfaction with BLS Web Site as measured by the ACSI Score* 75 75 75 77

* ACSI Score is calculated on a 100 point scale.
(Unaudited)

24     United States Department of Labor

American Recovery and Reinvestment Act of 2009

(Recovery Act)

Since our nation’s greatest resource is its workers, the Recovery Act targeted investments to key areas that

create and preserve good jobs. DOL has two key roles in this recovery effort: providing worker training through

the administration of programs for these jobs; and easing the burden of the recession on workers and

employers by providing extended and expanded unemployment benefits and assisting and educating them

regarding expanded access to continued health benefits.  Details for DOL’s Recovery Act program are posted on

the Web at www.recovery.gov and www.dol.gov/recovery.

Financial Performance Overview   

Sound financial management is an integral part of the Department's efforts to deliver services and administer

programs.   With the Department's emphasis on internal controls, accurate financial information delivery to key

decision makers, and transparent and accountable reporting, the Department's stakeholders can be confident that

resources are used efficiently and effectively.

DOL's internal control program and centralized processes for reporting financial data help to ensure the relevance

and reliability of financial performance data.  DOL's comprehensive internal control program has the objective of

providing, on a continuing basis, reasonable assurance that all financial, non‐financial, performance, statistical

records, and related reports are reliable.  DOL's internal control program helps ensure that appropriate internal

controls are in place for financial performance management and that Agencies institute sound, effective internal

control policies and procedures for financial performance measurement and regular evaluation of their processes.  

Financial performance is evaluated during comprehensive ongoing financial management reviews and corrective

actions are implemented as required to resolve audit findings and increase efficiency.  These business processes

help to ensure that reported financial performance information is relevant and reliable.

In FY 2012, DOL used managerial cost accounting for costing programs and performance indicator results in

accordance with the Federal Accounting Standards Advisory Board’s (FASAB’s) Statement of Federal Financial

Accounting Standards (SFFAS) No. 4, Managerial Cost Accounting Standards and Concepts for the Federal

Government, as amended by SFFAS No. 30, Inter‐Entity Cost Implementation.  The statements outline the standards

for Federal entities to provide “reliable and timely information on the full cost of federal programs, their activities,

and outputs.”  This information can be used to allocate resources and evaluate program performance.  Managerial

cost accounting directly supports the sections of the AFR that address Net Program Cost in the Statement of Net

Cost.  Total Net Cost of DOL activities for FY 2012 was $105.7 billion.  

Analysis of Financial Statements and Stewardship Information

The principal financial statements summarize the Department's financial position, net cost of operations, and

changes in net position, and provide information on budgetary resources and social insurance.  
    Financial Performance Overview

(Unaudited)

FY 2012 Agency Financial Report     25

(Dollars in Billions) 2012 2011 Amount Percent

Financial position

Total assets 43.8 $           $          38.1 $            5.7 15.0%

Investments 20.8                          16.2              4.6 28.4%

Total liabilities 60.3 $           $          70.8 $         ‐ (10.5) 14.8%

Intra‐governmental debt 39.0                          48.9              ‐ (9.9) 20.2%

Net cost of operations

Net cost of operations 105.7 $         $       135.1 $         ‐ (29.4) 21.8%

Income maintenance 96.3                        124.9           ‐ (28.6) 22.9%

Employment and training 6.7                              7.6              ‐ (0.9) 11.8%

Budgetary Resources

Obligations incurred 156.3 $         $       191.9 $         ‐ (35.6) 18.6%

Summary of Selected Financial Data

Change

Financial Position  

The Department's Balance Sheet presents DOL’s financial position through the identification of agency assets,

liabilities, and net position, as shown below.  The Department's total assets increased from $38.1 billion in FY 2011

to $43.8 billion in FY 2012, an increase of 15.0%, primarily due to an increase in investments.    Investments

increased primarily due to net inflows in the Unemployment Trust Fund in excess of immediate program needs for

benefit payments and administrative costs.  Liabilities decreased from $70.8 billion at the end of FY 2011 to $60.3

billion at the end of FY 2012, a decrease of (14.8%).   This decrease was primarily due to a decrease in intra‐

governmental debt [(20.2%)] due to Unemployment Trust Fund repayments of borrowings from the General Fund

of the Treasury as tax collections by the states exceeded the requirements for benefit payments.  

$0

$5

$10

$15

$20

$25

Funds with U.S.

Treasury

Investments Accounts

Receivable

Advances Property, Plant

and Equipment

ASSETS ($ in Billions)

2012 - $43.8 2011 - $38.1
Management’s Discussion and Analysis

(Unaudited)

26     United States Department of Labor

$0

$10

$20

$30

$40

$50

Intra-govtal Debt Accrued Benefits Future Workers'

Compensation

Benefits

Energy

Employees OIC

Benefits

Other Liabilities

LIABILITIES ($ in Billions)

2012 - $60.3 2011 - $70.8

Net Cost of Operations

The Department's net cost of operations for the year ended September 30, 2012 was $105.7 billion, a decrease of

($29.4) billion [(21.8%)] from 2011.  This decrease was attributable to the major programs discussed below:

$0

$20

$40

$60

$80

$100

$120

$140

Income

Maintenance

Employment and

Training

Standards Safety and Health Statistics

NET COST OF MAJOR PROGRAMS ($ in Billions) 

2012 - $105.7 2011 - $135.1

Income Maintenance programs continue to comprise the major portion of departmental costs. These programs

include unemployment benefits paid to covered individuals who are out of work and seeking employment, as well

as payments to individuals who qualify for disability benefits due to injury or illness suffered on the job, and the

costs to administer these programs. Income maintenance net costs were $96.3 billion, a decrease of (22.9%) from

FY 2011.    This decrease was primarily due to decreases in unemployment benefits provided under existing

legislation which decreased the length of coverage and due to lower levels of unemployment as compared to FY

2011.  
    Financial Performance Overview

(Unaudited)

FY 2012 Agency Financial Report     27

Employment and Training programs comprise DOL’s second largest cost.    These programs are designed to help

individuals deal with the loss of a job, identify new occupational opportunities, find training to acquire different

skills, start a new job, and make long‐term career plans, as well as connect employers to workers with the skills

they need. Employment and training costs were $6.7 billion in FY 2012, a decrease of (11.8%) from FY 2011.  This

decrease was due to reductions in amounts appropriated for the 2011 program year for various programs including

the Trade Adjustment Allowance programs.   

Budgetary Resources

The Statement of Budgetary Resources reports the budgetary resources available to DOL to effectively carry out the

activities of the Department during FY 2012 and FY 2011, as well as the status of these resources at the end of each

fiscal year.  The Department had total obligations incurred of $156.3 billion in FY 2012, a decrease of ($35.6) billion

[(18.6%)] from FY 2011. This decrease was primarily due to decreases in total obligations incurred for income

maintenance programs as noted above.  

Social Insurance and the Black Lung Disability Benefit Program  

The Federal Accounting Standards Advisory Board (FASAB) has classified the Black Lung Disability Benefit Program

as a social insurance program that is required to report a Statement of Social Insurance (SOSI) and a Statement of

Changes in Social Insurance Amounts (SCSIA) for the Black Lung Disability Trust Fund (BLDTF).  

The SOSI reports for the projection period (which begins on September 30 of the reporting year and ends

September 30, 2040), for all current and future participants, the actuarial present value of future benefits and the

present value of administrative costs, less the present value of coal excise tax income.  For FY 2008 through FY 2012

as presented in the SOSI, the present value of the coal excise tax income has been greater than the sum of the

actuarial present value of the future benefits and the present value of administrative costs.  This amount is also

called the open and closed group measure.   

(Dollars in Millions) 2012 2011 Amount Percent 

 Net cost of operations $ (441.1) $ (429.3) $ (11.8) 2.7%

 Total financing sources 562.8 568.6 (5.8) -1.0%

 Net change of cumulative results of operations $ 121.7 $ 139.3 $ (17.6) -12.6%

 Total assets $ 102.5 $ 63.8 $ 38.7 60.7%

 Less: total liabilities (6,080.1) (6,163.1) 83.0 -1.3%

 Net position (assets net of liabilities) $ (5,977.6) $ (6,099.3) $ 121.7 -2.0%

 Open and closed group measure,

 beginning of year $ 4,720.2 $ (730.3) -13.4%

 Open and closed group measure,

 end of year $ 4,658.5 $ 4,720.2 $ (61.7) -1.3%

Social Insurance

$ 5,450.5

Black Lung Disability Benefit Program – Table of Key Measures

 Change 

Costs and Changes in Net Position

Net Position 
Management’s Discussion and Analysis

(Unaudited)

28     United States Department of Labor

The increase in the net cost of operations for the year ended September 30, 2012 of $11.8 million [2.7%] from FY

2011 was mainly due to higher benefit costs.  FY 2012 total financing sources decreased ($5.8) million [(1.0%)] from

FY 2011 mainly due to decreases in taxes and interest.  The resulting net change of cumulative results of operations

for FY 2012 was $121.7 million, a decrease of ($17.6) million [(12.6%)] from FY 2011.

Total assets increased $38.7 million [60.7%] in FY 2012 primarily due to an increase in the Funds with U.S. Treasury

balance.    Liabilities decreased ($83.0) million [(1.3 %)] in FY 2012 due to repayments of debt.  The resulting net

position (deficit) decreased $121.7 million in FY 2012.

During FY 2012, the open and closed group measure decreased ($61.7) million [(1.3%)] and during FY 2011

decreased ($730.3) million [(13.4%)].    Reasons for the net decreases in the measures for FY 2012 and FY 2011

include changes in the assumptions, such as:

 Decreases in the projected coal excise tax revenues due to revisions based on current year experience and

decreases in future collections;

 Changes in future benefits costs; and  

 Decreases in discount rates leading to increases in the measures (described as a change in assumption about

interest rate on the SCSIA).

The total of open and closed group measure plus fund assets as of September 30, 2012 of $4,761.0 million

represents a projected net positive cash flow that may be used to liquidate the liabilities of the BLDTF, which were

$6,080.1 million as of September 30, 2012.

Refer to Notes 1‐W and 21 and RSI for additional information on the SOSI, including the summary section; SCSIA;

the Black Lung Disability Benefit Program; its reported activity and balances; and projections and sensitivity analysis

in constant dollars through 2040.  

Limitations on the Principal Financial Statements

As required by the Government Management Reform Act of 1994 (31 USC 3515(b)), the principal financial

statements report the Department's financial position and results of operations.  While the statements have been

prepared from the Department's books and records in accordance with formats prescribed by OMB, the statements

differ from 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 they are a component of the U.S.

Government, a sovereign entity, and that liabilities reported in the financial statements cannot be liquidated

without legislation providing resources to do so.  

Reducing Improper Payments

Improved financial performance through the reduction of improper payments continues to be a key financial

management focus of the Federal Government.  At DOL, developing strategies and the means to reduce improper

payments is a matter of good stewardship.  Accurate payments lower program costs.

In accordance with the Improper Payments Information Act (IPIA) of 2002, as amended by the Improper Payments

Elimination and Recovery Act (IPERA) of 2010, and as implemented by OMB Circular A‐123, Appendix C,

Requirements for Effective Measurement and Remediation of Improper Payments, the Department reviews its

programs and activities annually to identify programs that may be susceptible to significant improper payments.  

For programs and activities deemed risk susceptible, the Department performs testing to estimate the rates and

amounts of improper payments, establishes improper payment reduction targets in accordance with OMB

guidance, and develops and implements corrective actions.  
    Financial Performance Overview

(Unaudited)

FY 2012 Agency Financial Report     29

The Department has two programs that are classified to be at risk of significant improper payments in accordance

with OMB criteria or classification – the Unemployment Insurance (UI) benefit program and the Workforce

Investment Act (WIA) grant program. The table below shows the target and projected improper payments error

rates for the programs classified as at‐risk:

DOL Program FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Target Actual Target Actual Target Target Target

Unemployment Insurance (UI) 9.8% 12.0% 9.7% 11.42% * * *

Workforce Investment Act (WIA) 0.07% 0.31% 0.44% 0.22% 0.44% 0.44% 0.44%

*Integrity rate targets for FY 2013 to FY 2015 will be set based on an alternative methodology explained in section II of “Improper Payments

Reporting Details” ‐ UI Statistical Sampling.

The FY 2012 error rate target for UI’s improper payments was 9.7% as compared to the actual error rate of 11.42%

(10.81% overpayment rate plus 0.61% underpayment rate) for the period July 2011 to June 2012, the most recent

period for which data was available.   

The UI improper payment rate decreased from 12.0% for the 2011 reporting period (11.35% overpayments and

0.65% underpayments).  This decrease is primarily the result of decreases in overpayment rates for several root

causes, especially Employment Service (ES) registration (which declined from 1.03% to 0.74%) and Benefit Year

Earnings (BYE) which decreased from 3.44% to 3.23%.   

As a result of the Department’s efforts to improve the accuracy of the measured rate, OMB approved a revised WIA

annual target rate beginning with FY 2012.    The Department initially based its WIA improper payment rate on

analysis of Single Audit Act reports, using questioned costs as a proxy for improper payments.  The target rate was

set based on these estimates.  The use of Single Audit Act reports was later expanded to include other sources of

data; however, the target rate was not adjusted accordingly until 2012.

The Department has implemented various corrective actions to address the causes and reduce improper payments

in both of these programs. Like many other Federal agencies, the Department faces challenges in meeting its

improper payment reduction and recovery targets, particularly with programs that are sensitive to economic

fluctuations or natural disasters, such as the UI program. Furthermore, meeting improper payment reduction and

recovery targets of programs such as UI and WIA are contingent upon the cooperation and support of State

agencies and other outside stakeholders who are intricately involved in the day‐to‐day administration and

management of these programs' activities.   

See “Improper Payments Information Act Reporting Details” in the Other Accompanying Information section of this

report for additional information on improper payments.

Financial Management Systems and Strategy

DOL continues to pursue its financial management system strategy to improve reporting, accountability and

decision making, while furthering implementation of key Government‐wide initiatives, e‐Government requirements

and other regulatory mandates. The Department seeks to maintain financial management systems, processes and

controls that ensure financial accountability and transparency, provide useful information to management and

satisfy Federal laws, regulations and guidance.
Management’s Discussion and Analysis

(Unaudited)

30     United States Department of Labor

The Department implemented a new, then Financial Systems Integration Office compliant, off the shelf, agency

wide financial management system utilizing Oracle Federal Financials through a commercial Shared Service Provider

(SSP) in January 2010. The New Core Financial Management System (NCFMS) established on‐line real time

interfaces with major Departmental support system including procurement and e‐Travel. The system has been

deemed to be largely and substantially compliant in terms of FFMIA Act and A‐123 (Internal Controls).

The Department is replacing its existing procurement, travel and payroll/personnel systems over the next 12 to 24

months. Real time interfaces will again be developed within the framework of NCFMS to accept and record financial

transactions in the system. Taken as a whole, these systems represent the Department’s financial system and

supporting system.    

FY 2012 saw a transition from a normalization phase to one of optimization of NCFMS, which was introduced in FY

2010 as the financial system of record. Building upon our normalization efforts in FY 2011, paperless invoices were

introduced in FY 2012 with a target of full utilization during FY 2013. An executive management reporting initiative

was begun in FY 2012 to provide enhanced financial management reports throughout DOL to assist in agency and

departmental decision making processes.  

Continued efforts to fully utilize the capabilities of NCFMS coupled with new technology will continue in the future.

A skills assessment of DOL financial management personnel has also been initiated to enable financial users to

more fully leverage the system.
(Unaudited)

  FY 2012 Agency Financial Report     31

Management Assurances  

Federal Managers’ Financial Integrity Act of 1982 (FMFIA)

FMFIA requires that agencies establish internal controls and financial systems that provide reasonable assurance

that the integrity of Federal programs and operations is protected.  It requires that the head of the agency provide

an annual assurance statement whether the agency has met this requirement.

Appendix A of OMB Circular A‐123 provides specific requirements for conducting management’s assessment of

internal control over financial reporting, and also requires the agency head to provide an assurance statement on

the effectiveness of internal controls over financial reporting.

Federal Financial Management Improvement Act of 1996 (FFMIA)

FFMIA requires that agencies implement and maintain financial management systems that comply substantially

with the Federal financial management system requirements, applicable Federal accounting standards, and the

United States Government Standard General Ledger at the transaction level.  The agency head is to make an annual

determination whether the financial systems substantially comply with FFMIA.
   
 

Financial Section

     FY 2012 Agency Financial Report    35      

Message from the Chief Financial Officer

For FY 2012, the Department of Labor continued its high standard of financial management

by receiving an unqualified (clean) audit opinion on our financial statements for the 16th

year. The FY 2012 financial statements are only the second produced entirely from the

Department’s new core financial system, and I am pleased to report that the Department

has obtained this clean audit opinion. This provides independent confirmation that the

Department’s financial statements are presented fairly, transparently, and in conformity

with U.S. generally accepted accounting principles.

For the 11th year, the Association of Government Accountants awarded DOL the Certificate

of Excellence in Accountability Reporting for our FY 2011 AFR, clearly demonstrating the

quality of our reporting and transparency. Accurate and timely financial information

improves DOL’s accountability to its stakeholders and the operational, budget, and policy decision‐making

processes that are the foundation for the services the Department delivers to the public.

During the past year, the Department took numerous corrective actions to address the material weaknesses

identified by the auditors in FY 2011. I am happy to announce that this resulted in the elimination of all material

weaknesses for the Department of Labor. We will continue our efforts to further improve internal controls across

the Department.

As part of the Administration’s Accountable Government Initiative for the Improper Payments Elimination and

Recovery Act (IPERA), we performed audits which took steps to prevent and recover improper payments; please

see the Improper Payments Reporting Details section of this report for in‐depth discussion. In another effort, my

office worked with the Office of Management and Budget (OMB) and the Department of the Treasury to strengthen

controls on the use of Federal funds through the development of a Do Not Pay Solution plan. Do Not Pay is a one‐

stop shop that allows the Department to check various databases before making payments or awards in order to

identify ineligible recipients and prevent fraud or errors from being made. Furthermore, in support of the Vice

President’s Campaign to Cut Waste initiative, we have led the Department’s efforts to increase controls and make

across‐the‐board reductions in expenses. These reductions specifically include cutting travel and conference

expenses by at least 30 percent. We have identified strategies to achieve this goal by FY 2013, while implementing a

strict conference review process to ensure taxpayer dollars are spent wisely.

I am proud of the Department’s financial management accomplishments in FY 2012. These achievements meet the

high standards of professionalism demanded by the American people. Our efforts allow DOL to place an emphasis

on maximizing outcomes, while delivering an efficient, effective, and accountable government.
36 United States Department of Labor

KPMG LLP

Suite 12000

1801 K Street, NW

Washington, DC 20006

Independent Auditors’ Report

Secretary and Deputy Inspector General

U.S. Department of Labor:

We have audited the accompanying consolidated balance sheets of the U.S. Department of Labor (DOL) as 

of September 30, 2012 and 2011; the related consolidated statements of net cost and changes in net 

position and combined statements of budgetary resources for the years then ended; the statements of social 

insurance as of September 30, 2012, 2011, 2010, 2009, and 2008; and the statements of changes in social 

insurance amounts for the years ended September 30, 2012 and 2011 (hereinafter referred to as 

“consolidated financial statements” or “basic financial statements”). The objective of our audits was to 

express an opinion on the fair presentation of these consolidated financial statements. In connection with 

our fiscal year (FY) 2012 audit, we also considered DOL’s internal control over financial reporting and

tested DOL’s compliance with certain provisions of applicable laws, regulations, contracts, and grant 

agreements that could have a direct and material effect on these consolidated financial statements.

We have also examined DOL’s compliance with section 803(a) of the Federal Financial Management 

Improvement Act of 1996 (FFMIA) as of September 30, 2012.

SUMMARY

As stated in our opinion on the financial statements, we concluded that DOL’s consolidated financial 

statements present fairly, in all material respects, the financial position of DOL as of September 30, 2012

and 2011; its net costs, changes in net position, and budgetary resources for the years then ended; the 

financial condition of its social insurance program as of September 30, 2012, 2011, 2010, 2009, and 2008; 

and the changes in social insurance amounts for the years ended September 30, 2012 and 2011, in 

conformity with U.S. generally accepted accounting principles.

As discussed in our opinion on the financial statements, the statements of social insurance present the 

actuarial present value of DOL’s future expenditures to be paid to or on behalf of participants, estimated 

future income to be received from excise taxes, and estimated expenditures for administrative costs during 

a projection period ending in 2040.

Also, as discussed in our opinion on the financial statements, DOL changed its presentation for reporting 

the combined statement of budgetary resources in FY 2012.

KPMG LLP is a Delaware limited liability partnership, 

the U.S. member firm of KPMG International Cooperative

(“KPMG International”), a Swiss entity.
Independent Auditors’ Report

FY 2012 Agency Financial Report 37

Our consideration of internal control over financial reporting resulted in identifying certain deficiencies 

that we consider to be significant deficiencies, as defined in the Internal Control over Financial Reporting 

section of this report, as follows:

1. Lack of Sufficient Security Controls over Key Financial and Support Systems 

2. Lack of Sufficient Controls over Grants

3. Improvements Needed in the Preparation and Review of Journal Entries 

We did not identify any deficiencies in internal control over financial reporting that we consider to be 

material weaknesses as defined in the Internal Control over Financial Reporting section of this report.

The results of our tests of compliance with certain provisions of laws, regulations, contracts, and grant 

agreements, exclusive of those referred to in the FFMIA, disclosed no instances of noncompliance and four

other matters that are required to be reported under Government Auditing Standards, issued by the 

Comptroller General of the United States, and Office of Management and Budget (OMB) Bulletin No. 07-

04, Audit Requirements for Federal Financial Statements, as amended.

As stated in our opinion on DOL’s compliance with section 803(a) of FFMIA, we concluded that DOL 

complied, in all material respects, with the requirements of section 803(a) of FFMIA as of September 30, 

2012.

The following sections discuss our opinion on DOL’s consolidated financial statements; our consideration 

of DOL’s internal control over financial reporting; our tests of DOL’s compliance with certain provisions 

of applicable laws, regulations, contracts, and grant agreements; our opinion on DOL’s compliance with 

FFMIA; and management’s and our responsibilities.

OPINION ON THE FINANCIAL STATEMENTS

We have audited the accompanying consolidated balance sheets of the U.S. Department of Labor as of 

September 30, 2012 and 2011; the related consolidated statements of net cost and changes in net position 

and the combined statements of budgetary resources for the years then ended; the statements of social 

insurance as of September 30, 2012, 2011, 2010, 2009, and 2008; and the statements of changes in social 

insurance amounts for the years ended September 30, 2012 and 2011.

In our opinion, the consolidated financial statements referred to above present fairly, in all material 

respects, the financial position of the U.S. Department of Labor as of September 30, 2012 and 2011; its net 

costs, changes in net position, and budgetary resources for the years then ended; the financial condition of 

its social insurance program as of September 30, 2012, 2011, 2010, 2009, and 2008; and the changes in its 

social insurance amounts for the years ended September 30, 2012 and 2011, in conformity with U.S. 

generally accepted accounting principles.
Financial Section

38 United States Department of Labor

As discussed in Notes 1-W and 1-Y to the consolidated financial statements, the statements of social 

insurance present the actuarial present value of DOL’s future expenditures to be paid to or on behalf of 

participants, estimated future income to be received from excise taxes, and estimated expenditures for 

administrative costs during a projection period ending in 2040. In preparing the statements of social 

insurance, management considers and selects assumptions and data that it believes provide a reasonable 

basis for the assertions in the statements. However, because of the large number of factors that affect the 

statements of social insurance and the fact that future events and circumstances cannot be known with 

certainty, there will be differences between the estimates in the statements of social insurance and the 

actual results, and those differences may be material.

As discussed in Note 1-Z to the consolidated financial statements, DOL changed its presentation for 

reporting the combined statement of budgetary resources in FY 2012, based on new reporting requirements 

under OMB Circular No. A-136, Financial Reporting Requirements. As a result, DOL’s combined 

statement of budgetary resources for FY 2011 has been adjusted to conform to the current year 

presentation.

U.S. generally accepted accounting principles require that the information in the Management’s Discussion

and Analysis, Required Supplementary Information, and Required Supplementary Stewardship 

Information sections be presented to supplement the basic financial statements. Such information, although 

not a part of the basic financial statements, is required by the Federal Accounting Standards Advisory

Board who considers it to be an essential part of financial reporting for placing the basic financial 

statements in an appropriate operational, economic, or historical context. We have applied certain limited 

procedures to the required supplementary information in accordance with auditing standards generally 

accepted in the United States of America, which consisted of inquiries of management about the methods 

of preparing the information and comparing the information for consistency with management’s responses 

to our inquiries, the basic financial statements, and other knowledge we obtained during our audits of the 

basic financial statements. We do not express an opinion or provide any assurance on the information 

because the limited procedures do not provide us with sufficient evidence to express an opinion or provide 

any assurance.

The information in the Message from the Secretary of Labor, Message from the Chief Financial Officer, 

and Other Accompanying Information section is presented for the purposes of additional analysis and is 

not a required part of the basic financial statements. Such information has not been subjected to the 

auditing procedures applied in the audits of the basic financial statements, and accordingly, we do not 

express an opinion or provide any assurance on them.

INTERNAL CONTROL OVER FINANCIAL REPORTING

A deficiency in internal control exists when the design or operation of a control does not allow 

management or employees, in the normal course of performing their assigned functions, to prevent, or 

detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination 

of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of 

the entity’s financial statements will not be prevented, or detected and corrected on a timely basis.
Independent Auditors’ Report

FY 2012 Agency Financial Report 39

Our consideration of the internal control over financial reporting was for the limited purpose described in 

the Responsibilities section of this report and was not designed to identify all deficiencies in internal 

control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. 

In our FY 2012 audit, we did not identify any deficiencies in internal control over financial reporting that 

we consider to be material weaknesses, as defined above. However, we identified certain deficiencies in 

internal control over financial reporting described in Exhibit I that we consider to be significant 

deficiencies in internal control over financial reporting. A significant deficiency is a deficiency, or a 

combination of deficiencies, in internal control that is less severe than a material weakness, yet important 

enough to merit attention by those charged with governance.

Exhibit II presents the status of prior year significant deficiencies and material weaknesses.

We noted certain additional matters that we reported to management of DOL in a separate letter.

COMPLIANCE AND OTHER MATTERS

The results of our tests of compliance, as described in the Responsibilities section of this report, exclusive 

of those referred to in the FFMIA, disclosed no instances of noncompliance that are required to be reported 

herein under Government Auditing Standards or OMB Bulletin No. 07-04, as amended.

Other Matters. DOL is currently reviewing four incidents regarding potential violations of the Antideficiency Act. As of the date of this report, no final noncompliance determination has been made for these 

incidents.

We noted certain additional matters that we reported to management of DOL in a separate letter.

OPINION ON COMPLIANCE WITH FFMIA

DOL represented that, in accordance with the provisions and requirements of FFMIA, the Secretary of 

Labor determined that DOL’s financial management systems were in substantial compliance with FFMIA 

as of September 30, 2012.

We have examined the U.S. Department of Labor’s compliance with section 803(a) of the Federal 

Financial Management Improvement Act of 1996 as of September 30, 2012. Under section 803(a) of 

FFMIA, the U.S. Department of Labor’s financial management systems are required to substantially 

comply with (1) Federal financial management systems requirements, (2) applicable Federal accounting 

standards, and (3) the United States Government Standard General Ledger (USSGL) at the transaction 

level. We used OMB’s Implementation Guidance for the Federal Financial Management Improvement 

Act, dated January 9, 2009, to determine compliance.

In our opinion, the U.S. Department of Labor complied, in all material respects, with the aforementioned 

requirements as of September 30, 2012.

* * * * * * *
Financial Section

40 United States Department of Labor

RESPONSIBILITIES

Management’s Responsibilities. Management is responsible for the consolidated financial statements; 

establishing and maintaining effective internal control over financial reporting; and complying with laws, 

regulations, contracts, and grant agreements applicable to DOL.

Auditors’ Responsibilities. Our responsibility is to express an opinion on the FY 2012 and 2011

consolidated financial statements of DOL based on our audits. We conducted our audits in accordance with 

auditing standards generally accepted in the United States of America; the standards applicable to financial 

audits contained in Government Auditing Standards, issued by the Comptroller General of the United 

States; and OMB Bulletin No. 07-04, as amended. Those standards and OMB Bulletin No. 07-04 require 

that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial 

statements are free of material misstatement. An audit includes consideration of internal control over 

financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but 

not for the purpose of expressing an opinion on the effectiveness of DOL’s internal control over financial 

reporting. Accordingly, we express no such opinion.

An audit also includes:

• Examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated 

financial statements;

• Assessing the accounting principles used and significant estimates made by management; and

• Evaluating the overall consolidated financial statement presentation.

We believe that our audits provide a reasonable basis for our opinion.

In planning and performing our FY 2012 audit, we considered DOL’s internal control over financial 

reporting by obtaining an understanding of DOL’s internal control, determining whether internal controls 

had been placed in operation, assessing control risk, and performing tests of controls as a basis for 

designing our auditing procedures for the purpose of expressing our opinion on the consolidated financial 

statements, but not for the purpose of expressing an opinion on the effectiveness of DOL’s internal control 

over financial reporting. Accordingly, we do not express an opinion on the effectiveness of DOL’s internal 

control over financial reporting. We did not test all controls relevant to operating objectives as broadly 

defined by the Federal Managers’ Financial Integrity Act of 1982. 

As part of obtaining reasonable assurance about whether DOL’s FY 2012 consolidated financial statements 

are free of material misstatement, we performed tests of DOL’s compliance with certain provisions of 

laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and 

material effect on the determination of the consolidated financial statement amounts, and certain provisions 

of other laws and regulations specified in OMB Bulletin No. 07-04, as amended. We limited our tests of 

compliance to the provisions described in the preceding sentence, and we did not test compliance with all 

laws, regulations, contracts, and grant agreements applicable to DOL. However, providing an opinion on 

compliance with laws, regulations, contracts, and grant agreements was not an objective of our audit and, 

accordingly, we do not express such an opinion. 
Independent Auditors’ Report

FY 2012 Agency Financial Report 41

Our responsibility also included expressing an opinion on DOL’s compliance with FFMIA section 803(a) 

requirements as of September 30, 2012, based on our examination. Our examination was conducted in 

accordance with attestation standards established by the American Institute of Certified Public Accountants 

and the standards applicable to attestation engagements contained in Government Auditing Standards

issued by the Comptroller General of the United States, and accordingly, included examining, on a test 

basis, evidence about DOL’s compliance with the requirements of FFMIA section 803(a) and performing 

such other procedures as we considered necessary in the circumstances. We believe that our examination 

provides a reasonable basis for our opinion. Our examination does not provide a legal determination on 

DOL’s compliance with specified requirements.

______________________________

DOL’s written response to the findings identified in our audit and presented in Exhibit I was not subjected 

to the auditing procedures applied in the audit of DOL’s consolidated financial statements, and 

accordingly, we express no opinion on it.

This report is intended solely for the information and use of DOL’s management, DOL’s Office of 

Inspector General, OMB, the U.S. Government Accountability Office, and the U.S. Congress, and is not 

intended to be and should not be used by anyone other than these specified parties.

November 16, 2012
Financial Section

Significant Deficiencies

Exhibit I

42 United States Department of Labor

1. Lack of Sufficient Security Controls over Key Financial and Support Systems

In fiscal year (FY) 2012, U.S. Department of Labor (DOL) agencies completed corrective action 

to address certain previously-identified control deficiencies. Additionally, the Office of the Chief 

Information Officer (OCIO) issued an updated department-wide Computer Security Handbook to 

incorporate current National Institute of Standards and Technology (NIST) Special Publication 

800-53, Revision 3, Recommended Security Controls for Federal Information Systems and 

Organizations, information technology (IT) requirements on August 1, 2011, which was effective

for FY 2012. 

During FY 2012, we also noted improvements in DOL’s manual compensating controls that 

mitigate certain IT security control weaknesses. These controls had deteriorated when DOL’s 

control environment was significantly altered as a result of implementing the New Core Financial 

Management System (NCFMS) in FY 2010, but we determined most of these controls to be 

operating effectively during FY 2012. 

However, during our FY 2012 testing of significant DOL financial and support systems, we 

identified new security control deficiencies in addition to certain ones that were reported in prior 

years across the four DOL agencies responsible for these systems. We have classified the 

deficiencies identified into the following four categories: account management, system access 

settings, system audit log reviews, and vulnerability management. 

The first two categories summarize the identified deficiencies related to controls that are designed 

to help prevent unauthorized access to IT systems. The specific deficiencies identified in these 

two categories were as follows: 

Account Management 

• User accounts were not timely removed for separated users, and certain separated users had 

active system accounts;

• Shared, generic, and multiple user accounts for the same user existed;

• Incidents were not timely reported;

• Developer, test, and production roles were not separated; and

• Account management controls were not performed, as evidenced by incomplete or missing 

access requests, non-disclosure agreements, modification forms, and termination forms.

System Access Settings 

• Inactive accounts were not disabled in a timely manner; 

• Password settings did not comply with the OCIO Computer Security Handbook; and 

• Inadequate system configurations were in place.

Account management control deficiencies increase the risk that current employees, separated 

employees, and/or contractors may obtain unauthorized or inappropriate access to financial 

systems and/or data. Such access could lead to unauthorized activities and/or inappropriate 

disclosures of sensitive data. Additionally, system access setting deficiencies may be exploited, in 

either a singular fashion or in combination, by a malicious user, which may affect the 

confidentiality, integrity, and/or availability of DOL systems and data. 
Independent Auditors’ Report

Significant Deficiencies

Exhibit I

FY 2012 Agency Financial Report 43

System Audit Logs Reviews 

The system audit logs reviews category represents controls designed to detect unauthorized access 

to IT systems. Although DOL has certain detective controls in place to mitigate the 

aforementioned account management and system access settings risks, we identified that certain 

audit logs were not generated, reviewed, or reviewed timely. In addition, audit logging duties were 

not appropriately segregated for one system. The lack of effective and timely system audit log 

reviews may allow for unauthorized or inappropriate activities to go undetected by management

for lengthy periods of time. 

Vulnerability Management

Controls related to vulnerability management are designed to prevent weaknesses in IT systems 

from being exploited. Such controls include proactively monitoring system vulnerabilities, timely 

patching related security issues, and configuring IT systems in compliance with baseline security 

requirements. During our FY 2012 vulnerability assessments, we identified the following 

deficiencies: 

• Numerous critical and high-risk application and operating system patches were not 

implemented; 

• Numerous servers and workstations were not compliant with minimum security baselines;

• Passwords did not meet the minimum security baseline requirements; and 

• Logical access control weaknesses, such as the ability to enumerate local users without 

credentials and the ability to obtain the host security identifier for the remote host without 

credentials, existed. 

In addition, we noted that one agency did not implement any corrective actions in FY 2012 related 

to patch and configuration management weaknesses we identified in FY 2011 for two of its IT 

systems. The agency had developed Plans of Action and Milestones to address these weaknesses; 

however, they were not scheduled for completion until December 31, 2012. 

Vulnerabilities that are not remedied in a timely manner may result in information leaks or system 

threats. These vulnerabilities may also disrupt normal system processes, allow inappropriate 

access, prevent updates from being implemented, and jeopardize the integrity of financial 

information. Additionally, vulnerabilities that are not remedied or mitigated can present an 

opportunity to circumvent account management, system access settings, and audit logging 

controls.

Collectively, the aforementioned IT control deficiencies pose a significant risk to the integrity of 

DOL’s data, which could ultimately impact its ability to accurately and timely perform its

financial reporting duties. The specific nature of these deficiencies, their causes, and the systems 

impacted by them have been communicated separately to management. These deficiencies, which 

were noted across all four agencies selected for testing, were the result of issues in the 

implementation and monitoring of departmental procedures and controls. DOL agencies have not 

invested the necessary level of effort and resources to ensure that certain IT policies and 

procedures are operating effectively.

To address the deficiencies noted above, the Chief Information Officer should: 

a) Coordinate efforts among the DOL agencies to develop procedures and controls to address 

access and vulnerability management control deficiencies in financial and support systems;
Financial Section

Significant Deficiencies

Exhibit I

44 United States Department of Labor

b) Monitor the agencies’ progress to ensure that procedures and controls are appropriately 

implemented and maintained; and 

c) Coordinate with the applicable agencies to ensure that sufficient resources are available to 

develop, implement, and monitor the procedures and controls that address access and 

vulnerability management control deficiencies.

Management’s Response: The Office of the Assistant Secretary for Administration and 

Management (OASAM) will ensure proper resources are prioritized to address the security control 

weaknesses outlined above. In management’s view, DOL policies, procedures, and physical and 

logically separated systems with supporting boundary controls, collectively provide compound 

safeguards and redundant security measures to ensure the integrity of DOL financial systems. 

Management will increase communication with DOL Agencies to ensure they give priority 

attention and sufficient resources to prioritize and complete the corrective actions required to 

address the weaknesses.

We appreciate the importance of properly managing IT Security Risks within our major 

information systems. In FY 2011, the Office of the Chief Information Officer expanded upon the 

DOL Enterprise Risk Management Strategy by implementing Department-wide and agency 

specific IT Security Performance Metrics. One of the performance metrics: – Percentage of 

Agency audit recommendations related to DOL Security Significant Deficiencies closed within 90 

days –, has also been added to each Agency’s FY 2013 Operating Plan. Additionally, the OCIO 

completed the following actions:

• In the last two weeks of July 2012, the OCIO held meetings with each Agency to discuss their 

IT Security Performance Metrics and provided recommended actions to ensure they achieve 

their FY 12 and FY 13 targets. 

• On August 14, 2012, the DOL Chief Information Security Officer, provided an IT Security 

Risk Management briefing to the DOL Agency Heads regarding the importance of Risk 

Management as well as discussed the Departmental IT Security Risk Management metrics. 

• On August 23, 2012, OCIO provided a 2 hour training session for Agency representatives 

responsible for managing their Agency IT Security risks. 

• On September 19, 2012, the CIO distributed Agency IT Security Performance Metrics to each 

DOL Agency Head. 

The OCIO will monitor agency progress on achieving the IT Security Performance metrics via 

periodic status meetings as well as agency Operating Plan status updates. To ensure we continue 

to safeguard our financial systems, OASAM will evaluate its current efforts to deploy policies, 

procedures and automated tools to seek ways we can improve current continuous monitoring 

processes to strengthen the overall security posture of DOL’s information systems.

Auditors’ Response: We will conduct follow-up procedures in FY 2013 to determine whether 

corrective actions have been developed and implemented.

2. Lack of Sufficient Controls over Grants

DOL awards numerous formula and discretionary grants to various state and local governments, 

nonprofit organizations, and other organizations. The Employment and Training Administration 

(ETA) awards and monitors the majority of these grants. Recipients of DOL grants are required to 

report their expenses to DOL on a quarterly basis via form ETA 9130, U.S. DOL ETA Financial 
Independent Auditors’ Report

Significant Deficiencies

Exhibit I

FY 2012 Agency Financial Report 45

Report, or a SF-425, Federal Financial Report (cost reports). During our FY 2012 audit 

procedures, we identified deficiencies in certain controls over grants, as described below. 

Grant Expenses

As part of our audit procedures over grant controls as of March 31, 2012, we selected a sample of 

32 grants from the population of grant expenses recorded in the NCFMS to determine if Federal 

Project Officers’ (FPO) desk reviews were properly performed and documented in the Grants 

Electronic Management System (GEMS). However, 8 of the 32 grants selected were not listed in 

GEMS. ETA management communicated to us that these 8 grants were related to projects in 

GEMS that were reviewed timely, but based on the documentation provided, we noted no 

connection between these grants and the related projects communicated by management. As such, 

sufficient documentation evidencing the FPO desk reviews of the specific grants could not be 

provided. ETA did not have policies and procedures in place to ensure that all grants were 

properly included in GEMS.

In addition, we noted that supervisors were able to access exception reports in GEMS to identify 

FPO desk reviews that were not completed timely; however, the reviews of these reports were not 

required to be documented. Further, although the related ETA written policies and procedures 

were updated in August 2011, they did not include any guidance on monitoring the timely 

completion of FPO desk reviews. The policies and procedures related to GEMS were written to 

focus on the FPO’s grant responsibilities, not on supervisory responsibilities. 

We also tested the December 31, 2011, Delinquent Reporting Analysis and noted that the analysis 

did not identify all grantees that were delinquent in filing their cost reports. The analysis only 

identified those grantees that were delinquent and had a cash advance balance over a certain 

threshold. ETA’s Delinquent Filers Monitoring Procedures were not designed to identify grantees 

without a cash advance that were delinquent in filing their quarterly cost reports. Further, the cash 

advance balances in the analysis were not calculated using the most current information available;

ETA used the cumulative cash receipts data from the grantees’ latest submitted cost reports rather 

than current data from the U.S. Department of Health and Human Services (HHS)-Payment 

Management System (PMS). We also noted that ETA did not update the Delinquent Filers 

Monitoring Procedures to include deadlines for required follow-up by the appropriate parties, or a 

control procedure designed to ensure that the quarterly notification of delinquent filers was

distributed timely, as recommended in the prior year audit report.

Without adequate grantee monitoring controls, grantees may misreport, intentionally or 

unintentionally, grant expenses without the misstatement being detected by ETA, or may fail to 

report grant expenditure details. As a result, grant-related expenses, advances, payables, and 

undelivered orders could be misstated.

The DOL FPO Grant Management Responsibilities Related to the GEMS memorandum states: 

A quarterly desk review is required on all projects in GEMS. Desk reviews must be 

completed within 30 days from the date on which the grantee submits its certified 

report and/or not later than 75 days from the quarter-ending date. 

...FPOs with grant monitoring responsibilities must use GEMS to conduct and record 

results for initial and/or annual risk assessments, complete quarterly desk reviews, 
Financial Section

Significant Deficiencies

Exhibit I

46 United States Department of Labor

and include official site visit or desk record reviews. Other GEMS features available 

for optional use include work plans and budget records.

Chapter 75 of Title 31, United States Code (commonly referred to as the Single Audit Act), states:

Each Federal agency shall, in accordance with guidance issued by the Director under 

section 7505, with regard to Federal awards provided by the agency – (1) monitor 

non-Federal entity use of Federal awards...

In addition, the U.S. Government Accountability Office’s (GAO) Standards for Internal Control 

in the Federal Government (the Standards) states:

Internal control and all transactions and other significant events need to be clearly 

documented, and the documentation should be readily available for examination. The 

documentation should appear in management directives, administrative policies, or 

operating manuals and may be in paper or electronic form. All documentation and 

records should be properly managed and maintained.

The Standards also states:

Internal control should generally be designed to assure that ongoing monitoring 

occurs in the course of normal operations. It is performed continually and is ingrained 

in the agency’s operations. It includes regular management and supervisory activities, 

comparisons, reconciliations, and other actions people take in performing their duties.

Grant Accrual

Each year, ETA performs a grant accrual accuracy analysis to determine if the methodology used 

to calculate the previous year’s September 30 grant accrual is reasonable, and to develop cost-topayment ratios for subsequent grant accrual calculations. The accuracy analysis compares the 

expense amounts accrued at year end to the expenses subsequently reported on the grantees’ cost 

reports. During our testwork over the accuracy analysis for the grant accrual as of September 30, 

2011, we identified several errors in the data underlying the accuracy analysis. To test the 

accuracy analysis, we obtained an extract from E-Grants, the tracking and management system for 

ETA grants, of all cost reports for the quarter ended September 30, 2011. We then compared the 

accuracy analysis to the extract of cost reports to determine the completeness and accuracy of the 

data used in the analysis. As a result of our procedures, we identified the following:

• 167 grants were improperly excluded from the accuracy analysis, and 

• 77 grants had expenses in the accuracy analysis that did not agree to the related cost reports.

Certain grants were excluded because the methodology used in preparing the grant accrual 

accuracy analysis was not designed to capture grants that had cost reports submitted with 

cumulative expenses of $0 or with cumulative expenses that had not changed since the prior 

period. Additionally, the reported expenses that ETA used in the analysis did not include all 

adjusting entries from the general ledger, which caused the reported expenses in the accuracy 

analysis to be greater than the amounts actually reported by the grantees. If all relevant grant data 

is not properly captured in the grant accrual accuracy analysis, ETA will not be able to adequately 

assess if the grant accrual methodology is accurately estimating the accrual. In addition, without 
Independent Auditors’ Report

Significant Deficiencies

Exhibit I

FY 2012 Agency Financial Report 47

adequate controls over the data used in the accuracy analysis, errors could occur in the cost-topayment ratios that result in a misstatement of the grant accrual.

Office of Management and Budget (OMB) Circular No. A-123, Management’s Responsibility 

for Internal Control, states:

The agency head must establish controls that reasonably ensure that revenues and 

expenditures applicable to agency operations are properly recorded and accounted 

for to permit the preparation of accounts and reliable financial and statistical 

reports and to maintain accountability over the assets.

In addition, the Standards states:

Control activities occur at all levels and functions of the entity. They include a wide 

range of diverse activities such as approvals, authorizations, verifications, 

reconciliations, performance reviews, maintenance of security, and the creation and

maintenance of related records which provide evidence of execution of these 

activities as well as appropriate documentation. Control activities may be applied in a 

computerized information system environment or through manual processes.

Other Grant Controls

On a quarterly basis, ETA generates separate HHS-PMS Synch Reports for Office of Job Corps 

(OJC) grants and all other ETA grants. These reports identify differences between the authorized 

amount (obligation amount) and the advance amount (disbursement amount) reported in HHSPMS and DOL’s NCFMS. During our testwork over the OJC HHS-PMS Synch Report for the 

quarter ended December 31, 2011, we noted that ETA did not document explanations evidencing 

investigation and resolution for any of the differences identified. These differences totaled $27.4 

million for obligations and $15.5 million for disbursements. 

ETA did not document explanations evidencing investigation and resolution of differences 

because significant mapping issues between HHS-PMS and NCFMS for OJC-related grants 

continued to exist as of September 2012. ETA management informed us that they did not have the 

resources necessary to fully resolve these mapping issues, which were more complex than 

originally anticipated. Furthermore, related policies and procedures were not developed to assign 

responsibility within ETA to ensure that all differences on the OJC HHS-PMS Synch Report were 

investigated, resolved, and documented. Without adequate reconciliation controls, errors could 

occur and not be detected or corrected, resulting in a misstatement of OJC grant-related expenses, 

advances, payables, and undelivered orders.

In addition, we selected a sample of 45 expired grants from the Closeout Inventory Tracking 

System as of June 30, 2012, to determine if grants were properly and timely closed out. Based on 

our testing, we determined that 1 of the 45 grants should have been closed out as of April 2012,

but remained open as of September 2012.

This situation occurred because ETA’s Grant Closeout Unit did not follow-up timely on matters 

related to the grantee’s performance certification submitted by the FPO, which had to be 

addressed before the grant could be closed out. As a result, the performance certification was not 

finalized, and the final closeout modification could not be created in E-Grants. ETA’s 
Financial Section

Significant Deficiencies

Exhibit I

48 United States Department of Labor

management informed us that this grant’s closeout was suspended until the required issues could 

be resolved. Without adequate controls to timely close out expired grants and deobligate any 

remaining funds, undelivered orders may be overstated.

We also selected a sample of 25 grants from the population of on-site monitoring reviews planned 

in FY 2012 by each of the six regions to determine if the on-site monitoring reviews were

properly performed and documented in the GEMS. Based on our testwork, we determined that 

Monitoring Review Reports were not completed timely. Specifically, the Monitoring Review 

Reports for 8 of 25 on-site monitoring reviews were issued more than 45 days after the exit date 

of fieldwork, ranging from 46 to 120 days. The reports were not issued on time because the Core 

Monitoring Guide (Guide), dated April 2005, did not specify a timeline for completing and filing 

Monitoring Review Reports. Each region had its own internal guidelines, but those guidelines 

were not properly monitored. 

In addition, we noted for all 25 on-site monitoring reviews, proper documentation to support the 

conclusions reached as outlined in the respective Monitoring Review Reports was not preserved in 

GEMS. The Guide did not specify the documentation that is required to be retained in GEMS to 

support the results outlined in the Monitoring Review Reports.

If proper documentation is not retained and readily accessible in GEMS, possible findings may 

not be communicated in the Monitoring Review Reports and tracked for correction. This could 

ultimately lead to errors in grant expenses not being identified properly by ETA management. In 

addition, without adequate controls in the grant reporting process, grantees may be misusing grant 

funds without detection by DOL. As a result, grant-related expenses, advances, payables and 

undelivered orders could be misstated.

The Standards states:

Control activities occur at all levels and functions of the entity. They include a wide 

range of diverse activities such as approvals, authorizations, verifications, 

reconciliations, performance reviews, maintenance of security, and the creation and 

maintenance of related records which provide evidence of execution of these 

activities as well as appropriate documentation. Control activities may be applied in a 

computerized information system environment or through manual processes.

Internal control should generally be designed to assure that ongoing monitoring 

occurs in the course of normal operations. It is performed continually and is ingrained 

in the agency’s operations. It includes regular management and supervisory activities, 

comparisons, reconciliations, and other actions people take in performing their duties.

Internal control and all transactions and other significant events need to be clearly 

documented, and the documentation should be readily available or examination. The 

documentation should appear in management directives, administrative policies, or 

operating manuals and may be in paper or electronic form.

For an entity to run and control its operations, it must have relevant, reliable, and 

timely communications relating to internal as well as external events.

ETA’s Standard Operating Procedures (SOP) Closing out ETA’s Expired Grants and Agreements

provides internally-developed closeout procedures and documentation on the timeframe for the 
Independent Auditors’ Report

Significant Deficiencies

Exhibit I

FY 2012 Agency Financial Report 49

assignment of grants scheduled to be closed, the receipt of closeout documents from the grantee, 

and the reconciliation of the closeout documents by the closeout grant officer. The SOP indicates 

that the timeframe from closeout completion is “no later than 12 calendar months after the 

expiration date of the grant or agreement.”

In addition, the SOP states:

Obtain a performance certification from the national and regional program officers 

within 45 days after closeout documents are received. Requests from Regional Office 

FPOs must be forwarded to the Closeout Grant Officer for handling. Once a financial 

reconciliation is reached and internal certifications are completed final closeout 

modification is created in E-Grants. Modifications must be certified by the Closeout 

Grant Officer and forwarded to the DFAS for financial certification.

The Guide states that “Subsequent to the review, the results of using the guide in conducting the 

review are to be entered into GEMS at the objective level for each core activity.”

To address the issues noted above, the Assistant Secretary for Employment and Training should: 

a) Develop and implement policies and procedures to ensure all grants are properly and timely 

added to GEMS. Specifically, the policies and procedures should require the FPOs to 1) 

notify the GEMS Point of Contact when a new grant needs to be added to GEMS and 2) 

review GEMS on a monthly basis to confirm all grants have been properly included; 

b) Update written policies and procedures to include specific guidance on monitoring the timely 

completion of FPO desk reviews. The guidance should require supervisors to periodically 

review the GEMS exception report and document these reviews;

c) Revise the Delinquent Filers Monitoring Procedures to include 1) a control procedure 

designed to ensure that the quarterly notification of delinquent filers is distributed timely, 2) 

deadlines for required follow-up of delinquent filers, 3) procedures to identify all grantees that 

are delinquent in filing their costs reports, and 4) procedures that require the use of the most 

current appropriate data in the delinquent monitoring analysis; 

d) Revise the methodology for calculating the grant accrual accuracy analysis to capture all 

submitted cost reports as of September 30, including those that report cumulative costs of $0;

e) Develop and implement policy and procedures to reconcile the expenses obtained from the 

general ledger to the expenses reported by the grantees in E-Grants prior to uploading the 

expenses into the grant accrual accuracy analysis; and

f) Enhance policies and procedures related to closing out grants to ensure that issues identified 

during the closeout process are resolved and grant closeout documentation is finalized in a 

timely manner.

g) Allocate the necessary resources to timely resolve the mapping issues between HHS-PMS and 

NCFMS to allow the systems to communicate properly;

h) Develop and implement policies and procedures designating roles and responsibilities for 

reviewing the OJC HHS-PMS Synch Report to ensure that differences for authorized amount 

(obligation amount) and the advance amount (disbursement) are properly identified, resolved, 

and documented;

i) Update written policies and procedures to include specific guidance on monitoring the timely 

completion of regional on-site monitoring, including establishing a specific timeline to 

complete the Monitoring Review Reports;

j) Update written policies and procedures to include specific documentation requirements in 

GEMS to support the conclusions included in the Monitoring Review Reports; and
Financial Section

Significant Deficiencies

Exhibit I

50 United States Department of Labor

k) Develop monitoring controls to determine that Monitoring Review Reports are issued timely 

and are properly supported with documentation in GEMS.

Management’s Response: We believe that ETA has established and maintains strong internal 

controls over grants management. The exceptions covering desk reviews, delinquent cost reports, 

HHS/PMS Synch Report, and closeout noted by the auditors cover procedures relating to the 

analysis, review and documentation of recorded grant costs. ETA continues to improve its 

internal controls over grants and has already addressed some of the recommendations and will 

address in FY 2013 the other recommendations noted by the auditors. Specifically, ETA’s Office 

of Grants Management will work with the appropriate offices to determine the best process for 

ensuring that all related document IDs are properly and timely added to GEMS. Additionally, 

ETA will update the memorandum on Federal Project Officer Grant Management 

Responsibilities Related to the Grants Electronic Management System to instruct FPO supervisors 

to maintain documentation of periodic review of the timely completion of desk reviews. To

address the issues relating to the delinquent reporting analysis, ETA will establish due dates for 

responses to ensure timely update of cost information and revise the current policy to include all 

grantees with delinquent cost reports for timely follow up. Procedures will be reviewed and 

updated, as needed, regarding the regional on site monitoring and inclusion of related 

documentation in GEMS.

Regarding the accrual accuracy analysis, ETA has already begun implementing corrective actions. 

ETA has revised the methodology for calculating the grant accrual accuracy analysis to capture all 

submitted cost reports, including those that report cumulative costs of $0 and implemented 

changes to ensure all data used for the grant accrual accuracy analysis is complete. ETA will 

enhance its policies and procedures related to closing out grants to ensure that issues identified 

during the closeout process are timely resolved. ETA has established a re-engineering team 

comprised of both National and Regional office staff who, among other things, will address the 

timely close out issues and will develop a trigger to send a list of delinquent closeouts to the 

Regional Administrators.

ETA has been working with the NCFMS system operator to resolve the HHS/PMS Synch Report 

mapping issues. In June 2012, ETA implemented an alternative PMS reconciliation that is 

performed each quarter. The reconciliation compares obligation, disbursements and cost data 

recorded in PMS and NCFMS for all OJC contracts, and computes variances. These 

reconciliations are manually prepared based on reports obtained from the two systems, and will 

continue to be prepared until such time as the Synch Report mapping issues are fully resolved. 

Additionally, ETA will develop and implement policies and procedures designating roles and 

responsibilities for reviewing the OJC HHS-PMS Synch Report and the manual reconciliations to 

ensure that differences for authorized amount (obligation amount) and the advance amount 

(disbursement amount) are properly identified, resolved, and documented.

Auditors’ Response: We will conduct follow-up procedures in FY 2013 to determine whether 

corrective actions have been developed and implemented.

3. Improvements Needed in the Preparation and Review of Journal Entries

DOL records manual journal entries throughout the year to account for certain accounting 

transactions and to make corrections to general ledger account balances, as necessary. During FY 

2012, the Office of the Chief Financial Officer (OCFO) provided trainings to DOL staff to address 

the minimum documentation requirements needed to sufficiently support journal entries and the 
Independent Auditors’ Report

Significant Deficiencies

Exhibit I

FY 2012 Agency Financial Report 51

requirements for adequately reviewing journal entries and the related documentation. In addition, 

we noted that the OCFO implemented a process that required the JV Controller from the Division 

of Central Accounting Operations to review a sample of posted journal entries at least on a 

quarterly basis. The JV Controller is required to prepare a report for the OCFO that documents the 

findings and results of the review, and provide recommendations for improvement. The results 

and recommendations are also communicated to the preparers and approvers of the selected 

journal entries. The OCFO uses the report to implement corrective actions, including the 

coordination of training, as necessary. 

As a result of the items above, we noted improvements in the preparation and review of journal 

entries during our fiscal year 2012 audit testing. However, we continued to identify certain 

deficiencies during our testing of a sample of 410 journal entries recorded in NCFMS for the 

period October 1, 2011, through September 30, 2012. In summary, we determined that 42 of the 

410 journal entries contained one or more deficiencies. Specifically, we noted the following:

• 3 instances where the entry was not recorded in the correct accounting period and/or at the 

appropriate amount;

• 32 instances where the entry was not recorded in accordance with the United States Standard 

General Ledger (USSGL) and/or applicable Federal accounting standards;

• 4 instances where a generic account was used to approve a journal entry that was created by 

DOL’s shared service provider;

• 1 instance where the approver was not documented in NCFMS; and

• 7 instances where the entry did not reflect the underlying events and transactions.

Certain errors above were caused by insufficient review of journal entries by authorized DOL 

supervisors to ensure the journal entries were properly prepared and supported before posting 

them to the general ledger. In addition, DOL did not have formal policies and procedures in place 

during the first half of FY 2012 that required the approver’s name for manual journal entries 

created by the shared service provider to be documented in NCFMS to evidence that the 

appropriate entry was recorded. However, we noted that DOL implemented a process in March 

2012 that allowed the names of individuals approving journal entries prepared by the contractor to 

be documented in NCFMS, which allowed a clear approval chain to be documented strictly 

through the system.

Without proper review and approval of transactions, the risk increases that a material error would 

not be prevented or detected and corrected in a timely manner. Further, without formal policies 

and procedures for assigning journal entry preparing and approving rights, an increased risk exists 

that an unauthorized journal entry may be posted to the general ledger. 

The Standards state:

Internal control should generally be designed to assure that ongoing monitoring 

occurs in the course of normal operations. It is performed continually and is ingrained 

in the agency’s operations. It includes regular management and supervisory activities, 

comparisons, reconciliations, and other actions people take in performing their duties. 

To address the issues noted above, the Chief Financial Officer should: 

a) Formalize and implement policies and procedures for assigning preparer and approver rights 

to individuals for posting journal entries in NCFMS; and 
Financial Section

Significant Deficiencies

Exhibit I

52 United States Department of Labor

b) Continue to monitor journal entries and provide training to applicable supervisors to ensure 

they are performing sufficient reviews of journal entries and related documentation before the 

entries are posted.

Management’s Response: Management recognizes there is room for improvement and will 

continue to reinforce policies and procedures and provide additional training, as needed, to further 

enhance performance in this area. As noted by the auditors, the additional training and the review 

process implemented in FY 2012 resulted in further improvement in the preparation and review of 

journal entries. We cannot specifically respond to the deficiencies noted or to the level of 

deficiency as we did not have adequate time to review the majority of these items. We will 

review these items and implement changes as needed. Although we believe that journal entries 

are properly reviewed by the supervisors, we will continue to work to enhance the supporting 

documentation. We agree that prior to March 2012 a generic designation was included in the 

system for certain types of journal entries, however all such journal entries were specifically 

approved by a DOL employee in accordance with procedures in place at that time.

Auditors’ Response: We will conduct follow-up procedures in FY 2013 to determine whether 

corrective actions have been developed and implemented.
Independent Auditors’ Report

Status of Prior Year Findings and Recommendations

Exhibit II

FY 2012 Agency Financial Report 53

The following table provides the fiscal year (FY) 2012 status of all recommendations included in the Independent 

Auditors' Report on the U.S. Department of Labor's FY 2011 Consolidated Financial Statements, Report No. 22-12-

002-13-001 (November 15, 2011).

Fiscal Year 2011 

Finding

FY Finding 

Originated FY 2011 Recommendations FY 2012 Status

Internal Control

1. Lack of Sufficient 

Controls over 

Financial Reporting –

Material Weakness 

2009 (as a 

Significant 

Deficiency)

Recommendation (a): The Chief Financial Officer (CFO) 

should develop and implement procedures to properly 

complete and document the monthly Government-wide 

Accounting System (GWA) Fund Balance with Treasury 

(FBWT) reconciliations, including 1) reinstatement of the 

previous reconciliation process that reconciled the ending 

balances reported on the GWA Account Statements to the 

ending FBWT balances recorded in the general ledger and 

2) documented research and resolution of identified 

differences.

Partially 

Open and 

Revised to 

Control 

Deficiency

Recommendation (b): The CFO should dedicate adequate 

resources to complete the monthly FBWT reconciliations 

and supervisor reviews timely.

Closed

Recommendation (c): The CFO should perform, 

document, and review timely the monthly FMS 6652 

reconciliations to demonstrate that the differences 

identified on the FMS 6652 reports have been resolved.

Open and 

Revised to 

Control 

Deficiency

Recommendation (d): The CFO should update policies 

and procedures to properly complete and document the 

monthly FMS 6652 reconciliations, including documented 

research and resolution of all identified differences.

Open and 

Revised to 

Control 

Deficiency

Recommendation (e): The CFO should formalize 

procedures for generating data extracts of detailed general 

ledger transactions from New Core Financial Management 

System (NCFMS), and enhance the procedures for 

reviewing data extracts prior to submission for audit to 

ensure they reconcile to the consolidated trial balance.

Closed

Recommendation (f): The CFO should develop and 

implement a formal process for promptly researching and 

resolving significant financial reporting issues that are 

identified. In addition, resolution of each issue should be 

formally documented and retained to support the 

consolidated financial statements’ compliance with GAAP.

Open and 

Revised to 

Control 

Deficiency

Recommendation (g): The CFO should finalize draft 

Department of Labor Manual Series (DLMS) policies and 

procedures requiring detailed review of all financial 

information in the financial statements, and ensure that 

OCFO personnel adhere to these policies. Financial 

statement review should include procedures for comparing 

financial data reported on the different statements to ensure 

Closed
Financial Section

Status of Prior Year Findings and Recommendations

Exhibit II

54 United States Department of Labor

Fiscal Year 2011 

Finding

FY Finding 

Originated FY 2011 Recommendations FY 2012 Status

accuracy and consistency; agreeing the financial data to the 

general ledger to ensure existence, completeness, and 

accuracy of financial data reported; and analyzing 

significant variances between current period and prior 

period financial information.

Recommendation (h): The CFO should formally 

document comprehensive policies and procedures related to 

the financial reporting process under NCFMS.

Closed

Recommendation (i): The CFO should develop and 

implement policies and procedures to address the minimum 

documentation requirements needed to support adjustments 

recorded by DOL’s shared service provider, provide 

training to the agencies to address the minimum 

documentation requirements needed to sufficiently support 

recorded transactions, and develop and implement 

monitoring controls to ensure that individuals are 

performing sufficient reviews of expenses and related 

documentation before they are posted in NCFMS to ensure 

they are adequately supported.

Open and 

Revised to 

Control 

Deficiency

Recommendation (j): The CFO should investigate the 

specific cause of the grant expense misclassification issue, 

and develop and implement appropriate corrective action.

Closed

Recommendation (k): The CFO should record journal 

entries to correct the misclassified amounts identified 

above to their proper United States Standard General 

Ledger (USSGL) accounts in the general ledger, develop 

and implement procedures to properly record these 

transactions in the future, review significant transactions 

for USSGL compliance, and make any necessary 

corrections.

Open and 

Revised to 

Control 

Deficiency

Recommendation: The Assistant Secretary for 

Administration and Management should perform, 

document, and review timely the monthly FMS 6652 

reconciliations to demonstrate that the differences 

identified on the FMS 6652 reports have been resolved.

Open and 

Revised to 

Control 

Deficiency

Recommendation: The National Director for the Office of 

Job Corps continue working to resolve the mapping issues 

between U.S. Department of Health and Human Services 

(HHS)-Payment Management System (PMS) and NCFMS 

to allow the systems to communicate properly, and develop 

and implement procedures to investigate, resolve, and 

document differences identified through the quarterly 

HHS-PMS Synch Report.

Open (See 

Exhibit I, 

comment 

no. 2)
Independent Auditors’ Report

Status of Prior Year Findings and Recommendations

Exhibit II

FY 2012 Agency Financial Report 55

Fiscal Year 2011 

Finding

FY Finding 

Originated FY 2011 Recommendations FY 2012 Status

Recommendation (a): The Assistant Secretary for 

Employment and Training should develop and implement 

written policies and procedures regarding the quarterly 

reconciliation of E-Grants to NCFMS and resolution of 

identified differences, including an expected timeframe to 

ensure errors are detected and corrected to avoid a 

misstatement. Documentation should be maintained to 

support these activities.

Closed

Recommendation (b): The Assistant Secretary for 

Employment and Training should develop and implement 

comprehensive procedures for the preparation and review 

of the Unemployment Trust Fund (UTF) disbursements 

accrual that address the minimum documentation needed to 

support management’s conclusions and require individuals 

performing supervisory reviews to verify the accuracy of 

the accrual data and calculations and the adequacy of 

documentation maintained to substantiate management’s 

conclusion. 

Closed

Recommendation (c): The Assistant Secretary for 

Employment and Training should update written policies 

and procedures to include guidance on monitoring the 

timely completion of Federal Project Officers’ (FPO) desk 

reviews, which should include requirements for supervisors 

to periodically review a sample of active grantees to 

confirm that the FPO desk reviews are being completed 

timely. This review should be documented. 

Open (See 

Exhibit I, 

comment 

no. 2)

Recommendation (d): The Assistant Secretary for 

Employment and Training should update the Delinquent 

Filers Monitoring Procedures to include 1) a control 

procedure designed to ensure that the quarterly notification 

of delinquent filers is distributed timely, 2) a deadline by 

which the notification of delinquent filers must be sent to 

the responsible individuals for follow-up, and 3) deadlines 

for required follow-up. 

Partially 

Open (See 

Exhibit I, 

comment 

no. 2)

2. Lack of Sufficient 

Controls over 

Budgetary Accounting 

– Material Weakness 

2009 (as a 

Significant 

Deficiency)

Recommendation (a): The CFO should provide adequate 

resources to complete all necessary budgetary 

reconciliations timely.

Closed

Recommendation (b): The CFO should update policies 

and procedures over budgetary reconciliations 1) to address 

the minimum documentation requirements needed to 

substantiate that identified differences are properly 

researched and resolved, and 2) to outline the necessary 

steps to complete adequate supervisory reviews.

Open and 

Revised to 

Control 

Deficiency

Recommendation (c): The CFO should provide training Closed
Financial Section

Status of Prior Year Findings and Recommendations

Exhibit II

56 United States Department of Labor

Fiscal Year 2011 

Finding

FY Finding 

Originated FY 2011 Recommendations FY 2012 Status

on the updated policies and procedures over budgetary 

reconciliations, including timing and frequency of 

reconciliation preparation.

Recommendation (d): The CFO should update the 

NCFMS configuration so that all recorded transactions are 

subject to the system’s automated funds control.

Closed

Recommendation (e): The CFO should provide training 

to the agencies to address the minimum documentation 

requirements needed to sufficiently support the validity of 

undelivered orders.

Open and 

Revised to 

Control 

Deficiency

Recommendation (f): The CFO should update the 

NCFMS Budget Module configuration to allow 

appropriations that are exempt from apportionment to be 

posted to the correct general ledger account. Until the 

NCFMS Budget Module is properly configured, procedures 

should be developed and implemented to periodically 

review funds with appropriations exempt from 

apportionment to ensure amounts improperly reported as 

Unapportioned Authority are properly reclassified to 

Unobligated Funds Exempt from Apportionment.

Closed

Recommendation (g): The CFO should require that one 

agency be responsible for recording both the budgetary and 

proprietary journal entries for economic events, or if 

separate agencies continue to record the entries, develop 

and implement procedures that require those agencies to 

coordinate appropriately to ensure almost simultaneous 

recording.

Open and 

Revised to 

Control 

Deficiency

Recommendation (a): The Assistant Secretary for 

Employment and Training should evaluate E-Grants to 

determine the cause of the continuing system errors related 

to the acceptance of Employment and Training 

Administration (ETA) 9130s, and implement the 

appropriate corrective action.

Closed

Recommendation (b): The Assistant Secretary for 

Employment and Training should identify and correct the 

E-Grants coding issue that prevented timely and proper 

grant closeout.

Closed

Recommendation (c): The Assistant Secretary for 

Employment and Training should develop and implement 

alternative procedures to properly post refunds to 

appropriate grants in NCFMS.

Closed
Independent Auditors’ Report

Status of Prior Year Findings and Recommendations

Exhibit II

FY 2012 Agency Financial Report 57

Fiscal Year 2011 

Finding

FY Finding 

Originated FY 2011 Recommendations FY 2012 Status

3. Lack of Sufficient 

Security Controls over 

Access to Key 

Financial and Support 

Systems – Material 

Weakness 

2001 (as a 

Reportable 

Condition1

Recommendation (a): The Chief Information Officer 

(CIO) should coordinate efforts among the DOL agencies 

to develop procedures and controls to address access and 

vulnerability management control deficiencies in financial 

and support systems.

)

Open (See 

Exhibit I, 

comment 

no. 1)

Recommendation (b): The CIO should monitor the 

agencies’ progress to ensure that procedures and controls 

are appropriately implemented and maintained.

Open (See 

Exhibit I, 

comment 

no. 1)

Recommendation (c): The CIO should ensure that 

sufficient resources are available to develop, implement, 

and monitor the procedures and controls that address access 

and vulnerability management control deficiencies.

Open (See 

Exhibit I, 

comment 

no. 1)

4. Improvements 

Needed in the 

Preparation and 

Review of Journal 

Entries – Significant 

Deficiency

2006 (as a 

Reportable 

Condition1

)

Recommendation (a): The CFO should provide training 

on the updated policies and procedures implemented in

June 2011 to address the minimum documentation 

requirements needed to adequately support journal entries.

Closed

Recommendation (b): The CFO should develop 

monitoring controls to ensure that supervisors or 

individuals other than the preparer are performing 

sufficient reviews of journal entries and related 

documentation before the entries are posted to ensure they 

are adequately supported and are in compliance with the 

USSGL and Federal accounting standards.

Open (See 

Exhibit I, 

comment 

no. 3)

5. Weaknesses Noted 

over Payroll 

Accounting –

Significant Deficiency

2006 (as a 

Reportable 

Condition1

)

Recommendation (a): The CFO should design the 

Payroll/Time and Attendance Reconciliation Reports to 

reflect the necessary payroll-related information to conduct 

an adequate reconciliation.

Open and 

Revised to 

Control 

Deficiency

Recommendation (b): The CFO should complete periodic 

monitoring procedures to ensure that the July 2009 policy 

and procedures are implemented and complied with 

throughout DOL.

Closed

Recommendation (c): The CFO should revise procedures 

related to the monthly payroll reconciliations to require the 

preparer and the reviewer to document the preparation and 

review dates, respectively, and to sign the reconciliations 

once they have completed their work.

Closed

Recommendation: We also recommend that the Director 

of the Human Resource Center ensure that the OCFO’s 

July 2009 policy and procedures are properly and 

Open and 

Revised to 

Control 

 1 The term “reportable condition” was used through FY 2006 in accordance with Statement on Auditing Standards (SAS) No. 60. 

However, the term “reportable condition” was discontinued in FY 2007 as a result of the implementation of SAS No. 112 and 

replaced with the term “significant deficiency,” which had a revised definition. 
Financial Section

Status of Prior Year Findings and Recommendations

Exhibit II

58 United States Department of Labor

Fiscal Year 2011 

Finding

FY Finding 

Originated FY 2011 Recommendations FY 2012 Status

consistently implemented, by enforcing the requirements 

that all payroll-related reconciliations are documented, 

reviewed, and approved by an appropriate supervisor, and 

maintained. 

Deficiency

Compliance

1. Federal Financial 

Management 

Improvement Act

(FFMIA) of 1996 

2010 (as 

Noncompliance

We recommend that DOL follow the recommendations 

provided in Material Weakness Nos. 1, 2, and 3 and 

improve its processes to ensure compliance with FFMIA 

section 803(a) requirements in FY 2012.

Open and 

Revised to 

Nonreportable 

NonCompliance
5959 

Annual Financial Statements

5961 

Principal Financial Statements and Notes  
Financial Section

PRINCIPAL FINANCIAL STATEMENTS

62     United States Department of Labor

Principal Financial Statements Included in This Report

The principal financial statements included in this report have been prepared in accordance with the requirements

of the Chief Financial Officers Act of 1990 (P.L. 101‐576), the Government Management Reform Act of 1994, and  

Office of Management and Budget’s (OMB) Circular No. A‐136, Financial Reporting Requirements.    The

responsibility for the integrity of the financial information included in these statements rests with management of

the U.S. Department of Labor (DOL).  The audit of DOL’s principal financial statements was performed by KPMG LLP.  

The auditors’ report accompanies the principal statements.

The Department’s principal financial statements for fiscal years (FYs) 2012 and 2011 consist of the following:  

 The Consolidated Balance Sheet, which presents as of September 30, 2012 and 2011 those resources owned or

managed by DOL that are available to provide future economic benefits (assets); amounts owed by DOL that will

require payments from those resources or future resources (liabilities); and residual amounts retained by DOL,

comprising the difference (net position).

 The Consolidated Statement of Net Cost, which presents the net cost of DOL operations for the years ended

September 30, 2012 and 2011.  DOL’s net cost of operations includes the gross costs incurred by DOL less any

exchange revenue earned from DOL activities.  Due to the complexity of DOL’s operations, the classification of

gross cost and exchange revenues by major program and suborganization is presented in Note 15 to the

consolidated financial statements.

 The Consolidated Statement of Changes in Net Position, which presents the change in DOL’s net position

resulting from the net cost of DOL operations, budgetary financing sources other than exchange revenues, and

other financing sources for the years ended September 30, 2012 and 2011.

 The Combined Statement of Budgetary Resources, which presents the budgetary resources available to DOL

during FY 2012 and 2011, the status of these resources at September 30, 2012 and 2011, the change in

obligated balance during FY 2012 and 2011, and budgetary authority and net outlays of budgetary resources for

the years ended September 30, 2012 and 2011.

 The Statement of Social Insurance, which presents the net present value of projected cash inflows and cash

outflows of the Black Lung Disability Trust Fund as of September 30, 2012, 2011, 2010, 2009, and 2008; the net

present value of these cash flows is also known as the open and closed group measure. The summary section

presents the total of open and closed group measure plus fund assets (Funds with U.S. Treasury and

receivables).

 The Statement of Changes in Social Insurance Amounts, which presents the net change in the open and closed

group measure of the Black Lung Disability Trust Fund for the years ended September 30, 2012 and 2011 and

provides information about the change.
Annual Financial Statements

CONSOLIDATED BALANCE SHEET  

As of September 30, 2012 and September 30, 2011

(Dollars in Thousands)

FY 2012 Agency Financial Report     63 

 2012 2011

ASSETS

Intra-governmental

Funds with U.S. Treasury (Note 1-C and 2) 12,023,183 $ 10,954,458 $ 

Investments (Note 1-D and 3) 20,840,571 16,213,789 

Accounts receivable (Note 1-E and 4) 5,982,460 5,944,955 

Advances (Note 1-G and 6) 3,128 -

Total intra-governmental 38,849,342 33,113,202 

Accounts receivable, net of allowance (Note 1-E and 4) 2,258,276 2,170,862 

Property, plant and equipment, net

 of accumulated depreciation (Note 1-F and 5) 1,280,338 1,219,912 

Advances (Note 1-G and 6) 1,590,397 1,456,500 

Total assets $ 43,844,456 38,094,373 $ 

LIABILITIES AND NET POSITION

Liabilities (Note 1-I)

Intra-governmental

Accounts payable $ 43,327 33,524 $ 

Debt (Note 1-J and 8) 38,997,340 48,935,904 

Other liabilities (Note 9) 278,638 202,438 

Total intra-governmental 39,309,502 49,181,669

Accounts payable 332,450 308,932 

Accrued benefits (Note 1-K and 10) 2,289,602 3,320,444 

Future workers' compensation benefits (Note 1-L and 11) 1,677,985 1,732,024 

Energy employees occupational illness

 compensation benefits (Note 1-M) 15,631,188 15,145,777 

Accrued leave (Note 1-N) 121,716 116,659 

Other liabilities (Note 9) 993,161 1,004,299 

Total liabilities 70,822,184 60,343,224 

Contingencies (Note 13)

Net position (Note 1-R)

Unexpended appropriations - other funds 10,476,263 9,210,647 

Cumulative results of operations

Earmarked funds (Note 21) (18,333,071) (33,466,525) 

Other funds (8,471,933) (8,641,960) 

Total net position (32,727,811) (16,498,768) 

Total liabilities and net position $ 43,844,456 38,094,373 $ 

The accompanying notes are an integral part of these statements.
Financial Section

CONSOLIDATED STATEMENT OF NET COST  

For the Years Ended September 30, 2012 and 2011

(Dollars in Thousands)

64     United States Department of Labor

NET COST OF OPERATIONS (Note 1-S and 15)

CROSSCUTTING PROGRAMS

Income maintenance

 Gross cost $ 100,682,210 $ 129,233,668

 Less earned revenue (4,338,716) (4,335,839)

 Net program cost 96,343,494 124,897,829

Employment and training

 Gross cost 6,695,330 7,658,729

 Less earned revenue (10,606) (13,914)

 Net program cost 6,684,724 7,644,815

Labor, employment and pension standards

 Gross cost 851,197 836,184

 Less earned revenue (10,059) (9,944)

 Net program cost 841,138 826,240

Worker safety and health

 Gross cost 1,058,194 996,362

 Less earned revenue (4,282) (4,028)

 Net program cost 1,053,912 992,334

OTHER PROGRAMS

Statistics

 Gross cost 682,894 683,562

 Less earned revenue (13,286) (11,320)

 Net program cost 669,608 672,242

COSTS NOT ASSIGNED TO PROGRAMS

 Gross cost 81,176 60,472

 Less earned revenue not attributed to programs (22,166) (22,774)

 Net cost not assigned to programs 59,010 37,698

Net cost of operations $ 105,651,886 $ 135,071,158

2012 2011

The accompanying notes are an integral part of these statements.
Annual Financial Statements

CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION   

For the Years Ended September 30, 2012 and 2011

(Dollars in Thousands)

FY 2012 Agency Financial Report     65 

Consolidated Consolidated Consolidated Consolidated

Earmarked All Other Consolidated Earmarked All Other Consolidated

Funds Funds Total Funds Funds Total

Cumulative results of operations, beginning $ (8,471,933) (33,466,525) $ $ (41,938,458) $ (23,762,133) $ (29,547,335) (5,785,202) $ 

Budgetary financing sources (Note 1-T)

Appropriations used - 51,574,836 51,574,836 63,729,728 - 63,729,728 

Non-exchange revenue (Note 16)

Employer taxes 63,653,314 - 63,653,314 52,679,104 - 52,679,104

 Interest 1,586,958 3,996 1,590,954 1,886,494 1,402 1,887,896

Reimbursement of 

 unemployment benefits 3,457,681 (9,110) 3,448,571 4,035,503 4,013,921 (21,582) 

Total non-exchange revenue 68,697,953 (5,114) 68,692,839 58,601,101 58,580,921 (20,180) 

Transfers without reimbursement (Note 17) 35,770,127 (35,545,276) 224,851 45,540,978 207,087 (45,333,891) 

Other financing sources (Note 1-U)

Imputed financing from 

 costs absorbed by others 3,462 121,680 125,142 153,249 4,787 158,036 

Transfers without reimbursement (Note 17) - 966 966 2,075 - 2,075

Other - (3,321) (3,321) (762) 2,950 2,188

Total financing sources 104,471,542 16,143,771 120,615,313 104,149,816 122,680,035 18,530,219 

Net cost of operations (89,338,088) (16,313,798) (105,651,886) (113,854,208) (135,071,158) (21,216,950) 

Net change 15,133,454 (170,027) 14,963,427 (9,704,392) (12,391,123) (2,686,731) 

Cumulative results of operations, ending (8,641,960) (18,333,071) (26,975,031) (33,466,525) (41,938,458) (8,471,933) 

 Unexpended appropriations, beginning - 9,210,647 9,210,647 10,539,272 - 10,539,272 

Budgetary financing sources (Note 1-T)

Appropriations received (Note 18-F) - 62,229,387 62,229,387 67,405,860 - 67,405,860 

Appropriations used - (51,574,836) (51,574,836) (63,729,728) - (63,729,728) 

Appropriations transferred - (4,505) (4,505) 20,157 - 20,157 

Other adjustments - (9,384,430) (9,384,430) (5,024,914) - (5,024,914) 

Subtotal - 1,265,616 1,265,616 (1,328,625) - (1,328,625) 

 Unexpended appropriations, ending - 10,476,263 10,476,263 9,210,647 - 9,210,647 

Net position $ 1,834,303 (18,333,071) $ $ (16,498,768) $ (33,466,525) $ (32,727,811) 738,714 $ 

2012 2011

The accompanying notes are an integral part of these statements.
Financial Section

COMBINED STATEMENT OF BUDGETARY RESOURCES

For the Years Ended September 30, 2012 and 2011

(Dollars in Thousands)

66     United States Department of Labor

(Note 1-Z) 2012 2011

BUDGETARY RESOURCES

Unobligated balance brought forward, October 1 3,376,261 $ 4,191,543 $ 

Recoveries of prior year unpaid obligations 369,860 436,261 

Other changes in unobligated balance (128,341) (298,581) 

Unobligated balance from prior year budget authority, net 3,617,780 4,329,223 

Appropriations (discretionary and mandatory) (Note 18-F) 136,219,806 160,845,900

Borrowing authority (discretionary and mandatory) 12,378,421 22,007,749

Spending authority from offsetting collections (discretionary and mandatory) 8,460,059 8,128,492 

Total budgetary resources $ 160,676,066 $ 195,311,364

STATUS OF BUDGETARY RESOURCES

Obligations incurred (Note 18-A) $ 156,284,367 $ 191,935,103

Unobligated balance, end of year

 Apportioned 1,189,123 1,764,188 

 Exempt from apportionment 62,478 56,721 

 Unapportioned 2,124,660 2,570,790 

 Total unobligated balance, end of year 4,391,699 3,376,261 

Total budgetary resources $ 160,676,066 $ 195,311,364

CHANGE IN OBLIGATED BALANCE

Unpaid obligations brought forward, October 1 15,787,223 $ $ 18,448,078

Less: uncollected customer payments from Federal sources

brought forward, October 1 (1,968,497) (1,911,539)

Obligated balance, start of year (net) 13,818,726 16,536,539

Obligations incurred 156,284,367 191,935,103

Less: outlays (gross) (156,172,562) (194,159,697)

Change in uncollected customer payments from Federal sources (356,395) (56,958) 

Less: recoveries of prior year unpaid obligations (369,860) (436,261) 

Obligated balance, end of year (net) 13,204,276 $ $ 13,818,726

 Unpaid obligations, end of year (gross) 15,529,168 $ $ 15,787,223

 Less: uncollected customer payments from Federal sources, end of year (2,324,892) (1,968,497)

Obligated balance, end of year (net) 13,204,276 $ $ 13,818,726

BUDGET AUTHORITY AND OUTLAYS, NET

Budget authority, gross (discretionary and mandatory) 157,058,286 $ $ 190,982,141

Less: actual offsetting collections (discretionary and mandatory) (8,103,665) (8,071,535)

Less: change in uncollected customer payments from Federal

sources (discretionary and mandatory) (356,395) (56,958) 

Budget authority, net (discretionary and mandatory) 148,598,226 $ $ 182,853,648

Outlays, gross (discretionary and mandatory) 156,172,562 $ $ 194,159,697

Actual offsetting collections (discretionary and mandatory) (8,103,665) (8,071,535)

Outlays, net (discretionary and mandatory) 148,068,897 186,088,162

Distributed offsetting receipts (43,234,920) (53,119,556)

Agency outlays, net (discretionary and mandatory) 104,833,977 $ 132,968,606 $ 

The accompanying notes are an integral part of these statements.
Annual Financial Statements

   

STATEMENT OF SOCIAL INSURANCE

As of September 30, 2012, 2011, 2010, 2009, and 2008

(Dollars in Thousands)

FY 2012 Agency Financial Report     67 

2012 2011 2010 2009 2008

BLACK LUNG DISABILITY BENEFIT PROGRAM (Note 1-W)

Actuarial present value of future benefit payments

 during the projection period to disabled coal miners

 and dependent survivors 2,181,654 $ $ 1,951,755 $ 2,125,231 $ 2,139,810 2,170,943 $ 

 

Present value of estimated future administrative costs 

 during the projection period 963,995 935,444 881,311 984,996 827,437 

Actuarial present value of future benefit payments and 

 present value of estimated administrative costs during 

 the projection period for current and future participants 3,145,649 2,887,199 3,006,542 2,967,247 3,155,939 

 

Less the present value of estimated future excise tax

 income during the projection period 7,804,178 7,607,428 8,457,022 8,876,813 8,009,265 

Excess of present value of estimated future excise tax

 income over actuarial present value of future benefit 

 payments and present value of estimated administrative

 costs during the projection period for current and future 

 participants (open and closed group measure) 4,658,529 $ $ 4,720,229 $ 5,450,480 $ 5,720,874 $ 5,042,018

 

Trust fund net position deficit at start 

 of projection period (Note 21) (5,977,619) $ $ (6,099,261) $ (6,238,612) $ (6,320,321) $ (10,439,186)

Summary Section

Open and closed group measure 4,658,529 $ $ 4,720,229 $ 5,450,480 $ 5,042,018 5,720,874 $ 

Add: Funds with U.S. Treasury and receivables from

 benefit overpayments (Note 21) 102,498 63,814 68,028 67,598 63,840

Total of open and closed group measure

 plus fund assets (Note 1-W) 4,761,027 $ $ 4,784,043 $ 5,518,508 $ 5,788,472 $ 5,105,858

For the Projection Period Ending September 30, 2040

The accompanying notes are an integral part of these statements.
Financial Section

   

STATEMENT OF CHANGES IN SOCIAL INSURANCE AMOUNTS

For the Years Ended September 30, 2012 and 2011  

(Dollars in Thousands)

68     United States Department of Labor

BLACK LUNG DISABILITY BENEFIT PROGRAM (Note 1-W)

Open and Closed Group Measure

2012 2011

Excess of present value of estimated future excise tax income over actuarial

 present value of future benefit payments and present value of estimated

 administrative costs during the projection period for current and future participants

 (open and closed group measure), beginning of year $ 4,720,229 $ 5,450,480

Reasons for changes in the open and closed group measure during the year:

 Changes in the assumptions about beneficiaries, including

 costs, number, type, age and life expectancy

 Changes in assumptions about coal excise tax revenues (307,494) (1,144,303)

 Changes in assumptions about Federal civilian pay raises for income benefits (22,337) 33,839 

 Changes in assumptions about medical cost inflation for medical benefits (1,601) (1,152)

 Changes in assumptions about administrative costs 31,516 (19,155)

 Change in assumption about interest rate 320,055 197,720 

Net change in open and closed group measure (61,700) (730,251)

Open and closed group measure, end of year $ 4,658,529 $ 4,720,229 

 (81,839) 202,800 

The accompanying notes are an integral part of these statements.
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     69 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Reporting Entity

The U.S. Department of Labor (DOL or the Department), a cabinet level agency of the Executive Branch of the

United States Government, was established in 1913, to promote the welfare of the wage earners of the United

States.  Today the Department’s mission remains the same: to foster, promote and develop the welfare of the wage

earners, job seekers and retirees of the United States; improve working conditions; advance opportunities for

profitable employment; and assure work‐related benefits and rights.  

DOL accomplishes this mission through the execution of its congressionally approved budget, operating in four

major Federal program areas, under four major budget functions: (i) education, training, employment, and social

services; (ii) health (occupational health and safety); (iii) income security;    and (iv) national defense.    DOL is

organized into major program agencies, which administer the various statutes and programs for which the

Department is responsible.    DOL’s major program agencies and the major programs in which they operate are

shown below.

1. Major program agencies

 Employment and Training Administration (ETA)

- Office of Job Corps

 Office of Workers’ Compensation Programs (OWCP)

 Occupational Safety and Health Administration (OSHA)

 Bureau of Labor Statistics (BLS)

 Mine Safety and Health Administration (MSHA)

 Employee Benefits Security Administration (EBSA)  

 Veterans’ Employment and Training Service (VETS)

 Wage and Hour Division (WHD)

 Office of Federal Contract Compliance Programs (OFCCP)

 Office of Labor‐Management Standards (OLMS)

 Departmental Management

- Office of the Secretary        ‐    Office of the Deputy Secretary

- Office of the Assistant Secretary for    ‐    Office of Inspector General      

Administration and Management    ‐    Office of the Solicitor

- Office of the Assistant Secretary for Policy  ‐    Office of Public Affairs

- Women’s Bureau  ‐    Office of the Chief Financial Officer

- Bureau of International Labor Affairs  ‐    Office of Disability Employment Policy

In FY 2010, DOL dissolved the Employment Standards Administration (ESA) and established its four component

offices/divisions: the Office of Federal Contract Compliance Programs, the Office of Labor‐Management Standards,

the Office of Workers’ Compensation Programs, and the Wage and Hour Division, as stand‐alone agencies reporting

directly to the Office of the Secretary. This reorganization was reflected in DOL’s FY 2011 and 2012 budgets, in

which funding previously requested for ESA was requested separately for these four component agencies, and was

acted upon by Congress in FY 2012.   Presentation of the financial data for FY 2012 reflects the four component

agencies and the FY 2011 presentation was reclassified to conform to the FY 2012 presentation.

The Pension Benefit Guaranty Corporation (PBGC), wholly owned by the Federal government under the

chairmanship of the Secretary of Labor, has been designated by OMB as a separate reporting entity for financial

statement purposes and has been excluded from these financial statements.
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

70     United States Department of Labor

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

A. Reporting Entity ‐ Continued

2. Major programs

 Income maintenance  

 Employment and training  

 Labor, employment, and pension standards  

 Worker safety and health 

 Statistics  

Note 15 presents earned revenues and expenses by major program agency and by major program.

The table below shows the relationship between the Department’s strategic goals and its major programs.

                   

                                    Major Programs

Strategic Goals       

                          

Income

Maintenance

Employment

and Training

Labor,

Employment,

and Pension

Standards

Worker

Safety and

Health Statistics

1:  Prepare workers for good jobs and

ensure fair compensation.   ●  ●     

2:  Ensure workplaces are safe and healthy.        ●   

3:  Assure fair and high quality

      work‐life environments.     ●     

4:  Secure health benefits and, for those not   

working, provide income security. ●    ●     

5:  Produce timely and accurate data on the

economic conditions of workers and

their families.

        ● 

3. Fund accounting structure

DOL’s financial activities are accounted for by Federal account symbol, using individual funds and fund

accounts within distinct fund types to report to the U.S. Department of the Treasury’s (Treasury) Financial

Management Service and to OMB.  For financial statement purposes, DOL funds are further classified as

earmarked funds, fiduciary funds, and all other funds, and are discussed below:

                                        

Earmarked funds

Earmarked funds are financed by specifically identified revenues, which can be supplemented by other

financing sources, both of which remain available over time.    These revenues and financing sources are

required by statute to be used for designated purposes and must be accounted for separately from the

Government’s general revenues.  DOL’s earmarked funds are disclosed in Note 21 and are discussed below:

Unemployment Trust Fund was established under the authority of Section 904 of the Social Security Act of

1935, as amended, to receive, hold, invest, and disburse monies collected under the Federal Unemployment

Tax Act, as well as state unemployment taxes collected by the states and transferred to the Fund, and

unemployment taxes collected by the Railroad Retirement Board and transferred to the Fund.
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     71 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

A. Reporting Entity ‐ Continued

3. Fund accounting structure ‐ continued   

Earmarked funds ‐ continued

Black Lung Disability Trust Fund was established under Part C of the Black Lung Benefits Act, to provide

compensation and medical benefits to coal miners who suffer total disability due to pneumoconiosis (Black

Lung disease), and compensation benefits to their dependent survivors for claims filed subsequent to June

30, 1973.    Claims filed from the origination of the program until June 30, 1973 are paid by the Special

Benefits for Disabled Coal Miners fund. (See Note 1.A.3 – All other funds.)  

Gifts and Bequests Fund uses miscellaneous funds received by gift or bequest to support various activities

of the Secretary of Labor.  

Panama Canal Commission Compensation Fund was established to provide for the accumulation of funds

provided by the Commission to pay the workers compensation obligations of the Panama Canal Commission

under the Federal Employees’ Compensation Act.  

H‐1B Funds provide demonstration grants to regional and local entities to provide technical skills training to

unemployed and incumbent workers.    The funds are supported by fees paid by employers applying for

foreign workers under the H‐1B temporary alien labor certification program authorized by the American

Competitiveness and Workforce Improvement Act of 1998.

Fiduciary funds

Fiduciary funds are used to account for DOL’s fiduciary activities, which involve the collection or receipt and

subsequent disposition of cash or other assets in which non‐Federal entities have an ownership interest

that the Department must uphold.  Fiduciary assets are not assets of DOL or the Federal Government, and

accordingly, are not recognized on the Department’s balance sheet.  The fiduciary assets held by DOL and

the fiduciary activities related to these assets are disclosed in Note 22 to these financial statements.   DOL’s

fiduciary funds are discussed below.

Wage and Hour and Public Contracts Restitution Fund, a deposit fund established by the Fair Labor

Standards Amendments of 1949, receives deposits from employers assessed by the Department for unpaid

minimum wages or unpaid overtime compensation owed to employees as a result of labor law violations,

and pays these wages directly to the affected employees.   

Longshore and Harbor Workers’ Compensation Act Trust Fund, established under the authority of the

Longshore and Harbor Workers’ Compensation Act, provides medical benefits, compensation for lost wages,

and rehabilitation services for job‐related injuries and diseases or death to private sector workers engaged

in certain maritime and related employment, and in certain other employment covered by extensions such

as the Defense Base Act.  The Act authorizes the Department to assess insurance carriers on behalf of these

beneficiaries.

District of Columbia Workmen’s Compensation Act Trust Fund, established under the authority of the

District of Columbia Workmen’s Compensation Act, provides compensation  and medical payments to the  
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

72     United States Department of Labor

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

A. Reporting Entity ‐ Continued

3. Fund accounting structure ‐ continued

   

Fiduciary funds ‐ continued

District of Columbia employees for work‐related injuries or death which occurred prior to July 26, 1982.  The

Act authorizes the Department to assess insurance carriers on behalf of these beneficiaries.

All other funds  

Salaries and Expenses include appropriated funds which are used to carry out the missions and functions of

the Department, except where specifically provided for from other Departmental funds.

Training and Employment Services provides for a flexible, decentralized system of Federal and local

programs of training and other services for the economically disadvantaged designed to lead to permanent

gains in employment, through grants to states and Federal programs, authorized by the Workforce

Investment Act and the Job Training Partnership Act.   

Office of Job Corps supports the administration and management of the Job Corps program, which helps at‐

risk youth who need and can benefit from intensive education and training services to become more

employable, responsible, and productive citizens.   

Welfare‐to‐Work Jobs provides funding for the activities of the Welfare‐to‐Work Grants program established

by the Balanced Budget Act of 1997.    The program provides formula grants to States and Federally

administered competitive grants to other eligible entities to assist welfare recipients in securing lasting

unsubsidized employment.

State Unemployment Insurance and Employment Service Operations includes grants to states for

administering the Unemployment Compensation and Employment Service programs.    Unemployment

Compensation Program provides administrative grants to state agencies which pay unemployment benefits

to eligible individuals and collect state unemployment taxes from employers.    The Employment Service

Program is a nationwide system providing no‐fee employment services to individuals seeking employment

and to employers seeking workers.    Employment Service activities are financed by allotments to states

distributed under a demographically based funding formula established under the Wagner‐Peyser Act, as

amended.

Payments to the Unemployment Trust Fund was initiated as a result of amendments to the Emergency

Unemployment Compensation (EUC) law, which provided general fund financing to the Unemployment

Trust Fund to pay emergency unemployment benefits and the related administrative costs.  This account is  

currently used to provide  general fund financing for  emergency compensation benefits and administrative

costs under the Supplemental Appropriations Act of 2008, as extended by the American Recovery and

Reinvestment Act of 2009 (Recovery Act) and other authorizing legislation.  

Advances to the Unemployment Trust Fund and Other Funds provides advances to other accounts within

the Unemployment Trust Fund to pay unemployment compensation whenever the balances in these

accounts prove insufficient or whenever reimbursements to certain accounts, as allowed by law, are to be  
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     73 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

A. Reporting Entity ‐ Continued

3. Fund accounting structure ‐ continued

All other funds ‐ continued

made.  This account also makes advances to the Federal Unemployment and Benefits Allowances account to

pay the cost of benefits and services under the Trade Adjustment Assistance for Workers program; and

provides loans to the Black Lung Disability Trust Fund to make disability payments whenever the fund

balance proves insufficient.

Federal Unemployment Benefits and Allowances provides for payment of benefits, training, job search,  

relocation allowances, and employment and case management services (and State administrative expenses

for all benefits other than trade readjustment allowances, reemployment adjustment assistance and

alternative trade adjustment assistance) as authorized by the Trade Act of 1974.

Community Service Employment for Older Americans provides part‐time work experience in community

service activities to unemployed, low income persons aged 55 and over.

Federal Employees’ Compensation Act (FECA) Special Benefit Fund provides wage replacement benefits and

payment for medical services to covered Federal civilian employees injured on the job, Federal employees

and certain other workers who have incurred a work‐related illness or injury, and survivors of employees

whose death is attributable to a job‐related injury. The Fund also provides for vocational rehabilitation of

injured employees to facilitate their return to work.  Under extensions of FECA, benefits are also paid to

certain groups related to War Hazards, non‐Federal law enforcement officers, Job Corps enrollees, and

certain Federally‐supported volunteers.   Section 10(h) of the amended Longshore and Harbor Workers’

Compensation Act authorized payments from the Special Benefit fund for 50% of the annual increase in

benefits for compensation and related benefits for certain pre‐1972 Longshore cases.

Energy Employees Occupational Illness Compensation Fund was established to adjudicate, administer, and

pay claims for benefits under the Energy Employees Occupational Illness Compensation Program Act of

2000.  The Act authorizes lump sum payments and the reimbursement of medical expenses to employees of

the Department of Energy (DOE) or of private companies under contract with DOE, who suffer from

specified diseases as a result of their work in the nuclear weapons industry.    The Act also authorizes

compensation to the survivors of these employees under certain circumstances.  The Act was amended by

the Ronald Reagan National Defense Authorization Act of 2005 to provide coverage to additional claimants.  

Special Benefits for Disabled Coal Miners was established under the Federal Mine Safety and Health Act to

pay benefits to coal miners disabled from pneumoconiosis and to their widows and certain other

dependents.  Part B of the Act assigned processing of claims filed from the origination of the program until

June 30, 1973 to the Social Security Administration.  Part B claims processing and payment operations were

transferred to DOL effective October 1, 2003.

Federal Additional Unemployment Compensation was established under the Recovery Act to temporarily

provide a $25 weekly supplement to the unemployment compensation of eligible claimants.  Subsequent

legislation extended this program to June 2, 2010, with phase‐out through December 11, 2010.
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

74     United States Department of Labor

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

A. Reporting Entity ‐ Continued

3. Fund accounting structure ‐ continued

All other funds ‐ continued

Working Capital Fund maintains and operates a program of centralized services in the national office and

the field.  The Fund is paid in advance by the agencies, bureaus, and offices for which centralized services

are provided at rates which return the full cost of operations.

Miscellaneous receipt accounts hold non‐entity receipts and accounts receivable from DOL activities which

by law cannot be deposited into funds under DOL control.    The Treasury automatically transfers all cash

balances in these receipt accounts to the general fund of the Treasury at the end of each fiscal year.   

Clearing accounts hold monies that belong to DOL, but for which a specific receipt account has not been

determined.

Deposit funds account for monies held by DOL as an agent for others or monies held temporarily by DOL

until ownership is determined.  

4.  Inter‐departmental relationships

DOL and Treasury are jointly responsible for the operations of the Unemployment Trust Fund and the Black

Lung Disability Trust Fund.  DOL is responsible for the administrative oversight and policy direction of the

programs financed by these trust funds.  Treasury acts as custodian over monies deposited into the funds

and also invests amounts in excess of disbursing requirements in Treasury securities on behalf of DOL.  DOL

consolidates the financial results of the Unemployment Trust Fund and the Black Lung Disability Trust Fund

into these financial statements.

B. Basis of Accounting and Presentation

These consolidated financial statements present the financial position, net cost of operations, changes in net

position and budgetary resources of the U.S. Department of Labor, and estimated and actuarial projections, and

changes therein, for the Department’s Black Lung social insurance program, in accordance with U.S. generally

accepted accounting principles (GAAP) and the form and content requirements of OMB Circular No. A‐136,

Financial Reporting Requirements. To ensure that the Department’s financial statements are meaningful, other

liabilities as defined by OMB Circular A‐136 have been disaggregated on the balance sheet. These include energy

employees occupational illness compensation benefits, accrued leave and other liabilities.  Except as described in

the following paragraphs, they have been prepared from the books and records of DOL, and include the accounts of

all funds under the control of the DOL reporting entity.    All inter‐fund balances and transactions have been

eliminated, except in the Statement of Budgetary Resources, which is presented on a combined basis, as required

by OMB Circular No. A‐136.  

DOL is a party to allocation transfers with other Federal agencies as both a transferring (parent) entity and a

receiving (child) entity.   Allocation transfers are legal delegations by one department of its authority to obligate

budget authority and outlay funds to another department.  A separate fund account (allocation account) is created

in the U.S. Treasury as a subset of the parent fund account to track and report allocation transfers.  All allocation  
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     75 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

B. Basis of Accounting and Presentation ‐ Continued

transfers of balances are credited to this account, and subsequent obligations and outlays incurred by the child

entity on behalf of the parent entity are charged to this allocation account.  OMB Circular No.  A‐136 requires the

parent to report all budgetary and proprietary activity in its financial statements.   DOL (parent entity) allocates  

appropriations to the U.S. Department of Agriculture and the U.S. Department of Interior (child entities) to provide

funds for youth training programs. Accordingly, all activity for these allocation accounts is included in the DOL

financial statements. DOL (child entity) receives allocated appropriations from the U.S. Environmental Protection

Agency, the U.S. Department of State, and the U.S. Agency for International Development (parent entities).  

Accordingly, activity for these allocation accounts is excluded from the DOL financial statements and reported by

the parent agencies.

For social insurance, the Department complies with the financial reporting requirements of Federal Accounting

Standards Advisory Board (FASAB) Statement of Federal Financial Accounting Standards (SFFAS) No. 17, “Accounting

for Social Insurance,” as amended, and SFFAS No. 37, “Social Insurance: Additional Requirements for

Management’s Discussion and Analysis and Basic Financial Statements.”

U.S. generally accepted accounting principles encompass both accrual and budgetary transactions. Under accrual

accounting, revenues are recognized when earned and expenses are recognized when a liability is incurred.

Budgetary accounting facilitates compliance with legal constraints on, and controls over, the use of federal funds.

These consolidated financial statements are different from the financial reports, also prepared by DOL pursuant to

OMB directives, used to monitor DOL’s use of budgetary resources.

Throughout these financial statements, assets, liabilities, earned revenue, and costs have been classified according

to the type of entity with whom the transactions were made. Intra‐governmental assets and liabilities are those

from or to other federal entities. Intra‐governmental earned revenue represents collections or accruals of revenue

from other federal entities, and intra‐governmental costs are payments or accruals to other federal entities.   

C. Funds with U.S. Treasury  

DOL’s cash receipts and disbursements are processed by the U.S. Treasury.    Funds with U.S. Treasury represent

obligated and unobligated balances available to finance allowable expenditures and restricted balances, including

amounts related to expired authority and amounts not available for use by DOL.  (See Note 2)

D. Investments       

The Federal Government does not set aside assets to pay future benefits or other expenditures associated with

DOL’s earmarked funds.  The cash receipts collected from the public for earmarked funds are deposited in the U.S.

Treasury, which uses the cash for general Government purposes.  Interest earning Treasury securities are issued to

DOL’s earmarked funds as evidence of the receipts.  These Treasury securities are assets to DOL and liabilities to

the U.S. Treasury.  Because DOL and the U.S. Treasury are both parts of the Government, these assets and liabilities

offset each other from the standpoint of the Government as a whole.  For this reason, they do not represent an

asset or a liability in the U.S. Government‐wide financial statements.    Treasury securities provide DOL with

authority to draw upon the U.S. Treasury to make future benefit payments or other expenditures.    When DOL

requires redemption of these securities to make expenditures, the Government finances those expenditures out of  

accumulated cash balances, by raising taxes or other receipts, by borrowing from the public or repaying less debt,

or by curtailing other expenditures, just as the Government finances all other expenditures.
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

76     United States Department of Labor

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

D. Investments ‐ Continued

Balances held in the Unemployment Trust Fund are invested in non‐marketable, special issue Treasury securities

(certificates of indebtedness and bonds) available for purchase exclusively by Federal government agencies and

trust funds.    Special issues are purchased and redeemed at face value (cost), which is equivalent to their net

carrying value on the Consolidated Balance Sheet.  Interest rates and maturity dates vary.  The UTF special issue

Treasury bonds may be redeemed, in whole or in part, prior to their maturity date and continue to accrue interest

until fully redeemed.

Balances held in the Panama Canal Commission Compensation Fund are invested in marketable Treasury securities.  

These investments are stated at amortized costs that equal their net carrying value on the Consolidated Balance

Sheet.   Discounts and premiums are amortized using the effective interest method.   Interest rates and maturity

dates vary.    Management expects to hold these marketable securities until maturity; therefore, no provision is

made in the financial statements for unrealized gains or losses.  (See Note 3)

E. Accounts Receivable, Net of Allowance

Accounts receivable consists of intra‐governmental amounts due to DOL, as well as amounts due from the public.

(See Notes 4 and 23)

1.  Intra‐governmental accounts receivable

The Federal Employees Compensation (FEC) account within the Unemployment Trust Fund provides

unemployment insurance to eligible Federal workers (UCFE) and ex‐service members (UCX).  DOL recognizes

as accounts receivable amounts due from other Federal agencies for unreimbursed UCFE and UCX benefits.  

DOL’s Federal Employees’ Compensation Act (FECA) Special Benefit Fund provides workers’ compensation

benefits to eligible Federal workers on behalf of other Federal agencies.    DOL recognizes as accounts

receivable amounts due from other Federal agencies to the Special Benefit Fund for unreimbursed FECA

benefits.   

  

DOL also has receivables from other Federal agencies for work performed on their behalf under various

reimbursable agreements.

2. Accounts receivable due from the public

DOL recognizes as accounts receivable state unemployment taxes due from covered employers and

reimbursements of benefits paid on behalf of reimbursable employers.    Also recognized as accounts

receivable are benefit overpayments made by DOL to individuals not entitled to receive the benefit.

DOL recognizes as accounts receivable amounts due from the public for fines and penalties levied against

employers by OSHA, MSHA, WHD, and EBSA and for amounts due from grantees and contractors for grant

and contract costs disallowed by ETA.  
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     77 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

E. Accounts Receivable, Net of Allowance ‐ Continued

3. Allowance for uncollectible accounts

Accounts receivable due from the public are stated net of an allowance for uncollectible accounts.    The

allowance is estimated based on an aging of account balances, past collection experience, and an analysis of

outstanding accounts at year‐end.  Intra‐governmental accounts receivable are considered fully collectible.   

F. Property, Plant and Equipment, Net of Accumulated Depreciation

The majority of DOL’s property, plant and equipment (PP&E) is general purpose PP&E held by Job Corps centers

owned and operated by DOL through a network of contractors.    Internal use software is considered general

purpose PP&E. (See Note 5)

DOL’s capitalization thresholds for assets with a useful life of 2 years or longer are displayed in the following table.

Equipment    $50,000

Real Property Purchases or Improvements $500,000

Leasehold Improvements $500,000

Internal Use Software   $500,000

PP&E purchases and additions are stated at cost.    Normal repairs and maintenance are charged to expense as

incurred.   PP&E are depreciated over their estimated useful lives using the straight‐line method of depreciation.  

Job Corps center construction costs are capitalized as construction‐in‐progress until completed.  Upon completion

they are reclassified as structures or facilities and depreciated over their estimated useful lives.   Leasehold

improvements made at Job Corps centers and DOL facilities leased from the General Services Administration are

recorded at cost and amortized over the remaining life of the lease or the useful life of the improvements,

whichever is shorter, using the straight‐line method of amortization.  DOL operating leases have one‐year terms

with multiple option years.  The leases are cancelable by the government upon appropriate notice as specified in

the lease agreements.  Historically, these leases have not been canceled and DOL has no intention to cancel these

leases in the near term.   

Internal use software development costs are capitalized as software development in progress until the development

stage has been completed and successfully tested.  Upon completion and testing, they are reclassified as internal

use software and amortized over their estimated useful lives.

The table below shows the major classes of DOL’s depreciable PP&E, and the depreciation periods used for each

major classification.  

   Years  

Structures, facilities and improvements 20 ‐ 50

Furniture and equipment    2 ‐ 36

Internal use software    2 ‐ 15
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

78     United States Department of Labor

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

G. Advances

DOL advances consist primarily of payments made to state employment security agencies (SESAs) and to grantees

and contractors to provide for future DOL program expenditures.  These advance payments are recorded by DOL as

an asset, which is reduced when actual expenditures or the accrual of estimated unreported expenditures are

recorded by DOL.  (See Note 6)

H.  Non‐entity Assets

Assets held by DOL which are not available to DOL for obligation are considered non‐entity assets.  DOL holds non‐

entity assets for the Railroad Retirement Board and for transfer to the U.S. Treasury.  (See Note 7)

I. Liabilities

Liabilities represent probable amounts to be paid by DOL as a result of past transactions and are recognized when

incurred, regardless of whether there are budgetary resources available to pay them.  However, the liquidation of

these liabilities will consume budgetary resources and cannot be made until available resources have been

obligated. For financial reporting purposes, DOL’s liabilities are classified as covered or not covered by budgetary

resources.  DOL’s other liabilities for intra‐governmental and other are current liabilities, except for the capital lease

liability and environmental and disposal liability. (See Note 9)

Liabilities are classified as covered by budgetary resources if budgetary resources are available to pay them.  

Liabilities are also considered covered by budgetary resources if they are to be funded by permanent indefinite

appropriations, which have been enacted and signed into law and are available for use as of the balance sheet date,

provided that the resources may be apportioned by OMB without further action by the Congress and without a

contingency having to be met first.    Liabilities are classified as not covered by budgetary resources if budgetary

resources are not available.    These classifications differ from budgetary reporting, which categorizes liabilities as

obligated, consuming budgetary resources, or unobligated, not consuming budgetary resources. Unobligated

liabilities include those covered liabilities for which available budgetary resources have not been obligated, as well

as liabilities not covered for which budgetary resources are not available to pay them.  (See Note 12)

J. Debt

DOL’s debt consisted of the following:

1.  Black Lung Disability Trust Fund borrowings from U.S. Treasury

The Energy Improvement and Extension Act of 2008 (P.L. 110‐343, section 113), enacted October 3, 2008,

authorized restructuring of the Black Lung Disability Trust Fund (BLDTF) debt by the repayment at market

value the fund’s outstanding repayable Advances from U.S. Treasury, using the proceeds from borrowings

from Treasury’s Bureau of Public Debt and a one‐time appropriation.  Pursuant to this authority, in FY 2009,

the BLDTF borrowed from Treasury $6.496 billion which was structured into 32 discounted instruments with

sequential annual September 30th maturities over the 32‐year period 2009 through 2040, bearing interest

rates ranging from 1.412% to 4.556%.    Interest on each instrument accrues until its September 30th

maturity date or the instrument’s prepayment, whichever occurs first.    These debt payments are to be

made from the excise taxes assessed on coal mined.  In the event that the BLDTF cannot repay a discounted

instrument when it matures, or make benefit payments or other authorized expenditures, the Act  
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     79 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

J. Debt ‐ Continued

1.  Black Lung Disability Trust Fund borrowings from U.S. Treasury ‐ continued

authorizes the issuance of one‐year discounted instruments to finance these activities.  The BLDTF issued

additional debt on September 30, 2011 (due September 30, 2012) bearing an interest rate of 0.106%, and

on September 30, 2012 (due September 30, 2013) bearing an interest rate of 0.174%. (See Note 8)

2. Unemployment Trust Fund Advances from U.S. Treasury

Unemployment Trust Fund advances from U.S. Treasury outstanding as of September 30, 2012 and

September 30, 2011 represent borrowings from the General Fund of the U.S. Treasury pursuant to the

authority of section 1203 of the Social Security Act (42 USC 1323) and appropriated through P.L. 111‐117

(123 Stat. 3230) and five continuing resolutions culminating with P.L. 112‐74 (125 Stat. 1056) to pay

unemployment benefits, when amounts in the Unemployment Trust Fund are insufficient to fund these

benefits. These repayable advances bear interest rates ranging between 2.625% and 3.25%, which were

computed as the average interest rate, as of the end of the calendar month preceding the issuance date of

the advance, for all interest bearing obligations of the United States then forming the public debt, to the

nearest lower one‐eighth of 1%. Interest on the repayable advances is due on September 30th of each year

or upon the repayment of an advance.  Advances are repaid by transfers from the Unemployment Trust

Fund to the General Fund of the Treasury when the Secretary of the Treasury, in consultation with the

Secretary of Labor, has determined that the balances in the Unemployment Trust Fund allow repayment.

(See Note 8)

K. Accrued Benefits

The financial statements include a liability for unemployment, workers’ compensation, and disability benefits due

and payable from various DOL funds, as discussed below.  (See Note 10)

1. Unemployment benefits payable

The Unemployment Trust Fund provides benefits to unemployed workers who meet State and Federal

eligibility requirements.  Regular and extended unemployment benefits are paid from State accounts within

the Unemployment Trust Fund, financed primarily by a State unemployment tax on employer payrolls.  Fifty

percent of the cost of extended unemployment benefits is paid from the Extended Unemployment

Compensation Account (EUCA) within the Unemployment Trust Fund, financed by a Federal unemployment

tax on employer payrolls.    The Recovery Act provided for a 100% Federal funding of extended benefits

through December 2009. This 100% Federal funding provision has been extended several times, with phase

out through June 29, 2013.

Emergency unemployment compensation benefits, also paid from EUCA, were first authorized by the

Supplemental Appropriations Act of 2008.  These benefits  were extended by the Recovery Act and other

authorizing legislation through December 29, 2012, and are currently funded entirely from  General Fund

appropriations.
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

80     United States Department of Labor

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

K. Accrued Benefits ‐ Continued

1. Unemployment benefits payable ‐ continued

The Recovery Act also provided for Federal Additional Unemployment Compensation (FAUC), a $25 weekly

supplement entirely funded from Treasury General Fund revenues, payable through December 2009 to

individuals who were entitled under state law to otherwise receive any type of unemployment

compensation.    FAUC benefits were extended several times, with phase out of benefit eligibility by

December 2010.  

  

Unemployment benefits to unemployed Federal workers are paid from the Federal Employees

Compensation Account within the Unemployment Trust Fund, which is then reimbursed by the responsible

Federal agency.  

A liability is recognized for unpaid unemployment benefits applicable to the current period and for benefits

paid by states that have not been reimbursed by the fund.    DOL also recognizes a liability for Federal

employees’ unpaid unemployment benefits for existing claims filed during the current period, payable in

the subsequent period, to the extent reimbursed by other Federal entities.   

2. Federal employees disability and 10(h) benefits payable

The Federal Employees’ Compensation Act Special Benefit Fund provides income and medical cost

protection to covered Federal civilian employees injured on the job, employees who have incurred a work‐

related occupational disease and beneficiaries of employees whose death is attributable to a job‐related

injury or occupational disease. The fund is reimbursed by other Federal agencies for the FECA benefit

payments made on behalf of their workers.    The fund assumes the liability for unreimbursed (non‐

chargeable) FECA benefits.    The fund also provides 50% of the annual cost‐of‐living adjustments for pre‐

1972 compensation cases under the authority of Section 10(h) of the Longshore and Harbor Workers’

Compensation Act and the District of Columbia Workmen’s Compensation Act.  A liability for FECA benefits

payable by the Special Benefit Fund to the employees of DOL and other Federal agencies and for 10(h)

benefits is accrued to the extent of unpaid benefits applicable to the current period.

3. Black lung disability benefits payable

The Black Lung Disability Trust Fund and Special Benefits for Disabled Coal Miners provide compensation

and medical benefits for eligible coal miners who are totally disabled due to pneumoconiosis (black lung

disease).  DOL recognizes a liability for disability benefits to the extent of unpaid benefits applicable to the

current period.

4. Energy employees occupational illness compensation benefits payable

The Energy Employees Occupational Illness Compensation Fund provides benefits to eligible current or

former employees of the U.S. Department of Energy (DOE) and its contractors suffering from designated

illnesses incurred as a result of their work with DOE.  Benefits are also paid to certain survivors of those

employees and contractors, as well as to certain beneficiaries of the Radiation Exposure Compensation Act

(RECA). DOL recognizes a liability for disability benefits to the extent of unpaid benefits applicable to the

current period.
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     81 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

L. Future Workers’ Compensation Benefits

The financial statements include an actuarial liability for future workers’ compensation benefits payable by DOL to

its employees, to employees of the Panama Canal Commission and to enrollees of the Job Corps, as well as benefits

not chargeable to other Federal agencies, which must be paid by DOL’s Federal Employees’ Compensation Act

Special Benefit Fund.  The liability includes the expected payments for death, disability, medical, and miscellaneous

costs for approved compensation cases, as well as a component for incurred but not reported claims.  The liability is

determined using historical benefit payment patterns related to injury years to predict the ultimate payments.  

The actuarial methodology provides for the effects of inflation and adjusts historical payments to current year

constant dollars by applying wage inflation factors (cost of living adjustments or COLAs) and medical inflation factors

(consumer price index‐medical or CPIMs) to the calculation of projected benefits.  The COLAs and CPIMs used in the

projections for FY 2012 and FY 2011 were as follows:

            COLA               CPIM                            

  FY     2012 2011 2012 2011

   

2012 N/A    2.10% N/A    3.07% 

2013 2.83% 2.53% 3.65 % 3.62%

2014 2.03 %        1.83% 3.66 % 3.66%

2015 1.93 % 1.93% 3.72 % 3.73%

2016 2.00 % 2.00% 3.73 % 3.73%

2017+ 2.03 % 2.00% 3.80 % 3.73% 

Projected annual payments were discounted to present value based on OMB’s interest rate assumptions for ten‐

year Treasury notes.  For FY 2012, interest rate assumptions were 2.293% in year one and 3.138% in year two and

thereafter.  For FY 2011, interest rate assumptions were 3.535% in year one and 4.025% in year two and thereafter.   

M. Energy Employees Occupational Illness Compensation Benefits  

The Energy Employees Occupational Illness Compensation Fund, established under the authority of the Energy

Employees Occupational Illness Compensation Program Act of 2000 (EEOICPA), provides benefits to eligible current

or former employees of DOE and its contractors, or to certain survivors of those employees and contractors, as well

as benefits to certain beneficiaries of RECA.  DOL is responsible for adjudicating and administering claims filed under

the EEOICPA.  Effective July 31, 2001, compensation of $150,000 and payment of medical expenses from the date a

claim is filed are available to covered individuals suffering from designated illnesses incurred as a result of their

work with DOE.  Prior to October 2004, compensation of $50,000 and payment of medical expenses from the date a

claim is filed are available to individuals eligible for compensation under RECA.   As a result of the October 2004

changes, new RECA cases are paid the full $150,000 under EEOICPA.

The Ronald Reagan National Defense Authorization Act of 2005 amended EEOICPA to include Subtitle E –

Contractor Employee Compensation.  This amendment replaces Part D of the EEOICPA, which provided assistance

from DOE in obtaining state workers’ compensation benefits.    The amended program grants workers’

compensation benefits to covered employees and their families for illness and death arising from exposure to toxic  

substances at a DOE facility.  The amendment also makes it possible for uranium workers as defined under Section

5 of RECA to receive compensation under Part E for illnesses due to toxic substance exposure at a uranium mine or

mill covered under that Act.   
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

82     United States Department of Labor

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

M. Energy Employees Occupational Illness Compensation Benefits ‐ Continued

DOL has recognized a $15.6 billion and $15.1 billion actuarial liability for estimated future benefits payable by DOL

at September 30, 2012 and 2011, respectively, to eligible individuals under the EEOICPA.  At September 30, 2012

the undiscounted liability is $22.5 billion discounted to a present value liability of $15.6 billion based on an interest

rate of 3.138% projected over a 58‐year period.  At September 30, 2011 the undiscounted liability was $22.6 billion

discounted to a present value liability of $15.1 billion based on an interest rate of 4.025% projected over a 55‐year

period. The estimated liability includes the expected lump sum and estimated medical payments for approved

compensation cases and cases filed pending approval, as well as claims incurred but not yet filed.  The actuarial

projection methodology provided an estimate of the ultimate number of reported cases as a result of estimating

future claims from the historical patterns of reported claims and subsequent claim approval rates.    Medical

payments were derived by estimating an average benefit award per living employee claimant.  

N. Accrued Leave

A liability for annual and compensatory leave is accrued as leave is earned and paid when leave is taken.    The

balance of leave earned but not taken will be paid from future funding sources.  Sick leave and other types of non‐

vested leave are expensed as taken.

O. Employee Health and Life Insurance Benefits

DOL employees are eligible to participate in the contributory Federal Employees Health Benefit Program (FEHBP)

and the Federal Employees Group Life Insurance Program (FEGLIP).  DOL matches the employee contributions to

each program to pay for current benefits.    During FY 2012, DOL’s contributions to the FEHBP and FEGLIP were

$105.7 million and $2.4 million, respectively. During FY 2011, DOL’s contributions to the FEHBP and FEGLIP were

$99.2 million and $1.4 million, respectively.  These contributions are recognized as current operating expenses.

P. Other Retirement Benefits

DOL employees eligible to participate in the FEHBP and the FEGLIP may continue to participate in these programs

after their retirement.  DOL recognizes a current operating expense for the future cost of these other retirement

benefits (ORB) at the time the employee’s services are rendered.  This ORB expense must be financed by U.S. Office

of Personnel Management (OPM).    Using cost factors supplied by OPM, DOL recorded ORB imputed costs and

imputed financing sources of $79.9 million in FY 2012 and $96.8 million in FY 2011.

Q. Employee Pension Benefits

DOL employees participate in either the Civil Service Retirement System (CSRS) or the Federal Employees’

Retirement System (FERS).    For employees participating in CSRS, 7.0% of their gross earnings is withheld and

transferred to the Civil Service Retirement and Disability Fund.  DOL contributes an additional 7.0% of the employee

gross earnings to the Civil Service Retirement and Disability Fund.    For employees participating in FERS, DOL

withholds 0.8% of gross earnings and makes an 11.2% employer contribution.  This total is transferred to the Federal

Employees’ Retirement Fund.    The CSRS and FERS retirement funds are administered by the OPM.    DOL

contributions to the CSRS and FERS are recognized as current operating expenses.  FERS participants are also
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     83 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

Q. Employee Pension Benefits ‐ Continued

covered under the Federal Insurance Contribution Act (FICA) and are subject to withholdings.  DOL makes matching

FICA contributions, recognized as operating expenses.  DOL’s matching contributions were $111.5 million in FY 2012

and $88.6 million in FY 2011.

The Thrift Savings Plan (TSP) is a defined contribution retirement savings and investment plan for employees

covered by either CSRS or FERS.  CSRS participants may contribute up to $17,000 of their gross pay to the TSP during

calendar year 2012 ($16,500 in calendar year 2011), but there is no departmental matching contribution.    FERS

participants may contribute up to $17,000 of their gross pay to the TSP during calendar year 2012 ($16,500 in

calendar year 2011).  CSRS and FERS participants aged 50 years or older may also contribute an additional $5,500

each calendar year in “catch‐up” contributions during calendar years 2012 and 2011, but there is no departmental

matching on “catch‐up” contributions. For employees covered under FERS, DOL contributes 1% of the employees’

gross pay to the TSP.  DOL also matches employees’ contributions dollar‐for‐dollar on the first 3% of pay contributed

each pay period and 50 cents on the dollar for the next 2% of pay contributed.  DOL contributions to the TSP are

recognized as current operating expenses.  Employee and employer contributions to the TSP are transferred to the

Federal Retirement Thrift Investment Board. (See Note 14)   

DOL recognizes the full cost of providing future CSRS and FERS pension benefits to covered employees at the time

the employees’ services are rendered.    The pension expense recognized in the financial statements equals the

service cost for covered DOL employees, less amounts contributed by these employees.  Service cost represents the

actuarial present value of benefits attributed to services rendered by covered employees during the accounting

period.   

The measurement of service cost requires the use of actuarial cost methods to determine the percentage of the

employees’ basic compensation sufficient to fund their projected pension benefit.  These percentages (cost factors)

are provided by OPM, and applied by DOL to the basic annual compensation of covered employees to arrive at the

amount of total pension expense to be recognized in DOL’s financial statements.   

The excess of total pension expense over the amount contributed by the Department and by DOL’s employees

represents the amount of pension expense which must be financed directly by OPM.  DOL recognized an imputed

cost and an imputed financing source equal to the excess amount.    DOL does not recognize in its financial

statements FERS or CSRS assets, accumulated plan benefits or unfunded liabilities, if any, applicable to its

employees.  (See Note 14)

R. Net Position

DOL’s net position consists of the following:

1. Unexpended appropriations

Unexpended appropriations include the unobligated balances and undelivered orders of DOL’s appropriated

funds.  Unobligated balances associated with appropriations that expire at the end of the fiscal year remain

available for obligation adjustments, but not new obligations, until those appropriations are closed, five

years after the appropriations expire.  Unexpired multi‐year and no‐year appropriations remain available to

DOL for obligation in future periods.  
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

84     United States Department of Labor

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

R. Net Position ‐ Continued

2. Cumulative results of operations

Cumulative results of operations include the accumulated historical difference between expenses

consuming budgetary resources and financing sources providing budgetary resources in DOL’s trust,

revolving and special funds; liabilities not consuming budgetary resources net of assets not providing

budgetary resources; and DOL’s net investment in capitalized assets.   

S. Net Cost of Operations  

1. Operating costs   

Full operating costs are comprised of all direct costs consumed by the program and those indirect costs

which can be reasonably assigned or allocated to the program.  Full costs are reduced by exchange (earned)

revenues to arrive at net program cost.    The full and net operating costs of DOL’s major programs are

presented in the Consolidated Statement of Net Cost, and are also reported by sub‐organization in Note 15

to the financial statements.   

2. Earned revenue

Earned revenues arise from exchange transactions which occur through the provision of goods and services

for a price, and are deducted from the full cost of DOL’s major programs to arrive at net program cost.  

Earned revenues are recognized by DOL to the extent reimbursements are payable from other Federal

agencies and from the public, as a result of costs incurred or services performed on their behalf.   Major

sources of DOL’s earned revenue include reimbursements to the Federal Employees’ Compensation Act

Special Benefit Fund from Federal agencies for the costs of disability compensation and medical care

provided to or accrued on behalf of their employees and reimbursements to the Unemployment Trust Fund

from Federal agencies for the cost of unemployment benefits provided to or accrued on behalf of their

former employees.
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     85 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

T. Budgetary Financing Sources

Budgetary financing sources other than earned revenues provide funding for the Department’s net cost of

operations and are reported on the Consolidated Statement of Changes in Net Position.  These financing sources

include appropriations received, less appropriations transferred and not available, non‐exchange revenue, and

transfers without reimbursement, as discussed below:

1. Appropriations received, appropriations transferred, and appropriations not available

DOL receives financing sources through congressional appropriations to support its operations.  A financing

source is recognized for these appropriated funds received, less appropriations transferred or not available

through rescission or cancellation.  

2. Non‐exchange revenue

Non‐exchange revenues arise primarily from the Federal government’s power to demand payments from

the public.  Non‐exchange revenues are recognized by DOL on the Consolidated Statement of Changes in

Net Position and are discussed below.  (See Note 16)

Employer taxes  

Employer tax revenues are recognized on a modified cash basis, to the extent of cash transferred by the

collecting entity to DOL, plus the change in inter‐entity balances between the collecting entity and DOL.  

Inter‐entity balances represent revenue received by the collecting entity, net amounts due to the collecting

entity and adjustments made to previous transactions by the collecting entity which have not been

transferred to DOL.   

Federal and state unemployment taxes represent non‐exchange revenues collected from employers based

on wages paid to employees in covered employment.    Federal unemployment taxes are collected by the

Internal Revenue Service and transferred to designated accounts within the Unemployment Trust Fund.  

State unemployment taxes are collected by each State and deposited in separate State accounts within the

Unemployment Trust Fund.    Federal unemployment taxes are used to pay the Federal share of extended

unemployment benefits and to provide for Federal and State administrative expenses related to the

operation of the unemployment insurance program.  State unemployment taxes are restricted in their use

to the payment of unemployment benefits.

Interest

The Unemployment Trust Fund, the Panama Canal Commission Compensation Fund, and the Energy

Employees Occupational Illness Compensation Fund receive interest on fund investments.    The

Unemployment Trust Fund receives interest from states that had accounts with loans payable to the Federal

unemployment account at the end of the prior fiscal year.  Interest is also earned on Federal funds in the

possession of non‐Federal entities.  Interest is recognized as non‐exchange revenue when earned.  
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

86     United States Department of Labor

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

T. Budgetary Financing Sources ‐ Continued

2.  Non‐exchange revenue ‐ continued

Reimbursement of unemployment benefits

The Unemployment Trust Fund receives reimbursements from state and local government entities and non‐

profit organizations for the cost of unemployment benefits provided to or accrued on behalf of their

employees.  These reimbursements are recognized as non‐exchange revenue when earned.   

3. Transfers without reimbursement

Transfers recognized as budgetary financing sources by DOL include transfers from the Department of

Homeland Security H‐1B Nonimmigrant Petitioner Account to H‐1B Funds in ETA and WHD.  Also included

are transfers from various DOL general fund unexpended appropriation accounts to the Working Capital

Fund’s cumulative results of operations.  There are also transfers between DOL entities, primarily for the

administration of the unemployment insurance program and additional appropriations for extended

unemployment benefits. (See Note 17)

U.  Other Financing Sources

Other financing sources include items that do not represent budgetary resources.  

1.  Imputed financing

A financing source is imputed by DOL to provide for pension and other retirement benefit expenses

recognized by DOL but financed by OPM.  (See Notes 1‐P, 1‐Q, and 14)

2. Transfers without reimbursement

Transfers recognized as other financing sources by DOL include the transfers of property from the U.S.

General Services Administration.  (See Note 17)

V.  Custodial Activity

DOL collects and transfers to the general fund of the U.S. Treasury custodial non‐exchange revenues for penalties

levied against employers by OSHA, MSHA, WHD, and EBSA for regulatory violations; for ETA disallowed grant costs

assessed against canceled appropriations; and for FECA administrative costs assessed against government

corporations in excess of amounts reserved to finance capital improvements in the Federal Employees’

Compensation Act Special Benefit Fund.    These collections are not available to the agencies for obligation or

expenditure.  Penalties and other assessments are recognized as custodial revenues when collected or subject to

collection.   (See Notes 1‐B and 20)
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     87 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

W.  Significant Assumptions Used in the Statement of Social Insurance and Statement of Changes in

Social Insurance Amounts  

1. Program Background

The Black Lung Disability Benefit Program provides for compensation, medical, and survivor benefits for eligible

coal miners who are totally disabled due to pneumoconiosis (black lung disease) arising out of their coal mine

employment.   BLDTF provides benefit payments to eligible coal miners totally disabled by pneumoconiosis

when no responsible mine operator can be assigned the liability.    The Office of Workers' Compensation

Programs administers the Black Lung Program and the payment of benefits under the Black Lung Benefits Act.    

The Federal Coal Mine Health and Safety Act sets Black Lung benefits at 37.5% of the base salary of a Federal

employee at level GS‐2, Step 1.  Black lung disability benefit payments are funded by excise taxes from coal

mine operators based on the sale of coal, as are the fund’s administrative costs.  These taxes are collected by

the Internal Revenue Service and transferred to the BLDTF, which was established under the authority of the

Black Lung Benefits Revenue Act, and administered by the U.S. Department of the Treasury.   

P.L. 110‐343, Division B‐Energy Improvement and Extension Act of 2008, enacted on October 3, 2008, among

other things, restructured the BLDTF debt by refinancing the outstanding high interest rate repayable advances

with the proceeds from issuing low interest rate discounted debt instruments similar in form to zero‐coupon

bonds, plus a one‐time appropriation.  This Act also allowed that any debt issued by the BLDTF subsequent to

the refinancing may be used to make benefit payments, other authorized expenditures, or to repay debt and

interest from the initial refinancing.  (See Notes 1‐J and 8)

2. Significant Assumptions

The significant assumptions used in the projections for the Statement of Social Insurance (SOSI) are the coal

excise tax revenue estimates, the tax rate structure, the number of beneficiaries, life expectancy, Federal

civilian pay raises, and medical cost inflation.  These assumptions also affect the amounts reported on the SOSI

summary section and the Statement of Changes in Social Insurance Amounts (SCSIA).       

Treasury’s Office of Tax Analysis provides estimates of future receipts of the black lung excise tax.  Its estimates

are based on projections of future coal production and sale prices prepared by the Energy Information Agency

of the U.S. Department of Energy.  Treasury’s Office of Tax Analysis provides the first eleven years of tax receipt

estimates.  The remaining years are estimated using a growth rate based on both historical tax receipts and the

Treasury’s estimated tax receipts.  The coal excise tax rates of $1.10 per ton of underground‐mined coal and

$0.55 per ton of surface‐mined coal sold, with a cap of 4.4% of sales price, continue until the earlier of

December 31, 2018 or the first December 31 in which there exists no (1) balance of repayable debt described in

section 9501 of the Internal Revenue Code and (2) unpaid interest on the debt.  At that time, the tax rates

revert to $0.50 per ton of underground‐mined coal and $0.25 per ton of surface‐mined coal sold, with a limit of

2.0% of sales price.    
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

88     United States Department of Labor

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

W. Significant Assumptions Used in the Statement of Social Insurance and Statement of Changes in

Social Insurance Amounts ‐ Continued

2.  Significant Assumptions ‐ continued

The beneficiary population data is updated from information supplied by the program.   The beneficiary

population is a nearly closed universe in which attrition by death exceeds new entrants by a ratio of more than

ten to one.   Projections for new participants are included in the overall projections and are considered

immaterial.  Therefore, the difference between the open group measure and the closed group measure due to

new participants is immaterial and the same measure is presented for both the open group and the closed

group.

Social Security Administration life tables are used to project the life expectancies of the beneficiary population.  

OMB supplies assumptions for future monthly benefit rate increases based on increases in the Federal pay

scale and future medical cost inflation based on increases in the consumer price index‐medical, which are used

to calculate future benefit costs.  During the current projection period, the future benefit rate (annualized for

the fiscal year) increases 2.85% in 2013, 3.8% in 2014 through 2020, 3.876% in 2021, and 3.9% in each year

thereafter and medical cost increases 3.6% in 2013, ranges from 3.7% to 3.8% in 2014 through 2017, and 3.9%

in each year thereafter. Estimates for administrative costs for the first 11 years of the projection are supplied

by DOL’s Budget Office, based on current year enacted amounts, while later years are based on the number of

projected beneficiaries.   

The projection period ends September 30, 2040, because the primary purpose of the BLDTF, which was

established in 1978, is to compensate the victims of coal mine dust exposures which occurred prior to 1970.  By

the end of FY 2040, not only the disabled miners and their widows in that class, but also virtually all of their

eligible dependent disabled adult children will be deceased.  All of the current year projections are discounted

using an interest rate of 2.75% published by Treasury as of the start of the projection period.  This rate is for

Treasury loans to government agencies for loans with a duration from 26 years, 5 months up to but not

including 29 years, 3 months and approximates the projection period.  The valuation date for the FY 2012 and

FY 2011 information presented in the SOSI, including the summary section, and in the SCSIA is September 30,

2012, and 2011, respectively.

The accumulated deficit of all past disbursements over past cash receipts, including interest on investments, is

($6.0) billion, the amount of the trust fund net position deficit at the start of the projection period, September

30, 2012.    The excess of the present value of estimated future excise tax income over the actuarial present

value of future benefit payments and present value of estimated administrative costs during the projection

period for current and future participants (open and closed group measure) is calculated by adding the

outflows of:

(a) actuarial present value of future benefit payments during the projection period to disabled coal miners

and dependent survivors and

(b) present value of estimated future administrative costs during the projection period;

and then subtracting the inflows of:

(c) the present value of estimated future excise tax income during the projection period.
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     89 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

W. Significant Assumptions Used in the Statement of Social Insurance and Statement of Changes in

Social Insurance Amounts ‐ Continued

2.  Significant Assumptions ‐ continued

As a result of changes in the assumptions described above, in FY 2012 the open and closed group measure

decreased by ($61.7) million primarily due to projected lower coal excise tax revenues and higher beneficiaries

costs, offset in part due to the change in the interest rate used to discount the cash flows from 3.375% to 2.75%.  In

FY 2011, the open and closed group measure decreased ($730.3) million primarily due to projected lower coal

excise tax revenues, offset in part due to projected lower beneficiaries costs and the change in the interest rate

used to discount the cash flows from 3.75% to 3.375%.

X.  Tax Exempt Status

As an agency of the Federal government, the Department is exempt from all taxes imposed by any governing body

whether it is a Federal, state, commonwealth, local, or foreign government.  

Y.  Application of Critical Accounting Estimates

The financial statements are based on the selection of accounting policies and the application of significant

accounting estimates, some of which require management to make significant assumptions.  

Estimates and assumptions affect the reported amounts of assets and liabilities and the reported amounts of

revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Estimates and assumptions also affect the amounts reported on the SOSI and the SCSIA.  Further, the estimates are

based on current conditions that may change in the future. Actual results could differ materially from the estimated

amounts. The financial statements include information to assist in understanding the effect of changes in

assumptions to the related information.

Z. Reclassifications

The FY 2011 statements were reclassified to conform to the FY 2012 Departmental financial statement

presentation requirements, including changes in the presentation of the Combined Statement of Budgetary

Resources, the reclassification of the grant accrual liability on the Balance Sheet and Note 9, and the special fund

disclosure in Note 2 per the requirements of OMB Circular No. A‐136.  The reclassifications had no effect on total

assets, liabilities, net position, and change in net position or budgetary resources as previously reported.
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

90     United States Department of Labor

NOTE 2 ‐ FUNDS WITH U.S. TREASURY

Funds with U.S. Treasury at September 30, 2012 consisted of the following:

Unobligated Unobligated Obligated

Balance Balance Balance Not Total Non-entity

(Dollars in thousands) Available Unavailable Yet Disbursed Entity Assets Assets Total

Revolving funds 1,350 $ 15,670 $ $ 95,582 $ 112,602 $ 112,602 - $ 

Trust funds 80 - (260,156) (260,076) (265,798) (5,722) 

Special funds 212,151 89,208 303,149 604,508 604,508 - 

General funds 1,606,952 2,465,834 7,495,730 11,568,516 11,568,516 - 

Other - - - - 3,355 3,355 

$ 2,570,712 1,820,533 $ 7,634,305 $ 12,025,550 $ (2,367) $ 12,023,183 $ 

Entity Assets

Funds with U.S. Treasury at September 30, 2011 consisted of the following:

Unobligated Unobligated Obligated

Balance Balance Balance Not Total Non-entity

(Dollars in thousands) Available Unavailable Yet Disbursed Entity Assets Assets Total

Revolving funds $ 6,655 5,647 $ $ 85,078 $ 97,380 $ 97,380 - $ 

Trust funds 91 - 44,385 44,476 43,921 (555) 

Special funds 57,044 426,192 (15,626) 467,610 467,610 - 

General funds 819,588 2,060,961 7,461,157 10,341,706 10,341,706 - 

Other - - - - 3,841 3,841 

$ 2,124,660 1,251,518 $ 7,574,994 $ 10,951,172 $ 3,286 $ 10,954,458 $ 

Entity Assets

The negative fund balance reported as of September 30, 2012 and 2011 relates to the Unemployment Trust Fund

(UTF) and are the result of the timing of processing the investments and redemptions of UTF.  The investments and

redemptions relating to the last business day of the month are not processed until the first day of the next month.  

This results in a negative cash position for the preceding business day when the disbursements are greater than the

receipts to the fund.

Annual and multi‐year budget authority expires at the end of its period of availability.  During the first through the

fifth expired years, the unobligated balance is unavailable and may be used to adjust obligations and disbursements

that were recorded before the budgetary authority expired or to meet a legitimate or bona fide need arising in the

fiscal year for which the appropriation was made.  The unobligated balance for no‐year budget authority may be

used to incur obligations indefinitely for the purpose specified by the appropriation act. No‐year budget authority

unobligated balances, except those specifically exempt, are still subject to the annual apportionment and allotment

process.

Unobligated Balance Available at September 30, 2012 and 2011 includes $1.0 billion and $483.0 million,

respectively, of funds apportioned for use in the subsequent year.

  
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     91 

NOTE 3 ‐ INVESTMENTS

Investments at September 30, 2012 consisted of the following:

Face Premium Interest Net Market

(Dollars in thousands) Value (Discount) Receivable Value Value

Unemployment Trust Fund

Non-marketable

Special issue U.S. Treasury Bonds

2.625% maturing June 30, 2013 3,235,073 $ $ - $ 21,230 $ 3,235,073 3,256,303 $ 

2.625% maturing June 30, 2014 5,198,978 - 34,118 5,198,978 5,233,096 

Special issue Certificate of Indebtedness

2.625% maturing June 30, 2013 10,376,666 - 53,798 10,376,666 10,430,464 

2.500% maturing June 30, 2013 1,861,861 - 829 1,862,690 1,861,861 

 20,672,578 - 109,975 20,782,553 20,672,578 

Panama Canal Commission

 Compensation Fund

Marketable

U.S. Treasury Notes

4.000% maturing November 15, 2012 51,886 245 778 51,886 52,909 

3.625% maturing May 15, 2013 5,041 (1) 69 5,109 5,041 

 56,927 244 847 58,018 56,927 

$ 20,729,505 244 $ 110,822 $ 20,840,571 $ 20,729,505 $ 

Entity investments $ 20,553,677 $ 244 $ 109,887 $ 20,553,677 20,663,808 $ 

Non-entity investments 175,828 - 935 176,763 175,828 

$ 20,729,505 244 $ 110,822 $ 20,840,571 $ 20,729,505 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

92     United States Department of Labor

NOTE 3 ‐ INVESTMENTS ‐ Continued

Investments at September 30, 2011 consisted of the following:

Face Premium Interest Net Market

(Dollars in thousands) Value (Discount) Receivable Value Value

Unemployment Trust Fund

Non-marketable

Special issue U.S. Treasury Bonds

3.000% maturing June 30, 2012 $ 16,030,410 $ - $ 120,228 $ 16,150,638 16,030,410 $ 

 16,030,410 - 120,228 16,150,638 16,030,410 

Panama Canal Commission

 Compensation Fund

Marketable

U.S. Treasury Bills

Maturing November 17, 2011 580 - - 580 580 

U.S. Treasury Notes

1.750% maturing November 15, 2011 58,126 103 381 58,126 58,610 

3.625% maturing May 15, 2013 3,968 (61) 54 3,961 3,968 

 62,674 42 435 63,151 62,674 

$ 16,093,084 42 $ 120,663 $ 16,213,789 $ 16,093,084 $ 

Entity investments $ 42 16,037,946 $ $ 120,249 $ 16,037,946 16,158,237 $ 

Non-entity investments 55,138 - 414 55,552 55,138 

$ 16,093,084 42 $ 120,663 $ 16,213,789 $ 16,093,084 $ 
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     93 

NOTE 4 ‐ ACCOUNTS RECEIVABLE, NET OF ALLOWANCE

           

Accounts receivable at September 30, 2012 consisted of the following:

Gross Net

(Dollars in thousands) Receivables Allowance Receivables

Entity intra-governmental assets

Due for UCFE and UCX benefits 578,111 $ - $ 578,111 $ 

Due for workers' compensation benefits 5,387,349 - 5,387,349 

Other - 17,000 17,000 

 5,982,460 5,982,460 - 

Entity assets

State unemployment taxes 1,454,900 (917,141) 537,759 

Due from reimbursable employers 1,063,942 (115,773) 948,169 

Benefit overpayments 4,732,359 (4,051,100) 681,259 

Other 9,505 - 9,505 

 7,260,706 (5,084,014) 2,176,692 

Non-entity assets

Fines and penalties 138,040 (56,456) 81,584 

 7,398,746 (5,140,470) 2,258,276 

$ 13,381,206 $ 8,240,736 (5,140,470) $ 

Accounts receivable at September 30, 2011 consisted of the following:

Gross Net

(Dollars in thousands) Receivables Allowance Receivables

Entity intra-governmental assets

Due for UCFE and UCX benefits 666,272 $ $ - $ 666,272

Due for workers' compensation benefits 5,262,735 - 5,262,735

Other 15,948 - 15,948

 5,944,955 - 5,944,955

Entity assets

State unemployment taxes 1,164,204 335,188 (829,016) 

Due from reimbursable employers 1,209,305 1,100,195 (109,110) 

Benefit overpayments 4,175,940 630,521 (3,545,419) 

Other 3,142 - 3,142

 6,552,591 (4,483,545) 2,069,046 

Non-entity assets

Fines and penalties 149,637 101,816 (47,821) 

 6,702,228 (4,531,366) 2,170,862 

$ (4,531,366) 12,647,183 $ 8,115,817 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

94     United States Department of Labor

NOTE 5 ‐ PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION

Property, plant and equipment at September 30, 2012 consisted of the following:

Accumulated

Depreciation/ Net Book

(Dollars in thousands) Cost Amortization Value

Structures, facilities and improvements

Structures and facilities 1,350,272 $ $ (551,979) $ 798,293

Improvements to leased facilities 419,066 145,003 (274,063) 

 1,769,338 943,296 (826,042) 

Furniture and equipment

Equipment held by contractors 149,976 5,617 (144,359) 

Furniture and equipment 44,314 10,254 (34,060) 

 194,290 15,871 (178,419) 

Internal use software and software development in progress 225,915 145,394 (80,521) 

Construction-in-progress 81,676 81,676 - 

Land 94,101 94,101 - 

$ (1,084,982) 2,365,320 $ 1,280,338 $ 

2012

Structures and facilities include DOL’s only asset under a capital lease.  (See Note 9)

Property, plant and equipment at September 30, 2011 consisted of the following:

Accumulated

Depreciation/ Net Book

(Dollars in thousands) Cost Amortization Value

Structures, facilities and improvements

Structures and facilities 1,219,588 $ $ (515,118) $ 704,470

Improvements to leased facilities 423,263 157,887 (265,376) 

 1,642,851 862,357 (780,494) 

Furniture and equipment

Equipment held by contractors 155,493 5,661 (149,832) 

Furniture and equipment 46,146 10,911 (35,235) 

 201,639 16,572 (185,067) 

Internal use software and software development in progress 217,602 139,352 (78,250) 

Construction-in-progress 107,530 107,530 - 

Land 94,101 94,101 - 

$ (1,043,811) 2,263,723 $ 1,219,912 $ 

2011
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     95 

NOTE 6 ‐ ADVANCES

Advances at September 30, 2012 and 2011 consisted of the following:

(Dollars in thousands) 2012 2011

Intra-governmental

Advances $ 3,128 $ -

Advances to states for UI benefit payments 1,447,417 1,545,979

Other 9,083 44,418 

 1,456,500 1,590,397

$ 1,590,397 1,459,628 $ 

NOTE 7 ‐ NON‐ENTITY ASSETS

Non‐entity assets at September 30, 2012 and 2011 consisted of the following:

(Dollars in thousands) 2012 2011

Intra-governmental

Funds with U.S. Treasury (2,367) $ $ 3,286

Investments 176,763 55,552

 174,396 58,838

Accounts receivable, net of allowance 81,584 101,816

$ 255,980 160,654 $ 

NOTE 8 ‐ DEBT

DOL’s debt during FY 2012 consisted of the following:

Balance at Balance at

September 30, Net September 30,

(Dollars in thousands) 2011 Borrowing 2012

Intra-governmental debt to Treasury

Black Lung Disability Trust Fund

 Borrowing from U.S. Treasury 6,163,075 $ $ 6,065,585 (97,490) $ 

Unemployment Trust Fund

 Advances from U.S. Treasury 42,772,829 (9,841,074) 32,931,755

$ (9,938,564) 48,935,904 $ 38,997,340 $ 

DOL’s debt during FY 2011 consisted of the following:

Balance at Balance at

September 30, Net September 30,

(Dollars in thousands) 2010 Borrowing 2011

Intra-governmental debt to Treasury

Black Lung Disability Trust Fund

 Borrowing from U.S. Treasury 6,289,746 $ $ 6,163,075 (126,671) $ 

Unemployment Trust Fund

 Advances from U.S. Treasury 34,110,979 42,772,829 8,661,850 

$ 8,535,179 40,400,725 $ 48,935,904 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

96     United States Department of Labor

NOTE 8 ‐ DEBT ‐ Continued

For the Black Lung Disability Trust Fund, the net decrease in debt in FY 2012 includes repayment of debt of ($502.0

million) along with accrued interest paid of ($37.3 million), capitalized interest of $227.8 million, and additional

borrowing of $214.0 million, for a FY 2012 net total decrease of ($97.5 million).  In FY 2011, the net decrease in

debt includes repayment of debt of ($439.3 million) along with accrued interest paid of ($21.7 million), capitalized

interest of $226.6 million, and additional borrowing of $107.7 million, for a FY 2011 net total decrease of ($126.7

million).  

For the Unemployment Trust Fund, the net decrease in debt in FY 2012 includes new advances of $12.9 billion and

repaid debt of ($22.7 billion), for a net total decrease of ($9.8 billion).  In FY 2011, the net increase in debt includes

new advances of $21.9 billion and repaid debt of ($13.3 billion), for a FY 2011 net total increase of $8.6 billion.  At

September 30, 2012 and 2011, all accrued interest was paid.  Interest paid was $1.2 billion in FY 2012 and $1.4

billion in FY 2011.

NOTE 9 ‐ OTHER LIABILITIES

Other liabilities at September 30, 2012 and 2011 consisted of the following:

(Dollars in thousands) 2012 2011

Intra-governmental

Non-entity receivables due to U.S. Treasury 81,584 $ $ 101,816

Accrued payroll and other liabilties 197,054 100,622

Total intra-governmental 278,638 202,438

Grant accruals 797,967 816,828

Capital lease liability 43,166 - 

Environmental and disposal liability 31,930 - 

Accrued payroll and other liabilities 131,236 176,333

Total other liabilities with the Public 1,004,299 993,161

$ 1,195,599 1,282,937 $ 

The amounts shown above are current liabilities, except for the capital lease and environmental and disposal

liabilities.   

NOTE 10 ‐ ACCRUED BENEFITS

Accrued benefits at September 30, 2012 and 2011 consisted of the following:

(Dollars in thousands) 2012 2011

State regular and extended unemployment benefits payable 681,314 $ $ 1,454,256

Federal extended unemployment benefits payable 261,067 464,429

Federal emergency unemployment benefits payable 814,397 817,232

Federal employees' unemployment benefits payable 286,630 426,141

Federal additional unemployment benefits payable 32,891 18,787

Total unemployment benefits payable 2,076,299 3,180,845

Black lung disability benefits payable 27,465 16,255

Federal employees' disability and 10(h) benefits payable 160,542 101,175

Energy employees occupational illness compensation benefits payable 25,296 22,169

$ 3,320,444 2,289,602 $ 
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     97 

NOTE 11 ‐ FUTURE WORKERS' COMPENSATION BENEFITS

DOL’s liability for future workers’ compensation benefits at September 30, 2012 and 2011 consisted of the

following:   

(Dollars in thousands) 2012 2011

Projected gross liability of the Federal government

 for future FECA benefits $ 31,342,564 34,260,124 $ 

Less liabilities attributed to other agencies:

U.S. Postal Service (12,218,674) (14,404,031) 

Department of Navy (2,394,057) (2,427,697) 

Department of Homeland Security (2,229,503) (2,055,225) 

Department of Veterans Affairs (2,014,108) (1,890,635) 

Department of Army (1,828,972) (1,882,561) 

Department of Justice (1,359,361) (1,474,279) 

Department of Air Force (1,383,963) (1,349,859) 

Department of Transportation (1,017,770) (977,634) 

Department of Agriculture (944,353) (903,734) 

Department of Defense, Other (847,082) (794,008) 

Department of Interior (747,211) (802,555) 

Department of the Treasury (576,308) (558,388) 

Tennessee Valley Authority (456,908) (475,090) 

Social Security Administration (350,329) (334,083) 

Department of Health and Human Services (273,372) (269,073) 

Department of Commerce (227,990) (235,982) 

General Services Administration (132,802) (132,195) 

Department of Energy (94,065) (93,350) 

Department of State (73,829) (78,941) 

Department of Housing and Urban Development (75,577) (75,875) 

National Aeronautics and Space Administration (50,389) (51,078) 

Environmental Protection Agency (46,905) (44,832) 

Small Business Administration (31,591) (30,630) 

Agency for International Development (23,582) (22,175) 

Office of Personnel Management (23,291) (21,712) 

Department of Education (16,231) (16,641) 

Nuclear Regulatory Commission (7,224) (7,245) 

National Science Foundation (1,366) (1,272) 

Other (647,415) (687,671) 

 (32,582,139) (29,610,540) 

$ 1,732,024 1,677,985 $ 

Projected liability of the Department of Labor for future FECA benefits

FECA benefits not chargeable to other Federal agencies payable by

 DOL's Federal Employees' Compensation Act Special Benefit Fund 1,398,153 $ 1,457,173 $ 

FECA benefits due to eligible workers of DOL and Job Corps enrollees 231,995 226,156 

FECA benefits due to eligible workers of the Panama Canal Commission 47,837 48,695 

$ 1,732,024 1,677,985 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

98     United States Department of Labor

NOTE 12 ‐ LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

Liabilities not covered by budgetary resources at September 30, 2012 and 2011 consisted of the following:

(Dollars in thousands) 2012 2011

Intra-governmental

Debt $ 38,997,340 $ 48,935,904

Accrued benefits - 220,682

Future workers' compensation benefits 984,053 1,269,098

Accrued annual leave 116,063 112,639

Other liabilities 67,085 122,973

 1,167,201 1,725,392

$ 50,661,296 40,164,541 $ 

NOTE 13 ‐ CONTINGENCIES

The Department is involved in various lawsuits incidental to its operations.    In the opinion of management, the

ultimate resolution of pending litigation will not have a material effect on the Department’s financial position.  

NOTE 14 ‐ PENSION EXPENSE  

Pension expense in FY 2012 consisted of the following:

Total

Employer Costs Imputed Pension

(Dollars in thousands) Contributions by OPM Expense

Civil Service Retirement System 14,925 $ 32,504 $ 47,429 $ 

Federal Employees' Retirement System 143,552 12,754 156,306 

Thrift Savings Plan 52,208 - 52,208 

$ 210,685 $ 255,943 45,258 $ 

Pension expense in FY 2011 consisted of the following:

Total

Employer Costs Imputed Pension

(Dollars in thousands) Contributions by OPM Expense

Civil Service Retirement System 17,695 $ 41,243 $ 58,938 $ 

Federal Employees' Retirement System 135,039 19,985 155,024 

Thrift Savings Plan 50,149 - 50,149 

$ 202,883 $ 264,111 61,228 $ 

 
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     99 

NOTE 15 ‐ PROGRAM COST

Schedules A and B present detailed cost and revenue information by major program and major program agency

(responsibility segment) in support of the summary information presented in the Consolidated Statement of Net

Cost for FY 2012 and FY 2011, respectively. Schedule C presents a further breakdown of this cost and revenue

information for DOL’s two largest program agencies, the Employment and Training Administration, and the Office

of Workers’ Compensation Programs. (See Note 1‐A.1)
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

100     United States Department of Labor

NOTE 15 ‐ PROGRAM COST ‐ Continued

             

A. Consolidating Statement of Net Cost by Major Program Agency

Net cost by major program agency for the year ended September 30, 2012 consisted of the following:

Employment Office of Office Occupational

and Training Workers' of Safety and Health

(Dollars in thousands) Administration Compensation Job Corps Administration

CROSSCUTTING PROGRAMS

 Income maintenance

Intra-governmental 1,364,953 $ $ 325,022 $ - $ - 

With the public 5,324,918 93,636,205 - 182 

 Gross cost 5,649,940 95,001,158 - 182 

Intra-governmental earned revenue (1,319,939) (3,018,284) - - 

Public earned revenue - (22) - - 

 Less earned revenue (1,319,939) (3,018,306) - - 

Net program cost 2,631,634 93,681,219 - 182 

 Employment and training

Intra-governmental 37,027 - 33,428 - 

With the public 4,644,930 - 1,735,523 - 

 Gross cost 4,681,957 - 1,768,951 - 

Intra-governmental earned revenue (10,323) - - - 

Public earned revenue (28) - - - 

 Less earned revenue (10,351) - - - 

Net program cost 4,671,606 - 1,768,951 - 

 Labor, employment and pension

 standards

Intra-governmental - - - - 

With the public - - - - 

 Gross cost - - - - 

Intra-governmental earned revenue - - - - 

Public earned revenue - - - - 

 Less earned revenue - - - - 

Net program cost - - - - 

 Worker safety and health

Intra-governmental - - 126,394 - 

With the public - - - 517,626 

 Gross cost - - - 644,020 

Intra-governmental earned revenue - - (1,363) - 

Public earned revenue - - - (1,225) 

 Less earned revenue - - - (2,588) 

Net program cost - - - 641,432 

OTHER PROGRAMS

 Statistics

Intra-governmental - - - - 

With the public - - - - 

 Gross cost - - - - 

Intra-governmental earned revenue - - - - 

Public earned revenue - - - - 

 Less earned revenue - - - - 

Net program cost - - - - 

COSTS NOT ASSIGNED TO PROGRAMS

 Gross cost - - - - 

 Less earned revenue not attributed to programs - - - - 

Net cost not assigned to programs - - - - 

Net cost of operations $ 2,631,634 98,352,825 $ $ 1,768,951 $ 641,614
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     101 

Bureau of Mine Safety Employee Benefits Veterans' Wage Other

Labor and Health Security Employment and Departmental

Statistics Administration Administration and Training Hour Division Programs Total

$ - $ 7,464 - $ $ - $ - $ 1,697,439 - $ 

 - - 22,601 - - 865 98,984,771 

 - - 30,065 - - 865 100,682,210 

 - (471) - - - (4,338,694) - 

 - - - - - - (22) 

 - - (471) - - - (4,338,716) 

 - - 29,594 - - 865 96,343,494 

 - - - 10,637 521 81,736 123 

 - - - 232,251 393 497 6,613,594 

 - - - 242,888 914 620 6,695,330 

 - - - (201) - (10,578) (54) 

 - - - - - - (28) 

 - - - (201) - (54) (10,606) 

 - - - 242,687 914 566 6,684,724 

 - 49,142 - 1,016 92,161 209,937 67,618 

 - - 137,011 37,856 275,465 190,928 641,260 

 - - 186,153 38,872 367,626 258,546 851,197 

 - (6,193) - (22) (632) (7,271) (424) 

 - - - - (2,788) - (2,788) 

 - - (6,193) (22) (3,420) (424) (10,059) 

 - - 179,960 38,850 364,206 258,122 841,138 

 123,645 - - - - 250,039 - 

 - 290,398 - - - 131 808,155 

 - 414,043 - - - 131 1,058,194 

 (417) - - - - (1,780) - 

 - (1,277) - - - - (2,502) 

 - (1,694) - - - - (4,282) 

 - 412,349 - - - 131 1,053,912 

 221,565 - - - - 221,565 - 

 461,002 - - - - 327 461,329 

 682,567 - - - - 327 682,894 

 (13,286) - - - - (13,286) - 

 - - - - - - - 

 (13,286) - - - - - (13,286) 

 669,281 - - - - 327 669,608 

 - - - - - 81,176 81,176 

 - - - - - (22,166) (22,166) 

 - - - - - 59,010 59,010 

$ 669,281 412,349 $ 209,554 $ 281,537 $ $ 365,120 $ 319,021 105,651,886 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

102     United States Department of Labor

NOTE 15 ‐ PROGRAM COST ‐ Continued

B. Consolidating Statement of Net Cost by Major Program Agency  

Net cost by major program agency for the year ended September 30, 2011 consisted of the following:

Employment Office of Workers Office Occupational

and Training Compensation of Safety and Health

(Dollars in thousands) Administration Programs Job Corps Administration

CROSSCUTTING PROGRAMS

 Income maintenance

Intra-governmental 1,615,853 $ 367,534 $ $ 11 - $ 

With the public 7,527,531 119,690,548 - 1,075 

 Gross cost 7,895,065 121,306,401 - 1,086 

Intra-governmental earned revenue (1,332,733) (3,000,544) - - 

Public earned revenue (1,074) (1,015) - - 

 Less earned revenue (1,333,807) (3,001,559) - - 

Net program cost 4,893,506 119,972,594 - 1,086 

 Employment and training

Intra-governmental 114,403 - 51,405 - 

With the public 5,616,821 - 1,666,657 - 

 Gross cost 5,731,224 - 1,718,062 - 

Intra-governmental earned revenue (11,921) - (860) - 

Public earned revenue (501) - (506) - 

 Less earned revenue (12,422) - (1,366) - 

Net program cost 5,718,802 - 1,716,696 - 

 Labor, employment and pension

 standards

Intra-governmental - - - - 

With the public - - - - 

 Gross cost - - - - 

Intra-governmental earned revenue - - - - 

Public earned revenue - - - - 

 Less earned revenue - - - - 

Net program cost - - - - 

 Worker safety and health

Intra-governmental - - 144,847 - 

With the public - - - 452,208 

 Gross cost - - - 597,055 

Intra-governmental earned revenue - - (1,411) - 

Public earned revenue - - - (720) 

 Less earned revenue - - - (2,131) 

Net program cost - - - 594,924 

OTHER PROGRAMS

 Statistics

Intra-governmental - - - - 

With the public - - - - 

 Gross cost - - - - 

Intra-governmental earned revenue - - - - 

Public earned revenue - - - - 

 Less earned revenue - - - - 

Net program cost - - - - 

COSTS NOT ASSIGNED TO PROGRAMS

 Gross cost - - - - 

 Less earned revenue not attributed to programs - - - - 

Net cost not assigned to programs - - - - 

Net cost of operations $ 125,691,396 4,893,506 $ 1,716,696 $ 596,010 $ 
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     103 

Bureau of Mine Safety Employee Benefits Veterans' Wage and Other

Labor and Health Security Employment Hour Departmental

Statistics Administration Administration and Training Division Programs Total

$ - $ 9,200 - $ $ - $ - $ 1,992,665 67 $ 

 - - 18,426 - - 3,423 127,241,003 

 - - 27,626 - - 3,490 129,233,668 

 - (388) - - - (4,333,665) - 

 - - (85) - - - (2,174) 

 - - (473) - - - (4,335,839) 

 - - 27,153 - - 3,490 124,897,829 

 - - - 14,712 1,211 181,934 203 

 - - - 192,752 140 425 7,476,795 

 - - - 207,464 1,351 628 7,658,729 

 - - - (33) - (12,859) (45) 

 - - - (38) - (10) (1,055) 

 - - - (71) - (55) (13,914) 

 - - - 207,393 1,351 573 7,644,815 

 - 53,146 - 1,599 101,328 257,602 101,529 

 - - 132,546 18,730 232,469 194,837 578,582 

 - - 185,692 20,329 333,797 296,366 836,184 

 - (5,817) - (4) (506) (6,875) (548) 

 - - (32) (2) (2,939) (96) (3,069) 

 - - (5,849) (6) (3,445) (644) (9,944) 

 - - 179,843 20,323 330,352 295,722 826,240 

 131,306 - - - - 276,153 - 

 - 267,885 - - - 116 720,209 

 - 399,191 - - - 116 996,362 

 (344) - - - - (1,755) - 

 - (1,553) - - - - (2,273) 

 - (1,897) - - - - (4,028) 

 - 397,294 - - - 116 992,334 

 225,032 - - - - 225,032 - 

 458,240 - - - - 290 458,530 

 683,272 - - - - 290 683,562 

 (10,580) - - - - (10,580) - 

 (740) - - - - - (740) 

 (11,320) - - - - - (11,320) 

 671,952 - - - - 290 672,242 

 - - - - - 60,472 60,472 

 - - - - - (22,774) (22,774) 

 - - - - - 37,698 37,698 

$ 671,952 397,294 $ 206,996 $ 227,716 $ 331,703 $ 337,889 $ 135,071,158 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

104     United States Department of Labor

NOTE 15 ‐ PROGRAM COST ‐ Continued

C. Consolidating Statement of Net Cost ‐ Employment and Training Administration, and Office of

Workers’ Compensation Programs

Net cost for the year ended September 30, 2012 consisted of the following:

Employment Office of Workers'

and Training Compensation

(Dollars in thousands) Administration Programs

CROSSCUTTING PROGRAMS

 Income maintenance

Benefits 87,343,914 $ $ 5,061,376

Grants 4,695,049 - 

Interest 1,249,025 227,761

Administrative and other 1,713,170 360,803

 Gross cost 95,001,158 5,649,940

Less earned revenue (1,319,939) (3,018,306)

Net program cost 93,681,219 2,631,634

 Employment and training

Grants 4,533,033 - 

Interest 6 - 

Administrative and other 148,918 - 

 Gross cost 4,681,957 - 

Less earned revenue (10,351) - 

Net program cost 4,671,606 - 

Net cost of operations $ 2,631,634 98,352,825 $ 

Net cost for the year ended September 30, 2011 consisted of the following:

   

Employment Office of Workers'

and Training Compensation

(Dollars in thousands) Administration Programs

CROSSCUTTING PROGRAMS

 Income maintenance

Benefits 112,595,374 $ $ 7,192,332

Grants 5,327,043 - 

Interest 1,431,079 226,708

Administrative and other 1,952,905 476,025

 Gross cost 121,306,401 7,895,065

Less earned revenue (1,333,807) (3,001,559)

Net program cost 119,972,594 4,893,506

 Employment and training

Grants 5,698,976 - 

Administrative and other 32,248 - 

 Gross cost 5,731,224 - 

Less earned revenue (12,422) - 

Net program cost 5,718,802 - 

Net cost of operations $ 4,893,506 125,691,396 $ 
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     105 

NOTE 16 ‐ NON‐EXCHANGE REVENUE

Non‐exchange revenues reported on the Consolidated Statement of Changes in Net Position in FY 2012 and FY 2011

consisted of the following:

(Dollars in thousands) 2012 2011

Employer taxes

Unemployment Trust Fund

Federal unemployment taxes 7,058,220 $ 6,791,564 $ 

State unemployment taxes 45,264,659 55,974,102 

 52,056,223 63,032,322 

Black Lung Disability Trust Fund excise taxes 622,881 620,992 

 52,679,104 63,653,314 

Interest

Unemployment Trust Fund 1,884,900 1,586,401 

Other 4,553 2,996 

 1,887,896 1,590,954 

Reimbursement of unemployment benefits from state and local governments and

 non-profit organizations to the Unemployment Trust Fund 4,013,921 3,448,571 

$ 58,580,921 68,692,839 $ 

NOTE 17 ‐ TRANSFERS WITHOUT REIMBURSEMENT

Transfers from (to) other Federal agencies in FY 2012 and FY 2011 consisted of the following:

(Dollars in thousands) 2012 2011

Budgetary financing sources

From H-1B Nonimmigrant Petitioner Account, Department of Homeland Security 224,851 $ 204,987 $ 

From DOL general fund unexpended appropriation

 accounts to the DOL Working Capital Fund 6,000 - 

From DOL Working Capital Fund to the General Fund of the U.S. Treasury (3,900) - 

 207,087 224,851 

Other financing sources

From General Services Administration 2,075 966 

$ 225,817 209,162 $ 

The balance of $224.9 and $207.1 million in budgetary financing sources for FY 2012 and FY 2011 reflect the

elimination of intra‐DOL transfers of $35.8 and $45.5 billion, respectively.
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

106     United States Department of Labor

NOTE 18 ‐ STATUS OF BUDGETARY RESOURCES

    

A. Apportionment Categories of Obligations Incurred

Obligations incurred reported on the Combined Statement of Budgetary Resources in FY 2012 and FY 2011 consisted

of the following:

(Dollars in thousands) 2012 2011

Direct obligations

Category A $ 4,737,614 $ 4,812,366

Category B 51,645,520 62,910,921

Exempt from apportionment 96,500,468 121,232,769

Total direct obligations 152,883,602 188,956,056

Reimbursable obligations

Category A 261,825 264,788

Category B 3,138,940 2,714,259

Total reimbursable obligations 3,400,765 2,979,047

$ 191,935,103 156,284,367 $ 

B. Permanent Indefinite Appropriations

DOL’s permanent indefinite appropriations include all trust funds, the Federal Additional Unemployment

Compensation Fund, the Panama Canal Commission Compensation Fund, the Energy Employees Occupational

Illness Compensation Fund, ETA and WHD H‐1B funds, ETA’s Advances and Payments to the Unemployment Trust

Funds, and portions of State Unemployment Insurance and Employment Service Operations and Federal

Unemployment Benefits and Allowances.  These funds are described in Note 1‐A.3.  At September 30, 2012 and

2011, the Department returned unobligated, indefinite authority to Treasury in the amount of $10.0 and $9.3

billion, respectively.  

C. Legal Arrangements Affecting Use of Unobligated Balances

Unemployment Trust Fund receipts are reported as budget authority in the Combined Statement of Budgetary

Resources.  The portion of UTF receipts collected in the current year in excess of amounts needed to pay benefits

and other valid obligations are precluded by law from being available for obligation.    Therefore, these excess

receipts are not classified as budgetary resources in the Combined Statement of Budgetary Resources.  Current year

excess receipts are reported as temporarily not available pursuant to Public Law.    Conversely, when obligations

exceed receipts in the current year, amounts are drawn from unavailable collections to meet these obligations.  

Cumulative excess receipts are not included in unobligated balances in the status of budgetary resources included in

that Statement.  All excess receipts are reported as assets of the UTF and are included in the Consolidated Balance

Sheet.  They will become available for obligation as needed in the future.   

The cumulative amounts of excess UTF receipts are denoted as unavailable collections in the Budget of the United

States Government.  The cumulative amount of these excess receipts at September 30, 2012 and 2011 reclassified

from unobligated balances to UTF unavailable collections is presented on the following page.
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     107 

NOTE 18 ‐ STATUS OF BUDGETARY RESOURCES ‐ Continued

C. Legal Arrangements Affecting Use of Unobligated Balances ‐ Continued

(Dollars in millions) 2012 2011

Unemployment Trust Fund unavailable collections, beginning $ 10,963 9,736 $ 

Budget authority from current year appropriations and borrowing authority 100,275 118,505 

Less obligations (119,732) (95,103) 

Excess (deficiency) of budget authority over obligations 5,172 (1,227) 

Unemployment Trust Fund unavailable collections, ending $ 9,736 14,908 $ 

D. Explanation of Differences between the Combined Statement of Budgetary Resources and the Budget

of the United States Government

The Budget of the United States Government with actual amounts for the year ended September 30, 2012, has not

been published as of the issue date of these financial statements.    This document will be available in February

2013.

A reconciliation of budgetary resources, obligations incurred, distributed offsetting receipts, and net outlays, as

presented in the Combined Statement of Budgetary Resources, to amounts included in the Budget of the United

States Government for the year ended September 30, 2011, is shown below.  

Distributed

Budgetary Obligations Offsetting Net

(Dollars in millions) Resources Incurred Receipts Outlays

Combined Statement of Budgetary Resources $ 195,311 $ 191,935 $ 132,969 53,120 $ 

Pension Benefit Guaranty Corporation reported separately 21,191 5,879 - (1,166)

Distributed offsetting receipts - - - 53,120

Expired accounts (1,478) (139) - -

Fiduciary funds (included in the budget but not in the SBR) 201 138 - 139

Other 22 (32) - 32

Budget of the United States Government $ 215,247 $ 197,781 $ 185,094 53,120 $ 

E. Undelivered Orders

Undelivered orders at September 30, 2012 and 2011 were as follows.

(Dollars in thousands) 2012 2011

Undelivered orders $ 11,164,367 11,390,942 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

108     United States Department of Labor

NOTE 18 ‐ STATUS OF BUDGETARY RESOURCES ‐ Continued

F. Appropriations Received

The Combined Statement of Budgetary Resources includes appropriations of $136,220 and $160,846 million for FY

2012 and FY 2011, respectively.  The Consolidated Statement of Changes in Net Position includes appropriations

received of $62,229 and $67,406 million for FY 2012 and FY 2011, respectively.    Detail of these differences is

presented below. 

(Dollars in millions) 2012 2011

Receipts recognized as revenue in current or prior years

Unemployment Trust Fund $ 104,944 $ 111,069

Black Lung Disability Trust Fund 612 598 

Other earmarked funds 203 223 

Repayment of debt from appropriated receipts

Unemployment Trust Fund (22,005) (13,238) 

Black Lung Disability Trust Fund (502) (461) 

Return of permanent indefinite authority (4,583) (9,247) 

Other (162) (20) 

$ 93,440 73,991 $ 

G.  Borrowing Authority

As of September 30, 2012 and 2011, P.L. 112‐74 (125 Stat. 1056 dated December 23, 2011) and P.L. 111‐117 (123

Stat. 3230 dated December 16, 2009), respectively, granted borrowing authority for repayable advances and other

debt in the amount of “such sums as may be necessary” to (1) the UTF for advances as authorized by sections

905(d) and 1203 of the Social Security Act and (2) the BLDTF for advances as authorized by section 9501(c)(1) of the

Internal Revenue Code.    Although section 9501 of the Internal Revenue Code P.L. 112‐74 uses the terminology

"advance," the Treasury has interpreted this to mean any debt owed by the BLDTF to the Bureau of the Public Debt.
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     109 

NOTE 19 ‐ RECONCILIATION OF BUDGETARY RESOURCES OBLIGATED TO NET COST OF OPERATIONS  

(Dollars in thousands) 2012 2011 

Resources used to finance activities

Budgetary resources obligated

Obligations incurred $ 191,935,103 156,284,367 $ 

Recoveries of prior year obligations (436,261) (369,860) 

Less spending authority from offsetting collections (8,128,492) (8,460,059) 

Obligations, net of offsetting collections and recoveries 147,454,448 183,370,350 

Other resources

Imputed financing from costs absorbed by others 125,142 158,036 

Transfers, net 2,075 966 

Exchange revenue not in budget (1,556,689) (1,346,690) 

Total resources used to finance activities 181,973,772 146,233,866 

Resources used to finance items not part of the net cost of operations

Change in budgetary resources obligated for goods, services and

 benefits ordered but not yet received or provided (237,196) 816,928 

Resources that finance the acquisition of assets (141,648) (124,884) 

Transfers that do not effect the net cost of operations (50,510,629) (40,693,007) 

Total resources used to finance items not part of the net cost of operations (49,818,585) (41,071,851) 

Total resources used to finance the net cost of operations 132,155,187 105,162,015 

Components of the net cost of operations that will not require or generate

 resources in the current period

 Components requiring or generating resources in other periods

Increase in annual leave liability 154 5,057 

Increase in benefits liabilities 2,654,189 431,371 

Other 226,537 67,513 

Total 2,880,880 503,941 

Components not requiring or generating resources

Depreciation and amortization 67,188 76,507 

Revaluation of assets and liabilities 1,630,224 1,461,338 

Benefit overpayments (1,662,321) (1,551,915) 

Total 35,091 (14,070) 

Total components of the net cost of operations that will not

 require or generate resources in the current period 2,915,971 489,871 

Net cost of operations $ 135,071,158 105,651,886 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

110     United States Department of Labor

NOTE 20 ‐ CUSTODIAL REVENUE

Custodial revenues in FY 2012 consisted of the following:

Net Cash Increase

Collections (Decrease) in

and Transfers to Amounts to

U.S. Treasury be Collected Total

(Dollars in thousands) General Fund and Transferred Revenues

Civil monetary penalties

OSHA 128,446 $ $ 131,397 2,951 $ 

MSHA 133,434 137,798 4,364 

EBSA 20,459 18,890 (1,569) 

WHD 9,838 3,357 13,195 

 292,177 301,280 9,103 

ETA disallowed grant costs and other 1,208 1,176 (32) 

$ 293,385 9,071 $ 302,456 $ 

Custodial revenues in FY 2011 consisted of the following:

Net Cash Increase

Collections (Decrease) in

and Transfers to Amounts to

U.S. Treasury be Collected Total

(Dollars in thousands) General Fund and Transferred Revenues

Civil monetary penalties

OSHA 151,167 $ $ 114,457 (36,710) $ 

MSHA 100,111 106,721 6,610 

EBSA 20,708 22,509 1,801 

WHD 11,578 12,418 840 

 283,564 256,105 (27,459) 

ETA disallowed grant costs and other 7,607 7,802 195 

$ 291,171 (27,264) $ 263,907 $ 
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     111 

NOTE 21 ‐ EARMARKED FUNDS

DOL is responsible for the operation of certain earmarked funds.    Other earmarked funds include Gifts and

Bequests, Panama Canal Commission Compensation Fund, and H‐1B Funds.  The financial position of the earmarked

funds as of September 30, 2012 is shown below.

Black Lung

(Dollars in thousands) Unemployment Disability Other Total

Assets

Intra-governmental

Funds with U.S. Treasury (354,700) $ $ 88,805 $ 342,326 608,221 $ 

Investments 20,782,553 - 20,840,571 58,018 

Accounts receivable, net

Due from other Federal agencies

 for UCX and UCFE benefits 578,111 - 578,111 - 

Other - - 908 908 

Total intra-governmental 21,005,964 88,805 21,761,916 667,147 

Accounts receivable, net

State unemployment tax 537,759 - 537,759 - 

Due from reimbursable employers 948,169 - 948,169 - 

Benefit overpayments 646,232 13,693 659,925 - 

Other - - 4 4

Advances 1,339,191 - 1,339,191 - 

Other - - 930 930 

Total assets $ 102,498 24,477,315 $ 668,081 $ 25,247,894 $ 

Liabilities

Intra-governmental

Accounts payable to DOL agencies 2,288,912 $ $ - $ 2,289,028 116 $ 

Debt 32,931,755 6,065,585 38,997,340 - 

Amounts held for the Railroad

 Retirement Board 171,042 - 171,042 - 

Other - 1 7,263 7,264 

Total intra-governmental 35,391,709 6,065,586 41,464,674 7,379 

Accounts payable - 4 317 313 

Future workers' compensation benefits - - 47,837 47,837 

Accrued benefits 2,043,408 14,527 2,057,935 - 

Other liabilities - - 10,202 10,202 

Total liabilities 37,435,117 6,080,117 43,580,965 65,731 

Net position

Cumulative results of operations (12,957,802) (5,977,619) (18,333,071) 602,350 

Total liabilities and net position $ 102,498 24,477,315 $ 668,081 $ 25,247,894 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

112     United States Department of Labor

NOTE 21 ‐ EARMARKED FUNDS ‐ Continued

The net results of operations of the earmarked funds for the year ended September 30, 2012 are shown below.

Black Lung

(Dollars in thousands) Unemployment Disability Other Total

Cost, net of earned revenues

Benefits (87,271,399) $ $ (207,971) $ (87,479,370) - $ 

Grants - - (31,339) (31,339) 

Interest (1,249,022) (227,743) (1,476,765) - 

Administrative and other (1,572,126) (5,507) (1,648,211) (70,578) 

 (90,092,547) (441,221) (90,635,685) (101,917) 

Earned revenue 1,297,568 29 1,297,597 - 

Net cost of operations (88,794,979) (441,192) (89,338,088) (101,917) 

Net financing sources

Taxes 63,032,322 620,992 63,653,314 - 

Interest 1,586,401 291 1,586,958 266 

Reimbursement of unemployment benefits 3,457,681 - 3,457,681 - 

Imputed financing - - 3,462 3,462 

Transfers-in

Department of Homeland Security - - 222,731 222,731 

DOL entities 40,695,126 14,643 40,709,769 - 

Transfers-out

DOL entities (5,089,281) (73,092) (5,162,373) - 

Other financing sources - - - - 

 103,682,249 562,834 104,471,542 226,459 

Net results of operations 14,887,270 121,642 15,133,454 124,542 

Net position, beginning of period (27,845,072) (6,099,261) (33,466,525) 477,808 

Net position, end of period $ (5,977,619) (12,957,802) $ 602,350 $ (18,333,071) $ 
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     113 

NOTE 21 ‐ EARMARKED FUNDS ‐ Continued

The financial position of the earmarked funds as of September 30, 2011 is shown below.

Black Lung

(Dollars in thousands) Unemployment Disability Other Total

Assets

Intra-governmental

Funds with U.S. Treasury $ - $ 50,019 $ 521,813 471,794 $ 

Investments 16,150,638 - 16,213,789 63,151 

Accounts receivable, net

Due from other Federal agencies

 for UCX and UCFE benefits 666,272 - - 666,272 

Other - - 1,619 1,619 

Total intra-governmental 16,816,910 50,019 17,403,493 536,564 

Accounts receivable, net

State unemployment tax 335,188 - 335,188 - 

Due from reimbursable employers 1,100,195 - 1,100,195 - 

Benefit overpayments 552,225 13,795 566,020 - 

Other - - 7 7 

Advances 1,366,403 - 1,366,404 1 

Other - - 822 822 

Total assets $ 20,170,921 $ 63,814 $ 20,772,129 537,394 $ 

Liabilities

Intra-governmental

Accounts payable to DOL agencies 2,020,603 $ $ - $ 2,020,742 139 $ 

Debt 42,772,829 6,163,075 48,935,904 - 

Amounts held for the Railroad

 Retirement Board 54,995 - 54,995 - 

Other - - 7,169 7,169 

Total intra-governmental 44,848,427 6,163,075 51,018,810 7,308 

Accounts payable 5,508 - 8,319 2,811 

Future workers' compensation benefits - - 48,695 48,695 

Accrued benefits 3,162,058 - - 3,162,058 

Other liabilities - - 772 772 

Total liabilities 48,015,993 6,163,075 59,586 54,238,654 

Net position

Cumulative results of operations (27,845,072) (6,099,261) (33,466,525) 477,808 

Total liabilities and net position $ 20,170,921 $ 63,814 $ 20,772,129 537,394 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

114     United States Department of Labor

NOTE 21 ‐ EARMARKED FUNDS ‐ Continued

The net results of operations of the earmarked funds for the year ended September 30, 2011 is shown below.

Black Lung

(Dollars in thousands) Unemployment Disability Other Total

Cost, net of earned revenues

Benefits (111,241,172) $ (201,219) $ (10,650) $ (111,453,041) $ 

Grants - - (23,304) (23,304) 

Interest (1,431,065) (226,646) (1) (1,657,712) 

Administrative and other (2,002,696) (1,493) (47,660) (2,051,849) 

 (429,358) (114,674,933) (81,615) (115,185,906) 

Earned revenue 78 1,331,620 - 1,331,698 

Net cost of operations (429,280) (113,343,313) (81,615) (113,854,208) 

Net financing sources

Taxes 52,056,223 622,881 - 52,679,104 

Interest 1,884,900 1,227 367 1,886,494 

Reimbursement of unemployment benefits 4,035,503 - - 4,035,503 

Imputed financing - - 4,787 4,787 

Transfers-in

Department of Homeland Security - - 201,564 201,564 

DOL entities 50,444,186 - - 50,444,186 

Transfers-out

DOL entities (5,046,345) (58,427) - (5,104,772) 

Other financing sources 2,950 - - 2,950 

 568,631 103,374,467 206,718 104,149,816 

Net results of operations (9,968,846) 139,351 125,103 (9,704,392) 

Net position, beginning of period (6,238,612) (17,876,226) 352,705 (23,762,133) 

Net position, end of period $ (6,099,261) (27,845,072) $ 477,808 $ (33,466,525) $ 
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     115 

NOTE 22 ‐ FIDUCIARY ACTIVITY

The Department has one deposit fund and two trust funds that fall under the definition of fiduciary activity

promulgated by SFFAS No. 31, "Accounting for Fiduciary Activities”.   The schedule of fiduciary activity for these

funds for the year ended September 30, 2012 is shown below.

Longshore District of

Wage and Hour and Harbor Columbia

and Public Workers' Workmen's

Contracts Compensation Compensation Total

Restitution Act Trust Act Trust Fiduciary

(Dollars in thousands) Fund Fund Fund Funds

Fiduciary activity

Assessments 58,013 $ $ 124,874 $ 190,821 7,934 $ 

Investment earnings - 19 20 1 

Administrative and other expenses - (46) (46) - 

Transfer of funds to Treasury (5,271) (2,120) (7,391) - 

Disbursements to beneficiaries (35,055) (124,268) (168,121) (8,798) 

Increase (decrease) in fiduciary net assets 17,687 (1,541) 15,283 (863) 

Fiduciary net assets, beginning of year 101,607 21,513 1,969 125,089 

Fiduciary net assets, end of year $ 119,294 19,972 $ 1,106 $ 140,372 $ 

The schedule of fiduciary net assets for these funds as of September 30, 2012 is shown below.

Longshore District of

Wage and Hour and Harbor Columbia

and Public Workers' Workmen's

Contracts Compensation Compensation Total

Restitution Act Trust Act Trust Fiduciary

(Dollars in thousands) Fund Fund Fund Funds

Fiduciary assets

Cash 138,736 $ $ 9 $ 138,746 1 $ 

Investments - 55,656 58,570 2,914 

Other assets - 2,558 2,844 286 

Less: liabilities (19,442) (38,251) (59,788) (2,095) 

Total fiduciary net assets $ 19,972 119,294 $ 1,106 $ 140,372 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

116     United States Department of Labor

NOTE 22 ‐ FIDUCIARY ACTIVITY ‐ Continued

The schedule of fiduciary activity for the fiduciary funds for the year ended September 30, 2011 is shown below.

Longshore District of

Wage and Hour and Harbor Columbia

and Public Workers' Workmen's

Contracts Compensation Compensation Total

Restitution Act Trust Act Trust Fiduciary

(Dollars in thousands) Fund Fund Fund Funds

Fiduciary activity

Assessments 9,376 $ 126,877 $ 5,371 $ 141,624 $ 

Investment earnings - 25 2 27 

Administrative and other expenses - (1,744) - (1,744) 

Transfer of funds to Treasury - (2,118) - (2,118) 

Disbursements to beneficiaries (99) (126,737) (9,095) (135,931) 

Increase (decrease) in fiduciary net assets 9,277 (3,697) (3,722) 1,858 

Fiduciary net assets, beginning of year 92,330 25,210 5,691 123,231 

Fiduciary net assets, end of year $ 101,607 $ 21,513 $ 125,089 1,969 $ 

The schedule of fiduciary net assets for these funds as of September 30, 2011 is shown below.

Longshore District of

Wage and Hour and Harbor Columbia

and Public Workers' Workmen's

Contracts Compensation Compensation Total

Restitution Act Trust Act Trust Fiduciary

(Dollars in thousands) Fund Fund Fund Funds

Fiduciary assets

Cash $ 110,473 $ 5 $ 110,478 - $ 

Investments - 58,170 62,212 4,042 

Other assets - 1,763 1,892 129 

Less: liabilities (8,866) (38,425) (49,493) (2,202) 

Total fiduciary net assets $ 21,513 101,607 $ 1,969 $ 125,089 $ 

Unqualified opinions were expressed on separate financial statements issued for the Longshore and Harbor

Workers’ Compensation Act Trust Fund and the District of Columbia Workmen’s Compensation Act Trust Fund for FY

2011.  These separate financial statements were presented in accordance with U.S. GAAP.  Copies of these financial

statements are available on DOL’s website at www.oig.dol.gov.
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2012 and 2011

FY 2012 Agency Financial Report     117 

NOTE 23 ‐ MATERIAL CONCENTRATION OF RISK

The Division of Federal Employees' Compensation within the Office of Workers’ Compensation Programs (OWCP)

administers the Federal Employees' Compensation Act (FECA) program and the payment of workers' compensation

benefits to federal and postal workers for employment‐related injuries and occupational diseases. Federal agencies

and the U.S. Postal Service (USPS) reimburse the FECA Special Benefits Fund for payments made on behalf of their

workers. In Note 11, Future Workers’ Compensation Benefits, the USPS liability as of September 30, 2012, of $14.4

billion represents the largest portion of the total projected gross liability of the Federal government for future FECA

benefits attributed to other agencies of $32.6 billion as of September 30, 2012.  In October 2012, the USPS timely

reimbursed the FECA Special Benefits Fund for costs incurred on their behalf during the 12 months ended June 30,

2012.

In the USPS FY 2012 quarterly report for the nine months ended June 30, 2012, USPS disclosed in the notes to their

unaudited interim financial statements their severe lack of liquidity.  USPS reported net losses of $11.6 billion for

the nine months ended June 30, 2012 and reported on their balance sheet as of June 30, 2012, that their largest

noncurrent liability was $ 14.8 billion for the long‐term portion of workers’ compensation costs (out of $24.0 billion

total noncurrent liabilities). USPS reported annual losses of $5.1 billion, $8.5 billion, and $3.8 billion for the fiscal

years ended September 30, 2011, 2010, and 2009, respectively.

The size of the USPS FECA liability and its share of the total FECA liability as of September 30, 2012 (as reported in

Note 11), together with the USPS’ poor financial condition, represent a material concentration of risk for DOL.  

NOTE 24 ‐ SUBSEQUENT EVENTS

The financial statements, notes, and required supplementary information do not reflect the effects of the

subsequent event described below.

Unemployment Insurance

Subsequent to September 30, 2012, the Extended Unemployment Compensation Account (EUCA) of the

Unemployment Trust Fund (UTF) borrowed, as Advances from U.S. Treasury, $200.0 million at an interest rate of

2.5%.  During the same period, the Federal Unemployment Account (FUA) of the UTF borrowed, as Advances from

U.S. Treasury, $400.0 million at an interest rate of 2.5%.
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Required Supplementary Stewardship Information  
Financial Section

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION

(Unaudited)

120     United States Department of Labor

STEWARDSHIP INVESTMENTS IN HUMAN CAPITAL

Stewardship investments are made by DOL on behalf of the nation, providing long‐term benefits that cannot

be measured in traditional financial reports.    These investments are made for the general public, and are

intended to maintain or increase national economic productive capacity.  DOL’s stewardship investments are in

human capital, reported as employment and training expenses in DOL’s net cost of operations.    Within DOL, the

Employment and Training Administration (ETA), including the Office of Job Corps (OJC), and the Veterans’

Employment and Training Service (VETS) administertraining programsthat investin human capital.

Employment and Training Administration, Including the Office of Job Corps

ETA, including the Office of Job Corps, incurred total net costs of $100.1 billion in FY 2012.  The majority of these

costs consisted of unemployment benefits, which totaled $87.3 billion in FY 2012, a decrease of $23.9 billion

(21.5%) over the previous fiscal year.  Also included in ETA’s total net costs were investments in human capital

of $6.4 billion, which provided services to over 9.7 million participants in FY 2012.  These investments were

made through job training programs authorized by the Workforce Investment Act of 1998 (WIA), Title V of the

Older Americans Act, as amended, the Trade Act of 1974, as amended, the Health Care and Education

Reconciliation Act of 2010, the National Apprenticeship Act of 1937, the American Recovery and Reinvestment

Act of 2009 and other legislation.

Included within ETA, the OJC invests in human capital through WIA’s Job Corps training program.   OJC’s

investment in human capital in FY 2012 was $1.8 billion, providing services to 55.0 thousand participants in

primarily residential settings at 125 Job Corps centers.    The ETA and OJC job training programs authorized by WIA

are discussed below.

Adult, Dislocated Worker, Youth, and Job Corps Programs

Authorized by the Workforce Investment Act (WIA) of 1998

 Adult employment and training programs – ETA awards grants to states to design and operate training

and employment assistance programs for disadvantaged adults, including public assistance recipients.  

ETA’s FY 2012 investmentin human capital through WIA adult programs was $861 million.

 Dislocated worker employment and training programs – ETA awards grants to states to provide

reemployment services and retraining assistance to individuals dislocated from their employment.  ETA’s

FY 2012 investment in human capital through WIA dislocated worker programs was $1,524 million.

 Youth programs – ETA awards grants to states to support a wide range of program activities and

services to prepare low‐income youth for academic and employment success, including summer jobs, by

linking academic and occupational learning with youth development activities.   ETA’s FY 2012 investment

in human capital through WIA youth programswas $944 million.

 Job Corps program – ETA’s Office of Job Corps awards contracts to support a system of primarily

residential centers offering basic academic education, career technical training, work experience and

other support, to economically disadvantaged youth.    Large and small corporations and non‐profit

organizations manage and operate 97 Job Corps centers under these contractual arrangements.    The

remaining 28 centers are operated through interagency agreements between DOL and the U.S.

Department of Agriculture.    In addition, 24 operators are contracted to provide outreach and
Annual Financial Statements

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION

(Unaudited)

FY 2012 Agency Financial Report     121 

admissions and career transition services.    OJC’s FY 2012 investment in human capital through the Job

Corps programwas $1,770 million.

 Reintegration of Ex‐Offenders programs – ETA supports programs to help individuals exiting prison

make a successful transition to community life and long‐term employment through the provision of

mentoring and job training programs to promote the successful return of adult and juvenile ex‐offenders

into mainstream society. ETA’s FY 2012 investmentin human capital through ex‐offender programs was $76

million.

 National programs – ETA’s National programs provide evaluation resources and program support for

WIA activities including nationally administered programs providing employment and training services

to segments of the population that have special disadvantagesin the labor market, which include grants to

federally recognized Indian tribes and other Native American governments or non‐profit organizations, and

to Migrant and Seasonal Farmworker service organizations.  ETA’s FY 2012 human capital investment in

WIA National Programs was $180 million.

Community Service Employment for Older Americans(CSEOA) Program

ETA also invests in human capital through the Community Service Employment for Older Americans

program, authorized under Title V of the Older Americans Act, as amended in 2006.  Known as the Senior

Community Service Employment Program (SCSEP), the SCSEP is a federally sponsored community service

employment and training program that provides part‐time training through on‐the‐job work experience in

community service activities for unemployed, low‐income individuals age 55 and older, so that they can

prepare to enter or re‐enter the workforce.    ETA’s FY 2012 investment in human capital through the

CSEOA’s SCSEP was $492 million.

Trade Adjustment Assistance (TAA) Programs

 Trade Adjustment Assistance for Workers Program – The TAA for Workers program was authorized

by the Trade Act of 1974, as amended and reauthorized with expanded eligibility to service sector

workers by the Trade and Globalization Adjustment Assistance Act of 2009.  This expanded eligibility

was extended through December 31, 2013, by the Trade Adjustment Assistance Extension Act of 2011.  The

TAA for Workers program provides cash benefits; job search and relocation allowances; employment

services; and training to eligible workers displaced by international trade.    Only TAA training costs are

considered investmentsin human capital.

 Trade Adjustment Assistance Community College and Career Training (TAACCCT) Grant Fund –

Implemented in cooperation with the Department of Education, the TAACCCT program provides grants

to eligible institutions of higher learning to improve education and employment outcomes for students.  

Authorized by the Trade Act of 1974 and Health Care and Education Reconciliation Act of 2010, the

program enables educational institutions to prepare students to succeed in growing occupations by

acquiring the skills necessary for high‐wage, in‐demand jobs.

ETA’s FY 2012 human capital investment in the trade adjustment assistance programs was $431 million.

National Apprenticeship Program

The National Apprenticeship Act of 1937 established the foundation for development of the nation’s skilled

workforce through apprenticeship programs, which combine on‐the‐job learning with related technical

instruction to teach workers the theoretical aspects of skilled occupations.    Funding provides oversight for a
Financial Section

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION

(Unaudited)

122     United States Department of Labor    

national system of skilled and technical occupational training, which promotes apprentices, registers

apprenticeship programs, certifies apprenticeship standards, and safeguards the welfare of apprentices.  ETA’s

FY 2012 investment in apprenticeship programs was $29 million.

Program Costs and Outputs

The cost of ETA and OJC investmentsin human capital and the participantsserved are shown in the chart

below, for the five year period FY 2008 through FY 2012.

ETA and OJC Investmentsin Human Capital

Program Costs(in Millions) and Participants Served (1) (in Thousands)

For The Five Year Period FY 2008 through FY 2012

2012 2011 2010 2009 2008

Program Costs

Part.

Served Costs

Part.

Served Costs

Part.

Served Costs

Part.

Served Costs

Part.

Served

WIA

Adult $861 6,979.1 $960 7,025.2 $899 6,695.3 $878 4,921.8 $844 2,828.7

Dislocated

Worker (2) 1,524 1,358.4 2,039 1,570.6 2,539 1,250.4 1,440 842.1 1,307 401.3

Youth 944 239.6 1,124 245.0 1,431 316.3 1,125 438.9 966 250.7

Job Corps 1,770 55.0 1,717 56.2 1,663 59.8 1,640 60.9 1,589 63.4

Ex‐

Offenders (3) 76 49.1 67 39.0 70 36.1 58 9.8 61 14.2

National

Programs (4) 180 38.7 150 38.9 134 61.3 206 35.0 206 44.7

CSEOA

SCSEP 492 76.9 707 105.9 740 103.6 543 89.0 479 89.6

TAA

TAA for

Workers 431 144.7 506 193.1 540 232.7 286 105.0 248 82.1

Apprenticeship 29 410.0 32 432.2 28 485.4 25 301.6 25 385.7

Other (5) 95 357.7 135 104.9 139 95.8 120 N/A 108 N/A

TOTAL $6,402 9,709.2 $7,437 9,811.0 $8,183 9,336.7 $6,321 6,804.1 $5,833 4,160.4

(1) Participant numbers are from grantee reports submitted for the Program Year ending on June 30 of the corresponding fiscal

year.  In general, participants served increased in FY 2009 ‐ FY 2011 as a result of greater demand for services due to the

economic downturn and the increased availability of services and resources under American Recovery and Reinvestment Act.

(2)   Dislocated Worker programs include Community Based Job Training Grants, National Emergency Grants and High Growth and

Emerging Industry training.   

(3)   Prisoner Re‐entry and Youthful Offender programs were phased out in FY 2008.

(4)   National programs include the Native American and Migrant and Seasonal Farmworker programs.

(5)   Other includes training programs for highly skilled occupations funded through H1‐B fees, green jobs initiatives, and costs for lapsed

programs.
Annual Financial Statements

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION

(Unaudited)

FY 2012 Agency Financial Report     123 

Program Outcomes

Outcomes for training programs comprising ETA’s investment in human capital are presented in the

Department’s Annual Performance Report for FY 2012, available on the DOL website at

www.dol.gov/_sec/media/reports/ in February 2013.

Veterans’ Employment and Training Service

The mission of the Veterans’ Employment and Training Service (VETS) is to provide veterans and transitioning

service members with the resources and services to succeed in the 21st century workforce, maximizing employment

opportunities, protecting employment rights, and meeting labor market demands with qualified veterans.

Program Activities 

Jobs for Veterans State Grants (JVSG)

The Jobs for Veterans Act (JVA) of 2002, which allocates resources to the States through the JVSG program (38

U.S.C. 4102A(b)(5)), supports the majority of VETS activities through three major VETS programs:

 Disabled Veterans’ Outreach Program (DVOP) Specialists – The DVOP Specialists (as required by 38 U.S.C.

4103A), provide intensive services to meet the employment needs of veterans, including counseling,

assessment, lifelong learning skills and referral to training, particularly to veterans with disabilities or those

who recently separated from the military.

 Local Veterans’ Employment Representatives (LVER) Staff – The LVER staff (as required by 38 U.S.C. 4104)

conducts employer outreach on behalf of veterans, allowing States to develop marketing strategies and

outreach activities that promote the hiring of veterans.    The staff also provides individualized job

development services for veterans, especially veterans determined to be job‐ready after receipt of

intensive services from a DVOP specialist.

Transition Assistance Program (TAP)   

The TAP (established by 10 U.S.C. 1144) operates as a partnership between the Departments of Labor, Defense,

Homeland Security and Veterans Affairs.  The program provides separating service members and their spouses or

individuals retiring from military service with career counseling and training.    TAP workshops are provided

throughout the United States and overseas. 

Federal Management (VETS)

Federal management activities provide programs and policies to meet the employment and training needs of

veterans.  The majority of resources are devoted to Uniformed Services Employment and Reemployment Rights Act

(USERRA) of 1994, codified at 38 U.S.C. Chapter 43, and Veterans’ Preference Rights (5 U.S.C. 2108, 3309)

compliance and outreach.  Activities, as discussed below:

 Uniformed Services Employment and Reemployment Rights Act and Veterans’ Preference Rights –

USERRA protects civilian job rights and benefits for veterans, members of the National Guard and Reserves.

Veterans Preference for Federal Employment is codified in 5 U.S.C. 2108 and 3309.    VETS promotes a

productive relationship between employer and employee by educating both on the employment rights of

the individual veterans.
Financial Section

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION

(Unaudited)

124     United States Department of Labor    

Homeless Veterans and Veterans’ Workforce Investment Programs

 Homeless Veterans Reintegration Program (HVRP) – The HVRP, codified at 38 U.S.C. 2021, provides

employment assistance to homeless veterans through competitive grants to States or other entities in both

urban and rural areas to operate employment programs to reach out to homeless veterans and help them

become employed.

 Veterans’ Workforce Investment Program (VWIP) – The VWIP, (29 U.S.C. 2913), provides competitive

grants for training and retraining of veterans to create highly skilled employment opportunities for targeted

veterans.

Program Costs and Outputs

The full cost of VETS programs is presented in the Consolidated Statement of Net Cost.  The costs of VETS

investments in human capital, and the participants served by this investment, are presented below, by major

program.

VETS Investments in Human Capital

Program Costs and Participants Served (in Thousands)

For the Fiscal Years Ended FY 2008 through FY 2012

(1) This category was previously broken into its constituent components of DVOPs and LVERs.  However, to ensure consistency of each funding

mechanism representing a single row, DVOPs and LVERs have been consolidated into a single row entitled JVSG ‐ Jobs for Veterans State

Grants.

(2) Cost allocated based on historical program cost.

Program Outcomes

Outcomes for the programs comprising VETS’ investment in human capital are presented in the Department’s

Annual Performance Report for FY 2012, available on the DOL website at www.dol.gov/_sec/media/reports/ in

February 2013.

   2012 2011 2010 2009 2008

Program Cost(2) Part.

Served Cost Part.Served Cost Part.Served Cost Part.Served Cost Part.Served

JVSG(1) $210,671   508.8 $171,497 631.6 $191,802 709.0 $174,981 707.4 $166,872 730.2

TAP 13,093   153.0   7,089 143.1 7,928 129.0 7,233 124.7 6,898 150.0

USERRA 12,361   74.7   9,874 79.9 11,043 101.6 10,075 107.9 9,100 93.0

HVRP 35,562   19.8   28,385 17.0 31,746 14.4 28,962 13.7 27,620 14.0

VWIP 9,855   4.3   7,863 3.9 8,794 3.3 8,023 3.6 7,651 3.3

TOTAL $281,542   760.6   $224,708 875.5 $251,313 957.3 $229,274 957.3 $218,141 990.5
Required Supplementary Information  
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

126     United States Department of Labor

DEFERRED MAINTENANCE AND REPAIRS

DOL reports as general purpose plant, property and equipment, Buildings and Other Structures on which

maintenance and repair activities may be deferred. Over 99.6% of these buildings and other structures (based on

net book value) are owned by DOL’s Employment and Training Administration (ETA), Office of Job Corps (OJC), and

located at one hundred twenty‐five (125) Job Corps centers throughout the United States. The remaining 0.4% is

owned by the Department’s Mine Safety and Health Administration (MSHA).  Periodic maintenance is performed to

keep these properties in acceptable condition, as determined by DOL management.  Maintenance requirements are

stratified into critical and non‐critical projects.  Critical maintenance involves health and life safety deficiencies and

certain environmental and building code compliance deficiencies.    To the extent possible, critical maintenance

projects are funded shortly after they are identified.  Non‐critical maintenance projects are performed each year to

the extent that funding constraints allow.    Critical and non‐critical maintenance projects that cannot be funded

when scheduled are deferred to a future period.  

Condition Assessment Surveys

Condition assessment surveys are conducted every three years at each property to determine the current condition

of buildings and structures (constructed assets) and the estimated maintenance cost to correct deficiencies.  

Surveys conducted during years one and two of this three year cycle are updated to reflect maintenance and repairs

performed, and rolled up with current assessments to provide a condition assessment for the entire DOL portfolio

of constructed assets.    Condition assessment surveys are based on methods and standards consistently applied,

including descriptions of the facility condition; standardized condition codes, classifications and categories;

estimated costs of maintenance and repair actions and recommended maintenance schedules.

Asset Condition

Condition assessment surveys are used to estimate the current plant replacement value and deferred maintenance

repair backlog for each constructed asset.    Plant replacement value and repair backlog are used to calculate a

Facilities Condition Index (FCI) for each building and structure. The chart below ranks each asset within one of five

categories of asset condition, based on the assets FCI score, for the previous five year period.  

Job Corps Center and MSHA Constructed Assets  

Ranking of Individual Asset Condition By FCI Score(1)  

Fiscal Years 2008 – 2012

2012 2011 2010 2009 2008

Asset

Condition FCI Score

No. of

Assets

Asset

%

No. of

Assets

Asset

%

No. of

Assets

Asset

%

No. of

Assets

Asset

%

No. of

Assets

Asset

%

Excellent 90‐ 100% 3,454 86.8 3,338 86.2 3,273 86.4 3,037 84.6 2,878 81.9

Good 80‐ 89% 303 7.6 301 7.8 282 7.4 290 8.1 311 8.9

Fair 70‐ 79% 93 2.3 100 2.6 90 2.4 95 2.6 115 3.3

Poor 60‐ 69% 57 1.4 52 1.3 57 1.5 71 2.0 89 2.5

Very Poor < 60% 74 1.9 83 2.1 88 2.3 96 2.7 118 3.4

3,981 100.0 3,874 100.0 3,790 100.0 3,589 100.0 3,511 100.0

(1) FCI = 1 – (Repair Backlog / Plant Replacement Value).  An FCI closer to 100% indicates better asset condition. 
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 Agency Financial Report     127

Portfolio Condition and Deferred Maintenance Cost Estimates

The FCI assessments by building and structure are consolidated to calculate an FCI score for the entire portfolio of

constructed assets, which is used to evaluate the overall asset condition of the Job Corps and MSHA portfolios.   Job

Corps and MSHA have set the goal of achieving and maintaining an FCI of 90% or greater (the standard used by the

National Association of College and University Business Offices) for its portfolio of constructed assets as a level of

acceptable condition for the period reported.  In 2012, the portfolio’s aggregate FCI score for 3,981 constructed

assets was 94.2%, and deferred maintenance and repair costs to return the portfolio to an acceptable condition

were estimated at $104.6 million, as shown in the table below. The final graph juxtaposes deferred maintenance

cost estimates with the FCI trend line for the five year period ending in 2012.

Job Corps Center and MSHA Constructed Assets

Portfolio Condition and Deferred Maintenance and Repair Cost Estimates

Fiscal Years 2008 ‐ 2012

Constructed Assets ‐ FY

Number of

Constructed

Assets

Portfolio Condition

Based on

Aggregate FCI Score

Deferred Maintenance

Costs to Return Assets

to Acceptable Condition

Buildings and structures ‐ 2012 3,981 Excellent  ‐  94.2% $104,599,502

Buildings and structures ‐ 2011 3,874 Excellent  ‐  93.7%    $96,136,092

Buildings and structures ‐ 2010 3,790 Excellent  ‐  93.4%    $89,827,363

Buildings and structures ‐ 2009 3,589 Excellent  ‐  91.7% $83,861,828

Buildings and structures ‐ 2008 3,511 Excellent  ‐  92.2%    $71,901,425

 Deferred Maintenance and Repair Cost Estimates and FCI Trend Line

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

2008 2009 2010 2011 2012

Fiscal Year

Deferred Maintenance

90.0%

90.5%

91.0%

91.5%

92.0%

92.5%

93.0%

93.5%

94.0%

94.5%

Facilities Condition Index

DM FCI FCI Trendline
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

128     United States Department of Labor

SOCIAL INSURANCE PROGRAMS

The Federal Accounting Standards Advisory Board (FASAB) has classified certain government income transfer

programs as social insurance programs.  Recognizing that these programs have complex characteristics that do not

fit traditional accounting models, the FASAB has developed accounting standards for social insurance programs

which require the presentation of supplementary information to facilitate the assessment of the program’s long‐

term sustainability.    

The U.S. Department of Labor operates two programs classified under Federal accounting standards as social

insurance programs, the Unemployment Insurance Program and the Black Lung Disability Benefits Program.  

Presented below is the supplementary information for the two programs.

Unemployment Insurance Program

The Unemployment Insurance (UI) Program was created in 1935 to provide income assistance to unemployed

workers who lose their jobs generally through no fault of their own and are unemployed due to a lack of suitable

work.    The program protects workers during temporary periods of unemployment through the provision of

unemployment compensation benefits.  These benefits replace part of the unemployed worker’s lost wages and, in

so doing, stabilize the economy during recessionary periods by increasing the unemployed worker’s purchasing

power.    The UI program operates counter cyclically, with benefits exceeding tax collections during recessionary

periods and UI tax revenues exceeding benefit payments during periods of recovery.

Program Administration and Funding

The UI program is administered through a unique system of Federal‐state partnerships, established in Federal law

but executed through conforming state laws by state officials.    The Federal government provides broad policy

guidance and program direction through the oversight of the U.S. Department of Labor, while program details are

established through individual state UI statutes, administered through state UI agencies.

Federal and State Unemployment Taxes  

The UI program is financed through the collection of Federal and state unemployment taxes levied on subject

employers and deposited in the Unemployment Trust Fund (UTF) and Federal appropriations.    The UTF was

established to account for the receipt, investment, and disbursement of unemployment taxes.    Federal

unemployment taxes are used to pay for the administrative costs of the UI program, including grants to each state

to cover the costs of state UI operations and the Federal share of extended UI benefits.  Federal unemployment

taxes are also used to fund an account within the UTF, to make advances to state UI accounts that are unable to

make benefit payments because the state UI account balance has been exhausted.    State UI taxes are used

exclusively for the payment of regular UI benefits, as well as the state’s share of extended benefits.  

Federal Unemployment Taxes

Under the provisions of the Federal Unemployment Tax Act (FUTA), a Federal tax is levied on covered

employers, at a current rate of 6.0% of the first $7,000 in annual wages paid to each employee.    This

Federal tax rate is reduced by a credit of up to 5.4%, granted to employers paying state UI taxes under

conforming state UI statutes.  Accordingly, in conforming states, employers pay an effective Federal tax of

0.6% (0.8% prior to July 1, 2011).    Federal unemployment taxes are collected by the Internal Revenue

Service.  
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 Agency Financial Report     129

State Unemployment Taxes

In addition to the Federal tax, individual states finance their UI programs through state tax contributions

from subject employers based on the wages of covered employees.  (Three states also collect contributions

from employees.)  Within Federal confines, state tax rates are assigned in accordance with an employer’s

experience with unemployment.    Actual tax rates vary greatly among the states and among individual

employers within a state.  At a minimum, these rates must be applied to the Federal tax base of $7,000;

however, states may adopt a higher wage base than the minimum established by FUTA.  State UI agencies

are responsible for the collection of state unemployment taxes.

                                                                                                                                                                                                                               

Unemployment Trust Fund

Federal and state UI taxes are deposited into designated accounts within the Unemployment Trust Fund.  The UTF

was established under the authority of Title IX, Section 904 of the Social Security Act of 1935, as amended, to

receive, hold, invest, loan, and disburse Federal and state UI taxes.  The U.S. Department of the Treasury acts as

custodian over monies deposited into the UTF, investing amounts in excess of disbursing requirements in Treasury

securities.  The UTF is comprised of the following accounts:

Federal Accounts

The Employment Security Administration Account (ESAA) was established pursuant to Section 901 of the

Act.  All tax receipts collected under the Federal Unemployment Tax Act (FUTA) are appropriated to the

ESAA and used to pay the costs of Federal and state administration of the unemployment insurance

program and veterans’ employment services, as well as 97% of the costs of the state employment services.  

Excess balances in ESAA, as defined under the Act, are transferred to other Federal accounts within the

Fund, as described below.

The Federal Unemployment Account (FUA) was established pursuant to Section 904 of the Act.    FUA is

funded by any excesses from the ESAA as determined in accordance with Section 902 of the Act.  Title XII,

Section 1201 of the Act authorizes the FUA to loan Federal monies to state accounts that are unable to

make benefit payments because the state UI account balance has been exhausted.  Title XII loans must be

repaid with interest.  The American Recovery and Reinvestment Act of 2009 waived interest on advances to

state accounts for the period February 17, 2009, through December 31, 2010.  The FUA may borrow from

the ESAA or EUCA, without interest, or may also receive repayable advances, with interest, from the

general fund of the U.S. Treasury, when the FUA has a balance insufficient to make advances to the states.   

The Extended Unemployment Compensation Account (EUCA) was established pursuant to Section 905 of

the Act.    EUCA provides for the payment of extended unemployment benefits authorized under the

Federal‐State Extended Unemployment Compensation Act of 1970, as amended.    Under the extended

benefits program, extended unemployment benefits are paid to individuals who have exhausted their

regular unemployment benefits.  These extended benefits are financed one‐half by State unemployment

taxes and one‐half by FUTA taxes from the EUCA.  The EUCA is funded by a percentage of the FUTA tax

transferred from the ESAA in accordance with Section 905(b)(1) and (2) of the Act.  The EUCA may borrow

from the ESAA or the FUA, without interest, or may also receive repayable advances from the general fund

of the Treasury when the EUCA has a balance insufficient to pay the Federal share of extended benefits.  

During periods of sustained high unemployment, the EUCA may also receive payments and non‐repayable

advances from the general fund of the Treasury to finance emergency unemployment compensation

benefits.  Emergency unemployment benefits require Congressional authorization.
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

130     United States Department of Labor

The Federal Employees Compensation (FEC) Account was established pursuant to Section 909 of the Act.  

The FEC account provides funds to States for unemployment compensation benefits paid to eligible former

Federal civilian personnel and ex‐service members.  Generally, benefits paid are reimbursed to the Federal

Employees Compensation Account by the various Federal agencies.  Any additional resources necessary to

assure that the account can make the required payments to States, due to the timing of the benefit

payments and subsequent reimbursements, will be provided by non‐repayable advances from the general

fund of the Treasury.

   

State Accounts

Separate state accounts were established for each state and territory depositing monies into the Fund, in

accordance with Section 904 of the Act.    State unemployment taxes are deposited into these individual

accounts and may be used only to pay state unemployment benefits.    States may receive repayable

advances from the FUA when their balances in the Fund are insufficient to pay benefits.   

Railroad Retirement Accounts

The Railroad UI Account and Railroad UI Administrative Account were established under Section 904 of the

Act to provide for a separate unemployment insurance program for railroad employees.    This separate

unemployment insurance program is administered by the Railroad Retirement Board, an agency

independent of DOL.   DOL is not responsible for the administrative oversight or solvency of the railroad

unemployment insurance system.  Receipts from taxes on railroad payrolls are deposited in the Railroad UI

Account and the Railroad UI Administrative Account to meet benefit payment and related administrative

expenses.  

UI Program Benefits

   

The UI program provides regular and extended benefit payments to eligible unemployed workers.    Regular UI

program benefits are established under state law, payable for a period not to exceed a maximum duration.    In

1970, Federal law began to require states to extend this maximum period of benefit duration by 50% during periods

of high unemployment.  These extended benefit payments are paid equally from Federal and state accounts.  

   

Regular UI Benefits

The UI program is a cooperative Federal and state program with the federal government providing

oversight.  Eligibility requirements, as well as benefit amounts and benefit duration are determined under

state law.  Under state laws, worker eligibility for benefits depends on experience in covered employment

during a past base period, which attempts to measure the workers’ recent attachment to the labor force.  

Three factors are common to state eligibility requirements: (1) a minimum duration of recent employment

and earnings during a base period prior to unemployment, (2) unemployment not the fault of the

unemployed, and (3) availability of the unemployed for work.  

Benefit payment amounts under all state laws vary with the worker’s base period wage history.  Generally,

states compute the amount of weekly UI benefits as a percentage of an individual’s average weekly base

period earnings, within certain minimum and maximum limits.  Most states set the duration of UI benefits

by the amount of earnings an individual has received during the base period.  Currently, almost all states

have established the maximum duration for regular UI benefits at 26 weeks. Regular UI benefits are paid by
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 Agency Financial Report     131

the state UI agencies from monies drawn down from the state account within the Unemployment Trust

Fund.

Extended UI Benefits

The Federal/State Extended Unemployment Compensation Act of 1970 provides for the extension of the

duration of UI benefits during periods of high unemployment.    When the insured unemployment level

within a state, or in some cases total unemployment, reaches certain specified levels, the state must

extend benefit duration by 50%, up to a combined maximum of 39 weeks; certain states voluntarily

extended the benefit duration up to a combined maximum of 46 weeks.    Fifty percent of the cost of

extended unemployment benefits is paid from the Extended Unemployment Compensation Account within

the UTF, and 50% by the state, from the state’s UTF account.  The American Recovery and Reinvestment Act

of 2009 began temporary 100% Federal funding of extended benefits.  Subsequent legislation, most recently

P.L. 112‐96, the Middle Class Tax Relief and Job Creation Act of 2012, authorized continuing 100% Federal

funding of extended unemployment benefits to June 30, 2013, the statutory end date under the phase‐out.

Emergency UI Benefits

During prolonged periods of high unemployment, Congress may authorize the payment of emergency

unemployment benefits to supplement extended UI benefit payments.   Emergency benefits began in July

2008, authorized under the Supplemental Appropriations Act, 2008.    This emergency program was

temporarily extended and additionally funded by the Recovery Act and has been subsequently modified

several times, most recently by P.L. 112‐96, the Middle Class Tax Relief and Job Creation Act of 2012, which

changed the statutory end date of the emergency unemployment insurance program to January 2, 2013.   

Federal UI Benefits

Unemployment benefits to unemployed Federal civilian personnel and ex‐service members are paid from

the Federal Employees Compensation Account within the Unemployment Trust Fund.  These benefit costs

are reimbursed by the responsible Federal agency and are not considered to be social insurance benefits.  

Federal unemployment compensation benefits are not included in this discussion of social insurance

programs.  

Program Finances and Sustainability

At September 30, 2012, total liabilities within the UTF exceeded total assets by $13.0 billion.    Although at the

present time there is a deficit, any future surplus of tax revenues and earnings on these revenues over benefit

payment expenses is available to finance benefit payments in future periods when tax revenues may be

insufficient.    Treasury invests any accumulated surplus in Federal securities.    The net value of these securities,

including interest receivable, at September 30, 2012 was $20.8 billion.  This interest is distributed to eligible state

and Federal accounts within the UTF.    Interest income from these investments during FY 2012 was $1.6 billion.  

Federal and state UI tax and reimbursable revenues of $66.5 billion and regular, extended and emergency benefit

payment expense of $87.3 billion were recognized for the year ended September 30, 2012.

As discussed in Note 1.K.1 to the consolidated financial statements, DOL recognized a liability for regular, extended

and emergency unemployment benefits to the extent of unpaid benefits applicable to the current period and for

benefits paid by states that have not been reimbursed by the UTF.  Accrued unemployment benefits payable at

September 30, 2012 were $2.1 billion.   
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

132     United States Department of Labor

During FY 2012, both the FUA and EUCA borrowed from the general fund of the U.S. Treasury in the form of

repayable advances and also repaid certain prior year advances.   FUA had an outstanding repayable advances

balance of $15.3 billion, of which $0.4 billion bear interest at 3.0%, $7.4 billion bear interest at 2.875%, $5.9 billion

bear interest at 2.75%, and $1.6 billion bear interest at 2.625%, as of September 30, 2012.   EUCA had an

outstanding repayable advances balance of $17.6 billion, of which $3.1 billion bear interest at 3.25%, $5.3 billion

bear interest at 3.0%, $6.1 billion bear interest at 2.875%, $3.0 billion bear interest at 2.75%, and $0.1 billion bear

interest at 2.625%, as of September 30, 2012.

Subsequent Events

This required supplementary information does not reflect the effects of the subsequent events described below.

  

Subsequent to September 30, 2012, the Extended Unemployment Compensation Account (EUCA) of the

Unemployment Trust Fund (UTF) borrowed, as Advances from U.S. Treasury, $200 million at an interest rate of

2.5%.  During the same period, the Federal Unemployment Account (FUA) of the UTF borrowed, as Advances from

U.S. Treasury, $400 million at an interest rate of 2.5%.

Effect of Projected Cash Inflows and Outflows on the Accumulated Net Assets of the UTF, in Constant Dollars  

The ability of the UI program to meet a participant’s future benefit payment needs depends on the availability of

accumulated taxes and earnings within the UTF.    The Department measures the effect of projected benefit

payments on the accumulated net assets of the UTF, under an open group scenario, which includes current and

future participants in the UI program.  Future estimated cash inflows and outflows of the UTF are tracked by the

Department for budgetary purposes.  These projections allow the Department to monitor the sensitivity of the UI

program to differing economic conditions, and to predict the program’s sustainability under varying economic

assumptions.

The significant assumptions used in the projections include total unemployment rates, civilian labor force levels,

percent of unemployed receiving benefits, total wages, distribution of benefit payments by state, state tax rate

structures, state taxable wage bases, interest rates on UTF investments, and the Consumer Price Index‐Urban for

goods and services (CPI‐U).  The use of CPI‐U factors allows the projections to be presented in constant dollars with

FY 2012 as the base year.  The valuation date for the projections is September 30, 2012.  Cash projections depend

on the assumptions used and actual experience may differ from the projections.

Presented on the following pages is the effect of projected economic conditions on the net assets of the UTF, in

constant dollars, excluding the Federal Employees Compensation Account.    
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 Agency Financial Report     133

Expected Economic Conditions  

Charts I and II graphically depict the effect of expected economic conditions on the UTF, in constant dollars, over

the next ten years.   

Projected Cash Inflows and Outflows, in Constant Dollars, Under Expected Economic Conditions

Chart I depicts projected cash inflows and outflows of the UTF, in constant dollars, over the next ten years

under expected economic conditions.  Both cash inflows and cash inflows excluding interest earnings are

displayed.  Current estimates by the Department are based on an expected unemployment rate of 7.8%

during FY 2013, decreasing steadily to below 6% in FY 2017 and thereafter.  Total cash inflows exceed total

cash outflows in FY 2013 and through the end of the projected period.  The net inflow decreases from $9.6

billion in FY 2013 to $6.3 billion in FY 2014, and ranges between $6.4 billion and $2.6 billion thereafter.  The

net inflow is sustained by the excess of Federal tax collections over Federal expenditures.

  

Chart I

40

50

60

70

80

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

$ - Billions

Excludes the Federal Employees Compensation Account

Unemployment Trust Fund

Cash Inflow and Outflow in Constant Dollars

Total Cash Inflows Cash Inflow Excluding Interest Total Cash Outflow
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

134     United States Department of Labor

Effect of Expected Cash Flows on UTF Assets in Constant Dollars

Chart II demonstrates the effect of these expected cash inflows and outflows on the net assets of the UTF,

in constant dollars, over the ten year period ending September 30, 2022.    Yearly projected total cash

inflows, including interest earnings, and cash outflows, including interest payments, are depicted as well as

the net effect of this cash flow on UTF assets.  

Total cash inflows exceed total cash outflows in FY 2013 and all other years in the projected period.  The

excess of total cash inflows over total cash outflows is highest in FY 2013.  Starting at a $12.9 billion fund

balance deficit at the beginning of FY 2013, net UTF assets increase by about $52.6 billion over the next ten

years to a $39.7 billion fund net assets balance by the end of FY 2022.  The fund is in a deficit situation in FY

2013, but ends FY 2014 with a $3.0 billion fund net assets balance.

Chart II

(30)

(20)

(10)

0

10

20

30

40

50

60

70

80

90

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

$ - Billions

Excludes the Federal Employees Compensation Account

Unemployment Trust Fund 

Effect of Net Cash Flow on Net Assets in Constant Dollars

Total Cash Inflows Total Cash Outflows Net Assets
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 Agency Financial Report     135

Sensitivity Analyses in Constant Dollars

Charts III (Sensitivity Analysis I) and IV (Sensitivity Analysis II) demonstrate the effect on accumulated UTF assets of

projected total cash inflows and cash outflows of the UTF, in constant dollars, over the ten‐year period ending

September 30, 2022, in two sensitivity analyses.    Each sensitivity analysis uses an open group, which includes

current and future participants in the UI program.  Sensitivity Analysis I assumes lower rates of unemployment and

Sensitivity Analysis II assumes higher rates of unemployment compared to the expected economic conditions as

shown in Charts I and II.  

Conditions 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Expected 7.80% 7.42% 6.85% 6.27% 5.77% 5.45% 5.40% 5.40% 5.40% 5.40%

Sensitivity

  Analysis I 7.31% 6.54% 5.69% 5.56% 5.40% 5.40% 5.40% 5.40% 5.40% 5.40%

Sensitivity

  Analysis II 9.11% 10.21% 9.45% 8.75% 7.95% 7.65% 7.15% 6.55% 6.02% 5.57%

Total Unemployment Rate for the Ten‐Year Period Ending September 30, 2022

Effect on UTF Assets, in Constant Dollars, in Sensitivity Analysis I

In this sensitivity analysis, which utilizes a lower unemployment rate of 7.31% beginning in FY 2013, net cash

inflows peak in FY 2013 and continue to be positive through 2022.  Starting at a $12.9 billion fund balance deficit at

the beginning of FY 2013, net UTF assets increase by $57.9 billion over the next ten years to a $45.0 billion fund net

assets balance by the end of FY 2022.
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

136     United States Department of Labor

Chart III

(30)

(20)

(10)

0

10

20

30

40

50

60

70

80

90

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

$ - Billions

Excludes the Federal Employees Compensation Account

Unemployment Trust Fund 

Lower Unemployment Rate in Sensitivity Analysis I

Effect of Net Cash Flow on Net Assets in Constant Dollars

Total Cash Inflows Total Cash Outflows Net Assets

Effect on UTF Assets, in Constant Dollars, in Sensitivity Analysis II

In this sensitivity analysis, net cash outflows including interest earnings and expenses are projected in FY

2013 through FY 2015.  Net cash inflows are reestablished in FY 2016 and peak in FY 2018 with a drop in the

unemployment rate to 7.65% and then lower rates for FYs 2019 through 2022.    The net assets increase

$16.4 billion from a $12.9 billion fund balance deficit at the beginning of FY 2013 to a $3.5 billion fund net

assets balance in FY 2022.  At the end of the projection period of sensitivity analysis II, net assets are $36.2

billion less than under expected economic conditions.
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 Agency Financial Report     137

Chart IV

(80)

(60)

(40)

(20)

0

20

40

60

80

100

120

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

$ - Billions

Excludes the Federal Employees Compensation Account

Unemployment Trust Fund 

Higher Unemployment Rate in Sensitivity Analysis II

Effect of Net Cash Flow on Net Assets in Constant Dollars

Total Cash Inflows Total Cash Outflows Net Assets

The example of expected economic conditions and two sensitivity analyses, in constant dollars,

demonstrate the counter cyclical nature of the UI program, which experiences net cash outflows during

periods of recession to be replenished through net cash inflows during periods of recovery.  In the three

scenarios, state accounts without sufficient reserve balances to absorb negative cash flows are forced to

obtain advances from the FUA and to meet benefit payment requirements.  Advances to states also deplete

the FUA, which borrows from the ESAA and the EUCA until they are depleted.    The FUA then requires

advances from the general fund of the U.S. Treasury to provide borrowings to states.    (See following

discussion of solvency measures for state UI programs.)
   138    United States Department of Labor        (Dollars in millions) 2013 2014 2015 2016 2017 2018 2019 2020 

Balance, start of year $ (3,315) (12,932) $ $ 3,000 $ 8,686 $ 15,069 $ 26,622 21,036 $ $ 30,989 Cash inflow State unemployment taxes 49,540 45,673 43,347 41,917 40,209 38,494 38,626 37,176 

Federal unemployment taxes 8,140 8,591 9,566 10,342 10,034 9,931 8,934 9,188 General revenue appropriation 8,881 - - - - - - Interest on loans 770 635 518 418 383 369 361 348 Deposits by the Railroad Retirement Board 110 44 88 146 148 106 78 98 

Total cash inflow excluding interest 67,441 54,943 53,519 52,823 50,774 47,867 49,032 46,810 

Interest on Federal securities 573 635 591 657 803 987 1,206 1,417 

Total cash inflow 68,014 55,578 54,110 53,480 51,577 49,073 50,019 48,227 

Cash outflow

State unemployment benefits 52,937 44,303 43,680 42,436 40,997 40,117 39,846 40,762 

State administrative costs 4,213 3,903 3,847 3,842 3,850 3,860 3,871 3,880 Federal administrative costs 182 180 178 177 177 177 177 177 Interest on tax refunds 1 1 1 1 1 2 2 2 Interest on advances 953 761 604 527 471 434 425 424 Railroad Retirement Board withdrawals 111 115 114 114 114 114 114 114 

Total cash outflow 58,397 49,263 48,424 47,097 45,610 44,706 44,433 45,359 Excess of total cash inflow excluding interest over total cash outflow 9,044 5,680 5,095 5,726 5,164 4,599 3,161 1,451 Excess of total cash inflow over total cash outflow 9,617 6,315 5,686 6,383 5,967 5,586 4,367 2,868 

Balance, end of year $ 3,000 (3,315) $ $ 8,686 $ 15,069 $ 21,036 $ 30,989 26,622 $ $ 33,857 

Total unemployment rate 7.80% 7.42% 6.85% 6.27% 5.77% 5.45% 5.40% 5.40% 

U.S. DEPARTMENT OF LABOR

SUPPLEMENTARY SOCIAL INSURANCE INFORMATION IN CONSTANT DOLLARS

CASH INFLOW AND OUTFLOW OF THE 

UNEMPLOYMENT TRUST FUND EXCLUDING THE FEDERAL EMPLOYEES COMPENSATION ACCOUNT

FOR THE TEN-YEAR PERIOD ENDING SEPTEMBER 30, 2022

(1) EXPECTED ECONOMIC CONDITIONS
FY 2011

FY 2012 Agency Financial Report    139

(Dollars in millions) 2013 2014 2015 2016 2017 2018 2019 2020 Balance, start of year $ (12,932) $ (7) $ 9,988 $ 19,781 $ 25,529 $ 30,558 $ 32,824 $ 34,692 Cash inflow

State unemployment taxes 49,584 45,098 42,011 37,816 37,123 35,989 36,158 37,253 

Federal unemployment taxes 8,167 8,668 9,356 9,524 9,455 8,630 8,638 9,459 

General revenue appropriation 8,844                      ‐                            ‐                            ‐                            ‐                             ‐                             ‐                            

                           

Interest on loans 737 562 402 302 260 257 276 279 

Deposits by the Railroad Retirement Board 110 44 88 146 148 106 78 98 

Total cash inflow excluding interest 67,442 54,372 51,857 47,788 46,986 44,982 45,150 47,089 

Interest on Federal securities 606 702 717 792 965 1,177 1,356 1,522 

Total cash inflow 68,048 55,074 52,574 48,580 47,951 46,159 46,506 48,611 

Cash outflow

State unemployment benefits 49,739 40,269 38,249 38,394 38,456 39,359 40,062 40,683 

State administrative costs 4,157 3,821 3,739 3,757 3,794 3,843 3,867 3,875 

Federal administrative costs 182 180 178 177 177 177 177 177 

Interest on tax refunds 1 1 1 1 1 1 2 2 

Interest on advances 933 693 500 389 380 399 416 432 

Railroad Retirement Board withdrawals 111 115 114 114 114 114 114 114 

Total cash outflow 55,123 45,079 42,781 42,832 42,922 43,893 44,638 45,283 Excess of total cash inflow excluding

interest over total cash outflow 12,319 9,293 9,076 4,956 4,064 1,089 512 1,806 

Excess of total cash inflow over

total cash outflow 12,925 9,995 9,793 5,748 5,029 2,266 1,868 3,328 

Balance, end of year $ (7) $ 9,988 $ 19,781 $ 25,529 $ 30,558 $ 32,824 $ 34,692 $ 38,020 

Total unemployment rate 7.31% 6.54% 5.69% 5.56% 5.40% 5.40% 5.40% 5.40% 

U.S. DEPARTMENT OF LABOR

SUPPLEMENTARY SOCIAL INSURANCE INFORMATION IN CONSTANT DOLLARS

CASH INFLOW AND OUTFLOW OF THE

UNEMPLOYMENT TRUST FUND EXCLUDING THE FEDERAL EMPLOYEES COMPENSATION ACCOUNT

FOR THE TEN‐YEAR PERIOD ENDING SEPTEMBER 30, 2022

(2) SENSITIVITY ANALYSIS I LOWER UNEMPLOYMENT RATE
(Dollars in millions) 2013 2014 2015 2016 2017 2018 2019 2020 

Balance, start of year $ (12,932) $ (18,234) $ (38,184) $ (42,223) $ (36,997) $ (29,738) $ (21,550) $ (15,120) Cash inflow

State unemployment taxes 49,657 49,699 51,245 51,770 50,154 48,500 45,635 43,385 

Federal unemployment taxes 8,050 9,158 10,283 11,937 12,209 13,437 12,657 11,949 

General revenue appropriation 8,989 80                         ‐ 48                            ‐                            ‐                             ‐                            ‐                            

Interest on loans 873 1,091 1,137 1,045 996 970 948 925 

Deposits by the Railroad Retirement Board 110 44 88 146 148 106 78 98 

Total cash inflow excluding interest 67,679 60,072 62,801 64,898 63,507 63,013 59,318 56,357 

Interest on Federal securities 439 340 315 400 510 666 808 976 

Total cash inflow 68,118 60,412 63,116 65,298 64,017 63,679 60,126 57,333 

Cash outflow

State unemployment benefits 67,627 74,451 61,279 54,230 50,906 49,642 47,921 45,485 

State administrative costs 4,468 4,450 4,224 4,098 4,066 4,068 4,043 3,996 

Federal administrative costs 182 180 178 177 177 177 177 177 

Interest on tax refunds 1 1 1 1 2 2 2 2 

Interest on advances 1,031 1,165 1,359 1,452 1,493 1,488 1,439 1,382 

Railroad Retirement Board withdrawals 111 115 114 114 114 114 114 114 

Total cash outflow 73,420 80,362 67,155 60,072 56,758 55,491 53,696 51,156 Excess of total cash inflow excluding

interest over total cash outflow (5,741) (20,290) (4,354) 4,826 6,749 7,522 5,622 5,201 

Excess of total cash inflow over

total cash outflow (5,302) (19,950) (4,039) 5,226 7,259 8,188 6,430 6,177 

Balance, end of year $ (18,234) $ (38,184) $ (42,223) $ (36,997) $ (29,738) $ (21,550) $ (15,120) $ (8,943) 

Total unemployment rate 9.11% 10.21% 9.45% 8.75% 7.95% 7.65% 7.15% 6.55% 

U.S. DEPARTMENT OF LABOR

SUPPLEMENTARY SOCIAL INSURANCE INFORMATION IN CONSTANT DOLLARS

CASH INFLOW AND OUTFLOW OF THE

UNEMPLOYMENT TRUST FUND EXCLUDING THE FEDERAL EMPLOYEES COMPENSATION ACCOUNT

FOR THE TEN‐YEAR PERIOD ENDING SEPTEMBER 30, 2022

(3) SENSITIVITY ANALYSIS II HIGHER UNEMPLOYMENT RATE

140    United States Department of Labor  
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 FY 2012 Agency Financial Report     141t     

States with Minimally Solvent UTF Account Balances

Each state’s accumulated UTF net assets or reserve balance should provide a defined level of benefit payments over

a defined period.  To be minimally solvent, a state’s reserve balance should provide for one year’s projected benefit

payment needs based on the highest levels of benefit payments experienced by the state over the last twenty years.  

A ratio of 1.00 or greater indicates that the state UTF account balance is minimally solvent.  States below this level

are vulnerable to exhausting their funds in a recession.  States exhausting their reserve balance must borrow funds

from the Federal Unemployment Account (FUA) to make benefit payments.  During FY 2009, the balances in the FUA

were depleted and the FUA borrowed from the Treasury general fund and continued to do so through FY 2012,

although in FY 2011 and FY 2012 the FUA repaid some borrowings.   

Chart V presents the state by state results of this analysis at September 30, 2012 in descending order by ratio.  As

the table below illustrates, 40 state UTF accounts were below the minimal solvency ratio of 1.00 at September 30,

2012.

Chart V

State Ratio State Ratio State Ratio

Nebraska 1.68 South Dakota 0.89 Delaware 0.00

Wyoming 1.57 Puerto Rico 0.87 Florida 0.00

Mississippi 1.55 Montana 0.86 Georgia 0.00

Oklahoma 1.38 New Hampshire 0.85 Idaho 0.00

Louisiana 1.27 Maryland 0.77 Illinois 0.00

Maine 1.15 Tennessee 0.63 Indiana 0.00

North Dakota 1.12 West Virginia 0.44 Kentucky 0.00

Washington 1.11 Minnesota 0.26 Michigan 0.00

District of Columbia 1.10 New Mexico 0.26 Missouri 0.00

Utah 1.10 Hawaii 0.24 Nevada 0.00

Iowa 1.03 Alabama 0.20 New Jersey 0.00

Alaska 1.02 Massachusetts 0.19 New York 0.00

Oregon 1.00 Vermont 0.12 North Carolina 0.00

Kansas 0.07 Ohio 0.00

Virginia 0.06 Pennsylvania 0.00

Arizona 0.00 Rhode Island 0.00

Arkansas 0.00 South Carolina 0.00

California 0.00 Texas 0.00

Colorado 0.00 Virgin Islands 0.00

Connecticut 0.00 Wisconsin 0.00

Minimally Solvent Not Minimally Solvent

 
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

142     United States Department of Labor

Black Lung Disability Benefit Program

The Black Lung Disability Benefit Program provides for compensation, medical and survivor benefits for eligible coal

miners who are totally disabled due to pneumoconiosis (black lung disease) arising out of their coal mine

employment. The Black Lung Disability Trust Fund (BLDTF) provides benefit payments to eligible coal miners totally

disabled by pneumoconiosis when no responsible mine operator can be assigned the liability.  Other information

about the BLDTF and social insurance reporting is also presented in Note 1‐W of the financial statements.

Program Administration and Funding

The Federal Coal Mine Health and Safety Act sets Black Lung benefits at 37.5% of the base salary of a Federal

employee at level GS‐2, Step 1. Black lung disability benefit payments are funded by excise taxes from coal mine

operators based on the sale of coal, as are the program’s administrative costs.    These taxes are collected by the

Internal Revenue Service and transferred to the BLDTF, which was established under the authority of the Black Lung

Benefits Revenue Act, and administered by the U.S. Department of the Treasury.   

P.L. 110‐343, Division B‐Energy Improvement and Extension Act of 2008, enacted on October 3, 2008, in section

113, (1) allowed for the temporary increase in coal excise tax rates to continue an additional five years beyond the

current statutory limit and (2) restructured the BLDTF debt by refinancing the outstanding repayable advances

(which had higher interest rates) with the proceeds from issuing discounted debt instruments similar in form to

zero‐coupon bonds (which had lower interest rates), plus a one‐time appropriation.  This Act also allowed that any

debt issued by the BLDTF subsequent to the refinancing may be used to make benefit payments, other authorized

expenditures, or to repay debt and interest from the initial refinancing.  All debt issued by the BLDTF was effected

as borrowing from the Treasury's Bureau of Public Debt.  (See Notes 1‐J and 8)

Program Finances and Sustainability

At September 30, 2012, total liabilities of the BLDTF exceeded assets by nearly $6.0 billion.    This net position

represents the accumulated shortfall of excise taxes necessary to meet benefit payments, administrative costs, and

interest expense incurred prior to and subsequent to the debt refinancing pursuant to P.L. 110‐343.    Prior to

enactment of P.L. 110‐343, this shortfall was funded by repayable advances to the BLDTF, which were repayable with

interest.    Pursuant to P.L. 110‐343, any shortfall will be financed with debt instruments similar in form to zero‐

coupon bonds, with a maturity date of one year and bear interest at the Treasury 1‐year rate.  Outstanding debt at

September 30, 2012 was nearly $6.1 billion, bearing interest rates ranging from 0.174% to 4.556%.    Excise tax

revenues of $621.0 million, benefit payment expense of $208.0 million, and interest expense of $227.7 million were

recognized for the year ended September 30, 2012.   The interest expense is accrued and capitalized to the principal

of the debt until the debt reaches its face value at the time of maturity.  On September 30, 2012, the BLDTF issued

debt in the amount of $214.0 million, bearing interest at 0.174% and maturing on September 30, 2013.    At

September 30, 2012, there were 29 debt instruments with staggered maturities of September 30 for years 2013

through 2040, with a total carrying value of nearly $6.1 billion and a total face value at maturity of $10.1 billion.  Of

these 29 debt instruments, 28 are from the October 2008 refinancing and one debt instrument was issued on

September 30, 2012.  
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 FY 2012 Agency Financial Report     143t     

Projected Cash Inflows and Outflows, in Constant Dollars

The beneficiary population is a nearly closed universe in which attrition by death exceeds new entrants by a ratio of

more than ten to one.  Projections for new participants are included in the overall projections and are considered

immaterial.  Therefore, the difference between the open group measure and the closed group measure due to new

participants is immaterial and the same measure is presented for both the open group and the closed group.

The significant assumptions used in the projections, in constant dollars, are coal excise tax revenue estimates, the

tax rate structure, the number of beneficiaries, life expectancy, Federal civilian pay raises, medical cost inflation, the

interest rate on new debt issued by the BLDTF, and the Consumer Price Index‐Urban for goods and services (CPI‐U).  

The use of CPI‐U factors allows the projections to be presented in constant dollars with FY 2012 as the base year.  

The valuation date for the projections is September 30, 2012.  Cash projections depend on the assumptions used

and actual experience may differ from the projections.  These projections are sensitive to changes in the excise tax

rate and changes in interest rates on debt issued by the BLDTF.

These projections, in constant dollars, made over the 28‐year period ending September 30, 2040, indicate that cash

inflows from excise taxes will exceed cash outflows for benefit payments and administrative expenses for each

period projected.    Cumulative net cash inflows are projected to reach $5.0 billion by FY 2040.   However, when

payments from the BLDTF’s maturing debt are applied against this surplus cash inflow, the BLDTF’s cash flow turns

negative in all periods included in the projections.    Net cash outflows after payments on maturing debt are

projected to reach $4.5 billion by the end of FY 2040, resulting in a projected deficit of $6.4 billion at September 30,

2040.  (See Chart I and Table I)  Amount totals in tables may differ slightly due to rounding.   

  

The net present value of future projected benefit payments and other cash inflow and outflow activities together

with the fund’s deficit positions as of September 30, 2012, 2011, 2010, 2009, and 2008 are presented in the

Statement of Social Insurance.    
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

144     United States Department of Labor

Chart I

0

100

200

300

400

500

600

700

800

900

1,000

2013 2017 2021 2025 2029 2033 2037

$ - Millions

BLACK LUNG DISABILITY TRUST FUND

CASH INFLOW AND OUTFLOW IN CONSTANT DOLLARS

Total Cash Outflow Total Cash Inflow Cash Outflow Before Repayment of Debt and Interest

Projected Cash Inflows and Outflows with Sensitivity Analysis, in Constant Dollars

For the projected cash inflows and outflows with sensitivity analysis, in constant dollars, the significant assumptions

for Federal civilian pay raises were modified, but the other significant assumptions were left unchanged.    The

Federal Coal Mine Health and Safety Act sets Black Lung benefits at 37.5% of the base salary of a Federal employee

at level GS‐2.  The significant assumptions for Federal civilian pay raises were modified to reflect that no Federal

employee statutory pay adjustment would take effect through December 31, 2015.    As a result, because the

Federal employee base salary would remain unchanged through 2015, the rates for Black Lung benefits would

likewise remain unchanged through 2015.    Even after statutory pay adjustments return in 2016, they would be

applied to lower amounts of benefits and this would decrease the benefit amounts through FY 2040.  

Administrative costs, which are primarily determined by the number and type of beneficiaries, would not be

materially affected by changes in assumptions for Federal civilian pay raises.    Cash projections depend on the

assumptions used and actual experience may differ from the projections.    These projections are sensitive to

changes in the excise tax rate and changes in interest rates on debt issued by the BLDTF.

These projections with sensitivity analysis, in constant dollars, made over the 28‐year period ending September 30,

2040, indicate that cash inflows from excise taxes would exceed cash outflows for benefit payments and

administrative expenses for each period projected.  Cumulative net cash inflows would be projected to reach $5.2

billion by the year 2040.  However, when payments from the BLDTF’s maturing debt are applied against this surplus

cash inflow, the BLDTF’s cash flow would turn negative in all periods included in the projections.  Net cash outflows

after payments on maturing debt would be projected to reach $4.2 billion by the end of the year 2040, and would

result in a projected deficit of $6.1 billion at September 30, 2040.  (See Chart II and Table II)  Amount totals in tables

may differ slightly due to rounding.
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 FY 2012 Agency Financial Report     145t     

Chart II

0

100

200

300

400

500

600

700

800

900

1,000

2013 2017 2021 2025 2029 2033 2037

$ - Millions

BLACK LUNG DISABILITY TRUST FUND

CASH INFLOW AND OUTFLOW IN CONSTANT DOLLARS

SENSITIVITY ANALYSIS

Total Cash Outflow Total Cash Inflow Cash Outflow before Repayment of Debt and Interest

For the open and closed group measure with sensitivity analysis, the significant assumptions for Federal civilian pay

raises were modified, but the other significant assumptions were left unchanged.  The Federal Coal Mine Health and

Safety Act sets Black Lung benefits at 37.5% of the base salary of a Federal employee at level GS‐2.  The significant

assumptions for Federal civilian pay raises were modified to reflect that no Federal employee statutory pay

adjustment would take effect through December 31, 2015.  As a result, because the Federal employee base salary

would remain unchanged through 2015, the rates for Black Lung benefits would likewise remain unchanged

through 2015.  Even after statutory pay adjustments return in 2016, they would be applied to lower amounts of

benefits and this would decrease the benefit amounts through FY 2040.  Administrative costs, which are primarily

determined by the number and type of beneficiaries, would not be materially affected by changes in assumptions

for Federal civilian pay raises.

As a result of changing the significant assumptions for Federal civilian pay raises as described above, for FY 2012 the

actuarial present value of future benefit payments during the projection period to disabled coal miners and

dependent survivors would decrease ($173,480) from $2,181,654 as reported on the Statement of Social Insurance

(SOSI) to $2,008,174; the actuarial present value of future benefit payments and present value of estimated

administrative costs during the projection period for current and future participants would decrease ($173,480)

from $3,145,649 as reported on the SOSI to $2,972,169; the excess of present value of estimated future excise tax

income over actuarial present value of future benefit payments and present value of estimated administrative costs

during the projection period for current and future participants (open and closed group measure) would increase

$173,480 from $4,658,529 as reported on the SOSI to $4,832,009.  The trust fund net position deficit at the start of

the projection period would remain unchanged.
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

146     United States Department of Labor

Cash projections depend on the assumptions used and actual experience may differ from the projections.  These

projections are sensitive to changes in the excise tax rate and changes in interest rates on debt issued by the BLDTF.
Annual Financial Statement

REQUIRED SUPPL

Table I 

(Dollars in thousands) 2013 2014 2015 2016 2017 2018 Balance, start of year $ (5,977,619) (5,699,051) $ (5,444,008) $ (5,214,048) $ (5,001,119) $ (4,8

$ 

Cash inflow

Excise taxes 582,326 566,244 550,352 548,525 549,335 5,5

 

Total cash inflow 566,244 582,326 550,352 548,525 549,335 5,5

 

Cash outflow

Disabled coal miners benefits 190,618 178,089 165,102 152,237 140,132 1,4

 

Administrative costs 57,747 58,477 57,323 56,170 54,955 7

 

Cash outflows before repayment of

 debt and interest 236,566 248,365 222,425 208,407 195,087 2,2

 

Cash inflow over cash outflow  before repayment of debt and interest 333,961 329,678 327,927 340,118 354,248 3,3

 

Maturity of obligations refinanced October 2008 444,295 455,354 465,023 478,695 489,173 5,1

 

Interest on annual borrowings 365 1,961 6,550 14,991 24,680 2,03

 

Total cash outflow 693,881 693,026 693,998 702,093 708,940 9,38

 

Total cash outflow over total cash inflow (127,637) (110,700) (143,646) (153,568) (159,605) (3,8

 

Reduction of debt refinanced October 2008 389,268 382,680 373,606 366,497 355,779 2,2

 

Balance, end of year $ (5,444,008) (5,699,051) $ (5,214,048) $ (5,001,119) $ (4,804,945) $ (6,4

$ 

SUPPLEMENTARY SOCIAL INSURANCE INFORMATION

U.S. DEPARTMENT OF LABOR

CASH INFLOW AND OUTFLOW OF THE BLACK LUNG DISABILITY TRUST FUND IN CONSTANT DOLLARS

FOR THE 28-YEAR PERIOD ENDING SEPTEMBER 30, 2040

FY 2012 Agency Financial Report     147t    
Table II 

(Dollars in thousands) 2013 2014 2015 2016 2017 20Balance, start of year $ (5,694,532) (5,977,619) $ (5,429,805) $ (5,185,814) $ (4,958,303) $ (

$ 

Cash inflow

Excise taxes 582,326 566,244 550,352 548,525 549,335 

Total cash inflow 582,326 566,244 550,352 548,525 549,335 

Cash outflow

Disabled coal miners benefits 186,099 168,434 151,290 138,406 127,391 

 

Administrative costs 57,747 58,477 57,323 56,170 54,955 

Cash outflows before repayment of

 debt and interest 243,846 226,911 208,614 194,576 182,347 

Cash inflow over cash outflow  before repayment of debt and interest 338,480 339,333 341,738 353,949 366,988 

Maturity of obligations refinanced October 2008 444,295 455,354 465,023 478,695 489,173 

 

Interest on annual borrowings 365 1,932 6,331 14,240 23,196 

Total cash outflow 688,507 684,196 679,968 687,510 694,716 

Total cash outflow over total cash inflow (106,181) (117,952) (129,616) (138,985) (145,381) (

 

Reduction of debt refinanced October 2008 389,268 382,680 373,606 366,497 355,779 

 

Balance, end of year $ (5,694,532) (5,429,805) $ (5,185,814) $ (4,958,303) $ (4,747,905) $ (

$ 

 U.S. DEPARTMENT OF LABOR

SUPPLEMENTARY SOCIAL INSURANCE INFORMATION SENSITIVITY ANALYSIS

CASH INFLOW AND OUTFLOW OF THE BLACK LUNG DISABILITY TRUST FUND IN CONSTANT DOLLARS

FOR THE 28-YEAR PERIOD ENDING SEPTEMBER 30, 2040

148   United States Department of Labort     
Annual SUPPLEMENTARY INFORMATIO Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

)

FY 2012 Agency Financial Report     149   

STATEMENT OF BUDGETARY RESOURCES

The principal Combined Statement of Budgetary Resources combines the availability, status, and outlay of DOL’s

budgetary resources during FY 2012 and FY 2011.  Presented on the following pages is the disaggregation of this

combined information for each of the Department’s major budget agencies.
Financial Section

   

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

150     United States Department of Labor

COMBINING STATEMENT OF BUDGETARY RESOURCES

For the Year Ended September 30, 2012

Employment and Office of Workers' Office 

Training Compensation of

(Dollars in thousands) Administration Programs Job Corps

BUDGETARY RESOURCES

Unobligated balance, brought forward, October 1 1,922,143 $ 572,416 $ 641,913 $ 

Recoveries of prior year unpaid obligations 211,051 5,952 90,982 

Other changes in unobligated balance (80,596) (2,055) (7,295) 

Unobligated balance from prior year budget authority, net 2,052,598 576,313 725,600 

Appropriations (discretionary and mandatory) 129,163,572 2,033,171 2,405,732 

Borrowing authority (discretionary and mandatory) 12,164,421 214,000 - 

Spending authority from offsetting collections (discretionary and mandatory) 4,841,048 3,020,880 37 

Total budgetary resources $ 5,844,364 148,221,639 $ 3,131,369 $ 

STATUS OF BUDGETARY RESOURCES

Obligations incurred 146,232,004 $ 5,026,958 $ 1,808,478 $ 

Unobligated balance, end of year

Apportioned 716,840 659,456 296,525 

Exempt from apportionment - 56,721 - 

Unapportioned 1,330,179 43,845 1,026,366 

Total unobligated balance, end of year 1,989,635 817,406 1,322,891 

Total budgetary resources $ 5,844,364 148,221,639 $ 3,131,369 $ 

CHANGE IN OBLIGATED BALANCE

Unpaid obligations, brought forward, October 1 14,184,446 $ 214,319 $ 520,104 $ 

Less: uncollected customer payments from Federal sources,

brought forward, October 1 (2,021,992) 67,465 - 

Obligated balances start of year (net) 12,162,454 281,784 520,104 

Obligations incurred 146,232,004 5,026,958 1,808,478 

Less: outlays (gross) (146,340,557) (4,921,112) (1,790,267) 

Change in uncollected customer payments from Federal sources (270,220) (86,631) - 

Less: recoveries of prior year unpaid obligations (211,051) (5,952) (90,982) 

Obligated balance, end of year (net) 11,572,630 $ 295,047 $ 447,333 $ 

Unpaid obligations, end of year (gross) 13,864,842 $ 314,213 $ 447,333 $ 

Less: uncollected customer payments from Federal sources, end of year (2,292,212) (19,166) - 

Obligated balance, end of year (net) 11,572,630 $ 295,047 $ 447,333 $ 

BUDGET AUTHORITY AND OUTLAYS, NET

Budget authority, gross (discretionary and mandatory) 146,169,041 $ 5,268,051 $ 2,405,769 $ 

Less: actual offsetting collections (discretionary and mandatory) (4,586,704) (2,934,249) (37) 

Less: change in uncollected customer payments from Federal

sources (discretionary and mandatory) (270,220) (86,631) - 

Budget authority, net (discretionary and mandatory) 141,312,117 $ 2,247,171 $ 2,405,732 $ 

Outlays, gross (discretionary and mandatory) 146,340,557 $ 4,921,112 $ 1,790,267 $ 

Actual offsetting collections (discretionary and mandatory) (4,586,704) (2,934,249) (37) 

Outlays, net (discretionary and mandatory) 141,753,853 1,986,863 1,790,230 

Distributed offsetting receipts (43,211,817) (533) - 

Agency outlays, net (discretionary and mandatory 98,542,036 $ 1,986,330 $ 1,790,230 $ 
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2012 Agency Financial Report    151 

Occupational Employee Veterans'

Safety and Bureau of Mine Safety Benefits Employment Wage Other

Health Labor and Health Security and Training and Hour Departmental 

Administration Statistics Administration Administration Service Division Programs Total

$ 37,253 18,121 $ 4,834 $ 16,787 $ 7,020 $ 70,534 $ 85,240 $ 3,376,261 $ 

 7,798 11,272 5,022 6,284 1,858 4,897 24,744 369,860 

 (1,830) (6,334) (1,132) (9,986) (2,576) (12,153) (4,384) (128,341) 

 43,221 23,059 8,724 13,085 6,302 63,278 105,600 3,617,780 

 541,895 564,788 372,523 183,153 52,779 272,436 629,757 136,219,806 

 - - - - - - - 12,378,421 

 76,349 1,875 1,407 5,331 210,964 2,405 299,763 8,460,059 

$ 661,465 589,722 $ 382,654 $ 201,569 $ 270,045 $ 338,119 $ 1,035,120 $ 160,676,066 $ 

$ 623,834 572,236 $ 378,841 $ 196,553 $ 265,044 $ 275,378 $ 905,041 $ 156,284,367 $ 

 1,510 129 751 30 1,235 6,419 81,293 1,764,188 

 - - - - - - - 56,721 

 36,121 17,357 3,062 4,986 3,766 56,322 48,786 2,570,790 

 37,631 17,486 3,813 5,016 5,001 62,741 130,079 4,391,699 

$ 661,465 589,722 $ 382,654 $ 201,569 $ 270,045 $ 338,119 $ 1,035,120 $ 160,676,066 $ 

$ 85,680 102,235 $ 46,847 $ 42,947 $ 89,194 $ 60,468 $ 440,983 $ 15,787,223 $ 

 (711) (2,499) - - (883) - (9,877) (1,968,497) 

 84,969 99,736 46,847 42,947 88,311 60,468 431,106 13,818,726 

 623,834 572,236 378,841 196,553 265,044 275,378 905,041 156,284,367 

 (608,993) (557,691) (371,648) (172,904) (249,771) (274,953) (884,666) (156,172,562) 

 (585) (494) - - 883 - 652 (356,395) 

 (7,798) (11,272) (5,022) (6,284) (1,858) (4,897) (24,744) (369,860) 

$ 91,427 102,515 $ 49,018 $ 60,312 $ 102,609 $ 55,996 $ 427,389 $ 13,204,276 $ 

$ 92,723 105,508 $ 49,018 $ 60,312 $ 102,609 $ 55,996 $ 436,614 $ 15,529,168 $ 

 (1,296) (2,993) - - - - (9,225) (2,324,892) 

$ 91,427 102,515 $ 49,018 $ 60,312 $ 102,609 $ 55,996 $ 427,389 $ 13,204,276 $ 

$ 618,244 566,663 $ 373,930 $ 188,484 $ 263,743 $ 274,841 $ 929,520 $ 157,058,286 $ 

 (75,763) (1,381) (1,407) (6,247) (211,847) (3,005) (283,025) (8,103,665) 

 (585) (494) - - 883 - 652 (356,395) 

$ 541,896 564,788 $ 372,523 $ 182,237 $ 52,779 $ 271,836 $ 647,147 $ 148,598,226 $ 

$ 608,993 557,691 $ 371,648 $ 172,904 $ 249,771 $ 274,953 $ 884,666 $ 156,172,562 $ 

 (75,763) (1,381) (1,407) (6,247) (211,847) (3,005) (283,025) (8,103,665) 

 533,230 556,310 370,241 166,657 37,924 271,948 601,641 148,068,897 

 - - - - - - (22,570) (43,234,920) 

$ 533,230 556,310 $ 370,241 $ 166,657 $ 37,924 $ 271,948 $ 579,071 $ 104,833,977 $ 
Financial Section

   

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

152     United States Department of Labor

COMBINING STATEMENT OF BUDGETARY RESOURCES

For the Year Ended September 30, 2011

Employment and Office of Workers' Office 

Training Compensation of

(Dollars in thousands) Administration Programs Job Corps

BUDGETARY RESOURCES

Unobligated balance brought forward, October 1 2,238,705 $ $ 763,332 955,984 $ 

Recoveries of prior year unpaid obligations 266,223 36,042 10,999 

Other changes in unobligated balance (246,122) (63,927) (1,748) 

Unobligated balance from prior year budget authority, net 2,258,806 735,447 965,235 

Appropriations (discretionary and mandatory) 154,870,259 1,693,236 1,710,225 

Borrowing authority (discretionary and mandatory) 21,900,000 107,749 -

Spending authority from offsetting collections (discretionary and mandatory) 4,739,911 532 2,812,072 

Total budgetary resources $ 5,595,281 183,768,976 $ 2,429,215 $ 

STATUS OF BUDGETARY RESOURCES

Obligations incurred 181,846,833 $ $ 1,787,302 5,022,865 $ 

Unobligated balance, end of year

 Apportioned 694,547 191,087 219,994 

 Exempt from apportionment - 62,478 -

 Unapportioned 1,227,596 450,826 289,944 

Total unobligated balance, end of year 1,922,143 641,913 572,416 

Total budgetary resources $ 5,595,281 183,768,976 $ 2,429,215 $ 

CHANGE IN OBLIGATED BALANCE

Unpaid obligations, brought forward, October 1 16,964,600 $ $ 454,841 213,276 $ 

Less: uncollected customer payments from Federal sources,

brought forward, October 1 (1,899,939) 23,577 -

Obligated balances start of year (net) 15,064,661 454,841 236,853 

Obligations incurred 181,846,833 1,787,302 5,022,865 

Less: outlays (gross) (184,360,764) (1,685,997) (5,010,823) 

Change in uncollected customer payments from Federal sources (122,053) 43,888 -

Less: recoveries of prior year unpaid obligations (266,223) (36,042) (10,999) 

Obligated balance, end of year (net) 12,162,454 $ 281,784 $ 520,104 $ 

Unpaid obligations, end of year (gross) 14,184,446 $ $ 520,104 214,319 $ 

Less: Uncollected customer payments from Federal sources, end of year (2,021,992) 67,465 -

Obligated balance, end of year (net) 12,162,454 $ 281,784 $ 520,104 $ 

BUDGET AUTHORITY AND OUTLAYS, NET

Budget authority, gross (discretionary and mandatory) 181,510,170 $ $ 1,693,768 4,630,046 $ 

Less: actual offsetting collections (discretionary and mandatory) (4,617,861) (532) (2,855,961) 

Less: change in uncollected customer payments from Federal

sources (discretionary and mandatory) (122,053) 43,888 -

Budget authority, net (discretionary and mandatory) 176,770,256 $ 1,817,973 $ 1,693,236 $ 

Outlays, gross (discretionary and mandatory) 184,360,764 $ $ 1,685,997 5,010,823 $ 

Actual offsetting collections (discretionary and mandatory) (4,617,861) (532) (2,855,961) 

Outlays, net (discretionary and mandatory) 179,742,903 1,685,465 2,154,862 

Distributed offsetting receipts (53,090,479) (2,469) -

Agency outlays, net (discretionary and mandatory 126,652,424 $ 2,152,393 $ 1,685,465 $ 
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2012 Agency Financial Report    153 

Occupational Employee Veterans'

Safety and Bureau of Mine Safety Benefits Employment Wage Other

Health Labor and Health Security and Training and Hour Departmental 

Administration Statistics Administration Administration Service Division Programs Total

$ 7,825 21,311 $ 7,107 $ 4,488 $ $ 6,227 $ 47,100 $ 4,191,543 139,464 $ 

 84,609 2,909 3,337 3,760 2,909 6,759 436,261 18,714 

 (2,832) (327) (313) 12,070 (2,286) (2,342) (298,581) 9,246 

 89,602 23,893 10,131 20,318 6,850 51,517 4,329,223 167,424 

 532,116 558,620 361,843 159,362 45,879 297,070 160,845,900 617,290 

 - - - - - - - 22,007,749

 86,607 (5,594) 1,562 5,814 209,757 3,783 8,128,492 274,048 

$ 708,325 576,919 $ 373,536 $ 185,494 $ 262,486 $ 352,370 $ 1,058,762 $ 195,311,364 $ 

$ 671,072 558,798 $ 368,702 $ 168,707 $ $ 255,466 $ 281,836 $ 191,935,103 973,522 $ 

 480 13 1,998 11,749 2,070 21,417 1,189,123 45,768 

 - - - - - - - 62,478

 36,773 18,108 2,836 5,038 4,950 49,117 2,124,660 39,472 

 37,253 18,121 4,834 16,787 7,020 70,534 3,376,261 85,240 

$ 708,325 576,919 $ 373,536 $ 185,494 $ 262,486 $ 352,370 $ 1,058,762 $ 195,311,364 $ 

$ 114,323 111,859 $ 37,810 $ 46,436 $ $ 90,040 $ 43,715 $ 18,448,078 371,178 $ 

 (516) (9,703) - - (17,190) (7,768) - (1,911,539) 

 113,807 102,156 37,810 46,436 72,850 43,715 16,536,539 363,410 

 671,072 558,798 368,702 168,707 255,466 281,836 191,935,103 973,522 

 (615,106) (565,513) (356,328) (168,436) (253,403) (258,324) (194,159,697) (885,003) 

 (195) 7,204 - - 16,307 (2,109) - (56,958) 

 (84,609) (2,909) (3,337) (3,760) (2,909) (6,759) (436,261) (18,714) 

$ 84,969 99,736 $ 46,847 $ 42,947 $ 88,311 $ 60,468 $ 431,106 $ 13,818,726 $ 

$ 85,680 102,235 $ 46,847 $ 42,947 $ $ 89,194 $ 60,468 $ 15,787,223 440,983 $ 

 (711) (2,499) - - (883) (9,877) - (1,968,497) 

$ 84,969 99,736 $ 46,847 $ 42,947 $ 88,311 $ 60,468 $ 431,106 $ 13,818,726 $ 

$ 618,723 553,026 $ 363,405 $ 165,176 $ $ 255,636 $ 300,853 $ 190,982,141 891,338 $ 

 (86,412) (1,610) (1,562) (5,814) (226,063) (3,783) (8,071,535) (271,937) 

 (195) 7,204 - - 16,307 (2,109) - (56,958) 

$ 532,116 558,620 $ 361,843 $ 159,362 $ 45,880 $ 297,070 $ 617,292 $ 182,853,648 $ 

$ 615,106 565,513 $ 356,328 $ 168,436 $ $ 253,403 $ 258,324 $ 194,159,697 885,003 $ 

 (86,412) (1,610) (1,562) (5,814) (226,063) (3,783) (8,071,535) (271,937) 

 528,694 563,903 354,766 162,622 27,340 254,541 186,088,162 613,066 

 - - - - - (26,608) - (53,119,556) 

$ 528,694 563,903 $ 354,766 $ 162,622 $ 27,340 $ 254,541 $ 586,458 $ 132,968,606 $ 

FY 2012 Agency Financial Report    155

Other Accompanying Information

(Unaudited)

     United States Department of Labor     157

Top Management Challenges

The Top Management Challenges identified by the Office of the Inspector General (OIG) for the Department of

Labor (DOL) are discussed below.   

2012 Top Management Challenges Facing the Department of Labor

For 2012, the OIG considers the following as the most serious management and performance challenges facing the

Department:   

• Protecting the Safety and Health of Workers

• Protecting the Safety and Health of Miners

• Improving Performance Accountability of Workforce Investment Act Grants

• Ensuring the Effectiveness of the Job Corps Program

• Reducing Improper Payments

• Maintaining the Integrity of Foreign Labor Certification Programs

•       Ensuring the Security of Employee Benefit Plan Assets

• Securing Information Technology Systems and Protecting Related Information Assets

•       Ensuring the Effectiveness of Veterans’ Employment and Training Service Programs

•       Improving Procurement Integrity

For each challenge, the OIG presents the challenge, the OIG’s assessment of the Department’s progress in

addressing the challenge, and what remains to be done. These top management challenges are intended to identify

and help resolve serious weaknesses in areas that involve substantial resources and provide critical services to the

public.

CHALLENGE:  Protecting the Safety and Health of Workers

OVERVIEW

The Occupational Safety and Health Administration (OSHA) was established by the Occupational Safety and Health

Act of 1970 (OSH Act). OSHA’s mission is to assure, so far as possible, that every working man and woman has safe

and healthy working conditions. OSHA ensures the safety and health of more than 130 million workers at over

seven million establishments by setting and enforcing workplace safety and health standards; providing training,

outreach, and education; and encouraging continuous improvement in workplace safety and health.

CHALLENGE FOR THE DEPARTMENT

With more than seven million entities under its oversight and Bureau of Labor Statistics’ preliminary data indicating  

that 4,609 workers suffered fatal workplace injuries in 2011, OSHA continues to be challenged on how to best

target its resources to the highest‐risk worksites nationwide and to measure the impact of its policies and programs

and those of the 27 states authorized by OSHA to operate their own safety and health programs. OSHA carries out

its enforcement responsibilities through a combination of self‐initiated and complaint investigations, but can reach

only a fraction of the entities it regulates. Consequently, OSHA must strive to target the most egregious and

persistent violators and protect the most vulnerable worker populations.

Recent OIG audits have found that the highest risk industries and worksites were not always targeted and

inspected, and OSHA lacked outcomes‐based performance metrics to measure and demonstrate the causal effect

of its own Federal programs on the safety and health of workers nationwide. Without such metrics, OSHA cannot
Other Accompanying Information

(Unaudited)

158     United States Department of Labor

determine the effectiveness of either Federally‐operated or state‐run worker safety and health programs, and, as

such, cannot ensure that its limited resources are being used efficiently and with the greatest possible impact on

worker safety and health.  

DEPARTMENT’S PROGRESS AND WHAT REMAINS TO BE DONE

OSHA has established a workgroup with state representatives in order to develop and adopt effectiveness

measures for state‐operated safety and health programs. Moreover, OSHA is working on establishing regular

processes for evaluating the success of its enforcement strategies in helping to achieve its desired outcomes. In this

regard, the Department initiated a multi‐year study of OSHA’s Site Specific Targeting (SST) program to assess the

impact of the program interventions on future employer compliance.

OSHA should continue its efforts to work with state representatives on implementing effectiveness measures for

state‐operated safety and health programs. OSHA should also include the highest risk worksites in SST program

targeting, prioritize and complete inspections of the highest risk worksites, and continue with the study on the SST

program which is expected to conclude during FY 2013. Finally, OSHA needs to strengthen its oversight and

increase the effectiveness of its Management Accountability Program.

CHALLENGE:  Protecting the Safety and Health of Miners

OVERVIEW

The Federal Mine Safety and Health Act of 1977, as amended by the Mine Improvement and New Emergency

Response Act of 2006 (MINER Act), charges the Mine Safety and Health Administration (MSHA) with protecting the

health and safety of more than 380,000 miners who work at over 14,100 mines nationwide.

CHALLENGE FOR THE DEPARTMENT

MSHA continues to be challenged to effectively manage its resources to meet statutory mine inspection

requirements while successfully accomplishing other essential functions to help ensure that every miner returns

home safely at the end of each day. Our audits have shown that MSHA remains challenged to maintain a cadre of

experienced and properly trained enforcement staff to meet its statutory enforcement obligations. This challenge

will soon be exacerbated by retirements, with more than 50 percent of MSHA’s enforcement personnel eligible to

retire by 2014. MSHA also faces challenges in establishing a successful accountability program, and to some degree,

deficiencies continue to recur. In addition, as scientific knowledge and mining practices change, MSHA must

promote the development and use of new technologies and ensure that its standards and regulations keep pace.  

DEPARTMENT’S PROGRESS AND WHAT REMAINS TO BE DONE

MSHA has made some progress in addressing these challenges. MSHA continues to identify and hire mine inspector

candidates, within authorized personnel levels, through job announcements and employment screening events

held in various locations throughout the country. In addition, MSHA maintains a single‐source web‐based page in

order to provide potential mine inspector trainees with hiring information.

MSHA has initiated a “Rules to Live By” campaign which targets common mining deaths, recognized OSHA

standards on fall protections, and implemented pre‐assessment conferences to allow resolution of citations and

orders before litigation.  Additionally, MSHA’s rulemaking agenda includes new regulations for proximity detection

systems for mobile machines in underground mines and lowering miners' exposure to coal mine dust.

MSHA has made multiple changes to its organizational and reporting structures and several revisions to policies and

procedures to improve its accountability program, but this remains a work in progress. MSHA must continue to

develop a succession plan in order to ensure that properly trained mine inspectors are ready to step in as
Top Management Challenges  

(Unaudited)

FY 2012 Agency Financial Report    159

retirements occur, fully implement its accountability program, timely complete its rulemaking agenda, and

encourage technological advances.

CHALLENGE: Improving Performance Accountability of Workforce Investment Act Grants  

OVERVIEW

In Fiscal Year (FY) 2012, the Department’s Employment and Training Administration (ETA) was appropriated $3.2

billion for the Workforce Investment Act (WIA) Adult, Dislocated Worker, and Youth programs. WIA adult

employment and training services are provided through formula grants to states and territories or through

competitive grants to service providers to design and operate programs for disadvantaged, often unemployed

persons.    ETA also awards grants to states to provide reemployment services and retraining assistance to

individuals dislocated from their employment. Youth programs are funded through grant awards that support

program activities and services to prepare low‐income youth for academic and employment success, including

summer jobs.

CHALLENGE FOR THE DEPARTMENT

The Department is challenged in ensuring that the WIA grant programs are successful in training and placing

workers in suitable employment to reduce chronic unemployment, underemployment, and reliance on social

payments by the population it serves.    Our audit work over several decades has documented the difficulties

encountered by the Department in obtaining quality employment and training providers; ensuring that

performance expectations are clear to grantees and sub‐grantees; obtaining accurate and reliable data by which to

measure and assess the success of grantees and states in meeting the program’s goals; providing active oversight of

the grant making and grant execution process; disseminating proven strategies and programs for replication; and,

most critically, ensuring that training provided by grantees leads to placement in training‐related jobs paying a

living wage.   

For example, our audit in 2008 of the $271 million High Growth Job Training Initiative to help workers acquire

necessary skills for jobs in high growth industries such as health care and biotechnology disclosed that ETA awarded

most of the grants non‐competitively, that grantee performance expectations were so unclear in many cases we

could not determine whether or not they met their goals and, where the agreements had more clarity, we

determined that grantees did not meet objectives with respect to: training and placement goals; product

completion; product delivery and required tracking of outcomes.  The lack of clarity in grant proposals that were

approved called into question the rigor of ETA’s review of the proposals and the merit of ETA’s decision to award

the grants, especially because ETA decided to award them non‐competitively.  A 2011 OIG audit of the WIA Adult

and Dislocated Worker program found that 37 percent of program participants either did not obtain employment

or their employment was unrelated to the training that they received.  OIG projected that the amount of funds paid

for this training outcome totaled approximately $124 million.  Our October 2012 audit of the $500 million Recovery

Act Green Jobs program designed to train those most affected by the recession for jobs in “green” industries found

that the program had limited success because 47 percent of those served already had a job; that only 38 percent of

those trained were placed in jobs; and that, as of December 2011, only 16 percent of the collective job retention

goal had been met.  We also found that almost half of the training provided consisted of 1‐5 days of training, that

92 percent of “credentials” received for participating in the program were merely certificates of completion, and

that there were significant disparities of participant job retention goals proposed by grantees and approved by ETA.  

A finding common in all three audits, was the significant problem in obtaining accurate, reliable, and detailed

performance data from grantees, sometimes requiring us to reconstruct records in order to be able to make

assessments as to what was actually accomplished.   
Other Accompanying Information

(Unaudited)

160     United States Department of Labor

DEPARTMENT’S PROGRESS AND WHAT REMAINS TO BE DONE  

ETA recently awarded 26 Workforce Innovation Fund grants with the goal of evaluating strategies for delivering

services more efficiently, achieving better outcomes, and facilitating cooperation across programs and funding

streams. ETA has indicated that it will capture promising practices and lessons learned and share them with the

broader workforce system.  In addition to this type of program evaluation, ETA should continue to closely monitor

the WIA grants and address the disconnections between the training provided and the realities of the job market.

To that end, ETA should consider using Labor Market Information tools and provide technical assistance to

grantees.

ETA has made design changes to the WIA Gold Standard Evaluation of the Adult and Dislocated Worker programs.

ETA expects to receive the first evaluation report (on implementation) during the Fall of 2013, the first impact

report in 2015 and the final report in 2016. Through this evaluation, ETA intends to measure the net impact of

specific interventions, such as the incremental effects of the intensive and training services provided to adults and

dislocated workers. The multi‐year WIA Gold Standard is funded on an annual basis and is contingent on the

availability of appropriated funding.  

ETA and the Department have identified the reauthorization of WIA as a legislative priority and have specified

several goals that the Department believes should be a focus of the reauthorization process. Among those goals is

improving accountability by updating the performance measures used by WIA programs.

To meet the increased demand for services and improve coordination with other service providers, ETA continues

to work with the Department of Health and Human Services to develop a strategy for addressing client needs in the

One‐Stop Center setting. The regions are working with various Federal agencies to coordinate activities at the state

level. Activities include the coordination of training strategies to maximize employer skill needs and the facilitation

of successful outcomes from the TANF program.    

The OIG considers these initiatives to be of importance. In particular, we recommend that ETA give maximum

priority to the goal of evaluating strategies for delivering services more effectively and efficiently to address the

many grant making and program performance issues we have identified over the past several decades.

CHALLENGE:  Ensuring the Effectiveness of the Job Corps Program

OVERVIEW

The Job Corps program provides residential and nonresidential education, training, and support services to

approximately 60,000 disadvantaged, at‐risk youths, ages 16‐24, at 125 Job Corps centers nationwide.  The goal of

this $1.7 billion program is to offer an intensive intervention to this targeted population as a means to help them

turn their lives around and prevent a life‐time of unemployment, underemployment, dependence on social

programs, or criminal behavior.

CHALLENGE FOR THE DEPARTMENT

The Department is challenged in providing a safe, residential and nonresidential education and training program

which results in outcomes that truly assist at‐risk, disadvantaged youth in turning their lives around including:

placement in training‐related employment, entrance into advanced vocational/apprenticeship training, entrance

into higher education, or enlistment in the military. Our audits have consistently documented the Department’s

difficulty in ensuring the quality of residential life, a critical component of the Job Corps intensive intervention

experience.  Specifically, our audits have disclosed safety and health hazards and physical maintenance needs at

various centers as well as, in some instances, a lack of enforcement of disciplinary policies.
Top Management Challenges  

(Unaudited)

FY 2012 Agency Financial Report    161

Our audits have also demonstrated the challenge faced by the Department in obtaining and documenting desired

program outcomes. Most centers are operated by contractors through performance‐based contracts with incentive

fees and bonuses which are tied directly to contractor performance. Absent strict oversight, there is a risk that

contractors will overstate performance results and maintain disruptive students on site. We have also documented

problems with ETA’s reporting of job training matches. A 2011 audit found that 3,226 of the 17,787 placements

reported for the periods reviewed either did not relate, or poorly related, to the vocational training received (e.g.,

students trained in office administration placed in fast food restaurants) and another 1,569 students were placed in

jobs that required little or no previous skills or experience, such as parking lot attendants, janitors, and

dishwashers.

We have also documented significant problems with centers being unable to ensure that funds are only being

expended on serving participants who qualify for the program, and centers being unable to ensure that major

procurements include proper competition and ensure best value to the program.  

DEPARTMENT’S PROGRESS AND WHAT REMAINS TO BE DONE

The Department conducted on‐site safety and health evaluations at 123 centers; trained center safety officers and

staff; and published several information notices and policy changes. To improve its reported performance data, Job

Corps is updating its Job Training Match Crosswalk to align with the revised DOL O*NET‐Standard Occupational

Classification database, which characterizes all jobs in the U.S. labor market. OIG continues to recommend that Job

Corps provide rigorous oversight of contractors at all centers to: ensure they provide a safe environment that is

conducive to learning; ensure that only those who qualify for the program are served; improve the transparency

and reliability of performance metrics and outcomes; and ensure that center operators and other service providers

comply with applicable procurement requirements.

CHALLENGE:  Reducing Improper Payments  

OVERVIEW

The Office of Management and Budget (OMB) has designated the Unemployment Insurance (UI) and Workforce

Investment Act (WIA) programs as being at risk of making significant improper payments. The Federal Employees

Compensation Act (FECA) program is also susceptible to improper payments. In total, for Fiscal Year (FY) 2011, the

Department reported improper payments totaling approximately $13.7 billion.

According to the U. S. Government Accountability Office, the UI program reported the fourth highest dollar amount

of improper payments of any Federal program in FY 2011. Over the past three fiscal years, payments to UI

recipients have grown to unprecedented levels, totaling about $389 billion. This rapid, large growth, especially in

Federally‐funded emergency and additional benefits, has increased the risk of improper payments. Indeed, the UI

improper payment rate has increased from 11.2 percent in FY 2010 to 12.0 percent in FY 2011, and remains well

above the target rate of 9.8 percent.  

CHALLENGE FOR THE DEPARTMENT

Identifying and reducing the rate of improper payments in the UI program continues to be a challenge for the

Department, as evidenced by the increasing rate of improper payments in recent years. Our audits have found that

the Department lacked effective controls over the detection of improper payments for both the UI state and

Federal programs, and that the Department’s estimate of recoverable payments may be understated. In addition,

OIG investigations continue to uncover fraud committed by individual UI recipients who do not report or

underreport earnings, as well as fraud related to fictitious employer schemes.
Other Accompanying Information

(Unaudited)

162     United States Department of Labor

The Department also remains challenged in identifying the full extent of improper payments in the WIA and FECA

programs. As highlighted in past OIG audits, the estimation method used for the FECA program does not appear to

provide a reasonable estimate of improper payments. Without this information, the Department cannot implement

the appropriate corrective actions that will reasonably assure taxpayers’ funds are adequately safeguarded. In

addition, OIG investigations continue to identify high amounts of FECA compensation and medical fraud, which has

often greatly surpassed the Department’s improper payments estimates. For the WIA program, we have noted that

data are not readily available to allow the Department to directly sample grant payments to develop a statistically

valid estimate of improper payments.

DEPARTMENT’S PROGRESS AND WHAT REMAINS TO BE DONE

The Department continues to work with states to implement a number of strategies to improve prevention,

detection and recovery of UI improper payments. Among numerous other initiatives, the Department has launched

a website that clearly identifies each state’s estimated UI improper payment rate and payments over a 3‐year

period, and has undertaken the “Improper Payment High Priority States” initiative to reduce the UI improper

payment rate in those states with unacceptably high levels over a prolonged period. However, the Department

needs to employ cost benefit and return on investment analyses to evaluate the impact of those improper payment

reduction strategies. The Department can further improve oversight of the states’ detection and prevention of UI

overpayments by increasing the frequency of on‐site reviews at State Workforce Agencies. The Department must

also ensure that California – the state with the largest amount of estimated UI improper payments – has

implemented the National Directory of New Hires (NDNH) by December 31, 2012. In addition, the Department

needs to continue pursuing legislation to allow States to use a percentage of recovered UI overpayments to detect

and deter benefit overpayments.

With respect to improper payments in the FECA program, the Department stated that it is in the process of

designing a methodology for estimating the FECA improper payment rate. In the WIA program, the Department has

attempted to identify the full extent of improper payments by including estimates from other sources, but it should

continue to consider other sampling methods in order to provide a more complete estimate of improper payments.

Further, the Department needs to provide full disclosure in the Agency Financial Report regarding the limitations of

the data used to estimate WIA overpayments.

CHALLENGE:  Maintaining the Integrity of Foreign Labor Certification Programs

OVERVIEW

The Department’s Foreign Labor Certification (FLC) programs are intended to provide U.S. employers access to

foreign labor in order to meet worker shortages – as long as U.S. workers are not adversely affected. The H‐1B visa

specialty workers’ program requires that employers, who intend to employ foreign specialty occupation workers on

a temporary basis, file labor condition applications with the Department. The H‐2A program allows agricultural

employers, who anticipate a shortage of domestic workers, the ability to bring nonimmigrant foreign workers to

the U.S. to perform agricultural labor or services of a temporary or seasonal nature. The H‐2B program establishes a

means for U.S. nonagricultural employers to bring foreign workers into the U.S. to meet temporary worker

shortages.

CHALLENGE FOR THE DEPARTMENT

DOL is challenged to provide U.S. businesses access to foreign workers to meet their workforce needs while

protecting the jobs and wages of U.S. workers. Our audits have found that statutory limits on the Department’s

authority, and uncertainty regarding the process for including individuals or entities debarred on the government‐

wide excluded parties lists are some of the issues that have negatively impacted the H‐1B program. For the H‐2B

program, the Department published a new rule establishing a compliance‐based format that emphasizes the review
Top Management Challenges  

(Unaudited)

FY 2012 Agency Financial Report    163

of documentation provided to ETA in advance of its certification determination; this action addresses challenges

related to the old attestation model established in 2008. However, due to pending legal actions, the Department is

temporarily enjoined from implementing or enforcing the revised rule and continues to operate under the

attestation model in which employers merely assert, but do not demonstrate, that they have performed an

adequate test of the U.S. labor market before hiring foreign workers in lieu of U.S. workers.

OIG investigations continue to uncover schemes carried out by immigration attorneys, labor brokers, and

transnational organized crime groups. Our investigations have repeatedly revealed that fraudulent applications

filed with DOL on behalf of fictitious companies, as well as schemes wherein fraudulent applications were filed

using the names of legitimate companies without the companies’ knowledge. Additionally, we continue to uncover

complex schemes involving fraudulent DOL FLC documents filed in conjunction with or in support of similarly

falsified identification documents required by other Federal and state organizations.

DEPARTMENT’S PROGRESS AND WHAT REMAINS TO BE DONE

To address the H‐1B challenge, the Department has entered into a contract with a third‐party vendor in order to

have access to a more comprehensive employer identification database and verification system. To improve the H‐

2B program, ETA has issued two new final rules, one for determining prevailing wage rates and another which

replaced the self‐attestation model with a compliance‐based format. The effective date of the wage rule has been

extended to March 27, 2013, because of legislation which prevents the use of funds to implement, administer or

enforce the rule.  The new rule establishing a compliance‐based format emphasizes the review of documentation

provided to ETA in advance of the certification determination. However, due to pending legal actions, the

Department is temporarily enjoined from implementing or enforcing the revised rule. This matter is on appeal to

the U.S. Court of Appeals for the Eleventh Circuit and the Department expects a decision in the second quarter of

FY 2013. The Department is also working on ways to include FLC suspensions and debarments on the

government‐wide excluded parties list, and made its first referral in July 2012.

The Department still needs to evaluate the results of its certification processes in order to assess their

effectiveness. In addition, the Department needs to enhance its monitoring of the H‐2B application process in order

to ensure that employers are fully complying with program requirements and intentions. DOL also needs to make

adjustments in order to enhance the integrity of its employer verification services by fully implementing its

electronic employer verification controls over the H‐1B program and the remaining FLC programs. Furthermore,

DOL needs to continue assessing and applying its debarment action and ensure debarments are reported to

appropriate DOL personnel for inclusion in the government‐wide exclusion system. Finally, ETA needs to ensure

State Workforce Agencies (SWAs) have implemented the methods for reviewing and clearing job orders and making

interstate referrals of U.S. workers as reported in their FY 2012 state grant plans.

CHALLENGE:  Ensuring the Security of Employee Benefit Plan Assets

OVERVIEW

The mission of the Department’s Employee Benefits Security Administration (EBSA) is to protect the security of

retirement, health, and other private‐sector employer‐sponsored benefit plans for America’s workers, retirees, and

their families. EBSA is responsible for administering and enforcing the fiduciary, reporting, and disclosure provisions

of Title I of the Employee Retirement Income Security Act (ERISA). It has jurisdiction over an estimated 707,000

retirement plans, 2.3 million health plans and a similar number of other welfare plans. These plans hold about $6.7

trillion in assets and cover approximately 141 million participants and beneficiaries.  
Other Accompanying Information

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164     United States Department of Labor

CHALLENGE FOR THE DEPARTMENT

EBSA’s limited authority and resources present challenges to achieving its mission of administering and enforcing

ERISA requirements for an estimated 5.3 million employee benefit plans covering approximately 141 million

participants and beneficiaries. Chief among EBSA’s challenges over the past couple of decades has been the fact

that millions in pension assets held in otherwise regulated entities, such as banks, escape audit scrutiny because of

limited scope audits authorized under ERISA, which result in no opinion on the financial status of the plan by the

independent public accountants that conduct the limited review.  These concerns were renewed and heightened by

recent audit findings that as much as $3.3 trillion in pension assets received these types of no opinion audits,

providing no assurances to participants as to the financial health of their plans.

EBSA is further challenged by the many changes that have taken place in the employee benefit plan community

since ERISA was enacted in 1974, such as the shift from defined benefit retirement plans to defined contribution

retirement plans, the large increase in the types and complexity of investment products available to pension plans,

and the new health care law. In addition, uncertainty about the effectiveness of EBSA enforcement programs on

ERISA compliance makes it difficult for EBSA to direct its limited resources effectively among its regional offices to

the enforcement areas where they would do the most good.

DEPARTMENT’S PROGRESS AND WHAT REMAINS TO BE DONE

As an initial step in developing performance metrics to measure the effectiveness of its enforcement program,

EBSA implemented a broad Sample Investigation Program (SIP) in FY 2011, which reviewed 259 randomly selected

employee benefit plans for compliance with ERISA. EBSA continued to review plans under the SIP in 2012 and will

analyze results at the end of the year and develop the first baseline compliance measure in FY 2013.  

EBSA should complete its evaluation of the results of the Sample Investigation Program to determine what changes

are needed to improve enforcement program effectiveness. EBSA should also work to obtain legislative changes to

address deficient benefit plan audits and to ensure that auditors with poor records do not perform any additional

plan audits. In addition, EBSA should renew its efforts to obtain additional authority over plan auditors, and to

repeal the limited scope audit exception.  

CHALLENGE:  Securing Information Technology Systems and Protecting Related

Information Assets

OVERVIEW

The Department’s Information Technology (IT) systems contain sensitive information that is central to its mission

and to the effective administration of its programs. DOL systems are used to analyze and house the nation’s leading

economic indicators, such as the unemployment rate and the Consumer Price Index. They also maintain critical

data related to enforcement actions, worker safety, health, pension, and welfare benefits, job training services, and

other worker benefits.

CHALLENGE FOR THE DEPARTMENT

Safeguarding information assets is a continuing challenge for Federal agencies, including DOL. The Administration’s

goal of expanding the use of technology to create and maintain an open and transparent government, while

safeguarding systems and protecting sensitive information, has added to the challenge. Recent OIG audits have

identified access controls, background investigations, and oversight of third‐parties involved in operation and

support of IT systems, as significant deficiencies. In addition, we have identified major weaknesses in the process of

sanitizing electronic media prior to it being removed from DOL’s control and destroyed.
Top Management Challenges  

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FY 2012 Agency Financial Report    165

We have also identified issues with the timeliness of mitigating identified vulnerabilities. The Department

implemented a risk management program to prioritize corrective action plans. However, after years of planned

implementation the Department has not made measurable progress to move the program forward.

DEPARTMENT’S PROGRESS AND WHAT REMAINS TO BE DONE

The Department has made progress in establishing risk mitigation as a priority via its Risk Management program.  

The Office of the Chief Information Officer (OCIO) established Priority Security Performance Metrics and began

measuring agency progress on achieving these metrics.

The Department has also begun an IT modernization program with the goal to create a 21st‐century IT

infrastructure. As part of DOL’s IT modernization, program users will access their network accounts by logging on to

their desktops and/or laptop computers using their permanent DOL badge, also known as a Personal Identity

Verification (PIV) card. The DOL‐issued PIV card is designed to enhance security, reduce identity fraud, and protect

personal privacy.  

The IT Modernization program includes consolidating the Department’s nine infrastructures in an effort to create a

more unified, robust, and scalable IT service organization. In addition, DOL has acquired an enterprise IT system

monitoring tool to assist in configuration management, vulnerability assessment, and accounting for the inventory

of electronic devices connecting to each IT system.

To improve upon identity management and security issues, DOL needs to continue to reduce its IT footprint by

completing its data center consolidation efforts and reducing the number of external connections. Furthermore,

while the movement of email to the cloud was delayed and is not scheduled until the Summer of 2013, the

Department must take steps to ensure the cloud is secure prior to implementation. A greater presence in IT system

security is needed by the Executive level; fully implementing DOL’s planned Risk Management Program will assist in

that effort as Executives become integral to the discussion and understanding of their IT security issues and setting

mitigation priorities. To enhance security, reduce identity fraud, and protect personal privacy, DOL also needs to

ensure its PIV card workstation logon process is fully implemented throughout the Department.

CHALLENGE: Ensuring the Effectiveness of Veterans’ Employment and Training Service

Programs

OVERVIEW

The Department’s Veterans’ Employment and Training Service (VETS) programs are intended to provide both

veterans and transitioning service members the resources and services necessary for them to succeed in the

workforce by maximizing their employment opportunities and protecting their employment rights. Under the Jobs

for Veterans State Grant (JVSG) program, VETS issues grants to State Workforce Agencies to assist veterans in

obtaining and maintaining gainful employment. These grants are issued with a special emphasis on providing

intensive services to meet the employment needs of disabled veterans. Another VETS program, the Transition

Assistance Program (TAP), provides a three day training session in which participants learn techniques for job

searches, processes for career decision‐making, conditions of the current occupational and labor market, how to

write a resume, and interview techniques.

CHALLENGE FOR THE DEPARTMENT

According to data published by the Bureau of Labor Statistics, the monthly unemployment rate for veterans has

gone down over the past year, declining from 8.1 percent in September 2011 to 6.7 percent in September 2012.

However, many veterans still cannot find meaningful work, and the Department remains challenged to provide the

services these veterans need to prepare themselves for the civilian job market.  This is especially true for post‐9/11
Other Accompanying Information

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166     United States Department of Labor

veterans, as the portion of these veterans seeking work was 9.7 percent in September 2012, substantially above

the 7.4 percent unemployment rate for nonveterans. Moreover, the September 2012 unemployment rate for post‐

9/11 female veterans remained high at 19.9 percent.  

Our audits have found that JVSG staff needed to do a better job of accurately assessing the veterans’ needs and

documenting intensive service activities  ‐ particularly for homeless veterans with disabilities. We have also found

that VETS did not use measurable performance goals and outcomes to evaluate program effectiveness and lacked

adequate contracting oversight for TAP workshop services. These deficiencies undermined VETS’s ability to ensure

that it was providing a high‐quality program which helps veterans successfully transition from military to civilian

employment.

DEPARTMENT’S PROGRESS AND WHAT REMAINS TO BE DONE

In collaboration with the Department of Defense and the VA, VETS has instituted a new TAP Employment

Workshop which is scheduled to be completed in November 2012. VETS is a also collaborating with other cognizant

agencies to explore new data sharing possibilities that would allow standards and policy for monitoring TAP

Employment Workshops, student load, and Outcome Goals. VETS is also ensuring that the Disabled Veteran

Outreach Program focuses on those veterans who have the most significant barriers to employment by providing

more intensive services.

VETS still needs to ensure that JVSG program funds are used effectively to provide services to veterans and disabled

veterans who have the most significant barriers to employment. Further, VETS needs to provide rigorous oversight

over contractors, grantees, and state agencies for all programs. VETS also needs to implement standard forms and

policy for monitoring TAP Employment Workshops, establish clear performance measures and Outcome Goals, and

sign a new Memorandum of Understanding with partner agencies to define each agency’s roles and

responsibilities. In addition, VETS needs to ensure that its staff complies with management controls for contract

administration.  

CHALLENGE: Improving Procurement Integrity

OVERVIEW

The Department contracts for many goods and services to assist in carrying out its mission.  In Fiscal Year 2012, DOL

awarded an estimated 3,325 new contracts totaling about $360 million, and issued almost 6,000 modifications to

existing contracts totaling approximately $1.6 billion.

CHALLENGE FOR THE DEPARTMENT

Ensuring integrity in procurement activities is a continuing challenge for the Department. Until procurement and

programmatic responsibilities are properly separated and effective controls are put into place, DOL will continue to

be at risk for wasteful and abusive procurement practices. Our most recent audits and investigations of DOL’s

procurement activities identified the need for better control and monitoring of procurement activities delegated to

program agencies.

The current control environment surrounding the Department’s procurement activities has introduced both

financial and operational risk to DOL. The lack of standard and updated operating procedures leaves the

consistency and quality of DOL’s procurement functions heavily dependent on the various program agencies with

delegated procurement authority. OIG audits have found that DOL could not produce documentation that it

awarded some contracts based on the best value to the government. Moreover, for some contract modifications

reviewed, DOL could not produce documentation that it issued contract modifications within the scope of work and

terms of the initial contracts.  
Top Management Challenges  

(Unaudited)

FY 2012 Agency Financial Report    167

The issues described above, along with those in the Securing Information Technology Systems and Protecting

Related Information Assets challenge, highlight the need for DOL to appoint a Chief Acquisition Officer (CAO) whose

primary duty is acquisition management. DOL continues to be out of compliance with the Service Acquisition

Reform Act of 2003 requirement that executive agencies appoint a CAO whose primary duty is acquisition

management. The Assistant Secretary for Administration and Management presently serves as DOL’s CAO, while

retaining other significant non‐acquisition responsibilities.

DEPARTMENT’S PROGRESS AND WHAT REMAINS TO BE DONE

To ensure integrity in procurement activities, the Department has stepped up its efforts to ensure procurement

staff receives appropriate training. In addition, the Department has issued guidance to improve DOL's overall

procurement program that included provisions which require contractors to inform the contracting officer of

suspected procurement violations, and require agencies and Contracting Officer's Technical Representatives to

certify that task orders are properly within the scope of the contract and that there is no conflict of interest. The

Department has also issued guidance addressing procurement conflicts of interest and has provided training to DOL

senior executive staff focusing on ethics and procurement integrity, and lessons learned.

The Department needs to continue its development of standard and consistent internal controls, and compliance

frameworks for component agencies with procurement authority in order to ensure the consistency and quality of

DOL’s procurement functions. Furthermore, DOL needs to complete procurement reviews of all of its acquisition

offices, update internal policies and procedures in order to clarify the processes related to acquisition planning and

administration of procurements, and ensure all contracting officers and contracting officer representatives obtain

necessary certifications. While DOL is taking positive actions to improve procurement integrity, it has yet to appoint

a Chief Acquisition Officer whose primary duty is acquisition management.

Changes from Last Year

Changes to the Top Management Challenges from FY 2011 include the combining of “Safeguarding Unemployment

Insurance” and “Improving the Management of Workers’ Compensation Programs” into a single challenge entitled

“Reducing Improper Payments.”    Also, “Protecting the Safety and Health of Miners” is presented as a separate

challenge; in prior years it was included within the “Protecting the Safety and Health of Workers” challenge.

Ensuring the successful development and implementation of major information management systems was

previously discussed in our FY 2011 Top Management Challenges. Traditional system developments are losing their

importance as the Department moves to cloud computing services for almost all its applications. As a result, we

have removed the information system development as a separate issue in the FY 2012 Top Management

Challenges.
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168     United States Department of Labor

Summary of Financial Statement Audit and Management Assurances

The following tables provide a summary of the Department’s FY 2012 financial statement audit and its

management assurances.

Summary of Financial Statement Audit  

Audit Opinion Unqualified

Restatement No

Material Weaknesses Beginning

Balance

New Resolved Consolidated Ending

Balance

Lack of Sufficient Controls over Financial Reporting 1    1    0

Lack of Sufficient Controls over Budgetary Accounting 1    1    0

Lack of Adequate Controls over Access to Key Financial and Support Systems 1    1    0

Total Material Weaknesses 3    3    0

Summary of Management Assurances

Effectiveness of Internal Control over Financial Reporting (FMFIA § 2)

Statement of Assurance Unqualified

Material Weaknesses Beginning

Balance

New Resolved Consolidated Reassessed Ending

Balance

Weaknesses over Financial Reporting 0         0

Weaknesses over Preparation and Review of Journal Vouchers 0         0

Weaknesses over Budgetary Accounts Reconciliation 0         0

Total Material Weaknesses 0         0

Effectiveness of Internal Control over Operations (FMFIA § 2)

Statement of Assurance Unqualified

Material Weaknesses Beginning

Balance

New Resolved Consolidated Reassessed Ending

Balance

Total Material Weaknesses 0         0

Conformance with financial management system requirements (FMFIA § 4)

Statement of Assurance Systems conform to financial management system requirements

Non‐Conformances Beginning

Balance

New Resolved Consolidated Reassessed Ending

Balance

Federal Financial Management System Requirements, Internal

Controls, Preparation of Financial Statements

0         0

Total non‐conformances 0         0

Compliance with Federal Financial Management Improvement Act (FFMIA)

Agency Auditor

Overall Substantial Compliance Yes Yes

1. System Requirements Yes Yes

2. Accounting Standards Yes Yes

3. USSGL at Transaction Level Yes Yes
(Unaudited)

FY 2012 Agency Financial Report    169

Improper Payments Reporting Details

In accordance with the Improper Payments Information Act (IPIA) of 2002, as amended by the Improper Payments

Elimination and Recovery Act (IPERA) of 2010, and as implemented by OMB Circular A‐123, Appendix C,

Requirements for Effective Measurement and Remediation of Improper Payments, the Department reviews its

programs and activities annually to identify programs that may be susceptible to significant improper payments.  

For programs and activities deemed risk susceptible, the Department performs testing to estimate the rates and

amounts of improper payments, establishes improper payment reduction targets in accordance with OMB

guidance, and develops and implements corrective actions to reduce and recover improper payments.  

Additionally, the Department conducts payment recapture audits for each program and activity that expends $1

million or more annually if conducting such audits is cost‐effective.    

DOL Review of Programs and Activities  

Similar to prior years, the Department’s Fiscal Year (FY) 2012 review of its major programs and activities included

the following tasks:

 Reviewing the prior three years’ results of IPIA risk assessments and detailed tests.

 Reviewing DOL Office of Inspector General (OIG) and Government Accountability Office (GAO) audit reports

issued for DOL programs to determine whether the reports indicate control weaknesses or other issues

that could potentially impact the amount of improper payments for DOL programs.

 Reviewing results of the Department’s OMB Circular A‐123 internal control assessment to determine

whether control weaknesses were identified that could potentially impact the amount of improper

payments for DOL programs.

 Reviewing DOL programs’ funding levels for FY 2009 through FY 2011 for significant changes in program

funding that may impact the amount of improper payments.

The DOL review identified one program, the Unemployment Insurance (UI) benefit program, to be at risk of

significant improper payments in accordance with OMB criteria (programs with annual improper payments

exceeding both $10 million and 2.5% of annual program payments, or $100 million).

The Workforce Investment Act (WIA) grant program was classified as at‐risk in OMB’s former Circular A‐11, Section

57, due to its annual level of expenditures; however, the Department’s annual risk assessments have not supported

the high‐risk designation.

  

The Federal Employees’ Compensation Act benefit program (FECA) was also classified as at‐risk in OMB’s former

Circular A‐11, Section 57.  The Department’s past risk assessments have not supported the high‐risk designation for

the FECA program.  In both FY 2011 and FY 2012, the FECA program performed risk assessments which showed that

FECA continued to be not risk susceptible.    Based on the results of the risk assessments, DOL did not perform

detailed testing of the FECA program in FY 2012.  DOL is designing a revised methodology for performing detailed

testing of the FECA program as the basis for assessing risk and estimating an improper payment rate for the

program.

In FY 2012, the Department performed detailed testing for the UI and WIA programs to estimate the level of

improper payments and their major causes.  The Department has taken corrective actions to address the causes

and reduce improper payments in these programs and has established improper payment reduction targets in

accordance with OMB guidance.  
Other Accompanying Information

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170     United States Department of Labor

Table 1 shows the FY 2011 – FY 2015 targets and projected rates for Department’s “At‐Risk” programs.

   

Table 1: Target and Actual Improper Payments Rates for the Department’s At‐Risk Programs

DOL Program FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Target Actual Target Actual Target Target Target

   Unemployment Insurance (UI) 9.8% 12.0% 9.7% 11.42% * * *

   Workforce Investment Act (WIA) 0.07% 0.31% 0.44% 0.22% 0.44% 0.44% 0.44%

*Integrity rate targets for FY 2013 to FY 2015 will be set based on an alternative methodology explained in section II ‐ UI Statistical

Sampling.

The FY 2012 error rate target for UI’s improper payments was 9.7% as compared to the actual error rate of 11.42%

(10.81% overpayment rate plus 0.61% underpayment rate) for the period July 2011 to June 2012, the most recent

period for which data was available.

The UI improper payment rate decreased from 12.0% for the 2011 reporting period (11.35% overpayments and

0.65% underpayments).  This decrease is primarily the result of decreases in overpayment rates for several root

causes, especially Employment Service (ES) registration (which declined from 1.03% to 0.74%) and Benefit Year

Earnings (BYE) which decreased from 3.44% to 3.23%.  BYE overpayments occur when claimants continue to claim

benefits after they return to work.  Corrective actions to address these and other causes of improper payments are

described in Section III.

As a result of the Department’s efforts to improve the accuracy of the measured rate, OMB approved a revised WIA

annual target rate beginning with FY 2012.

Unemployment Insurance Program  

Overview  

The single largest program at the DOL is the UI program, which represented over $90.16 billion in outlays in FY

2012.  Because the improper payments for UI are above $750 million and are estimated to be over 10%, the UI

program is classified as a high‐priority program, the only program with this designation within the DOL.

Enhancing Federal and state efforts to reduce improper payments in the UI program is a top priority at DOL.  

Additionally, the UI program is continuing to emphasize the recovery of overpayments by performing payment

recapture activities and providing states with tools to aid their recovery efforts.   

I.     UI Risk Assessment

The outlays for the UI program (State UI, Unemployment Compensation for Federal Employees [UCFE],

Unemployment Compensation for Ex‐Service Members [UCX], Extended Benefits [EB], Emergency Unemployment

Compensation 2008 [EUC08] and Federal Additional Compensation [FAC]) decreased in FY 2012 to an estimated

$90.16 billion, compared with $114 billion in FY 2011, reflecting (1) improved labor market conditions, (2) a

significant drop in EUC08 program payments, which decreased from $52.66 billion in 2011 to an estimated $39.99

billion in 2012, and (3) a decrease in EB payments, which decreased from $11.92 billion in 2011 to an estimated

$5.15 billion in 2012.   

The UI’s estimated annual improper payments for 2012 are $10.30 billion, consisting of $9.75 billion in

overpayments and $550 million in underpayments.  The estimates are based on the results of the Benefit Accuracy

Measurement (BAM) survey, which includes payments from the State UI, UCFE, and UCX programs, but does not
Improper Payments Reporting Details

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FY 2012 Agency Financial Report    171

include EUC and EB payments.  For the purposes of reporting UI payment accuracy data required by the IPIA, the

estimated improper payment rates are assumed to generally reflect the accuracy of benefit payments from the EUC

and EB programs, although they are not directly measured by the BAM survey.  The BAM survey methodology is

described in Section II – UI Statistical Sampling.

II.   UI Statistical Sampling

The following sampling was performed for the UI benefit program:  

Sampling Process:  Improper payment rates are estimated from the BAM program.  BAM includes the three largest

permanently authorized unemployment compensation (UC) programs: State UI1

, UCFE, and UCX.  The Department

reports an improper payment rate, which is the combined Annual Report Overpayment Rate and the

Underpayment Rate, required by the IPIA.    Executive Order 13520 required “high‐priority” federal programs to

develop supplemental measures.   The Department, in consultation with OMB, developed two supplemental

measures  ‐  the Operational Rate, which includes fraud and non‐fraud recoverable overpayments that state

agencies are expected to identify and establish for recovery, and the Employment Service (ES) Registration Rate,

which measures the percentage of UI claimants who were required to register with the state ES, but who were not

actively registered during the paid week selected for the BAM audit.   The Department reports these two

supplemental measures quarterly for publication on the Department of the Treasury Payment Accuracy Web site

(www.paymentaccuracy.gov/).   The Operational Rate is also reported annually as part of the IPIA reporting

requirements.

BAM investigators in each state conduct comprehensive audits for randomly selected weekly samples of paid and

denied claims.  Effective January 2008, all paid claims sampled for BAM investigation must be matched with the

National Directory of New Hires (NDNH) database to improve the ability to detect overpayments due to individuals

who claim benefits after returning to work, the largest single cause of UI overpayments.  The universe (population)

includes paid and denied claims under the State UI, UCFE, and UCX programs.    However, because the claims

processes and eligibility requirements are very similar for the additional benefits paid to unemployed individuals

under the EB, EUC08, and FAC programs, the estimated improper payment rates are assumed to generally reflect

the accuracy of these benefit payments.  Overpayment and underpayment rates for FY 2012 shown in the Improper

Payment Reduction Outlook Table are for the period July 1, 2011 to June 30, 2012.   Data are reported for this

period rather than the fiscal year because a higher percentage of BAM investigations have been completed and

will, therefore, produce more accurate estimates.    For the period July 1, 2011 to June 30, 2012, state agencies

completed audits for 24,783 paid claims cases, a completion rate of 99.7%.  Additional information about the BAM

methodology can be found at:  www.oui.doleta.gov/unemploy/bam/2011/bam‐cy2011.pdf.

During 2012, DOL developed an alternative metric to measure improper payments that takes into account the

“net” effect of UI overpayment recoveries.  The alternative rate includes the two components in the rate that are

currently reported annually as part of IPIA reporting requirements ‐ total overpayments plus total underpayments ‐

and subtracts the amount of overpayments recovered by state workforce agencies.

 Overpayments include fraud, non‐fraud recoverable, and non‐fraud non‐recoverable overpayments.

 Underpayments include benefits payable to the claimant and underpayments not payable due to state

finality rules or other disqualifying issues.

 Both the overpayment and underpayment rates include all causes.

 

1 The 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands (referred to as states/areas) administer UI

programs.  The U.S. Virgin Islands does not participate in BAM.  
Other Accompanying Information

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172     United States Department of Labor

 Currently, the Department reports overpayment and underpayment rates estimated from the results of the

BAM survey.  The alternative measure includes two components ‐‐ improper payments, which will continue

to be estimated from BAM, and overpayment recoveries, which are based on actual amounts reported by

the state workforce agencies on the ETA 227 Overpayment Detection and Recovery reports for UI, UCFE,

UCX, and EUC.   

Table 2 summarizes the current IPIA rate and the alternative rate for the 2012 IPIA reporting period (July 2011 to

June 2012).

Table 2: UI Improper Payment Rate

UI Improper Payment Rates 2012 IPIA Rate

   IPIA Rate (Current:  Overpayment rate (OP) + Underpayment rate (UP)) 11.42%

   Alternative Rate:  OP + UP – Overpayments Recovered 9.22%

III.   UI Corrective Actions

OMB has established the following categories to classify the root causes of improper payments in the UI program:  

(1) Documentation and Administrative Errors, (2) Verification Errors, and (3) Authentication and Medical Necessity

Errors.

These categories do not align precisely with the way in which the UI program classifies root causes.    The BAM

survey collects data on state workforce agency actions associated with the processing of overpayments.   

Table 3 displays the crosswalk between the OMB classification for Documentation and Administrative Errors and

Verification Errors and the BAM data.   No UI overpayments fit the definition of the Authentication and Medical

Necessity Errors category.

Table 3: OMB‐Specified Causes of Errors and BAM Data Crosswalk

Overpayment Causes (OMB Classification) Percent of Overpayments

   Documentation and Administrative Errors: 14.82%

      Procedures Not Followed by Agency 5.26%

      Agency Took Incorrect Action 8.07%

      Other Agency Errors 1.37%

      Agency Provided Incorrect Information 0.12%

   Verification Errors: 85.18%

      Issue Not Detectable By Agency Procedures 73.10%

      Agency Had Documentation/Did Not Resolve Properly 8.08%

      Agency In Process of Resolving 2.56%

      New Hire Cross‐Match 1.04%

      Wage Record Cross‐Match 0.40%

Table 4 reflects the root causes of UI overpayments.  The Department classifies the root causes of UI overpayments

according to the following categories:
Improper Payments Reporting Details

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FY 2012 Agency Financial Report    173

Table 4: Root Causes of UI Overpayments

Annual Report Rate Overpayments Percent of

Overpayments    

(2012 IPIA Rate)

    Benefit Year Earnings (BYE) 29.85%

    Separation   21.18%

    Work Search   20.55%

    Employer Service Registration 6.81%

    Able and Available   5.29%

    Base Period Wages   4.98%

    Other Eligibility Issues1 3.61%

    All Other Issues2 7.73%

        Total    100.00%

1

Other Eligibility Issues include refusal of work, self‐employment, failure to report for agency review or report requested information,

citizenship status, and claiming benefits using a false identity.

2

Other issues include adjustments to dependents’ allowance, adjustments to benefits due to claimant receipt of income from severance

pay, vacation pay, Social Security, or employer pension, back pay awards, payment during a period of disqualification, or agency

redetermination of eligibility.

Reducing Improper Payments in Unemployment Insurance  

In response to the level of improper payments in the UI program, ETA has developed a Strategic Plan to address

several root causes of improper payments.    A high level summary of the Strategic Plan is available at

http://www.dol.gov/dol/maps/Strategies.htm.

Funds for UI are disbursed and monitored through established systems and processes.  In addition, the Department

has taken and will continue to take various actions to minimize and manage risk, including the following:

 Conducting outreach to states and other eligible grant applicants to communicate policies and guidelines

and utilizing the regional office Federal Project Officers to conduct and document quarterly desk reviews of

financial obligations, expenditures, and program performance.  Grantees identified as “high‐risk grantees”

through these reviews are given priority attention for on‐site monitoring.   

 Training grantees on Federal grant requirements, performance expectations, fiscal and program

requirements, and allowable use of funds.  

 Closely monitoring the draw‐down of UI’s funds from the specific accounts and ensuring systems are in

place for reporting information required for monitoring and evaluating the operations of these programs.

 Conducting program reviews to ensure that the various activities are properly implemented, including the

use of funds according to various operating instructions and guidance provided to the states.

Goals for improving UI’s improper payment program included:

 Working with the states to develop and implement processes to identify and recapture improper payments;

 Defining audit procedures to be performed on selected items;
Other Accompanying Information

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174     United States Department of Labor

 Developing a framework for identifying improper payments and providing guidance to implement that

framework;  

 Establishing appropriate payment recapture targets; and

 Utilizing statutory and regulatory authorities to recapture improper payments.

Several factors contribute to improper UI payments.  Efforts to reduce costs of taking claims and improve customer

service prompted the states to design remote claims processing. The transition from in‐person claims to remote

claims processing (phone and internet) has depersonalized the process, making it easier for claimants to make false

statements, and has had the additional side effect of precluding valuable prevention activities (such as agency

messaging to reinforce eligibility requirements with claimants and questioning claimants with respect to their

active work search efforts and benefit year employment issues) and contributed to the rise of improper payments.  

Additionally, the states are required to meet benefit payment timeliness performance standards, which may result

in some eligibility decisions that are based on incomplete or untimely information.

DOL is actively working with the states to reduce improper payments.   All states have been called to action to

ensure that UI integrity is a top priority and to develop state specific strategies to bring down the overpayment

rate.    Specific attention and assistance has been given to those states with the largest impact on the improper

payment rate.  This work is continuing with all the states, particularly those with unacceptably high overpayment

rates.

Additionally, DOL has provided states with supplemental funding to implement strategies and technology‐based

infrastructure investments that will help the states to prevent, detect and recover UI overpayments. These grants

demonstrate DOL’s commitment to the development of integrity‐related systems focused on the proper payment

of UI benefits. These systems can result in significant savings of staff costs for integrity‐related activities, increased

dollar amounts of overpayments recovered, and prevention of future overpayments.   

Between FY 2005 and FY 2011, DOL provided approximately $110 million to states in supplemental funding for

integrity related projects.   Additionally, in FY 2011, $128 million in supplemental funding was provided to three

consortia to address outdated IT system infrastructures, all of which are necessary to improve UI integrity.

UI Program Letter (UIPL) No. 18‐12, issued in May 2012, provided funding opportunities that encourage states to

continue efforts to aggressively target UI overpayment prevention and detection, and to develop state‐specific

strategies to reduce the UI improper payment rate.    The funding opportunities are designed to build from the

supplemental funding provided in FY 2011 to assist states in developing their own state‐specific strategies to

prevent, detect, and recover improper payments.   

In September 2012 DOL ETA announced the award of $169.9 million in supplemental funding to 33 states for the

prevention, detection, and recovery of improper UI benefit payments; improve state performance; address

outdated IT system infrastructures necessary to improve UI program integrity; and enable states to expand or

implement Reemployment and Eligibility Assessment (REA) programs.    These incentive funds will support state

implementation of high‐priority activities including:

   Activities to address Worker Misclassification;

   Implementation of other integrity‐related projects, including technology‐based prevention, detection, and

collection activities;
Improper Payments Reporting Details

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FY 2012 Agency Financial Report    175

   Implementing the State Information Data Exchange System (SIDES) earnings / wage verification and

monetary and potential employer charges data exchange;  

   Subscription fees for maintenance and operation of SIDES;

   Contract staff support for activities that do not require the use of state merit staff;

   Implementation of the Treasury Offset Program (TOP); and

   Automation efforts that result in performance and system improvements.

Overpayment Prevention and Detection in Unemployment Insurance  

Every state conducts post award audits for the prevention and detection of UI improper payments on benefit

payments to determine whether error or willful misrepresentation has occurred in the payment of UI benefits. All

states audit all benefits payments by means of a cross‐match against National and State new hire directories and

state wage files. However, under certain circumstances, states may exclude payments from these matches if the

wages are being reported by the claimant, or if the payment was made to a claimant with a return‐to‐work date.   

These activities are conducted through the use of automated tools and procedures that:  confirm the identity and

legal status of the claimants, search for unreported earnings, and detect other forms of fraud or errors contributing

to improper payments in the UI program.  

States agencies also maintain the integrity of unemployment insurance and reduce the amount of improper

payments by ensuring that employers contribute their fair share of tax and facilitate the return to work of UI

claimants.

Some of the most useful tools and practices include:

(1)  Benefit Year Earnings (BYE) Issues (claimants continuing to claim UI benefits after returning to work)

   National Directory of New Hires – This database is managed by the Department of Health and Human

Services, Office of Child Support Enforcement.  The NDNH has claims information as well as wage and

new hire information from employers including the Federal government and military.  States use this

database to cross‐match between the wage record data to detect unreported earnings and new hire

data to identify individuals who continue to claim benefits after returning to work.

   State Directory of New Hires – This tool provides information similar to the NDNH, but only contains

data reports from employers within the state.  

   State Quarterly Wage Cross‐Match – Paid claims are matched against the quarterly wage records

reported by employers to state tax units. (The lag in reporting requirements for UI taxes can prevent

identification of overpayments in a timely manner.)  

(2)  Separation Issues (claimants ineligible to receive benefits due to voluntary quit or discharge for cause)

 State Information Data Exchange System – This automated data exchange promotes the receipt of

timely information from employers regarding the claimants’ separation from employment and

verification of earnings upon returning to work.    Timely and adequate information from employers

provides the state agency with the necessary information to make a determination on the claimants’

eligibility and thus prevent improper payments.  
Other Accompanying Information

(Unaudited)   

176     United States Department of Labor

(3)  Verification of Claimant Identity and Other Fraud Prevention Activities

 State Department of Motor Vehicles – Helps verify the identity of the claimant.  

 Social Security Administration (SSA) – Helps confirm identity and benefits from SSA.  

 Systematic Alien Verification for Entitlement (SAVE) – Maintained by the Department of Homeland

Security, SAVE confirms the legal status of non‐citizens.  The wages used to establish a claim must be

earned legally, and after filing a UI claim, non‐citizens must be legally authorized to seek and accept

employment.  

 State and Local Prison Records – Some states match claimant data against these records to prevent

fraud in the program.  

 Internal state databases record multiple claimants using the same contact information (phone

numbers, addresses, bank accounts, or IP addresses).  These tools can prevent fraud schemes.

(4)  Tax Fraud Detection  

 State Unemployment Tax Act (SUTA) Dumping Detection System (SDDS) – Use of SDDS software helps

detect employers who manipulate their tax rates by, for example, shifting employees from accounts

with higher tax rates to accounts with lower tax rates.

 Worker Misclassification Programs – Includes audits and investigations to prevent worker

misclassification by employers.   Worker misclassification occurs when an employee is erroneously

classified by an employer as a non‐employee, which reduces UI tax revenue, as well as the worker’s

ability to receive UI benefits, worker’s compensation, Social Security benefits, health insurance

coverage, retirement coverage, and protection under the Fair Labor Standards Act.   

(5)  Reemployment and Continuing Eligibility

 Worker Profiling and Reemployment Services – A system designed to identify claimants who are likely

to exhaust benefits and refer them to services designed to assist them in returning to work quickly.

 Reemployment and Eligibility Assessments – In‐person claimant interviews conducted at the One‐Stop

Career Centers to review continuing UI eligibility and assess reemployment needs, including providing

labor market information, assisting with the development of a work‐search plan, and referral to

reemployment services and/or training when appropriate.

IV.   UI Improper Payment Reporting  

Table 5 showsthe Improper Payment Reduction outlook, for the UI program, for FY 2011 – FY 2015.
Improper Payments Reporting Details

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FY 2012 Agency Financial Report    177

Table 5: UI Improper Payment Reduction Outlook FY 2011– FY 2015

($ in millions)

Program FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Outlays IP % IP $ Outlays IP% IP$

Est

Outlays IP % IP $

Est

Outlays IP % IP $

Est

Outlays IP % IP $

Unemployment Insurance

$114,140    $90,160 $54,770 $46,850     $47,100

Annual Report Rate

Overpayments

11.35% $12,955 10.81% $9,746 * *    * *    * *

Underpayments 0.65% $742 0.61% $550 * *    * *    * *

Operational Rate 6.22% $7,100 5.99% $5,401 * *    * *    * *

Employment Service

Registration

1.03% $1,176 .74% $664 * *    * *    * *

Note:  * Integrity rate targets for FY 2013 to FY 2015 will be set based on an alternative methodology explained in section II ‐ UI Statistical

Sampling.

Actual UI outlays in FY 2012 include no benefit payments under the EB, FAC and EUC08 programs funded by the

American Recovery and Reinvestment Act of 2009.  Recovery Act UI modernization incentive and administrative

cost payments to states are not included.

The rates were determined as described in Section II – Statistical Sampling and applied to the estimated outlays

for the fiscal year.  UI rates are estimates based on a statistical survey of State UI, UCFE, and UCX payments.  

Because the claims processes and eligibility requirements are very similar for the EB, EUC08, and FAC programs,

the estimated improper payment rates are assumed to generally reflect the accuracy of these benefit payments.  

These rates, which include full and partial overpayments, may overestimate the improper payments relating to

FAC outlays ($1.92 billion in FY 2011; no benefits were paid under the FAC program in FY 2012), as the FAC

payments are payable in full to claimants entitled to at least $1 in unemployment compensation.

An estimated 2.85% of UI benefits were overpaid due to fraud in FY 2012, compared with a 2.94% fraud rate in

FY 2011.    Overpayments due to fraud are included as part of both the Annual Report and Operational

overpayment rates.   

V.   UI Recapture of Improper Payments Reporting   

The UI program was deemed cost effective for payment recapture audits.    Performing UI payment recapture

activities and providing states with tools to aid recovery are top priorities at DOL.  DOL’s recapture activities have

focused on the following areas that offer the greatest opportunity for improvement:

 Benefit Year Earnings (BYE) Issues – These issues arise when a claimant continues to claim and receive UI

benefits after returning to work.

 Separation Issues – These issues occur because the claimant files for benefits when they are ineligible to do

so, and the state has not received documentation to that effect from the former employer before the claim

is processed.

 Employment Service (ES) Registration Issues – These issues occur when the claimant has not registered in

the state’s Employment Service system (or job bank) when required to do so, and is therefore ineligible for

UI benefits.

The Department coordinates with states to recover UI overpayments. Each state’s Benefit Payment Control (BPC)

unit is responsible for promoting and maintaining UI program integrity through prevention, detection,

investigation, establishment, and recovery of improper payments.   BPC operations identify UI overpayments for

recovery through such methods as cross‐matching claimant SSNs with State and National Directories of New Hires,
Other Accompanying Information

(Unaudited)   

178     United States Department of Labor

wage record files submitted each quarter by employers, matches with other databases, such as Workers

Compensation and State Corrections, and other sources such as appeals, reversals and tips and leads.  States collect

overpaid claims through offsets of UI benefits, federal income tax refunds under TOP, state income tax offsets, and

direct cash reimbursement from the claimant.  From FY 2004 through FY 2011, approximately $6.016 billion was

recovered for the UI program (including the State UI, UCFE, UCX, EB, and EUC programs).  

In February 2011, the Department of Treasury (Treasury) enacted a regulation to permit states to offset UI

overpayments through TOP.  As of September 2012, 17 states had implemented TOP and several others were in

various stages of implementation.  An estimated $134 million in UI overpayments were recovered through TOP in

FY 2012.   

The states must hold the claimants liable to repay benefits that were received improperly and take an active role to

recover improper payments (payment recapture audits).    States may waive repayments for non‐fraud

overpayments when it would be against equity and good conscience pursuant to their state’s law.  

Some of the recovery activities and tools used by states include:  

 Offsets from benefits;

 Offsets from state and Federal income tax refunds;

 Offsets from lottery winnings, homestead exemptions, and other benefits, including the Alaska Mineral

Refund;

 Interstate recovery agreements;

 Repayment plans;

 Civil Actions, including wage garnishments and property liens;

 Skip tracing, collection agencies, and credit bureaus;

 Probate and Bankruptcy;

 Referral to Office of Inspector General and other Law Enforcement Agencies;

 State and Federal Prosecution; and

 Establishment of interest and penalties on overpayments, which adds an incentive to repay quickly.

Table 6 provides an eight‐year summary of UI overpayments established and recovered as a result of the activities

described above.

Separate rates are shown for State UI, UCFE, UCX, and EB claims only and for State UI, UCFE, UCX, and EB plus EUC

claims.  Recovered overpayments for State UI claims are returned to the UI account from which the benefits were

originally paid.    EUC and EB overpayments that are recovered by the states are returned to the EUCA account

within the UI Trust Fund.

Table 6: UI Overpayments Established and Recovered By Fiscal Year (Excluding Waivers)

Fiscal Year Overpayments

Established

UI/UCFE/UCX/EB

Overpayments

Recovered

UI/UCFE/UCX/EB

Recovered % Overpayments

Established

UI/UCFE/UCX/EB

+ EUC

Overpayments

Recovered

UI/UCFE/UCX/EB

+ EUC

Recovered %

2004 $1,101,549,360 $528,941,410 48.02%

2005 $960,277,791 $488,807,550 50.90%

2006 $979,836,264 $511,524,977 52.21%

2007 $952,898,179 $531,724,056 55.80%

2008 $1,002,131,148 $571,160,044 56.99% $1,010,170,720 $572,970,520 56.72%

2009 $1,456,403,205 $850,987,241 58.43% $1,736,295,243 $914,626,113 52.68%

2010 $1,906,310,909 $966,016,812 50.67% $2,805,367,403 $1,175,555,423 41.90%

2011 $1,887,177,040 $997,967,260 52.88% $2,957,910,114 $1,291,384,816 43.66%
Improper Payments Reporting Details

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FY 2012 Agency Financial Report    179

The states are required to report quarterly on overpayment detection and recovery activities on the Employment

and Training Administration (ETA) 227 report.    The amounts established and recovered are based on reports

submitted during the indicated fiscal year.  However, the actual payment of benefits may have occurred in a prior

fiscal year.   

The information reported on the ETA 227 report is based on actual counts of UI overpayments identified and

recovered by the state agencies.  This is in contrast to the estimates of UI overpayment rates and amounts that are

reported for the IPIA, which are based on the results of BAM.  BAM is a statistical survey of paid and denied UI

claims.  The results of the BAM audits are projected to the population of benefit payments for all unemployment

compensation programs: State UI, UCFE, UCX, EB, and EUC.  These BAM estimates may be significantly higher than

actual overpayments identified for recovery because:    1) the BAM audits detect eligibility issues that usual BPC

detection methods will not identify, because it is very workload intensive and/or not cost effective to detect (for

example, verification of all claimant work search activity or that all claimants were able and available for work); or

2) the overpayment is not recoverable because the responsibility for the improper payment is the agency’s and/or

the employer’s, rather than the claimant’s, or due to state finality rules.  

“Overpayment Establishments” have been adjusted to subtract waivers, which are overpayments that the state

agency has determined are not recoverable.  The Unemployment Insurance Report Handbook (ET Handbook 401,

4th edition, Section IV, Chapter 3, p. 10) defines a waiver as:

“A non‐fraud overpayment for which the state agency, in accordance with state law, officially relinquishes

the obligation of the claimant to repay.”  

Usually, this is authorized when the overpayment was not the fault of the claimant and requiring repayment would

be against equity and good conscience or would otherwise defeat the purpose of the UI law.

DOL believes that this definition is consistent with the criteria established by OMB for evaluating the cost‐

effectiveness of a payment recapture program in the revised Appendix C, Part I.B, Section 5.

Table 7 compares the overpayment establishment and recovery rates for UI/UCFE/UCX/EB claims versus EUC

claims.  The lower recovery rates for EUC reduce the overall recovery rates that include all UI benefit programs.

Table 7: Comparison of UI/UCFE/UCX/EB and EUC Overpayments Established and Recovered

($ in billions)

Fiscal Year UI/UCFE/UCX/EB

Outlays

Overpayments

Established*

UI/UCFE/UCX/EB

Established

As a Percent

of Outlays

Overpayments

Recovered

Recovered As a

Percent of

Established

2008 $38.88 $1.002 2.58% $0.571 56.99%

2009 $80.42 $1.456 1.68% $0.851 58.43%

2010 $72.36 $1.906 2.63% $0.966 50.67%

2011 $62.02 $1.887 3.04% $0.998 52.88%

Fiscal Year EUC Outlays Overpayments

Established*

Established

As a Percent

of Outlays

Overpayments

Recovered

Recovered As a

Percent of

Established

2008 $3.55 $0.008 0.23% $0.002 22.54%

2009 $32.66 $0.280 0.86% $0.064 22.74%

2010 $72.09 $0.899 1.25% $0.210 23.31%

2011 $52.66 $1.071 2.03% $0.293 27.40%

* Excluding waivers
Other Accompanying Information

(Unaudited)   

180     United States Department of Labor

The recovery rate for EUC overpayments is significantly less than the recovery rate for state UI and EB

overpayments due to several factors:

 Many of these claimants have exhausted benefits, and therefore, states are unable to offset overpayments

against their unemployment compensation payments.

 The legislation establishing the EUC program limits offsets to 50% of the amount payable to the claimant

for the compensated week.  The Middle Class Tax Relief and Job Creation Act of 2012 (Public Law 112‐96)

removed this restriction, which should increase recoveries of EUC overpayments beginning in FY 2012.

 Claimants who have been unemployed for long durations have few resources available for the repayment

of overpayments.

 The severe decline in the housing market removed the option that states have used to recover

overpayments by attaching liens to an individual’s property and recovering the overpayments when the

property is sold.

 Many states reassigned BPC staff to process claims when workloads increased sharply during the recession,

thereby leaving fewer staff to identify and recover overpayments.

The ETA 227 report captures data on the causes of overpayments, the method of detection, recovery and

reconciliation, criminal and civil actions, and the aging of benefit accounts.  After eight quarters, the overpayments

are removed from the total outstanding balance on this report. This does not affect the state’s accounting

practices. When overpayments are recovered that have been removed from the reported outstanding balance, the

amount will be added back to report the recovery in the quarterly report, regardless of when the overpayment

originally occurred.  States are now able to attempt recovery of these older unemployment compensation debts

through the U.S. Department of Treasury’s TOP by offsetting the claimant’s Federal income tax returns. When

improper payments are recovered, they are returned to the states’ UI trust fund account from which they were

paid.

A cost‐benefit analysis conducted in 2012, which updated the methodology of a cost‐benefit analysis conducted in

2001, indicates that an additional $6.52 will be recovered for every $1 invested in BPC, based on the inflation‐

adjusted average returns on investment for the period FY 2001 to FY 2011.    In addition to the methodology

replicating the FY 2001 study, regression models were constructed to identify variables with statistical associations

with UI overpayment detections and recoveries.  The period of analysis was FY 2007 to FY 2011 for all states and

territories excluding the Virgin Islands.    The model for UI overpayment detections indicates that estimated

overpayments (from the BAM survey) explained the largest proportion of the variance, followed by EB benefit

payments, and BPC funding.  This indicates that state BPC operations can detect additional overpayments as the

pool of overpayments expands up to a point using existing resource levels.  The model indicates that agencies will

establish a little more than $5 in overpayments for every additional dollar in BPC funding they receive.

With respect to overpayment recoveries, the model suggests that recoveries are largely a function of the pool of

overpayments and the amount of those overpayments that the agency establishes.  The model also indicates that

recoveries are unresponsive to changes in BPC resource levels, although these resources are important to support

additional overpayment detections, which are in turn significant with respect to recoveries.
Improper Payments Reporting Details

(Unaudited)

FY 2012 Agency Financial Report    181

Table 8 shows the payment recapture audit reporting for the UI program.

Table 8:  Payment Recapture Audit Reporting ($ in millions)

Status Benefits (UI)

Amount Subject to Review for Current Year (CY) 2012 Reporting $90,160

Actual 2012 Amount Reviewed and Reported N/A

Amount Identified for Recovery in 2012 $2,928

Amount Recovered in 2012 $1,474

% of Amount Recovered Out of Amount Identified in 2012 $50.34%

Amount Outstanding in 2012 $1,923

(1)

% of Amount Outstanding Out of Amount Identified in 2012 65.68%

(1)

Amount Determined Not to be Collectable in 2012 $993.8

(2)

% of Amount Determined Not to be Collectable Out of Amount Identified in 2012 33.94%

(2)

Amounts Identified for Recovery in Prior Years (PYs) 2004‐2011 $12,504

Amounts Recovered in PYs 2004‐2011 $6,016

Cumulative Amounts Identified for Recovery (CY + PYs) $15,432

Cumulative Amounts Recovered (CY + PYs) $7,490

Cumulative Amounts Outstanding (CY + PYs) $4,702

(3)

Cumulative Amounts Determined Not to be Collectable (CY & PYs) $4,975

(2)

Note:  Amounts include State UI, UCFE, UCX, EB, and EUC programs.  Data for FY 2012 are estimated based on data submitted on the ETA

227 report for the period July 1, 2011, through June 30, 2012, the most recent period for which data are available.  

(1) Includes that portion of overpayments reported as outstanding on the ETA 227 and EUC 227 reports (line 313) that were 360 days old

or less as of the report date.  Overpayment aging data are not available for EUC overpayments and have been imputed from UI, UCFE,

UCX, and EB overpayment aging data.

(2) Includes overpayments written off (ETA 227 and EUC 227 reports, line 309) and receivables removed after two years unless recovery is

in progress (ETA 227 and EUC 227 reports, line 312).

(3) Includes total overpayments reported as outstanding on the ETA 227 and EUC 227 reports, line 313) as of the report date.

Table 9 shows the UI program’s established annual targets which drive performance.  The targets are based on the

rate of recovery.

Table 9: Payment Recapture Audit Targets

($ in millions)

Type of Payment Current Year 2012

Amount Identified

Current Year

2012 Amount

Recovered

Current Year

Recovery Rate

(Amount

Recovered /

Amount

Identified)

2012 Recovery

Rate Target

2013 Recovery

Rate Target

2014 Recovery

Rate Target

UI Benefits $2,928

(1)

(2)

$1,474

(2)

50.34% 64% 72%

55%

(3)

N/A

58%

(3)

Note: Amounts include State UI, UCFE, UCX, EB, and EUC programs.  

(1) Excludes amounts waived for recovery.   

(2) Estimated for FY 2012 based on data for the period October 1, 2011 through June 30, 2012, the most recent period for which data are

available.

(3) The first percentage represents the recovery target published in the 2011 AFR.  The second percentage is the revised estimate based on

additional data for the period October 1, 2011 through June 30, 2012.
Other Accompanying Information

(Unaudited)   

182     United States Department of Labor

Table 10 is an aging schedule of the amount of overpayments identified through the UI program’s payment

recapture audit program that are outstanding (i.e., overpayments that have been identified but not recovered).   

Table 10: Aging of Outstanding Overpayments

($ in millions)

Type of Payment Current Year Amount

Outstanding (0‐6

months)

Current Year Amount

Outstanding (6 months to

1 year)

Current Year Amount

Outstanding (over 1 year)

UI Benefits $690.3

(1)

$553.2

(2)

$1,806.2

(3)

Note: Amounts include State UI, UCFE, UCX, and EB programs.  Aging data are not available for EUC overpayments.  Aging status is as of

June 30, 2012.

(1)Amounts outstanding less than or equal to 180 days.

(2)Amounts outstanding more than 180 days and less than or equal to 360 days.

(3)Amounts outstanding more than 360 days.

Table 11 describes the purpose for which recaptured funds were used.

Table 11: Disposition of Recaptured Funds

($ in millions)

Type of Payment Agency

Expenses to

Administer

the

Program

Payment

Recapture

Auditor

Fees

Financial

Management

Improvement

Activities

Original

Purpose

Office of

Inspector

General

Returned to

Treasury

UI Benefits     $1,474

Note:  Amounts include State UI, UCFE, UCX, EB, and EUC programs.  Estimated for FY 2012 based on data for the period July 1, 2011

through June 30, 2012, the most recent period for which data are available.

All recovered overpayments are returned to the state’s UI Trust Fund or to the appropriate Federal account for the payment of future

benefits.

  No UI benefit overpayments were recovered outside of payment recapture audits.

VI. UI Accountability

The ETA is responsible for Federal oversight of state unemployment insurance (UI) programs, including oversight of

state activities to reduce and recover improper UI benefit payments.  ETA has taken/continues to take the following

steps to hold Federal managers accountable for reduction and recovery of improper UI payments by states.  State

workforce agencies administer the UI program and set operational priorities within the resources available.  The

Department has limited authority to link the performance of state workforce agency staff to improper payment

reduction goals and targets.  However, ETA has established a robust set of performance measures used to evaluate

the states’ overall operational performance.  States not meeting the criteria set for these measures are expected to

submit corrective action plans as part of their annual State Quality Service Plan submission.

In response to the level of improper payments in the UI program, ETA developed a Strategic Plan to address the

several root causes of improper payments which are described in detail in section III – Corrective Actions.  In FY

2012, ETA continues to focus on the following integrity related activities and ensure the annual performance

standards for managers include the completion of significant milestones for the projects listed below.

 As part of their State Quality Service Plan (SQSP), states are required to prepare an Integrity Action Plan.  

The plan must identify the state officer(s) accountable for reducing improper payments, summarize the

state’s assessment of whether it has the internal controls, human capital, and information systems and

other infrastructure needed to reduce improper payments to minimal cost‐effective levels, and identify any
Improper Payments Reporting Details

(Unaudited)

FY 2012 Agency Financial Report    183

statutory or regulatory barriers which may limit the agency’s corrective actions in reducing improper

payments.    Additionally, the plan must discuss the root causes of improper payments and present the

state’s strategies to address these causes.

 ETA requires states to operate the Benefit Accuracy Measurement survey to measure and report the

percent, dollar amount, and reasons for improper payments.   Data are derived from investigations of a

statistically valid sample of payments using federally prescribed procedures. ETA reviews this data for

validity, analyzes the data for each state, and makes the data available publicly on the ETA OUI Web site –  

www.oui.doleta.gov/unemploy/bam/2011/bam‐cy2011.pdf    Data review, analysis and publication are

included in the performance plan of the Administrator of ETA’s Office of Unemployment Insurance (OUI)

and in the elements and standards of numerous staff in that office.  

 ETA has implemented a core performance measure for detection of overpayments by state UI programs.  

State performance data is available at the OUI Web site – oui.doleta.gov/unemploy/3yr_overpay.asp States

that fail to meet the performance criterion submit corrective action plans.  Analysis of state performance

and monitoring of states’ corrective actions continue to be evaluation factors in OUI managers’

performance plans.   

 ETA has developed additional performance measures that require states to: 1) reduce by 30% after the first

year of implementation and by 50% after the second year of implementation those overpayments

attributable to individuals who continue to claim UI benefits after they return to work; 2) meet the less

than 10% improper payment rate criterion included in IPERA; and 3) meet a minimum UI overpayment

recovery rate target.

 ETA has promoted and continues to promote cost effective methods for states to prevent, detect, and

recover improper UI benefit payments.  Development, delivery, and/or successful implementation of these

initiatives by states have been and continue to be factors on which the OUI administrator and managers are

evaluated.  These initiatives are described in detail in section III – Corrective Actions.

 National Integrity Conference:    In order to provide a forum for disseminating successful practices for

preventing, detecting and recovering UI overpayments, ETA, working with the National association of State

Workforce Agencies (NASWA) sponsors a biennial National Unemployment Insurance Integrity Professional

Development Conference.  The 2012 UI Integrity Summit was held in Arlington, Virginia, March 12‐14, 2012.  

The next conference is scheduled for Spring 2014.  

As part of its monitoring and oversight responsibilities of the State's UI operations, the Department takes an active

role in facilitating and promoting strategies to reduce improper payments and meet the payment accuracy and

recovery targets required by IPERA.  However, it should be noted that these strategies require the cooperation and

implementation by individual states, including in some cases changes to state laws and regulations.    The

Department has no explicit authority over how states establish priorities in administering their UI programs and,

therefore, can only make recommendations and provide technical assistance in the use of these strategies.

VII.   UI Agency Information Systems and Other Infrastructure

States have internal controls, processes, programs, and staff in place throughout all operations of the UI program

dedicated to protection from internal threats and vulnerabilities.  These threats and vulnerabilities include physical

damage and harm to staff and property, misuse of administrative funds and assets by agency staff, and misuse of UI

funds by agency staff.  It is incumbent upon the state agencies to have a series of protections in place addressing

controls such as the granting of systems access, developing and upholding security policies and procedures, the
Other Accompanying Information

(Unaudited)   

184     United States Department of Labor

proper configuration of hardware and software, basic physical safeguards, backup tests and disaster recovery

provisions, regular audits, ongoing employee training, etc.

While State Internal Security (IS) programs are intended to identify and eliminate system vulnerabilities, the risk

remains of losses from the issuance of improper UI benefit payments and misuse of administrative funds due to

fraud, waste, and abuse.  States are expected to review these controls and update them regularly to eliminate new

threats and vulnerabilities as technology and business practices in the administration of the UI program evolve.

Although integrity is the responsibility of all agency staff, the states have dedicated staff conducting BPC activities

to prevent, detect, and recover improper payments.  These staffs work closely with agency management to assure

that sufficient controls are in place to prevent improper payments, conduct complex fraud investigations, and

operate the activities required to recover improper payments if they have been made.

ETA is also engaged with the states to monitor activity and provide technical assistance to ensure that states are

able to utilize the integrity tools that are available.  For example, as a result of ETA monitoring, states modified

computer matching procedures to improve the productivity of NDNH as a resource to detect improper payments.  

ETA is also working closely with the state agencies to develop the information systems and infrastructure to

support SIDES and to access TOP for UI overpayment recovery.   

State UI benefit and tax systems vary in terms of their performance capacities, capabilities, and their adaptability to

new UI programs and integrity strategies.  In response, between FY 2005 and FY 2010, the Department provided

approximately $46.5 million to states in supplemental funding for integrity‐related projects.  In September 2011,

the Department awarded $192 million in supplemental funding, which included $128 million awarded to three

state consortia, and $63.5 million awarded to 42 state workforce agencies. These resources will fund activities to

support the prevention, detection, and recovery of improper UI benefit payments, improve performance, and

address outdated IT system infrastructures, all of which are necessary to improve UI integrity.

UI Program Letter (UIPL) No. 18‐12, issued in May 2012, solicited state Supplemental Budget Request.  UI integrity

activities eligible for Supplemental Budget Request grants are discussed previously, in Section III, UI Correction

Actions  ‐ Reducing Improper Payments in Unemployment Insurance.  Based on positive outcomes from previous

investments, the UIPL also invited states that commit to implementation of all of the core activities, or have already

implemented the core activities, to submit Supplemental Budget Request proposals for consortium projects.   

In September 2012, ETA announced the award of $169.9 million in supplemental funding to 33 states for the

prevention, detection, and recovery of improper UI benefit payments; improve state performance; address

outdated IT system infrastructures necessary to improve UI program integrity; and enable states to expand or

implement Reemployment and Eligibility Assessment (REA) programs.  Included in these awards are three consortia

grants totaling $92.8 million for projects designed to improve overall program quality, performance, and integrity.

VIII.   UI Barriers

The UI program has several statutory barriers to reducing improper payments.  States administer the UI program

and set operational priorities.    The Department has limited authority to ensure they pursue improper payment

reduction activities.    The most significant legislation affecting the UI program in 2012 was The Middle Class Tax

Relief and Job Creation Act of 2012 (Public Law 112‐96), February 22, 2012.  The Act included several provisions

affecting the UI program.    A detailed description of the Act’s provisions, DOL guidance, and other reference

documents can be found on the OUI Web page ‐ https://www.ows.doleta.gov/unemploy/jobcreact.asp.
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FY 2012 Agency Financial Report    185

Other Barriers and Department Response

The Department of Treasury requires states to use merit‐based state government staff to access TOP data.  

However, several states use contract staff to perform program activities that require accessing TOP data.  Some

states have reported difficulties in implementing the TOP program due to Treasury’s mandate to use merit staff.  

Treasury is working with the Department to provide customized technical assistance to resolve this issue.

ETA is working with OMB on a new integrity legislative package that will provide both DOL and states with new

tools to promote improved prevention, detection, and recovery of improper payments.

Workforce Investment Act Grant Program

I. WIA Risk Assessment

The Workforce Investment Act (WIA) grant program was classified as at‐risk in OMB’s Circular A‐11, Section 57, due

to its annual level of expenditures, although the Department’s annual risk assessments have not supported the

high‐risk designation.

DOL remains consistent with how WIA funds are disbursed and monitored through established systems and

processes.    The Department continues to ensure that all grantees deliver agreed upon products and services,

achieve negotiated performance outcomes, and operate in accordance with programmatic, administrative, and

budgetary requirements, which minimizes and manages risk.

Specific objectives over grant performance include the following:

 Oversee grant compliance, progress, and achievement through the use of a variety of oversight tools.

 Identify grantees’ individual and collective training and technical assistance needs and arrange for such

training and technical assistance within the parameters of available resources.

 Develop and update monitoring plans to target at‐risk grantees.

For FY 2012, the Department used the same methodology to estimate the improper payment rate for the WIA

grant program as was used in FY 2011.  This methodology is similar to previous measurements.

II. WIA Statistical Sampling

The following sampling was performed for the WIA grant program:  

Sampling Process:  Unlike the benefit programs, data is not readily available to allow the Department to directly

sample grant payments to develop a statistically valid estimate of improper payments.    The grant programs’

funding stream makes it very difficult to assess the improper payment rate on payments to final recipients.  The

Department provides grants to states, cities, counties, private non‐profits, and other organizations to operate

programs, and relies significantly on Single Audit Act reports (which are required by the Single Audit Act of 19961

)

 

1 The Single Audit Act of 1996 provides for consolidated financial and single audits of state, local, non‐profit entities, and Indian tribes

administering programs with Federal funds. Non‐Federal entities that expend $500,000 or more of Federal awards in a year are subject to a

consolidated financial single audit; any non‐Federal entities that do not meet this threshold are not required to have a single audit. All non‐

Federal entities are required to submit all single audit reports to a Federal Audit Clearinghouse (Clearinghouse) that is administered by the

Census Bureau.
Other Accompanying Information

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186     United States Department of Labor

to monitor funding to all grant recipients.  Based on a review of the definition of questioned costs in OMB Circular

A‐133 and OMB's IPIA implementation guidance, the Department determined that questioned costs can be used as

a proxy for improper payments.  Therefore, in FY 2012 the Single Audit Act reports, along with other data, were

utilized to determine the improper payment rate for the WIA grant program.     

The Department reviewed FY 2010 (most recent available) Single Audit Act reports with DOL‐related findings from

the Federal Audit Clearinghouse (which is the national repository of Single Audit Act reports) and identified all WIA

program questioned costs included in such reports.  As additional evidence that no other audit reports included

questioned costs for the DOL grant programs, the Department selected and reviewed random samples of audit

reports classified in the Clearinghouse database as not having any questioned costs.  In addition to using the Single

Audit Act reports, the Department performed additional analyses to assess the level of improper payments,

including a review of the results of the monitoring work performed by the ETA regional staff responsible for

managing the WIA program and the GAO and DOL OIG audit reports issued for the WIA program.  To determine an

approximate rate of improper payments for the grant programs, the Department divided the average annual

amount of questioned costs from these sources by the three‐year average of direct program outlays.  The resulting

improper payment rate (assumed to be representative of the FY 2012 rate) was applied to the WIA program outlays

for FY 2012 to determine the estimated improper payment amount for FY 2012.   

While the Department uses all sources of data currently available to estimate the improper payment rate, these

sources are not designed to measure improper payments. For example, since all grantees are not tested every year,

all improper payments may not be recorded.

The Department determined that it would not be cost‐effective to evaluate a statistically valid nationwide sample

of WIA grantees and sub‐grantees each year and perform detailed reviews focused on measuring the nationwide

WIA improper payment rate.    However, the Department continues to consider methods for improving its

methodology for estimating the rate.

III. WIA Corrective Actions  

The WIA estimated improper payment rate for FY 2012 of 0.22% applies to two of OMB’s three categories of error,

“Documentation and Administration Errors” at 0.216% and “Verification Errors” at 0.004%.    No errors fit the

definition of “Authentication and Medical Necessity Errors”.

The improper payment rate estimate work indicated that the major types of errors found in the WIA program are

primarily administrative in nature, including cash management, sub‐recipient monitoring, unallowable costs and

insufficient documentation for participant payments.   

Grant operations are monitored on a continuing basis to ensure that the grant activities conform to the

requirements of the grant.  Monitoring activities are carried out primarily at the regional level by Federal Project

Officers (FPOs), and include annual risk assessments, on‐site monitoring visits, as well as annual and quarterly desk

reviews, all tracked electronically in the Grants Electronic Management System (GEMS).    Once each year for

formula funded grants, and upon award for discretionary grants, FPOs assess the risk of each grant assigned using

reported information and knowledge of the grantees and the grant activities.    This assessment is also used to

determine the level of monitoring to be used in the future (i.e., site visits or technical assistance).  For all grants

that are considered high risk according to the annual risk assessments, on‐site visits are conducted to give the FPO

an idea of what activities are being carried out by the grantee, and whether or not the grantee is working within

the legal limits of the grant.   Quarterly reviews of financial and performance reports submitted by grantees are

performed to ensure timeliness, accuracy, and satisfactory progress of completion toward program outcomes.  At

the end of each quarter, each grantee is required to submit a performance based progress report to the regional

FPOs.    Performance progress reports indicate participant service activity and accomplishments against project
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FY 2012 Agency Financial Report    187

goals.  The grant agreement outlines when the progress report is due (i.e., within 15 or 45 days), depending on the

fund source.    The FPO reviews this report to determine if the grantee is meeting projected goals and operating

within the terms of the grant agreement.    The review consists of the FPO comparing the report to the grant

agreement to determine if the grantee has been performing according to its plan and will meet all goals for the

grant as documented in the work plan.  If there is a deviation, the ETA will work with the grantee to offer technical

assistance and assist in getting the grant back on track.

All of the reviews are documented and sustained deficiencies may result in formal corrective active plans.    The

FPOs provide the written results of their reviews to regional management staff and the grantees as well as verbally

discussing the deficiencies.  A record of all of the above reviews (e.g., risk assessments, on‐site reviews, annual desk

reviews, and quarterly reviews) is maintained in E‐Grants (in the GEMS sub‐system), which allows the FPOs to

create an electronic working file of their grant management and oversight activity and also provides supervisors

and program managers with key grants management information.  Regional Administrators and their management

team within the regional offices are responsible for ensuring that all required monitoring is conducted by the FPOs.

The ETA Division of Policy Review and Resolution processes each grant at closeout, reviewing final grantee reports, the

grant closeout package, FPO recommendations, and other documents available to them to determine whether the

objectives of the grant were accomplished and that all funds were expended as authorized.  Expenditures which are

questioned are resolved through the normal determination process and disallowed costs are forwarded for collection.  

The Audit Resolution staff receives grantee A‐133 audit reports(Single Audit Act reports) which report questioned costs

and/or administrative weaknessesin need of correction.  These items are followed up using the same determination

process noted above, disallowed costs are forwarded for collection, and resolutionsreported back to the OIG.  In

addition, these units participate in special grantee reviews and provide fiscal policy training for grantee and Federalstaff.

Overpayment Prevention and Detection  

DOL has established processes that help to prevent, detect and/or recapture overpayments for the WIA program.  

DOL’s Employment and Training Administration (ETA) performs grant monitoring activities on direct grants on a

periodic basis1

.  Similarly, for formula grants, the States monitor their sub‐recipients (pass‐through grantees), which

in turn monitor their sub‐recipient grantees. DOL regional monitoring teams also make on‐site visits to select direct

grantees and sub‐recipients each year.  This cascading monitoring structure results in all grantees and sub‐grantees

being monitored on a regular basis.  

ETA also manages grant closeouts, reviewing final grantee reports, the grant closeout package, related

recommendations, and other documents, to determine whether the objectives of the grants were accomplished

and that all funds were expended as authorized.  Questioned costs are resolved through the normal determination

process.

In addition to these monitoring activities, DOL grant programs and their grantees and sub‐grantees are subjected to

numerous GAO audits, DOL OIG audits, and annual audits by CPA firms who perform Single Audit Act audits of

Federal grantees.  These audits address a wide range of issues, including program effectiveness, management and

operational issues, financial statements, internal controls, and identification of unallowable costs (questioned

costs/improper payments).    Grants are also covered in the annual DOL internal control assessment, per OMB

Circular A‐123, Appendix A, which evaluates controls that could impact improper payments.  All these monitoring

activities and related audits and assessments serve as a basis for identifying and correcting issues that could

potentially lead to improper payments.  

 

1 Depending on the grant agreement, grant expenditures may be monitored either on a monthly or quarterly basis, in addition

to annual reviews.
Other Accompanying Information

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188     United States Department of Labor

Use of Single Audit Act Reports to Prevent, Reduce, and Recapture Improper Payments

All non‐Federal entities that are subject to a Single Audit Act audit are required to submit summary level results

from their audits and a copy of the audit report to the Federal Audit Clearinghouse (FAC), which is administered by

the Census Bureau and operates on behalf of the OMB.  The Clearinghouse is a central repository of information on

all Single Audits conducted each fiscal year.  For findings noted in Single Audit Act reports, OMB guidelines require a

corrective action plan to be included in the report, and, in subsequent reports, the status of prior year findings is to

be reported.

DOL leverages Single Audit Act audits to review and address issues reported relative to DOL grant funds using an

established periodic review cycle.  Additionally, in the summer of each year, ETA verifies that a random sample of

grantees has conducted and obtained Single Audit Act audits.  ETA personnel select the random sample using IDEA

software.  They then access the Federal Audit Clearinghouse and verify that the selected grantees have had Single

Audit packages filed within the prior two years.  If any control deficiencies were noted in the audit package and

audit report, ETA personnel will contact the DOL OIG to verify that the OIG has the report in its tracking system and

is following up for resolution.  If no report is in the Clearinghouse, ETA personnel will follow up with the grantee to

determine if a Single Audit was conducted.  If a Single Audit Act audits was conducted, then ETA personnel request

the grantee to submit the report to the Clearinghouse.  If not, the grantee is referred to the Office of Grants and

Contracts Management for follow‐up.

For grantees with Single Audit Act reports identifying funding received directly from DOL and that also identify

materials weaknesses or significant deficiencies, DOL OIG forwards the reports and finding details to the

appropriate DOL agency for issue resolution.    The responsible agency(s) then determines how to most

appropriately resolve the questioned costs noted in the report.    All findings for direct grantees are considered

important to resolve, especially those deficiencies that are related to sub‐recipient monitoring, and all findings are

tracked through to resolution.

 The report itself may describe corrective actions that have already been taken, and the A‐133 auditor has

accepted the actions taken as appropriate to resolve the finding. In this case, the agency simply verifies that

the actions described in the report were taken.

 With some questioned costs, a review must be conducted to determine the exact amount of questioned

costs that are actually improper overpayments and therefore subject to recapture. These reviews may

involve on‐site visits to, or email exchanges and discussions with, the grantee to establish the facts related

to the questioned costs.  At the conclusion of this review, the grantee will be informed of the agency’s final

determination decision, and be required to take whatever corrective actions that may be required to

resolve the questioned costs. The agency then verifies that the required actions were performed.

 With most questioned costs, the amount of improper overpayments is clearly identified in the report, and

the grantee is already engaged in the process of either reimbursing DOL for the overpayment or adjusting

their drawdown for a subsequent period to reflect the fact that they have already received the funds to

reimburse their subsequent grant expenditures. When refunds are collected, they are returned to the

original year and appropriation from which the obligation was established.  For cancelled appropriations,

the refunds are returned to the Treasury.

For sub‐grantees with A‐133 Reports identifying funding received from direct grantees (e.g. states), monitoring

of issue resolutions is the responsibility of the direct grantees that passed the funds through, although the

appropriate DOL agency may also track resolution through their own grant monitoring and close‐out processes.  

For example, within ETA, once determinations are final, they are referred to ETA’s accounting office to establish

the debt.  The ETA accounting office will perform standard collection activities to collect the debt, and if unable

to do so, will refer the debt to Treasury for further collection efforts.
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FY 2012 Agency Financial Report    189

IV. WIA Accomplishments in the Area of Funds Stewardship Past the Primary Recipient

WIA grants support employment and training services by states and local entities and represent a major investment

by the Federal Government for the benefit of the public.    DOL oversees grantee and sub‐grantee operations

through regular monitoring reviews by its regional office staff, using established systems and processes.    The

reviews target at‐risk grantees and focus on high‐risk areas.  The reviews assess performance and track data on

quarterly financial reports back to the grantee’s source records and systems to identify and report problem areas.  

The regional monitoring efforts produce a major source of improper payments data for the WIA program.

V. WIA Improper Payment Reduction Outlook  

Table 12 showsthe Improper Payment Reduction outlook, for the WIA program, for FY 2011 – FY 2015.  

Table 12: Improper Payment Reduction Outlook FY 2011– FY 2015

($ in millions)

Program FY 2011 FY 2012 FY 2013 FY 2014 FY 2015

Outlays IP % IP $ Outlays IP% IP$

Est

Outlays IP % IP $

Est

Outlays IP % IP $

Est

Outlays IP % IP $

Workforce Investment Act $4,123 0.31% $12.4 $3,406 0.22%* $7.5 $3,723 .44% $16.4 $3,550 0.44% $15.6 $3,384 0.44% $14.9

*The WIA IP rate is comprised of overpayments of 0.218% and underpayments of 0.002%.

VI. WIA Recapture of Improper Payments Reporting  

The WIA program is in the very early stage of IPERA payment recapture audits.  During FY 2012, a pilot feasibility

study was conducted to establish the feasibility and cost‐effectiveness of payment recapture audits at the grantee

level for the WIA program.  It was determined that payment recapture audits at the grantee level are feasible for

various types of outlays.  It was recommended that ETA improve its WIA improper payments program, including

investing resources in training, additional staff, information technology, site visits, and payment recapture audits, if

cost effective.  At this stage, we do not have data to populate payment recapture audit tables; therefore, tables

have not been provided.

For the WIA program, the identification of overpayments for recovery is primarily done through ETA’s onsite

monitoring activities, the Single Audit Act reports, and OIG program audits.    From FY 2009 through FY 2012,

approximately $1.4 million has been recovered for the WIA programs.   

Table 13 displays overpayments recaptured outside of recapture audits.   

Table 13: Overpayments Recaptured Outside of Payment Recapture Audits

Agency Source Amount

Identified

(2012)

Amount

Recovered

(2012)

Amount

Identified

(2009‐2011)

Amount

Recovered

(2009‐2011)

Cumulative

Amount

Identified

(2009‐2012)

Cumulative

Amount

Recovered

(2009‐2012)

WIA Post‐Payment Reviews $4,605,627 $63,572 $20,045,567 $1,373,014 $24,651,194 $1,436,586

For sub‐grantees with A‐133 Reports identifying funding received from direct grantees (e.g. States), monitoring of

issue resolutions is the responsibility of the direct grantees that passed the funds through, although the

appropriate DOL agency may also track resolution through their own grant monitoring and close‐out processes.  For

example, within ETA, once determinations are final, they are referred to ETA’s accounting office to establish the
Other Accompanying Information

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190     United States Department of Labor

debt.  The ETA accounting office will perform standard collection activities to collect the debt, and if unable to do

so, will refer the debt to Treasury for further collection efforts.

VII. WIA Accountability

ETA has revised and expanded its training for all grant managers.  GEMS tracks the grant managers’ grant review

actions and provides the grant managers with financial and other information useful in managing the grants.  The

ETA Division of Policy Review and Resolution has requirements in its closeout grant officer performance standards

relating to the requirement to follow up on Single Audit Act, OIG or GAO audit findings and questioned costs relating to

WIA grants, and the Director of the Office of Grant and Contract Management has overall responsibility for ensuring that

these procedures are followed.

VIII. WIA Agency Information Systems and Other Infrastructure

The WIA program utilizes various tools to execute the risk management process to assess and monitor grantees.  

They include the web‐based Enterprise Business Support System (EBSS), in concert with GEMS.    EBSS is a web‐

based solution used to track and manage grants.  A component of the EBSS is the automated grant cost reporting

system that captures grant costs and obligations, which improves fiscal integrity.  The combination of the two is

part of the cradle‐to‐grave E‐grants solution for the entire Department.    The GEMS system, mentioned also in

Section III of this appendix, is an online grants management tool meant to provide web accessible, role‐based

context access to grant‐related information from multiple sources.    The utilization of the GEMS system by the

Federal Project Officers and program management and financial staff allows ETA a coordinated and comprehensive

repository of grant‐specific information.  ETA published a data validation supplement to the Core Monitoring Guide

used by its Federal Project Officers (FPOs).  The supplement includes a detailed appendix, or “Resource and Tool

Guide”, for use by FPOs.  The appendix provides a step‐by‐step reference guide that provides the basis of training

specific to data validation overall.  ETA expects to complete field testing and implement the supplement in FY 2013.     

IX. WIA Barriers

No statutory or regulatory barriers exist that limit WIA's ability to address and reduce improper payments.  The

WIA program has the legal authority to establish receivables and implement actions to collect those receivables.

X. Other

Federal Employee’s Compensation Act Program

1. FECA Risk Assessment

The FECA program is a workers’ compensation program covering more than three million federal and postal

employees. It authorizes medical benefits, income replacement, and certain supportive services to employees with

work‐related injuries or, in the case of deaths, survivor benefits to family members.  

In FY 2012, the Department conducted a risk assessment of the FECA program to estimate the risk of improper

payments. The process involved the following:  

 FECA managers qualitatively assessed the risk of improper payments associated with (1) Payment

processing controls, (2) internal monitoring controls, (3) Human capital, (4) Program complexity, and (5)

Nature of payments.
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FY 2012 Agency Financial Report    191

 FECA managers reviewed the results of the most recent detailed testing of a random sample of FECA

medical payments and compensation payments.1 For medical payments, the sampling was designed to test

issues such as duplicate payments, appropriate receipts, consistency with regional allowances, payments

made for appropriate procedures, and eligibility at date of service. For compensation payments, the

sampling was designed to test issues such as consistency with identified injury, current medical evidence

supporting continued compensation payments, eligibility requirements, and calculations of compensation

amounts.

 OCFO  reviewed settled FECA fraud cases reported by the DOL OIG in Semiannual Reports to Congress  for

fiscal Years 2009, 2010, 2011 and for the spring 2012 (3.5 years of reports) to estimate the amount of

improper payments due to fraud in the FECA program for a typical year.

Results:

 FECA managers rated the program as low risk for improper payments.

 The improper payment amount projected though analysis of a random sample of payments plus the

estimated annual amount of improper payments due to fraud indicated that the improper payment

rate was well under 2.5 percent of outlays and $100 million.

Based on the risk analysis, the FECA program was determined not to be risk susceptible in FY 2012.    

DOL plans to design a revised methodology for performing detailed testing of the FECA program as the basis for

estimating an improper payment rate for the program.

2. FECA Recapture of Improper Payments Reporting

During FY 2012, DOL conducted a limited scope pilot payment recapture audit of the FECA program Medical Invoice

Process to determine the cost‐effectiveness of performing a full scope recapture audit for these payments.  DOL

reviewed $1.8 million of paid medical invoices processed during the six‐month period of January 1, 2011 and June

30, 2011.  Based on the results of the audit, these payments appear to be a low‐risk area for improper payments.  

However, this effort did not evaluate the potential for fraud or improper payments related to compensation or

death benefit payments.  Recent reports from both the Office of the Inspector General (OIG) and the Government

Accountability Office (GAO) reported ongoing fraud in the FECA program.    DOL should expand its payment

recapture efforts to include other areas of possible FECA improper payments, including compensation and death

benefit payments and the potential for fraud.

Contracts/Procurement Payments

1.  Contracts/Procurement Recapture of Improper Payments Reporting

Payment Recapture Audits

In FY 2010 based on other post payment review processes, improper payments of approximately $5.9 million were

identified for recovery, of which $5.6 million was actually recovered.  DOL addressed the weaknesses identified and

a new financial management system has enhanced the Department’s ability to refine internal controls and conduct

 

1 July 1, 2007 through June 30, 2008 was the most recent period for which detailed testing was performed for the FECA

program.  In FY 2009, OMB granted a waiver relieving the program from detailed testing in FY 2009 and FY 2010.  In FY 2011,

the program performed a risk analysis which showed that FECA had not become risk susceptible, so the program did not

perform detailed testing in FY 2011.
Other Accompanying Information

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192     United States Department of Labor

frequent management reviews to identify and reduce the incidence of improper payments moving forward.   As

further evidence of the cost‐effectiveness of performing payment recapture audits, the services of a contingency

contractor were secured during FY 2012 to perform payment recapture audits for:

   Payments for procurement contracts, services, operations and maintenance, equipment, land or structures;

   Payments for rent, communications and utilities;

   Payments for printing and reproduction services; and

   Payments for supplies and materials

The contractor’s fees are based on overpayments identified and recaptured and will be paid out of recaptured

funds.  The audit covers disbursements for FY 2007 through 2011 consisting of approximately 200,000 invoices for

about $2 billion in annual disbursements.  The audit is currently ongoing. When completed, it will identify improper

payments such as overpayments and duplicate payments.   It will also identify discounts and pricing errors,

duplicate vendor master records, and provide best practices for vendor‐naming conventions and addresses and

invoice coding standards.  In addition, the audit firm will help DOL recapture overpayments and improve internal

controls to prevent improper payments.    

At the close of the audit, the audit firm will issue a final report identifying the root cause analysis of any recaptured

items along with best practice recommendations for preventing future disbursement errors.  The audit firm will also

conduct an analysis of potential fraudulent or questionable vendors.  The results of this analysis will be reported to

DOL.  

Do Not Pay Plan

The “Do Not Pay (DNP) Solution” is a new initiative under the improper payment program that will help prevent

improper payments and/or identify and recapture improper payments.   Presidential and OMB directives require

agencies to integrate the use of existing Federal databases (collectively known as the “Do Not Pay List”) to verify

eligibility for Federal payments in order to reduce and eliminate payment errors before they occur.  OMB and the

Department of the Treasury have developed DNP to provide Federal agencies with both a web‐based single‐entry

access portal (Portal) to these existing databases to facilitate their use and additional data analytics.

At DOL, the DNP Solution will be implemented in three phases over a three‐year period and will be designed to

address the Department’s three major business areas affected: Benefit Programs, Grant Programs, and Contracts.

Incorporating the DNP Solution fully into DOL’s business processes is a major undertaking involving the active

cooperation of not only OMB, Treasury, and DOL component agencies, but also the states.  The Office of the Chief

Financial Officer (OCFO) will facilitate development of a Plan for enrollment and implementation of the DNP

Solution with affected DOL component agencies.   DOL’s Accountability Officer for Improper Payments, the Chief

Financial Officer, is responsible for monitoring and concurring with any changes to the Department’s DNP Plan.  

Component agencies will work with OCFO to implement the DNP Solution in their business processes, provide

status reports when requested, and clear any variations from the DNP Solution Plan with OCFO.    Component

agencies will be responsible for implementation of the DNP Solution within their business processes and interfacing

with their state stakeholders where appropriate.   

The DNP Solution will be implemented in three phases.  Phase 1 involves choosing a pilot program or activity from

each of three major business areas in which the DNP Solution can be implemented.  Planned pilot activities include:

1.  Benefit Programs – Unemployment Insurance (UI) and Office of Workers’ Compensation Programs (OWCP)

benefit programs;

2.  Grant Programs – Employment and Training Administration (ETA) grant programs;

3.  Contracts – Department‐wide procurement and contract payment activities.

Lessons learned from Phase 1 and best practices gained from the experience of other Agencies will be incorporated

into DOL planning for Phases 2 and 3.  Phase 1 is expected to be completed by September 2013.
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FY 2012 Agency Financial Report    193

Phase 2 will include expanded rollout of the DNP Solution to more states in the UI and Grants Programs, and will

emphasize the continued improvement of previously incorporated programs.    During Phase 2, DOL will also

evaluate DNP Solution applicability to additional aspects of Contracts pre‐payment and pre‐award processes.  Phase

2 is expected to be completed in September 2014.

During Phase 3, DOL plans to implement the DNP Solution across all program areas that can gain value from its use,

including expanding implementation to all remaining interested states and DOL Benefit and Grant Programs.  DOL

currently plans to complete the majority of this phase by September 2015.

Do Not Pay Solution for the UI Program

DOL is coordinating with OMB and the Department of the Treasury to provide the DNP Solution to state agencies

for identifying potential UI improper payments and/or fraud.    The DNP Solution will be accomplished in phases.  

Phase 1 will include piloting the DNP Portal service in at least two states, as well as working with the DNP Solution’s

Data Analytics Services (DAS) to develop data analytics and predictive modeling methodologies and tools that are

transferable and expandable to all states.  During Phase 1, the two selected pilot states will conduct a value test for

the use of the DNP Portal to support existing processes to verify the eligibility of beneficiaries for continuing

payments, and to study the feasibility of using the DNP Solution for pre‐award activities.   

DOL is also in the process of establishing a UI Integrity Center of Excellence (Center) to continue to improve the

prevention and detection of UI improper payments and fraud through the use of sophisticated data analytics and

predictive modeling.  The Center will:

 Collaborate with Treasury’s Do Not Pay Solution unit to develop data analytics and predictive modeling

methodologies and tools to improve UI fraud prevention and detection.

 Develop a secure portal to routinely communicate fraud schemes among states.

 Identify and pilot new strategies to combat improper payments and fraud, building on the work of states,

other Federal and state government agencies, and the private sector.

 Identify and disseminate promising practices for state fraud prevention across the UI program.

 Identify state training needs on fraud solutions and integrity strategies, develop a comprehensive training

plan, and provide training.

DNP for the Black Lung Program

The Black Lung Program is currently using the Do Not Pay Portal to perform single online searches of the Social

Security Administration’s (SSA) Death Master File (DMF) to identify improper payments.  The Black Lung Program

plans to begin using the Portal for continuous monitoring of its beneficiary files after data exchange processes are

established and after all required Memoranda of Understanding (MOU) are approved.  DOL is hopeful that the

processes will be set up and tested successfully, and that the necessary Departmental clearances of an MOU in both

DOL and Treasury will be completed by the end of the first quarter of FY 2013.
SCHEDULE OF SPENDING

For the Years Ended September 30, 2012 and 2011

(Unaudited)

  

194     United States Department of Labor

The Schedule of Spending presents an overview of how and where the Department is spending its money. The

Schedule of Spending is presented on a budgetary basis, the same as the Combined Statement of Budgetary

Resources (SBR).  The amounts shown below as “Total amounts agreed to be spent” and “Total spending (outlays)”

agree with amounts shown as “Obligations incurred” and “Outlays, gross” on the SBR.

Schedule of Spending

(Dollars in millions) 2012 2011

Section I – What money is available to spend?

This section presents resources that were available to spend by the Department.

Total resources $     160,676 $       195,312

Less amount available but not agreed to be spent (1,821)                      (1,252)

Less amount not available to be spent          (2,571)            (2,125)

Total amounts agreed to be spent $     156,284 $      191,935

Section II – How was the money spent?

This section presents services or items purchased and grouped for the Department’s major programs based on outlays.

Income maintenance

     Insurance claims and indemnities $       94,282 $      120,731

     Transfers among DOL funds 45,187                    54,973

     Personnel compensation and benefits                299                 300

     Contractual services and supplies                   873              1,126

     Grants, subsidies, and contributions 4,424                           4,846

     Other             1,524              1,508

Employment and training

     Personnel compensation and benefits                145                 145

     Contractual services and supplies                1,621              1,617

     Grants, subsidies, and contributions 4,794                           6,032

     Other                267                 136

Labor, employment and pension standards; worker safety and health; statistics; other

     Personnel compensation and benefits             1,460              1,433

     Contractual services and supplies                   968                 943

     Grants, subsidies, and contributions 293                                 321

     Other                  35                   49

Total spending (outlays) 156,172                   194,160

Amounts remaining to be spent                112            (2,225)

Total amounts agreed to be spent $     156,284 $      191,935

Section III – Who did the money go to?

This section identifies with whom the Department is spending money based on obligations incurred.

Individuals $       93,358 $      119,222

Transfers among DOL funds 45,187                    54,973

States and local governments 7,926                           7,845

Other federal agencies             2,763              4,640

Vendors and other             2,796              1,181

Employees             1,874              1,901

Higher education             1,388              1,256

Not‐for‐profit organizations               992                 917

Total amounts agreed to be spent $     156,284 $      191,935

Section IV – How was the money issued?

This section presents how the obligations are issued or the payment type based on obligations incurred.

Financial assistance direct payments 93,235 $        $      119,054

Transfers among DOL funds 45,187                    54,973

Grants, subsidies, and contributions 10,664                    10,420

Contracts             3,563              3,861

Non‐financial assistance direct payments 1,911                           1,880

Other            1,724              1,747

Total amounts agreed to be spent $     156,284 $      191,935
FY 2012 Agency Financial Report    195

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196     United States Department of Labor

Acronyms

BAM Benefit Accuracy Measurement 

BLDTF Black Lung Disability Trust Fund 

BLS Bureau of Labor Statistics 

BPC Benefit Payment Control 

COLA Cost of Living Allowance 

CPIM Consumer Price Index - Medical 

CSEOA Community Service Employment for 

Older Americans 

CSRS Civil Service Retirement System 

DNP Do Not Pay Solution 

DOL Department of Labor 

DVOP Disabled Veterans' Outreach Program 

EB Extended Benefits 

EBSA Employee Benefits Security 

Administration 

EEOICPA Energy Employees Occupational Illness 

Compensation Program Act 

ERISA Employee Retirement Income Security 

Act 

ESAA Employee Security Administration 

Account 

ETA Employee and Training Administration 

FAC Federal Audit Clearinghouse 

FECA Federal Employees' Compensation Act 

FERS Federal Employee Retirement System 

FFMIA Federal Financial Management 

Improvement Act 

FLC Foreign Labor Certification

FMFIA Federal Managers' Financial Integrity 

Act 

FUA Federal Unemployment Account 

FUTA Federal Unemployment Tax Act 

FY Fiscal Year 

GAAP Generally Accepted Accounting 

Principles 

GAO Government Accountability Office 

GEMS Grants Electronic Management System 

ILAB Bureau of International Labor Affairs 

IPERA Improper Payments Elimination and 

Recovery Act 

IPIA Improper Payments Information Act 

MSHA Mine Safety and Health Administration 

NCFMS New Core Financial Management 

System 

NDNH National Directory of New Hires 

NIOSH National Institute for Occupational 

Safety and Health 

OASAM Office of the Assistant Secretary for 

Administration and Management 

OASP Office of the Assistant Secretary for 

Policy 

OCFO Office of the Chief Financial Officer 

ODEP Office of Disability Employment Policy 

OFCCP Office of Federal Contract Compliance 

Programs 

OIG Office of Inspector General 

OJC Office of Job Corps 

OLMS Office of Labor-Management Standards 

OPM Office of Personnel Management 

OSHA Occupational Health and Safety 

Administration 

OUI Office of Unemployment Insurance 

OWCP Office of Workers’ Compensation 

Programs 

PBGC Pension Benefit Guaranty Corporation 

PPACA Patient Protection and Affordable Care 

Act 

RECA Radiation Exposure Compensation Act 

SBR Statement of Budgetary Resources 

SCSIA Statement of Changes in Social 

Insurance Amounts 

SFFAS Statement of Federal Financial 

Accounting Standards 

SIDES State Information Data Exchange 

System 

SOL Office of the Solicitor 

SOSI Statement of Social Insurance 

SSA Social Security Administration 

TAA Transition Adjustment Assistance 

TAP Transition Assistance Program 

TOP Treasury Offset Program 

UI Unemployment Insurance 

USERRA Uniformed Services Employment and 

Reemployment Rights Act 

UTF Unemployment Trust Fund 

VETS Veterans’ Employment and Training 

Service 

WB Women’s Bureau 

WHD Wage and Hour Division 

WIA Workforce Investment Act