FY 2014 Agency Financial Report 3

Table of Contents

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

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

Program Performance Overview............................................................................................................................ 10

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

Management Assurances....................................................................................................................................... 33

Financial Section..................................................................................................................................35

Message from the Chief Financial Officer .............................................................................................................. 37

Independent Auditors’ Report................................................................................................................................ 39

Annual Financial Statements.................................................................................................................................. 53

Principal Financial Statements and Notes........................................................................................................ 55

Required Supplementary Stewardship Information...................................................................................... 111

Required Supplementary Information........................................................................................................... 117

Other Information .............................................................................................................................147

Inspector General’s Top Management Challenges............................................................................................... 149

Summary of Financial Statement Audit and Management Assurances............................................................... 159

Improper Payments Reporting Details................................................................................................................. 160

Schedule of Spending ........................................................................................................................................... 201

Open Government Links....................................................................................................................................... 202

Acronyms.............................................................................................................................................................. 203

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

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

AFRComments@dol.gov

or

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 2014 Agency Financial Report 5

Message from the Secretary of Labor

For 101 years, a dynamic Labor Department has helped expand 

opportunity, strengthen the middle class and ensure that everyone 

who works hard has a chance to live out their highest and best 

dreams.

For a full picture of the Department’s objectives and the steps we’re 

taking to achieve them, I encourage you to visit DOL.gov and read 

our Fiscal Year 2014-18 Strategic Plan. The Strategic Plan provides a 

five-year outline of the specific, measurable and strategic outcomes 

and goals to which we are committed.

Things are busy at the Department. We are working hard to build a 

21st century skills infrastructure that prepares people to succeed in 

the jobs of today and tomorrow. Just this fall, we announced $450 

million in community college grants, which will help more people 

get the training they need to punch their ticket to the middle class. 

All in all this year, we’re putting more than a billion dollars in grant 

money on the street, to help connect more ready-to-work 

Americans with ready-to-be-filled jobs. This summer, with a 

bipartisan vote, Congress passed the Workforce Innovation and 

Opportunity Act, further rejuvenating our workforce system, better 

aligning it with the needs of employers and ensuring that it is jobdriven. This law is the first major reform of the public workforce 

system in fifteen years. Implementing it is a challenge the 

Department is ready to meet.

We are also fighting every day to ensure that hard work is rewarded 

with a fair wage. We have completed the final rule to increase to $10.10 

per hour the minimum wage for workers on federal service and 

construction contracts, even as we continue to make the strong case for 

legislation to raise the wage floor to $10.10 for all workers. We also 

continue to work on rules to give more workers access to overtime pay.

We have taken steps forward to protect workers’ safety and health on 

the job. We completed a life-saving rule, decades in the making, to limit miners’ exposure to coal mine dust and 

move us closer to eliminating black lung disease. We have also taken the next steps toward protecting workers 

from inhaling high levels of crystalline silica.

The Department’s work to expand opportunity can only be successful if we deploy our resources in the most 

efficient and strategic way possible. That is why I am pleased to present the U.S. Department of Labor’s FY 

2014 Agency Financial Report. This is our annual publication to Congress and the American public 

demonstrating 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. It is with tremendous pride that I report that an independent audit of our 

financial statements has once again resulted in an unmodified “clean” opinion.

I am also pleased to provide an unqualified statement of assurance regarding the Department’sinternal controls, as 

required by the Federal Managers Financial Integrity Act of 1982 and Office of Management and Budget Circular 

No. A-123. The results of management’s assessment of internal controls and compliance of financial

management systems is included in the Management’s Discussion and Analysis section of this report. I am 

Thomas E. Perez

U.S. Secretary of Labor

The Department of 

Labor’s 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.”
Message from the Secretary of Labor

6 United States Department of Labor

confident that the financial data and summary performance results are complete and reliable in accordance with 

federal requirements.

In addition to transparency tools like this financial report, we analyze our programs to determine whether we are 

providing the best return on investment to the American public. Each departmental agency has an evaluation 

agenda, designed to measure the impact of existing programs and activities. Quite simply, we are committed to 

doing what works. Our commitment to performance and quantifiable outcomes is summarized in the Program 

Performance Overview section of this report. For in-depth performance information, please see the Department’s 

Annual Performance Report and Budget on DOL.gov.

I believe in the work of this Department, in the people who carry out that work, and in the financial integrity of our 

programs. I am excited about the work ahead. I look forward to continuing our efforts to create and expand 

opportunity for workers nationwide.

/S/

THOMAS E. PEREZ 

U.S. Secretary of Labor

November 17, 2014
FY 2014 Agency Financial Report 7

Management’s Discussion and Analysis

(Unaudited)

FY 2014 Agency Financial Report 9

The Department of Labor's (DOL or the Department) annual Agency Financial Report (AFR) provides fiscal data and 

summary 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 No. A-136, Financial Reporting Requirements.

Mission Statement and Organizational Structure

DOL’s mission remains as relevant today as at the Department’s founding in 1913:

“To foster, promote and develop the welfare of the job seekers, wage earners and retirees 

of the United States; improve working conditions; advance opportunities for profitable 

employment; and assure work related benefits and rights.”

The Department accomplishes this mission through component agencies and offices that administer various 

statutes and programs. These programs are carried out through a network of regional offices and smaller field, 

district, and area offices, as well as through grantees and contractors.
(Unaudited)

10 United States Department of Labor

Program Performance Overview

The Program Performance Overview presents the Department’s performance goals, objectives, and results. It 

discusses key performance measures and program priorities. This section includes results for measures 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 

2015 with the Fiscal Year (FY) 2016 Congressional Budget Justification. A third report, the Summary of Performance 

and Financial Information for Fiscal Year 2014, will be available on February 16, 2015. All three reports will be 

posted at http://www.dol.gov/dol/aboutdol/#budget.

The Department’s current five-year Strategic Plan- http://www.dol.gov/_sec/stratplan/ includes five strategic goals 

and 10 strategic objectives that support the Secretary’s vision of promoting and protecting opportunity for all 

workers and employers. These goals are presented in the following table:

STRATEGIC GOAL 1: Prepare workers for better jobs.

1.1. Advance employment opportunities for US workers in the 21st century demand sectors and occupations using 

proven training models through increased employer engagement and partnerships.

1.2. Provide marketable skills and knowledge to increase workers’ incomes and help them overcome barriers to the 

middle class through partnerships among business, education, labor, community organizations, and the workforce 

system.

1.3. Advance workers’ rights, acceptable work conditions, and livelihoods, particularly for the world’s vulnerable 

populations.

STRATEGIC GOAL 2: Improve workplace safety and health.

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

STRATEGIC GOAL 3: Promote fair and high-quality work environments.

3.1. Break down barriers to fair and diverse work-places and narrow wage and income inequality.

3.2. Protect workers’ rights.

3.3. Secure wages and overtime.

STRATEGIC GOAL 4: Secure retirement, health, and other employee benefits and, for those not working, provide 

income security.

4.1. Provide income support when work is impossible or unavailable and facilitate return to work. 

4.2. 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.

The goal structure incorporates the Department’s commitment to measuring activities that positively impact the 

day-to-day lives of working families. The results for these measures allow the Department to track progress in 

implementation of the strategic goals and objectives.

The Program Performance Overview organizes DOL program agencies into five categories that report FY 2014 

performance data. The Department’s mission is also supported by administrative, policy, legal, public affairs, and 

Congressional liaison offices.
Program Performance Overview

(Unaudited)

FY 2014 Agency Financial Report 11

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 following section presents a brief description of the programs administered by each agency, the most recent 

results for key performance measures, and a brief statement of forward-looking information. The Department 

tracks performance through over 400 output and outcome measures. The selected measures below are most 

representative of agency activities.

EMPLOYMENT & TRAINING

Employment and Training Administration (ETA)

ETA provides employment assistance, labor market information, and job training through the administration of 

programs authorized by the Workforce Investment and Opportunity Act of 2014 (WIOA) for adults, youth, 

dislocated workers, and other targeted populations. ETA administers Job Corps; Trade Adjustment Assistance (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. These 

programs support the Department’s Strategic Goal 1, Prepare workers for better jobs and the associated Strategic 

Objectives 1.1, Advance employment opportunities for US workers in the 21st century demand sectors and 

occupations using proven training models through increased employer engagement and partnerships, and 1.2, 

Provide marketable skills and knowledge to increase workers’ incomes and help them overcome barriers to the 

middle class through partnerships among business, education, labor, community organizations, and the workforce 

system.

Percent of Grant Reports Issued by Regional Offices – The ETA Regional Offices monitor grants to ensure compliance 

with Federal statute and regulations and assess performance progress through enhanced desk monitoring reviews 

and onsite monitoring reviews. ETA’s strategy is to monitor 100 percent of all active grants within a four year cycle. 
Management’s Discussion and Analysis

(Unaudited)

12 United States Department of Labor

In FY 2014, ETA Regional Offices monitored 28.45 percent of all active grants assigned to the regions, compared to 

32.48 percent in FY 2013 and 25.00 percent in FY 2012. 

Strategic Goal 1: Prepare workers for better jobs

Measure FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Percent of Grant Monitoring Reports Issued 

by Regional Offices -- -- -- 25.00% 32.48% 28.45%

Looking Forward: In 2015, ETA will build upon 2014 efforts to implement the President’s Job-Driven Training 

Agenda and the recently enacted WIOA. In accordance with DOL’s industry-recognized credentials priority goal, ETA 

continues to focus on increasing the percentage of training program completers who attain industry-recognized 

credentials by 10 percent. Through the American Apprenticeship Grants, ETA will build on successful Registered 

Apprenticeship models, drive ongoing innovation, and support state and regional strategies to expand quality 

apprenticeships.

Veterans’ Employment and Training Service (VETS)

VETS is committed to the Nation’s responsibility to meet the employment, training, and job security needs of 

Americans who have served in uniform. VETS prepares transitioning service members and military spouses for 

civilian employment and provides employment and training services to eligible veterans. VETS also protects service 

members and veterans by ensuring employers respect their rights to employment and reemployment; and ensures 

that federal employers give appropriate preferential hiring to veterans. VETS supports the Department’s Strategic 

Goal 1, Prepare workers for better jobs, and the associated Strategic Objective 1.1, Advance employment 

opportunities for US workers in the 21st century demand sectors and occupations using proven training models 

through increased employer engagement and partnerships.

VETS tracks timeliness and quality measures for its Uniformed Services Employment and Reemployment Rights Act 

(USERRA) program. To provide prompt resolution for both claimants and employers, VETS strives to complete 

USERRA investigations within 90 days. For cases that require investigation beyond 90 days, investigators ensure 

claimants are consulted to approve an extension. Additionally, VETS conducts a review of a sampling of cases each 

quarter to ensure that cases meet the quality standards set by the Agency.

In FY 2014, the timeliness of investigations was negatively impacted by the government shutdown, which occurred 

in the first quarter of the year. Performance for that quarter was 81 percent, the lowest on record. Despite this, 

performance in the final three quarters of the year raised performance to a level exceeding three of the past five 

years. The quality of investigations continues to increase as well, as quality reviews become institutionalized in the 

work of individual investigators nationwide. In FY 2014, VETS expanded the best practice of monthly regional 

conference calls to discuss USERRA timeliness and quality of investigations, which has had a positive effect on both 

outcomes.

Strategic Goal 1: Prepare workers for better jobs

Measure FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Percent of USERRA Investigations 

Completed Within 90 Days 86% 84% 87% 89% 89.6% 88.0%

Percent of Closed USERRA Cases 

Meeting Agency’s Quality Standard -- -- -- 83% 83% 91.5%

Looking Forward: VETS has a goal to increase the percent of participants who receive intensive services from 

Disabled Veterans’ Outreach Program (DVOP) specialists to 90 percent by September 30, 2016. While American Job 

Centers continue to make progress toward this target, VETS is also working with ETA to implement WIOA. As part of 

this act, the types of services provided by American Job Centers, currently “core services” and “intensive services,” 
Program Performance Overview

(Unaudited)

FY 2014 Agency Financial Report 13

have been consolidated under the new label of “career services.” Upon determining the impact of these changes, 

VETS and ETA will release guidance to State Workforce Agencies regarding the intensive services target.

WORKER PROTECTION 

Office of Federal Contract Compliance Programs (OFCCP)

OFCCP ensures that nearly 200,000 contractor facilities and locations provide equal employment opportunities 

leading to a fair and diverse workplace. OFCCP administers and enforces three legal authorities that require equal 

employment opportunity: Executive Order 11246, as amended; Section 503 of the Rehabilitation Act of 1973, as 

amended; and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) of 1974, as amended. Together, 

these laws ban discrimination and require Federal contractors and subcontractors to take affirmative action to 

ensure that all individuals have an equal opportunity for employment, without regard to race, color, religion, sex, 

gender identity, sexual orientation, national origin, disability, or status as a protected veteran. OFCCP supports the 

Department’s Strategic Goal 3, Promote fair and high-quality work environments and the associated Strategic 

Objective 3.1, Break down barriers to fair and diverse work-places and narrow wage and income inequality.

OFCCP’s compliance evaluations and complaint investigations play a critical role in measuring Federal contractor 

compliance with legal obligations under these authorities. In FY 2014, OFCCP staff continued to build knowledge 

and experience in investigating systemic cases of pay discrimination. These efforts are a further step in the agency’s 

long-term goal to commit the majority of its pay investigation resources to large systemic cases with a greater 

potential to impact more workers. These cases require additional time and resources; they demand much more 

sophisticated fact-finding and analysis than do the individual pay cases. Despite the lower number of evaluations, 

the number of impacted employees increased from 9,268 in FY 2013 to 22,952 in FY 2014.

Strategic Goal 3: Promote fair and high quality work environments

Measure FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Compliance Evaluations 3,917 4,960 4,014 4,017 4,345 3,985

Looking Forward: In FY 2015, OFCCP will continue to emphasize the strategic priority of investigating a greater 

proportion of systemic pay discrimination cases, as compared to individual pay discrimination cases. OFCCP will also 

focus on Mega Construction Projects, which have the potential for better success in increasing the representation 

of minorities, women, people with disabilities, and protected veterans in skilled trades through effective 

recruitment and training. 

Occupational Safety and Health Administration (OSHA)

OSHA is authorized by the Occupational Safety and Health Act of 1970 to assure safe and healthful conditions for 

working men and women by setting and enforcing standards and providing training, outreach, education, and 

technical assistance. OSHA aims to reduce the number of work related illnesses, injuries, and fatalities and 

contributes to the broader goal to promote competitiveness of our nation's economy. OSHA supports the 

Department’s Strategic Goal 2, Improve workplace safety and health, and Strategic Goal 3, Promote fair and high 

quality work environments, and related Strategic Objectives 2.1, Secure safe and healthy workplaces, particularly in 

high-risk industries and 3.2, Protect workers’ rights. The most recent data for key measures of OSHA’s activity – the 

number of safety and health inspections – are presented in the table below.

Safety inspections conducted in general industry and construction take place in a variety of high-hazard industries, 

such as the chemical and refinery industries; industries that generate combustible dust; oil and gas well drilling; 

commercial construction; highway, street, bridge, and tunnel construction; arborist and logging work; water, 

sewer, pipeline, communications (including telecommunications), and power line construction; power distribution 

and generation; wind energy; forging; steel manufacturing; food manufacturing; grain handling; demolition; 
Management’s Discussion and Analysis

(Unaudited)

14 United States Department of Labor

warehouses; and nursing homes. There are a multitude of serious safety hazards that workers can be exposed to in 

these industries.

Health inspections are conducted in general industry and construction and address hazards such as chemical 

hazards, biological hazards (e.g., blood borne 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). Safety and health inspections increased from FY 2008 through FY 2012, but dropped in FY 2013 

due to sequestration. In FY 2014, OSHA committed to addressing more health hazards through the more complex 

and resource-intensive health inspections process. This shift led to a slight reduction in safety inspections. 

Additionally, the government shutdown at the beginning of the fiscal year had an impact on the decreasing number 

of health and safety inspections. Toward the end of FY 2014, OSHA concentrated its efforts on closing existing 

cases. This production did not impact results for either measure, which track inspections initiated, not their 

completion.

Strategic Goal 2: Improve workplace safety and health, and

Strategic Goal 3: Promote fair and high-quality work environments

Measure FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Total Number of Safety Inspections Conducted 33,221 34,320 33,341 [r] 33,580 31,948 29,2401

Total Number of Health Inspections Conducted 5,783 6,649 7,317 7,381 7,280 6,8091

1

Preliminary results. Final FY 2014 results will be included in the FY 2016 Congressional Budget Justification.

[r] Indicates revised result from the FY 2013 AFR.

Looking Forward: In FY 2015, OSHA will continue to target the most hazardous worksites and focus on complex 

hazards that require significant resources, such as cases that involve heat stroke hazards, chemical and biological 

hazards, process safety management hazards, ergonomic hazards, and fatalities, serious injuries, and illnesses.

Wage and Hour Division (WHD)

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

working conditions. Collectively, these labor standards cover most private, State, and local government 

employment. They protect over 135 million workers in more than 7.3 million establishments throughout the U.S. 

and its territories. 

WHD investigators, supervisors, analysts, technicians, and administrative employees enforce and administer the 

minimum wage, overtime and child labor provisions of the Fair Labor Standards Act (FLSA); the prevailing wage 

requirements and wage determination provisions of the Davis Bacon and Related Acts (DBRA) and Service Contract 

Act (SCA); the wages and working conditions under the Migrant and Seasonal Agricultural Worker Protection Act 

(MSPA); and the Employee Polygraph Protection Act (EPPA). WHD also enforces the field sanitation and temporary 

labor camp standards in agriculture and certain employment standards and worker protections of the Immigration 

and Nationality Act (INA). WHD’s enforcement responsibilities directly contribute to the Department’s Strategic 

Goal 3, Promote fair and high–quality work environments, and related Strategic Objectives 3.2, Protect workers’ 

rights, and 3.3, Secure wages and overtime.

To be effective in securing compliance, WHD continues to prioritize conducting directed investigations focused on 

new business models characterized by the use of subcontracting, franchising, temporary employment, labor 

suppliers, independent contracting, and a contingent workforce. These business models, where companies 

outsource key aspects of their production, often lead to less compliance with wage and hour related statutes. The 

first measure below is directed investigations as a percentage of all investigations conducted. In FY 2014, WHD fell 

below FY 2013 performance (by less than 1 percent) for “Percent of Directed Investigations”, but still maintained 
Program Performance Overview

(Unaudited)

FY 2014 Agency Financial Report 15

increases from the four years prior to FY 2013. 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, such as the janitorial and residential 

construction industries. Misclassification adversely affects a worker’s ability to receive Unemployment Insurance 

and Social Security benefits, workers’ compensation, health insurance and retirement coverage, and protection 

under the Fair Labor Standards Act. In FY 2014, WHD continued to increase the “Percent of Directed Investigations 

in Industries with a High Prevalence of Misclassified as Independent Contractors”. WHD has and will continue to 

focus its presence in those industries that have developed business practices to avoid classifying and treating 

workers as employees, including those in which employees are misclassified as independent contractors. WHD has 

established Memorandums of Understanding (MOUs) with Federal and state agencies. These MOUs have and will 

continue to advance coordination and communication around misclassification between WHD and its MOU 

counterparts.

Strategic Goal 3: Promote fair and high-quality work environments 

Measure FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Percent of Directed Investigations1 35.21% 26.72% 29.21% 40.63% 44.19% 43.51%

Percent of Directed Investigations in Industries 

with a High Prevalence of Employees 

Misclassified as Independent Contractors2 10.41% 16.68% 21.07% 19.98% 19.08% 21.06%

1 Prior year data reflect measure revision. Results now exclude conciliations – a customer service function performed by WHD technicians, 

not investigators. 

2 Changes to FY 2009-11 results from those in FY 2013 AFR attributed to previous rounding. 

Looking Forward: The employment relationship has changed enormously. The modern workplace in many 

industries is no longer a brick and mortar company owned and operated by a single employer. Instead, employment 

has fissured apart, as companies have shed activities to be done by other businesses. Often those secondary 

businesses deepen the fissures even further. Fissuring arises from a variety of business organizations: 

subcontracting, temporary agencies, labor brokers, franchising, licensing, and third party management. It may lead 

to misclassification of employees as independent contractors in a variety of ways. Employment relationships are 

more tenuous and the workforce becomes vulnerable to violations of even the most basic protections of our laws. 

Ensuring that workers receive a fair day’s pay for a fair day’s work in the millions of workplaces covered by the FLSA 

and other laws administered by the WHD has always been challenging. The fissured workplace and its ripple effects 

present new enforcement challenges for WHD.

WHD has three strategic priorities to meet these challenges:

1. Ensuring that the regulatory agenda of providing a fair day’s pay for a hard day’s work is fully and properly 

implemented;

2. Building a strategic enforcement system that supports the agency’s mission, vision, and values; and

3. Providing support for key initiatives such as government contracts, addressing the fissured workplace, and 

modernizing WHD’s approach in program enforcement areas.

The agency's priorities are supported by performance measures to monitor the organization’s progress in achieving 

strategic enforcement and compliance outcomes. WHD has used a balance of measures to evaluate whether the 

agency is effective, productive, and consistent in applying new policies and strategies. WHD has consistently 

prioritized enforcement resources in those industries defined by their fissured structures. The increased level of 

directed investigations, has increased the agency’s presence in those priority industries. By focusing on priority 

industries, WHD also increases the likelihood of detecting instances of misclassification. 
Management’s Discussion and Analysis

(Unaudited)

16 United States Department of Labor

Employee Benefits Security Administration (EBSA)

EBSA protects more than 142 million workers, retirees, and their families which are covered by nearly 677,000 

private retirement plans, 2.4 million health plans, and similar numbers of other welfare benefit plans which 

together hold estimated assets of $8.4 trillion. EBSA’s proactive enforcement, outreach, and education programs 

protect the most vulnerable populations while ensuring broad compliance with the Employee Retirement Income 

Security Act of 1974 (ERISA) and related laws. In particular, EBSA’s enforcement program targets the most

egregious and persistent violators; protects the most vulnerable populations while assuring broad-based 

compliance; and establishes regular processes for evaluating the success of enforcement activities. EBSA supports 

the Department’s Strategic Goal 4, Secure retirement, health, and other employee benefits and, for those not 

working, provide income security and related Strategic Objective 4.2, Improve health benefits and retirement 

security for all workers.

EBSA’s enforcement program seeks to detect and correct violations of ERISA through the conduct of civil and 

criminal investigations. Historical data for two performance measures, “Criminal Investigations Processed” and 

“Civil Investigations Processed,” are shown in the table below. In FY 2014, EBSA focused its enforcement resources 

on National Projects (including expansion of health investigations initiated pursuant to Health Benefits Security) 

and the Major Case Enforcement Priority. The Major Case Enforcement Priority concentrates resources on cases 

with the greatest impact on the protection of plan assets and plan participants.

Strategic Goal 4: Secure retirement, health benefits, and other employee benefits 

and, for those not working, provide income security

Measure FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Number of Criminal Investigations Processed 287 281 302 318 320 364

Number of Civil Investigations Processed 3,669 3,112 3,472 3,566 3,677 3,923

Looking Forward: In FY 2015, EBSA will implement performance measurement changes designed to increase the 

effectiveness of its enforcement program while avoiding reliance on raw case numbers. As a result, the new 

enforcement program measures/indicators will focus on the areas of: prompt detection and pursuit of violations,

effective targeting to detect violations, the successful pursuit of monetary recoveries, non-monetary results that 

promote compliance with ERISA, and the aggressive and timely pursuit of participant tips and complaints.

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. 

MSHA focuses on the prevention of death, disease, and injury from mining and on promoting safe and healthful 

workplaces for the Nation’s miners. MSHA supports the Department’s Strategic Goal 2, Improve workplace safety 

and health and Strategic Goal 3, Promote fair and high-quality work environments, and related Strategic Objectives 

2.1, Secure safe and healthy workplaces, particularly in high-risk industries and 3.2, Protect workers’ rights.

MSHA is required to conduct four complete inspections annually at active underground mines and two complete 

inspections annually at active surface mines. The table below shows the number of inspections for Coal vs. Metal 

and Nonmetal mine types. Fluctuations in the number of inspections over time reflect variation in the number of 

mines operating during any given time period. Except for the first quarter, when the government shutdown 

prevented inspections, MSHA performed all mandated inspections.
Program Performance Overview

(Unaudited)

FY 2014 Agency Financial Report 17

Strategic Goal 2: Improve workplace safety and health, and 

Strategic Goal 3: Promote fair and high-quality work environments 

Measure FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Regular Mandated Coal Mine Inspections 5,526 5,121 5,139 5,117 4,658 4,176

Regular Mandated Metal and Nonmetal 

Mine Inspections 17,168 16,127 16,269 16,620 16,624 16,253

Looking Forward: By September 30, 2015, MSHA aims to reduce worker fatality rates in mining by five percent

based on a rolling five-year average. MSHA will use the following strategies in pursuit of achieving this target: 

increasing inspection and enforcement effectiveness, strengthening and modernizing training and education, 

improving mine emergency response preparedness, strengthening health and safety regulations, increasing efforts 

to protect miners from discrimination, and supporting open government.

Office of Labor-Management Standards (OLMS)

OLMS protects the rights of American workers by administering the Labor-Management Reporting and Disclosure 

Act (LMRDA) and related laws, which safeguard union democracy and union financial integrity. OLMS supports the 

Department’s Strategic Goal 3, Promote fair and high-quality work-life environments, and related Strategic 

Objective 3.2, Protect workers’ rights. 

OLMS focuses audit resources by using advanced targeting techniques to identify the unions most likely to be 

subject to a violation of the law. The success of audit targeting strategies is measured by “Percent of Audits 

Resulting in a Criminal Case (Fallout Rate).” Since the implementation of this performance measure, OLMS has 

consistently increased the fallout rate, reaching its highest percentage to date in FY 2014. 

Timely resolution of union election complaints is a paramount goal of the LMRDA, and OLMS gauges its progress 

against this goal through the “Days to Resolve Union Officer Election Complaints” measure. Over the last several 

years, OLMS has dramatically reduced the average number of elapsed days per case. OLMS continues to exceed this 

goal.

OLMS is also making it easier for unions, employers, and consultants to file the financial and activity reports 

required under the LMRDA, and it tracks its success in these efforts through the “Percent of LMRDA Required Forms 

Filed Electronically” measure. OLMS continues to use existing outreach tools (e.g., seminars, compliance assistance 

incidental to an audit) to introduce and encourage union leaders and other filers to use web-based forms.

Strategic Goal 3: Promote fair and high-quality work environments

Measure FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Percent of Audits Resulting in a Criminal Case 

(Fallout Rate) -- -- 14.9% 13.8% 20.9% 21.7%

Number of Days to Resolve Union Officer Election 

Complaints 70 81 79 71 71 72

Percent of LMRDA Reports Filed Electronically -- -- 21.4% 37.8% 42.4% 45.0%

Looking Forward: These results measure progress in the three OLMS high priority programs. In the future, OLMS 

will focus its efforts on continued improvements. For its fallout measure, OLMS will continue to refine the targeting 

techniques in an effort to continue, saving resources directed at audits and redirecting these saved resources to 

high priority programs. While efforts to work closely and cooperatively with the Office of the Solicitor have resulted 

in dramatic improvement in election case processing, OLMS will explore additional areas of mutual cooperation. 

OLMS also continues to coordinate efforts between and among National Office and field staff. In the past, these 

efforts have expedited processing and OLMS believes that by enhancing this coordination and looking for additional 

areas of increased efficiency, the number of elapsed days can be further reduced. Finally, in FY 2014, OLMS 
Management’s Discussion and Analysis

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18 United States Department of Labor

allocated greater resources to its Voluntary Compliance Program (VCP), a cooperative effort with 42 international

and national unions designed to provide targeted outreach to their affiliates, with one goal being fostering greater 

use of the electronic filing capabilities of the OLMS web site. 

POLICY

Women’s Bureau (WB or Bureau)

The mission of the Women’s Bureau is to develop policies and standards and conduct inquiries to safeguard the 

interests of working women, advocate for their equality and economic security for themselves and their families, 

and promote quality work environments. The Bureau is the only Federal office dedicated to serving and promoting 

the interests of women in the workforce. The Bureau supports the Department’s Strategic Goal 3, Promote fair and 

high-quality work environments and Strategic Objective 3.1, Break down barriers to fair and diverse work places and 

narrow wage and income inequality.

The Bureau conducts research to identify and formulate practices and policies that support working women and 

inform strategic interventions and recommends these practices and policies within DOL and the Federal 

government, national organizations, and local communities. It identifies trends, data gaps, policy and programmatic 

needs, and promising practices. 

Office of Disability Employment Policy (ODEP)

ODEP utilizes data and evidence to promote the adoption and implementation of policy strategies and effective 

practices that will positively impact the employment of people with disabilities. ODEP develops effective policy and 

practices, conducts outreach to share this critical information, and provides technical assistance to all levels of 

government, service providers and non-governmental organizations, and employers. These ODEP activities support 

the Department’s Strategic Goal 3, Promote fair and high-quality environments and the associated Strategic 

Objective 3.1, Break down barriers to fair and diverse work-places and narrow wage and income inequality.

ODEP develops, evaluates, and disseminates policy strategies and effective practices to increase the number and 

quality of job opportunities for people with disabilities. ODEP’s key measures are the numbers of “Policy Outputs”, 

“Effective Practices”, and “Formal Agreements.” “Policy Outputs” are recommendations for significant policy 

change or an interpretation of existing policy related to disability employment – which could be 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 between ODEP and external agencies or 

nonprofit organizations that are formalized through memoranda of understanding, inter/intra-agency agreements, 

public private partnership agreements, or alliance agreements.

ODEP has markedly increased its policy outputs, capitalizing on interest by states in implementing effective 

practices that prioritize competitive, integrated employment and interest by employers in hiring people with 

disabilities spurred by new regulations. The majority of ODEP work in 2014 was in a later stage in the logic model. 

This involved producing policy outputs using validated effective practices and existing partners. As a result, there 

was a decrease in new formal agreements and effective practices.

Strategic Goal 3: Promote fair and high-quality work environments

Measure FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Policy Outputs 39 35 42 39 54 125

Effective Practices 15 23 44 131 192 147

Formal Agreements 17 30 29 30 103 86

Looking Forward: In FY 2015, ODEP’s initiatives and projects include improving community college education and 

employment opportunities for people with disabilities; providing technical assistance to employers; and 
Program Performance Overview

(Unaudited)

FY 2014 Agency Financial Report 19

disseminating information that counters negative perceptions of hiring people with disabilities. ODEP will also 

provide support and technical assistance for Executive Order 13548 regarding the recruitment, hiring, and retention 

of people with disabilities.

Bureau of International Labor Affairs (ILAB)

In a global economy, opportunities for American workers are shaped by the working conditions and opportunities 

of workers worldwide. Addressing worker rights and livelihoods overseas has the dual effect of protecting American 

and foreign workers. Realizing the Secretary’s vision of promoting and protecting opportunity requires improving 

working conditions, raising living standards, protecting workers’ ability to exercise their rights, and addressing the 

workplace exploitation of children and other vulnerable populations.

ILAB has three major strategies for achieving its goal: (1) promoting labor standards through an integrated 

approach; (2) combatting child labor, forced labor, and human trafficking through integrated approaches and 

evidence; and (3) improving workers’ rights through targeted labor policy engagement. ILAB supports the 

Department’s Strategic Goal 1, Prepare workers for better jobs, and Strategic Objective 1.3, Advance workers’ 

rights, acceptable work conditions, and livelihoods, particularly for the world’s vulnerable populations.

Looking Forward: ILAB has adopted an integrated approach that combines efforts to amend laws and strengthen 

enforcement with activities to assist worker organizations, improve industrial relations, effectively engage 

companies, and raise awareness about worker rights. In FY 2015, ILAB will continue efforts to monitor and enforce 

worker rights, provide technical assistance and cooperation including the oversight of $362 million in grants for 68 

projects in 66 countries, represent the United States in various international meetings, and provide relevant 

research and awareness raising including the Trade and Development Act Child Labor Report.

BENEFITS

Office of Workers’ Compensation Programs (OWCP)

OWCP is comprised of four separate programs that provide workers’ compensation benefits supporting the 

Department’s Strategic Goal 4, Secure retirement, health, and other benefits and, for those not working, provide 

income security, and Strategic Objective 4.1, Provide income support when work is impossible or unavailable and 

facilitate return to work: 

• The Federal Employees' Compensation Act (FECA) Program provides wage-loss compensation, payment for 

medical treatment, return to work assistance, and vocational rehabilitation to civilian employees of the 

Federal Government injured at work and to certain other designated groups. In the event of death, FECA 

provides ongoing monetary compensation to dependents.

• The Longshore and Harbor Workers' Compensation Act (Longshore) Program oversees the provision of 

similar benefits to injured private sector workers engaged in certain maritime and related employment, and 

by extension to contractors working overseas for the U.S. government under the Defense Base Act.

• The Black Lung Benefits Program oversees the provision of monetary compensation and medical benefits to 

coal mine employees who are totally disabled due to pneumoconiosis arising out of coal mine employment, 

and monetary benefits to their eligible dependent survivors.

• The Energy Employees Occupational Illness Compensation Program Act (Energy Program) provides 

compensation and medical benefits to employees or survivors of employees of the Department of Energy, 

contractors or subcontractors with Department of Energy (DOE), who worked on the nation’s nuclear 

weapons program and became ill due to exposure to radiation or toxic substances.

One of the Federal Employees’ Compensation Act program’s principal focus areas is to provide disability 

management intervention and rehabilitative and placement services to assist with injury recovery and to facilitate 

the return to work of the individuals who sustained an injury or illness. Two measures used to monitor progress in 

this area are Return to Work (RTW) rates, expressed as the share of injured workers returned to work within two 
Management’s Discussion and Analysis

(Unaudited)

20 United States Department of Labor

years of injury, and Lost Production Day (LPD) rates, expressed as days of lost production and wages in the first year 

following injury per 100 employees. These measures have been used over the last several years and provide 

valuable information on the effectiveness of OWCP’s and Federal employers’ return to work activities and the 

overall incidence and severity of workplace injuries for Federal employees. In FY 2014, RTW activities were 

significantly impacted by sequestration, the government shutdown and ongoing budget reductions. OWCP will 

continue to place a strong emphasis on RTW; and will carefully monitor progress and work with agencies to 

leverage best practices and implement new methods and tools.

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 Percent of First Payment of Compensation for Defense Base Act cases 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 improved over 20 percentage points, and the program expects performance to continue to 

improve in FY 2015. In the area of first payments, Defense Base Act cases presented significant challenges in FY 

2014. Due to security issues, limited access to injured workers and their dependents, as well as limited banking 

infrastructure, there was a slight decline in the delivery of first payments. 

The Black Lung Program monitors the timeliness of black lung disease claim processing through a key measure, 

Average Time to Render Proposed Decision and Order (PDO) on Black Lung claims. The Patient Protection and 

Affordable Care Act (PPACA) of 2010 has increased the average time for Black Lung claims decisions, as it reinstated 

two provisions in the Black Lung Benefits Act favorable to claimants. This change led to a 70 percent increase in 

claims received – 4,354 claims filed in FY 2009 (pre-PPACA) compared to FY 2014’s 7,394 claims.

In FY 2014, the average time to render Black Lung PDO increased as the agency balanced increasing workload, 

quality and timeliness. OWCP implemented quality control measures, requiring additional development of evidence 

to ensure that the best and most accurate decisions were issued. The implementation of a focused quality review 

process also added additional time, leading to an average processing time of 234 days, up from 221 in FY 2013.

The Energy Employees Occupational Illness Compensation Act program has joint timeliness measures with DOE and 

the National Institute for Occupational Safety and Health (NIOSH), as each partner agency has a role in final claims 

decisions. The below reported measure focuses on shortening the overall time to make claims decisions through 

improving program coordination. A priority focus for the program is to reduce the time required to process cases 

that are sent to NIOSH for dose reconstruction that require an oral hearing. The average number of days between 

filing date and final decision for cases sent to NIOSH when a hearing was held was 469 days in FY 2014, 

representing a slight increase from FY 2013, but more than 15 and 24 percent declines from FYs 2012 and 2011, 

respectively. (See Strategic Goal 4 on next page.)
Program Performance Overview

(Unaudited)

FY 2014 Agency Financial Report 21

Strategic Goal 4: Secure retirement, health benefits, and other benefits 

and, for those not working, provide income security

Measure FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Government-Wide LPD Rate in Non-Postal 

Agencies 35.8 34.6 33.8 34.8 34.6 34.51

Government-Wide Share of Injured Workers 

Returned to Work Within Two Years of Injury 85.8% 89.7% 91.6% 91.5% 91.9% 90.7%

Percent of First Payment of Compensation 

issued Within 30 days for Defense Base Act 43% 55% 56% 63% 67% 63%

Average Time to Render Proposed Decision and 

Order on Black Lung Claims (days) 201 210 238 262 221 234

Average Number of Days Between Filing Date 

and Final Decision for Cases Sent to NIOSH 

When a Hearing is Held -- -- 619 552 452 469

1 Preliminary results. Final FY 2014 results will be included in the FY 2016 Congressional Budget Justification.

Looking Forward: In FY 2015, OWCP will continue to chair the Protecting Our Workers and Ensuring Reemployment 

(POWER) Return to Work Council, consisting of representatives from the 14 executive branch agencies; expand the 

reemployment pathways and opportunities for injured workers; increase the number of injured workers placed in 

jobs when they cannot be reemployed by their date-of-injury Federal employer; and establish a candidate bank 

(Labor for America) of FECA claimants for potential employers in both the public and private sectors. OWCP will also 

provide training for staff to strengthen dispute resolution quality and monitor the effectiveness of completed 

dispute resolutions through stakeholder feedback. In addition, OWCP will conduct outreach to Black Lung program 

customers and medical provider communities to improve the quality of medical evidence that is submitted with 

claims, foster a better understanding of the claims decisions issued, and use higher-credentialed physicians for 

diagnostic examinations to increase the credibility of initial eligibility decisions.

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 

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.

The decline in First Payment Timeliness performance is related to state staff layoffs, high state staff turnover, and 

technology issues. The staff layoffs are a consequence of the reduction in administrative funding resulting from 

lower workloads due to expiration of the Emergency Unemployment Compensation program. States have 

experienced a high turnover of staff leaving them with a less experienced and trained staff to make claim eligibility 

determinations which led to workload backlogs in the claims-taking and adjudication units. Additionally, several 

states have reported technology issues following system modernization implementation efforts or because they 
Management’s Discussion and Analysis

(Unaudited)

22 United States Department of Labor

have antiquated technology systems. ETA continues to provide intensive technical assistance and monitoring to 

underperforming states. 

Strategic Goal 4: Secure retirement, health benefits, and other benefits

and for those not working, provide income security

Measure FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Total Unemployment Rate 8.5% 9.7% 9.2% 8.3% 7.6% 6.5%

First Payment Timeliness 82.9% 82.2% 84.0% 83.7% 81.0% 79.0%

Looking Forward: ETA will continue to work with states with the poorest performance in the first payment and/or 

lower authority appeals timeliness measures, providing high-emphasis technical assistance to support performance 

improvement. ETA UI staff will work with these states to develop comprehensive Corrective Action Plans (CAPs) 

designed to improve performance. Examples of ETA’s customized technical assistance strategies to support 

performance improvement for the poor performing states include:

• Work collaboratively with the state(s) to conduct enhanced analysis of all relevant data (including 

performance data) to inform strategic approaches to performance improvement. The data analysis may 

also involve examining data in similarly situated states.

• Deploy a team of experts from ETA, and possibly other state experts, to conduct a thorough review of the 

state’s administrative and business processes relevant to the poor performance using state-of the-art 

business process analysis and process mapping tools, resulting in recommendations and an action plan the 

state will implement, as appropriate.

• Engage high-level state officials to bring focus to the egregious performance and promote prioritizing state 

resources to support performance improvement.

• Enhanced monitoring and follow-up that may include additional reporting by the state in area(s) of 

performance deficiency and on-site visits by ETA or partnering with state staff to assess process changes.

ETA in collaboration with the National Association of State Workforce Agencies’ Information Technology Support 

Center (ITSC) continues to diligently work with individual states and state consortia to provide appropriate technical 

assistance. Pending availability of funding in future years, ETA will continue to support the states’ system 

modernization efforts.

STATISTICS

Bureau of Labor Statistics (BLS)

In support of the Department’s Strategic Goal 5, Produce timely and accurate data on the economic conditions of 

workers and their families, BLS produces accurate, objective, relevant, timely, and accessible statistics reflecting 

labor market activity, working conditions, and price changes in the economy. Its mission is to collect, analyze, and 

disseminate essential economic information to support public and private decision-making. Policies and decisions 

based on BLS data affect virtually all Americans, and the wide range of BLS data products is necessary to meet the 

diverse needs of a broad customer base. In FY 2014, BLS reached 100 percent of the underlying timeliness and 

relevance targets for all of its Principal Federal Economic Indicators (PFEIs). BLS reached 95% of the underlying 

accuracy targets for its PFEIs, missing the Producer Price Index (PPI) Percentage of industry product line indexes 

published monthly target by one percentage point. PPI changed its policy for delinquent respondents, resulting in 

fewer industry indexes meeting publishability requirements. PPI plans to adjust its outyear targets accordingly. 

Results for the five performance measures are indicated in the table below.

BLS strives to ensure that its data products are readily accessible online and meet users’ needs. The most common 

way that people gain access to BLS data is through bls.gov, which averaged more than 8 million user sessions each 

month in FY 2014. BLS uses the American Customer Satisfaction Index (ACSI) to measure customer satisfaction with 
Program Performance Overview

(Unaudited)

FY 2014 Agency Financial Report 23

its website. 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. In addition, the BLS uses the number of internet user sessions to track 

the dissemination of its data. 

Strategic Goal 5: Produce timely and accurate data on the economic conditions of workers and their families

Performance Measure FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Percentage of Timeliness Targets Achieved for 

the Principal Federal Economic Indicators 

(PFEIs) 1 100% 100% 100% 100% 100%

Percentage of Accuracy Targets Achieved for 

the PFEIs 1 100% 100% 100% 100% 95%

Percentage of Relevance Targets Achieved for 

the PFEIs 1 100% 100% 90% 100% 100%

Average Number of Internet Site User Sessions 

Each Month (Dissemination) 6,972,577 7,213,823 8,149,686 8,765,143 8,395,453

Customer Satisfaction with the BLS website 

through the American Customer Satisfaction 

Index (Mission Achievement)2

75 75 77 77 77

1 Measure is new beginning in FY 2014. The FY 2010 – 2013 results are shown for trend comparison purposes. 2 ACSI Score is calculated on a 100 point scale.

Looking Forward: BLS will continue to report timeliness, accuracy, and relevance for its Principal Federal Economic 

Indicators, and use the American Customer Satisfaction Index to measure customer feedback with its website. Note 

that, in FY 2015, due to a change in software, BLS will replace the current dissemination measure of Average 

number of Internet site user sessions each month, with a new, more comprehensive measure, Average number of 

BLS website page views each month.
(Unaudited)

24 United States Department of Labor

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 2014 and FY 2013, DOL used managerial cost accounting for costing programs and performance indicator 

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

Financial Accounting Standards (SFFAS) No. 4, Managerial Cost Accounting Standards and Concepts, 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 was $55.7 billion for FY 2014 and $82.9 billion for FY 2013.

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 2014 Agency Financial Report 25

Figure 1: Summary of Selected Financial Data for FY 2014 and 2013

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 $53.9 billion at the end 

of FY 2013 to $60.1 billion at the end of FY 2014, an increase of 11.5%, primarily due to an increase in investments. 

Investments increased primarily due to net inflows in the Unemployment Trust Fund (UTF) in excess of immediate 

program needs for benefit payments and administrative costs. (See Figure 2 on next page for reported Assets by 

Type for FY 2014 and FY 2013.)

(Dollars in billions) 2014 2013 Amount Percent

Financial position

Total assets $ 60.1 $ 53.9 $ 6.2 11.5% 

 Funds with U.S. Treasury 13.0 13.1 (0.1) (0.8)%

Investments 36.2 29.7 6.5 21.9% 

Total liabilities $ 47.0 $ 57.5 $ (10.5) (18.3)%

Debt 26.7 35.7 (9.0) (25.2)%

Net cost of operations

Net cost of operations $ 55.7 $ 82.9 $ (27.2) (32.8)%

Income maintenance 47.0 73.9 (26.9) (36.4)%

Employment and training 6.3 6.4 (0.1) (1.6)%

Budgetary resources

 Appropriations $ 59.4 $ 102.6 $ (43.2) (42.1)%

 Borrowing authority 2.7 7.7 (5.0) (64.9)%

 Obligations incurred 69.9 118.1 (48.2) (40.8)%

Summary of Selected Financial Data

Change
Management’s Discussion and Analysis

(Unaudited)

26 United States Department of Labor

Figure 2: Assets by Type for FY 2014 and FY 2013

Liabilities decreased from $57.5 billion at the end of FY 2013 to $47.0 billion at the end of FY 2014, a decrease of 

(18.3)%. This decrease was primarily due to a decrease in intra-governmental debt [(25.2)%] due to UTF

repayments of borrowings from the General Fund of the Treasury as tax collections by the states exceeded the 

requirements for benefit payments.

Figure 3: Liabilities by Type for FY 2014 and FY 2013

* OIC = Occupational Illness Compensation.
Financial Performance Overview

(Unaudited)

FY 2014 Agency Financial Report 27

Net Cost of Operations 

The Department's net cost of operations for the year ended September 30, 2014, was $55.7 billion, a decrease of 

$(27.2) billion [(32.8)%] from FY 2013. This decrease was attributable to the decreases in the programs discussed 

below:

Figure 4: Net Cost of Operations by Program for FY 2014 and FY 2013

1

Net Cost of Programs include costs not assigned to specific programs, which were $0.03 billion and 

$0.1 billion for FY 2014 and FY 2013, respectively.

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 $47.0 billion, a decrease of (36.4)% from 

FY 2013. This decrease was primarily due to decreases in unemployment benefits provided under existing 

legislation, and lower levels of unemployment as compared to FY 2013.

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 $6.3 billion in FY 2014, a decrease of (1.6)% from FY 2013. This 

decrease was due to reductions in appropriated amounts for the 2014 program year for various programs.

Budgetary Resources

The Statements of Budgetary Resources report the budgetary resources available to DOL to effectively carry out the 

activities of the Department during FY 2014 and FY 2013, as well as the status of these resources at the end of each 

fiscal year. During FY 2014, the Department’s appropriations decreased ($43.2) billion [(42.1)%] primarily due to 

decreases in transfers to the UTF for Emergency Unemployment Compensation; also, the Department’s borrowing 
Management’s Discussion and Analysis

(Unaudited)

28 United States Department of Labor

authority decreased ($5.0) billion [(64.9)%], which is consistent with the lower balance of intra-governmental debt 

at the end FY 2014. The Department had total obligations incurred of $69.9 billion in FY 2014, a decrease of $(48.2) 

billion [(40.8)%] from FY 2013. 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 

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 future administrative costs, less the present value of future coal excise tax income. For FY 2010

through FY 2014 as presented in the SOSI, the present value of the future coal excise tax income has been greater 

than the sum of the actuarial present value of the future benefits and the present value of future administrative 

costs. This amount is also called the open and closed group measure. 

Figure 5: Black Lung Disability Benefit Program - Table of Key Measures for FY 2014 and FY 2013

(Dollars in millions) 2014 2013 Amount Percent 

 Total assets $ 129.4 $ 145.8 $ (16.4) (11.2)%

 Less: total liabilities (5,884.7) (6,040.0) $ 155.3 2.6% 

 Net position (assets net of liabilities) $ (5,755.3) $ (5,894.2) $ 138.9 2.4% 

 Net cost of operations $ (388.6) $ (403.7) $ 15.1 3.7% 

 Total financing sources 527.5 487.1 $ 40.4 8.3% 

 Net change of cumulative results of operations $ 138.9 $ 83.4 $ 55.5 66.5% 

 Open and closed group measure,

 beginning of year $ 4,620.3 $ 4,658.5 $ (38.2) (0.8)%

 Open and closed group measure,

 end of year $ 4,482.8 $ 4,620.3 $ (137.5) (3.0)%

Social insurance

Black Lung Disability Benefit Program – Table of Key Measures

 Change 

Financial position 

Costs and changes in net position

The decrease in the net cost of operations for the year ended September 30, 2014 of $15.1 million [3.7%] from FY

2013 was mainly due to lower benefit costs. FY 2014 total financing sources increased $40.4 million [8.3%] from FY 

2013 mainly due to increases in tax collections. The resulting net change of cumulative results of operations for 

FY 2014 was $138.9 million, an increase of $55.5 million [66.5%] from FY 2013.

Total assets decreased $(16.4) million [(11.2)%] at the end of FY 2014 primarily due to a decrease in the Funds with 

U.S. Treasury balance. Liabilities decreased $(155.3) million [2.6%] at the end of FY 2014 due to repayments of 

debt. The resulting net position (deficit) decreased $138.9 million at the end of FY 2014.
Financial Performance Overview

(Unaudited)

FY 2014 Agency Financial Report 29

At the end of FY 2014, the open and closed group measure decreased $(137.5) million [(3.0)%] and at the end of FY 

2013 decreased $(38.2) million [(0.8)%]. Reasons for the net decreases in the measures for FY 2014 and FY 2013

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;

• Decreases in future benefits costs; and

• Changes in the interest rates used to discount cash flows (described as changes in assumptions about interest 

rates on the SCSIA).

The total of open and closed group measure plus fund assets as of September 30, 2014, of $4,612.2 million

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

$5,884.7 million as of September 30, 2014.

Refer to Notes 1-W and 21, and Required Supplementary Information (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 U.S. Generally Accepted Accounting 

Principles (GAAP) for Federal entities and the formats prescribed by OMB, the statements are in addition to the 

financial reports used to monitor and control budgetary resources, which are prepared from the same books and 

records. The statements should be read with the realization that 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 of 2002 (IPIA), as amended by the Improper Payments 

Elimination and Recovery Act of 2010 (IPERA), the Improper Payment Elimination and Recovery Improvement Act of 

2012 (IPERIA)1

, and as implemented by OMB in Circular No. A-123, Appendix C, Requirements for Effective 

Measurement and Remediation of Improper Payments, the Department reviews its programs and activities annually 

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.

IPERA Section 2(a) requires agency heads to “review all programs to identify risk susceptibility for improper 

payments every three years.” As the last Department-wide risk assessment was performed in FY 2011, DOL 

performed a full assessment of all DOL programs for FY 2014 based on criteria prescribed in IPERA Section 2(a)3(b), 

outlined on the next page:

 1 IPIA, Public Law (P.L.) 107-300 (2002); IPERA, P.L. 111-204 (2010); IPERIA, P.L. 112-248 (2013). All three laws are codified at 31 U.S.C. 3321 

note.
Management’s Discussion and Analysis

(Unaudited)

30 United States Department of Labor

Scope. — In conducting the reviews [. . .] the head of each agency shall take into account those risk factors that are 

likely to contribute to a susceptibility to significant improper payments, such as —

(i) whether the program or activity reviewed is new to the agency;

(ii) the complexity of the program or activity reviewed;

(iii) the volume of payments made through the program or activity reviewed;

(iv) whether payments or payment eligibility decisions are made outside of the agency, such as by a 

state or local government;

(v) recent major changes in program funding, authorities, practices, or procedures;

(vi) the level, experience, and quality of training for personnel responsible for making program eligibility 

determinations or certifying that payments are accurate; and

(vii) significant deficiencies in the audit report of the agency or other relevant management findings that 

might hinder accurate payment certification.

Based on DOL’s Department-wide risk assessment, only the Unemployment Insurance (UI) program meets the 

susceptibility threshold in statute: either potential estimated improper payments greater than 1.5% of outlays and

greater than $10 million (IPERA §2(a)(3)(A)(ii)(I)) or potential estimated improper payments of more than $100 

million, regardless of percentage (IPERA §2(a)(3)(A)(ii)(II)). Two DOL Programs are required to provide estimates 

based on inclusion in Exhibit 57B, Section 57, of OMB Circular A-11 (2002)1

. These programs are the Federal 

Employees’ Compensation Act (FECA) benefit program and the Workforce Investment Act (WIA) of 1998 Title I 

programs (WIA Programs). In addition to these programs, DOL is required to report an improper payments estimate 

for funds provided in response to Hurricane Sandy through the Disaster Relief Appropriations Act (Public Law 113-

2), signed on January 29, 2013. Section 904(b) of the Act provides that all programs and activities receiving funds 

under this Act shall be deemed to be “susceptible to significant improper payments” for the purposes of IPIA, 

notwithstanding IPIA section 2(a).”

 1 In July 2001, OMB issued Section 57, Information on Erroneous Payments, as part of the 2002 revision to Circular A-11, Preparation, 

Submission, and Execution of the Budget. Exhibit 57B of Section 57 listed programs required “. . . to provide improper payment data, 

assessments and action plans with initial budget submission beginning in 2003.” All “benefit programs” exceeding obligations of $2 billion 

were included on Exhibit 57B.
Financial Performance Overview

(Unaudited)

FY 2014 Agency Financial Report 31

DOL Programs Required to Submit Improper Payments Estimates

Program Requirement Based 

on...

Estimated Rate

Unemployment Insurance 

(UI)1

Risk analysis Improper Payment Rate (Overpayments 

plus Underpayments):

11.57%

 Overpayment Rate 11.16%

 Underpayment Rate 0.41%

Net Improper Payment Rate (Improper 

Payment Rate Minus Amounts 

Recovered by States)

8.65%

Improper Payment Rate Minus “Work 

Search” Errors

7.85%

Federal Employees’ 

Compensation Act (FECA) 1

Inclusion in Exhibit 57B 

of OMB Circular A-11 

(2002)

Improper Payment Rate (Overpayments 

plus Underpayments)

2.5%

Workforce Investment Act 

(WIA) Title I Programs1

Inclusion in Exhibit 57B 

of OMB Circular A-11 

(2002)

Rate of Services to Potentially Ineligible 

Participants (maximum)

< 1.5%

Hurricane Sandy Funding1 Disaster Relief 

Appropriations Act of 

2013

Rate of Salary Spent on Potentially 

Ineligible Participants (maximum)

< 0.5%

1 Covers the 12-month period from July 1, 2013 through June 30, 2014.

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

payments in 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 the improper payments reduction 

and recovery targets of programs such as UI 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. A variety of complexities related to administration of the UI program create significant 

challenges in controlling improper payments as compared to other Federal benefit programs, including state 

unemployment insurance laws, under which the program is administered; structural impediments such as the

Federal requirement to pay UI benefits “when due” causing states to proceed with payment when not all eligibility 

information has been received and verified; aging information technology (IT) systems; and resource capacity.

See “Improper Payments Reporting Details” in the Other Information section of this report for additional 

information on improper payments.

Financial Management Systems and Strategy

The Department strives to maintain and enhance financial management systems, processes, and controls that 

ensure financial accountability and transparency, provide financial management data and information to decision 

makers, and comply with Federal laws, regulations, and policy. The New Core Financial Management System 
Management’s Discussion and Analysis

(Unaudited)

32 United States Department of Labor

(NCFMS) is the system of record for the Department’s financial activities in supporting accountability and 

transparency.

During FY 2014, the Department’s financial system private Shared Service Provider (SSP) faced significant 

managerial, operational, and financial issues which threatened its ability to sustain and maintain NCFMS. Faced 

with the possibility of service shut down, the federal establishment took extraordinary coordinated mitigation 

actions. The Departments of Treasury, Transportation, and General Services Administration (GSA) along with OMB 

working in concert with Labor planned and executed a strategy to procure the system from the SSP and transition 

it’s operation and management to a federal SSP at Transportation. These actions culminated in government 

ownership of the system and the avoidance of disruption of financial services. Within Labor, senior management 

within the OASAM, SOL, the Office of Procurement Services (OPS), and the Office of the Chief Financial Officer 

(OCFO) effectively managed a coordinated response to this situation.

In addition to the successful acquisition and transition of NCFMS, other FY 2014 efforts focused on seamlessly 

integrating two new major administrative systems: Acquisition Management System (AMS) and HR-Connect for 

personnel and payroll processing. Other established automated interfaces continued to record the financial 

activities initiated by these systems in NCFMS.

Emphasis also continued on executive-level reporting with the further development of a set of financial measures 

included in the Department’s Performance Measurement Plan for all agencies. These metrics are reviewed 

quarterly with the Deputy Secretary.

Computer Based Training continued during FY 2014 as additional courses were developed and made available 

through DOL's e-Training solution, LearningLink, to all financial management employees and contractors.
(Unaudited)

FY 2014 Agency Financial Report 33

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.

Federal Managers’ Financial Integrity Act of 1982

The Department of Labor’s management is responsible for establishing and maintaining effective internal control 

and financial management systems that meet the objectives of the Federal Managers’ Financial Integrity Act of 

1982 (FMFIA). DOL conducted an assessment of its internal controls over the effectiveness and efficiency of 

operations as well as compliance with applicable laws and regulations in accordance with OMB Circular A-123, 

Management’s Responsibility for Internal Control. Based on the results of this evaluation, DOL can provide 

reasonable assurance that its internal controls over operations are operating effectively and efficiently and are in 

compliance with applicable laws and regulations as of September 30, 2014. No material weaknesses were found in 

the design or operation of the internal controls. 

In addition, DOL conducted an assessment of the effectiveness of internal control over financial reporting, which 

includes safeguarding of assets and compliance with applicable laws and regulations, in accordance with the 

requirements of Appendix A of OMB Circular A-123. Based on the results of this evaluation, DOL can provide 

reasonable assurance that its internal controls over financial reporting as of June 30, 2014 were operating 

effectively. No material weaknesses were found in the design or operation of the internal control over financial 

reporting. DOL is also in conformance with Section 4 of FMFIA. 

Federal Financial Management Improvement Act of 1996

The Federal Financial Management Improvement of 1996 (FFMIA) requires agencies to implement and maintain 

financial management systems that are substantially in compliance with Federal financial management systems 

requirements, Federal accounting standards, and the United States Government Standard General Ledger at the 

transaction level. All Department of Labor financial management systems substantially comply with FFMIA as of 

September 30, 2014.

/S/___________________________ /S/_______________________________

Thomas E. Perez Chris Lu

Secretary of Labor Deputy Secretary of Labor

/S/___________________________ /S/_______________________________

Karen Tekleberhan T. Michael Kerr

Acting Chief Financial Officer Assistant Secretary of Administration and

 Management/Chief Information Officer

November 17, 2014

Financial Section

FY 2014 Agency Financial Report 37

Message from the Chief Financial Officer

During Fiscal Year (FY) 2014, the Department of the Labor (DOL) received 

an unmodified opinion on its consolidated financial statements for the 

18th year. I am very proud of this achievement as it represents our 

commitment to financial management excellence, transparency, and 

accountability. In addition, the Association of Government Accountants 

awarded the Department the Certificate of Excellence in Accountability 

Reporting for its FY 2013 Annual Financial Report. This prestigious award 

serves as confirmation of the superior quality of financial reporting that 

is the cornerstone of our financial management program. The 

Department’s award-winning Agency Financial Report provides 

extensive program, performance, and financial information that 

demonstrates our continued commitment and approach to sound 

financial management.

I am also pleased to report that during the fiscal year, the Department 

continued to make great strides in reducing costs, strengthening internal 

controls, and enhancing financial programs, processes, and systems. 

Some of our most note-worthy achievements are as follows:

• Several initiatives were undertaken to ensure compliance with the 

tenets of Executive Order 13576 and the Campaign to Cut Waste, 

both of which promote efficient spending in the federal government. 

The Department's efforts in this regard resulted in decreased 

spending on administrative costs across the board, including 

reductions in travel and conference costs. The Department 

continues to identify areas in which cost reductions can be achieved 

while maintaining its commitment to the overall agency mission to 

protect the rights and welfare of the American workforce.

• The Department successfully planned and executed the transition of 

its core financial system to a federal shared service provider (FSSP). 

This was a collaborative effort, with assistance provided by the 

Office of Management and Budget, the General Services 

Administration, and the Departments of Treasury and 

Transportation. It is expected that the transition to a FSSP will result 

in a streamlined and more effective financial system that will 

provide increased internal controls and faster processing of financial 

transactions and data.

• Progress was made in accelerating payments to the many small businesses, vendors, and contractors that 

conduct business with the Department on a daily basis. As a result of our efforts, accelerated payments were 

made to 99.68% of all of the Department's prime contractors, which represents a 15 day reduction in the 

number of days that payments are processed and generated, i.e., a 50 percent reduction. This initiative is in 

compliance with the Administration's goal to accelerate payments to small businesses for goods and services 

received in order to improve cash flow, and to spur job creation and economic growth throughout the United 

States.

• All Financial Management Policy and Procedures manuals were reviewed, revised and/or updated as needed. In 

addition, a policy/procedures documents review cycle was implemented as a measure of ensuring the integrity 

Karen Tekleberhan

Acting Chief Financial Officer

Department of Labor

OCFO's Mission

“The Office of Chief 

Financial Officer (OCFO) 

is responsible for the 

financial leadership of 

DOL and its primary duty 

is to uphold strong 

financial management 

and accountability while 

providing timely, 

accurate, and reliable 

financial information 

and enhancing internal 

controls.”
Message from the Chief Financial Officer

38 United States Department of Labor

and accuracy of the data. The goals realized as a result of this initiative are enhanced internal controls over 

financial processes, and reliable policy and procedures manuals that comply and comport with applicable 

federal regulations and guidance. 

I am proud of the Department's financial management accomplishments in FY 2014. These achievements meet the 

high standards of professionalism demanded by the American people. In addition, the Office of the Chief Financial 

Officer takes pride is its role as steward of the Department’s financial resources. While we have realized significant 

gains in our continuous journey to strengthen and enhance financial processes, systems, and internal controls, we 

will seek to identify methods by which we may exceed our goals. In this regard, we look forward to the challenges 

of maintaining an effective, efficient, and strong financial management program in support of the Department’s 

mission to defend, protect, and safeguard the rights of the American workforce.

Thank you for taking the time to review our Agency Financial Report, and we hope that you find this document both 

informative and helpful.

/S/

Karen Tekleberhan

Acting Chief Financial Officer

November 17, 2014
Independent Auditors’ Report

Secretary and Inspector General

U.S. Department of Labor:

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of the U.S. Department of Labor

(DOL), which comprise the consolidated balance sheets as of September 30, 2014 and 2013; 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, 2014, 2013, 2012, 

2011, and 2010; and the statements of changes in social insurance amounts for the years ended September 30, 

2014 and 2013; and the related notes to the consolidated financial statements (hereinafter referred to as 

“consolidated financial statements” or “basic consolidated financial statements”). 

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial 

statements in accordance with U.S. generally accepted accounting principles; this includes the design, 

implementation, and maintenance of internal control relevant to the preparation and fair presentation of 

consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements 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 Office of Management and Budget (OMB) Bulletin No. 

14-02, Audit Requirements for Federal Financial Statements. Those standards and OMB Bulletin No. 14-02

require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated

financial statements are free from material misstatement. 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the 

consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the 

assessment of the risks of material misstatement of the consolidated financial statements, whether due to 

fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s 

preparation and fair presentation of the consolidated financial statements in order to design audit procedures 

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness 

of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating 

the appropriateness of accounting policies used and the reasonableness of significant accounting estimates 

made by management, as well as evaluating the overall presentation of the consolidated financial statements. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our 

audit opinion.

KPMG LLP

Suite 12000

1801 K Street, NW

Washington, DC 20006

KPMG LLP is a Delaware limited liability partnership, 

the U.S. member firm of KPMG International Cooperative

(“KPMG International”), a Swiss entity.

FY 2014 Agency Financial Report 39
Financial Section

Opinion on the Financial Statements

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, 2014 and 2013; its net costs, 

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

insurance as of September 30, 2014, 2013, 2012, 2011 and 2010; and the changes in its social insurance 

amounts for the years ended September 30, 2014 and 2013, in accordance with U.S. generally accepted 

accounting principles.

Emphasis of Matter 

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 future 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.

Other Matters

Required Supplementary Information

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 consolidated financial statements. Such information, although 

not a part of the basic consolidated 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

consolidated 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 consolidated financial statements, and other knowledge 

we obtained during our audits of the basic consolidated 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.

Other Information

Our audits were conducted for the purpose of forming an opinion on the basic consolidated financial 

statements as a whole. The information in the Message from the Secretary of Labor, Message from the Chief 

Financial Officer, and Other Information section is presented for purposes of additional analysis and is not a 

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

auditing procedures applied in the audit of the basic consolidated financial statements, and accordingly, we 

do not express an opinion or provide any assurance on it.

40 United States Department of Labor
Independent Auditors’ Report

Other Reporting Required by Government Auditing Standards

Internal Control over Financial Reporting

In planning and performing our audit of the consolidated financial statements as of and for the year ended 

September 30, 2014, we considered the DOL’s internal control over financial reporting (internal control) to

determine the audit procedures that are appropriate in the circumstances 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. Accordingly, we do not express an opinion on the effectiveness of 

DOL’s internal control. We did not test all internal controls relevant to operating objectives as broadly 

defined by the Federal Managers’ Financial Integrity Act of 1982. 

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. 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. 

Our consideration of internal control was for the limited purpose described in the first paragraph of this 

section and was not designed to identify all deficiencies in internal control that might be material weaknesses 

or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were 

not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control 

that we consider to be material weaknesses. However, we did identify certain deficiencies in internal control, 

described in Exhibit I, that we considerto be significant deficiencies. 

Compliance and Other Matters

As part of obtaining reasonable assurance about whether DOL’s consolidated financial statements are free 

from material misstatement, we performed tests of its 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 financial statement amounts, and certain provisions of other laws and 

regulations specified in OMB Bulletin No. 14-02. However, providing an opinion on compliance with those 

provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results 

of our tests disclosed no instances of noncompliance or other matters that are required to be reported under 

Government Auditing Standards or OMB Bulletin No. 14-02. 

We also performed tests of its compliance with certain provisions referred to in Section 803(a) of the Federal 

Financial Management Improvement Act of 1996 (FFMIA). Providing an opinion on compliance with 

FFMIA was not an objective of our audit, and accordingly, we do not express such an opinion. The results 

of our tests of FFMIA disclosed no instances in which DOL’s financial management systems did not 

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

accounting standards, and (3) the United States Government Standard General Ledger at the transaction level. 

Other Matters. DOL is currently reviewing three 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.

FY 2014 Agency Financial Report 41
Financial Section

DOL’s Responses to Findings

DOL’s responses to the findings identified in our audit are described in Exhibit I. DOL’s responses were not 

subjected to the auditing procedures applied in the audit of the consolidated financial statements and, 

accordingly, we express no opinion on the responses. 

Purpose of the Other Reporting Required by Government Auditing Standards

The purpose of the communication described in the Other Reporting Required by Government Auditing 

Standards section is solely to describe the scope of our testing of internal control and compliance and the 

result of that testing, and not to provide an opinion on the effectiveness of DOL’s internal control or 

compliance. Accordingly, this communication is not suitable for any other purpose.

November 17, 2014

42 United States Department of Labor 
Independent Auditors’ Report

Significant Deficiencies

Exhibit I

1. Lack of Sufficient Information Technology General Controls over Key Financial and Support 

Systems

In fiscal year (FY) 2014, U.S. Department of Labor (DOL) agencies completed corrective action to 

address certain previously-identified control deficiencies. However, during our FY 2014 testing of 

significant DOL financial and support systems, we identified new 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 categories: account management, system 

access settings, system audit log reviews, configuration management, vulnerability management, and 

third party oversight.

The first two categories summarize the identified deficiencies related to controls that were designed to 

help prevent unauthorized access to information technology (IT) systems. Control deficiencies related to 

account management 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. System access setting control 

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. The specific 

deficiencies identified in these two categories were as follows: 

Account Management 

• Certain user accounts were not timely removed for separated users, and certain separated users had 

active system accounts;

• Personnel activities were not consistently controlled through effective segregation of incompatible 

duties and responsibilities;

• Account management controls were not consistently performed, as evidenced by incomplete or 

missing access requests, rules of behavior, non-disclosure agreements, and modification forms; and

• Shared, generic, and multiple user accounts for the same user existed on one DOL system.

System Access Settings 

• Inactive accounts were not consistently disabled in a timely manner; and

• Certain password settings did not comply with the Office of the Chief Information Officer (OCIO) 

Computer Security Handbook.

 

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 certain audit logs were not generated or 

reviewed timely. 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.

Configuration Management

Controls related to configuration management are designed to provide reasonable assurance that changes 

to information system resources are authorized and systems are configured and operated securely and as 

intended. Although DOL had designed controls to establish accountability and responsibility for 

configuration management, including monitoring and tracking of changes, we identified certain 

segregation of incompatible duties weaknesses in the development and production environments and 

FY 2014 Agency Financial Report 43
Financial Section 

Significant Deficiencies

Exhibit I

instances where configuration changes and patches did not follow the DOL configuration management 

process. The lack of strong change controls may allow for unauthorized or inappropriate changes to be 

applied and go undetected by management, resulting in lower assurance that the information system will 

operate as intended and that the data is reliable, valid, and complete.

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 2014 audit procedures, we identified that the following FY 2013 deficiencies had not 

been remediated despite having associated corrective action plans: 

• Numerous critical and high-risk application and operating system patches were not implemented; 

• Numerous servers were not compliant with minimum security baselines; and

• Certain logical access control weaknesses, such as the ability to obtain the host security identifier for 

the remote host without credentials, existed. 

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.

Third Party Oversight

DOL did not have formalized policies, procedures, or processes established for monitoring a third party 

service provider that hosts and operates a financially relevant system used by DOL. Without effective 

oversight of third parties, an increased risk exists that unauthorized persons could access sensitive 

resources and disclose sensitive information and that the system’s security posture would not be 

consistently reported to the authorizing officials responsible for adequate security and making informed 

decisions about residual risks. In addition, without formally established policies, procedures, and 

processes in place, DOL management risks ineffective monitoring of accounting transaction information 

hosted by third parties and the inability to consistently support an effective entity-wide system of internal 

control.

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 specific causes, and the systems impacted by them 

have been communicated separately to management. These deficiencies were the result of issues in the

design, implementation, or 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 

developed, implemented, and operating effectively.

The National Institute of Standards and Technology Special Publication 800-53, Revision 4, 

Recommended Security Controls for Federal Information Systems and Organizations, provides federal 

information systems standards and guidelines for controls that include, but are not limited to, the controls 

in which deficiencies were identified.

44 United States Department of Labor 
Independent Auditors’ Report

Significant Deficiencies

Exhibit I

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 account 

management, system access settings, system audit log reviews, configuration management, and 

vulnerability management control deficiencies in financial and support systems;

b) Monitor the agencies’ progress to ensure that procedures and controls are appropriately implemented 

and maintained;

c) Coordinate with the applicable agencies to ensure that sufficient resources are available to develop, 

implement, and monitor the procedures and controls that address account management, system 

access settings, system audit log reviews, configuration management, and vulnerability management 

control deficiencies in financial and support systems; and

d) Establish and implement formal policies, procedures, and processes to monitor third party service 

providers that host and operate financially relevant systems used by DOL and document these 

monitoring efforts.

Management’s Response: The Office of the Assistant Secretary for Administration and Management 

(OASAM) is committed to ensuring the Department implements adequate safeguards to protect its 

information and information systems and appreciates the importance of adequately managing identified 

security risks. As such, the Department will ensure resources are applied to implement required 

corrective actions to address all identified security issues. The Chief Information Officer continues to 

strengthen its Cybersecurity program efforts and completed the following activities in FY 2014:

• Released Computer Security Handbook, Edition 5 to provide agencies with updated policies, 

procedures, and standards to ensure minimum security requirements for account and configuration 

management are achieved.

• Released an updated Enterprise Risk Management Strategy and facilitated an Agency training 

session to ensure DOL’s risk management processes are effectively administered across the 

Department. 

• Facilitated a series of Cybersecurity Case Study sessions with DOL Agencies resulting in the 

identification of proposed enterprise solutions to address account management, information system 

audit log reviews, as well as vulnerability and configuration management deficiencies. The OCIO 

performed an in-depth analysis of the proposed solutions and established a priority order for their 

implementation. 

• Monitored the Agencies’ progress in mitigating weaknesses found to be contributors to the 

Department’s Significant Deficiency via Agency Operating Plans, Departmental Administrative 

Measures. 

• Documented and began implementing the Information Security Continuous Monitoring (ISCM) 

Strategy including a focused patch management security monitoring effort resulting in a considerable 

decrease in system vulnerabilities.

• Acquired additional enterprise ISCM tools from the US Department of Homeland Security (DHS) 

and General Services Administration’s Continuous Diagnostics and Mitigation (CDM) Program that 

will enhance DOL’s current automated solutions for the ISCM Strategy. 

OASAM accepts the recommendations in this report. Building on the progress mentioned above, in 

FY15, OCIO will continue implementation of its ISCM program. DOL will implement the ISCM tools 

received from the DHS CDM program; ultimately, automating additional DOL ISCM capabilities in 

alignment with the ISCM Strategy. In addition, DOL will increase the quantity of performance metrics, 

enhance automated monitoring, and provide data-driven security reporting. The OCIO will re-emphasize 

communication efforts with DOL agencies to ensure they give priority attention and sufficient resources 

to prioritize and complete planned corrective action(s) and will monitor agency progress on addressing 

FY 2014 Agency Financial Report 45
Financial Section 

Significant Deficiencies

Exhibit I

identified deficiencies. Lastly, the OCIO will finalize and release guidance to DOL agencies to strengthen 

their practices as it relates to monitoring third-party service providers compliance with its information 

security requirements.

Auditors’ Response: We will conduct follow-up procedures in FY 2015 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 Report, or a SF425, Federal Financial Report (cost reports). During our FY 2014 audit procedures, we identified 

deficiencies in certain controls over grants, as described below. These deficiencies are grouped into two 

categories, Grant Accrual and Grant Monitoring.

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-to-payment 

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 FY

2014 testing of controls over ETA’s grant accrual accuracy analysis provided on May 27, 2014, we 

identified 658 document IDs/footprints that were improperly excluded from the accuracy analysis. 

Sufficiently detailed procedures were not in place to identify discrepancies during the review process. 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 adequate controls over the data used in the accuracy analysis, errors could occur in the 

accrual ratios that may result in a misstatement of subsequent grant accruals.

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.

OMB Circular No. A-123 also states:

Control activities include policies, procedures and mechanisms in place to help ensure that 

agency objectives are met. Several examples include: proper segregation of duties (separate 

personnel with authority to authorize a transaction, process the transaction, and review the 

transaction); physical controls over assets (limited access to inventories or equipment); 

proper authorization; and appropriate documentation and access to that documentation.

46 United States Department of Labor 
Independent Auditors’ Report

Significant Deficiencies

Exhibit I

In addition, the U.S. Government Accountability Office’s Standards for Internal Control in the Federal 

Government (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.

Grant Monitoring

Site Visits

When a grantee is selected for an on-site monitoring visit, the related Federal Project Officer (FPO) 

conducts the visit to assess compliance with applicable regulations, policies, and procedures outlined in 

the ETA Core Monitoring Guide. We selected a sample of 45 on-site monitoring reviews planned in FY 

2014 as of June 30, 2014, by each of the six regions to determine if the on-site monitoring reviews were 

properly performed and documented in the Grant Electronic Management System (GEMS). Based on 

our testwork, we identified issues with both the site visit monitoring plans and the site visit monitoring 

review reports, as follows:

• For 8 items, the on-site monitoring review was not performed as indicated on the monitoring review 

plans received from the regions as of August 2014;

• For 5 items, an on-site monitoring review was performed, but the on-site monitoring review report 

was not issued within 45 business days of the exit conference date; the reports were issued ranging 

from 4 to 54 days past the due date;

• For 3 items, the on-site monitoring review report was not attached to GEMS as of the date our testing 

was performed, which was 30 days or greater after the report issuance date; 

• For 5 items, GEMS did not include a monitoring history for the corresponding grant file, and neither 

the findings nor the report were documented in GEMS as of the time our testing was performed;

• For 2 items, the on-site monitoring review report was not included in GEMS within the 30 day period; 

these reports were uploaded in GEMS 59 and 83 days after issuance of the reports; and

• For 6 items, the on-site monitoring review report was not uploaded in GEMS until after we notified 

ETA that the report was missing during the completion of our testwork; these reports were uploaded 

in GEMS ranging from 71 to 175 days after issuance of the reports.

ETA was unable to provide current year on-site monitoring review reports for eight on-site reviews 

selected from these plans because of inadequate reviews of original on-site regional monitoring plans 

and lack of periodic reviews for changes to these plans. In addition, ETA did not dedicate resources to

update written policies and procedures to include specific guidance on monitoring the timely completion 

of regional on-site monitoring or to develop monitoring controls to ensure the timely issuance of on-site 

monitoring review reports and the completeness of documentation included in GEMS related to these 

reports.

Failure to monitor site visit plans increases the risk that proper monitoring is not occurring, which 

increases the risk of undetected grantee reporting errors and/or violations. In addition, failure to 

implement proper monitoring controls to ensure compliance with existing policies and procedures 

increases the risk that policy deviations are not detected and corrected. Specifically, failing to ensure onsite monitoring review reports are completed timely increases the risk that issues identified with grantees 

are not resolved timely.

FY 2014 Agency Financial Report 47
Financial Section 

Significant Deficiencies

Exhibit I

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. 

Without adequate controls in the grant monitoring 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: 

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. All documentation and records 

should be properly managed and maintained.

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.

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.

The ETA Core Monitoring Guide states:

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.

The DOL Update to the August 30, 2011, Memo for Federal Project Officer (FPO) Grant Management 

Responsibilities Related to the Grants Electronic Management System (GEMS) memorandum states: 

Details of the monitoring event, including all findings, observations, and promising practices 

will be entered into GEMS within 30 working days of issuing the report to the grantee...

The FPO is required to input all reportable compliance findings, observations, promising 

practices and the grantee’s progress to resolution. The FPO must also input questioned cost 

amounts under the appropriate finding. Details of the monitoring event, including all 

findings, observations, and promising practices will be entered into GEMS within 30 

working days of issuing the formal report to the grantee. A copy of the formal compliance 

report will be uploaded to the Case File module within 30 working days of issuing the report 

to the grantee.

The SES Performance Management; Executive Performance; Agreement Appraisal Cycle [October 1 –

September 30] Results No. 2, Section “Measure of Outcomes/Targets” states:

1. Conduct on site monitoring according to plan and issue Monitoring Reports

a. 80% of all initial written Monitoring Reports issued within 45 days of the exit 

conference date.

b. Copies are uploaded to GEMS within 30 days of issuance.

48 United States Department of Labor 
Independent Auditors’ Report

Significant Deficiencies

Exhibit I

Other Monitoring Procedures

As part of our audit procedures over grant controls as of June 30, 2014, we selected a sample of 45 grants 

from the population of grant expenses recorded in DOL’s financial management system to determine if 

FPOs’ desk reviews were properly performed and documented in GEMS. We noted that for 1 of the 45 

grants selected, the desk review was not completed for the quarter selected. ETA management indicated

that two desk reviews for the grant had been completed for the prior period, which resulted in GEMS 

erroneously identifying that a desk review had been completed for the period tested.

In addition, during our April 2014 test of design and implementation, we inquired of five FPOs across 

multiple regions about their process for documenting communication with delinquent grantees. We noted 

that responses provided by the FPOs to this inquiry were inconsistent as different interpretations of what 

information should be documented were provided. 

Furthermore, we noted that ETA was in the process of creating a comprehensive Standard Operating 

Procedures (SOP) manual for all ETA regions, which would address, among other items, the insufficient 

FPO documentation of grantee delinquent cost reports condition identified in the prior fiscal year; 

however, ETA had not yet created the policies and procedures over the delinquent cost report process. 

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 Update to the August 30, 2011, Memo for Federal Project Officer (FPO) Grant Management 

Responsibilities Related to the Grants Electronic Management System (GEMS) memorandum states: 

A quarterly desk review is required on all projects in GEMS. Desk reviews must be 

completed following a review of both the progress and cost reports submitted during the 

reporting timeframe. Section iii below identifies the due dates for Desk Review 

completions.... 

Frontline supervisors are responsible for ensuring the FPOs meet these requirements and 

timeframes. Supervisors conduct quarterly reviews of the GEMS exception report and notify 

FPOs of concerns or anomalies regarding completeness or timeliness. Supervisors report 

their unit’s status to their Administrator on a regular basis.

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 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.

FY 2014 Agency Financial Report 49
Financial Section 

Significant Deficiencies

Exhibit I

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.

To address the issues noted above, the Assistant Secretary for Employment and Training should:

a) Enhance current procedures to ensure that all aspects of the grant accrual accuracy analysis are 

properly reviewed and approved to prevent potential errors in the preparation of the analysis; 

b) Develop and implement a monitoring procedure to ensure changes to original regional site visit plans 

are appropriate, accurately documented, and reported to the ETA National Office; 

c) Update written policies and procedures to include specific guidance on monitoring the timely 

completion of regional on-site monitoring;

d) Develop and implement monitoring controls to determine that on-site monitoring review reports are 

timely issued and uploaded into GEMS with the appropriate documentation;

e) Correct the configuration of GEMS to ensure that multiple desk reviews for the same period are 

associated with the correct period, and in the interim, implement additional monitoring procedures 

to verify that desk review submission dates correspond with the appropriate quarterly review 

timeframe.

f) Complete the process of creating an SOP manual for all regions that will address documentation 

requirements for FPO follow-up communications with delinquent grantees;

g) Upon completion and dissemination of the SOP manual, provide appropriate training to FPOs to 

ensure consistency in documentation of delinquent grantee communications across regions; and

h) Provide notification to all regions that all communication with grantees should be properly 

documented and retained in the interim until the SOP manual is complete.

Management’s Response: Grants management and workforce investment system leadership is at the 

core of ETA’s risk management strategy to ensure proper use of Federal funds. The grant management 

activities carried out by the Regional Offices includes managing 2,021 grants currently totaling nearly 

$26 billion in taxpayer resources. The ETA Regional Offices provide oversight for ETA’s portfolio of 

investments to ensure accountability, conformity with statute, compliance with regulations, and fiscal 

accountability. The Regional Offices are primarily responsible for this function through: risk 

assessments; quarterly desk reviews; reviews of quarterly performance and financial reports; enhanced 

desk monitoring reviews (EDMR); onsite monitoring; establishing corrective action plans when required; 

and promoting improved grantee performance by providing direct guidance and technical assistance to 

grantees. In addition to resolving current problems, these activities allow ETA to proactively provide 

direct guidance to grantees to help them achieve their stated goals and demonstrate the cost effective use 

of federal investments in accordance with Federal laws and regulations, and grant terms and conditions.

ETA has a comprehensive grants management strategy and monitoring system, which is focused on 

continuous improvement; however, the Agency also is very aware of financial and human resource 

challenges it faces to fully operate this system. In response to specific recommendations:

a) Enhance current procedures to ensure that all aspects of the grant accrual analysis are properly 

reviewed and approved to prevent potential errors in the preparation of the analysis. 

ETA has made improvements in its processes and procedures over the reasonableness of the data used 

in the accuracy analysis. These documented procedures include, but are not limited to, comparing the 

new ratios to that of prior years and the number of lines analyzed in various parts of the analysis to that 

of prior years, and investigating variances noted in the overall calculated difference between estimated 

50 United States Department of Labor 
Financial Section

Significant Deficiencies

Exhibit I

and actual costs analysis down to the program and individual stratum. Additionally, ETA implemented 

the use of data analysis software to assist in the analysis, providing a comprehensive review of the 

updated costs information. The results of the analysis were shared with both ETA and OCFO 

management during and at the completion of the analysis. Any unusual situations or results that fall 

outside of management’s expectations were further researched. 

ETA is currently reviewing all policies and procedures related to the grant accrual analysis to ensure all 

aspects of the process are completely addressed. Any updates to the policies and procedures will be 

finalized by December 31, 2014.

b) Develop and implement a monitoring procedure to ensure changes to original regional site visit 

plans are appropriate, accurately documented, and reported to the ETA National Office;

To address this, on October 1, 2013, the regions created and began using a consistent monitoring plan 

template that captures all the required data fields. The On-Site Monitoring plan represents the proposed 

number and type of reviews each Regional Office initially plans to undertake, based on grant risk, travel 

resources and staffing patterns. This plan is completed at the beginning of each fiscal year based on 

estimated resources. The Monitoring plan is a living document which is updated quarterly or upon 

request, based on various changes in events; travel allotments, staff workloads, grantee availability, 

coordination of reviews, complexity of reviews, incident reports or OIG request, complaints, grantee 

types, etc. Quarterly updates will be monitored for accuracy by ETA’s Office of Financial Administration 

(OFA) as part of the Annual OMB Circular A-123 internal controls process and all discrepancies will be 

communicated to the Office of Regional Management (ORM). The final Monitoring plan is reported 

annually to ORM along with final travel expenditures, monitoring reports issued from this plan, and the 

number of findings issued from each report.

c) Update written policies and procedures to include specific guidance on monitoring the timely 

completion of regional on-site monitoring;

The policies and procedures related to monitoring have been updated and are in place. Employment and 

Training Order (ETO) 1-14, which outlines all of the grant management policies and responsibilities for 

the agency was updated and issued on March 21, 2014. The Regional Administrator (RA), Regional 

Manager, and Federal Project Officer (FPO) performance standards include the ETA operating metrics 

established: Percent of grants to be monitored annually; percent of quarterly desk reviews completed 

timely; the timeliness of monitoring report issuance (80 percent within 45 days of exit date), and the 

number of findings issued and closed (70 percent closed annually). These Operating Plan metrics are 

then cascaded down to managers and staff so that all ETA Regional staff have identical goals. ETA will 

review existing policies and procedures to determine if updates are needed.

d) Develop and implement monitoring controls to determine that on-site monitoring review reports are 

timely issued and uploaded into GEMS with the appropriate documentation;

The RA, Regional Manager, and FPO performance standards require that regions conduct on site 

monitoring and Enhanced Desk Monitoring Reviews (EDMR), and that 80 percent of all initial written 

Monitoring Reports are issued within 45 days of the exit conference date. In addition, the RA Standards 

and an August 30, 2011, Memorandum entitled, Federal Project Officer (FPO) Grant Management 

Responsibilities Related to the Grants Electronic Management System (GEMS); and a March 27, 2013 

Memorandum which updated the August 30, 2011, Memorandum require that copies of all issued 

monitoring reports be uploaded to GEMS within 30 days of issuance. Staff are informed on a quarterly 

basis about upcoming GEMS deadline requirements (desk reviews, report acceptance, etc.) and managers 

monitor the completion. The Regions report their performance under the RA standards each quarter.

FY 2014 Agency Financial Report 51
Financial Section 

Significant Deficiencies

Exhibit I

ORM will work with ETA, OFA’s internal controls group to identify a useful process to ensure adherence 

to written guidelines.

e) Correct the configuration of GEMS to ensure that multiple desk reviews for the same period are 

associated with the correct period, and in the interim, implement additional monitoring procedures 

to verify that desk review submission dates correspond with the appropriate quarterly review 

timeframe.

ETA will research options to design a technology fix in GEMS, if funds are available, and a “fix” is 

technically feasible. If it is not feasible, ETA will seek to address this requirement in any future 

specifications for the grant management system. Staff are informed on a quarterly basis about upcoming 

GEMS deadline requirements (desk reviews, report acceptance, etc.) and managers monitor the 

completion. The Regions report their performance under the RA standards each quarter. Additionally, 

ETA notes that the performance standard in question states that 90 percent of quarterly desk reviews will 

be completed timely; ETA Operating Plan data from the last three years show that the Regions have 

exceeded this measure by completing nearly 97 percent of their desk reviews within the required 

timeframe of 30 days.

f) Complete the process of creating an SOP manual for all regions that will address documentation 

requirements for FPO follow-up communications with delinquent grantees;

ETA is in the final stage of reviewing and approving the SOP on the monitoring of ETA – 9130 Quarterly 

Financial Reports. This SOP addresses the following oversight actions: (1) upgrading the system’s 

automated review of the grantee entering of data on the 9130 report (e.g. improved edit checks, on screen 

response to triggered edit checks, providing grantee with a report of soft edit checks triggered prior to 

the final certification, automatic notification to grantee and FPO when report has not been submitted 

timely, etc.); (2) addressing National Office’s oversight through the development and dissemination of a 

standardized report identifying all 9130 reports which are late or not submitted; and (3) identifying 

FPO’s responsibility in responding to the delinquent 9130 report within 10 work days of receipt.

g) Upon completion and dissemination of the SOP manual, provide appropriate training to FPOs to 

ensure consistency in documentation of delinquent grantee communications across regions;

When ETA completes the SOP, webinar training will be provided to all FPOs and financial reviewers in 

the National Office and all Regional Offices.

h) Provide notification to all regions that all communication with grantees should be properly 

documented and retained in the interim until the SOP manual is complete.

Interim guidance is being prepared for immediate dissemination to all ETA offices responsible for 

reviewing the 9130 quarterly reports, ensuring that appropriate documentation on communication with 

grantees regarding their 9130 reports is being retained in GEMS or other established recording system.

Auditors’ Response: We will conduct follow-up procedures in FY 2015 to determine whether corrective 

actions have been developed and implemented.

52 United States Department of Labor 
53

Annual Financial Statements

55

Principal Financial Statements and Notes
Financial Section

PRINCIPAL FINANCIAL STATEMENTS

56 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 

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 Department. The audit of DOL’s principal 

financial statements was performed by KPMG LLP. The auditors’ report accompanies the principal financial

statements.

The Department’s principal financial statements for FY 2014 and 2013 consist of the following: 

• The Consolidated Balance Sheets, which presents as of September 30, 2014 and 2013, 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 Statements of Net Cost, which presents the net cost of DOL operations for the years ended 

September 30, 2014 and 2013. DOL’s net cost of operations includes the gross costs incurred by DOL less any 

exchange revenue earned from DOL activities. The classification of gross cost and exchange revenue by 

program and program agency is presented in Note 15 to the consolidated financial statements.

• The Consolidated Statements 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 revenue, and 

other financing sources for the years ended September 30, 2014 and 2013.

• The Combined Statements of Budgetary Resources, which presents the budgetary resources available to DOL, 

change in obligated balance, and budget authority and net outlays of budgetary resources for FYs 2014 and 

2013; and the status of these resources as of September 30, 2014 and 2013.

• The Statements of Social Insurance, which presents the net present value of projected cash inflows and cash 

outflows of the Black Lung Disability Trust Fund (BLDTF) as of September 30, 2014, 2013, 2012, 2011, and 2010; 

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 Statements of Changes in Social Insurance Amounts, which presents the net change in the open and 

closed group measure of the BLDTF for the years ended September 30, 2014 and 2013, and provides 

information about the change.
Annual Financial Statements

CONSOLIDATED BALANCE SHEETS

As of September 30, 2014 and 2013

(Dollars in Thousands)

FY 2014 Agency Financial Report 57 

 2014 2013

ASSETS

Intra-governmental

Funds with U.S. Treasury (Note 1-C and 2) $ 13,004,346 $ 13,110,719

Investments (Note 1-D and 3) 36,151,884 29,684,278

Accounts receivable (Note 1-E and 4) 5,618,751 5,824,506

Advances (Note 1-G and 6) 3,410 1,928

Total intra-governmental 54,778,391 48,621,431

Accounts receivable, net of allowance (Note 1-E and 4) 1,888,592 2,090,927

Property, plant and equipment, net

 of accumulated depreciation (Note 1-F and 5) 1,290,869 1,269,915

Advances (Note 1-G and 6) 2,162,421 1,925,678

Total assets $ 60,120,273 $ 53,907,951

LIABILITIES AND NET POSITION

Liabilities (Note 1-I and 12)

Intra-governmental

Accounts payable $ 19,444 $ 28,086

Debt (Note 1-J and 8) 26,695,818 35,722,273

Other liabilities (Note 9) 259,716 312,778

Total intra-governmental 26,974,978 36,063,137

Accounts payable 276,003 282,751

Accrued benefits (Note 1-K and 10) 1,220,941 2,517,122

Future workers' compensation benefits (Note 1-L and 11) 1,495,446 1,613,335

Energy employees occupational illness compensation benefits (Note 1-M) 15,970,176 16,016,729

Accrued leave (Note 1-N) 122,368 121,677

Other liabilities (Note 9) 944,596 917,682

Total liabilities 47,004,508 57,532,433

Contingencies (Note 13)

Net position (Note 1-R)

Funds from dedicated collections

Cumulative results of operations (Note 21) 11,304,501 (5,038,568)

All other funds

Unexpended appropriations 9,272,731 9,346,932

Cumulative results of operations (7,461,467) (7,932,846)

Total net position - all other funds 1,811,264 1,414,086

Total net position 13,115,765 (3,624,482)

Total liabilities and net position $ 60,120,273 $ 53,907,951

The accompanying notes are an integral part of these statements.
Financial Section

CONSOLIDATED STATEMENTS OF NET COST

For the Years Ended September 30, 2014 and 2013

(Dollars in Thousands)

58 United States Department of Labor

 2014 2013

NET COST OF OPERATIONS (Note 1-S and 15)

CROSSCUTTING PROGRAMS

Income maintenance

Gross Cost $ 50,757,490 $ 77,921,579

Less earned revenue (3,806,525) (4,037,710)

Net Program Cost 46,950,965 73,883,869

Employment and training

Gross Cost 6,267,289 6,432,749

Less earned revenue (251) (12,408)

Net Program Cost 6,267,038 6,420,341

Labor, employment and pension standards

Gross Cost 785,094 839,964

Less earned revenue (4,406) (10,357)

Net Program Cost 780,688 829,607

Worker safety and health

Gross Cost 1,046,288 1,009,235

Less earned revenue (4,560) (5,305)

Net Program Cost 1,041,728 1,003,930

OTHER PROGRAMS

Statistics

Gross Cost 635,677 635,763

Less earned revenue (17,196) (12,083)

Net Program Cost 618,481 623,680

COSTS NOT ASSIGNED TO PROGRAMS

Gross Cost 30,394 110,672

Less earned revenue not attributed to programs (296) (816)

Net cost not assigned to programs 30,098 109,856

Net cost of operations $ 55,688,998 $ 82,871,283

The accompanying notes are an integral part of these statements.
Annual Financial Statements

CONSOLIDATED STATEMENTS OF CHANGES IN NET POSITION

For the Years Ended September 30, 2014 and 2013

(Dollars in Thousands)

FY 2014 Agency Financial Report 59 

Funds from Funds from 

Dedicated All Other Dedicated All Other

Collections Funds Total Collections Funds Total

Cumulative results of operations, beginning $ (5,038,568) $ (7,932,846) $ (12,971,414) $ (18,333,071) $ (8,641,960) $ (26,975,031)

Budgetary financing sources (Note 1-T)

Appropriations used - 15,624,282 15,624,282 - 38,260,332 38,260,332

Non-exchange revenue (Note 16)

Employer taxes 53,150,871 - 53,150,871 54,494,335 - 54,494,335

Interest 1,206,326 - 1,206,326 1,272,176 - 1,272,176

Reimbursement of 

 unemployment benefits and other 2,171,480 5,820 2,177,300 2,509,745 22,716 2,532,461

Total non-exchange revenue 56,528,677 5,820 56,534,497 58,276,256 22,716 58,298,972

Transfers without reimbursement (Note 17) 1,039,871 (816,448) 223,423 22,153,422 (21,953,782) 199,640

Other financing sources (Note 1-U)

Imputed financing from 

 costs absorbed by others 3,284 117,263 120,547 2,992 109,937 112,929

Transfers without reimbursement (Note 17) - 6,498 6,498 - 4,764 4,764

Other - (5,801) (5,801) - (1,737) (1,737)

Total financing sources 57,571,832 14,931,614 72,503,446 80,432,670 16,442,230 96,874,900

Net cost of operations (41,228,763) (14,460,235) (55,688,998) (67,138,167) (15,733,116) (82,871,283)

Net change 16,343,069 471,379 16,814,448 13,294,503 709,114 14,003,617

Cumulative results of operations, end of year 11,304,501 (7,461,467) 3,843,034 (5,038,568) (7,932,846) (12,971,414)

 Unexpended appropriations, beginning - 9,346,932 9,346,932 - 10,476,263 10,476,263

Budgetary financing sources (Note 1-T)

Appropriations received (Note 18-F) - 16,856,873 16,856,873 - 43,105,275 43,105,275

Appropriations used - (15,624,282) (15,624,282) - (38,260,332) (38,260,332)

Appropriations transferred - - - - 3,202 3,202

Other adjustments - (1,306,792) (1,306,792) - (5,977,476) (5,977,476)

Subtotal - (74,201) (74,201) - (1,129,331) (1,129,331)

 Unexpended appropriations, end of year - 9,272,731 9,272,731 - 9,346,932 9,346,932

Net position $ 11,304,501 $ 1,811,264 $ 13,115,765 $ (5,038,568) $ 1,414,086 $ (3,624,482)

2014 Consolidated 2013 Consolidated

The accompanying notes are an integral part of these statements.
Financial Section

COMBINED STATEMENTS OF BUDGETARY RESOURCES

For the Years Ended September 30, 2014 and 2013

(Dollars in Thousands)

60 United States Department of Labor

(Note 18) 2014 2013

BUDGETARY RESOURCES

Unobligated balance brought forward, October 1 $ 4,655,078 $ 4,391,699

Recoveries of prior year unpaid obligations 436,816 461,549

Other changes in unobligated balance (299,604) (221,903)

Unobligated balance from prior year budget authority, net 4,792,290 4,631,345

Appropriations (discretionary and mandatory) 59,435,713 102,609,040

Borrowing authority (discretionary and mandatory) 2,700,000 7,700,000

Spending authority from offsetting collections (discretionary and mandatory) 7,604,889 7,826,120

Total budgetary resources $ 74,532,892 $ 122,766,505

STATUS OF BUDGETARY RESOURCES

Obligations incurred $ 69,921,152 $ 118,111,427

Unobligated balance, end of year

 Apportioned 2,979,755 3,071,003

 Exempt from apportionment 46,795 54,279

 Unapportioned 1,585,190 1,529,796

 Total unobligated balance, end of year 4,611,740 4,655,078

Total budgetary resources $ 74,532,892 $ 122,766,505

CHANGE IN OBLIGATED BALANCE

Unpaid Obligations:

Unpaid obligations, brought forward, October 1 $ 14,992,121 $ 15,529,168

Obligations incurred 69,921,152 118,111,427

Less: outlays (gross) (70,423,240) (118,186,925)

Less: recoveries of prior year unpaid obligations (436,816) (461,549)

Unpaid obligations, end of year 14,053,217 14,992,121

Uncollected Payments: 

Uncollected payments, Federal sources, brought forward, October 1 (1,946,057) (2,324,892)

Change in uncollected payments, Federal sources (71,646) 378,835

Uncollected payments, Federal sources, end of year (2,017,703) (1,946,057)

Obligated balance, start of year $ 13,046,064 $ 13,204,276

Obligated balance, end of year $ 12,035,514 $ 13,046,064

BUDGET AUTHORITY AND OUTLAYS, NET

Budget authority, gross (discretionary and mandatory) $ 69,740,602 $ 118,135,160

Less: actual offsetting collections (discretionary and mandatory) (7,533,243) (8,204,955)

Less: change in uncollected customer payments from Federal 

sources (discretionary and mandatory) (71,646) 378,835

Budgetary authority, net (discretionary and mandatory) $ 62,135,713 $ 110,309,040

Outlays, gross (discretionary and mandatory) $ 70,423,240 $ 118,186,925

Actual offsetting collections (discretionary and mandatory) (7,533,243) (8,204,955)

Outlays, net (discretionary and mandatory) 62,889,997 109,981,970

Distributed offsetting receipts (6,482,060) (28,189,684)

Agency outlays, net (discretionary and mandatory) $ 56,407,937 $ 81,792,286

The accompanying notes are an integral part of these statements.
Annual Financial Statements

STATEMENTS OF SOCIAL INSURANCE

As of September 30, 2014, 2013, 2012, 2011, and 2010

(Dollars in Thousands)

FY 2014 Agency Financial Report 61 

2014 2013 2012 2011 2010

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 $ 1,876,522 $ 1,953,763 $ 2,181,654 $ 1,951,755 $ 2,125,231

 

Present value of estimated future administrative costs 

 during the projection period 942,107 920,740 963,995 935,444 881,311

Actuarial present value of future benefit payments and 

 present value of estimated future administrative costs during 

 the projection period for current and future participants 2,818,629 2,874,503 3,145,649 2,887,199 3,006,542

 

Less the present value of estimated future excise tax

 income during the projection period 7,301,416 7,494,800 7,804,178 7,607,428 8,457,022

Excess of present value of estimated future excise tax

 income over actuarial present value of future benefit 

 payments and present value of estimated future administrative

 costs during the projection period for current and future 

 participants (open and closed group measure) $ 4,482,787 $ 4,620,297 $ 4,658,529 $ 4,720,229 $ 5,450,480

 

Trust fund net position deficit at start 

 of projection period (Note 1-W and 21) $ (5,755,352) $ (5,894,222) $ (5,977,619) $ (6,099,261) $ (6,238,612)

Summary Section

Open and closed group measure $ 4,482,787 $ 4,620,297 $ 4,658,529 $ 4,720,229 $ 5,450,480

Add: Funds with U.S. Treasury and receivables from

 benefit overpayments (Note 21) 129,376 145,794 102,498 63,814 68,028

Total of open and closed group measure

 plus fund assets (Note 1-W) $ 4,612,163 $ 4,766,091 $ 4,761,027 $ 4,784,043 $ 5,518,508

For the Projection Period Ending September 30, 2040

The accompanying notes are an integral part of these statements.
Financial Section

STATEMENTS OF CHANGES IN SOCIAL INSURANCE AMOUNTS

For the Years Ended September 30, 2014 and 2013 

(Dollars in Thousands)

62 United States Department of Labor

BLACK LUNG DISABILITY BENEFIT PROGRAM (Note 1-W)

Open and Closed Group Measure

2014 2013

Excess of present value of estimated future excise tax income over actuarial

 present value of future benefit payments and present value of estimated future

 administrative costs during the projection period for current and future participants

 (open and closed group measure), beginning of year $ 4,620,297 $ 4,658,529 

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 120,126

 Changes in assumptions about coal excise tax revenues (443,815) (141,062)

 Changes in assumptions about Federal civilian pay raises for income benefits 7,245 13,254 

 Changes in assumptions about medical cost inflation for medical benefits (1,179) 1,004 

 Changes in assumptions about administrative costs (13) 33,575 

 Changes in assumptions about interest rates 180,126 (148,713)

Net change in open and closed group measure (137,510) (38,232)

Open and closed group measure, end of year $ 4,482,787 $ 4,620,297 

 203,710 

The accompanying notes are an integral part of these statements.
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 63 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Reporting Entity

DOL, 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 under four 

major budget functions: (i) education, training, employment, and social services; (ii) health (occupational health and 

safety); (iii) income security; and (iv) veterans benefits and services (veterans education and training). DOL is 

organized into program agencies, which administer the various statutes and programs for which the Department is 

responsible. DOL’s program agencies are shown below.

1. 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)

Other Program Agencies

• 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

- Office of Congressional and - Office of the Chief Financial Officer

Intergovernmental Affairs - Office of Disability Employment Policy

- Women’s Bureau - Bureau of International Labor Affairs

The Pension Benefit Guaranty Corporation (PBGC), wholly owned by the Federal government and whose Board of 

Directors is chaired by 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, 2014 and 2013

64 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 

The table below shows the relationship between the Department’s strategic goals and its major programs.

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) Bureau of 

the Fiscal Service and to OMB. For financial statement purposes, DOL funds are further classified as funds 

from dedicated collections, fiduciary funds, and all other funds, and are discussed below:

 

Funds from dedicated collections

Funds from dedicated collections 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 funds from dedicated collections are disclosed 

in Note 21 and are discussed below:

Unemployment Trust Fund (UTF) 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 (FUTA), 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.

 

 Major Programs

Strategic Goals Income 

Maintenance

Employment 

and Training

Labor, 

Employment 

and Pension 

Standards

Worker 

Safety and 

Health Statistics

1: Prepare workers for better jobs • •

2: Improve workplace safety and health •

3: Promote fair and high-quality work 

environments •

4: Secure retirement, health, and other employee 

benefits and, for those not working, provide 

income security 

• •

5: Produce timely and accurate data on the 

economic conditions of workers and their 

families 

•
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 65 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

A. Reporting Entity - Continued

3. Fund accounting structure - continued

Funds from dedicated collections - continued

Black Lung Disability Trust Fund (BLDTF) 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 its workers compensation obligations under the Federal Employees’

Compensation Act (FECA).

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 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 

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.
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

66 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

Davis-Bacon Act Trust Fund established under the Davis-Bacon Act, provides payment for claims relating to 

violations of the Davis-Bacon Act and Contract Work Hours and Safety Standards Act. Effective November 

21, 2013, responsibility for administrating this fund was transferred from Government Accountability Office 

(GAO) to the Department of Labor. The Department investigates violation allegations to determine if 

federal contractors owe additional wages to covered employees. If the Department concludes that a 

violation has occurred, the Department collects the amount owed from the contracting federal agency, 

deposits the funds into an account with the U.S. Treasury, and remits payment to the claimant. 

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 training 

programs and other services for the economically disadvantaged and others, designed to lead to 

permanent gains in employment, through grants to states and Federal programs, authorized by the 

Workforce Investment Act (WIA) and the Job Training Partnership Act. 

Office of Job Corps supports the administration and management of the Job Corps program, which helps atrisk youth who need and can benefit from intensive education and training services to become more 

employable, responsible, and productive citizens. 

State Unemployment Insurance and Employment Service Operations (SUIESO) includes grants to states for 

administering the Unemployment Compensation (UC) and Employment Service (ES) programs. UC

Programs provide administrative grants to state agencies which pay unemployment benefits to eligible 

individuals and collect state unemployment taxes from employers. The ES Program is a nationwide system 

providing no-fee ES to individuals seeking employment and to employers seeking workers. ES funding 

allotments for state activities are determined upon 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 UTF to pay EUC 

benefits and the related administrative costs. This account is currently used to provide general fund 

financing for EUC benefits and administrative costs under the Supplemental Appropriations Act of 2008, as 

extended by the Recovery Act and other authorizing legislation.

Advances to the Unemployment Trust Fund and Other Funds provides advances to other accounts within 

the UTF to pay UC whenever the balances in these accounts prove insufficient or whenever 

reimbursements to certain accounts, as allowed by law, are to be made. This account also makes advances 

to the Federal Unemployment Benefits and Allowances account to pay the cost of benefits and services 
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 67 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

A. Reporting Entity - Continued

3. Fund accounting structure - continued

All other funds - continued

under the Trade Adjustment Assistance (TAA) for Workers program; and provides loans to the BLDTF to 

make disability payments whenever the fund balance proves insufficient.

Revolving fund for Advances to Employment Security Administration Account (ESAA), Unemployment Trust 

Fund was established under the authority of Social Security Administration (SSA) Section 901(e), to advance 

amounts to ESAA in the event that balances in this account prove insufficient to cover expenditures relating 

to administrative costs associated with the administration of the UTF. 

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 TAA) as authorized by the Trade Act of 1974. 

Short-Time Compensation provides grants to states to implement or improve short-time compensation 

programs as authorized by the Middle Class Tax Relief and Job Creation Act. Short-time compensation 

programs allow employers to voluntarily reduce the number of hours worked by employees in lieu of 

layoffs and permits employees to collect a pro rata portion of the UC which would otherwise be payable to 

the employee if the employee was unemployed. 

Community Service Employment for Older Americans (CSEOA) provides part-time work experience in 

community service activities to unemployed, low income persons aged 55 and over.

Federal Employees’ Compensation Act 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 and the District of Columbia Workmen’s Compensation Act authorized payments from 

the Special Benefit fund for 50% of the annual increase in benefits for compensation and certain related 

benefits.

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

(EEOICPA) of 2000. The Act authorizes compensation 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. 
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

68 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

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 SSA, after which time DOL began processing new claims under Part C. SSA continued to 

administer Part B claims until DOL permanently assumed responsibility effective October 1, 2003. 

Working Capital Fund (WCF) 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 cover the full cost of operations.

General fund 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 fund 

balances in these receipt accounts to the General Fund of the Treasury at the end of each fiscal year. 

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 UTF and the BLDTF. 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 UTF and the BLDTF into these financial statements.

B. Basis of Accounting and Presentation

These financial statements present the financial position, net cost of operations, changes in net position and 

budgetary resources of DOL, and estimated and actuarial projections, and changes therein, for the Department’s 

Black Lung social insurance program, in accordance with U.S. GAAP and the form and content requirements of OMB 

Circular No. A-136. To ensure that the Department’s financial statements are meaningful, other liabilities as defined 

by OMB Circular No. 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, the financial statements 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 Statements of Budgetary Resources, which are presented on a combined basis, as 

required by OMB Circular No. A-136. 
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 69 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

B. Basis of Accounting and Presentation - Continued

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 delegations by one department of its authority to obligate budget 

authority and outlay funds to another agency as prescribed by law. 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 the 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. Department of State to support 

international HIV/AIDS relief efforts and the Executive Office of the President of the United States to support an 

unemployment insurance (UI) financial data access project (parent entities). Accordingly, activity for these 

allocation accounts is excluded from the DOL financial statements and reported by the parent agencies.

U.S. GAAP encompasses both accrual and budgetary transactions. Under accrual accounting, revenues are 

recognized when earned and expenses are recognized when liabilities are incurred. Budgetary accounting facilitates 

compliance with legal constraints on, and controls over, the use of Federal funds. These 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 

Funds from Dedicated Collections

The Federal Government does not set aside assets to pay future benefits or other expenditures associated with 

DOL’s funds from dedicated collections. The cash receipts collected from the public for funds from dedicated 

collections are deposited in the U.S. Treasury, which uses the cash for general government purposes. Interest 

earning Treasury securities are issued to DOL’s funds from dedicated collections 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 U.S. 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, 2014 and 2013

70 United States Department of Labor

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

D. Investments - Continued

Balances held in the UTF 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)

All Other Funds

Balances held in the Energy Employees Occupational Illness Compensation Fund are invested in non-marketable 

Treasury one-day certificates. (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 UTF provides unemployment compensation

to eligible Federal employees (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 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 other 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 and other agencies. 
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 71 

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. 

DOL’s capitalization thresholds for assets with a useful life of 2 years or longer, and the related depreciable life are 

displayed in the following table.

Capitalization Threshold Years

Structures, facilities and improvements $500,000 20 - 50

Furniture and equipment $50,000 2 - 36

Internal use software and software in development $500,000 2 - 15

Construction-in-progress $500,000 -

Land $500,000 -

Internal use software development costs are capitalized as software in development 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. 

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 and facilities and depreciated over their estimated useful lives. Structures and 

facilities also includes DOL’s only asset under capital lease. Leasehold improvements made at Job Corps centers and 

DOL facilities leased from the General Services Administration (GSA) are capitalized as construction-in-progress until 

completed. Upon completion, they are reclassified as improvements to leased facilities, 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. (See Note 5)

G. Advances

DOL advances consist primarily of payments made to State Employment Security Agencies (SESA) 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 expenditures are recorded by DOL. 

(See Note 6)
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

72 United States Department of Labor

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

H. Non-entity Assets

Assets held by DOL which are not available to DOL for obligation are considered non-entity assets. DOL holds nonentity 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. 

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. Unemployment Trust Fund advances from U.S. Treasury

UTF advances from U.S. Treasury outstanding as of September 30, 2014, and September 30, 2013, represent 

borrowings from the General Fund of the U.S. Treasury pursuant to the authority of Sections 905(d) and 

1203 of the Social Security Act (42 USC 1323). These advances were appropriated in FY 2014 through two 

continuing resolutions with P.L. 113-46 and P.L. 113-73 and an appropriations act P.L. 113-76 and in FY 2013 

through two continuing resolutions with P.L. 112-175 and P.L. 113-6 to pay unemployment benefits when 

amounts in the UTF are insufficient to fund these benefits. These repayable advances bear interest rates 

ranging between 2.375% and 3.250%, 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 UTF to the General Fund of the U.S. Treasury when the Secretary of the 

Treasury, in consultation with the Secretary of Labor, has determined that the balances in the UTF allow 

repayment. (See Note 8)
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 73 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

J. Debt - Continued

2. 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 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 the 

Fiscal Service 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 mined coal. In the event that the BLDTF cannot repay a discounted instrument when it 

matures, or make benefit payments or other authorized expenditures, the Act authorizes the issuance of 

one-year discounted instruments to finance these activities. The BLDTF issued additional debt on 

September 30, 2013 (due September 30, 2014) bearing an interest rate of 0.098%, and on September 30, 

2014 (due September 30, 2015) bearing an interest rate of 0.11%. (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 UTF provides benefits to unemployed workers who meet state and Federal eligibility requirements. 

Regular and extended unemployment benefits are paid from state accounts within the UTF, 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 UTF, financed by a Federal unemployment tax on employer payrolls. The Recovery Act provided for a 

100% Federal funding of Extended Benefits (EB) through December 2009. This 100% Federal funding 

provision has been extended several times, which phased out on January 1, 2014.

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 UC. FAUC benefits were 

extended several times, with phase-out of benefit eligibility by December 2010. Although the vast majority 

of FAUC activity has ceased, states are still reporting residual transactions related to the program on 

monthly reports.

EUC 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 January 1, 

2014, and are currently funded entirely from General Fund appropriations.

Unemployment benefits to unemployed Federal workers are paid from the FEC account within the UTF, 

which is then reimbursed by the responsible Federal agency. 
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

74 United States Department of Labor

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

K. Accrued Benefits - Continued

1. Unemployment benefits payable - continued

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 reimbursable by other Federal entities. 

2. Federal employees disability and 10(h) benefits payable

The FECA 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 BLDTF 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 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.

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 FECA 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 future 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 COLA) and medical inflation factors 
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 75 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

L. Future Workers’ Compensation Benefits - Continued

(consumer price index-medical or CPIM) to the calculation of projected benefits. The COLAs and CPIMs used in the 

projections for FY 2014 and FY 2013 were as follows:

 COLA CPIM 

 FY 2014 2013 2014 2013

 

2014 N/A 1.67 % N/A 3.46 %

2015 1.73 % 1.80 % 2.93 % 3.82 %

2016 2.17 % 2.20 % 3.76 % 3.83 %

2017 2.13 % 2.20 % 3.86 % 3.82 %

2018 2.23 % 2.20 % 3.90 % 3.82 %

2019+ 2.30 % 2.20 % 3.90 % 3.82 %

In FY 2014, based on the approach used in FY 2013, DOL refined the approach for selecting the interest rate 

assumptions. For FY 2014, projected annual payments were discounted to present value based on interest rate 

assumptions on the Treasury’s Yield Curve for Treasury Nominal Coupon Issues to reflect the average duration for 

income payments of 15.1 years and medical payments of 9.9 years. For FY 2014, interest rate assumptions were 

3.455% for years one, two, and thereafter for income payments and 2.855% for years one, two, and thereafter for 

medical payments.

For FY 2013, projected annual payments were discounted to present value based on OMB’s interest rate 

assumptions which were interpolated to reflect the average duration for income payments of 14.7 years and 

medical payments of 9.6 years. For FY 2013, interest rate assumptions were 2.727% in year one and 3.127% in year 

two and thereafter for income payments and 2.334% in year one and 2.869% in year two and thereafter for medical 

payments.

M. Energy Employees Occupational Illness Compensation Benefits 

The Energy Employees Occupational Illness Compensation Fund, established under the authority of the 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, subsequent 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. 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. 

DOL has recognized a $16.0 billion and $16.0 billion actuarial liability for estimated future benefits payable by DOL 

as of September 30, 2014 and September 30, 2013, respectively, to eligible individuals under the EEOICPA.
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

76 United States Department of Labor

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

M. Energy Employees Occupational Illness Compensation Benefits - Continued

In FY 2014, based on the approach used in FY 2013, DOL refined the approach for selecting the interest rate 

assumptions. For FY 2014, projected payments were discounted to present value based on interest rate 

assumptions on the Treasury’s Yield Curve for Treasury Nominal Coupon Issues to reflect the average duration for 

compensation payments of 8.9 years and medical payments of 16.7 years. As of September 30, 2014, the 

undiscounted liability was $23.5 billion discounted to a present value liability of $16.0 billion based on an interest 

rate of 2.661% for compensation payments and 3.560% for medical payments projected over a 58-year period.

For FY 2013, projected payments were discounted to present value based on OMB’s interest rate assumptions which 

were interpolated to reflect the average duration for compensation payments of 9.2 years and medical payments of 

17.3 years. As of September 30, 2013, the undiscounted liability was $23.0 billion discounted to a present value 

liability of $16.0 billion based on an interest rate of 2.826% for compensation payments and 3.245% for medical 

payments projected over a 58-year period.

The estimated liability includes the expected compensation 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 reported 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 nonvested 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 2014, DOL’s contributions to the FEHBP and FEGLIP were 

$111.0 million and $2.4 million, respectively. During FY 2013, DOL’s contributions to the FEHBP and FEGLIP were 

$110.1 million and $2.4 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 the U.S. 

Office of Personnel Management (OPM). Using cost factors supplied by OPM, DOL recorded ORB imputed costs and 

imputed financing sources of $68.2 million in FY 2014 and $70.3 million in FY 2013.
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 77 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

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. P.L. 112-96, Section 5001, the “Middle Class Tax 

Relief and Job Creation Act of 2012,” changed the employee and employer contributions for new employees 

participating in FERS. For those employees designated by OPM as FERS Revised Annuity Employees (RAEs, i.e., new 

employees who, in general, were hired on or after January 1, 2013), DOL withholds 3.1% of gross earnings and 

makes a 9.6% employer contribution; for FERS employees hired on December 31, 2012 and before, DOL withholds 

0.8% of gross earnings and makes an 11.9% employer contribution. The Bipartisan Budget Act of 2013, section 401, 

further changed the employee and employer contributions for new employees participating in FERS. For those 

employees designated by OPM as FERS Further Revised Annuity Employees (FRAEs, i.e., new employees who, in 

general, were hired on or after January 1, 2014), DOL withholds 4.4% from gross earnings and makes a 9.6% 

contribution for FERS FRAE employees.

Percentage of Gross Earnings

FERS FERS RAE FERS FRAE

Employee contribution/withholding 0.8% 3.1% 4.4%

DOL contribution 11.9% 9.6% 9.6%

These totals are transferred to the Federal Employees’ Retirement Fund. The CSRS and FERS retirement funds are 

administered by OPM. DOL contributions to the CSRS and FERS are recognized as current operating expenses. FERS 

participants are also covered under the Federal Insurance Contribution Act (FICA) and are subject to withholdings. 

DOL makes matching FICA contributions, recognized as current operating expenses. DOL’s matching contributions 

were $117.3 million in FY 2014 and $115.5 million in FY 2013.

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 $17,500 of their gross pay to the TSP during 

calendar years 2014 and 2013, but there is no departmental matching contribution. FERS participants may 

contribute up to $17,500 of their gross pay to the TSP during calendar years 2014 and 2013. 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 2014 and 2013, 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. 
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

78 United States Department of Labor

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Q. Employee Pension Benefits - Continued

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. 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. 

2. 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 cancelled, five 

years after the appropriations expire. Unexpired multi-year and no-year appropriations remain available to 

DOL for obligation in future periods. 

S. Net Cost of Operations 

1. Operating costs 

Full operating costs are comprised of all direct costs consumed by programs and those indirect costs which 

can be reasonably assigned or allocated to programs. 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 Statements of Net Cost, and are also reported by program agency and major program. (See 

Note 15)

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 FECA 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 UTF from Federal agencies for the cost of unemployment benefits 

provided to or accrued on behalf of their former employees. (See Note 15)
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 79 

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 Statements 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 used, appropriations transferred, and adjustments

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 adjusted due 

to rescission, cancellation, sequestration, or return of permanent indefinite authority. Appropriations are 

considered used as a financing source when goods and services are received or benefits are provided.

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 Statements 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 UTF. State unemployment taxes 

are collected by each state and deposited in separate state accounts within the UTF. Among other things, 

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 UI program, 

employment services including veterans’ ES, and foreign labor certifications (FLC). Additional Federal

collections from states with advances from the fund that have been outstanding for more than two years 

are used to reduce states’ outstanding advance balances. State unemployment taxes are restricted in their 

use to the payment of unemployment benefits.

Interest

The UTF, the Panama Canal Commission Compensation Fund, and the Energy Employees Occupational 

Illness Compensation Fund receive interest on fund investments. The UTF receives interest from states that 

had accounts with loans payable to the Federal Unemployment Account (FUA) 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, 2014 and 2013

80 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 and other

The UTF 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. There are also 

transfers between DOL entities, primarily for the administration of the UI program and of 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 from costs absorbed by others

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 GSA. (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; and for FECA administrative 

costs assessed against government corporations in excess of amounts reserved to finance capital improvements in 

the FECA Special Benefit Fund; and for ETA collections and administrative charges and restitution payments. These 

collections are not available to the agencies for obligation or expenditure. Penalties and other assessments are 

recognized as custodial non-exchange revenues when collected or subject to collection. (See Note 20)

W. Significant Assumptions Used in the Statements of Social Insurance and Statements 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 and the BLDTF provides benefit payments when no responsible mine operator can 

be assigned the liability. The OWCP administers the program.
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 81 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

W. Significant Assumptions Used in the Statements of Social Insurance and Statements of Changes in 

Social Insurance Amounts - Continued

1. Program Background - continued

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 domestic 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 low interest rate discounted debt instruments similar in form to zero-coupon 

bonds, plus a one-time appropriation. This Act also allowed that any subsequent debt issued by the BLDTF 

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 Statements 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 affect the amounts reported on 

the SOSI, summary section and the Statements 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 10

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.

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.

SSA 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 CPIM, which are used to calculate future benefit costs.
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

82 United States Department of Labor

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

W. Significant Assumptions Used in the Statements of Social Insurance and Statements of Changes in 

Social Insurance Amounts - Continued

2. Significant Assumptions - continued

During the current projection period, the future benefit rate (annualized for the fiscal year) increases 3.56% 

in 2015, 3.49% in 2016, 3.20% in 2017 and 2018, and approximately 3.10% in each year thereafter and 

medical cost increases 3.3% in 2015, 3.8% in 2016, and 3.9% in each year thereafter. Estimates for 

administrative costs for the first 10 years of the projection period 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.

In FY 2014, DOL further refined the approach for selecting the interest rate assumptions to enhance 

matching between the timing of cash flows and interest rates and increase comparability. For FY 2014, 

projected annual cash flows were discounted to present value based on Treasury rates that reflect the 

average duration of cash flows between 10.4 and 12.2 years for income payments, medical payments, 

administrative expenses, and coal excise tax collections. The interest rates used to discount FY 2014 

projections are 2.50% for income payments and 2.63% for medical payments, administrative expenses, and 

coal excise tax collections.

In FY 2013, DOL refined the approach for selecting the interest rate assumptions and enhanced matching 

between the timing of cash flows and interest rates. For FY 2013, projected annual cash flows were 

discounted to present value based on OMB’s interest rate assumptions which were interpolated to reflect 

the average duration of cash flows between 21.3 and 25.4 years for income payments, medical payments, 

administrative expenses, and coal excise tax collections. The interest rates used to discount FY 2013

projections were between 2.79% and 2.95% for income payments, medical payments, administrative 

expenses, and coal excise tax collections.

For FYs 2010 through 2012, the projections were discounted using an interest rate published by Treasury as 

of the start of the projection period for Treasury loans to government agencies for loans with a duration 

that approximated the projection period. The valuation date for the FY 2014 and FY 2013 information 

presented in the SOSI, including the summary section, and in the SCSIA is September 30, 2014, and 2013, 

respectively.

The accumulated deficit of all past disbursements over past cash receipts, including interest on investments, 

is ($5.76) billion, the amount of the trust fund net position deficit at the start of the projection period, 

September 30, 2014. 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 future administrative 

costs during the projection period for current and future participants (open and closed group measure) is 

calculated by adding the outflows of:
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 83 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

W. Significant Assumptions Used in the Statements of Social Insurance and Statements of Changes in 

Social Insurance Amounts - Continued

2. Significant Assumptions - continued

(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.

As a result of changes in the assumptions above:

– in FY 2014, the open and closed group measure decreased by ($137.5) million primarily due to 

projected lower coal excise tax revenues, offset in part due to lower beneficiary costs and the change 

in interest rates used to discount the cash flows from between 2.79% and 2.95% in FY 2013 to 2.50% 

for income payments and 2.63% for medical payments, administrative expenses, and coal excise tax 

collections in FY 2014; and

– in FY 2013, the open and closed group measure decreased by ($38.2) million primarily due to 

projected lower coal excise tax revenues and the change in the interest rates used to discount the 

cash flows from 2.75% in FY 2012 to between 2.79% and 2.95% in FY 2013 for income payments, 

medical payments, administrative expenses, and coal excise tax collections, offset in part due to lower 

beneficiary costs.

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.
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

84 United States Department of Labor

NOTE 2 - FUNDS WITH U.S. TREASURY

Funds with U.S. Treasury as of September 30, 2014, consisted of the following:

(Dollars in thousands) Revolving funds Trust funds Special funds General funds Other Total

Unobligated Balance Available $ 1,761 $ 163 $ 345,638 $ 2,632,358 $ - $ 2,979,920

Unobligated Balance Unavailable 21,868 - 55,114 1,508,208 - 1,585,190

Obligated Balance Not Yet Disbursed 87,385 12,910 327,939 7,911,976 - 8,340,210

Non-Budgetary Fund Balance with Treasury - 97,577 239 292 - 98,108

Total Entity Assets 111,014 110,650 728,930 12,052,834 - 13,003,428

Non-entity Assets - (2,577) - - 3,495 918

Fund Balance with Treasury $ 111,014 $ 108,073 $ 728,930 $ 12,052,834 $ 3,495 $ 13,004,346

Funds with U.S. Treasury as of September 30, 2013, consisted of the following:

(Dollars in thousands) Revolving funds Trust funds Special funds General funds Other Total

Unobligated Balance Available $ 11,187 $ 163 $ 370,975 $ 2,743,221 $ - $ 3,125,546

Unobligated Balance Unavailable 10,500 - 39,094 1,480,120 - 1,529,714

Obligated Balance Not Yet Disbursed 89,636 253,240 260,221 7,570,932 - 8,174,029

Non-Budgetary Fund Balance with Treasury - 276,804 - 66 - 276,870

Total Entity Assets 111,323 530,207 670,290 11,794,339 - 13,106,159

Non-entity Assets - 822 - - 3,738 4,560

Fund Balance with Treasury $ 111,323 $ 531,029 $ 670,290 $ 11,794,339 $ 3,738 $ 13,110,719

Obligated and unobligated balances differ from the amounts reported on the Combined Statements of Budgetary 

Resources because budgetary balances are supported by amounts other than Fund Balance with Treasury, such as 

investments. Non-Budgetary Fund Balance with Treasury consists of amounts included in Fund Balance with 

Treasury but excluded from the Department’s budgetary resources.

The negative fund balance reported as of September 30, 2014, relates to the UTF and is 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 subject to the annual apportionment and allotment 

process.

Unobligated Balance Available as of September 30, 2014 and 2013, includes $486.6 million and $991.7 million, 

respectively, of funds apportioned for use in the subsequent year period.
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 85 

NOTE 3 - INVESTMENTS

Investments as of September 30, 2014, 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

 2.375% maturing June 30, 2016 $ 3,751,987 $ - $ 22,277 $ 3,774,264 $ 3,751,987

Special issue Certificate of Indebtedness

 2.375% maturing June 30, 2015 32,167,350 - 162,657 32,330,007 32,167,350

 35,919,337 - 184,934 36,104,271 35,919,337

Panama Canal Commission

 Compensation Fund

Marketable

U.S. Treasury Notes

 4.250% maturing November 15, 2014 46,631 239 743 47,613 46,631

$ 35,965,968 $ 239 $ 185,677 $ 36,151,884 $ 35,965,968

Entity investments $ 35,838,676 $ 239 $ 185,022 $ 36,023,937 $ 35,838,676

Non-entity investments 127,292 - 655 127,947 127,292

$ 35,965,968 $ 239 $ 185,677 $ 36,151,884 $ 35,965,968
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

86 United States Department of Labor

NOTE 3 - INVESTMENTS - Continued

Investments as of September 30, 2013, 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, 2014 $ 5,198,978 $ - $ 34,118 $ 5,233,096 $ 5,198,978

 2.375% maturing June 30, 2015 4,000,000 - 23,750 4,023,750 4,000,000

 2.375% maturing June 30, 2016 3,751,987 - 22,277 3,774,264 3,751,987

Special issue Certificate of Indebtedness

 2.375% maturing June 30, 2014 16,527,070 - 49,327 16,576,397 16,527,070

 29,478,035 - 129,472 29,607,507 29,478,035

Panama Canal Commission

 Compensation Fund

Marketable

U.S. Treasury Notes

 4.250% maturing November 15, 2013 51,509 264 821 52,594 51,509

Energy Employees Occupational Illness 

 Compensation Fund

Non-marketable

One day certificate

 0.030% maturing October 1, 2013 24,177 - - 24,177 24,177

$ 29,553,721 $ 264 $ 130,293 $ 29,684,278 $ 29,553,721

Entity investments $ 29,367,286 $ 264 $ 129,474 $ 29,497,024 $ 29,367,286

Non-entity investments 186,435 - 819 187,254 186,435

$ 29,553,721 $ 264 $ 130,293 $ 29,684,278 $ 29,553,721
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 87 

NOTE 4 - ACCOUNTS RECEIVABLE, NET OF ALLOWANCE

Accounts receivable, net as of September 30, 2014, consisted of the following:

Gross Net

(Dollars in thousands) Receivables Allowance Receivables

Entity intra-governmental assets

Due for UCFE and UCX benefits $ 348,885 $ - $ 348,885

Due for workers' compensation benefits 5,262,857 - 5,262,857

Other 7,009 - 7,009

 5,618,751 - 5,618,751

Entity assets

State unemployment taxes 1,294,831 (870,938) 423,893

Due from reimbursable employers 718,016 (69,204) 648,812

Benefit overpayments 3,912,278 (3,212,275) 700,003

Other 11,699 - 11,699

 5,936,824 (4,152,417) 1,784,407

Non-entity assets

Fines and penalties 222,614 (118,429) 104,185

 6,159,438 (4,270,846) 1,888,592

$ 11,778,189 $ (4,270,846) $ 7,507,343

Accounts receivable, net as of September 30, 2013, consisted of the following:

Gross Net

(Dollars in thousands) Receivables Allowance Receivables

Entity intra-governmental assets

Due for UCFE and UCX benefits $ 519,690 $ - $ 519,690

Due for workers' compensation benefits 5,298,168 - 5,298,168

Other 6,648 - 6,648

 5,824,506 - 5,824,506

Entity assets

State unemployment taxes 1,403,161 (939,261) 463,900

Due from reimbursable employers 861,286 (75,979) 785,307

Benefit overpayments 4,480,925 (3,765,155) 715,770

Other 10,395 - 10,395

 6,755,767 (4,780,395) 1,975,372

Non-entity assets

Fines and penalties 141,499 (25,944) 115,555

 6,897,266 (4,806,339) 2,090,927

$ 12,721,772 $ (4,806,339) $ 7,915,433
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

88 United States Department of Labor

NOTE 5 - PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION

Property, plant and equipment, net as of September 30, 2014, consisted of the following:

Accumulated

Depreciation/ Net Book

(Dollars in thousands) Cost Amortization Value

Structures, facilities and improvements

Structures and facilities $ 1,435,293 $ (630,328) $ 804,965

Improvements to leased facilities 398,288 (288,939) 109,349

 1,833,581 (919,267) 914,314

Furniture and equipment

Equipment held by contractors 146,748 (134,906) 11,842

Furniture and equipment 40,540 (31,773) 8,767

 187,288 (166,679) 20,609

Internal use software and software in development 248,404 (115,839) 132,565

Construction-in-progress 123,847 - 123,847

Land 99,534 - 99,534

$ 2,492,654 $ (1,201,785) $ 1,290,869

2014

Property, plant and equipment, net as of September 30, 2013, consisted of the following:

Accumulated

Depreciation/ Net Book

(Dollars in thousands) Cost Amortization Value

Structures, facilities and improvements

Structures and facilities $ 1,411,415 $ (593,862) $ 817,553

Improvements to leased facilities 399,543 (279,676) 119,867

 1,810,958 (873,538) 937,420

Furniture and equipment

Equipment held by contractors 146,887 (139,173) 7,714

Furniture and equipment 40,230 (31,233) 8,997

 187,117 (170,406) 16,711

Internal use software and software in development 237,589 (99,272) 138,317

Construction-in-progress 77,925 - 77,925

Land 99,542 - 99,542

$ 2,413,131 $ (1,143,216) $ 1,269,915

2013
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 89 

NOTE 6 - ADVANCES

Advances as of September 30, 2014 and 2013, consisted of the following:

(Dollars in thousands) 2014 2013

Intra-governmental

Advances $ 3,410 $ 1,928

Advances to states for UI benefit payments 2,155,414 1,916,300

Other 7,007 9,378

 2,162,421 1,925,678

$ 2,165,831 $ 1,927,606

NOTE 7 - NON-ENTITY ASSETS

Non-entity assets as of September 30, 2014 and 2013, consisted of the following:

(Dollars in thousands) 2014 2013

Intra-governmental

Funds with U.S. Treasury $ 918 $ 4,560

Investments 127,947 187,254

 128,865 191,814

Accounts receivable, net of allowance 104,185 115,555

Total non-entity assets 233,050 307,369

Total entity assets 59,887,223 53,600,582

$ 60,120,273 $ 53,907,951

NOTE 8 - DEBT

Debt during FY 2014 consisted of the following:

Balance at Balance at

September 30, Additional Repayment of September 30,

(Dollars in thousands) 2013 Borrowing Debt Interest 2014

Intra-governmental debt to Treasury

Unemployment Trust Fund

 Advances from U.S. Treasury $ 29,695,634 $ 2,700,000 $ (11,578,829) $ 6,794 $ 20,823,599

Black Lung Disability Trust Fund

 Borrowing from U.S. Treasury 6,026,639 496,000 (798,383) 147,963 5,872,219

$ 35,722,273 $ 3,196,000 $ (12,377,212) $ 154,757 $ 26,695,818

Debt during FY 2013 consisted of the following:

Balance at Balance at

September 30, Additional Repayment of September 30,

(Dollars in thousands) 2012 Borrowing Debt Interest 2013

Intra-governmental debt to Treasury

Unemployment Trust Fund

 Advances from U.S. Treasury $ 32,931,755 $ 7,700,000 $ (10,985,509) $ 49,388 $ 29,695,634

Black Lung Disability Trust Fund

 Borrowing from U.S. Treasury 6,065,585 401,000 (610,403) 170,457 6,026,639

$ 38,997,340 $ 8,101,000 $ (11,595,912) $ 219,845 $ 35,722,273
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

90 United States Department of Labor

NOTE 8 - DEBT - Continued

For the year ended September 30, 2014, interest expense for the UTF was $780.3 million, of which $773.5 million

was paid. For the year ended September 30, 2013, interest expense for the UTF was $968.4 million, of which 

$919.0 million was paid.

For the year ended September 30, 2014, interest expense for the BLDTF was $223.8 million, of which $148.0 million 

was capitalized interest and $75.8 million was paid. For the year ended September 30, 2013, interest expense for 

the BLDTF was $226.6 million, of which $170.5 million was capitalized interest and $56.1 million was paid. 

NOTE 9 - OTHER LIABILITIES

Other liabilities as of September 30, 2014 and 2013, consisted of the following:

(Dollars in thousands) 2014 2013

Intra-governmental

Non-entity receivables due to U.S. Treasury $ 104,011 $ 115,044

Accrued payroll and other liabilities 155,705 197,734

Total intra-governmental 259,716 312,778

Grant accruals 793,703 778,731

Capital lease liability 40,379 41,811

Environmental and disposal liability 31,063 31,501

Accrued payroll and other liabilities 79,451 65,639

Total other liabilities with the public 944,596 917,682

$ 1,204,312 $ 1,230,460

The amounts above are current liabilities, except for the capital lease and environmental and disposal liabilities. 

NOTE 10 - ACCRUED BENEFITS

Accrued benefits as of September 30, 2014 and 2013, consisted of the following:

(Dollars in thousands) 2014 2013

State regular and extended unemployment benefits payable $ 543,540 $ 1,017,609

Federal extended unemployment benefits payable 95,567 242,907

Federal emergency unemployment benefits payable 204,952 808,505

Federal employees' unemployment benefits payable 174,759 259,137

Federal additional unemployment benefits payable 28,340 26,364

Total unemployment benefits payable 1,047,158 2,354,522

Black lung disability benefits payable 22,381 24,562

Federal employees' disability and 10(h) benefits payable 121,686 115,125

Energy employees occupational illness compensation benefits payable 29,716 22,913

$ 1,220,941 $ 2,517,122
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 91 

NOTE 11 - FUTURE WORKERS' COMPENSATION BENEFITS

DOL’s liability for future workers’ compensation benefits as of September 30, 2014 and 2013, consisted of the 

following: 

(Dollars in thousands) 2014 2013

Projected gross liability of the Federal government

 for future FECA benefits $ 36,550,420 $ 36,787,794

Less liabilities attributed to other agencies:

U.S. Postal Service (16,022,491) (15,824,912)

Department of the Navy (2,412,365) (2,492,678)

Department of Homeland Security (2,539,846) (2,507,229)

Department of Veterans Affairs (2,263,351) (2,220,399)

Department of the Army (1,866,670) (1,927,282)

Department of Justice (1,679,244) (1,632,706)

Department of the Air Force (1,395,204) (1,441,960)

Department of Transportation (999,991) (1,047,454)

Department of Agriculture (954,753) (986,318)

Department of Defense, Other (856,734) (888,494)

Department of the Interior (821,633) (846,634)

Department of the Treasury (615,139) (618,603)

Tennessee Valley Authority (427,367) (460,475)

Social Security Administration (348,538) (368,218)

Department of Health and Human Services (288,214) (292,875)

Department of Commerce (226,371) (242,691)

General Services Administration (132,817) (138,657)

Department of Energy (102,200) (101,333)

Department of State (96,054) (88,426)

Department of Housing and Urban Development (74,365) (76,903)

National Aeronautics and Space Administration (47,600) (50,822)

Environmental Protection Agency (49,060) (51,818)

Small Business Administration (34,627) (33,703)

Agency for International Development (26,520) (26,047)

Office of Personnel Management (25,692) (24,750)

Department of Education (16,328) (17,575)

Nuclear Regulatory Commission (6,669) (7,023)

National Science Foundation (1,330) (1,425)

Other (723,801) (757,049)

 (35,054,974) (35,174,459)

$ 1,495,446 $ 1,613,335

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 $ 1,217,382 $ 1,323,300

FECA benefits due to eligible workers of DOL and Job Corps enrollees 234,974 243,612

FECA benefits due to eligible workers of the Panama Canal Commission 43,090 46,423

$ 1,495,446 $ 1,613,335
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

92 United States Department of Labor

NOTE 12 - LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

Liabilities not covered by budgetary resources as of September 30, 2014 and 2013, consisted of the following:

(Dollars in thousands) 2014 2013

Intra-governmental

Debt $ 26,695,818 $ 35,722,273

Future workers' compensation benefits 106,167 546,873

Accrued annual leave 116,755 116,030

Other liabilities 64,320 60,943

 287,242 723,846

Total liabilities not covered by budgetary resources 26,983,060 36,446,119

Total liabilities covered by budgetary resources 20,021,448 21,086,314

$ 47,004,508 $ 57,532,433

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 2014 consisted of the following:

Total

Employer Costs Imputed Pension

(Dollars in thousands) Contributions by OPM Expense

Civil Service Retirement System $ 10,417 $ 27,197 $ 37,614

Federal Employees' Retirement System 151,085 25,104 176,189

Thrift Savings Plan 55,252 - 55,252

$ 216,754 $ 52,301 $ 269,055

Pension expense in FY 2013 consisted of the following:

Total

Employer Costs Imputed Pension

(Dollars in thousands) Contributions by OPM Expense

Civil Service Retirement System $ 12,780 $ 28,582 $ 41,362

Federal Employees' Retirement System 149,548 14,027 163,575

Thrift Savings Plan 54,514 - 54,514

$ 216,842 $ 42,609 $ 259,451
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 93 

NOTE 15 - NET COST OF OPERATIONS

Note 15 A and B present detailed cost and revenue information by program and program agency (responsibility 

segment) in support of the summary information presented in the Consolidated Statements of Net Cost for FY 2014 

and FY 2013, respectively. Note 15 C presents a further breakdown of this cost and revenue information for DOL’s 

two largest program agencies, ETA, and the OWCP. (See Note 1-A.1 and 1-S)
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

94 United States Department of Labor

NOTE 15 - NET COST OF OPERATIONS - Continued

A. Consolidating Statements of Net Cost by Program Agency

Net cost of operations by program agency for the year ended September 30, 2014, 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 $ 889,609 $ 307,020 $ - $ -

With the public 45,040,591 4,509,356 - -

 Gross cost 45,930,200 4,816,376 - -

Intra-governmental earned revenue (831,755) (2,964,728) - -

Public earned revenue (310) (9,490) - -

 Less earned revenue (832,065) (2,974,218) - -

Net program cost 45,098,135 1,842,158 - -

 Employment and training

Intra-governmental 41,310 - 28,677 -

With the public 4,415,412 - 1,508,563 -

 Gross cost 4,456,722 - 1,537,240 -

Intra-governmental earned revenue (99) - (24) -

Public earned revenue - - - -

 Less earned revenue (99) - (24) -

Net program cost 4,456,623 - 1,537,216 -

 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 - - - 119,419

With the public - - - 481,052

 Gross cost - - - 600,471

Intra-governmental earned revenue - - - (376)

Public earned revenue - - - (1,846)

 Less earned revenue - - - (2,222)

Net program cost - - - 598,249

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 $ 49,554,758 $ 1,842,158 $ 1,537,216 $ 598,249
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 95 

Bureau of Mine Safety Employee Benefits Veterans' Wage and Other

Labor and Health Security Employment Hour Program 

Statistics Administration Administration and Training Division Agencies Total

$ - $ - $ 396 $ 26 $ - $ - $ 1,197,051

 - - 1,716 114 - 8,662 49,560,439

 - - 2,112 140 - 8,662 50,757,490

 - - (227) (15) - - (3,796,725)

 - - - - - - (9,800)

 - - (227) (15) - - (3,806,525)

 - - 1,885 125 - 8,662 46,950,965

 - - - 10,967 9 2,734 83,697

 - - - 252,220 48 7,349 6,183,592

 - - - 263,187 57 10,083 6,267,289

 - - - (53) - (75) (251)

 - - - - - - -

 - - - (53) - (75) (251)

 - - - 263,134 57 10,008 6,267,038

 - 77 56,671 332 86,258 59,158 202,496

 - 168 163,999 7,650 214,867 195,914 582,598

 - 245 220,670 7,982 301,125 255,072 785,094

 - - (230) (10) (5) (1,359) (1,604)

 - - (2) - (2,800) - (2,802)

 - - (232) (10) (2,805) (1,359) (4,406)

 - 245 220,438 7,972 298,320 253,713 780,688

 - 125,790 - - - - 245,209

 - 320,027 - - - - 801,079

 - 445,817 - - - - 1,046,288

 - (312) - - - - (688)

 - (2,026) - - - - (3,872)

 - (2,338) - - - - (4,560)

 - 443,479 - - - - 1,041,728

 222,862 - - - - - 222,862

 412,815 - - - - - 412,815

 635,677 - - - - - 635,677

 (17,196) - - - - - (17,196)

 - - - - - - -

 (17,196) - - - - - (17,196)

 618,481 - - - - - 618,481

 - - - - - 30,394 30,394

 - - - - - (296) (296)

 - - - - - 30,098 30,098

$ 618,481 $ 443,724 $ 222,323 $ 271,231 $ 298,377 $ 302,481 $ 55,688,998
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

96 United States Department of Labor

NOTE 15 - NET COST OF OPERATIONS - Continued

B. Consolidating Statements of Net Cost by Program Agency 

Net cost of operations by program agency for the year ended September 30, 2013, 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 $ 1,078,164 $ 302,834 $ - $ -

With the public 71,443,513 5,086,617 - 274

 Gross cost 72,521,677 5,389,451 - 274

Intra-governmental earned revenue (1,131,451) (2,905,979) - -

Public earned revenue - (18) - -

 Less earned revenue (1,131,451) (2,905,997) - -

Net program cost 71,390,226 2,483,454 - 274

 Employment and training

Intra-governmental 50,753 - 12,467 -

With the public 4,595,597 - 1,512,470 -

 Gross cost 4,646,350 - 1,524,937 -

Intra-governmental earned revenue (12,246) - (25) -

Public earned revenue - - - -

 Less earned revenue (12,246) - (25) -

Net program cost 4,634,104 - 1,524,912 -

 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 - - - 115,231

With the public - - - 476,410

 Gross cost - - - 591,641

Intra-governmental earned revenue - - - (401)

Public earned revenue - - - (1,829)

 Less earned revenue - - - (2,230)

Net program cost - - - 589,411

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 $ 76,024,330 $ 2,483,454 $ 1,524,912 $ 589,685
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 97 

Bureau of Mine Safety Employee Benefits Veterans' Wage and Other

Labor and Health Security Employment Hour Program 

Statistics Administration Administration and Training Division Agencies Total

$ - $ - $ 490 $ 33 $ - $ - $ 1,381,521

 - - 1,947 130 - 7,577 76,540,058

 - - 2,437 163 - 7,577 77,921,579

 - - (245) (17) - - (4,037,692)

 - - - - - - (18)

 - - (245) (17) - - (4,037,710)

 - - 2,192 146 - 7,577 73,883,869

 - - - 15,440 2,041 174 80,875

 - - - 238,219 475 5,113 6,351,874

 - - - 253,659 2,516 5,287 6,432,749

 - - - (55) - (82) (12,408)

 - - - - - - -

 - - - (55) - (82) (12,408)

 - - - 253,604 2,516 5,205 6,420,341

 - 98 55,140 471 85,415 61,653 202,777

 - 153 163,621 7,349 218,958 247,106 637,187

 - 251 218,761 7,820 304,373 308,759 839,964

 - - (6,144) (11) - (1,542) (7,697)

 - - - - (2,660) - (2,660)

 - - (6,144) (11) (2,660) (1,542) (10,357)

 - 251 212,617 7,809 301,713 307,217 829,607

 - 124,196 - - - - 239,427

 - 285,143 - - - 8,255 769,808

 - 409,339 - - - 8,255 1,009,235

 - (334) - - - - (735)

 - (2,741) - - - - (4,570)

 - (3,075) - - - - (5,305)

 - 406,264 - - - 8,255 1,003,930

 213,821 - - - - - 213,821

 421,779 - - - - 163 421,942

 635,600 - - - - 163 635,763

 (12,056) - - - - - (12,056)

 (27) - - - - - (27)

 (12,083) - - - - - (12,083)

 623,517 - - - - 163 623,680

 - - - - - 110,672 110,672

 - - - - - (816) (816)

 - - - - - 109,856 109,856

$ 623,517 $ 406,515 $ 214,809 $ 261,559 $ 304,229 $ 438,273 $ 82,871,283
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

98 United States Department of Labor

NOTE 15 - NET COST OF OPERATIONS – Continued

C. Statements of Net Cost - Employment and Training Administration and Office of Workers’ Compensation 

Programs

Net cost of operations for the year ended September 30, 2014, consisted of the following:

Employment Office of Workers'

and Training Compensation

(Dollars in thousands) Administration Programs

CROSSCUTTING PROGRAMS

 Income maintenance

Benefits $ 39,588,100 $ 4,213,783

Grants 4,243,834 -

Interest 781,245 223,823

Administrative and other 1,317,021 378,770

 Gross cost 45,930,200 4,816,376

Less earned revenue (832,065) (2,974,218)

Net program cost 45,098,135 1,842,158

 Employment and training

Grants 4,166,872 -

Administrative and other 289,850 -

 Gross cost 4,456,722 -

Less earned revenue (99) -

Net program cost 4,456,623 -

Net cost of operations $ 49,554,758 $ 1,842,158

Net cost of operations for the year ended September 30, 2013, consisted of the following:

Employment Office of Workers'

and Training Compensation

(Dollars in thousands) Administration Programs

CROSSCUTTING PROGRAMS

 Income maintenance

Benefits $ 65,542,488 $ 4,784,610

Grants 4,648,186 -

Interest 969,191 226,980

Administrative and other 1,361,812 377,861

 Gross cost 72,521,677 5,389,451

Less earned revenue (1,131,451) (2,905,997)

Net program cost 71,390,226 2,483,454

 Employment and training

Grants 4,411,803 -

Interest 1 -

Administrative and other 234,546 -

 Gross cost 4,646,350 -

Less earned revenue (12,246) -

Net program cost 4,634,104 -

Net cost of operations $ 76,024,330 $ 2,483,454
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 99 

NOTE 16 - NON-EXCHANGE REVENUE

Non-exchange revenues reported on the Consolidated Statements of Changes in Net Position in FY 2014 and FY 

2013 consisted of the following:

(Dollars in thousands) 2014 2013

Employer taxes

Unemployment Trust Fund

State unemployment taxes $ 44,100,597 $ 46,205,383

Federal unemployment taxes 8,469,495 7,747,614

 52,570,092 53,952,997

Black Lung Disability Trust Fund excise taxes 580,779 541,338

 53,150,871 54,494,335

Interest

Unemployment Trust Fund 1,205,037 1,270,780

Other 1,289 1,396

 1,206,326 1,272,176

Reimbursement of unemployment benefits and other 2,177,300 2,532,461

$ 56,534,497 $ 58,298,972

NOTE 17 - TRANSFERS WITHOUT REIMBURSEMENT

Transfers from other Federal agencies in FY 2014 and FY 2013 consisted of the following:

(Dollars in thousands) 2014 2013

Budgetary financing sources

From H-1B Nonimmigrant Petitioner Account, Department of Homeland Security and other $ 223,423 $ 199,640

Other financing sources

From General Services Administration 6,498 4,764

$ 229,921 $ 204,404

The balance of $223.4 million and $200.0 million in budgetary financing sources for FY 2014 and FY 2013, 

respectively, reflect the elimination of intra-DOL transfers of $1 billion and $22.2 billion, respectively.
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

100 United States Department of Labor

NOTE 18 - STATUS OF BUDGETARY RESOURCES

A. Apportionment Categories of Obligations Incurred

Obligations incurred reported on the Combined Statements of Budgetary Resources in FY 2014 and FY 2013

consisted of the following:

(Dollars in thousands) 2014 2013

Direct obligations

Category A $ 4,840,064 $ 4,446,633

Category B 14,883,429 37,017,563

Exempt from apportionment 47,125,978 73,913,459

Total direct obligations 66,849,471 115,377,655

Reimbursable obligations

Category A 293,824 334,110

Category B 2,777,857 2,399,662

Total reimbursable obligations 3,071,681 2,733,772

$ 69,921,152 $ 118,111,427

B. Permanent Indefinite Appropriations

DOL’s permanent indefinite appropriations include trust funds, the FAUC 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 UTF, Short-Time Compensation, and portions of SUIESO and Federal 

Unemployment Benefits and Allowances. These funds are described in Note 1-A.3. As of September 30, 2014 and 

2013, the Department returned unobligated, indefinite authority to Treasury in the amount of $1.35 billion and 

$8.4 billion, respectively. 

C. Legal Arrangements Affecting Use of Unobligated Balances

UTF receipts are reported as budget authority in the Combined Statements 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 is 

classified as temporarily not available pursuant to public law at September 30. Therefore, these excess receipts are 

reported as a reduction to Appropriations and Unobligated Balances – Exempt from Apportionment in the 

Combined Statements of Budgetary Resources. Conversely, when obligations exceed receipts in the current year, 

amounts are drawn from the temporarily unavailable collections to increase current year Appropriations and 

Unobligated Balances – Exempt from Apportionment on the Combined Statements of Budgetary Resources to cover 

these obligations. All excess receipts are reported as assets of the UTF and are included in the Consolidated Balance 

Sheets.

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 as of September 30, 2014 and 2013,

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, 2014 and 2013

FY 2014 Agency Financial Report 101 

NOTE 18 - STATUS OF BUDGETARY RESOURCES - Continued

C. Legal Arrangements Affecting Use of Unobligated Balances - Continued

(Dollars in millions) 2014 2013

Unemployment Trust Fund unavailable collections, beginning $ 24,378 $ 14,908

Budget authority from current year appropriations $ 50,493 $ 74,237

Budget authority from current year borrowing authority 2,700 7,700

Less: obligations (45,764) (72,467)

Excess of budget authority over obligations 7,429 9,470

Unemployment Trust Fund unavailable collections, ending $ 31,807 $ 24,378

D. Explanation of Differences between the Combined Statement of Budgetary Resources and the Budget 

of the United States Government for FY 2013

The Budget of the United States Government with actual amounts for the year ended September 30, 2014, has not 

been published as of the issue date of these financial statements. This document will be available in February 2015 

at http://www.dol.gov/dol/aboutdol/.

A reconciliation of budgetary resources, obligations incurred, distributed offsetting receipts, and net outlays, as 

presented in the Combined Statement of Budgetary Resources (SBR) for FY 2013, to amounts included in the 

Budget of the United States Government for the year ended September 30, 2013, is shown below.

(Dollars in millions)

 Budgetary 

Resources 

 Obligations 

Incurred 

Distributed 

Offsetting 

Receipts Net Outlays

Combined Statement of Budgetary Resources $ 122,766 $ 118,111 $ 28,190 $ 109,982

Pension Benefit Guaranty Corporation reported separately 23,042 5,860 - (1,576)

Fiduciary activity 196 133 - 131

Expired accounts (1,585) (169) - -

Other 11 15 - (39)

Budget of the United States Government $ 144,430 $ 123,950 $ 28,190 $ 108,498

E. Undelivered Orders

Undelivered orders as of September 30, 2014 and 2013, were as follows:

(Dollars in thousands) 2014 2013

Undelivered orders $ 12,075,285 $ 11,590,796
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

102 United States Department of Labor

NOTE 18 - STATUS OF BUDGETARY RESOURCES - Continued

F. Appropriations Received

Appropriations from the Consolidated Statements of Changes in Net Position and the Combined Statements of 

Budgetary Resources are reconciled below.

(Dollars in millions) FY 2014 FY 2013

Appropriations Received, Consolidated Statements of Changes in Net Position $ 16,857 $ 43,105

Receipts recognized as revenue in current or prior years

Unemployment Trust Fund 54,645 76,029

Black Lung Disability Trust Fund 598 501

Other funds from dedicated collections 221 198

Repayment of debt from appropriated receipts

Unemployment Trust Fund (11,579) (10,986)

Black Lung Disability Trust Fund (302) (209)

Return of permanent indefinite authority (901) (5,241)

Reduction for sequestration, across the board reductions, and other (103) (788)

 42,579 59,504

Appropriations, Combined Statements of Budgetary Resources $ 59,436 $ 102,609

G. Borrowing Authority

As of September 30, 2014 and 2013, P.L. 113-76 (128 Stat. 352 dated January 17, 2014) and P.L. 113-6 (127 Stat. 

412 dated March 26, 2013), 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 and P.L. 113-76 use the terminology

“advance," the Treasury has interpreted this to mean any debt owed by the BLDTF to the Bureau of the Fiscal 

Service.

Borrowing authority for the UTF was $2.7 billion and $7.7 billion for FY 2014 and FY 2013, respectively. The 

borrowing authority was used to allow states to borrow, as necessary, from the Federal government to pay 

unemployment benefits. 

Borrowing authority for the BLDTF was $496 million and $401 million for FY 2014 and FY 2013, respectively. The 

borrowing authority was applied to repay debt of $496 million and $401 million for FY 2014 and FY 2013, 

respectively.
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 103 

NOTE 19 - RECONCILIATION OF BUDGETARY RESOURCES OBLIGATED TO NET COST OF OPERATIONS 

(Dollars in thousands) FY 2014 FY 2013

Resources used to finance activities

Budgetary resources obligated

Obligations incurred $ 69,921,152 $ 118,111,427

Recoveries of prior year unpaid obligations (436,816) (461,549)

Less: spending authority from offsetting collections (7,604,889) (7,826,120)

Obligations, net of offsetting collections and recoveries 61,879,447 109,823,758

Other resources

Imputed financing from costs absorbed by others 120,547 112,929

Transfers without Reimbursement 6,498 4,764

Exchange revenue not in budget (738,077) (985,901)

Total resources used to finance activities 61,268,415 108,955,550

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 (444,498) (160,936)

Resources that finance the acquisition of assets (93,847) (66,477)

Transfers that do not affect the net cost of operations (5,012,892) (26,393,701)

Total resources used to finance items not part of the net cost of operations (5,551,237) (26,621,114)

Total resources used to finance the net cost of operations 55,717,178 82,334,436

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 (decrease) in annual leave liability 691 (39)

(Decrease) increase in benefits liabilities (189,774) 299,882

Increase in capitalized interest and other 72,092 196,245

Total (116,991) 496,088

Components not requiring or generating resources

Depreciation and amortization 71,683 73,501

Revaluation of assets and liabilities 904,334 1,062,620

Benefit overpayments (887,206) (1,095,362)

Total 88,811 40,759

Total components of the net cost of operations that will not

 require or generate resources in the current period (28,180) 536,847

Net cost of operations $ 55,688,998 $ 82,871,283
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

104 United States Department of Labor

NOTE 20 - CUSTODIAL REVENUE

Custodial revenues in FY 2014 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

Occupational Safety and Health Administration $ 102,966 $ (5,714) $ 97,252

Mine Safety and Health Administration 79,869 (5,480) 74,389

Employee Benefits Security Administration 21,688 506 22,194

Wage and Hour Division 32,734 (16) 32,718

 237,257 (10,704) 226,553

Other custodial activity

Employment and Training Administration

 and other agencies 3,219 (326) 2,893

$ 240,476 $ (11,030) $ 229,446

Custodial revenues in FY 2013 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

Occupational Safety and Health Administration $ 111,066 $ 12,490 $ 123,556

Mine Safety and Health Administration 99,907 7,792 107,699

Employee Benefits Security Administration 32,607 488 33,095

Wage and Hour Division 33,523 6,018 39,541

 277,103 26,788 303,891

Other custodial activity

Employment and Training Administration

 and other agencies 4,427 - 4,427

$ 281,530 $ 26,788 $ 308,318
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 105 

NOTE 21 – FUNDS FROM DEDICATED COLLECTIONS

DOL is responsible for the operation of certain funds from dedicated collections. Other funds from dedicated 

collections include Gifts and Bequests, Panama Canal Commission Compensation Fund, and H-1B Funds. See Note 2 

for the explanation of the negative FBWT. The financial position of the funds from dedicated collections as of 

September 30, 2014, is shown below.

Black Lung

(Dollars in thousands) Unemployment Disability Other Total

Assets

Intra-governmental

Funds with U.S. Treasury $ (4,064) $ 111,966 $ 729,190 $ 837,092

Investments 36,104,271 - 47,613 36,151,884

Accounts receivable

Due from other Federal agencies

 for UCFE and UCX benefits 348,885 - - 348,885

Other - - 3,060 3,060

Total intra-governmental 36,449,092 111,966 779,863 37,340,921

Accounts receivable, net of allowance

State unemployment tax 423,893 - - 423,893

Due from reimbursable employers 648,812 - - 648,812

Benefit overpayments 655,009 17,410 - 672,419

Other 84 - 2 86

Advances 2,134,502 - - 2,134,502

Other - - 652 652

Total assets $ 40,311,392 $ 129,376 $ 780,517 $ 41,221,285

Liabilities

Intra-governmental

Accounts payable to DOL agencies $ 1,983,842 $ - $ 1 $ 1,983,843

Debt 20,823,599 5,872,219 - 26,695,818

Amounts held for the Railroad

 Retirement Board 125,370 - - 125,370

Other - 1 10,238 10,239

Total intra-governmental 22,932,811 5,872,220 10,239 28,815,270

Accounts payable - - 4,204 4,204

Future workers' compensation benefits - - 43,090 43,090

Accrued benefits 1,018,818 12,508 - 1,031,326

Other liabilities - - 22,894 22,894

Total liabilities 23,951,629 5,884,728 80,427 29,916,784

Net position

Cumulative results of operations 16,359,763 (5,755,352) 700,090 11,304,501

Total liabilities and net position $ 40,311,392 $ 129,376 $ 780,517 $ 41,221,285
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

106 United States Department of Labor

NOTE 21 - FUNDS FROM DEDICATED COLLECTIONS - Continued

The net results of operations of the funds from dedicated collections for the year ended September 30, 2014, are 

shown below.

Black Lung

(Dollars in thousands) Unemployment Disability Other Total

Cost, net of earned revenues

Benefits $ (39,597,023) $ (164,812) $ - $ (39,761,835)

Grants - - (94,112) (94,112)

Interest (781,245) (223,823) - (1,005,068)

Administrative and other (1,117,028) - (77,940) (1,194,968)

 (41,495,296) (388,635) (172,052) (42,055,983)

Earned revenue 827,220 - - 827,220

Net cost of operations (40,668,076) (388,635) (172,052) (41,228,763)

Net financing sources

Taxes 52,570,092 580,779 - 53,150,871

Interest 1,205,037 1,223 66 1,206,326

Reimbursement of unemployment benefits and other 2,171,480 - - 2,171,480

Imputed financing - - 3,284 3,284

Transfers-in

Department of Homeland Security - - 237,624 237,624

DOL entities 5,015,034 - - 5,015,034

Transfers-out

DOL entities (4,141,947) (54,497) - (4,196,444)

Other - - (16,343) (16,343)

 56,819,696 527,505 224,631 57,571,832

Change in net position 16,151,620 138,870 52,579 16,343,069

Net position, beginning of period 208,143 (5,894,222) 647,511 (5,038,568)

Net position, end of period $ 16,359,763 $ (5,755,352) $ 700,090 $ 11,304,501
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 107 

NOTE 21 - FUNDS FROM DEDICATED COLLECTIONS - Continued

The financial position of the funds from dedicated collections as of September 30, 2013, is shown below.

Black Lung

(Dollars in thousands) Unemployment Disability Other Total

Assets

Intra-governmental

Funds with U.S. Treasury $ 402,065 $ 128,793 $ 670,634 $ 1,201,492

Investments 29,607,507 - 52,594 29,660,101

Accounts receivable

Due from other Federal agencies

 for UCFE and UCX benefits 519,690 - - 519,690

Other - - 489 489

Total intra-governmental 30,529,262 128,793 723,717 31,381,772

Accounts receivable, net of allowance

State unemployment tax 463,900 - - 463,900

Due from reimbursable employers 785,307 - - 785,307

Benefit overpayments 670,993 17,001 - 687,994

Other - - 1 1

Advances 1,892,383 - - 1,892,383

Other - - 684 684

Total assets $ 34,341,845 $ 145,794 $ 724,402 $ 35,212,041

Liabilities

Intra-governmental

Accounts payable to DOL agencies $ 1,921,834 $ - $ 1 $ 1,921,835

Debt 29,695,634 6,026,639 - 35,722,273

Amounts held for the Railroad

 Retirement Board 188,076 - - 188,076

Other - 1 6,506 6,507

Total intra-governmental 31,805,544 6,026,640 6,507 37,838,691

Accounts payable - 6 3,025 3,031

Future workers' compensation benefits - - 46,423 46,423

Accrued benefits 2,328,158 13,370 - 2,341,528

Other liabilities - - 20,936 20,936

Total liabilities 34,133,702 6,040,016 76,891 40,250,609

Net position

Cumulative results of operations 208,143 (5,894,222) 647,511 (5,038,568)

Total liabilities and net position $ 34,341,845 $ 145,794 $ 724,402 $ 35,212,041
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

108 United States Department of Labor

NOTE 21 – FUNDS FROM DEDICATED COLLECTIONS - Continued

The net results of operations of the funds from dedicated collections for the year ended September 30, 2013, are

shown below.

Black Lung

(Dollars in thousands) Unemployment Disability Other Total

Cost, net of earned revenues

Benefits $ (65,484,089) $ (174,122) $ - $ (65,658,211)

Grants - - (85,296) (85,296)

Interest (969,191) (226,980) - (1,196,171)

Administrative and other (1,219,700) (2,594) (70,782) (1,293,076)

 (67,672,980) (403,696) (156,078) (68,232,754)

Earned revenue 1,094,587 - - 1,094,587

Net cost of operations (66,578,393) (403,696) (156,078) (67,138,167)

Net financing sources

Taxes 53,952,997 541,338 - 54,494,335

Interest 1,270,780 1,224 172 1,272,176

Reimbursement of unemployment benefits and other 2,509,649 - 96 2,509,745

Imputed financing - - 2,992 2,992

Transfers-in

Department of Homeland Security - - 208,619 208,619

DOL entities 26,395,361 - - 26,395,361

Transfers-out

DOL entities (4,384,449) (55,469) - (4,439,918)

Other - - (10,640) (10,640)

 79,744,338 487,093 201,239 80,432,670

Change in net position 13,165,945 83,397 45,161 13,294,503

Net position, beginning of period (12,957,802) (5,977,619) 602,350 (18,333,071)

Net position, end of period $ 208,143 $ (5,894,222) $ 647,511 $ (5,038,568)
Annual Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

FY 2014 Agency Financial Report 109 

NOTE 22 - FIDUCIARY ACTIVITY

The schedule of fiduciary activity and net assets for the fiduciary funds for the year ended and as of September 30, 

2014, is shown below.

Longshore District of

Wage and Hour and Harbor Columbia

and Public Workers' Workmen's

Contracts Compensation Compensation Davis-Bacon Total

Restitution Act Trust Act Trust Act Trust Fiduciary

(Dollars in thousands) Fund Fund Fund Fund Funds

Fiduciary activity

Assessments $ 71,778 $ 119,053 $ 6,111 $ - $ 196,942

Transfer of funds from GAO - - - 5,277 5,277

Investment earnings - 12 2 - 14

Administrative and other - 32 2 (5,277) (5,243)

Transfer of funds to Treasury (17,643) (2,142) - - (19,785)

Disbursements to beneficiaries (39,767) (119,084) (8,197) - (167,048)

Increase (decrease) in fiduciary net assets 14,368 (2,129) (2,082) - 10,157

Fiduciary net assets, beginning of year 149,784 22,689 4,846 - 177,319

Fiduciary net assets, end of year $ 164,152 $ 20,560 $ 2,764 $ - $ 187,476

Fiduciary assets

Cash $ 162,542 $ 1 $ 2 $ 5,277 $ 167,822

Investments - 58,693 4,432 - 63,125

Other assets 1,610 2,467 42 - 4,119

Less: liabilities - (40,601) (1,712) (5,277) (47,590)

Total fiduciary net assets $ 164,152 $ 20,560 $ 2,764 $ - $ 187,476

The schedule of fiduciary activity and net assets for the fiduciary funds for the year ended and as of September 30, 

2013, 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 $ 83,704 $ 126,235 $ 12,209 $ 222,148

Investment earnings - 20 1 21

Administrative and other expenses - 10 (15) (5)

Transfer of funds to Treasury (15,629) (2,116) - (17,745)

Disbursements to beneficiaries (37,585) (121,432) (8,455) (167,472)

Increase (decrease) in fiduciary net assets 30,490 2,717 3,740 36,947

Fiduciary net assets, beginning of year 119,294 19,972 1,106 140,372

Fiduciary net assets, end of year $ 149,784 $ 22,689 $ 4,846 $ 177,319

Cash $ 144,106 $ 343 $ 1 $ 144,450

Investments - 57,161 7,915 65,076

Other assets 5,678 4,088 554 10,320

Less: liabilities - (38,903) (3,624) (42,527)

Total fiduciary net assets $ 149,784 $ 22,689 $ 4,846 $ 177,319
Financial Section

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2014 and 2013

110 United States Department of Labor

Note 22 - FIDUCIARY ACTIVITY - Continued

FY 2012 audits were performed on the Longshore and Harbor Workers’ Compensation Act Trust Fund and the 

District of Columbia Workmen’s Compensation Act Trust Fund is available on DOL’s website at www.oig.dol.gov.

NOTE 23 - MATERIAL CONCENTRATION OF RISK

The Division of FEC within OWCP administers 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 Benefit Fund for payments made on behalf of its workers. In Note 11, Future 

Workers’ Compensation Benefits, the USPS liability as of September 30, 2014, of $16.0 billion represents the largest 

portion of the total projected gross liability of the Federal government for future FECA benefits attributed to other 

agencies of $35.1 billion as of September 30, 2014.

In October 2014 and 2013, USPS timely reimbursed the FECA Special Benefit Fund for costs incurred on its behalf 

during the 12 months ended June 30, 2014 and 2013, respectively. The USPS disclosed its lack of liquidity in its FY 

2013 audited financial statements and it’s FY 2014 interim unaudited financial statements. The USPS’s portion of 

the FECA actuarial liability as of September 30, 2014, together with the USPS’s poor financial condition, represent a 

material concentration of risk for the Department. 

NOTE 24 - SUBSEQUENT EVENTS

Management has determined that there are no subsequent events.
Required Supplementary Stewardship Information

(Unaudited)
Financial Section

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION

(Unaudited)

112 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) administer training programs that invest in human capital.

Employment and Training Administration, Including the Office of Job Corps

ETA, including the OJC, incurred total net costs of $51.1 billion in FY 2014. The majority of these costs consisted of 

unemployment benefits, which totaled $39.6 billion in FY 2014, a decrease of $25.9 billion (39.5%) over the 

previous fiscal year. Also included in ETA’s total net costs were investments in human capital of $4.5 billion, which 

provided services to over 7.9 million participants in FY 2014. 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 (ARRA) and other 

legislation.

Within ETA the OJC also invests in human capital through WIA’s Job Corps training program. OJC’s investment in 

human capital in FY 2014 was $1.5 billion, providing services to 109.6 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 2014 investment in human capital through WIA adult programs was $846 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

2014 investment in human capital through WIA dislocated worker programs was $1.189 billion.

• 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 2014 investment in human 

capital through WIA youth programs was $905 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 admissions and career transition services. 

OJC’s FY 2014 investment in human capital through the Job Corps program was $1.537 billion.

• 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 2014 investment in human capital through ex-offender programs was $85 

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 
Annual Financial Statements

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION

(Unaudited)

FY 2014 Agency Financial Report 113 

segments of the population that have special disadvantages in the labor market, including 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 2014 human capital investment in WIA 

National Programs was $149 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 ages 55 and older, so that they can prepare to enter or re-enter the 

workforce. ETA’s FY 2014 investment in human capital through the CSEOA’s SCSEP was $428 million.

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, 2014, 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 investments in human capital these costs were $277 million for FY 2014.

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 2014 human capital investment in the TAACCCT Grant Fund was $416 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 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 2014 investment in 

apprenticeship programs was $32 million.

Program Costs and Outputs

The cost of ETA and OJC investments in human capital and the participants served are shown in the chart on the 

next page, for the five year period FY 2010 through FY 2014.
Financial Section

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION

(Unaudited)

114 United States Department of Labor 

ETA and OJC Investmentsin Human Capital

Program Costs(in Millions) and Participants Served 1 (in Thousands)

For The Five Year Period FY 2010 through FY 2014

2014 2013 2012 2011 2010

Program Costs

Part. 

Served Costs

Part. 

Served Costs

Part. 

Served Costs

Part. 

Served Costs

Part. 

Served

WIA

 Adult $846 6,105.3 $883 6,761.5 $861 6,979.1 $960 7,025.2 $899 6,695.30

 Dislocated 

Worker 2 1,189 853.8 1,329 1,340.4 1,524 1,358.4 2,039 1,570.6 2,539 1,250.4

 Youth 905 204.1 942 224.0 944 239.6 1,124 245 1,431 316.3

 Job Corps 3 1,537 109.6 1,525 79.6 1,770 97.5 1,717 99.4 1,663 102.4

 Ex-Offenders 85 11.8 96 22.2 76 49.1 67 39 70 36.1

National 

Programs 4 149 52.2 170 60.0 180 38.7 150 38.9 134 61.3

CSEOA

 SCSEP 428 67.7 445 66.9 492 76.9 707 105.9 740 103.6

TAA for Workers 277 67.9 257 105.1 431 144.7 506 193.1 540 232.7

TAACCCT 416 66.5 266 18.1

Apprenticeship 32 392.1 28 366.0 29 410.0 32 432.2 28 485.4

Other 5 113 28.8 212 109.3 95 357.7 135 104.9 139 95.8

TOTAL6 $5,977 7,959.8 $6,153 9,153.1 $6,402 9,751.7 $7,437 9,854.2 $8,183 9,379.3 1

Participant numbers are from grantee reports submitted for the Program Year (PY) ending on June 30 of the corresponding fiscal year. 2

Dislocated Worker programs include Community Based Job Training Grants and National Emergency Grants. 3

Job Corps participants served in the FY 2013 and prior years report switches from reporting only the number of new enrollees to the number 

of participants served.

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. 

(High Growth and Emerging Industry Grants were reclassified from Dislocated Workers to Other in FY 2013.) 6

FY 2014 and FY 2013 total Program Costs reported in this table differ from the Statements of Net Costs because these Human Capital Costs 

don't include allocated costs.

The table below compares the revised method to the prior method for reporting Job Corps participants served:

Method/Reporting Year 2014 2013 2012 2011 2010

New students enrolled (reporting method used in prior FYs reports) 53,862 40,800 55,029 56,204 59,839

Students Served (reporting method used in the FY 2014 report) 109,627 79,595 97,474 99,431 102,411

Program Outcomes

Outcomes for training programs comprising ETA’s investment in human capital are presented in the Department’s 

Annual Performance Report for FY 2014, available on the DOL website at www.dol.gov/_sec/media/reports/ in 

February 2015.
Annual Financial Statements

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION

(Unaudited)

FY 2014 Agency Financial Report 115 

Veterans’ Employment and Training Service

The Veterans' Employment and Training Service (VETS) administers programs that address the employment, 

training, and job security needs of Americans who have served in uniform. VETS prepares transitioning service 

members and military spouses for civilian employment and provides employment and training services to eligible 

veterans. VETS also protects service members and veterans by ensuring employers respect their rights to 

employment and reemployment; and ensures that federal employers give preferential hiring to 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 two 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 

with barriers to employment.

• 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 educate partners within the American 

Job Centers on current employment initiatives and programs for veterans.

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.

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.
Financial Section

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION

(Unaudited)

116 United States Department of Labor 

Program Costs and Outputs

The full cost of VETS programs is presented in the Consolidated Statements 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 2010 through FY 2014

2014 2013 2012 2011 2010

Program Cost Part. 

Served Cost Part. Served Cost1 Part. Served Cost Part. Served Cost Part. Served

JVSG2

$170,764 332.0 $162,999 450.6 $210,671 508.8 $171,497 631.6 $191,802 709.0

TAP3

14,103 180.5 13,176 187.0 13,093 153.0 7,089 143.1 7,928 129.0

USERRA4 37,997 10.9 11,381 47.5 12,361 74.7 9,874 79.9 11,043 101.6

HVRP 36,885 16.1 40,691 17.4 35,562 19.8 28,385 17.0 31,746 14.4

VWIP5

1,894 2.1 2,157 1.9 9,855 4.3 7,863 3.9 8,794 3.3

TOTAL6 $261,643 541.6 $230,404 704.4 $281,542 760.6 $224,708 875.5 $251,313 957.3 1 FY 2012 and prior cost allocated based on historical program cost. 2

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. 3 Department of Defense participant estimates, which are not finalized until the end of the first quarter of the following fiscal year. 4 USERRA Participants (USERRA Outreach Measure) reflects the number of people VETS connects with each year (service members, spouses, 

and employers) to inform them of their rights and responsibilities under the law. In addition, measure assumes 30% of USERRA authorized 

staff workload is dedicated to USERRA outreach efforts. 5

Public Law 113-6, Consolidated and Further Continuing Appropriations Act, 2013, did not provide funding for the Veterans’ Workforce 

Investment Program.

6 FY 2014 and FY 2013 total Program Costs reported in this table differ from the Statements of Net Costs because these Human Capital Costs 

don't include allocated costs.

Program Outcomes

Outcomes for the programs comprising VETS’ investment in human capital are presented in the Department’s 

Annual Performance Report for FY 2014, available in February 2015 on the DOL website at:

www.dol.gov/_sec/media/reports/.
Required Supplementary Information

(Unaudited)
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

118 United States Department of Labor 

DEFERRED MAINTENANCE AND REPAIRS

DOL reports as general purpose plant, property and equipment, Structures, facilities and improvements on which 

maintenance and repair activities may be deferred (deferred maintenance or DM). Over 99.3% of these buildings 

and other structures (based on net book value) are owned by ETA-OJC, and located at one hundred twenty-five (125) 

Job Corps centers throughout the United States. The remaining 0.7% is owned by 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 Score1

Fiscal Years 2010 – 2014

2014 2013 2012 2011 2010

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% 3,720 87.9 3,593 88.4 3,454 86.8 3,338 86.2 3,273 86.4

Good 80- 89% 264 6.2 234 5.8 303 7.6 301 7.8 282 7.4

Fair 70- 79% 127 3.0 117 2.9 93 2.3 100 2.6 90 2.4

Poor 60- 69% 38 0.9 34 0.8 57 1.4 52 1.3 57 1.5

Very Poor < 60% 82 2.0 88 2.1 74 1.9 83 2.1 88 2.3

TOTALS 4,231 100.0 4,066 100.0 3,981 100.0 3,874 100.0 3,790 100.0 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 2014 Agency Financial Report 119

Portfolio Condition and Deferred Maintenance and Repair Cost Estimates

The FCI assessments by structures, facilities and improvements 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 periods reported. In 2014, the portfolio’s aggregate FCI score for 

4,231 constructed assets was 93.0%, and deferred maintenance and repair costs to return the portfolio to an 

acceptable condition were estimated at $115.6 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 ended September 30, 2014.

Job Corps Center and MSHA Constructed Assets

Portfolio Condition and Deferred Maintenance and Repair Cost Estimates

Fiscal Years 2010 - 2014

Constructed Assets - FY

Number of 

Constructed 

Assets1

Portfolio Condition 

Based on Aggregate 

FCI Score

Deferred Maintenance 

Costs to Return Assets 

To Acceptable Condition

Structures, facilities and improvements - 2014 4,231 Excellent - 93.0% $115,644,267

Structures, facilities and improvements - 2013 4,066 Excellent - 94.0% $96,507,601

Structures, facilities and improvements - 2012 3,981 Excellent - 94.2% $104,599,502

Structures, facilities and improvements - 2011 3,874 Excellent - 93.7% $96,136,092

Structures, facilities and improvements - 2010 3,790 Excellent - 93.4% $89,827,363 1

Includes capitalized and non-capitalized assets.

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

$140,000,000

2010 2011 2012 2013 2014

Fiscal Year

Deferred Maintenance

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)

120 United States Department of Labor

SOCIAL INSURANCE PROGRAMS

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. 

DOL operates two programs classified under Federal accounting standards as social insurance programs, the UI 

Program and the Black Lung Disability Benefits Program. Presented below is the supplementary information for the 

two programs.

Unemployment Insurance Program

The 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 UC 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 DOL, 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 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 EB. 

Federal Unemployment Taxes

Under the provisions of the 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%; employers in states with advances from 

the fund may pay a higher effective Federal tax rate because the Federal tax rate credit of 5.4% may be 

decreased in increments of 0.3% if a state has had an outstanding advance for more than two years. 

Additional Federal unemployment taxes collected as a result of the reduced Federal tax rate credit are used 
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2014 Agency Financial Report 121

to pay down the state’s outstanding advance balance. Federal unemployment taxes are collected by the 

Internal Revenue Service. 

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 UTF. 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. Tax receipts collected under the FUTA are appropriated to the ESAA and used to pay the costs of 

Federal and state administration of the UI program and veterans’ ES and 97% of the costs of the state ES; 

and, amounts collected due to FUTA credit reductions are transferred to the FUA and are used to pay down 

balances of state advances that have been outstanding for more than two years. 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 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 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 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 EB program, extended 

unemployment benefits are paid to individuals who have exhausted their regular unemployment benefits. 

These EB 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 U.S. Treasury when the EUCA has a balance 

insufficient to pay the Federal share of EB. During periods of sustained high unemployment, the EUCA may 
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

122 United States Department of Labor

also receive payments and non-repayable advances from the General Fund of the Treasury to finance EUC 

benefits. Emergency unemployment benefits require Congressional authorization.

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 U.S. 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 UI program for railroad employees. This separate UI 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 UI 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 
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have established the maximum duration for regular UI benefits at 26 weeks. Regular UI benefits are paid by 

the state UI agencies from monies drawn down from the state account within the UTF.

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 EUCA within the UTF, and 50% by the state, from the 

state’s UTF account. The ARRA of 2009 began temporary 100% Federal funding of EB. Subsequent 

legislation, most recently P.L. 112-240, the American Taxpayer Relief Act of 2012, authorized continuing 

100% Federal funding of extended unemployment benefits to December 31, 2013.

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. 112-240, the American Taxpayer Relief Act of 2012, which extended the 

emergency unemployment insurance program to January 1, 2014. 

Federal UI Benefits

Unemployment benefits to unemployed Federal civilian personnel and ex-service members are paid from 

the Federal Employees Compensation Account within the UTF. These benefit costs are reimbursed by the 

responsible Federal agency and are not considered to be social insurance benefits. Federal UC benefits are 

not included in this discussion of social insurance programs. 

Program Finances and Sustainability

As of September 30, 2014, total assets within the UTF exceeded total liabilities by $16.4 billion. At the present time 

there is a surplus; any 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, as of 

September 30, 2014 was $36.1 billion. This interest is distributed to eligible state and Federal accounts within the 

UTF. Interest income from these investments during FY 2014 was $1.2 billion. Federal and state UI tax and 

reimbursable revenues of $54.7 billion and regular, extended and emergency benefit payment expense of $39.6

billion were recognized for the year ended September 30, 2014.

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 as of 

September 30, 2014 were $1.0 billion. 

During FY 2014, 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 (PY) advances. FUA had an outstanding repayable advances 
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124 United States Department of Labor

balance of $2.6 billion, bearing interest at 2.375% as of September 30, 2014. EUCA had an outstanding repayable 

advances balance of $18.2 billion bearing interest between 2.375% and 3.250% as of September 30, 2014.

Subsequent Events

Management has determined that there are no subsequent events.

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 

(CPI-U) for goods and services. The use of CPI-U factors allows the projections to be presented in constant dollars 

with FY 2014 as the base year. The valuation date for the projections is September 30, 2014. Cash projections 

depend on the assumptions used and actual experience may differ materially 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. Amount totals for expected sensitivity 

analyses may differ due to rounding.
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FY 2014 Agency Financial Report 125

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 5.85% 

during FY 2015, decreasing steadily to 5.40% in FY 2018 and thereafter. Total cash inflows exceed total 

cash outflows in FY 2015 and through the end of the projected period. The net inflow decreases from 

$16.7 billion in FY 2015 to $13.1 billion in FY 2018, and ranges between $9.9 billion and $7.1 billion 

thereafter. The net inflow is sustained primarily by the excess of Federal tax collections over Federal 

expenditures.

Chart I

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Unemployment Trust Fund

Cash Inflow and Outflow in Constant Dollars

Total Cash Inflows Cash Inflow Excluding Interest Total Cash Outflow

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, 2024. 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. 
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126 United States Department of Labor

Total cash inflows exceed total cash outflows in FY 2015 and all other years in the projected period. The 

excess of total cash inflows over total cash outflows is highest in FY 2015. Starting at a $14.7 billion fund 

balance at the beginning of FY 2015, net UTF assets increase by about $111.0 billion over the next ten years 

to a $125.7 billion fund net assets balance by the end of FY 2024.

Chart II

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Unemployment Trust Fund 

Effect of Net Cash Flow on Net Assets in Constant Dollars

Total Cash Inflows Total Cash Outflows Net Assets

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, 2024, 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 higher rates of unemployment and 

Sensitivity Analysis II assumes even higher rates of unemployment compared to the expected economic conditions 

as shown in Charts I and II. Table I below summarizes the unemployment rates for expected conditions, Sensitivity 

Analysis I, and Sensitivity Analysis II.
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Table I

Conditions 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Expected 5.85% 5.52% 5.42% 5.40% 5.40% 5.40% 5.40% 5.40% 5.40% 5.40%

Sensitivity

 Analysis I 6.84% 7.51% 6.91% 6.08% 5.40% 5.40% 5.40% 5.40% 5.40% 5.40%

Sensitivity

 Analysis II 7.81% 10.11% 8.95% 7.37% 7.13% 6.90% 5.96% 5.42% 5.40% 5.40%

Total Unemployment Rate for the Ten-Year Period Ending September 30, 2024

Effect on UTF Assets, in Constant Dollars, in Sensitivity Analysis I

In this sensitivity analysis, which utilizes a higher unemployment rate of 6.84% beginning in FY 2015, net cash 

inflows peak in FY 2015 and continue to be positive through 2024. Starting at a $14.7 billion fund balance at the 

beginning of FY 2015, net UTF assets increase by about $92.5 billion over the next ten years to about a $107.2 

billion fund net assets balance by the end of FY 2024.

Chart III

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Higher 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 inflows including interest earnings and expenses are projected in 

FY 2015, but outflows exceed inflows by $10.2 billion in FY 2016. Net cash inflows are reestablished in FY 

2017 and peak in FY 2021 with a drop in the unemployment rate below 6.0% and then about 5.4% for FYs 

2022 through 2024. The net assets increase $66.5 billion from a $14.7 billion fund balance at the beginning 
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128 United States Department of Labor

of FY 2015 to an $81.2 billion fund balance in FY 2024. At the end of the projection period of Sensitivity 

Analysis II, net assets are $44.5 billion less than under expected economic conditions.

Chart IV

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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 inflows during 

periods of low unemployment that are depleted by net cash outflows during periods of increased 

unemployment. 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.)
FY 2011

FY 2014 Agency Financial Report 129

Annual Financial Statements

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(Unaudited)

(Dollars in millions) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Balance, start of year $ 14,723 $ 31,420 $ 47,927 $ 61,718 $ 74,769 $ 84,661 $ 93,678 $ 102,612 $ 110,589 $ 118,612

Cash inflow

State unemployment taxes 47,898 46,745 45,219 44,547 44,117 43,853 44,108 43,588 44,150 43,797

Federal unemployment taxes 8,442 8,629 7,153 7,433 5,208 5,170 5,138 5,101 5,066 5,033

General revenue appropriation - - - - - - - - - -

Interest on loans 252 129 61 17 2 2 2 2 2 2

Deposits by the Railroad Retirement Boar 76 129 137 108 86 102 122 117 101 100

Total cash inflow excluding interest 56,668 55,632 52,570 52,105 49,413 49,127 49,370 48,808 49,319 48,932

Interest on Federal securities 965 1,142 1,406 1,751 2,159 2,620 3,093 3,550 3,946 4,302

Total cash inflow 57,633 56,774 53,976 53,856 51,572 51,747 52,463 52,358 53,265 53,234

Cash outflow

State unemployment benefits 36,261 35,716 35,731 36,441 37,365 38,447 39,269 40,115 40,972 41,838

State administrative costs 3,992 3,998 3,996 3,993 3,993 3,990 3,987 3,993 3,999 4,009

Federal administrative costs 185 184 183 183 182 180 179 179 178 178

Interest on tax refunds 1 1 1 1 1 1 1 1 1 1

Interest on advances 402 269 178 92 45 18 - - - -

Railroad Retirement Board withdrawals 95 99 96 95 94 94 93 93 92 92

Total cash outflow 40,936 40,267 40,185 40,805 41,680 42,730 43,529 44,381 45,242 46,118

Excess of total cash inflow excluding

 interest over total cash outflow 15,732 15,365 12,385 11,300 7,733 6,397 5,841 4,427 4,077 2,814

Excess of total cash inflow over

 total cash outflow 16,697 16,507 13,791 13,051 9,892 9,017 8,934 7,977 8,023 7,116

Balance, end of year $ 31,420 $ 47,927 $ 61,718 $ 74,769 $ 84,661 $ 93,678 $ 102,612 $ 110,589 $ 118,612 $ 125,728

Total unemployment rate 5.85% 5.52% 5.42% 5.40% 5.40% 5.40% 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, 2024

(1) EXPECTED ECONOMIC CONDITIONS
 

(Dollars in millions) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Balance, start of year $ 14,723 $ 28,181 $ 36,777 $ 46,557 $ 57,594 $ 70,965 $ 79,889 $ 87,038 $ 94,253 $ 100,574

Cash inflow

State unemployment taxes 48,829 47,377 46,945 45,656 45,542 43,723 42,231 42,547 41,892 42,194

Federal unemployment taxes 8,379 8,380 7,064 7,146 7,426 4,989 4,958 4,921 4,887 5,148

General revenue appropriation - - - - - - - - - -

Interest on loans 256 146 82 35 9 2 5 15 47 86

Deposits by the Railroad Retirement Board 76 129 137 108 86 102 122 117 101 100

Total cash inflow excluding interest 57,540 56,032 54,228 52,945 53,063 48,816 47,316 47,600 46,927 47,528

Interest on Federal securities 940 1,020 1,172 1,435 1,839 2,302 2,727 3,121 3,495 3,826

Total cash inflow 58,480 57,052 55,400 54,380 54,902 51,118 50,043 50,721 50,422 51,354

Cash outflow

State unemployment benefits 40,293 43,788 41,054 38,891 37,175 37,882 38,614 39,249 39,843 40,496

State administrative costs 4,056 4,134 4,098 4,044 3,998 3,984 3,981 3,984 3,987 3,994

Federal administrative costs 185 184 183 183 182 180 179 179 178 178

Interest on tax refunds 1 1 1 1 1 1 1 1 1 1

Interest on advances 392 250 188 129 81 53 26 - - -

Railroad Retirement Board withdrawals 95 99 96 95 94 94 93 93 92 92

Total cash outflow 45,022 48,456 45,620 43,343 41,531 42,194 42,894 43,506 44,101 44,761

Excess of total cash inflow excluding

 interest over total cash outflow 12,518 7,576 8,608 9,602 11,532 6,622 4,422 4,094 2,826 2,767

Excess of total cash inflow over

 total cash outflow 13,458 8,596 9,780 11,037 13,371 8,924 7,149 7,215 6,321 6,593

Balance, end of year $ 28,181 $ 36,777 $ 46,557 $ 57,594 $ 70,965 $ 79,889 $ 87,038 $ 94,253 $ 100,574 $ 107,167

Total unemployment rate 6.84% 7.51% 6.91% 6.08% 5.40% 5.40% 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, 2024

(2) SENSITIVITY ANALYSIS I HIGHER UNEMPLOYMENT RATE

130 United States Department of Labor

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FY 2014 Agency Financial Report 131

(Dollars in millions) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Balance, start of year $ 14,723 $ 20,383 $ 10,139 $ 11,436 $ 21,672 $ 33,026 $ 43,389 $ 55,130 $ 64,530 $ 74,989

Cash inflow

State unemployment taxes 48,774 49,311 51,466 51,639 50,211 49,057 47,535 45,162 43,401 42,392

Federal unemployment taxes 8,136 8,145 8,556 8,278 8,905 7,852 7,662 5,128 7,864 4,849

General revenue appropriation - - - - - - - - - -

Interest on loans 278 262 277 214 121 55 28 20 8 21

Deposits by the Railroad Retirement Board 76 129 137 108 86 102 122 117 101 100

Total cash inflow excluding interest 57,264 57,847 60,436 60,239 59,323 57,066 55,347 50,427 51,374 47,362

Interest on Federal securities 911 816 793 953 1,205 1,531 1,935 2,436 2,855 3,224

Total cash inflow 58,175 58,663 61,229 61,192 60,528 58,597 57,282 52,863 54,229 50,586

Cash outflow

State unemployment benefits 47,614 63,747 54,877 46,090 44,429 43,510 40,873 38,834 39,158 39,753

State administrative costs 4,169 4,454 4,352 4,183 4,118 4,080 4,026 3,986 3,980 3,986

Federal administrative costs 185 184 183 183 182 180 179 179 178 178

Interest on tax refunds 1 1 1 1 1 1 1 1 1 1

Interest on advances 451 422 423 404 350 369 369 370 361 329

Railroad Retirement Board withdrawals 95 99 96 95 94 94 93 93 92 92

Total cash outflow 52,515 68,907 59,932 50,956 49,174 48,234 45,541 43,463 43,770 44,339

Excess of total cash inflow excluding

 interest over total cash outflow 4,749 (11,060) 504 9,283 10,149 8,832 9,806 6,964 7,604 3,023

Excess of total cash inflow over

 total cash outflow 5,660 (10,244) 1,297 10,236 11,354 10,363 11,741 9,400 10,459 6,247

Balance, end of year $ 20,383 $ 10,139 $ 11,436 $ 21,672 $ 33,026 $ 43,389 $ 55,130 $ 64,530 $ 74,989 $ 81,236

Total unemployment rate 7.81% 10.11% 8.95% 7.37% 7.13% 6.90% 5.96% 5.42% 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, 2024

(3) SENSITIVITY ANALYSIS II HIGHER UNEMPLOYMENT RATE
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132 United States Department of Labor

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 FUA to make benefit payments. During FY 2009, the balances in the FUA were depleted and the FUA 

borrowed from the General Fund of the U.S. Treasury and continued to do so through FY 2014, although in FY 2012 

through FY 2014 the FUA repaid some borrowings. 

Chart V presents the state by state results of this analysis at September 30, 2014 in descending order by ratio. As 

the chart below illustrates, 36 state UTF accounts were below the minimal solvency ratio of 1.00 at September 30, 

2014. Some states borrow from the FUA and then issue bonds to repay their FUA borrowings; the ratios do not 

reflect a state’s debt to bondholders.

Chart V

Minimally Solvent Not Minimally Solvent

State Ratio State Ratio State Ratio

Wyoming 2.42 Minnesota 0.96 New Mexico 0.24 

Oklahoma 2.23 District of Columbia 0.94 Nevada 0.24 

Nebraska 1.81 Puerto Rico 0.93 New Jersey 0.15 

Mississippi 1.68 Tennessee 0.85 Pennsylvania 0.14 

Utah 1.61 Vermont 0.84 Missouri 0.10 

Oregon 1.51 Maryland 0.78 Wisconsin 0.10 

Alaska 1.36 Florida 0.64 Delaware 0.09 

South Dakota 1.33 Michigan 0.62 Rhode Island 0.00 

Idaho 1.37 Alabama 0.61 South Carolina 0.00 

Iowa 1.31 Colorado 0.61 Arizona 0.00 

Montana 1.30 Virginia 0.47 North Carolina 0.00 

Louisiana 1.25 Texas 0.44 Connecticut 0.00 

Washington 1.23 Kansas 0.40 New York 0.00 

New Hampshire 1.17 Illinois 0.37 Ohio 0.00 

North Dakota 1.09 West Virginia 0.36 Kentucky 0.00 

Hawaii 1.04 Arkansas 0.35 Indiana 0.00 

Maine 1.00 Georgia 0.32 California 0.00 

Massachusetts 0.32 Virgin Islands 0.00 
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FY 2011 FY 2014 Agency Financial Report 133

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 and the BLDTF provides benefit payments 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 domestic 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 

statutory limit and (2) restructured the BLDTF debt by refinancing the outstanding repayable advances (which had 

higher interest rates) with 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 subsequent debt issued by the BLDTF 

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, 2014, total liabilities of the BLDTF exceeded assets by nearly $5.8 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 zerocoupon bonds, with a maturity date of one year and bear interest at the Treasury 1-year rate. Outstanding debt at 

September 30, 2014 was $5.9 billion, bearing interest rates ranging from 0.110% to 4.556%. Excise tax revenues of 

$580.8 million, benefit payment expense of $164.8 million, and interest expense of $223.8 million were recognized 

for the year ended September 30, 2014. 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, 2014, the BLDTF issued debt in the 

amount of $496.0 million, bearing interest at 0.110% and maturing on September 30, 2015. At September 30, 

2014, there were 27 debt instruments with staggered maturities of September 30 for years 2015 through 2040, 

with a total carrying value of nearly $5.9 billion and a total face value at maturity of nearly $9.5 billion. Of these 27

debt instruments, 26 are from the October 2008 refinancing and one debt instrument was issued on September 30, 

2014.
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134 United States Department of Labor

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 CPI-U for goods and services. The use of CPI-U factors allows 

the projections to be presented in constant dollars with FY 2014 as the base year. The valuation date for the 

projections is September 30, 2014. Cash projections depend on the assumptions used and actual experience may 

differ materially from the projections.

These projections, in constant dollars, made over the 26-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 $4.7 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 $3.8 billion by the end of FY 2040, resulting in a projected deficit of $6.2 billion at September 30, 

2040. Amount totals in tables may differ slightly due to rounding (See Chart I and Table I).

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, 2014, 2013, 2012, 2011, and 2010 are presented in the SOSI.
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FY 2011 FY 2014 Agency Financial Report 135

Chart I

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BLACK LUNG DISABILITY TRUST FUND

CASH INFLOW AND OUTFLOW IN CONSTANT DOLLARS

Total Cash Outflow Total Cash Inflow Cash Outflows 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 reduced by one-half in calendar years 2015 through 2017 (which in turn affected 

income benefits) and the administrative costs were reduced by 7.5% for FYs 2015 through 2024; however, 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 only one-half of the pay adjustment would take effect through December 31, 

2017. As a result, because the Federal employee base salary would experience smaller increases through 2017, the 

rates for Black Lung benefits would likewise be affected through 2017. Even after statutory pay adjustments return 

to the full amount in 2018, they would be applied to lower amounts of benefits and this would decrease the benefit 

amounts through FY 2040. The administrative costs were reduced to reflect the effects of reduced budgets overall 

due to the sequestration which occurred during FY 2013 and continued into FY 2014. Cash projections depend on 

the assumptions used and actual experience may differ materially from the projections.

These projections with sensitivity analysis, in constant dollars, made over the 26-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 $4.85 

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 nearly $3.6 billion by the end of the year 2040, and 

would result in a projected deficit of $5.9 billion at September 30, 2040 (See Chart II and Table II). Amount totals in 

tables may differ slightly due to rounding.
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136 United States Department of Labor

Chart II

0

100

200

300

400

500

600

700

800

900

2015 2019 2023 2027 2031 2035 2039

$ - Millions

BLACK LUNG DISABILITY TRUST FUND

CASH INFLOW AND OUTFLOW IN CONSTANT DOLLARS

SENSITIVITY ANALYSIS

Total Cash Outflow Total Cash Inflow Cash Outflows Before Repayment of Debt and Interest

Open and Closed Group Measure with Sensitivity Analysis

For the open and closed group measure with sensitivity analysis, we modified the significant assumptions as 

described above (see Projected Cash Inflows and Outflows with Sensitivity Analysis, in Constant Dollars) for Federal 

civilian pay raises and administrative costs, but the other significant assumptions were left unchanged.

In FY 2014, for the SOSI, DOL further refined the approach for selecting the interest rate assumptions to enhance 

matching between the timing of cash flows and interest rates and increase comparability. For FY 2014, projected 

annual cash flows were discounted to present value based on Treasury rates that reflect the average duration of 

cash flows between 10.4 and 12.2 years for income payments, medical payments, administrative expenses, and coal 

excise tax collections. The interest rates used to discount FY 2014 projections are 2.50% for income payments and 

2.63% for medical payments, administrative expenses, and coal excise tax collections.

For the Sensitivity Analysis, the changes that we made in the assumptions as described above (see projected Cash 

Inflows and Outflows with Sensitivity Analysis, in Constant Dollars) did not result in different average durations or in 

different interest rates used to discount the income payments, medical payments, administrative expenses, and coal 

excise tax collections as compared to the average durations and interest rates used in the SOSI.

As a result of changing the significant assumptions for Federal civilian pay raises and administrative costs as 

described above (see projected Cash Inflows and Outflows with Sensitivity Analysis, in Constant Dollars), at 

September 30, 2014 (in thousands of dollars):

In the SOSI,

(a) the actuarial present value of future benefit payments during the projection period to disabled coal miners and 

dependent survivors would decrease ($71,064) from $1,876,522 to $1,805,458;
Annual Financial Statements

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FY 2011 FY 2014 Agency Financial Report 137

(b) the present value of estimated future administrative costs during the projection period would decrease 

($70,669) from $942,107 to $871,438;

(c) the actuarial present value of future benefit payments and present value of estimated future administrative 

costs during the projection period for current and future participants would decrease ($141,733) from 

$2,818,629 to $2,676,896;

(d) the excess of present value of estimated future excise tax income over actuarial present value of future benefit 

payments and present value of estimated future administrative costs during the projection period for current 

and future participants (open and closed group measure) would increase $141,733 from $4,482,787 to 

$4,624,520;

(e) the trust fund net position deficit at the start of the projection period would remain unchanged;

In the SOSI Summary Section,

(f) the open and close group measure would increase as described in (d) above;

(g) the Funds with U.S. Treasury and receivables from benefit overpayments at the start of the projection period 

would remain unchanged; and

(h) the Total of open and closed group measure plus fund assets would increase $141,733 from $4,612,163 to 

$4,753,896.

Cash projections depend on the assumptions used and actual experience may differ materially from the 

projections.
Table I 

(Dollars in thousands) 2015 2016 2017 2018 2019 2020 - 2040 Total

Balance, start of year $ (5,755,352) $ (5,470,213) $ (5,227,049) $ (5,007,328) $ (4,801,042) $ (4,710,081) $ (5,755,352)

Cash inflow

Excise taxes 594,860 565,440 559,644 567,324 349,322 4,978,358 7,614,948

Total cash inflow 594,860 565,440 559,644 567,324 349,322 4,978,358 7,614,948

Cash outflow

Disabled coal miners benefits 155,927 144,530 133,772 124,499 116,105 1,255,664 1,930,497

Administrative costs 58,356 57,389 56,133 54,878 53,682 700,216 980,655

Cash outflows before repayment of

 debt and interest 214,283 201,919 189,905 179,377 169,788 1,955,880 2,911,151

Cash inflow over cash outflow 

 before repayment of debt and interest 380,577 363,521 369,739 387,947 179,534 3,022,478 4,703,796

Maturity of obligations refinanced October 2008 482,757 496,808 507,551 514,675 162,982 4,580,434 6,745,206

Interest on annual borrowings 535 3,914 11,612 21,305 31,202 1,717,125 1,785,693

Total cash outflow 697,575 702,640 709,068 715,357 363,971 8,253,438 11,442,050

Total cash outflow over total cash inflow (102,715) (137,200) (149,424) (148,033) (14,649) (3,275,080) (3,827,102)

Reduction of debt refinanced October 2008 387,854 380,364 369,145 354,319 105,610 1,806,964 3,404,256

Balance, end of year $ (5,470,213) $ (5,227,049) $ (5,007,328) $ (4,801,042) $ (4,710,081) $ (6,178,198) $ (6,178,198)

CASH INFLOW AND OUTFLOW OF THE BLACK LUNG DISABILITY TRUST FUND IN CONSTANT DOLLARS

FOR THE 26-YEAR PERIOD ENDING SEPTEMBER 30, 2040

SUPPLEMENTARY SOCIAL INSURANCE INFORMATION

U.S. DEPARTMENT OF LABOR

1(Unaudited)REQUIRED SUPPLEMENTARY INFORMATIONFinancial Section

38 United States Department of Labor t 
11

Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

Table II 

(Dollars in thousands) 2015 2016 2017 2018 2019 2020 - 2040 Total

Balance, start of year $ (5,755,352) $ (5,463,651) $ (5,212,010) $ (4,982,279) $ (4,765,746) $ (4,664,579) $ (5,755,352)

Cash inflow

Excise taxes 594,860 565,440 559,644 567,324 349,322 4,978,358 7,614,948

Total cash inflow 594,860 565,440 559,644 567,324 349,322 4,978,358 7,614,948

Cash outflow

Disabled coal miners benefits 153,742 140,402 128,214 118,984 111,021 1,205,122 1,857,484

Administrative costs 53,978 53,083 51,922 50,761 49,655 647,695 907,094

Cash outflows before repayment of

 debt and interest 207,721 193,485 180,136 169,745 160,676 1,852,816 2,764,578

Cash inflow over cash outflow 

 before repayment of debt and interest 387,139 371,955 379,508 397,579 188,646 3,125,541 4,850,369

Maturity of obligations refinanced October 2008 482,757 496,808 507,551 514,675 162,982 4,580,434 6,745,206

Interest on annual borrowings 535 3,871 11,371 20,690 30,109 1,614,917 1,681,492

Total cash outflow 691,013 694,164 699,058 705,109 353,766 8,048,167 11,191,276

Total cash outflow over total cash inflow (96,153) (128,724) (139,414) (137,785) (4,444) (3,069,809) (3,576,329)

Reduction of debt refinanced October 2008 387,854 380,364 369,145 354,319 105,610 1,806,964 3,404,256

Balance, end of year $ (5,463,651) $ (5,212,010) $ (4,982,279) $ (4,765,746) $ (4,664,579) $ (5,927,425) $ (5,927,425)

 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 26-YEAR PERIOD ENDING SEPTEMBER 30, 2040

FY 2014 Agency Financial Report 139 t 
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

140 United States Department of Labor

COMBINING STATEMENTS OF BUDGETARY RESOURCES

The principal Combined Statements of Budgetary Resources combine the availability, status, and outlay of DOL’s 

budgetary resources during FY 2014 and FY 2013. Presented on the following pages is the disaggregation of this 

combined information for each of the Department’s major budget agencies.
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

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FY 2014 Agency Financial Report 14111

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142 United States Department of Labor

COMBINING STATEMENTS OF BUDGETARY RESOURCES

For the Year Ended September 30, 2014

Employment and Office of Workers' Office 

Training Compensation of

Administration Programs Job Corps

BUDGETARY RESOURCES

Unobligated balance brought forward, October 1 $ 2,015,197 $ 1,209,243 $ 1,227,110

Recoveries of prior year unpaid obligations 284,276 10,180 26,995

Other changes in unobligated balance (261,811) (2,046) (13,756)

Unobligated balance from prior year budget authority, net 2,037,662 1,217,377 1,240,349

Appropriations (discretionary and mandatory) 53,075,632 2,106,108 1,700,979

Borrowing authority (discretionary and mandatory) 2,700,000 - -

Spending authority from offsetting collections (discretionary and mandatory) 3,875,605 3,086,893 1,084

Total budgetary resources $ 61,688,899 $ 6,410,378 $ 2,942,412

STATUS OF BUDGETARY RESOURCES

Obligations incurred $ 59,745,569 $ 4,879,765 $ 2,004,906

Unobligated balance, end of year

Apportioned 546,168 1,442,385 900,991

Exempt from apportionment - 46,795 -

Unapportioned 1,397,162 41,433 36,515

Total unobligated balance, end of year 1,943,330 1,530,613 937,506

Total budgetary resources $ 61,688,899 $ 6,410,378 $ 2,942,412

CHANGE IN OBLIGATED BALANCE

Unpaid Obligations:

Unpaid obligations, brought forward, October 1 $ 13,360,987 $ 227,844 $ 582,162

Obligations incurred 59,745,569 4,879,765 2,004,906

Less: Outlays (gross) (60,860,894) (4,829,137) (1,610,291)

Less: recoveries of prior year unpaid obligations (284,276) (10,180) (26,995)

Unpaid obligations, end of year 11,961,386 268,292 949,782

Uncollected Payments: 

Uncollected payments, Federal sources, brought forward, October 1 (1,935,613) (990) -

Change in uncollected payments, Federal sources (48,924) (20,500) -

Uncollected payments, Federal sources, end of year (1,984,537) (21,490) -

Obligated balance, start of year $ 11,425,374 $ 226,854 $ 582,162

Obligated balance, end of year $ 9,976,849 $ 246,802 $ 949,782

BUDGET AUTHORITY AND OUTLAYS, NET

Budget authority, gross (discretionary and mandatory) $ 59,651,237 $ 5,193,001 $ 1,702,063

Less: actual offsetting collections (discretionary and mandatory) (3,826,681) (3,066,393) (1,084)

Less: change in uncollected customer payments from Federal 

 sources (discretionary and mandatory) (48,924) (20,500) -

Budgetary authority, net (discretionary and mandatory) $ 55,775,632 $ 2,106,108 $ 1,700,979

Outlays, gross (discretionary and mandatory) $ 60,860,894 $ 4,829,137 $ 1,610,291

Actual offsetting collections (discretionary and mandatory) (3,826,681) (3,066,393) (1,084)

Outlays, net (discretionary and mandatory) 57,034,213 1,762,744 1,609,207

Distributed offsetting receipts (6,459,842) (1,891) -

Agency outlays, net (discretionary and mandatory) $ 50,574,371 $ 1,760,853 $ 1,609,207
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2014 Agency Financial Report 14311

Occupational Employee Veterans'

Safety and Bureau of Mine Safety Benefits Employment Wage Other

Health Labor and Health Security and Training and Hour Program

Administration Statistics Administration Administration Service Division Agencies TOTAL

$ 20,042 $ 6,778 $ 3,155 $ 5,597 $ 6,957 $ 53,117 $ 107,882 $ 4,655,078

 4,685 6,567 2,749 1,011 3,648 8,263 88,442 436,816

 (4,712) (1,696) (1,143) (795) (4,059) (2,741) (6,845) (299,604)

 20,015 11,649 4,761 5,813 6,546 58,639 189,479 4,792,290

 552,249 527,212 375,887 178,500 38,109 268,067 612,970 59,435,713

 - - - - - - - 2,700,000

 2,112 84,264 2,315 6,143 231,465 3,059 311,949 7,604,889

$ 574,376 $ 623,125 $ 382,963 $ 190,456 $ 276,120 $ 329,765 $ 1,114,398 $ 74,532,892

$ 555,645 $ 613,477 $ 378,696 $ 185,449 $ 269,994 $ 286,812 $ 1,000,839 $ 69,921,152

 79 696 256 79 208 26,734 62,159 2,979,755

 - - - - - - - 46,795

 18,652 8,952 4,011 4,928 5,918 16,219 51,400 1,585,190

 18,731 9,648 4,267 5,007 6,126 42,953 113,559 4,611,740

$ 574,376 $ 623,125 $ 382,963 $ 190,456 $ 276,120 $ 329,765 $ 1,114,398 $ 74,532,892

$ 79,162 $ 99,264 $ 40,184 $ 54,660 $ 90,300 $ 26,878 $ 430,680 $ 14,992,121

 555,645 613,477 378,696 185,449 269,994 286,812 1,000,839 69,921,152

 (533,577) (599,047) (357,833) (183,375) (245,651) (271,370) (932,065) (70,423,240)

 (4,685) (6,567) (2,749) (1,011) (3,648) (8,263) (88,442) (436,816)

 96,545 107,127 58,298 55,723 110,995 34,057 411,012 14,053,217

 (2,979) (262) - - - - (6,213) (1,946,057)

 - 262 - - - - (2,484) (71,646)

 (2,979) - - - - - (8,697) (2,017,703)

$ 76,183 $ 99,002 $ 40,184 $ 54,660 $ 90,300 $ 26,878 $ 424,467 $ 13,046,064

$ 93,566 $ 107,127 $ 58,298 $ 55,723 $ 110,995 $ 34,057 $ 402,315 $ 12,035,514

$ 554,361 $ 611,476 $ 378,202 $ 184,643 $ 269,574 $ 271,126 $ 924,919 $ 69,740,602

 (2,112) (84,526) (2,315) (6,143) (231,465) (3,059) (309,465) (7,533,243)

 - 262 - - - - (2,484) (71,646)

$ 552,249 $ 527,212 $ 375,887 $ 178,500 $ 38,109 $ 268,067 $ 612,970 $ 62,135,713

$ 533,577 $ 599,047 $ 357,833 $ 183,375 $ 245,651 $ 271,370 $ 932,065 $ 70,423,240

 (2,112) (84,526) (2,315) (6,143) (231,465) (3,059) (309,465) (7,533,243)

 531,465 514,521 355,518 177,232 14,186 268,311 622,600 62,889,997

 - - (5,508) - - - (14,819) (6,482,060)

$ 531,465 $ 514,521 $ 350,010 $ 177,232 $ 14,186 $ 268,311 $ 607,781 $ 56,407,937
Financial Section 

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

144 United States Department of Labor

COMBINING STATEMENTS OF BUDGETARY RESOURCES

For the Year Ended September 30, 2013

Employment and Office of Workers' Office 

Training Compensation of

Administration Programs Job Corps

BUDGETARY RESOURCES

Unobligated balance brought forward, October 1 $ 1,989,635 $ 817,406 $ 1,322,891

Recoveries of prior year unpaid obligations 381,166 7,085 19,291

Other changes in unobligated balance (187,523) (1,737) (7,069)

Unobligated balance from prior year budget authority, net 2,183,278 822,754 1,335,113

Appropriations (discretionary and mandatory) 96,223,426 2,272,746 1,634,317

Borrowing authority (discretionary and mandatory) 7,700,000 - -

Spending authority from offsetting collections (discretionary and mandatory) 4,165,101 3,059,918 950

Total budgetary resources $ 110,271,805 $ 6,155,418 $ 2,970,380

STATUS OF BUDGETARY RESOURCES

Obligations incurred $ 108,256,608 $ 4,946,175 $ 1,743,270

Unobligated balance, end of year

Apportioned 674,871 1,097,292 1,191,512

Exempt from apportionment - 54,279 -

Unapportioned 1,340,326 57,672 35,598

Total unobligated balance, end of year 2,015,197 1,209,243 1,227,110

Total budgetary resources $ 110,271,805 $ 6,155,418 $ 2,970,380

CHANGE IN OBLIGATED BALANCE

Unpaid Obligations:

Unpaid obligations, brought forward, October 1 $ 13,864,842 $ 314,213 $ 447,333

Obligations incurred 108,256,608 4,946,175 1,743,270

Less: Outlays (gross) (108,379,297) (5,025,459) (1,589,150)

Less: recoveries of prior year unpaid obligations (381,166) (7,085) (19,291)

Unpaid obligations, end of year 13,360,987 227,844 582,162

Uncollected Payments: 

Uncollected payments, Federal sources, brought forward, October 1 (2,292,212) (19,166) -

Change in uncollected payments, Federal sources 356,599 18,176 -

Uncollected payments, Federal sources, end of year (1,935,613) (990) -

Obligated balance, start of year $ 11,572,630 $ 295,047 $ 447,333

Obligated balance, end of year $ 11,425,374 $ 226,854 $ 582,162

BUDGET AUTHORITY AND OUTLAYS, NET

Budget authority, gross (discretionary and mandatory) $ 108,088,527 $ 5,332,664 $ 1,635,267

Less: actual offsetting collections (discretionary and mandatory) (4,521,700) (3,078,094) (950)

Less: change in uncollected customer payments from Federal 

 sources (discretionary and mandatory) 356,599 18,176 -

Budgetary authority, net (discretionary and mandatory) $ 103,923,426 $ 2,272,746 $ 1,634,317

Outlays, gross (discretionary and mandatory) $ 108,379,297 $ 5,025,459 $ 1,589,150

Actual offsetting collections (discretionary and mandatory) (4,521,700) (3,078,094) (950)

Outlays, net (discretionary and mandatory) 103,857,597 1,947,365 1,588,200

Distributed offsetting receipts (28,171,829) (1,371) -

Agency outlays, net (discretionary and mandatory) $ 75,685,768 $ 1,945,994 $ 1,588,200
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2014 Agency Financial Report 14511

Occupational Employee Veterans'

Safety and Bureau of Mine Safety Benefits Employment Wage Other

Health Labor and Health Security and Training and Hour Program

Administration Statistics Administration Administration Service Division Agencies TOTAL

$ 17,486 $ 37,631 $ 3,813 $ 5,016 $ 5,001 $ 62,741 $ 130,079 $ 4,391,699

 8,759 5,427 3,058 4,166 6,149 4,597 21,851 461,549

 (5,833) (1,552) (890) (764) (1,755) (12,499) (2,281) (221,903)

 20,412 41,506 5,981 8,418 9,395 54,839 149,649 4,631,345

 537,496 513,551 353,702 173,573 36,188 256,354 607,687 102,609,040

 - - - - - - - 7,700,000

 2,269 79,949 1,639 5,969 214,438 3,455 292,432 7,826,120

$ 560,177 $ 635,006 $ 361,322 $ 187,960 $ 260,021 $ 314,648 $ 1,049,768 $ 122,766,505

$ 540,135 $ 628,228 $ 358,167 $ 182,363 $ 253,064 $ 261,531 $ 941,886 $ 118,111,427

 1,061 1,000 440 42 512 38,957 65,316 3,071,003

 - - - - - - - 54,279

 18,981 5,778 2,715 5,555 6,445 14,160 42,566 1,529,796

 20,042 6,778 3,155 5,597 6,957 53,117 107,882 4,655,078

$ 560,177 $ 635,006 $ 361,322 $ 187,960 $ 260,021 $ 314,648 $ 1,049,768 $ 122,766,505

$ 105,508 $ 92,723 $ 49,018 $ 60,312 $ 102,609 $ 55,996 $ 436,614 $ 15,529,168

 540,135 628,228 358,167 182,363 253,064 261,531 941,886 118,111,427

 (557,722) (616,260) (363,943) (183,849) (259,224) (286,052) (925,969) (118,186,925)

 (8,759) (5,427) (3,058) (4,166) (6,149) (4,597) (21,851) (461,549)

 79,162 99,264 40,184 54,660 90,300 26,878 430,680 14,992,121

 (2,993) (1,296) - - - - (9,225) (2,324,892)

 14 1,034 - - - - 3,012 378,835

 (2,979) (262) - - - - (6,213) (1,946,057)

$ 102,515 $ 91,427 $ 49,018 $ 60,312 $ 102,609 $ 55,996 $ 427,389 $ 13,204,276

$ 76,183 $ 99,002 $ 40,184 $ 54,660 $ 90,300 $ 26,878 $ 424,467 $ 13,046,064

$ 539,765 $ 593,500 $ 355,341 $ 179,542 $ 250,626 $ 259,809 $ 900,119 $ 118,135,160

 (2,283) (80,983) (1,639) (5,969) (214,438) (3,455) (295,444) (8,204,955)

 14 1,034 - - - - 3,012 378,835

$ 537,496 $ 513,551 $ 353,702 $ 173,573 $ 36,188 $ 256,354 $ 607,687 $ 110,309,040

$ 557,722 $ 616,260 $ 363,943 $ 183,849 $ 259,224 $ 286,052 $ 925,969 $ 118,186,925

 (2,283) (80,983) (1,639) (5,969) (214,438) (3,455) (295,444) (8,204,955)

 555,439 535,277 362,304 177,880 44,786 282,597 630,525 109,981,970

 - - - - - - (16,484) (28,189,684)

$ 555,439 $ 535,277 $ 362,304 $ 177,880 $ 44,786 $ 282,597 $ 614,041 $ 81,792,286

FY 2014 Agency Financial Report 147

Other Information

(Unaudited)

FY 2014 Agency Financial Report 149

Inspector General’s Top Management Challenges
Other Information

(Unaudited)

150 United States Department of Labor

Top Management Challenges Facing the Department of Labor 

November 2014

As of November 2014, the Office of Inspector General (OIG) considers the following as the most serious

management challengesfacing the Department:

• Protecting the Safety and Health of Workers

• Ensuring the Safety of Students and Staff at Job Corps Centers

• Helping Unemployed Adults, Youth and Veterans Obtain Skills, Training, and Services That Result in 

Training-Related Job Placements

• Protecting the Security of Retirement, Health, and Other Benefit Plans for Workers, Retirees, and Their 

Families

• Reducing Improper Payments

• Securing and Managing Information Systems

CHALLENGE: Protecting the Safety and Health of Workers

BACKGROUND

The Department administers the Occupational Safety and Health Act of 1970 (OSH Act) and the Federal Mine Safety 

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

2006 (MINER Act). The Department of Labor’s (DOL) effective enforcement of these laws is critical toward ensuring 

the workplace safety of our nation’s workers.

The two DOL agencies primarily responsible for enforcing these laws are the Occupational Safety and Health 

Administration (OSHA) and the Mine Safety and Health Administration (MSHA). OSHA is responsible for assuring 

safe and healthful working conditions for 130 million workers at more than eight million establishments. MSHA is 

responsible for the safety and health of more than 350,000 miners who work at more than 14,500 mines.

CHALLENGE FOR THE DEPARTMENT

The Department faces challenges in determining how to best use its limited resources to help ensure the safety and 

health of workers, particularly in high-risk industries such as construction, forestry, fishing, agriculture, and mining.

Recent OIG audits have found that OSHA did not always effectively target and inspect the highest risk industries and 

worksites, primarily because it lacks outcome-based data needed to determine the effectiveness of its programs.

OSHA is also challenged to ensure the fairness, efficiency, effectiveness, and transparency of its Whistleblower 

Protection Program. Workers who “blow the whistle” on unsafe or unhealthy workplace practices are essential to 

ensuring that employers abide by worker safety and health laws.

MSHA continues to struggle to meet its statutory mine inspection requirements and other enforcement 

responsibilities, such as protecting the rights of miners who report workplace safety and health concerns. At MSHA, 

this challenge is made even more difficult by the demands of maintaining a cadre of experienced, diverse and 

properly trained enforcement staff. Almost 40 percent of MSHA’s health and safety personnel are eligible to retire 

by 2017. This is a particularly pressing issue given the nearly 2 years it takes to train new mine inspectors. MSHA is 

also challenged by the underreporting of occupational injuries and illnesses by mine operators. This reporting helps 

MSHA to focus its resources on mines that have elevated accident and injury rates.
Top Management Challenges

(Unaudited)

FY 2014 Agency Financial Report 151

DEPARTMENT’S PROGRESS

OSHA and MSHA are looking at ways to change the way they do business as part of their efforts to better use their 

limited resources. In this regard, the Department initiated a multi-year study of OSHA’s Site Specific Targeting 

program to assess the impact of program interventions on future employer compliance. The study is scheduled to 

be completed by the end of calendar year 2015. Over the past 2 years, OSHA introduced 10 new performance 

measures for monitoring State Plans, one of which is intended to help OSHA determine the effectiveness of State 

Plan inspection targeting. OSHA stated it received funding for 16 new positions in its whistleblower budget for 

Fiscal Year (FY) 2014 and used the positions to establish whistleblower dedicated Assistant Regional Administrator 

positions in its regions.

MSHA stated that its efforts included enhancing its outreach and education to the mining community by focusing 

on the causes of recent fatalities at metal and nonmetal mines; completing corrective actions that address the 

recommendations from reviews conducted following the Upper Big Branch mine accident; improving its process for 

reviewing, approving and overseeing coal mine roof control plans; publishing an updated Accountability Program 

Handbook; continuing the impact inspection program; implementing the final Coal Mine Examination Rule, which 

requires underground coal mine operators to find and fix unsafe conditions in working areas; and implementing its 

Pattern of Violations rule. MSHA also stated that it has developed a succession plan for FY 2013-2017 and is 

implementing key strategies for leadership development such as training, mentoring, and detailing employees to 

developmental detail assignments. To detect and deter underreporting of accidents and injuries, MSHA reported 

that it conducts education, training programs, and outreach efforts to educate miners about their rights under the 

Mine Act. Finally, MSHA stated it is developing a strategy to address mine operator programs and practices that it 

believes may discourage reporting.

WHAT REMAINS TO BE DONE

OSHA’s existing and new performance measures focus on activities; it needs to continue its efforts to develop 

metrics that reflect impact of its enforcement efforts on workplace safety and health. When its study of the Site 

Specific Targeting Program is completed, OSHA needs to analyze the study results and use them to improve its 

targeting efforts. Similarly, OSHA needs to evaluate its 10 new performance measures to identify the measures that 

are having a positive impact on improving worker safety and health. While OSHA has implemented timeliness 

measures for its Whistleblower Program, it needs to develop performance measures or indicators that focus on 

whether the program is working as intended and complaints are thoroughly investigated.

MSHA needs to continue taking action to improve oversight of its Management Accountability Program, strengthen 

its roof control plan review and monitoring process, and improve its process for investigating mine operators who 

knowingly fail or refuse to comply with an order issued by MSHA issues or who violate mandatory health or safety 

standards. MSHA also needs to enhance its knowledge of the underreporting of accidents, injuries and illnesses by 

mine operators and use this knowledge to finalize its strategy to address mine operator programs and practices 

that discourage reporting.

CHALLENGE: Ensuring the Safety of Students and Staff at Job Corps Centers

BACKGROUND

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 $1.6 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.
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152 United States Department of Labor

CHALLENGE FOR THE DEPARTMENT

Improving the quality of residential life, a critical component of the Job Corps’ intensive intervention experience, 

remains a challenge for the Department. Ensuring the safety of Job Corps’ students and staff by addressing serious 

student misconduct (e.g., assault, illegal drugs, and theft) has been on an ongoing challenge for many years. In 

1995, Jobs Corps instituted a “zero tolerance policy” for drugs and violence. However, enforcement of the zero 

tolerance policy has eroded and recent OIG audits have disclosed that some centers did not take appropriate 

disciplinary action for serious student misconduct. Contract awards to operate Job Corps centers rely heavily on 

past performance in areas such as graduation rates and operating centers at or near capacity, and provide a 

disincentive for centers to comply with the zero tolerance policy.

The Department is also challenged in dealing with Centers’ physical maintenance needs and promptly correcting

center safety and health hazards. In 2013, we reported that Job Corps did not always ensure the timely repair of 

critical and funded maintenance deficiencies at its centers, which exposed students, staff, and visitors to potential 

safety and health hazards. We also identified $32.9 million in unused maintenance funds that were expired or were 

approaching expiration because Job Corps had not effectively managed these funds.

DEPARTMENT’S PROGRESS

Job Corps indicated that it has recently begun to take steps to address safety issues at its centers. Job Corps stated 

that it instructed its regional offices to take immediate action to ensure centers are enforcing the program’s zero 

tolerance policy. In addition, Job Corps reported that is developing a comprehensive center safety profile intended 

to provide management staff with current data on significant incident reports and comments and concerns 

expressed by students or the public regarding center safety. Job Corps stated that regional office staff has been 

instructed to conduct unannounced monitoring visits to centers with a focus on high-risk or low performing centers. 

Job Corps also stated that it is in the process of developing a risk management assessment tool to help program 

managers identify centers with a higher level of programmatic risk, including factors such as safety and student 

conduct. In response to concerns about the underreporting of data regarding student conduct infractions and 

dispositions, Job Corps reported that it has conducted training on entering complete and accurate data in a timely 

manner into its Center Information System.

The Department is in the process of making changes to Job Corps’ Policy and Requirements Handbook to ensure 

maintenance deficiencies are accurately identified, repaired, and executed in a timely manner, including 

completion of “Funded-Not-Corrected” projects within one year from issue. The Department is also developing new 

controls and reporting, as well as reinforcing existing controls, to track contractor expenditures against submitted 

spending plans.

WHAT REMAINS TO BE DONE

To provide a safe and healthful center environment for Job Corps students and staff, the Department needs to 

expeditiously implement the various initiatives it has recently begun to protect the safety of its students. After 

these initiatives have been implemented, the Department must be more vigilant in its monitoring to ensure center 

operators and Regional Office staff enforce Job Corps’ zero tolerance policy. The Department also needs to examine 

whether its admissions screening process is adequately vetting the youth who apply for admission to the program.

Regarding the physical maintenance needs at Job Corps centers, the Department needs to improve its management 

processes to ensure maintenance deficiencies are identified, tracked, and repaired appropriately and timely, and 

better monitor and track the status of funds obligated for center repairs to ensure funds are used for the intended 

purposes.
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FY 2014 Agency Financial Report 153

CHALLENGE: Helping Unemployed Adults, Youth, and Veterans Obtain the Skills, 

Training, and Services That Result in Training-Related Job Placements

BACKGROUND

In Fiscal Year 2014, the Department’s Employment and Training Administration (ETA) was appropriated $1.8 billion 

for grants to States for Workforce Investment Act Adult, Dislocated Worker, and Youth programs. ETA also operates 

the Job Corps program, spending $1.6 billion dollars annually to provide 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 Veterans’ Employment and Training Service (VETS) assists veterans in obtaining and maintaining civilian 

employment through its Jobs for Veterans State Grants Program. Administered by State Workforce Agencies, this 

program provides intensive services to disabled and other eligible veterans, conducts outreach to employers, and 

engages in advocacy efforts to increase employment opportunities for veterans.

CHALLENGE FOR THE DEPARTMENT

The Department remains challenged to ensure that its job training programs and other employment services are 

helping those in need to obtain suitable employment. This challenge is made even more difficult by the lack of 

reliable outcome data.

Relating primarily to discretionary grants, our audit work over several decades has documented the difficulties 

encountered by the Department in its job training programs. These problems include difficulties in obtaining quality 

employment and training providers, not providing active oversight of the grant making and grant execution process; 

and training provided by grantees that did not lead to marketable skills or industry-recognized credentials. Similarly, 

our work in Job Corps has found that its graduates are often placed in jobs unrelated to the vocational training they 

received or in jobs that required little or no training.

The Department also faces challenges in obtaining accurate and reliable data needed to measure the success of 

grantees, contractors, and states in meeting program goals. A 2014 Government Accountability Office report on 

Workforce Investment Act (WIA) training outcome data concluded that data on credential attainment and trainingrelated employment can potentially provide more meaningful information on the value of training services. 

However, collecting data on these outcomes can be resource-intensive, in part because there is no single readily 

available source of data.

Meeting the employment needs of veterans returning to civilian life after the recent conflicts in Iraq and 

Afghanistan remains a challenge for the Department. The Department estimates that about 90 percent of future 

participants served by its Jobs for Veterans State Grants program will require intensive services, such as career 

planning and assessment and referrals to job training and support services. A lack of reliable data prevents VETS 

from determining how well States are meeting veterans’ needs by providing services that lead to good jobs.

DEPARTMENT’S PROGRESS 

On July 22, 2014, the President signed the Workforce Innovation and Opportunity Act (WIOA), which replaced the 

Workforce Investment Act of 1998. Due to take effect in July 2015, WIOA contains provisions intended to improve 

accountability by updating the performance measures used by federally funded workforce training programs. For 

example, the Act creates a single set of common measures for adults across all core programs authorized under the 

bill, including both occupational training and adult education programs, and a similar set of common measures 

across all youth serving programs authorized under the bill. Adult measures include unsubsidized employment, 

median earnings, receipt of a secondary diploma or recognized postsecondary credential, measurable skills gains 

toward a credential or employment, and employer engagement.

ETA now expects to receive the first evaluation report on implementation from its WIA Gold Standard Evaluation, 

originally due in summer 2014, by March 2015, the first impact findings in October 2015, and the final impact 

findings in December 2016. Through this evaluation, ETA intends to measure the net impact of specific 
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154 United States Department of Labor

interventions, such as the incremental effects of intensive and training services provided to adults and dislocated 

workers. ETA also created a Performance Reporting Workgroup to identify recommendations for specific steps that 

ETA can take to clarify grantee data collection and reporting expectations.

As part of its ongoing efforts to improve the oversight and performance tracking of grants, ETA reported that it is 

working on an Enhanced Desk Monitoring Review process and recently began updating its Core Monitoring Guide. 

ETA also stated that it has updated all grant agreements to ensure that all performance outcome information is 

clearly required to be reported.

Job Corps indicated that it is continuing its efforts to improve the quality of program services and achieve better 

outcomes for the students it serves. These efforts include implementing a standards-based system of teaching and 

learning, and identifying and replicating the practices of high-performing centers. To improve its reported 

performance data, Job Corps stated it has updated 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. 

VETS reported that it has directed states to provide more oversight to ensure that veterans with significant barriers 

to employment are getting the assistance they need, and issued clarifying guidance about providing and 

documenting intensive services to veterans with significant barriers to employment. ETA is piloting the Enhanced 

Outreach and Employment Services for Army Unemployment Compensation for Ex-Service Members in four states. 

The goal of this initiative is to improve outreach, exposure to jobs, and reemployment strategies for unemployed 

veterans.

WHAT REMAINS TO BE DONE

The Department needs to issue regulations to implement the provisions of the WIOA. It needs to ensure that the 

WIA Gold Standard Evaluation experiences no additional delays and use the results of the evaluation to identify 

those services that are having a positive impact on participants’ ability to obtain good jobs. After the Performance 

Reporting Workgroup has completed its efforts, the Department needs to implement the recommended actions for 

improving data reliability.

In Job Corps, the Department needs to increase its oversight of under-performing training programs by improving 

its monitoring, and by more effectively using performance improvement plans, center assessments, and other 

oversight activities.

The Department should continue to pursue statutory access to the National Directory of New Hires. Such access 

would streamline the process of obtaining earnings data needed to assess the impact of services provided by ETA, 

VETS and other agencies within the Department. The Department should also consider conducting a longitudinal 

study, similar to the WIA Gold Standard Evaluation, of the job counseling, training, and placement services for 

veterans provided by the Department. Such a study could provide a better understanding of the impact of the 

Department’s services on the employment outcomes of veterans.

CHALLENGE: Protecting the Security of Retirement, Health, and Other Benefit Plans for 

Workers, Retirees, and Their Families 

BACKGROUND

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). The agency is charged with protecting about 142

million workers, retirees and their families who are covered by nearly 677,000 private retirement plans, 2.4 million 

health plans, and similar numbers of other welfare benefit plans which together hold estimated assets of $8.4

trillion. 
Top Management Challenges

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FY 2014 Agency Financial Report 155

CHALLENGES FOR THE DEPARTMENT

EBSA’s limited authority and resources present challenges in achieving its mission of administering and enforcing 

ERISA requirements protecting approximately 142 million participants and beneficiaries. An important part of 

EBSA's mission is to deter and correct violations of ERISA through a strong enforcement program to ensure workers 

receive promised benefits. Given the number of plans that the agency oversees relative to the number of 

investigators, EBSA has to devise ways to focus its available resources on investigations, audits and other reviews 

that it believes will most likely result in the deterrence, detection, and correction of ERISA violations. In order to do 

so, EBSA must determine which of its enforcement initiatives are the most effective.

For many years, EBSA’s oversight efforts have been challenged by the fact that billions in pension assets held in 

otherwise regulated entities, such as banks, escape audit scrutiny. ERISA authorizes these institutions to obtain socalled “limited scope audits,” presumably because they are being audited by other entities for other purposes. As a 

result, the independent public accountants that conduct their audits express “no opinion” on the financial 

statements of the assets they hold on behalf of plans. These limited scope audits weaken assurances to 

stakeholders and may put retirement plan assets at risk because they provide little or no confirmation regarding 

the existence or value of plan assets. These concerns were renewed and heightened by recent audit findings that as 

much as $3.3 trillion in pension assets received these types of limited scope audits.

EBSA is further challenged by the large increase in the types and complexity of investment products available to 

pension plans. In particular, since 2010, the Department has been working on the so-called “conflict of interest --

fiduciary investment advice rule.” This conflict of interest rule is intended to ensure workers enrolled in retirement 

plans can be assured the investment advice they receive is delivered with their best interest in mind by broadening 

the definition of investment advice fiduciary for ERISA plans and individual retirement accounts, and by reducing 

the opportunities for financial conflicts of interest to compromise the impartiality of investment advice in the 

retirement savings marketplace.

DEPARTMENT’S PROGRESS

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. Now in its fourth year, the SIP is designed to 

measure overall compliance with ERISA and the impact of ERISA investigations on compliance rates. In addition, 

EBSA stated that data collected by the SIP will be used to evaluate the effectiveness of EBSA’s enforcement 

targeting strategies, as well as the impact of investigations on plan compliance. EBSA reported that it processed 376 

SIP cases through 2013, and will continue to analyze and expand the compliance data already collected.

WHAT REMAINS TO BE DONE

EBSA needs to analyze violation trends as an additional methodology to help guide its resource allocation 

strategies. EBSA should concentrate on issuing final regulations on the so-called “conflict of interest rule” and 

continue its work to obtain legislative changes repealing the limited-scope audit exemption. In the interim, EBSA 

should continue to expand upon its existing authority to clarify and strengthen limited scope audit regulations and 

evaluate the ERISA Council’s recommendations on the issue.

CHALLENGE: Reducing Improper Payments 

BACKGROUND

In its FY 2014 Agency Financial Report, the Department estimated the Unemployment Insurance (UI) benefit 

program made $5.60 billion in improper payments and identified it as susceptible to significant improper payments.

The leading cause of UI overpayments is claimants who have returned to work and continue to claim UI benefits. 

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.
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156 United States Department of Labor

The cluster of Workforce Investment Act (WIA) grant programs (Adult, Youth, and Dislocated Workers) and the 

Federal Employees’ Compensation Act (FECA) benefit program have been classified as at-risk of significant improper 

payments by OMB former Circular No. A-11, Section 57; however, the Department’s annual risk assessments have 

not supported the at-risk designations.

CHALLENGE FOR THE DEPARTMENT

OMB has designated the Unemployment Insurance (UI) program as being particularly at risk for improper 

payments, and the Department’s ability to identify and reduce UI improper payments continues to be a challenge.

The Department also remains challenged in identifying the full extent of improper payments in the FECA and WIA 

programs. As highlighted in past OIG audits, estimation methods used in prior years for the FECA program did 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, DOL OIG investigations continue to identify significant amounts of FECA compensation 

and medical fraud, which has often surpassed the Department’s improper payments estimates. For the WIA 

program, data are not readily available to allow the Department to directly sample grant payments and develop a 

statistically valid estimate of improper payments.

DEPARTMENT’S PROGRESS

The Department continues to work with states to implement a number of strategies to improve the 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, as well as each state’s progress in implementing the identified improper payment strategies. The 

Department has also 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. In addition, the Department 

established a UI Integrity Center of Excellence. Over the next three years, the Center plans to develop, implement, 

and promote innovative program integrity strategies to reduce improper payments, including the prevention and 

detection of fraud, in the UI program. In addition, the Center plans to provide products to help states improve their 

integrity operations and offer states on-site technical assistance to identify operational changes for improving 

program integrity.

With respect to improper payments in the FECA program, in FY 2014, the Department submitted a new sampling 

and estimation plan to OMB for the FECA program. In addition, OWCP stated that it is developing a Program 

Integrity Unit with auditors and data analysts to provide greater oversight and analysis of payment accuracy. OWCP 

has also contracted with a data analytics firm to build agency capacity in this area.

In the WIA programs, the Department stated that it has attempted to identify the full extent of improper payments 

by including estimates from other sources.

WHAT REMAINS TO BE DONE

The Department needs to employ cost benefit and return on investment analyses to evaluate the impact of its 

improper payment reduction strategies for UI. 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. 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.

The Department also needs to assess the validity of the FECA overpayment estimates resulting from its new 

estimation methodology and make adjustments as needed for future estimates.

Finally, the Department needs to continue working with OMB to properly classify the individual grant programs 

authorized under the newly enacted Workforce Innovations and Opportunities Act. Since data are not readily 

available to allow the Department to develop a statistically valid improper payments estimate by directly sampling 

grant payments, the Department needs to consider other sampling methods. Further, the Department needs to 
Top Management Challenges

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FY 2014 Agency Financial Report 157

provide full disclosure in the Agency Financial Report regarding the limitations of the data used to estimate WIA 

overpayments.

CHALLENGE: Securing and Managing Information Systems

BACKGROUND

More than 50 of the Department of Labor’s major information 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 the Department’s financial activities, enforcement actions, worker safety, health, 

pension, and welfare benefits, job training services, and other worker benefits.

CHALLENGE FOR THE DEPARTMENT

Safeguarding data and information systems is a continuing challenge for all Federal agencies, including DOL. Recent 

OIG audits have identified deficiencies in configuration management and account management, as well as security 

and access controls weaknesses in key departmental financial and non-financial systems. These deficiencies can 

pose an increased risk to the security of data and information maintained in DOL systems. As the Department 

continues moving applications to a cloud environment, it must address challenges identified by the Council of 

Inspectors General on Integrity and Efficiency’s (CIGIE) 2014 review of cloud computing. The CIGIE found that 

Federal agencies have not fully considered Federal guidance and best practices; contracts lacked detailed 

specifications as suggested in the Federal cloud computing guidelines and best practices documentation; and 

agencies did not have an accurate and complete inventory of their cloud systems. The Department has not resolved 

the concern that data downloaded through a remote connection, which may contain personally identifiable 

information, is not being tracked and managed in accordance with OMB M-07-16, “Safeguarding Against and 

Responding to the Breach of Personally Identifiable Information. This OMB memorandum requires the Department 

to log all computer-readable data extracts from databases holding sensitive information and verify each extract, 

including whether sensitive data has been erased within 90 days or its use is still required.

The Department has also faced challenges in managing its financial system, New Core Financial Management 

System (NCFMS). The contractor that owned and operated NCFMS and owned the DOL financial data filed for 

bankruptcy protection on September 4, 2014. In anticipation of the contractor’s insolvency, the Department 

devoted considerable resources during the summer for contingency planning in the event that the Department 

would not have complete access to critical data. We issued a report recommending certain measures to strengthen 

the contingency planning efforts. In addition, the Department was forced to make unexpected expenditures 

totaling $23 million over 25 months to procure software, hardware and the DOL data to continue to maintain the 

financial system following the contractor closing down.

DEPARTMENT’S PROGRESS

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 resulting in the remediation and closure of 93% of prior year 

findings. The Department stated there were multiple new initiatives completed within the previous fiscal year, such 

as updating the DOL Computer Security Handbook and implementing its enterprise monitoring tool, Tivoli Endpoint 

Manager for Security and Compliance (known as BigFix), automating DOL inventory, vulnerability and configuration 

management processes.

In addition, the Department stated it has acquired an enterprise information technology (IT) system monitoring tool 

to assist in configuration management, vulnerability assessment, and accounting for the inventory of electronic 

devices connecting to each IT system. Finally, the Department reported that is has made considerable progress in 

consolidating its data centers and implementing its personal identity verification (PIV) card logon program.
Other Information

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158 United States Department of Labor

In response to our audit work, the Department made improvements to the contingency planning for the financial 

management system. The Department also worked with the General Services Administration to effectuate the 

procurement of the software, hardware and data from the now-defunct contractor. The bankruptcy court has 

approved the transaction, and operations have transitioned to a federal shared services provider.

WHAT REMAINS TO BE DONE

DOL needs to continue to reduce its IT footprint by completing its data center consolidation efforts and reducing 

the number of external connections. The Department must take steps to ensure its processes for managing 

applications and information in cloud computing environments are updated and institutionalized in the form of 

department wide policies and procedures. The Department needs to continue its efforts to implement the OMB M07-16 requirement to log/verify data extracts and the PIV logon program. Most importantly, a greater presence in 

IT system security is needed at the Executive Level; continuing current Risk Management and Continuous 

Monitoring Program processes will assist in that effort as Executives become integral to the discussion and 

understanding of their IT security risks and control weaknesses, including setting mitigation priorities.

The Department will need to accelerate its transition planning and funding to meet the unexpected costs incurred 

with the NCFMS contractor’s insolvency. The Department will need to closely monitor the operation of the financial 

system for the foreseeable future to ensure that it is operating effectively.

CHANGES FROM LAST YEAR:

Changes to the 2013 Top Management Challenges report include combining of the challenge related to miner 

safety and health into one challenge on worker safety and health. Similarly, the 2013 report contained separate 

challenges for Workforce Investment Act grants, the Job Corps program, and Veterans Employment and Training 

Service programs. The 2014 report contains one challenge describing the difficulties the Department faces in 

providing unemployed adults, youth and veterans with job training programs and other employment services that 

help them to obtain suitable employment. In 2014, “Ensuring the Safety and Health of Job Corps Students and 

Staff” is reported as a separate challenge.
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FY 2014 Agency Financial Report 159

Summary of Financial Statement Audit and Management Assurances

The following tables provide a summary of the Department’s FY 2014 financial statement audit and its management 

assurances.

Summary of Financial Statement Audit

Audit Opinion Unmodified

Restatement No

Material Weaknesses Beginning 

Balance

New Resolved Consolidated Ending 

Balance

Total Material Weaknesses 0 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

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

Total Non-Conformances 0 0

Compliance with Federal Financial Management Improvement Act (FFMIA)

Agency Auditor

1. System Requirements No lack of substantial compliance noted No lack of substantial compliance noted

2. Accounting Standards No lack of substantial compliance noted No lack of substantial compliance noted

3. USSGL at Transaction Level No lack of substantial compliance noted No lack of substantial compliance noted
(Unaudited)

160 United States Department of Labor

Improper Payments Reporting Details

The Improper Payments Information Act of 2002 (IPIA), as amended by the Improper Payments Elimination and 

Recovery Act of 2010 (IPERA) and the Improper Payment Elimination and Recovery Improvement Act of 2012 

(IPERIA),1 requires federal agencies to identify and reduce improper payments and report annually on their efforts 

according to guidance promulgated by the Office of Management and Budget in OMB Circular No. A-123, Appendix 

C, Requirements for Effective Measurement and Remediation of Improper Payments. This section is presented in 

accordance with Section II.5.8 of OMB Circular A-136, issued September 2014.

Department-wide Risk Assessment

IPERA Section 2(a) requires agency heads to “review all programs to identify risk susceptibility for improper 

payments every three years.” As the last Department-wide risk assessment was performed in FY 2011, DOL 

performed a full assessment of all DOL programs for FY 2014 based on criteria prescribed in IPERA Section 2(a)(3(b), 

outlined below:

Scope. — In conducting the reviews [. . .] the head of each agency shall take into account those risk factors 

that are likely to contribute to a susceptibility to significant improper payments, such as —

i. whether the program or activity reviewed is new to the agency;

ii. the complexity of the program or activity reviewed;

iii. the volume of payments made through the program or activity reviewed;

iv. whether payments or payment eligibility decisions are made outside of the agency, such as by a 

State or local government;

v. recent major changes in program funding, authorities, practices, or procedures;

vi. the level, experience, and quality of training for personnel responsible for making program 

eligibility determinations or certifying that payments are accurate; and

vii. significant deficiencies in the audit report of the agency or other relevant management findings 

that might hinder accurate payment certification.

Based on DOL’s Department-wide risk assessment, only the Unemployment Insurance (UI) program meets the 

susceptibility threshold in statute: either potential estimated improper payments greater than 1.5% of outlays and

greater than $10 million (IPERA §2(a)(3)(A)(ii)(I)) or potential estimated improper payments of more than $100 

million, regardless of percentage (IPERA §2(a)(3)(A)(ii)(II)). Two DOL Programs are required to provide estimates 

based on inclusion in Exhibit 57B, Section 57, of OMB Circular A-11 (2002)2

. These programs are the Federal 

Employees’ Compensation Act (FECA) benefit program and the Workforce Investment Act (WIA) of 1998 Title I 

programs (WIA Programs). In addition to these programs, DOL is required to report an improper payments estimate 

for funds provided in response to Hurricane Sandy through the Disaster Relief Appropriations Act (Public Law 113-

2), signed on January 29, 2013. Section 904(b) of the Act provides that all programs and activities receiving funds 

under this Act shall be deemed to be “susceptible to significant improper payments” for the purposes of IPIA, 

notwithstanding IPIA section 2(a).”

 1 IPIA, Public Law (P.L.) 107-300 (2002); IPERA, P.L. 111-204 (2010); IPERIA, P.L. 112-248 (2013). All three laws are codified at 31 U.S.C. 3321 

note. 

2 In July 2001, OMB issued Section 57, Information on Erroneous Payments, as part of the 2002 revision to Circular A-11, Preparation, 

Submission, and Execution of the Budget. Exhibit 57B of Section 57 listed programs required “. . . to provide improper payment data, 

assessments and action plans with initial budget submission beginning in 2003.” All “benefit programs” exceeding obligations of $2 billion 

were included on Exhibit 57B.
Improper Payments Reporting Details

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FY 2014 Agency Financial Report 161

DOL Programs Required to Submit Improper Payments Estimates

Program Requirement Based 

on...

Estimated Rate

Unemployment Insurance 

(UI)1

Risk analysis Improper Payment Rate (Overpayments 

plus Underpayments):

11.57%

 Overpayment Rate 11.16%

 Underpayment Rate 0.41%

Net Improper Payment Rate (Improper 

Payment Rate Minus Amounts 

Recovered by States)

8.65%

Improper Payment Rate Minus “Work 

Search” Errors

7.85%

Federal Employees’ 

Compensation Act (FECA)

Inclusion in Exhibit 57B 

of OMB Circular A-11 

(2002)

Improper Payment Rate (Overpayments 

plus Underpayments)

2.5%

Workforce Investment Act 

(WIA) Title I Programs

Inclusion in Exhibit 57B 

of OMB Circular A-11 

(2002)

Rate of Services to Potentially Ineligible 

Participants (maximum)

< 1.5%

Hurricane Sandy Funding Disaster Relief 

Appropriations Act of 

2013

Rate of Salary Spent on Potentially 

Ineligible Participants (maximum)

< 0.5%

1 Covers the 12-month period from July 1, 2013 through June 30, 2014.

Details for each program are provided in the following sections based on the format prescribed by OMB Circular A136 Section II.5.8.

Unemployment Insurance (UI) Program

UI Program Integrity Overview

The Federal-state unemployment insurance (UI) program, established by the Social Security Act of 1935 (SSA), 

offers the first line of defense against the negative effects of unemployment. Through payments made directly to 

eligible, unemployed workers, it ensures that at least a significant proportion of the necessities of life, most notably 

food, shelter, and clothing, can be met on a week-to-week basis while the individual searches for a new job. As 

temporary, partial wage replacement to the unemployed, UI is of vital importance in maintaining purchasing power 

and in stabilizing the economy.

The UI program is a unique Federal-state partnership, based on Federal law but administered by state employees 

under state law. The program is designed to provide benefits to most individuals who are out of work, generally 

through no fault of their own, for periods between jobs. In order to be eligible for benefits, jobless workers must 

demonstrate workforce attachment, usually measured by amount of wages and/or weeks of work, and must be 

able and available for work and actively searching for work.
Other Information

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162 United States Department of Labor

States also administer two federal unemployment compensation programs – Unemployment Compensation for 

Federal Employees (UCFE) and Unemployment Compensation for Ex-service members (UCX). The States also 

administer an Extended Benefits (EB) program in times of significant unemployment when the unemployment rate 

triggers for EB are met. In addition, Congress periodically enacts temporary episodic programs in times of recession, 

such as the Emergency Unemployment Compensation (EUC) program during the most recent recession and its 

aftermath.

Section 303(a)(1), SSA, requires, as a condition for a state to receive administrative grants for its UI program, that 

the law of the state provide for "such methods of administration ... as are found by the Secretary of Labor to be 

reasonably calculated to insure full payment of unemployment compensation when due." The U.S. Supreme Court 

interpreted the words "when due" in §303(a)(1) to mean "at the earliest stage of unemployment that such 

payments [are] administratively feasible after giving both the worker and the employer an opportunity to be heard.

Section 303(a)(1) has also been interpreted to mean that states must have "methods of administration" to ensure 

that eligible claimants are paid UI benefits promptly when determined eligible and to ensure claimants who are not 

eligible are not paid. In addition, states must have methods of administration to protect against improper payments 

and fraud. This federal-state partnership structure makes UI unique among the country’s social insurance programs, 

and program integrity depends almost entirely on actions by the states. 

The combination of the requirement to pay “when due” and the complexity of managing a large program with 

eligibility rules and administrative resources that vary by state create a complex environment for states to ensure 

program integrity. As such, the Department uses targeted strategies to work with states across many fronts 

including facilitating the development of information technology systems, employer and claimant communication 

tool-kits, legislation, a platform to share best practices, targeted technical assistance and supplemental funding for 

state program integrity related information technology improvements to ensure that payments go only to claimants 

eligible to receive benefits under state law.

The UI program’s program integrity efforts pre-date the IPIA. The Department’s comprehensive strategic plan 

focuses on strategies and other technical assistance activities to states addressing specific root causes of improper 

payments. The plan is continuously evolving as new strategies are identified and the progress with each strategy in 

this plan is regularly monitored. These strategies target the three largest root causes of UI improper payments:

• Payments to individuals who continue to claim benefits after they have returned to work (Benefit Year 

Earnings);

• Failure of employers or their third party administrators to provide timely and adequate information on 

the reason for an individual’s separation from employment (Separation); and

• Failure of claimants to comply with the state’s work search requirements (Work Search).

Under the Department’s guidance, each state’s Benefit Payment Control (BPC) unit is responsible for ensuring UI 

program integrity through prevention, detection, investigation, establishment, and recovery of improper payments. 

Every state conducts post-award reviews for the prevention and detection of UI improper payments to determine 

whether error or willful misrepresentation has occurred. An additional tool, the Benefit Accuracy Measurement 

(BAM), is a statistical survey created in the 1980s as a quality control and improper payment estimation tool. Each 

state’s estimated improper payment rate and the national improper payment rate are based on results of the BAM 

survey. (For details on the BAM program, please see the UI Statistical Sampling section of this document.)

The UI program uses both the BPC and BAM program results to support the state’s efforts to continuously monitor 

and improve prevention, detection and recovery of improper payments. The results from both BPC and BAM help 

the Department to assess the progress made by the states and provide targeted technical assistance and support.

Benefit outlays for all UI programs decreased in FY 2014 to $48.41 billion from the $66.8 billion paid in FY 2013. This 

decrease reflects the decline in the number of new claims, the discontinuance of the Federally-funded Emergency 

Unemployment Compensation (EUC) program, and the absence of states meeting the trigger thresholds required to 

pay Extended Benefits (EB).
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UI-I. Risk Assessment

The UI program’s estimated annual improper payment rate for FY 2014 is 11.57%, with an estimated dollar amount 

of $5.60 billion, consisting of $5.40 billion in overpayments plus $0.20 billion in underpayments. States reported 

total overpayment recoveries of $1.42 billion, which includes overpayments recovered from the State UI, UCFE, 

UCX, EUC, and EB programs.

UI-II. Statistical Sampling

Improper payment estimates are based on results of the BAM survey, described in detail below, which examines a 

statistically valid sample of payments from the State UI, UCFE, and UCX programs (the three largest permanently 

authorized unemployment compensation (UC) programs), but does not include EUC and EB payments. For purposes 

of reporting payment accuracy data, the estimated improper payment rates are assumed be generalizable to the 

EUC and EB programs, although those programs are not directly measured by the BAM survey.

BAM investigators in each state conduct comprehensive audits for randomly-selected weekly samples of paid and 

denied claims. Beginning in 2008, all paid claims sampled for BAM investigation are matched with the National 

Directory of New Hires (NDNH) database to detect overpayments to individuals who claim benefits after returning 

to work, the largest single cause of UI overpayments. The population includes paid and denied claims under the 

State UI, UCFE, and UCX programs. Since the claims processes and eligibility requirements are very similar for the 

EB and EUC programs, the estimated improper payment rates are assumed to generally reflect the accuracy of 

these benefit payments. Overpayment and underpayment rates for FY 2014 are shown in Table UI-1, Improper 

Payment Reduction Outlook, and are for the period July 1, 2013 to June 30, 2014. Data are reported for this period 

rather than the fiscal year because a higher percentage of BAM investigations will have been completed, therefore 

providing a more accurate estimate. For the period July 1, 2013 to June 30, 2014, state agencies completed audits 

for 23,666 paid claims cases, a completion rate of 100%. 

In FY 2013, the Department used a new metric to measure improper payments that took into account the “net” 

effect of UI overpayment recoveries. Prior to FY 2013, the Department’s reported UI improper payment rate 

included two components – total overpayments plus total underpayments – as estimated from BAM. The FY 2013 

methodology, as approved by OMB, subtracts the amount of overpayment recoveries, which are based on actual 

amounts reported by the state workforce agencies on the ETA 227 Overpayment Detection and Recovery reports 

for State UI, UCFE, UCX, EB, and EUC. However, IPERIA now requires agencies to include all identified improper 

payments in the reported estimate, regardless of whether the improper payment in question has been or is being 

recovered, and any program that currently excludes recovered amounts from its estimate is required to update its 

methodology to reflect the new IPERIA requirement. As a result of IPERIA, beginning in FY 2014, the Department 

cannot use the “net” improper payment rate for its improper payment rate measure.

For FY 2014 reporting, the estimated UI Improper Payment rate consists of all overpayments plus underpayments. 

However, the rate excludes those payments determined to be “technically proper” under state UI law. The 

statutory definition of an improper payment is “any payment that should not have been made or that was made in 

an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. This 

definition allows for the exclusion of “technically proper” payments from the UI Improper Payment rate. Payments 

that are deemed to be “technically proper” by BAM audit investigators are those which meet applicable state 

statutory requirements. In July 2014, OMB approved the Department’s proposed improper payment rate 

estimation methodology, which included the exclusion of any payments determined to be “technically proper” 

under state UI law.

Reasons that certain payments are determined to be “technically proper” under state UI law include:

• Finality Reasons – This includes payments with an eligibility issue(s), but the state cannot take official 

action to establish an overpayment for recovery because the time that has elapsed between the decision 

to pay the claimant and the detection of the eligibility issue exceeds the period established in state law 

for establishing an improper payment. In other words, such payments are considered final under the state 
Other Information

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164 United States Department of Labor

UI law. The designation of “technically proper” payments under state law is based on a Supreme Court 

decision (California Department of Human Resources Development v. Java). The link for the Supreme 

Court decision is available at: http://www.law.cornell.edu/supremecourt/text/402/121

• Other Reasons – This category includes payments with an eligibility issue(s), but the state does not take 

official action to recover the overpayment because the claimant is without fault for the error creating the 

improper payment, and recovery would be against the state’s standard of “equity and good conscience.”

In addition to the Improper Payment rate required by IPERA, the Department has also implemented supplemental 

measures as required by Executive Order 13520. These supplemental measures, developed in consultation with 

OMB, are important metrics that provide additional insight into root causes and possible corrective actions. The 

current supplemental measures are:

• The “net improper payment” rate, which subtracts recoveries from the improper payment rate; and

• The improper payment rate excluding work search, which subtracts improper payments due to work 

search errors. 

Both supplemental measures use the estimated overpayment and underpayment rate from BAM survey data. The 

supplemental “net improper payment” rate is the rate previously reported by the Department in its FY 2013 Agency 

Financial Report. Monitoring and reporting on the “net improper payment” rate is a positive incentive for 

constructive behavior among the states. States making progress on both reducing overpayments and increasing 

recoveries will realize significant reductions in the “net improper payment” rate and will have achieved 

considerable improvement in efficient use of unemployment insurance trust fund dollars.

• The “net improper payment” rate is defined as total overpayments plus total underpayments minus the 

amount of overpayments recovered by state workforce agencies. This supplemental measure includes 

both the overpayment and underpayment rates for all causes, but excludes payments determined to be 

technically proper under state UI law. The net improper payment rate includes two components –

improper payments, which will continue to be estimated from BAM, and overpayments recoveries, which 

are based on actual amounts reported by the state workforce agencies on the ETA 227 Overpayment 

Detection and Recovery report.

The improper payment rate excluding work search as a supplemental measure allows for the review of improper 

payment rates without the influence of work search errors. During the recent quarters, work search errors are 

driving much of the increase in the improper payment rate as states have implemented stricter work search 

requirements. It has become increasingly difficult for agencies, including BAM auditors, to verify claimant work 

search contacts with potential employers given the more pervasive role of tools such as employment search 

engines, large employment application databases, and online social networks in the modern job search process. 

These methods of work search are extremely difficult and expensive to independently validate. In addition, 

employers do not maintain records on all applicants or individuals submitting resumes, which create an additional 

challenge of validating work search as part of a BAM audit. As a result, it is not cost-effective for agencies to audit 

and verify the work search activities for all UI claimants. Very few states have the resources to conduct random 

audits outside of BAM, and the few that do audit only a small percentage of claimants. 

Since there are a multitude of challenges identifying realistic strategies to bring down the work search component 

of the overall improper payment rate, tracking the improper payment rate excluding the work search rate will help 

assess progress made on the other root causes. 

• The supplemental improper payment rate excluding work search consists of all overpayments minus work 

search overpayments plus total underpayments. This supplemental measure includes the overpayment 

and underpayment rates for all causes except work search related errors. Both the overpayment and 

underpayment rates exclude payments determined to be technically proper under state UI law.
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FY 2014 Agency Financial Report 165

The Department reports these supplemental measures quarterly for publication on the Department of the Treasury 

Payment Accuracy Web site (http://www.paymentaccuracy.gov/). These supplemental measures are also reported 

annually as part of the IPIA reporting requirements (see Table UI-4, Improper Payment Reduction Outlook).

Table UI-A: UI Improper Payment Reduction Outlook FY 2014 – FY 2017 ($ in millions)

FY 2014 FY 2015 (Targets) FY 2016 (Targets) FY 2017 (Targets)

Est. IP% Est. IP$ Est. IP% Est. IP$ Est. IP% Est. IP$ Est. IP% Est. IP$

Net Improper Payment 

Rate 

8.65% $4,188 7.8% $2,947 7.6% $2,883 7.5% $2,907

Improper Payment rate 

excluding Work Search 7.85% $3,798 7.5% $2,833 7.4% $2,807 7.3% $2,829

UI-III. Corrective Actions

All corrective actions are based on root causes ascertained through years of analysis. OMB established the following 

categories to classify root causes of improper payments in Federal programs:

• Documentation and Administrative Errors

• Verification Errors

• Authentication and Medical Necessity Errors

These categories do not align precisely with the way the UI program classifies root causes. Table UI-A1 displays the 

crosswalk between the OMB classification for Documentation and Administrative Errors and Verification Errors and 

BAM data. Since UI does not provide medical benefits of any type, no UI overpayments fit the definition of the 

Authentication and Medical Necessity Errors category.

Table UI-A1: OMB-Specified Causes of Errors and BAM Data Crosswalk

Overpayment Causes (OMB Classification) Percent of Overpayments

(2014 IPIA Rate)

Documentation and Administrative Errors Total (breakdown listed below) 9.13%

State Agency Took Incorrect Action 4.14%

Procedures Not Followed by State Agency 4.07%

Other State Agency Errors 0.30%

State Agency Provided Incorrect Information 0.62%

Verification Errors Total (breakdown listed below) 90.87%

Issue Not Detectable by State Agency Procedures 82.62%

State Agency Had Documentation/Did Not Resolve Properly 5.76%

State Agency in Process of Resolving 2.75%

New Hire Cross-Match 0.45%

Wage Record Cross-Match 0.29%

Authentication and Medical Necessity Errors Total 0.00%
Other Information

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166 United States Department of Labor

Table UI-A2 reflects the root causes of UI overpayments. The Department classifies the root causes of UI 

overpayments according to the following categories:

Table UI-A2: Root Causes of UI Overpayments Percent of 

Overpayments 

(2014 IPIA Rate)

Work Search (failure to actively seek employment) 35.86%

Benefit Year Earnings (continuing to claim benefits after returning to work) 31.03%

Separation (ineligible because of voluntary quit or discharge for cause) 14.09%

Base Period Wages (error in calculating claimant’s benefit based on wages earned 

prior to period of unemployment)

5.03%

Able and Available (ineligible due to not being able to work or available for work) 4.52%

Employer Service Registration (failing to register with the state Employment 

Service when required to do so)

1.61%

Other Eligibility Issues (refusal of work, self-employment, failure to report for 

agency review or report requested information, citizenship status, and claiming 

benefits using a false identity)

2.61%

All Other Issues (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)

5.26%

Reducing Improper Payments in Unemployment Insurance 

In response to the level of improper payments in the UI program, the Department 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.
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FY 2014 Agency Financial Report 167

• Goals for improving UI’s improper payment program include:

 Working with the states to develop and implement processes to identify and recapture improper 

payments.

 Defining audit procedures to be performed on selected items.

 Developing a framework for identifying improper payments and providing guidance to implement that 

framework. Establishing appropriate payment recapture targets.

 Utilizing statutory and regulatory authorities to recapture improper payments.

Several factors contribute to the risk of improper UI payments. Efforts to reduce costs of taking claims and improve 

customer service prompted the states to move 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 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, states are required to meet benefit payment timeliness performance standards, which may result in 

some eligibility decisions based on incomplete or untimely information. The Department is actively working with 

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 

states, particularly those with high overpayment rates.

DOL has provided states with supplemental funding to implement strategies and technology-based infrastructure 

investments that will help the states 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 improvements 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 2013, DOL provided approximately $264.7 million to states in supplemental funding for 

integrity related projects. Additionally, between FY 2009 and FY 2013, $344.6 million in supplemental funding was 

provided to five consortia to address outdated IT system infrastructure, which is necessary to improve UI integrity.

In September 2014 DOL ETA awarded $87.1 million in supplemental funding to 49 state workforce agencies for the 

prevention, detection, and recovery of improper UI benefit payments; to improve state performance; to address 

outdated IT system infrastructures necessary to improve UI program integrity; and to enable states to expand or 

implement Reemployment and Eligibility Assessment (REA) programs. These supplemental funds will support state 

implementation of high-priority activities, including:

• Implementation of other integrity-related projects, including technology-based prevention, detection, and 

collection activities;

• Implementation and/or expansion of the State Information Data Exchange System (SIDES) for state 

communications with employers regarding for claimant separation information;

• Subscription fees for maintenance and operation of SIDES;

• Merit or contract staff support for BPC activities;

• UI IT security and IT contingency planning projects; and

• Automation efforts that result in improvements in performance and program integrity.
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168 United States Department of Labor

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. Every state audits 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.

State agencies also maintain the integrity of UI and reduce improper payments by ensuring that employers 

contribute their fair share of taxes and facilitate the return to work of UI claimants.

Some of the most useful tools and practices include:

1. Benefit Year Earnings Issues (claimants continuing to claim UI benefits after returning to work)

a. The National Directory of New Hires (NDNH) – 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.

b. State Directories of New Hires – This tool provides information similar to the NDNH, but only contains 

data reports from employers within the state.

c. 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)

a. SIDES – 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.

3. Verification of Claimant Identity and Other Fraud Prevention Activities

a. State Departments of Motor Vehicles – Helps verify the identity of the claimant.

b. U.S. Social Security Administration – Helps confirm identity and Social Security benefits.

c. Systematic Alien Verification for Entitlement (SAVE) – Maintained by the U.S. 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.

d. State and Local Prison Records – Some states match claimant data against these records to prevent fraud 

in the program.

e. 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.
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FY 2014 Agency Financial Report 169

4. Tax Fraud Detection

a. 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.

b. 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

a. 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.

b. Reemployment and Eligibility Assessments – In-person claimant interviews conducted at American Job

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.

UI-IV. UI Improper Payment Reporting 

Table UI-1 shows the Improper Payment Reduction Outlook for the UI program for FY 2013 – FY 2017. The FY 2013 

improper payment rates shown in the table uses the prior estimation methodology, which nets out improper 

payment recoveries. In accordance with IPERIA, which requires agencies to include all identified improper payments 

in reported estimates regardless of whether the improper payment in question has been or is being recovered, DOL 

updated the methodology for FY 2014. This change in methodology resulted in an increase in improper payment 

rate targets beginning in FY 2014.

Table UI-1A: UI Improper Payment Reduction Outlook FY 2013 – FY 2017 ($ in millions)

FY 20131 FY 2014 FY 2015 (Targets) FY 2016 (Targets) FY 2017 (Targets)

UI Program 

Outlays $66,788 $48,412 $37,776 (estimated) $37,938 (estimated) $38,759 (estimated)

Est. IP% Est. IP$ Est. IP% Est. IP$ Est. IP% Est. IP$ Est. IP% Est. IP$ Est. IP% Est. IP$

Improper 

Payment 

Rate

9.32% $6.225 11.57% $5,604 11.34% $4,284 11.14% $4,226 10.94% $4,240

Overpayment 

Rate

8.82% $5,891 11.16% $5,404 10.91% $4,121 10.72% $4,067 10.52% $4,077

Underpayment 

Rate

0.50% $334 0.41% $200 0.43% $162 0.42% $159 0.42% $163

1 FY 2013 improper payment rate results shown in the table uses the estimation methodology which nets out improper payment recoveries 

made.
Other Information

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170 United States Department of Labor

The rates were determined as described in Section UI-II. – UI Statistical Sampling and applied to the estimated 

outlays for the fiscal year. UI rates are estimates based on the BAM statistical survey of State UI, UCFE, and UCX 

payments.

An estimated 3.19% of UI benefits were overpaid due to fraud in FY 2014, compared with a 2.89% fraud rate in FY 

2013. Overpayments due to fraud are included as part of both the IPIA Rate and supplemental overpayment rates.

UI-V. 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 areas that offer the greatest opportunity for improvement.

The Department coordinates with states to recover UI overpayments. Each state’s 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 Social Security Numbers with State and National Directories of New Hires, 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 the Treasury Offset Program (TOP), state income 

tax offsets, and direct cash reimbursement from the claimant. From FY 2008 through FY 2013, approximately $6.85 

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 2014, 42 states have implemented TOP and 5 other states are in 

various stages of implementation. An estimated $377.1 million in UI overpayments were recovered through TOP in 

FY 2014. Additionally, on December 26, 2013, the President signed into law the Bipartisan Budget Act. This Act 

amended section 303 of the SSA to require states, as a condition for receipt of grants to administer their UI 

programs, to use the TOP to recover covered UI debt that remains uncollected as of the date that is one year after 

the debt was finally determined to be due and collected.

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 OIG and other law enforcement agencies;

• State and Federal prosecution; and

• Establishment of interest and penalties on overpayments, which adds an incentive to repay quickly.
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FY 2014 Agency Financial Report 171

Table UI-2 provides a 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 Extended 

Unemployment Compensation Account (EUCA) within the UI Trust Fund.

Table UI-2: UI Overpayments Established and Recovered by Fiscal Year (Excluding Waivers) ($ in millions)

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 

%

2008 $1,002 $571 56.99% $1,010 $573 56.72%

2009 $1,456 $851 58.43% $1,736 $915 52.68%

2010 $1,906 $966 50.67% $2,834 $1,180 41.63%

2011 $1,887 $998 52.88% $2,996 $1,299 43.36%

2012 $1,740 $1,015 58.34% $3,021 $1,400 46.34%

2013 $1,576 $1,077 68.36% $2,452 $1,513 61.69%

The states are required to report quarterly on overpayment detection and recovery activities on the 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. 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 of Circular A-123.
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Table UI-2.1 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 UI-2.1: 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 

(excluding waivers)

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%

2012 $50.61 $1.740 3.44% $1.015 58.33%

2013 $41.57 $1.58 3.79% $1.077 68.36%

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 $0.928 1.29% $0.214 23.04%

2011 $52.66 $1.109 2.11% $0.301 27.15%

2012 $39.58 $1.281 3.24% $0.385 30.04%

2013 $25.75 $0.877 3.40% $0.436 49.71%

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; therefore, states are unable to offset overpayments 

against 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 contributed to the increase in recoveries of EUC overpayments 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.
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• 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 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 

identify and possibly recoup 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. Table UI-3 shows the 

payment recapture audit reporting for the UI program. Amounts include State UI, UCFE, UCX, EB, and EUC 

programs. Data for FY 2014 are estimated based on ETA 227 reports from July 1, 2013, through June 30, 2014, the 

most recent period for which data are available.
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Table UI-3: Payment Recapture Audit Reporting ($ in millions)

Status Amount

Amount Subject to Review for Current Year (CY) 2014 Reporting $48,412

Actual 2013 Amount Reviewed and Reported (see note 1 below) N/A1

Amount Identified for Recovery in 2014 (see note 2 below) $2,1402

Amount Recovered in 2014 (see note 2 below) $1,4162

% of Amount Recovered Out of Amount Identified in 2014 66.15%

Amount Outstanding in 2014 (see note 2 below) $1,5712

% of Amount Outstanding Out of Amount Identified in 2014 (see note 2 below) 73.34%2

Amount Determined Not to be Collectable in 2014 (see note 3 below) $1,4963

% of Amount Not Collectable out of Amount Identified in 2014 (see note 3 below) 69.90%3

Amounts Identified for Recovery in Prior Years (PYs) 2008-2013 $13,509

Amounts Recovered in PYs 2008-2013 $6,851

Cumulative Amounts Identified for Recovery (CY + PYs) $15,649

Cumulative Amounts Recovered (CY + PYs) $8,042

Cumulative Amounts Outstanding (CY + PYs) (see note 4 below) $3,7044

Cumulative Amounts Determined Not to be Collectable (CY & PYs) (see note 3 below) $3,9033

Notes for Table UI-3 1 UI payments are reviewed by each state, not by the DOL, in accordance with the provisions of the Single Audit Act and state UI law. Each 

state follows review procedures, such as matching paid claims against the NDNH and other databases to detect benefits which are 

improperly paid and use a variety of tools to recover benefits overpaid, such as leveraging the U.S. Treasury Offset Program. 

Overpayments detected and recovered are reported to DOL on the Quarterly Overpayment Report, ETA 227.

2 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.

3 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).

4 Includes total overpayments reported as outstanding on the ETA 227 and EUC 227 reports (line 313) as of the report date.
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Table UI-4 shows the UI program’s established annual targets which drive performance. The targets are based on 

the rate of recovery. Amounts include UI, UCFE, UCX, EB, and EUC programs.

Table UI-4: Payment Recapture Audit Targets ($ in millions)

Type of 

Payment

Current 

Year 2014 

Amount 

Identified

Current Year 

2014 

Amount 

Recovered

Current Year 

Recovery Rate 

(Amount 

Recovered / 

Amount 

Identified)

2014 

Recovery 

Rate 

Target

2015 

Recovery 

Rate 

Target

2016 

Recovery 

Rate 

Target

UI Benefits $2,1401,2 $1,4162 66.15%2 58% 65% 68%

Notes for Table UI-4 1 Excludes amounts waived for recovery. 2 2014 amounts based on data for the period July 1, 2013 through June 30, 2014, the most recent period for which data 

are available.

Table UI-5 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). 

Amounts include State UI, UCFE, UCX, and EB programs. Aging data are not available for EUC overpayments. Aging 

status is as of June 30, 2014.

Table UI-5: 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 $875.3 $695.7 $2,133.4

Table UI-6 describes the purpose for which recaptured funds were used.

Table UI-6: 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 Note Note Note $1,416 Note Note

Note: Federal law prohibits the use of UI funds recaptured for any purpose other than the original purpose.

No UI benefit overpayments were recovered outside of payment recapture audits.

UI-VI. Accountability

ETA is responsible for Federal oversight of state UI programs, including oversight of state activities to reduce and 

recover improper UI benefit payments. ETA has taken and continues to take the steps discussed below 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 
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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. The UI performance measures 

are summarized at http://workforcesecurity.doleta.gov/unemploy/pdf/Core_Measures.pdf.

In response to the level of improper payments in the UI program, ETA developed a Strategic Plan to address several 

root causes of improper payments which were described in detail earlier in this document at Section III – UI 

Corrective Actions. 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 

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 BAM survey to measure and report the percentage, 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 ETA’s Office of Unemployment Insurance (OUI)

Website:

http://www.oui.doleta.gov/unemploy/bam/2013/IPIA_2013_Benefit_Accuracy_Measurement_Annual_Rep

ort.pdf

Data review, analysis and publication are included in the performance plan of the Administrator of ETA’s 

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, 

available at http://oui.doleta.gov/unemploy/3yr_ranking.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 were described in detail earlier in this document at Section UI-III. UI Corrective 

Actions.

• UI Integrity Center of Excellence: In September 2012, the Department funded a cooperative agreement 

with the New York State Department of Labor (NYSDOL) to establish a national UI Integrity Center of 

Excellence. The Center was created to develop, implement, and promote innovative program integrity 

strategies to reduce improper payments, including the prevention and detection of fraud, in the UI 

program. The Department worked collaboratively with five other states, and the National Association of 

State Workforce Agencies (NASWA), to establish a Steering Committee to guide the Center’s work and 
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ensure its strategies support all states’ integrity activities, creating greater efficiency, improving operations, 

and saving millions of taxpayer dollars. The Center’s focus is on the following key activities and strategies:

o Developing data analytics and predictive modeling methodologies and tools that are transferable and 

expandable for all states to improve UI fraud prevention and detection;

o Developing a secure method to rapidly alert states to new fraud schemes as they are identified;

o Serving as a laboratory for innovation by supporting the development and piloting of new strategies 

and tools to combat improper payments and fraud, building on the work of states, other Federal 

government agencies and the private sector;

o Supporting knowledge sharing among states by identifying and disseminating promising practices for 

state fraud prevention across the UI program; and

o Increasing staff capacity by developing and delivering training on fraud solutions and integrity 

strategies to all states.

In FY 2015, new activities to be implemented by the Center include development of a model BPC operation 

and development of integrity business requirements for use by states when modernizing their IT 

infrastructure. In addition, states will receive funding for innovative solutions that reduce improper 

payments. The Department is also working with the Center to identify improved data cross-matching 

opportunities for prevention of improper payments.

• National Integrity Summit: To provide a forum for disseminating successful practices for preventing, 

detecting, and recovering UI overpayments, ETA, working with NASWA sponsors a biennial National 

Unemployment Insurance Integrity Professional Development Conference. The 2014 UI Integrity Summit 

was held in May 2014 at DOL headquarters in Washington, D.C. The summit featured the UI Integrity 

Center of Excellence and included plenary sessions and training workshops on program integrity strategies 

to help target and prevent improper payments. The event was well attended by state representatives, 

other Federal agencies and staff from OIG. Over 164 individuals representing 52 state workforce agencies 

attended the event.

As part of its monitoring and oversight responsibilities of each 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.

UI-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 

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 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
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178 United States Department of Labor

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 available integrity tools. 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 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 performance capacities, capabilities, and adaptability to new UI 

programs and integrity strategies. In response, between FY 2005 and FY 2012 the Department provided 

approximately $264.7 million to states in supplemental funding for integrity-related projects, between FY 2009 and 

FY 2013, awarded an additional $344.6 million to five state consortia. (A description of these consortia is provided 

earlier in this document at Section UI-III. UI Corrective Actions.) 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.

The Department solicited state Supplemental Budget Request grant proposals in Unemployment Insurance Program 

Letter (UIPL) No. 13-14, issued in June 2014. (UI integrity activities eligible for Supplemental Budget Request grants 

are discussed earlier in this document at Section UI-III. UI Corrective Actions.) Based on positive outcomes from 

previous investments in integrity efforts, UIPL No. 13-14 also invited states that commit to implementation of all 

core activities, or have already implemented the core activities, to submit Supplemental Budget Request grant 

proposals for consortium projects.

In September 2014, ETA awarded $82 million in supplemental funding to 48 state workforce agencies for the 

prevention, detection, and recovery of improper UI benefit payments; improve state performance; and address 

outdated IT system infrastructures necessary to improve UI program integrity. Included in these awards are grants 

for five existing consortia totaling $15.8 million for projects designed to improve their UI IT systems for overall 

program quality, performance, and integrity.

UIPL Nos. 10-14 and 13-14, Change 1, issued in April, 2014 and June, 2014, respectively, solicited Supplemental 

Budget Request grant proposals to enable states to expand or implement REA programs., ETA awarded a total 

$73.7 million to 42 state workforce agencies to implement or continue re-employment and eligibility assessments 

for UI beneficiaries. These UIPLs are available at:

http://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=6924; and

http://wdr.doleta.gov/directives/corr_doc.cfm?DOCN=8615

Additionally, the Department solicited state Supplemental Budget Request grant proposals to implement worker 

misclassification detection and enforcement initiatives in the state UI programs in UIPL 18-14 issued in July, 2014 

and available at http://wdr.doleta.gov/directives/attach/UIPL/UIPL_18-14.pdf. Funding for the $10.2 million in 

grants awarded to 19 states was authorized in the Consolidated Appropriations Act of 2014 for “activities to 

address the misclassification of workers.” Under an innovative “high performance bonus” program, four states 

shared proportionately $2.0 million in grant funds, due to their high performance, or most improved performance, 

in detecting incidents of worker misclassification.

UI-VIII. Barriers.

The UI program has several statutory provisions establishing requirements that impose challenges to reducing 

improper payments.

Federal-State Partnership: Each state administers the UI program according to its own laws and policies, which 

must conform to broad federal requirements. Improper payment rates often reflect differences in state law. For 

example, states with strict active work search requirements will have perennially higher overpayment rates than 
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FY 2014 Agency Financial Report 179

those states with minimal active work search requirements. It is extremely resource intensive for states to verify 

and enforce claimant work search contacts with employers given the more pervasive role employment search 

engines, large employment application databases, and online social networks play in the modern job search 

process.

Additionally, States have bottom-line authority to set operational priorities. The Department has limited authority 

to ensure states use their funding to pursue improper payment reduction activities.

Delays in receiving separation information: Section 303(a)(1) of the SSA requires payment “when due”, prohibiting 

states from suspending UI benefit payments until an official determination has been made that payments are no 

longer due. As discussed in the UI Program Integrity Overview, above, there are strong policy reasons for ensuring 

prompt payment of benefits when due; UI is a critical safety net program providing individuals funds to pay for 

necessities while searching for the next job, and UI funds circulating in the economy during times of increased 

unemployment acts has a stabilizing impact on the economy. In compliance with the “when due” provisions of the 

law, states will make the determination of whether or not to pay benefits based on the best available information. 

A major challenge to addressing improper payments is created when claimants, employers, and third party 

administrators working for employers fail to report information timely and/or accurately.

State Resource Priorities: In recent years state staffing resources have been negatively impacted in two ways. First, 

during the recent recession, many state agencies diverted integrity staff to claims taking functions to process 

overwhelming workloads. In addition, Federal funding for state UI operations has been adjusted for inflation only 

once since at least 2004. Also, state furloughs and hiring freezes have reduced the UI administrative staff overall. 

Due to these personnel dislocations and staffing mismatches, UI claims adjudication was often conducted by less 

experienced or inadequately trained staff, resulting in an increased number of claims processing errors.

Second, state agencies’ employees who leave through normal attrition or early retirements are often replaced by 

less experienced staff. Pressures on state budgets have reduced training, further contributing to the decrease in 

skilled staff who can accurately administer the relatively complex UI program.

Work Search as a Root Cause: Developing strategies to address work search errors, which is the highest root cause 

of UI improper payments nationally, is very challenging. State eligibility requirements with respect to active work 

search vary significantly among states and in some cases use vague language making it difficult to interpret 

consistently. More states are implementing stricter work search requirements resulting in significantly increased 

work search errors. It is very difficult for state UI agencies to verify claimant work search contacts with employers, 

given the methods of employment application vary widely in the current labor market, such as the posting of 

resumes on employment search engines and large databases. In addition, employers do not maintain records on all 

applicants or individuals submitting resumes, also adding to the challenge of validating work search. Strategies to 

address these challenges are few. The most effective strategy is random work search audits, which is workload and 

resource intensive and states have not been specifically required or funded to do random work search audits. As a 

result of all these factors, work search improper payments are increasing and driving up the overall UI improper 

payment rate.

Information Technology (IT) Capacity: State IT capacity has been strained by the need to reprogram for the several 

extensions of temporary unemployment compensation programs. IT resources are not available for integrity 

functions, such as cross-matching claimant information with the new hire and other databases. Many state systems 

are several decades old and cannot be easily adapted to new improper payment detection methods, such as 

generating follow-up communications with claimants and employers to verify new hire matches.
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UI-IX. Additional Comments

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 developing Integrity legislation. The package is completing the departmental approval process, and ETA is 

drafting legislative specifications and language for clearance by OMB. Legislative language is expected to be 

transmitted to Congress, pending OMB approval.

The Federal Employees’ Compensation Act (FECA) Program

FECA Program Integrity Overview

The Federal Employees' Compensation Act provides workers' compensation coverage to approximately three 

million federal and postal workers around the world for employment-related injuries and occupational diseases. 

The Office of Workers’ Compensation Programs and its Division of Federal Employees' Compensation (DFEC) have 

responsibility for administering the Act through twelve district offices and national office staff. DFEC adjudicates 

new claims for benefits and manages ongoing cases; pays medical expenses and compensation benefits to injured 

workers and survivors; and helps injured employees return to work when they are medically able to do so.

The FECA program operates on a Chargeback year that runs from July through June. Approximately 8.5 million 

FECA payments totaling $2,894,367,589 were attributable to Chargeback Year 2014 (CBY 2014). These totals reflect 

two basic types of FECA benefit payments: “compensation” and “medical” payments.

• Compensation payments are those made to replace lost wages for a work related injury, benefits for a 

permanent physical impairment due to those injuries, as well as benefits to beneficiaries of federal 

employees that die as a result of a work-related injury.

• Medical payments are made to cover the expenses of medical services, equipment and supplies incurred 

from treatment for illness and/or injury sustained while an employee was engaged in job-related activities.

In CBY 2014, medical payments accounted for 90% of all FECA payments; the remaining 10% were compensation 

payments. By contrast, the total amount of compensation payments was about $1.94 billion (about 67.1%), 

whereas the total amount of medical payments was $0.95 billion (about 32.9%).

FECA-I. Risk Assessment

While previous risk assessments had considered the improper payment rate in the FECA program to be below 1.5%, 

OWCP chose to begin estimating the improper payment rate on an annual basis through a sampling methodology. 

The FY 2014 improper payment estimate is the first estimate prepared by OWCP using this methodology. For FY 

2014, the estimated improper payment rate for the FECA program is 2.5%, with an estimated dollar amount of 

$72.36 million, consisting of $59.92 million in overpayments plus $9.26 million in underpayments plus $3.18 million 

in estimated fraud. The amount recovered is $33.13 million.

FECA-II. Statistical Sampling

OWCP consulted with Office of the Chief Financial Officer (OCFO) to develop a sampling methodology and approach 

to improper payment calculation. OWCP also consulted with the DOL Inspector General’s Office to determine a 

methodology for estimating fraud that could be added to the improper payment rate estimate. Ultimately this two 

part approach was approved by OMB for utilization by OWCP in FY 2014. 
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The improper payment rate component for non-fraudulent FECA payments was derived by random sampling with 

replacement. The sample sizes used (504 compensation payments and 504 medical payments, for a total of 1,008 

payments) were selected and validated by the OWCP statistician to assure a 90% confidence interval with a 

precision of 2.5%. Each sampled payment was closely examined in accordance with the law and program standards 

to determine whether or not it was proper. The absolute value of any improper payments found in the sample were 

totaled and projected to a dollar amount that represents the improper payment rate for the entire population.

FECA-III. Corrective Actions

All corrective actions are based on root causes ascertained through years of analysis. OMB established the following 

categories to classify root causes of improper payments in Federal programs:

• Documentation and Administrative Errors

• Verification Errors

• Authentication and Medical Necessity Errors

Table FECA-1 displays the breakdown of root causes.

Table FECA-1: OMB-Specified Causes of Errors

Overpayment Causes (OMB Classification) Percent of 

Overpayments

Documentation and Administrative Errors 76.8%

Verification Errors 0.0%

Authentication and Medical Necessity Errors 23.2%

Reducing Improper Payments in the FECA Program 

A number of improper payments in the FECA program were “technically proper” when they were initiated, but due 

to current payment cycles, the payments could not be adjusted when additional information was received. These 

payments are considered authentication errors in the FECA-1 table above. In order to reduce this aspect of the 

FECA improper payment rate, OWCP has already begun discussions with the Treasury to shorten the current 

payment cycles in order to significantly reduce the number of technically proper payments. The program is also 

planning to engage in greater outreach efforts to the employing agencies, stressing the importance of timely and 

accurate reporting of payment information to FECA. The Documentation and Administrative Error Category above 

reflects pay rate errors and other errors that result from the lack of timely and accurate documentation from 

employing agencies. In addition, OWCP is developing a Program Integrity Unit with auditors and data analysts to 

provide greater oversight and analysis of payment accuracy. OWCP has also contracted with a data analytics firm to 

build agency capacity in this area.
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FECA-IV. Improper Payment Reporting

Table FECA-2 shows the Improper Payment Reduction Outlook, for the FECA program, for FY 2014 – FY 2017.

Table FECA-2: FECA Improper Payment Reduction Outlook FY 2014 – FY 2017 ($ in millions)

FY 2014 was intended as a baseline year, so Improper Payment reduction targets for FY 2015 to FY 2017 will be set 

in FY 2015 pending additional guidance and consultation regarding OWCP’s estimation methodology and the 

selection of payment accuracy enhancement strategies.

V. FECA Reporting on the Recapture of Improper Payments

Prior analysis of the FECA program showed that recovery audits would not be cost effective.

Table FECA-3 provides a summary of FECA overpayments established and recovered through normal business 

processes used by the FECA Program.

Table FECA-3: FECA Overpayments Established and Recovered by Fiscal Year ($ in millions)

Fiscal Year Overpayments Established Overpayments Recovered Recovered %

2014 $39.48 $32.93 83.42%

Table FECA-4: Payment Recapture Audit Reporting ($ in millions) NOT APPLICABLE

Table FECA-5: Payment Recapture Audit Targets ($ in millions) NOT APPLICABLE

Table FECA-6 is an aging schedule of the amount of overpayments identified that are outstanding (i.e., 

overpayments that have been identified but not recovered).
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Table FECA-6: 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)

FECA Benefits $43.61 $5.49 $6.48

Table FECA-7: Disposition of Recaptured Funds ($ in millions) NOT APPLICABLE

VI. FECA Accountability

The FECA improper payment rate includes a fraud component. For the purposes of rate calculation, OWCP 

considers fraudulent payments to be those payments for which fraud has been admitted or proven in the judicial 

system. A fraudulent payment rate was determined by averaging the court-ordered restitution awarded to FECA as 

the result of fraud across a three year period. Using this process, the average for the CBY2014 fraud estimation was 

$3,213,635 per year, which translated to 0.0011 or 0.11%. The overall improper payment rate, less fraud, was 

2.39%. While this is above the IPERA threshold for risk susceptibility, issues identified during OWCP’s improper 

payments review should lead to substantial improvements in the FECA rate in the coming years.

VII. FECA Agency Information Systems and Other Infrastructure 

OWCP utilizes the Integrated Federal Employees Compensation System (iFECS) to administer the FECA program. 

iFECS is a major application that provides a case management system to support DFEC core business functions in 

administering FECA. iFECS includes the iFECS system and three sub-components, the Agency Query System (AQS), 

the Claimant Query System (CQS) and the Employees' Compensation Operations and Management Portal (ECOMP). 

iFECS is a three-tier application that was established to provide FECA with an automated case management system. 

iFECS provides data processing, program management, financial management, and decision support functionalities 

to authorized users in OWCP’s Division of Federal Employees’ Compensation (DFEC). DFEC is a claims processing 

organization adjudicating workers’ compensation claims for all Federal employees and certain non-Federal 

employees specifically covered under FECA. iFECS maintains an automated record of all claims filed, the 

adjudicatory status of those claims and benefits paid and denied. Data on entitlement, benefits payment status and 

attorney fees maintained on iFECS is available in accordance with the Privacy Act to authorized claimants, 

authorized representatives and authorized user organizations verbally via telephone and in paper/electronic 

formats.

VIII. FECA Barriers and Agency Response

The largest category of discrepancies identified is payments that were technically proper but were issued 

improperly due to payment cycle limitations with the Treasury. Specifically, the improper payment was due to the 

fact that FECA was notified of a claimant’s ineligibility AFTER the payment cycle had closed, but before the payment 

was issued, yet was still unable to stop the payment. Had these technically proper payments been stopped before 

issuance, the FECA improper payment rate would have dropped to 1.69%.

The other major category highlighted an ongoing difficulty that FECA has with its payment process, namely reliance 

on reporting by other Federal agencies. The FECA program has to rely on the information supplied by the injured 

worker’s employing agency in order to determine their benefit payments and has no mechanism to determine if the 

agency reporting is accurate. Untimely or inaccurate pay rate information provided by the employing agency leads 

to improper payments attributed to the FECA program, even if a DFEC employee keyed the payment accurately 

according to the information available. In essence, this increases FECA’s improper payment rate through no fault of 

the program.
Other Information

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184 United States Department of Labor

Lastly, the urgency of FECA payments must be considered when reviewing payment performance. FECA wage-loss 

payments are issued to injured federal employees who are likely without any other source of income, so it is 

imperative that the program issues the payments in a very timely manner. This restricts the program’s ability to put 

additional controls in place to ensure payment accuracy, such as a more detailed post-payment review process, in 

the interest of avoiding hardship to the claimants it serves.

Workforce Investment Act Title I Programs

The stated intent of the Workforce Investment Act (WIA) of 1998 (and the objective of its multiple programs) is “to 

consolidate, coordinate, and improve employment, training, literacy, and vocational rehabilitation programs in the 

United States” through grants to state agencies. It is important to note that WIA programs are not entitlement 

programs – government programs that “provide individuals with personal financial benefits to which an indefinite 

number of potential beneficiaries have a legal right...whenever they meet eligibility conditions specified by the 

standing law that authorizes the program."1 (Examples of entitlement programs include Social Security, Medicare 

and Medicaid, most Veterans' Administration programs, federal employee and military retirement plans, 

unemployment compensation, food stamps, and agricultural price support programs.) WIA funds are awarded to 

states based on a complex statutory formula, driven by unemployment rates and other economic factors—not by 

the number of “participants.” Governors then allocate those limited funds through the nation’s workforce 

development system, which was established by WIA.

The “core” of WIA is Title I – Workforce Investment Systems, which authorized funding to be provided through 

three separate programs: Adult, Dislocated Worker and Youth Programs. These programs primarily provide grant 

funds to states, which, in turn, award the majority of funds to state and local Workforce Investment Boards (WIBs), 

which award sub-grants or contracts to American Job Centers (previously known as One-Stop Centers) and eligible 

non-profit service providers, such as Community Colleges, local school districts, or charities. 

WIA-I. Risk Assessment

It is important to understand the complex funding stream and governance structure for WIA grant dollars when 

assessing the risk of improper payments. While WIA is often referred to as one program, in actuality, the law 

authorizes nearly a dozen different programs. The “core” WIA programs correspond to three distinct funding 

streams: Adult, Dislocated Workers, and Youth, each of which has different objectives and eligibility requirements. 

The original legislation provided that eighty-five percent of adult and youth funds be allocated to local area with the 

remainder (15%) reserved for statewide activities. In recent years, the amount reserved for statewide activities was 

reduced. For Program Year 2014, that percentage was 8.75%. For dislocated workers, 20% is reserved by the 

Secretary of Labor for National Emergency Grants, dislocated worker demonstration efforts, and technical 

assistance. Of the remaining 80%, the original law allocated 60 percent to local areas, with 15 percent reserved for 

statewide activities and 25% reserved for state rapid response efforts. The percentage for Program Year 2014 for 

statewide activities was reduced to 8.75%.

States may merge the set-asides for statewide activities from the three separate funding streams (dislocated 

workers, adults, and youth) if they choose to do so (for example, state set-aside funds from the adult stream may 

be used for statewide youth activities, etc.). Also, localities (with the permission of the Governor) may transfer 

amounts among the Adult and Dislocated Worker programs up to a certain percentage.

In FY 2014, the estimated rate of improper payments of WIA programs is about 0.37%. Applied to FY 2014 outlays 

of $2.5 billion, the estimated dollar amount is approximately $9.2 million.

 1 "A Glossary of Political Economic Terms," Paul M. Johnson, Ph.D., Auburn University 1994-2005.
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The following sections provide a description of each of the three core WIA programs:

WIA Adult Program: (Formula Grants)1

The Adult Program provides employment and workforce development services to adults, including low-income 

adults, to increase their incomes through occupational and related skills acquisition. The WIA Adult program 

prepares workers — particularly disadvantaged, low-skilled, and underemployed adults — for employment by 

helping them obtain employment in industries and occupations that offer good wages and opportunities for 

advancement; match their current skills to better jobs or helping them improve their skills through training so they 

can compete for better jobs; and develop the skills they need to succeed on the job and stay employed.

Funding for these services is allotted through grants to states based on a statutory formula. States, in turn, 

distribute resources by formula to local workforce investment areas. States and localities use the funds to provide a 

statutorily prescribed set of employment and training services at the state and local level. Grant funds pay 

organizations for services to individuals and do not provide direct cash payments to individuals. (Source: 2011 and 

2013 Catalog of Federal Domestic Assistance and DOL Congressional Budget Justification for FY 2014)

WIA Dislocated Worker Assistance Program (Formula Grants)2

The objective of the Dislocated Worker Program is “to support the coordination, development, and provision of 

appropriate training, technical assistance, staff development and other activities, including assistance in replicating 

programs of demonstrated effectiveness to States, local areas, and other entities involved in providing assistance to 

dislocated workers, as well as promoting the continuous improvement of assistance provided to dislocated 

workers.”

The program offers employment and training services to individuals who have lost their jobs, including those 

dislocated as a result of plant closings or mass layoffs, and who are unlikely to return to employment in their 

previous industries; formerly self-employed individuals; and displaced homemakers who have been dependent on 

the income of another family member but are no longer supported by that income. Funding for this program is 

allotted to States based on statutory formula. States, in turn, distribute resources by formula to local workforce 

investment areas.

WIA offers a variety of service options to dislocated workers, ranging from basic core services, such as job search 

and placement assistance and real-time labor market information, to more intensive services, such as 

comprehensive skills assessments, career counseling and career planning. For dislocated workers needing new or 

upgraded skills, training services are available. These services include, but are not limited to, occupational skills 

training, On-the-Job-Training, programs that combine workplace training and related instruction, including 

Registered Apprenticeship, skill upgrading and retraining, adult education and literacy training, and customized 

training. In addition, dislocated workers may receive supportive services, such as transportation, child care, and 

needs-related payments to assist them in entering into and remaining in training. Grant funds pay organizations for 

services to individuals and do not provide direct cash payments to individuals. (Source: 2011 and 2013 Catalog of 

Federal Domestic Assistance and DOL Congressional Budget Justification for FY 2014)

 1 Statutory Authorization: Public Law 105-220, 20 U.S.C. 9201, Regulation: 20 CFR Part 652 2 Public Law 105-220; 29 USC 2915
Other Information

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186 United States Department of Labor

WIA Youth Activities: (Formula Grants)

The objective of the Youth Program is to help low income youth, between the ages of 14 and 21, acquire the 

educational and occupational skills, training, and support needed to achieve academic and employment success 

and successfully transition into careers and productive adulthood. (Source 2013 Catalog of Federal Domestic 

Assistance CFDA)

Program funds are allocated by formula to state and local areas to deliver a comprehensive array of youth 

workforce investment activities designed to help youth obtain skills and knowledge to succeed in a knowledgebased economy, including in growing and emerging industry sectors such as health care. The WIA Youth program 

targets low-income youth (ages 14 through 21) with barriers to employment. Eligible youth are deficient in basic 

skills or are homeless, runaways, pregnant or parenting, ex-offenders, school dropouts, or foster children. The 

program serves both in- and out-of-school youth, including youth with disabilities and other youth who may require 

additional assistance to complete an educational program or to secure and hold employment. Service providers 

prepare youth for employment and post-secondary education by stressing linkages between academic and 

occupational learning. They also assist youth by providing tutoring, alternative secondary school services, summer 

and year-round work experiences, occupational training, supportive services, leadership development 

opportunities, mentoring, counseling, and follow-up services. Grant funds pay organizations for services to 

individuals and do not provide direct cash payments to individuals. (Source: DOL FY 2014 Congressional Budget 

Justification)

WIA is Intentionally Flexible

The law itself is designed for flexibility, primarily so that state and local officials can respond as needed to regional 

labor market conditions. To ensure that training programs continued to meet the immediate needs of local 

businesses, as intended, WIA gave significant authority to local entities and state governments. Section 133(b)(4) 

authorizes workforce investment areas, with the approval of the Governor, to transfer up to 20 percent 

(subsequently increased to 30 percent in 20031

) of Adult Activities funds to Dislocated Workers Activities, and vice 

versa. In 1998, when WIA was enacted, the economy was strong and the paramount concern was that employers 

needed workers with certain skills. The focus shifted with the Great Recession, changing the needs of stakeholders. 

Funds are used as an investment in the local labor force, at the discretion of local officials working to achieve the 

goals established by Governors of each state.

WIA and its recently-passed successor, the Workforce Investment and Opportunity Act (WIOA) emphasize 

outcomes and results (e.g., wage levels post-employment, number of participants earning an industry-recognized 

credential). For this reason, both WIA and WIOA are intentionally flexible, giving Governors significant discretion 

and the ability to request waivers from certain requirements. For example, WIA Adult services are available for 

anyone over the age of 18, with “priority for intensive and training services for public assistance recipients and low 

income populations when funds are limited.”

Factors Contributing to a Low Risk Environment

Several conditions inherent to the structure of the WIA Programs create a scenario where improper payments are 

highly unlikely.

• Individuals do not receive cash payments – they receive services delivered through government 

employees or eligible training providers

• Training providers are screened and approved and subject to strict performance measures

• ETA has a well-established control environment to communicate requirements and monitor 

grantees (described further in the section on “Barriers”)

 1 Public Law No. 108-7
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WIA-II. Statistical Sampling

The WIA grant program’s funding stream and structure make it extremely difficult to directly sample grant 

payments and develop an all-encompassing statistically valid estimate of improper payments for several reasons: 

• The majority of funding is disbursed to states through formula grants (amounts set by statutory formulae 

based on economic conditions), which are then passed through to thousands of recipients, including local 

Workforce Investment Boards, non-profit entities, local governments or educational institutions located 

across the country. 

• With the multitude of different types of service providers, the differences in state and local administration 

and the many different eligibility requirements for each program authorized by WIA, developing a statistically 

valid, generalizable measurement is next to impossible. 

• Financial records and other documentation supporting WIA outlays at the state level and lower tiers are 

located at the grantee and sub-grantee locations rather than at the DOL National Office. 

• Since no direct cash payments go to individuals, and participants are not legally entitled to a specific amount 

of financial “benefit,” it is unclear what scenario or scenarios would constitute an “improper payment.”

The most effective means to gathering integrity data for grant programs is the use of reports required by the Single 

Audit Act of 1984, as amended in 1996. The Act and its implementing guidance, OMB Circular A-133, established 

uniform audit requirements for states, local governments, Indian Tribes and non-profit organizations. 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 FAC 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. While the use of Single Audits has limitations due to the nature of Single Audits, it is still a good 

representation of a statistical analytically prepared estimate for these programs.

DOL determined that it would not be cost effective to evaluate a completely 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. 

Section 3 of IPERA and OMB Circular No. A-123 Appendix C specify that each agency’s OIG review agency improper 

payment reporting in the Agency Financial Report (AFR), and accompanying materials, to determine whether the 

agency complied with IPERA. DOL OIG issued its report, The Department of Labor’s Compliance with the Improper 

Payments Elimination and Recovery Act of 2010 in the FY 2013 Agency Financial Report (Report No. 03-14-004-13-

001) on April 15, 2014, with the following repeat recommendation for WIA Title I programs:

“Consider methods for improving the WIA sampling methodology to provide a more complete 

estimate of improper payments, and include information on the limitations of the data used in the 

estimation of WIA overpayments in the AFR.” (p. 15)

In response to OIG’s recommendation, DOL determined that a quantitative assessment of Eligibility Findings in A133 reports would provide the most effective means to estimating an improper payment rate. While keeping the 

same statistical methodology, DOL selected an alternative Single Audit data point and calculated numbers for the 

prior year (FY 2013) for comparison. 

A-133 audits are conducted by independent auditors based on uniform criteria laid out in the A-133 Compliance 

Supplement, which lists requirements and categorizes them into 14 types, not all of which, in the event of 

noncompliance, would cause improper payments. Among the 14 types is “Eligibility.”

As described in the A-133 Compliance Supplement, the main objective of the eligibility compliance requirement 

is to ensure that only eligible individuals or organizations participate in Federal assistance programs. While 

criteria for determining eligibility varies from program to program, the objective that only eligible individuals or 
Other Information

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188 United States Department of Labor

organizations participate is consistent across all Federal programs. To demonstrate compliance, recipients must 

first assure that proper eligibility determinations are made and then must provide assurance of such 

determination through documentation.1 WIA Title I eligibility requirements for each program are based in statute 

and regulation and are very specific nature. 

For each major program the auditor must test each compliance requirement. All audit findings are reported in the 

Federal Audit Clearinghouse (FAC) as part of a grantee’s full audit report. Findings are associated to program costs 

according to the CFDA number listed in the database.

The vast majority of DOL’s grantees undergo a Single Audit. For WIA grantees, DOL analyzed more than 5,000 

reports from FY 2012 and FY 2011, representing all levels – from states to non-profits. Using findings data, DOL is 

able to isolate the specific areas of concern with regard to program participant eligibility – the scenario most likely 

to result in an “improper payment” – in this case, providing services to an ineligible recipient.

DOL focused on the core programs included in the A-133 “WIA Cluster,” which consists of the WIA Adult Program 

(CFDA No. 17.258), WIA Youth Activities (CFDA No. 17.259) and WIA Dislocated Worker Formula Grants. These 

programs are authorized by Title I of WIA. 

To isolate grant dollars associated with an eligibility finding, DOL downloaded all entries for DOL programs based on 

CFDA number from the FAC database. Since grantees enter data, some programs may be categorized incorrectly 

(e.g., using the wrong CFDA number or using a discontinued number). To ensure that all WIA Title I funds were 

captured for analysis, DOL systematically associated CFDA numbers to program clusters, based on the A-133 

Compliance Supplement, where possible, as not all programs have a Compliance Supplement.

For WIA Title I analysis, DOL uses finalized data (i.e., results of audits that have gone through the resolution 

process) by analyzing prior year data. For FY 2014, DOL analyzed data collected for FY 2011 and FY 2012 reports for 

the reasons described below.

WIA Funding Cycle

The WIA funding cycle and the timing of A-133 reports necessitates a rolling review over several years. Funds 

allotted to a State are available for expenditure during that program year and the two succeeding program years. 

Funds allocated by a state to a local area for any program year available for expenditure only during that program 

year and the succeeding program year. Funds that are not expended by a local area in this two year period must be 

returned to the state, which can use the fund for statewide projects during the third year of program availability, or 

distribute the fund to local areas that have fully expended their allocation of funds for the same program year 

within the 2-year period.

Timing of Single Audit Act Reports

Grantees must submit reports to the FAC within nine months of the end of their fiscal year, which, in many cases, 

does not correspond with the Federal fiscal year. Since the purpose of the Single Audit Act was to combine audit 

activities for awardees, audits cover multiple Federal programs managed by the auditee (e.g., auditors test for 

compliance not only with WIA programs but those of the Department of Education, the Department of Housing and 

Urban Development and others). Findings are linked to the appropriate program and its outlays using the CFDA 

Number. The programs tested may change every year based on the level of program outlays relative to the 

auditee’s total outlays, with proportionally larger programs defined as “Major Programs” for that particular 

auditee. Major programs must be tested once every three years or more often if a significant deficiency is 

identified. With WIA’s three-year funding cycle, auditees have time both to contest audit findings and to make 

adjustments in response to audit findings – thus the delay.

 1 A-133 Supplement Part 3 (2013); Section E -- Eligibility, pg. 3-E-1.
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Estimated Improper Payment Rate Calculation

The FY 2014 estimated improper payment rate for WIA Title I programs was calculated based on the probability of 

eligibility findings in Single Audit Reports (quantitative, as results are reported and associated to programs dollars) 

and OIG and GAO reports (qualitative, as these reports are primarily anecdotal and presented in a narrative 

format). DOL took the following steps:

1. Downloaded the entire Single Audit database for Fiscal years 2011 and 2012 from the FAC.

2. Isolated all DOL programs by selecting those with CFDA numbers beginning with 17.

3. Assigned A-133 Clusters based on CFDA numbers.

4. To ensure that no WIA findings are missed because of an incorrect classification, analyzed the text in the 

Program Name field to find “Workforce Investment Act” or “WIA.” Assigned any of those entries to the WIA 

Cluster.

5. To enable analysis for different WIA Title I programs, DOL further classified WIA Cluster entries into Program 

where possible (Adult, Youth, Dislocated Worker, National Emergency Grants, which is a subset of DW, etc.) 

Those listing all three CFDAs were categorized as “General.” This provided the universe of WIA program 

dollars audited, with each line of program expenditures associated with audit findings (if any) based on the 

grantee’s Schedule of Expenditures of Federal Awards.

6. Isolated Eligibility Findings, indicated by “E” in the COMPLIANCE TYPE column, providing the entire 

population of WIA grant dollars associated to an eligibility finding.

7. Developed the baseline rate analysis using the methodology described below. 

DOL analyzed each report with findings. Based on this very extensive analysis, DOL derived the error range 

and developed the estimated improper payment rate.

WIA-III. Corrective Actions

Although the rate of estimated improper payments is very low, DOL has a robust control environment focused on 

preventative actions, effective communications, and monitoring. 

Grant operations are monitored on a continuing basis to ensure that grant activities conform to requirements. 

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 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.
Other Information

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190 United States Department of Labor

All reviews are documented, and 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 Single Audit Act reports, which identify questioned costs and/or 

administrative weaknesses in need of correction. These items evaluated using the same determination process 

noted above; disallowed costs are forwarded for collection, and resolutions reported back to the OIG. In addition, 

these units participate in special grantee reviews and provide fiscal policy training for grantee and Federal staff.

WIA-IV. Improper Payment Reduction Outlook 

Table WIA-4 shows the Improper Payment Reduction outlook, for the WIA program, for FY 2013 – FY 2017. 

Table WIA-4: Improper Payment Reduction Outlook FY 2013– FY 2017 ($ in millions)

Program FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Outlays IP % IP $ Outlays IP% IP$

Est. 

Outlays

Est. IP 

% 

target

Est. IP 

$ 

target

Est. 

Outlays

Est. IP 

% 

target 

Est. IP 

$ 

target

Est. 

Outlays

Est. IP 

% 

target 

Est. IP 

$ 

target

Workforce 

Investment 

Act

$2,6381 0.194% $5.1 $2,478

Target 

0.44%

Target 

$10.9 $3,384 0.44% $14.9 $3,365 0.44% $14.8 $3,365 0.44% $14.8

Actual 

0.37%2

Actual 

$9.2

1

The preliminary FY2013 amount shown in the FY 2013 AFR has been replaced by the closing FY 2013 amount. 2 The WIA IP rate is comprised of overpayments of 0.37%.

WIA-V. Recapture of Improper Payments Reporting

Because of the WIA delivery structure, recapture audits are neither feasible nor cost effective. Participants do not 

receive cash payments but training and other services. This section is not applicable to the WIA program.

WIA-VI. Accountability

DOL’s Employment and Training Administration (ETA) performs grant monitoring activities on direct grants on a 

regular 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 

 1 Depending on the grant agreement, grant expenditures may be monitored either on a monthly or quarterly basis, in addition to annual 

reviews.
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and that all funds were expended as authorized. In addition to these monitoring activities, DOL grant programs and 

their grantees and sub-grantees are subjected to numerous Government Accountability Office (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. 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. In FY 2013, DOL developed a 

Grants Closeout handbook and tracked compliance through quarterly certifications to DOL by ETA management.

Use of Single Audit Act Reports to Prevent, Reduce, and Recapture Improper Payments

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 finding 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.

WIA-VII. 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 with a step-by-step reference guide.

WIA-VIII. Barriers and Departmental Response

The very elements of the WIA structure that were intended to create a flexible tool to respond to regional 

workforce demands also make it difficult to measure improper payments. For example, states and localities are 

afforded significant latitude in administering programs, including the use of waivers for certain eligibility 

requirements. In addition, the complex funding stream creates a situation where the point of service is many levels 
Other Information

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192 United States Department of Labor

down from the DOL national office. To overcome these barriers, the Office of Workforce Investment relies on 

creating a strong control environment through effective communication and monitoring of grantees.

The following are general controls applicable to all WIA programs:

• Grants are subject to Governor/Secretary Agreement and State Plan. The Governor submits a single 

Strategic State Plan in accordance with Planning Guidance (either Stand Alone or Unified) through the 

Federal Register

• The Planning Guidance provides detailed instruction on what must be included in the State Plan and a 

framework for collaboration across programs and integration of services beyond WIA Title I programs and 

Wagner-Peyser Activities, including non-DOL programs

• The Plan is submitted to the Federal Coordinator for Plan Review and Approval at the Office of Workforce 

Investment of ETA

• Those portions of the State Plan over which the Assistant Secretary for Employment and Training exercises 

authority are reviewed and approved by ETA in accordance with 20 CFR 661.220(e), which provides that the 

Secretary must approve all state plans within 90 days of their submission unless the Secretary determines 

in writing that:

oThe State Plan is inconsistent with the provisions of Title I of WIA or the WIA Regulations, including 

29 CFR Part 37; or

oThe portion of the State Plan impacting the Wagner-Peyser Act plan does not satisfy the criteria for 

approval in Section 8(d) of the Wagner-Peyser Act regulations at 20 CFR Part 652

• Funds are awarded/allotted by Letter of Credit based on a statutory formula provided in WIA every year in 

two portions during a program year and are available for that program year and the two succeeding years

• States sign a grant document agreeing to comply with the Act and regulations

• Grantees are subject to OMB Circulars on allowable cost reporting

• Grantees are subject to the following Performance Reporting requirements:

oWIA Annual Report and Narrative

oRequired to submit information for participants and exiters quarterly

oQuarterly Financial Reports

• Monitoring Activities:

oMonitoring is conducted by Regional Federal Project Officers based on risk assessment

oGrantees receiving more than $500,000 in Federal awards are subject to A-133 audits

oStates are also subject to audits by DOL or other authorized Government agencies

oStates are required to maintain adequate records in accordance with 29 CFR 95 and 97.

WIA-IX. Additional Comments

It is important to note that Section 511 of the Workforce Innovation and Opportunity Act (WIOA) repealed WIA in 

its entirety. The majority of WIOA provisions will become effective on July 1, 2015, the first full program year after 

enactment. However, the Act includes several provisions that become effective on other dates. For example, the 

WIA State and local plans remain in effect for PY 2015 and the new State Unified Strategic Plan is to be submitted 

for PY 2016, which begins July 1, 2016. In addition, the WIA performance accountability section remains in effect for 

PY 2015, with the new WIOA performance accountability provisions taking effect at the beginning PY 2016.
Improper Payments Reporting Details

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FY 2014 Agency Financial Report 193

Hurricane Sandy Funds Provided by the Disaster Relief Appropriations Act of 2013

On January 29, 2013, the President signed into law the Disaster Relief Appropriations Act, Public Law 113-2 (127 

Stat. 4), which provided $50.5 billion in aid for Hurricane Sandy disaster victims and their communities. The Act 

requires Federal agencies supporting Sandy recovery and other disaster-related activities to implement additional 

internal controls to prevent waste, fraud, and abuse of these funds. DOL submitted its internal control plan on 

March 31, 2013, to OMB, GAO and OIG in accordance with OMB Memorandum M-13-07 “Accountability for Funds 

Provided by the Disaster Relief Appropriations Act,” issued March 12, 2013.

Sandy-I. Risk Assessment

DOL awards Disaster National Emergency Grants (NEGs) to states to provide disaster relief employment for workers 

in areas declared eligible for public assistance, as defined by the Stafford Act administered by the Federal 

Emergency Management Agency (FEMA). States may contract out work to contractors or vendors who, in turn, 

employ eligible participants to perform clean up and humanitarian activities.

For the Hurricane Sandy Disaster NEGs, ETA instituted seven levels of review for all grant applications, beginning 

with the Regional Federal Project Officer (FPO) through the Department’s top leadership. Throughout the review 

and approval process, ETA implemented the use of checklists and other internal review processes to ensure 

compliance of applications with the grant application requirements prior to approval.

To ensure proper oversight of all Hurricane Sandy supplemental funds, DOL established a Hurricane Sandy Recovery 

Team made up of senior agency representatives. The team met regularly to coordinate the full range of DOL 

Hurricane Sandy recovery deliverables, from tracking obligations to reporting. By focusing consistent, high-level 

attention on DOL’s financial performance under the statute, the Department was able to mitigate potential risks 

and successfully implement its recovery responsibilities.

In addition to the DOL Hurricane Sandy Recovery Team at the departmental level, ETA also implemented robust 

grant monitoring and oversight of all grant recipients. At the beginning of the grant award, the Regional FPO 

conducted an initial risk assessment of the grantee, which included an initial onsite visit. A formal compliance 

monitoring visit was then conducted by ETA to review any issues identified to ensure timely resolution. All grant 

recipients were required to submit a bi-weekly report to the Regional FPO for the first three months of the award, 

and monthly thereafter.

Similar to The Recovery Act, the Department collaborated with OIG to minimize risk of waste, fraud and abuse of 

Hurricane Sandy recovery funds.

Certain factors contribute to a low-risk environment:

• “Recipients” are actually providing clean-up and recovery services. They do not receive “payments,” they 

receive a salary (typically minimum wage) for their services.

• Municipalities oversee grants and contracts and must comply with additional compliance mandates for 

Hurricane Sandy accountability.

For FY 2014, the estimated improper payment rate for Hurricane Sandy program is 0.11%. Applied to FY 2014 

outlays of $21.0 million, the estimated dollar amount is approximately $23,100.

ETA National Emergency Grants

ETA provided $70.3 million in National Emergency Grants (NEGs) to New York, New Jersey, Connecticut, West 

Virginia, and Rhode Island for continuing cleanup and recovery efforts. This included $20.5 million provided by the 

Disaster Relief Appropriation Act of 2013 and $49.8 million provided by ETA’s WIA Dislocated Worker National 

Reserve (DWNR), which funds NEGs. 
Other Information

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194 United States Department of Labor

Based on the following language in the OMB Guidance, “Whenever possible, agencies should leverage resources 

already devoted to improper payment related activities,” (Page 3), DOL will extend its IPIA analysis to focus on 

Sandy funds awarded through NEGs (both those funded by the Disaster Relief Appropriation Act and those funded 

under DWNR grants).

OSHA

Most of OSHA’s funding went to inspections, but the agency did provide $1.2 million in Susan Harwood training 

grants (CFDA 17.502) to five grantees for training in mitigating workplace hazards in a disaster area. The complete 

list of grantees with amounts and grant requirements can be found at this link:

https://www.osha.gov/dte/sharwood/2013_Disaster_Relief_Grant_Abstracts.html

DOL used the same methodology to analyze Single Audit findings for CFDA 17.502 for those two grantees. No 

eligibility findings were associated with this program. 

WHD

WHD initiated 157 investigations of contractors and employers for compliance with the requirements of the Fair 

Labor Standards Act, Service Contract Act, and/or Davis-Bacon Act. No grant money was awarded – Disaster Relief 

Appropriation Act money simply paid for an increase in Full Time Employees (FTEs).

Sandy-II. Statistical Sampling

•Analyze Single Audit findings for impacted states for CFDA Numbers 17.284 (Sandy grants), 17.277 (National 

Emergency Grants), 17.260 (Dislocated Workers) – though this CFDA was split into two in FY 2010, many 

grantees continue to report NEGs under 17.260.

• Analyze sub-recipients website for any Single Audit Findings in the above CFDAs. NEGs can only be awarded to 

states – the money then goes to sub-recipients (typically municipalities), which then hire dislocated or longterm unemployed workers to perform clean-up activities.

• Calculate the estimated rate based on extrapolation of the probability of eligibility findings

The Department uses an alternative sampling methodology for Hurricane Sandy that is a methodology that was 

previously approved for another DOL program. The Sandy methodology will be submitted to OMB for approval.

Sandy-III. Corrective Actions

Although the rate of estimated improper payments is very low, DOL has a robust control environment focused on 

preventative actions, effective communications, and monitoring. 

Grant operations are monitored on a continuing basis to ensure that grant activities conform to requirements. 

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. 

The Audit Resolution staff receives grantee Single Audit Act reports, which identify questioned costs and/or 

administrative weaknesses in need of correction. These items evaluated using the same determination process 
Improper Payments Reporting Details

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FY 2014 Agency Financial Report 195

noted above; disallowed costs are forwarded for collection, and resolutions reported back to the OIG. In addition, 

these units participate in special grantee reviews and provide fiscal policy training for grantee and Federal staff.

Sandy-IV. Improper Payment Reduction Outlook 

Table Sandy-IV shows the Improper Payment Reduction outlook, for Hurricane Sandy, for FY 2013 – FY 2017. 

Table Sandy-IV: Improper Payment Reduction Outlook FY 2013– FY 20171 ($ in thousands)

Program FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Outlays IP % IP $ Outlays IP% IP$

Est. 

Outlays

Est. IP 

% 

target

Est. IP 

$ 

target

Est. 

Outlays

Est. IP 

% 

target 

Est. IP 

$ 

target

Est. 

Outlays

Est. IP 

% 

target 

Est. IP 

$ 

target

Hurricane 

Sandy N/A N/A N/A $21,042

Target 

N/A

Target 

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Actual 

0.11%2

Actual 

$23.1 1 FY 2014 was baseline year, Improper Payment reduction targets for FY 2015 to FY 2017 will be set in FY 2015 pending additional guidance 

and consultation regarding Hurricane Sandy rate reporting.

2 The Hurricane Sandy IP rate is comprised of overpayments of 0.11%.

Sandy-V. Recapture of Improper Payments Reporting

Because of the Hurricane Sandy delivery structure, recapture audits are neither feasible nor cost effective. This 

section is not applicable to the Hurricane Sandy program.

Sandy-VI. Accountability

DOL’s Employment and Training Administration (ETA) performs grant monitoring activities on direct grants on a 

regular 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. 

In addition to these monitoring activities, DOL grant programs and their grantees and sub-grantees are subjected to 

numerous Government Accountability Office (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. 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. In FY 2013, DOL developed a Grants Closeout handbook and tracked compliance through 

quarterly certifications to DOL by ETA management.

 1 Depending on the grant agreement, grant expenditures may be monitored either on a monthly or quarterly basis, in addition to annual 

reviews.
Other Information

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196 United States Department of Labor

Use of Single Audit Act Reports to Prevent, Reduce, and Recapture Improper Payments

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 findings 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.

Sandy-VII. Agency Information Systems and Other Infrastructure

DOL 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 with a step-by-step reference guide.

Sandy-VIII. Barriers and Departmental Response

In addition to a complex funding stream, the point of service is many levels down from the DOL national office. To 

overcome these barriers, the Office of Workforce Investment relies on creating a strong control environment 

through effective communication and monitoring of grantees.

The “Do Not Pay” Initiative

This section describes an important part of DOL’s program integrity efforts designed to prevent, identify, and 

recapture improper payments. Specifically, the Do Not Pay (DNP) solution is a government-wide initiative mandated 

by the Improper Payments Elimination and Recovery Improvement Act (IPERIA) of 2012 (Pub. L. 112-248) to screen 

payment recipients before a grant, contract award or payment is made. Participation in the initiative is required 

under IPERIA and OMB guidance. DOL is implementing the screening of payments through the Treasury Do Not Pay 

System. 
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FY 2014 Agency Financial Report 197

Overview of Do Not Pay

IPERIA 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. DNP provides Federal agencies with a web-based single-entry access portal (Portal) to these 

existing databases and additional data analytics.

At DOL, the DNP Solution is being 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. 

In addition, DOL has participated in post-payment reviews for all contract and benefit payments since May 2013.

Approach for Implementing DNP

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 OCFO facilitated 

development of a Plan for enrollment and implementation with affected 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 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 are responsible for implementation of DNP within their business processes 

and interfacing with state stakeholders where appropriate. 

Phase 1 involved choosing the following pilot programs from each of three major business areas: 

Benefits Programs – UI and Office of Workers’ Compensation Programs (OWCP) benefit programs

Grant Programs – ETA grant programs

Contracts – Department-wide procurement and contract payment activities

Lessons learned from Phase 1 and best practices gained from the experience of other Agencies have been 

incorporated into DOL planning for Phases 2 and 3. Phase 1 was completed in December 2013.

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 was 

expected to be completed in September 2014.

During Phase 3, DOL plans to implement DNP 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.

DNP for UI

Pilot of “The Work Number”

Several states are working with Treasury to begin cross-matching UI claims with “The Work Number,” a real-time 

database compiled by Equifax directly from payroll feeds of employers across the country. “The Work Number” 

includes current employment and income data on about one third of the U.S. workforce and is the largest database 

of its kind. It is currently used by some government agencies for employment and earnings verification.

Arizona has completed a new cross-matching agreement to access “The Work Number”, and several other states 

are in various stages of discussion and implementation including Colorado, Nebraska, New York, Tennessee, and 

Utah.
Other Information

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198 United States Department of Labor

DNP for the Black Lung Program

The Black Lung Program was capable of using the DNP Portal to perform single online searches of the Social Security 

Administration’s (SSA) Death Master File (DMF) to verify potential improper payments during FY 2014. During FY 

2014 the Black Lung Program also completed development of Payment Automation Manager (PAM) format for its 

payment files and is submitting payments to Treasury in that mode. Also the program is poised to adjudicate data 

matches thorough the upgraded DNP Portal v.3.0. The Black Lung Program will be utilizing the Portal for continuous 

monitoring of payments against the DMF in early FY 2015, pending technical adjustments with the DNP project staff 

that are currently in process.

DNP for ETA Grants Programs

ETA was selected as the pilot grantor agency to implement the Do Not Pay initiative for DOL, as its grant programs 

are representative of the various other DOL grants. ETA’s experience with the DNP Portal is being used to shape 

planning as other DOL grantor agencies implement DNP Initiative pre-award vetting processes.

Once grants are awarded, the recipients are accountable for monitoring the use of grant funds. The recipients are 

responsible for: pre-award reviews of awards to contractors and sub-recipients; pre-payment reviews of payments 

to recipient employees, program participants, sub-recipients and contractors; and post-payment reviews of all 

payees.

DNP Post Payment Reviews

Beginning in May 2013, the DNP Working System has been comparing names on DOL’s Payments, Claims and 

Enhanced Reconciliation (PACER) file against the public System for Award Management (SAM) and DMF databases 

on a monthly post-payment basis as required by IPERIA. The PACER file includes automated payments made by the 

Department. When a name matches, the payment information is returned to the Department for adjudication in a 

monthly “Hitlist”. The HitList is then adjudicated by the Department to determine which are false-positives and to 

retrieve any true-positive improper payments.

At DOL, the adjudication is completed in a two-step process. OCFO reviews the matches to cull false-positives per 

the business rules agreed to by the component agencies making the payments, the OCFO, and the DNP Initiative. 

The remaining matches are then provided to the component agency for final adjudication. Following these reviews, 

detailed Adjudication Reports are returned to the DNP Working System indicating the number of false-positives and 

reasons why the payment was proper and number of true-positives and what was done to recover any improper 

payments.

Since its inception, the Department has reviewed HitLists on a monthly basis. Because the DNP Working System 

provides the Hitlist on a two-month lag (i.e. March 2013 payments were reviewed in May 2013), the last payment 

month reviewed at the time of this report was August 2014.

DNP has completed post-payment reviews of over 3.3 million payments from the Department and returned over 

220,000 matches in monthly HitLists. DOL has adjudicated 100% of those matches on a monthly basis and found 

none to be verified improper payments.

Table DNP – 1: DNP Post Payment Reviews and Adjudication shows the number and dollar value of matches 

received from DNP against both DMF and SAM, and number of true positive improper payments DOL found in 

those matches since the inception on the DNP Working Solution. (See Table DNP – 1 on next page.)
Improper Payments Reporting Details

(Unaudited)

FY 2014 Agency Financial Report 199

Table DNP – 1: DNP Post Payment Reviews and Adjudication (October 2013 – June 2014) 

Number (#) 

of Payments 

Reviewed for 

Improper 

Payments 1

Dollars ($) of 

Payments 

Reviewed for 

Improper 

Payments

($ in millions)

Number (#) 

of Payments 

Stopped

Dollars ($) of 

Payments 

Stopped 2

Number (#) 

of Improper 

Payments 

Reviewed 

and Not 

Stopped

Dollars ($) of 

Improper 

Payments 

Reviewed 

and Not 

Stopped 3

Reviews 

with DMF 

Public

1,643,574 $4,589 N/A N/A 0 $0

Reviews 

with SAM 

Exclusions 

Public

1,718,602 $4,805 N/A N/A 0 $0

1 Payments Reviewed for Improper Payments includes the total number of payments disbursed by the agency through the PACER payment 

system minus any payments that were excluded from matching due to A) a missing or unmatchable TIN (DMF only) or B) a missing name. 2 Payments Stopped is currently not applicable since the Do Not Pay matching and adjudication process is based on post payment results. 3 Improper Payments Reviewed and Not Stopped includes the total number of matches identified by the Do Not Pay Initiative that were 

adjudicated as improper by the agency.

Freeze the Footprint

Consistent with Section 3 of the OMB Memorandum-12-12, Promoting Efficient Spending to Support Agency 

Operations and OMB Management Procedures Memorandum 2013-02, the “Freeze the Footprint” (FTF) policy 

implementing guidance, all Chief Financial Officer Act departments and agencies shall not increase the total square 

footage of their domestic office and warehouse inventory compared to the FY 2012 baseline. There are significant 

opportunities for reductions in square footage and cost savings through agency co-locations, consolidations, and 

disposals of unneeded space within the Federal Government’s vast portfolio of real property assets. As a result, 

OMB is working in partnership with GSA and other Federal agencies to better align the size of the Federal real 

property inventory.

Agencies are required to report cost data along with the most recent square footage information submitted to the 

Federal Real Property Profile (FRPP) in their annual Performance and Accountability Report or AFR. This section is 

presented in accordance with Section 11.5.10 of OMB Circular A-136, issued September 2014.

Actions to Freeze the Footprint

Overall, the space utilization for DOL personnel in GSA provided office space is 258.6 square feet per person 

(SF/per), and represents an opportunity for DOL to achieve both rent savings and a reduction of the total office 

footprint nation-wide. As GSA leases commercial space on a competitive basis and sets the rent for federal 

buildings, DOL has little control of the rent and maintenance cost per square foot for each office location.

Using the initial President’s Management Agenda Real Property Benchmarking Metrics, DOL has identified potential 

space consolidations and co-locations that can result in significant reductions to the DOL office footprint and 

achieve rent savings for the agencies.

Table FTF 1 reflects the total square footage associated with DOL’s assets subject to “Freeze the Footprint” policy, 

as identified by Data Element #3 from Federal Real Property Council’s “Guidance for Real Property Inventory 

Reporting from the latest available reporting year1

, and compares it to the FY 2012 “Freeze the Footprint” baseline 

(as assigned by GSA). The square footage totals reported align with agency totals confirmed by GSA.
Other Information

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200 United States Department of Labor

Table FTF 1: Freeze the Footprint Baseline Comparison

FY 2012 

Baseline

2013 (CY) Change (2013 CY - FY 2012 Baseline) 

Square Footage (SF in millions) 6,942,509 6,979,804 37,297

Table FTF 2 reflects the annual operating costs as reported in the most recent Federal Real Property Profile 

submittal for owned and direct lease facilities (direct lease facilities does not include GSA occupancy agreements) 

that are subject to the “Freeze the Footprint” policy, as identified by Data Element #3 from Federal Real Property 

Council’s “Guidance for Real Property Inventory Reporting” as reported in the most recent Federal Real Property 

Profile submittal1

. The cost data reported by DOL is based directly on data reported into the latest available Federal 

Real Property Profile database.

Table FTF 2: Operation and Maintenance Costs ($ in millions) – Owned and Direct Lease Buildings

FY 2012 

Reported Cost

2013 (CY) Change (2013 CY - FY 2012 Baseline)

Operation and Maintenance 

Costs ($ in millions)

$6.9 $7.5 $0.6

 1 See GSA, Office of Government-wide Policy, Federal Real Property Council, 2014 Guidance for Real Property Inventory Reporting (May 27, 

2014) page 6.
SCHEDULES OF SPENDING

For the Years Ended September 30, 2014 and 2013

(Unaudited)

FY 2014 Agency Financial Report 201

The Schedule of Spending presents an overview of how and where the Department is spending its money. It is 

presented on a budgetary basis, the same as the Combined Statements of Budgetary Resources (SBR). Amounts 

shown below as “Total amounts agreed to be spent” equal amounts shown as “Obligations incurred” on the SBR. 

To improve public transparency and the quality of data reported on USASpending.gov, DOL has begun reconciliation 

efforts between obligations reported on the financial statements and spending reported on USASpending.gov.

Obligations included on the financial statements that are not included on USASpending.gov generally include: 

financial assistance direct payments, personnel compensation and benefits, leases, interagency agreements, travel, 

and training. Differences may also exist due to timing differences between obligations reported in DOL's financial 

reporting system and data transmitted to USASpending.gov through the Federal Procurement Data System.

(Dollars in millions) 2014 2013

Section I - What money is available to spend?

This section presents resources that were available to spend by the Department.

Total resources $ 74,533 $ 122,766

Less amount available but not agreed to be spent (3,027) (3,125)

Less amount not available to be spent (1,585) (1,530)

Total amounts agreed to be spent $ 69,921 $ 118,111

Section II - How was the money spent/issued?

This section presents services or items purchased and grouped for the Department’s 

 major programs based on obligations incurred.

Income maintenance

 Financial assistance direct payments $ 44,661 $ 71,168

 Net internal transfers between DOL funds 9,064 31,186

 Personnel compensation and benefits 308 292

 Contractual services and supplies 466 335

 Grants, subsidies, and contributions 4,394 4,298

 Interest 774 920

 Other 480 448

Employment and training

 Personnel compensation and benefits 256 151

 Contractual services and supplies 2,002 1,577

 Grants, subsidies, and contributions 4,655 4,665

 Other 24 273

Labor, employment and pension standards; worker safety and health; 

 statistics; other

 Personnel compensation and benefits 1,451 1,473

 Contractual services and supplies 1,009 989

 Grants, subsidies, and contributions 330 303

 Other 47 33

Total amounts agreed to be spent $ 69,921 $ 118,111

Section III - Who did the money go to?

This section identifies with whom the Department is spending money based on obligations incurred.

Individuals $ 44,746 $ 71,222

Net internal transfers between DOL funds 9,143 31,186

State and local governments 7,367 7,270

Other federal agencies 2,063 1,744

Vendors and other 2,826 2,877

Employees 1,787 1,771

Higher education 1,121 1,270

Not-for-profit organizations 868 771

Total amounts agreed to be spent $ 69,921 $ 118,111

Schedule of Spending
202 United States Department of Labor

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FY 2014 Agency Financial Report 203

Acronyms

ACSI American Customer 

Satisfaction Index

AFR Agency Financial Report

ARRA American Reinvestment and 

Recovery Act

BAM Benefit Accuracy Measurement

BLDTF Black Lung Disability Trust Fund

BLS Bureau of Labor Statistics

BPC Benefit Payment Control

CFDA Catalog of Federal Domestic 

Assistance

COLA Cost of Living 

Allowance/Adjustment

CPIM Consumer Price Index-Medical

CPI-U Consumer Price Index-Urban

CSEOA 

Community Service 

Employment for Older 

Americans

CSRS Civil Service Retirement System

CY Current Year

DNP Do Not Pay

DOE Department of Energy

DOL U.S. Department of Labor

EB Extended Benefits

EBSA Employee Benefits Security 

Administration

EBSS Enterprise Business Support 

System

EEOICPA

Energy Employees 

Occupational Illness 

Compensation Program Act

ERISA Employee Retirement Income 

Security Act

ES Employment Service

ESAA Employment Security 

Administration Account

ETA Employment and Training 

Administration

EUC Emergency Unemployment 

Compensation

EUCA Extended Unemployment 

Compensation Account

FAC Federal Additional 

Compensation

FAUC Federal Additional 

Unemployment Compensation

FASAB Federal Accounting Standards 

Advisory Board

FCI Facilities Condition Index

FEC Federal Employees 

Compensation

FECA Federal Employees’ 

Compensation Act

FERS Federal Employee Retirement 

System

FFMIA Federal Financial Management 

Improvement Act

FLSA Fair Labor Standards Act

FMFIA Federal Managers’ Financial 

Integrity Act

FPO Federal Project Officer

FUA Federal Unemployment 

Account

FUTA Federal Unemployment Tax Act

FY Fiscal Year

GAAP Generally Accepted Accounting 

Principles

GAO General Accountability Office

GEMS Grants e-Management System

GSA General Services 

Administration

HVRP Homeless Veterans’ 

Reintegration Program

ILAB Bureau of International Labor 

Affairs

IPERA Improper Payments Elimination 

and Recovery Act

IPERIA

Improper Payments Elimination 

and Recovery Improvement 

Act

IPIA Improper Payments 

Information Act

IT Information Technology

JVA Jobs for Veterans Act

JVSG Jobs for Veterans State Grants

LPD Lost Production Day

MSHA Mine Safety and Health 

Administration

NASWA National Association of State 

Workforce Agencies

NCFMS New Core Financial 

Management System

NDNH National Directory of New 

Hires

NIOSH National Institute for 

Occupational Safety and Health

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

OMB Office of Management and 

Budget

OPM Office of Personnel 

Management

OSHA Occupational Safety and Health 

Administration

OUI Office of Unemployment 

Insurance

OWCP Office of Workers’ 

Compensation Programs

PFEI Principal Federal Economic 

Indicator

PIV Personal Identification 

Verification

PY Prior Year/Program Year

REA Re-employment and Eligibility 

Assessment

RECA Radiation Exposure 

Compensation Act

RTW Return To Work

SAM System for Award Management

SBR Statement of Budgetary 

Resources

SCSEP Senior Community Service 

Employment Program

SCSIA Statement of Changes in Social 

Insurance Amounts

SIDES State Information Data 

Exchange System

SOSI Statement of Social Insurance

SSA Social Security Administration

SUIESO

State Unemployment Insurance 

and Employment Service 

Operations

TAA Trade Adjustment Assistance

TAACCCT

Trade Adjustment Assistance 

Community College and Career 

Training

TOP Treasury Offset Program

UC Unemployment Compensation

UCFE Unemployment Compensation 

for Federal Employees

UCX Unemployment Compensation 

for Ex-Service Members

UI Unemployment Insurance

UIPL UI Program Letter

USC United States Code

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