FY2009 Performance and Accountability Report

November 16, 2009 

U.S. OFFICE OF SPECIAL COUNSEL

1730 M Street, N.W., Suite 300

Washington, D.C. 20036-4505

(www.osc.gov) 
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TABLE OF CONTENTS

 

Page 

Message from the Associate Special Counsel 3 

Part 1: Management Discussion and Analysis 4 

I. Agency at a Glance 4 

II. Statutory Background 4 

III. The Mission of the U.S. Office of Special Counsel 5 

IV. Organizational Structure of OSC 6 

V. Performance Highlights 8 

VI. OSC’s Systems, Controls, and Legal Compliance 10 

VII. Management Assurances 13 

VIII. Future Effects of Known Demands, Risks, Uncertainties, 

 Events, Conditions and Trends 14 

IX. Comments on Final FY 2009 Financial Statements 16 

X. Endnotes 17 

Part 2: Performance Section 18 

Goals: Prohibited Personnel Practices ..................................................................................................... 19 

Goals: Hatch Act ...................................................................................................................................... 20 

Goals: USERRA ...................................................................................................................................... 23 

Goals: Whistleblower Disclosures ........................................................................................................... 27 

Part 3: Financial Section 30

CFO Letter .............................................................................................................................................. 31 

Independent Auditor’s Report ................................................................................................................. 32 

FY 2009 Financial Statements.................................................................................... 35 

Notes to Principal Financial Statements......................................................................... . 39 
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A Message from the Associate Special Counsel

It is my pleasure to present the Office of Special Counsel’s Performance and Accountability 

Report for Fiscal Year 2009. This agency has a proud history of serving the federal workforce and 

the public through its tenacious defense of the merit system principles that continue to safeguard 

the integrity of the executive branch agencies of the United States. Fiscal Year 2009 marks the 

sixth year the U.S. Office of Special Counsel was required to have a financial audit. I am happy to 

report once again the agency’s strong results, which include no reportable conditions and no 

material weaknesses.

To all of those who rely on our counsel, our service, and our protection, be assured that we will 

continue striving for excellence. Thank you for your continued trust and confidence. 

 Sincerely,

 William E. Reukauf

 Associate Special Counsel
U.S. Office of Special Counsel

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Part 1: Management Discussion and Analysis 

I. Agency at a Glance

The U.S. Office of Special Counsel (OSC) is an independent federal investigative and 

prosecutorial agency. Its primary mission is to safeguard the merit system in federal employment, 

by protecting employees and applicants from prohibited personnel practices (PPPs), especially 

reprisal for whistleblowing. In addition, the agency operates a secure channel for federal 

whistleblower disclosures of violations of law, rule or regulation; gross mismanagement; gross 

waste of funds; abuse of authority; and substantial and specific danger to public health and safety. 

OSC also has jurisdiction under the Hatch Act to enforce restrictions on political activity by 

government employees. Finally, OSC enforces federal employment rights secured by the 

Uniformed Services Employment and Reemployment Rights Act (USERRA). 

II. Statutory Background 

OSC was first established on January 1, 1979. From then until 1989, it operated as an 

autonomous investigative and prosecutorial arm of the Merit Systems Protection Board (“the 

Board”). By law, OSC received and investigated complaints from current and former federal 

employees, and applicants for federal employment, alleging prohibited personnel practices by 

federal agencies. OSC provided advice on restrictions imposed by the Hatch Act on political 

activity by covered federal, state, and local government employees. And the agency received 

disclosures from federal whistleblowers (current and former employees, and applicants for 

employment) about wrongdoing in government agencies. The office also enforced restrictions 

against prohibited personnel practices and political activity by filing, where appropriate, petitions 

for corrective and/ or disciplinary action with the Board. 

In 1989, Congress enacted the Whistleblower Protection Act. The law made OSC an 

independent agency within the Executive Branch, with continued responsibility for the functions 

described above. It also enhanced protections against reprisal for employees who disclose 

wrongdoing in the federal government, and strengthened OSC’s ability to enforce those 

protections.

The Congress passed legislation in 1993 that significantly amended Hatch Act provisions 

applicable to federal and District of Columbia (D.C.) government employees, and enforced by 

OSC.1

 Provisions of the act enforced by OSC with respect to certain state and local government 

employees were unaffected by the 1993 amendments. 

In 1994, the Uniformed Services Employment and Reemployment Rights Act became law. 

It defined employment-related rights of persons in connection with military service, prohibited 

discrimination against them because of that service, and gave OSC new authority to pursue 

remedies for violations by federal agencies.2
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OSC’s 1994 reauthorization act expanded protections for federal employees, and defined 

new responsibilities for OSC and other federal agencies. It provided that within 240 days after 

receiving a prohibited personnel practice complaint, OSC should determine whether there are 

reasonable grounds to believe that such a violation occurred, exists, or is to be taken. The act 

extended the protections of certain legal provisions enforced by OSC to approximately 60,000 

employees of what was then known as the Veterans Administration (now the Department of 

Veterans Affairs), and to employees of certain government corporations. It also broadened the 

scope of personnel actions covered under these provisions. Finally, the act made federal agencies 

responsible for informing their employees of available rights and remedies under the 

Whistleblower Protection Act, and directed agencies to consult with OSC in that process. 3

In November of 2001, Congress enacted the Aviation and Transportation Security Act,4

OSC efforts led to the signing of a memorandum of understanding (MOU) with TSA in 

May 2002, under which OSC would review whistleblower retaliation complaints from security 

screeners, and recommend corrective or disciplinary action to TSA when warranted. The MOU 

did not (and could not), however, provide for OSC enforcement action before the MSPB, or for 

individual right of action (IRA) appeals by security screeners to the MSPB. 

which created the Transportation Security Administration (TSA). Under the act, non-security 

screener employees of TSA could file allegations of reprisal for whistleblowing with OSC and the 

MSPB. The approximately 45,000 security screeners in TSA, however, could not pursue such 

complaints at OSC or the MSPB.

III. The Mission of the U.S. Office of Special Counsel 

OSC’s mission is to protect current and former federal employees, and applicants for 

federal employment, especially whistleblowers, from prohibited employment practices; promote 

and enforce compliance by government employees with legal restrictions on political activity, and 

facilitate disclosures by federal whistleblowers about government wrongdoing. OSC carries out 

this mission by:

• investigating complaints of prohibited personnel practices, especially reprisal for 

whistleblowing, and pursuing remedies for violations; 

• providing advisory opinions on, and enforcing Hatch Act restrictions on political 

activity;

• operating an independent and secure channel for disclosures of wrongdoing in federal 

agencies;

• protecting reemployment and antidiscrimination rights of veterans under the USERRA; 

and

• promoting greater understanding of the rights and responsibilities of federal employees 

under the laws enforced by OSC.
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IV. Organizational Structure of OSC

OSC maintains its headquarters office in Washington, D.C. Four field offices are located 

in Dallas, Oakland, Detroit, and Washington, D.C. 

Agency components during FY2009 include the Immediate Office of the Special Counsel 

(IOSC), five operating units/divisions and several supporting offices explained in detail below. 

Immediate Office of the Special Counsel. The Special Counsel and staff in IOSC are 

responsible for policymaking and overall management of OSC. They also manage the agency’s 

congressional liaison and public affairs activities, and its outreach program, which includes 

promotion of compliance by other federal agencies with the employee information requirement at 

5 U.S.C. § 2302(c). 

Complaints Examining Unit. This unit is the intake point for all complaints alleging 

prohibited personnel practices and other violations of civil service law, rule, or regulation within 

OSC’s jurisdiction. This unit is responsible for screening approximately 2,000 prohibited 

personnel practice cases per year. Attorneys and personnel management specialists conduct an 

initial review of complaints to determine if they are within OSC’s jurisdiction, and if so, whether 

further investigation is warranted. The unit refers all matters stating a potentially valid claim to 

the Investigation and Prosecution Division for further investigation or potential mediation. 

Disclosure Unit (DU). This component receives and reviews disclosures from federal 

whistleblowers. Reporting directly to the Deputy Special Counsel, DU recommends the 

appropriate disposition of disclosures, which may include referral to the head of the agency 

involved for investigation and a report to the Special Counsel; informal referral to the Inspector 

General (IG) of the agency involved; or closure without further action. Unit attorneys review each 

agency report of investigation to determine its sufficiency and reasonableness before the Special 

Counsel sends the report to the President and responsible congressional oversight committees, 

along with any comments by the whistleblower and the Special Counsel. 

Investigation and Prosecution Division (IPD). IPD is comprised of the four field offices, 

and is generally responsible for conducting field investigations of matters referred after 

preliminary inquiry by CEU. In selected cases referred by CEU for further investigation, IPD 

coordinates mediation of complaints in which the complainant and the agency involved have 

agreed to participate in OSC’s voluntary Alternative Dispute Resolution (ADR) Program. In other 

cases, after field investigation of matters referred by CEU, IPD attorneys perform legal analyses to 

determine whether the evidence is sufficient to establish that a prohibited personnel practice (or 

other violation within OSC’s jurisdiction) has occurred. IPD investigators work with the attorneys 

in deciding whether a matter warrants corrective action, disciplinary action, or both. If 

meritorious cases cannot be resolved through negotiation with the agency involved, the attorneys 

represent the Special Counsel in litigation before the MSPB. They also represent the Special 

Counsel when OSC intervenes, or otherwise participates, in other proceedings before the Board. 

Finally, when needed, IPD investigators and attorneys assist the Hatch Act Unit and the USERRA 

Unit by handling Hatch and USERRA cases. 
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Hatch Act Unit (HAU). This unit investigates complaints of Hatch Act violations, and 

represents OSC in litigation before the MSPB seeking disciplinary action. Besides enforcing the 

Hatch Act, the unit is responsible for providing legal advice on the Hatch Act to federal, D.C., 

state and local employees, as well as the public at large.

USERRA Unit. This component reviews USERRA cases referred by the Department of 

Labor (DOL) to OSC for legal representation of the claimant before the MSPB, if warranted. 

Under a nearly three-year demonstration project established by Congress, the USERRA Unit also 

directly received and investigated approximately one-half of all federal sector USERRA cases 

filed between February of 2005 and December of 2007, bypassing DOL. 

Support Units: 

Legal Counsel and Policy Division. This division serves as OSC’s office of general 

counsel, and provides policy advice and support to the agency. The division’s responsibilities 

include provision of legal advice and support in connection with management and administrative 

matters; defense of OSC interests in litigation filed against the agency; management of the 

agency’s Freedom of Information Act, Privacy Act, and ethics programs; and policy planning and 

development. 

Office of the Chief Financial Officer and Director of Administrative Services. This 

office manages OSC’s budget and provides management support and administrative services to 

the agency. Component units are the Budget and Analysis Branch, Document Control Branch, 

Human Resources Branch, Information Technology Branch, and the Procurement Branch. 

Map showing locations of OSC Field Offices
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V. Performance Highlights 

FY 2009 brought record numbers of cases to OSC. Hatch Act cases increased an 

unprecedented 58%, whistleblower disclosures increased 10%, and cases involving Prohibited 

Personnel Practices increased 8%. OSC received 41 complex USERRA referral cases from the 

Department of Labor (173% higher than during FY 2008), and there is now a new statute requiring 

action on them within 60 days. Despite a nearly overwhelming caseload, the agency fulfilled its 

role as an independent prosecutorial and investigative agency charged with bringing greater 

integrity and efficiency to the merit system. 

OSC’S SUCCESSES IN FY 2009

1) FAA Safety. OSC has referred a substantial number of whistleblower disclosures of aviation 

safety vulnerabilities to the Department of Transportation for investigation in the past year, 

prompting additional Congressional oversight and ensuring in-depth investigations into 

important safety allegations. 

2) Inspector General Resignation. Two complainants, both high-level employees of a federal 

agency, alleged that personnel actions were taken because they reported, or were believed to 

have reported, suspected travel irregularities by an agency IG to the President’s Council on 

Integrity and Efficiency. OSC investigated and reported its findings to the President, 

recommending disciplinary action against the IG, and corrective action for the two 

complainants. The IG resigned and the agency agreed to provide full corrective action to the 

complainants. 

3) Threats against ATF Agent. OSC completed a referral in which the whistleblower alleged 

that officials with the Bureau of Alcohol, Tobacco and Firearms (ATF) failed to adequately 

investigate death threats made against an agent and that ATF lacked sufficient policies on the 

investigation of threats and the protection of its agents. The Department of Justice found that 

ATF officials needlessly and inappropriately delayed investigation into some of the threats 

made against the agent and that ATF’s policies were generally sufficient, but that an 

amendment was necessary to ensure that orders for emergency relocations were in writing. 

4) Missing Property. An OSC referral substantiated two whistleblowers’ claims of millions of 

dollars of missing government property, including computers and other electronic equipment, 

at Indian Health Services, Rockville, Maryland. Furthermore, the agency’s report 

demonstrated its continued failure of accountability, which OSC reported to the President and 

Congress. 

5) Mediated Settlement after Aircraft Safety Disclosure. An electronics mechanic disclosed to 

his agency that a specific aircraft was not being repaired and overhauled according to 

specifications. He alleged that this could result in an electrical short-circuit and cause a crash. 

Shortly thereafter, the employee was reassigned and received a letter of reprimand. Through 
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OSC mediation, the agency agreed to remove the letter of reprimand from the employee’s 

record and to issue him a written commendation and cash award. 

6) Mediated Settlement after Public Safety Disclosure. A scientist alleged that he was 

retaliated against after raising three critical public health and safety issues and assisted a 

congressional committee’s investigation. The scientist was demoted, placed in untenable 

working conditions, and given a negative performance appraisal. Through mediation, the 

agency agreed to pay the scientist a lump sum and to expunge any unsatisfactory performance 

reviews or other related documents critical of his work. The agency also agreed to pay 

attorney’s fees.

7) Full Corrective Action after Reprisal for Whistleblowing. Complainant, a research pilot, 

alleged that he was grounded from flying, subjected to a psychiatric examination, reassigned to 

a non-flying position, and coerced into accepting a position at another agency facility because 

of his whistleblowing. He reported that several managers had violated various laws and 

agency aviation safety directives, engaged in gross mismanagement, abused their authority, 

and endangered public safety. The agency agreed to reassign complainant back to his original 

duty station and pay him monetary restitution. 

8) Enforcement of Veteran’s Preference. Complainant alleged that his employing agency 

improperly imposed a one-day cutoff in accepting applications for an information technology 

position. Based on the investigation, OSC determined that the agency had granted the selectee 

an unauthorized preference and violated veterans’ reference requirements in selecting a 

requested candidate by name over a higher-standing preference eligible applicant. The agency 

agreed to offer the veteran a similar position and reassigned the human resources official from 

the delegated examining unit. 

9) Increased Hatch Act Litigation & Investigation. As a result of the considerable increase in 

both the number and seriousness of Hatch Act violations by federal employees during the 2008 

Presidential election, the Hatch Act Unit continues to generate increased investigative and 

litigation activity at OSC. Many of these violations involve supervisors coercing subordinates 

to engage in political activity and employees soliciting political contributions. In one such 

case, an administrative law judge recently held that a federal supervisor should be removed 

from her employment because she sent a partisan political e-mail to six individuals, including 

two subordinates, while she was on duty and in the federal workplace. 

10) Hatch Act Disciplinary Action. OSC also has investigated many other significant Hatch Act 

cases and has filed seven complaints for disciplinary action with the Merit Systems Protection 

Board, with many more to be filed soon. For example, one case was filed against a federal 

supervisor who, during a mandatory staff meeting, told his subordinates which Presidential 

candidate he planned to vote for, polled them about the candidates for whom they planned to 

vote, and then encouraged them to exercise their right to vote. 

11) More Hatch Act Disciplinary Action. Another significant investigation by OSC resulted in a 

90-day suspension for a high level supervisory official at a federal agency who violated three 

provisions of the Hatch Act: the prohibitions against using one’s official authority or influence 

for the purpose of affecting the result of an election; soliciting, accepting, or receiving a 
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political contribution; and engaging in political activity while on duty or in federal room or 

building. The supervisor hosted a partisan political fundraising event in her home and, during 

a staff meeting, invited her subordinates to the event. 

12) Other Hatch Act Prosecutions. OSC also successfully prosecuted two federal employees for 

violating the Hatch Act’s prohibition against being a candidate in a partisan election. In both 

cases, the Merit Systems Protection Board ordered the federal employees removed from their 

employment for violating the Act.

13) Litigating important USERRA matters. This year, OSC tried a case of first impression that 

should clarify the remedies available to federal contract employees whose USERRA rights 

have been violated by a federal executive agency. OSC will file several other cases before the 

end of the year if no settlement is reached.

14) Obtaining relief for military service members under USERRA. OSC has received a record 

number of USERRA referrals from the Department of Labor, many of which have resulted in 

favorable settlements for service members, including retroactive promotions, back pay, and 

restored leave. In addition to obtaining individual relief, OSC has also sought to make broader 

“systemic” changes in agency policies and procedures to ensure better compliance with 

USERRA. This includes ensuring that agency merit promotion plans have a mechanism for 

considering employees who are absent due to military service.

15) OSC continues to enhance its resources for conducting mediations. Instead of having one 

full time mediator, seven people from different parts of the agency have received training in 

conducting mediations. OSC now has a cadre of professionals with varied skills and legal 

expertise in multiple areas from which to draw. 

 

VI. OSC's Systems, Controls, and Legal Compliance

Management control activities carried out by OSC include periodic reviews of agency 

administrative and program elements to assure that obligations and costs comply with applicable 

laws; funds, property and other assets are safeguarded; revenues and expenditures are properly 

recorded and accounted for; and programs are efficiently and effectively carried out in accordance 

with law and management policy. During FY 2009, reviews were completed on the following 

agency administrative operations:

1. Information Security Program. OSC’s Chief Information Officer conducts an annual 

security review. The results of this review were summarized in the agency’s Federal 

Information Security Management Act (FISMA) Report, submitted to OMB in 

October, 2009. The review found no material weaknesses in the agency’s information 

technology policies, procedures, or practices. Further, there were no security incidents 

affecting critical agency information systems.

2. GAO Correspondence. In early 2008, GAO followed up on its 2007 correspondence 

entitled “Office of Special Counsel Needs to Follow Structured Life Cycle 
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Management Practices for its Case Tracking System.” That report had recommended 

that OSC develop a Systems Development Life Cycle (SDLC) approach for its case 

tracking system, OSC2000. OSC’s case tracking system has never had any data 

reliability problems during its nine years of constant use by the agency. But in order to 

acknowledge that a recommendation had been made, OSC spent considerable manhours developing the SDLC documentation for the system, which was completed in 

August of 2007. The report also recommended that OSC establish a standardized 

method of querying its database. OSC launched a project to create the standardized 

queries and completed the project in July of 2007. OSC responded to follow–up 

questions from GAO concerning both of them in early FY 2008. During April of FY 

2009, OSC’s Information Technology Branch followed up with GAO and received 

GAO’s general agreement with developing a global set of templates standardized for 

all new IT projects. GAO recommends that OSC use other agencies’ templates as 

examples, tailoring them to OSC’s specific needs. 

3. Financial Audit. OSC is undergoing its sixth financial audit. The agency’s first audit 

was in FY 2004. The auditors reported no material weaknesses in FY 2004, FY 2005, 

FY 2006, FY 2007, or FY 2008. The FY 2009 audit addresses the financial statements 

and accounting processes, almost all of which were accomplished by the National 

Business Center (NBC) at the Department of Interior under an interagency outsourcing 

agreement. In the event that any material control weaknesses are identified during this 

year’s audit, they will be discussed in the next FMFIA/IG Act report.

4. OSC Review of Capital Assets. OSC has a capitalization policy for assets with a 

purchase price over $50,000. OSC’s reviews its purchases quarterly, to determine if 

there are additional assets to capitalize. 

5. HSPD-12. To comply with the security requirements of directive HSPD-12, OSC has 

an agreement for HSPD-12 services with the General Services Administration. OSC 

has met all deadlines so far for the accomplishment of HSPD-12 milestones, has issued 

PIV cards issued to all OSC employees, and is now working on expanding its program 

to include two-factor HSPD-12 authentication for securing each employee’s computer. 

In FY 2009, OSC outsourced several financial management and administrative activities to 

the National Business Center (NBC). These activities included budget accounting, financial 

accounting, reporting accounting, procurement systems software, and travel services. OSC 

personnel and payroll data entry transactions were processed by the Department of Agriculture’s 

National Finance Center (NFC). These operations were administered under cross-servicing 

agreements. For information on any significant management control issues related to services 

provided under these agreements, OSC relies on information received from NBC and NFC, and 

any audits or reviews issued by the Inspectors General and Chief Financial Officers of the 

Departments of Treasury and Agriculture, and the Government Accountability Office (GAO).

In May of 2007, there was a GAO Correspondence entitled “Managerial Cost Accounting 

Practices at the Department of Interior”, which pointed out perceived managerial accounting 

deficiencies in various divisions of the Department of Interior. However, GAO states that the 

deficiencies affect the way NBC sets pricing and makes managerial decisions. There is no effect 
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on the accounting they do for OSC, other than the possibility that NBC’s pricing could be slightly 

lower or higher than it would be with a better activity based costing system, which could spread 

costs evenly among clients according to effort expended on the individual clients. 

In September of 2009, NBC certified its Oracle Federal Financials Major Application, in 

accordance with OMB Circular A-130, Appendix III, approving the system for continued 

operation. This authorization is valid for three years. 
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VII. Management Assurances

Annual Assurance Statement on Internal Controls and Internal Control over Financial 

Reporting

OSC'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 (FMFIA). OSC conducted its assessment of internal control over the 

effectiveness and efficiency of operations and 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, OSC can provide reasonable assurance that its internal control 

over the effectiveness and efficiency of operations and compliance with applicable laws and 

regulations as of September 30, 2009 was operating effectively and no material weaknesses were 

found in the design or operation of the internal controls. 

OSC works with the National Business Center (NBC) for its financial reporting needs. 

OSC obtains the SAS 70 report from NBC, and reviews it to assist in assessing internal control 

over financial reporting. OSC has not discovered any significant issues or deviations in its 

financial reporting during FY 2009 and therefore concludes that the agency’s internal controls 

over financial reporting are sufficiently strong.

OSC has no in-house financial system. OSC has chosen to use Oracle Federal Financials 

on an instance hosted by NBC, a shared service provider. Because of the rigorous testing that 

NBC undergoes, OSC considers its financial system to be reliable and effective. 

 

William E. Reukauf

Associate Special Counsel

November 16, 2009 
U.S. Office of Special Counsel

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VIII.Future Effects of Known Demands, Risks, Uncertainties, 

Events, Conditions, and Trends

In the past several years, the agency has experienced year-after-year increases in caseload 

levels. For example, in FY 2007, OSC’s overall caseload increased 6.0%. In FY 2008, OSC’s 

overall caseload increased 8.0%. And now in FY 2009, the overall caseload jumped 19.5%. 

Several factors which have contributed to these rising levels of complaint filings with OSC: 

 In recent years, OSC has had a large number of high-profile whistleblower cases, leading to 

increased national press coverage of OSC. FY 2009 accelerated this trend. During FY 2008, 

OSC received a record 530 whistleblower disclosures. During FY 2009, OSC received 724 

disclosures, which was 37% more than the record number the agency had received in FY 2008. 

 There is now a very heightened awareness of the Hatch Act among Federal employees. The 

number of Hatch Act complaints received in FY 2008 was 58% higher than the previous year. 

The number received in FY 2009 was 11% higher than that record number of complaints in 

FY 2008. Hatch Act complaints in mid-term election year FY 2010 are expected to continue 

to increase. 

Hatch Act Complaints

Note 1: The figures in the FY 2010 – FY 2012 columns are conservative projections

based on recent trends.

Note 2: Though OSC’s Hatch Act Unit has become much more efficient over the last 

four years, and the staff of the unit has increased from 7 to 12 FTE, the drastically 

increased number of cases received in FY 2008 and FY 2009 has made the workload 

nearly overwhelming.
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 In 2004, Congress passed a statute intended to improve results and decrease the processing 

time for USERRA complaints from members of our armed forces. Under the three-year 

Demonstration Project, which ended December 31, 2007, OSC investigated half of the 

USERRA cases that would typically have been investigated by the Department of Labor, 

thereby increasing OSC’s USERRA caseload considerably. OSC is confident that this pilot 

program improved results for members of our military who were being denied rights under 

USERRA. During the three year program OSC achieved 120 corrective actions in USERRA 

cases, which represented 27% of all USERRA cases handled by OSC under the Demonstration 

Project. Given these excellent results, now that the three year project is over, it is possible that 

Congress will ask OSC to take on the responsibility of investigating all Federal USERRA 

cases. 

 OSC continues to investigate whistleblower retaliation complaints from Transportation 

Security Agency (TSA) security screeners under OSC’s Memorandum of Understanding 

(MOU) with TSA. This MOU remains viable despite the Merit System Protection Board’s 

decision that the Board does not have jurisdiction to adjudicate these matters.

 During FY 2009, OSC continued to certify agencies through its outreach program. As 

agencies implement the certification process, agency employees who might previously have 

been unaware of their rights and remedies through OSC are becoming informed. 

 In addition to OSC’s certification program, OSC continues to provide outreach programs to 

agencies requesting them, or as part of OSC settlements in particular matters. Outreaches 

explaining the twelve Prohibited Personnel Practices can precipitate new cases being filed with 

OSC because employees learn more about what constitutes a PPP, and sometimes realize that 

one may have been committed against them. But in the long run, continued outreaches should 

diminish actual violations by raising awareness.
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IX. Comments on Final FY 2009 Financial Statements

 OSC’s Asset Capitalization Policy has been in place for three years. It pertains to assets 

with an initial purchase price over $50,000. The agency’s phone system was the first item 

to be placed on the list of capitalized assets. The videoconferencing equipment and certain 

leasehold improvements were subsequently added to the list. 

 An ongoing trend is that salaries, benefits, rent and utility payments tend to take 

precedence over major productivity-enhancing Information Technology projects. Salaries, 

benefits, rent and utility payments are over 90% of the agency’s expenditures. Any 

increases such as pay raises or rent increases have an impact on the agency’s ability to fund 

the IT projects. OSC continues to find ways to implement IT enhancements at low costs. 

However, in the near future, investments in certain systems must be made, for projects 

such as the upgrade of OSC’s case tracking system to a web-based platform. 

 OSC’s Unfunded Annual Leave Liability on the Balance Sheet continues to rise. At the 

end of FY 2009, it was $900,000, a 6% increase over the already high accrued leave 

liability amount at the end of FY 2008. This liability stems from the diligent effort given 

by the OSC employees to continue to accomplish the missions of the agency in a timely 

manner in spite of elevated case levels in all units, and to handle the increased 

responsibilities of the Special Task Force, the FAA Task Force, and the remaining 

USERRA Demonstration Project cases. 

 Limitations of the Financial Statements: The principal financial statements have been 

prepared to report the financial position and results of operations of OSC, pursuant to the 

requirements of 31 U.S.C. 3515 (b). 

The statements have been prepared from the books and records of the Review Commission 

in accordance with generally accepted accounting principles (GAAP) for Federal entities 

and formats prescribed by the Office of Management and Budget (OMB). The statements 

are in addition to the financial reports used to monitor and control budgetary resources 

which are prepared from the same books and records. These statements should be read 

with the realization that they are for a component of the United States Government, a 

sovereign entity. 
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Endnotes

 

1 Public Law No. 103-94 (1993), codified in scattered sections of 5 U.S.C. and 12 U.S.C.

2 Public Law No. 103-353 (1994), codified at 38 U.S.C. § 4301, et seq. The Veterans’ Employment Opportunities 

Act of 1998 (Public Law No. 103-424) also expanded OSC’s role in protecting veterans. The act made it a prohibited 

personnel practice to knowingly take, recommend, or approve (or fail to take, recommend, or approve) any personnel 

action, if taking (or failing to take) such action would violate a veterans’ preference requirement. See 5 U.S.C. § 

2302(b)(11). (The former § 2302(b)(11) was re-designated as § 2302(b)(12).).

3

 Public Law No. 103-424 (1994), codified in various sections of title 5 of the U.S. Code. The provision making 

federal agencies responsible, in consultation with OSC, for informing their employees of rights and remedies under 

the Whistleblower Protection Act appears at 5 U.S.C. § 2302(c).

4 Public Law 107-71 (2001).
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FY 2009 Performance and Accountability Report 18

Part 2: Performance Section
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FY 2009 Performance and Accountability Report 19

Goal 1: TO PROTECT THE MERIT SYSTEM THROUGH TIMELY 

 CASE PROCESSING

PPP Enforcement Mission PROHIBITED PERSONNEL

PRACTICES CASES

PERFORMANCE INDICATOR Indicator A: Percentage of cases 

processed in less than 240 days.

FY 2006 TARGET 85%

FY 2006 RESULTS 89%

FY 2007 TARGET 92%

FY 2007 RESULTS 94%

FY 2008 TARGET 92%

FY 2008 RESULTS 95%

FY 2009 TARGET 92%

FY 2009 RESULTS 94%

FY 2010 TARGET 94%

FY 2010 RESULTS

FY 2011 TARGET 94%

FY 2011 RESULTS

OSC achieved its timeliness target in FY 2009. We are maintaining 94% as the target in FY 

2011. Full field investigations often take longer than 240 days due to factors outside of OSC’s 

control, such as extensions of time requested by the agency under investigation, and the 

timeframes associated with litigation. Therefore, raising the target above 94% would not be 

realistic or helpful. 
U.S. Office of Special Counsel 

FY 2009 Performance and Accountability Report 20

Goal 2: TO PROMOTE JUSTICE THROUGH THE QUALITY OF 

 INVESTIGATIONS AND ENFORCEMENTS 

PPP Enforcement Mission Prohibited Personnel 

Practices Cases 

PERFORMANCE INDICATOR

Indicator A: % favorable 

outcomes in cases determined by 

OSC to be meritorious = (# of 

settlements achieved + # of 

successful litigations) / (# 

meritorious cases)

FY 2006 TARGET 99%

FY 2006 RESULTS 100%

FY 2007 TARGET 99%

FY 2007 RESULTS 100%

FY 2008 TARGET 100%

FY 2008 RESULTS 100%

FY 2009 TARGET 100%

FY 2009 RESULTS 100%

FY 2010 TARGET 100%

FY 2010 RESULTS

FY 2011 TARGET 100%

FY 2011 RESULTS

OSC did not lose any cases this year in PPP litigation before the board. Normally, agencies will 

settle the matter when OSC outlines the nature of the prohibited personnel practices that have 

been committed. 
U.S. Office of Special Counsel 

FY 2009 Performance and Accountability Report 21

Goal 3: TO PROMOTE COMPLIANCE WITH THE STATUTES THAT 

 OSC ENFORCES THROUGH ENHANCED OUTREACH TO 

 FEDERAL AGENCIES

PPP Enforcement Mission PROHIBITED PERSONNEL

PRACTICES CASES

PERFORMANCE INDICATOR

Indicator A: # of new Federal 

agencies certified in the 2302 (c) 

Program by OSC.

FY 2006 TARGET 5

FY 2006 RESULTS 6

FY 2007 TARGET 5

FY 2007 RESULTS 3

FY 2008 TARGET 5

FY 2008 RESULTS 5

FY 2009 TARGET 5

FY 2009 RESULTS 11

FY 2010 TARGET 5

FY 2010 RESULTS

FY 2011 TARGET 5

FY 2011 RESULTS

During FY 2009, eleven agencies were certified or re-certified under OSC’s 2302(c) program. 

This spike was due to an OSC effort to re-certify agencies whose certifications were expiring. 

We are not increasing the FY 2011 target for certifying agencies, because many agencies 

involved with the program have exhibited dwindling interest. We note that the statutory 

provision upon which OSC’s certification program is based - 5 USC § 2302(c) - does not provide 

an enforcement tool to require agencies to become certified. 
U.S. Office of Special Counsel 

FY 2009 Performance and Accountability Report 22

Indicator A: During FY 2009, OSC issued formal written advisory opinions 82% of the time 

within 120 days, missing the target of 90%. This is due to the tremendous increase in Hatch Act 

caseload. During FY 2009, the number of Hatch Act complaints requiring investigation climbed 

to nearly 500. Prior to FY 2008, the number of complaints was always less than 300. When 

considering these steep increases in caseload, issuing 82% of the written advisories within 120 

days was an accomplishment. OSC’s target in FY 2011 will be to issue 85% of the opinions 

within 120 days. 

Goal 1: TO DEFEND THE MERIT SYSTEM BY ENFORCING THE 

 HATCH ACT – THROUGH TIMELY CASE PROCESSING

HATCH ACT 

MISSION 

HATCH ACT 

WRITTEN 

ADVISORY 

OPINIONS 

HATCH ACT 

ORAL & 

EMAIL 

ADVISORY 

OPINIONS 

HATCH ACT 

COMPLAINTS

PERFORMANCE 

INDICATORS

Indicator A:

Percentage of 

formal written 

advisory 

opinions issued 

in less than 120 

days.

Indicator B: 

Percentage of 

oral and e-mail 

advisory 

opinions issued 

in less than five 

business days

Indicator C: 

Percentage of 

matters resolved 

in less than 365 

days.

FY 2006 TARGET 75% 99% 60%

FY 2006 RESULTS 93% 100% 84%

FY 2007 TARGET 80% 99% 70%

FY 2007 RESULTS 91% 99% 92%

FY 2008 TARGET 85% 99% 80%

FY 2008 RESULTS 60% 100% oral 88%

95% email

FY 2009 TARGET 90% 99% oral 85%

95% email

FY 2009 RESULTS 82% 99% oral 84%

98% email

FY 2010 TARGET 90% 99% oral 85%

95% email

FY 2010 RESULTS

FY 2011 TARGET 85% 99% oral 85%

95% email

FY 2011 RESULTS
U.S. Office of Special Counsel 

FY 2009 Performance and Accountability Report 23

Goal 2: TO PROMOTE JUSTICE THROUGH THE QUALITY OF 

 INVESTIGATIONS AND ENFORCEMENTS

HATCH ACT 

MISSION 

HATCH ACT CASES

See comment 1. 

PERFORMANCE 

INDICATOR

Indicator A: % favorable outcomes in meritorious 

cases

FY 2006 TARGET 90%

FY 2006 RESULTS 97%

FY 2007 TARGET 90%

FY 2007 RESULTS 97%

FY 2008 TARGET 97%

FY 2008 RESULTS 96%

FY 2009 TARGET 97%

FY 2009 RESULTS 100%

FY 2010 TARGET 97%

FY 2010 RESULTS

FY 2011 TARGET 97%

FY 2011 RESULTS

During FY 2009, for the first time in recent years, OSC achieved 100% favorable outcomes in 

meritorious Hatch Act cases, exceeding the target of 97%. Due to the high volume of upcoming 

litigation in FY 2010 and FY 2011 and the degree of unpredictability inherent whenever a new 

board is put in place at the MSPB, the agency is maintaining its FY 2011 target at 97%. 
U.S. Office of Special Counsel 

FY 2009 Performance and Accountability Report 24

Goal 3: TO PROMOTE COMPLIANCE WITH THE STATUTES THAT 

 OSC ENFORCES THROUGH ENHANCED OUTREACH TO 

 FEDERAL AGENCIES

HATCH ACT 

MISSION 

HATCH ACT 

OUTREACH VISITS 

HATCH ACT SECTION 

OF OSC WEBSITE 

PERFORMANCE 

INDICATORS

Indicator A: (# of HA 

trainings and 

outreaches given) / (# 

of invitations to 

provide HA training 

or outreach, where the 

inviter sponsors OSC)

Indicator B: Number of new 

advisory complex opinions 

added every month to the 

website.

FY 2006 TARGET 90% One

FY 2006 RESULTS 96% One

FY 2007 TARGET 90% One

FY 2007 RESULTS 100% One

FY 2008 TARGET 95% One

FY 2008 RESULTS 98% One 

FY 2009 TARGET 95% One

FY 2009 RESULTS 99% One

FY 2010 TARGET 95% One

FY 2010 RESULTS

FY 2011 TARGET 97% One

FY 2011 RESULTS

Indicator A: During FY 2009, OSC’s Hatch Act Unit provided training to federal, state, and 

local agencies 99% of the time when the agency offered to sponsor the cost of the training. This 

exceeded the target of 95%. Only one training had to be declined this year, due to scheduling. 

OSC is increasing its target for FY 2011 to 97%. 
U.S. Office of Special Counsel 

FY 2009 Performance and Accountability Report 25

Indicator A: OSC changed this performance indicator for FY 2009 to reflect the Veterans’ 

Benefits Improvement Act of 2008 (P.L. 110-389), which amended USERRA to require that 

OSC make its representation decision within 60 days of receiving a case from the Department of 

Labor (unless the claimant agrees to an extension of time). The amendments also require OSC to 

submit Quarterly Reports to Congress concerning its compliance with the new deadline. 

Because the law became effective on October 10, 2008, OSC excluded from its Quarterly 

Reports cases it received before that date, resulting in a higher compliance rate for FY 2009 than 

reported above (82% vs. 75%). 

Goal 1: TO ENFORCE THE UNIFORMED SERVICES EMPLOYMENT AND 

 REEMPLOYMENT RIGHTS ACT THROUGH TIMELY CASE 

 PROCESSING 

USERRA 

MISSION 

USERRA Referral (RE) Cases 

PERFORMANCE 

INDICATORS

Indicator A: Average number of days in which the case 

is settled, closed or a decision to litigate is made. 

FY 2007 TARGET 75 days

FY 2007 RESULTS 33 days

FY 2008 TARGET 75 days

FY 2008 RESULTS 110 days

FY 2009 TARGET 80% in 60 days

FY 2009 RESULTS 75% in 60 days

FY 2010 TARGET 80% in 60 days

FY 2010 RESULTS

FY 2011 TARGET 80% in 60 days

FY 2011 RESULTS
U.S. Office of Special Counsel 

FY 2009 Performance and Accountability Report 26

Goal 2: TO PROMOTE JUSTICE THROUGH THE QUALITY OF 

 INVESTIGATIONS AND ENFORCEMENTS

USERRA 

MISSION 

USERRA CASES

PERFORMANCE 

INDICATORS

Indicator A: % favorable 

outcomes in cases 

determined by OSC to be 

meritorious = (# 

successful meditations + # 

of settlements achieved + 

# of successful litigations) 

/ (# meritorious cases)

Indicator B: # of “test cases” 

filed

FY 2006 TARGET 90% Inappropriate to set

a specific target

FY 2006 RESULTS 100% 0

FY 2007 TARGET 90% Inappropriate to set 

a specific target

FY 2007 RESULTS 100% 1

FY 2008 TARGET 95% Inappropriate to set 

a specific target

FY 2008 RESULTS 97% 1

FY 2009 TARGET 99% Inappropriate to set 

a specific target

FY 2009 RESULTS 100% 0

FY 2010 TARGET 90% Inappropriate to set 

a specific target

FY 2010 RESULTS

FY 2011 TARGET 90% Inappropriate to set 

a specific target

FY 2011 RESULTS

Indicator A: OSC was successful in 6 out of 6 meritorious referral cases during FY 2009. 

Indicator B: There were no test cases filed in FY 2009 that fall in this category. 
U.S. Office of Special Counsel 

FY 2009 Performance and Accountability Report 27

Goal 3: TO PROMOTE COMPLIANCE WITH THE STATUTES THAT 

OSC ENFORCES THROUGH ENHANCED OUTREACH TO 

FEDERAL AGENCIES

USERRA 

MISSION 

USERRA CASES

PERFORMANCE 

INDICATORS

Indicator A: (# of 

USERRA trainings and 

outreaches given) / (# of 

invitations to provide 

USERRA training or 

outreach visits {where 

inviting agency sponsors 

OSC})

Indicator B: (# of USERRA 

trainings and outreaches 

given) / (# of invitations to 

provide USERRA training 

or outreach visits {where 

OSC pays expenses})

FY 2006 TARGET 90% 50%

FY 2006 RESULTS NA 100%

FY 2007 TARGET 90% 50% 

FY 2007 RESULTS 100% 100%

FY 2008 TARGET 90% 75%

FY 2008 RESULTS 100% NA

FY 2009 TARGET 90% 75%

FY 2009 RESULTS 100% NA

FY 2010 TARGET 100% 75%

FY 2010 RESULTS

FY 2011 TARGET 100% 75%

FY 2011 RESULTS

Three outreaches were requested in FY 2009. All three were accomplished by the USERRA 

Unit.
U.S. Office of Special Counsel 

FY 2009 Performance and Accountability Report 28

Goal 1: TO RECEIVE AND RESOLVE WHISTLEBLOWER DISCLOSURES 

 WITH TIMELY PROCESSING 

WHISTLEBLOWER 

DISCLOSURE 

MISSION 

DISCLOSURES

PERFORMANCE 

INDICATORS

Indicator A: Percentage of disclosures resolved within 

the statutory 15 day time frame

FY 2006 TARGET 50%

FY 2006 RESULTS 42%

FY 2007 TARGET 50%

FY 2007 RESULTS 61%

FY 2008 TARGET 50%

FY 2008 RESULTS 52%

FY 2009 TARGET 50%

FY 2009 RESULTS 54%

FY 2010 TARGET 50%

FY 2010 RESULTS

FY 2011 TARGET 50%

FY 2011 RESULTS

 OSC’s Disclosure Unit exceeded its target of 50% during FY 2009. 
U.S. Office of Special Counsel 

FY 2009 Performance and Accountability Report 29

Goal 2: TO PROMOTE JUSTICE AND PROTECT THE MERIT SYSTEM 

 THROUGH THE QUALITY OF DETERMINATIONS AND 

 REFERRALS

WHISTLEBLOWER 

DISCLOSURE 

MISSION 

DISCLOSURES

PERFORMANCE 

INDICATORS

Indicator A: % Percentage of disclosures referred to 

agency head, pursuant to 5 U.S.C. § 1213, or under the 

informal IG referral process.

FY 2006 TARGET 7%

FY 2006 RESULTS 8%

FY 2007 TARGET 7%

FY 2007 RESULTS 10%

FY 2008 TARGET 7%

FY 2008 RESULTS 6%

FY 2009 TARGET 7%

FY 2009 RESULTS 7%

FY 2010 TARGET 7%

FY 2010 RESULTS

FY 2011 TARGET 7%

FY 2011 RESULTS

During FY 2009, the overall number of disclosures received by the agency rose to 724 (from 530 

in FY 2008. The number of referrals to agency heads and IGs rose by 7. The quality of the 

incoming disclosures is the major driver of the percent referred to agency heads. 
U.S. Office of Special Counsel 

FY 2009 Performance and Accountability Report 30

Part 3: Financial Section 

Harper, Rains, Knight & Company, P.A. • Certified Public Accountants • Consultants 

One Hundred Concourse • 1052 Highland Colony Parkway, Suite 100 • Ridgeland, Mississippi 39157 

Telephone 601.605.0722 • Facsimile 601.605.0733 • www.hrkcpa.com 

Report of Independent Auditors 

Mr. William Reukauf 

Associate Special Counsel 

Opinion on the Financial Statements 

We have audited the accompanying balance sheet of the U.S. Office of Special Counsel (OSC), as of 

September 30, 2009 and September 30, 2008, and the related statements of net cost of operations, 

changes in net position, and budgetary resources, for the year then ended. These financial statements are 

the responsibility of OSC’s management. Our responsibility is to express an opinion on these financial 

statements based on our audit. 

We conducted our audit in accordance with auditing standards generally accepted in the United States of 

America, the standards applicable to financial audits contained in Government Auditing Standards, 

issued by the Comptroller General of the United States, and OMB Bulletin No. 07-04, Audit 

Requirements for Federal Financial Statements, as amended. Those standards require that we plan and 

perform the audit to obtain reasonable assurance about whether the financial statements are free of 

material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts 

and disclosures in the financial statements. An audit also includes assessing the accounting principles 

used and significant estimates made by management, as well as evaluating the overall financial 

statement presentation. We believe that our audit provides a reasonable basis for our opinion. 

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

financial position of OSC as of September 30, 2009 and 2008, and its net cost of operations, changes in 

net position, and budgetary resources for the year then ended, in conformity with accounting principles 

generally accepted in the United States of America. 

Report on Internal Control over Financial Reporting 

In planning and performing our audit, we considered OSC’s internal control over financial reporting by 

obtaining an understanding of OSC’s internal control, determining whether these internal controls had 

been placed in operation, assessing control risk, and performing tests of OSC’s internal controls in order 

to determine our audit procedures for the purpose of expressing our opinion on the financial statements 

and not to provide an opinion on the internal control over financial reporting. 

We limited our internal control testing to those controls necessary to achieve the objectives described in 

OMB Bulletin No. 07-04, as amended. We did not test all internal controls relevant to the operating 

objectives as broadly defined by the Federal Managers' Financial Integrity Act of 1982. Providing an 

opinion on internal control over financial reporting was not the objective of our audit, accordingly, we 

do not express an opinion the effectiveness of OSC’s internal control over financial reporting. 
A control deficiency 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 

misstatements on a timely basis. Our consideration of the internal control over financial reporting would 

not necessarily disclose all deficiencies that might be a significant deficiency. A significant deficiency is 

a deficiency in internal control, or a combination of deficiencies, that adversely affects the entity's 

ability to initiate, authorize, record, process, or report financial data reliably in accordance with 

generally accepted accounting principles such that there is more than a remote likelihood that a 

misstatement of the entity's financial statements that is more than inconsequential will not be prevented 

or detected. However, we noted no matters involving the internal control and its operation that we 

considered to be significant deficiencies as defined above. Our consideration of the internal control over 

financial reporting would not necessarily disclose all significant deficiencies that might be a material 

weakness. A material weakness is a significant deficiency, or combination of significant deficiencies, 

that result in a more than remote likelihood that a material misstatement of the financial statements will 

not be prevented or detected. Because of inherent limitations in internal controls, misstatements, losses, 

or non-compliance may nevertheless occur and not be detected. However, we noted no matters involving 

the internal control and its operation that we considered to be material weaknesses as defined above. 

Report on Compliance with Applicable Laws and Regulations 

The management of OSC is responsible for complying with laws and regulations applicable to OSC. As 

part of obtaining reasonable assurance about whether OSC’s financial statements are free of material 

misstatement, we performed tests of its compliance with certain provisions of laws and regulations 

including laws governing the use of budgetary authority and government-wide policies identified in 

OMB Bulletin No. 07-04, as amended, non-compliance with which could have a direct and material 

effect on the determination of consolidated and combined financial statements. 

We limited our tests of compliance to the provisions of laws and regulations referred to in the preceding 

paragraph. Providing an opinion on compliance with those provisions was not an objective of our audit, 

accordingly, we do not express such an opinion. However, we noted no noncompliance with laws and 

regulations, which could have a direct and material effect on the determination of the financial 

statements. 

Other Information 

Management’s Discussion and Analysis (MD&A) is not a required part of the financial statements but is 

supplementary information required by the Federal Accounting Standards Advisory Board and OMB 

Circular A-136, Financial Reporting Requirements. We have applied certain limited procedures, which 

consisted principally of inquiries of management regarding the methods of measurement and 

presentation of the MD&A. However, we did not audit the information and accordingly, we express no 

opinion on it. 

Our audits were conducted for the purpose of forming an opinion on the financial statements of OSC 

taken as a whole. The other accompanying information included in this performance and accountability 

report is presented for purposes of additional analysis and is not a required part of the financial 
statements. Such information has not been subjected to the auditing procedures applied in the audit of 

the financial statements and, accordingly, we express no opinion on them. 

This report is intended solely for the information and use of the management of the U.S Office of 

Special Counsel, the U.S. Office of Management and Budget, the U.S. Government Accountability 

Office, and the U.S. Congress and is not intended to be and should not be used by anyone other than 

these specified parties. 

November 13, 2009 




 Notes to Principal Financial Statements 

39 

OFFICE OF SPECIAL COUNSEL 

Washington, D.C 

Notes to Principal Financial Statements 

As of September 30, 2009 and 2008 
 Notes to Principal Financial Statements 

40

Office of Special Counsel 

Notes to Principal Financial Statements 

As of September 30, 2009 and 2008

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Reporting Entity 

The Office of Special Counsel (OSC) is an independent federal investigative and prosecutorial agency. 

OSC’s authority comes from four federal statutes, the Civil Service Reform Act, the Whistleblower 

Protection Act, the Hatch Act, and the Uniform Services Employment and Reemployment Rights Act. 

OSC’s primary mission is to safeguard the merit system by protecting federal employees and applicants 

from prohibited personnel practices. OSC receives, investigates, and prosecutes allegations of prohibited 

personnel practices, with an emphasis on protecting federal government whistleblowers. 

OSC is headed by the Special Counsel, who is appointed by the President, and confirmed by the Senate. 

At full strength, the agency employs approximately 111 employees to carry out its government-wide 

responsibilities in the headquarters office in Washington, D.C., and in the Dallas, Oakland, and Detroit 

field offices. 

OSC has rights and ownership of all assets reported in these financial statements. There are no non-entity 

assets. 

B. Basis of Presentation 

The financial statements have been prepared to report the financial position, net cost of operations, 

changes in net position, status and availability of budgetary resources, and the reconciliation between 

proprietary and budgetary accounts of the OSC. The statements are a requirement of the Chief Financial 

Officers Act of 1990, the Government Management Reform Act of 1994, the Accountability of Tax 

Dollars Act of 2002 and the Office of Management and Budget (OMB) Circular A-136, Financial 

Reporting Requirements. They have been prepared from, and are fully supported by, the books and 

records of OSC in accordance with the hierarchy of accounting principles generally accepted in the 

United States of America, standards approved by the principals of the Federal Accounting Standards 

Advisory Board (FASAB), OMB Circular A-136, and OSC Accounting policies which are summarized in 

this note. These statements, with the exception of the Statement of Budgetary Resources, are different 

from financial management reports, which are also prepared pursuant to OMB directives that are used to 

monitor and control OSC’s use of budgetary resources. 

The statements consist of the Balance Sheet, Statement of Net Cost, Statement of Changes in Net 

Position, and the Statement of Budgetary Resources. In accordance with OMB Circular A-136, the 

financial statements and associated notes are presented on a comparative basis. 

C. Basis of Accounting 

Transactions are recorded on both an accrual accounting basis and a budgetary basis. Under the accrual 

method, revenues are recognized when earned and expenses are recognized when a liability is incurred, 

without regard to receipt or payment of cash. These financial statements were prepared following accrual 

accounting. Budgetary accounting facilitates compliance with legal requirements on the use of federal 

funds. Balances on these statements may therefore differ from those on financial reports prepared 
 Notes to Principal Financial Statements 

41

pursuant to other OMB directives that are primarily used to monitor and control OSC’s use of budgetary 

resources. 

D. Taxes 

OSC, as a Federal entity, is not subject to Federal, State, or local income taxes, and, accordingly, no 

provision for income taxes has been recorded in the accompanying financial statements. 

E. Fund Balance with Treasury 

The U. S. Treasury processes cash receipts and disbursements. Funds held at the Treasury are available to 

pay agency liabilities. OSC does not maintain cash in commercial bank accounts or foreign currency 

balances. 

F. Accounts Receivable 

Accounts receivable consists of amounts owed to OSC by other Federal agencies and the public. Amounts 

due from Federal agencies are considered fully collectible. Accounts receivable from the public include 

reimbursements from employees. An allowance for uncollectible accounts receivable from the public is 

established when either (1) based upon a review of outstanding accounts and the failure of all collection 

efforts, management determines that collection is unlikely to occur considering the debtor’s ability to pay, 

or (2) an account for which no allowance has been established is submitted to the Department of the 

Treasury for collection, which takes place when it becomes 180 days delinquent. 

G. General Property, Plant and Equipment, Net 

OSC’s property and equipment is recorded at original acquisition cost and is depreciated using the 

straight-line method over the estimated useful life of the asset. Major alterations and renovations are 

capitalized, while maintenance and repair costs are charged to expense as incurred. OSC’s capitalization 

threshold is $50,000 for individual purchases. Applicable standard governmental guidelines regulate the 

disposal and convertibility of agency property, plant and equipment. The useful life classifications for 

capitalized assets are as follows: 

Description Useful Life (years) 

Leasehold Improvements 10 

Office Equipment 5 

Hardware 5 

Software 2 

H. Advances and Prepaid Charges 

Advance payments are generally prohibited by law. There are some exceptions, such as reimbursable 

agreements, subscriptions and payments to contractors and employees. Payments made in advance of the 

receipt of goods and services are recorded as advances or prepaid charges at the time of prepayment and 

recognized as expenses when the related goods and services are received. 
 Notes to Principal Financial Statements 

42

I. Liabilities 

Liabilities covered by budgetary or other resources are those liabilities for which Congress has 

appropriated funds or funding is otherwise available to pay amounts due. 

Liabilities not covered by budgetary or other resources represent amounts owed in excess of available 

congressionally appropriated funds or other amounts. The liquidation of liabilities not covered by 

budgetary or other resources is dependent on future Congressional appropriations or other funding. 

Intragovernmental liabilities are claims against OSC by other Federal agencies. Liabilities not covered by 

budgetary resources on the Balance Sheet are equivalent to amounts reported as components requiring or 

generating resources on the Statement of Financing. Additionally, the government, acting in its sovereign 

capacity, can abrogate liabilities. 

Accrued liabilities for OSC are comprised of program expenses accruals, payroll accruals, and annual 

leave (funded and unfunded) earned by employees. Program expense accruals represent expenses that 

were incurred prior to year-end but were not paid. Similarly, payroll accruals represent payroll expenses 

that were incurred prior to year-end but were not paid. 

J. Accounts Payable 

Accounts payable consists of amounts owed to other Federal agencies and the public. 

K. Annual, Sick, and Other Leave 

Annual leave is accrued as it is earned, and the accrual is reduced as leave is taken. The balance in the 

accrued leave account is adjusted to reflect current pay rates. Liabilities associated with other types of 

vested leave, including compensatory, restored leave, and sick leave in certain circumstances, are accrued 

at year-end, based on latest pay rates and unused hours of leave. Sick leave is generally non-vested. 

Funding will be obtained from future financing sources to the extent that current or prior year 

appropriations are not available to fund annual and other types of vested leave earned but not taken. Nonvested leave is expensed when used. 

L. Accrued Workers’ Compensation

A liability is recorded for actual and estimated future payments to be made for workers’ compensation 

pursuant to the Federal Employees’ Compensation Act (FECA). The actual costs incurred are reflected as 

a liability because OSC will reimburse the Department of Labor (DOL) two years after the actual 

payment of expenses. Future appropriations will be used for the reimbursement to DOL. The liability 

consists of (1) the net present value of estimated future payments calculated by the DOL, and (2) the 

unreimbursed cost paid by DOL for compensation to recipients under the FECA. 

M. Retirement Plans 

OSC employees participate in either the Civil Service Retirement System (CSRS) or the Federal 

Employees’ Retirement System (FERS). The employees who participate in CSRS are beneficiaries of 

OSC’s matching contribution, equal to seven percent of pay, distributed to their annuity account in the 

Civil Service Retirement and Disability Fund. 

FERS went into effect on January 1, 1987. FERS and Social Security automatically cover most 

employees hired after December 31, 1983. Employees hired prior to January 1, 1984 elected to join either 

FERS, Social Security, or remain in CSRS. FERS offers a savings plan to which OSC automatically 

contributes one percent of pay and matches any employee contribution up to an additional four percent of 

pay. For FERS participants, OSC also contributes the employer’s matching share of Social Security. 
 Notes to Principal Financial Statements 

43

FERS employees and certain CSRS reinstatement employees are eligible to participate in the Social 

Security program after retirement. In these instances, OSC remits the employer’s share of the required 

contribution. 

OSC recognizes the imputed cost of pension and other retirement benefits during the employees’ active 

years of service. Office of Personnel Management (OPM) actuaries determine pension cost factors by 

calculating the value of pension benefits expected to be paid in the future and communicate these factors 

to OSC for current period expense reporting. OPM also provides information regarding the full cost of 

health and life insurance benefits. OSC recognized the offsetting revenue as imputed financing sources to 

the extent these expenses will be paid by OPM. 

OSC does not report on its financial statements information pertaining to the retirement plans covering its 

employees. Reporting amounts such as plan assets, accumulated plan benefits, and related unfunded 

liabilities, if any, are the responsibility of the OPM. 

N. Net Position 

Net position is the residual difference between assets and liabilities and is comprised of unexpended 

appropriations and cumulative results of operations. Unexpended appropriations represent the amount of 

unobligated and unexpended budget authority. Unobligated balances are the amount of appropriations or 

other authority remaining after deducting the cumulative obligations from the amount available for 

obligation. The cumulative result of operations is the net result of OSC’s operations since inception. 

O. Imputed Costs/Financing Sources 

Federal government entities often receive goods and services from other Federal government entities 

without reimbursing the providing entity for all the related costs. In addition, Federal government entities 

also incur costs that are paid in total or in part by other entities. An imputed financing source is 

recognized by the receiving entity for costs that are paid by other entities. OSC recognized imputed costs 

and financing sources in fiscal years 2009 and 2008 to the extent directed by OMB. 

P. Revenues & Other Financing Resources 

Congress enacts annual and multi-year appropriations to be used, within statutory limits, for operating 

and capital expenditures. Additional amounts are obtained from service fees and reimbursements from 

other government entities and the public. 

Appropriations are recognized as a financing source when expended. Revenues from service fees 

associated with reimbursable agreements are recognized concurrently with the recognition of accrued 

expenditures for performing the services. 

OSC recognizes as an imputed financing source the amount of accrued pension and post-retirement 

benefit expenses for current employees paid on our behalf by (OPM). 

Q. Contingencies 

Liabilities are deemed contingent when the existence or amount of the liability cannot be determined with 

certainty pending the outcome of future events. OSC recognizes contingent liabilities, in the 

accompanying Balance Sheet and Statement of Net Cost, when it is both probable and can be reasonably 

estimated. OSC discloses contingent liabilities in the notes to the financial statements when the conditions 

for liability recognition are not met or when a loss from the outcome of future events is more than remote. 

In some cases, once losses are certain, payments may be made from the Judgment Fund maintained by the 
 Notes to Principal Financial Statements 

44 

U.S. Treasury rather than from the amounts appropriated to OSC for agency operations. Payments from 

the Judgment Fund are recorded as an “Other Financing Source” when made. 

R. Expired Accounts and Cancelled Authority 

Unless otherwise specified by law, annual authority expires for incurring new obligations at the beginning 

of the subsequent fiscal year. The account in which the annual authority is placed is called the expired 

account. For five fiscal years, the expired account is available for expenditure to liquidate valid 

obligations incurred during the unexpired period. Adjustments are allowed to increase or decrease valid 

obligations incurred during the unexpired period but not previously reported. At the end of the fifth 

expired year, the expired account is cancelled. 

S. Use of Estimates 

The preparation of financial statements in conformity with Generally Accepted Accounting Principles 

(GAAP) requires management to make estimates and assumptions that affect the reported amounts of 

assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial 

statements and the reported amounts of revenues and expenses during the reporting period. Actual results 

could differ from those estimates. 

T. Comparative Data 

The financial statements and footnotes present comparative data for the prior fiscal year. In order to 

provide an understanding of changes in OSC’s financial position and operations, certain FY 2008 line 

amounts have been reclassified to conform to the FY 2009 financial statement and footnote presentations. 
 Notes to Principal Financial Statements 

45 

NOTE 2. FUND BALANCE WITH TREASURY 

Fund Balance with Treasury account balances as of September 30, 2009 and 2008 were: 

(dollars in thousands)

Fund Balances: 2009 2008

 Appropriated Funds (general) $ 4,423 $ 4,202

Total Fund Balance with Treasury $ 4,423 $ 4,202

Status of Fund Balance with Treasury

 Unobligated Balance:

 Available $ 160 $ 94

 Unavailable 1,407 1,369

 Obligated Balance Not Yet Disbursed 2,856 2,739

Total Status of Fund Balance with Treasury $ 4,423 $ 4,202

Restricted unobligated fund balance represents the amount of appropriations for which the period of 

availability for obligation has expired. These balances are available for upward adjustments of 

obligations incurred only during the period for which the appropriation was available for obligation or 

paying claims attributable to the appropriations. 

NOTE 3. ACCOUNTS RECEIVABLE 

A summary of accounts receivable from the public as of September 30, 2009 and 2008 were as follows: 

(dollars in thousands) 2009 2008

Accounts Receivable from the Public:

Billed:

 Current $ 26 $ 26

Total Accounts Receivable 26 26

Accounts Receivable from the Public, Net $ 26 $ 26

NOTE 4. GENERAL PROPERTY, PLANT AND EQUIPMENT 

Property, Plant and Equipment account balances as of September 30, 2009 and 2008 were as follows: 
 Notes to Principal Financial Statements 

46 

(dollars in thousands) Service Life

Acquisition 

Value

Accumulated 

Depreciation

2009 Net Book 

Value

2008 Net Book 

Value

Office Equipment 5 yrs $ 330 $ (195) $ 135 $ 47

Leashold Improvements 10 yrs 273 (82) 191 218

Total $ 603 $ (277) $ 326 $ 265

NOTE 5. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES 

The liabilities on OSC’s Balance Sheet as of September 30, 2009 and 2008 include liabilities not covered 

by budgetary resources, which are liabilities for which congressional action is needed before budgetary 

resources can be provided. Although future appropriations to fund these liabilities are likely and 

anticipated, it is not certain that appropriations will be enacted to fund these liabilities. 

A. Intragovernmental and Public Liabilities

(dollars in thousands) 2009 2008

Intragovernmental:

 Accounts Payable $ -

 Employer Contributions & Payroll Taxes Payable 138 $ 134

 Unfunded Payroll Liabilities 49 53

Total Intragovernmental 187 187

Federal Employee Benefits-FECA Actuarial Liability 275 339

Unfunded Annual Leave 900 851

Total Liabilities Not Covered by Budgetary Resources $ 1,362 $ 1,377

Total Liabilities Covered by Budgetary Resources 649 702

Total Liabilities $ 2,011 $ 2,079

B. Other Information 

Unfunded Payroll Liabilities consists of workers’ compensation claims payable to the 

Department of Labor, which will be funded in a future period, and an unfunded estimated liability for 

future workers’ compensation claims based on data provided from the DOL. Unfunded FECA liabilities 

for 2009 and 2008 were $49 and $53, respectively. Unfunded Employment liabilities for 2009 were $0 

and $-18 for 2008. The actuarial calculation is based on benefit payments made over 12 quarters, and 

calculates the annual average of payments. The Actuarial FECA liabilities for 2009 and 2008 were $275 

and $339, respectively. For medical expenses and compensation this average is then multiplied by the 

liability-to-benefit paid ratio for the whole FECA program. 

Unfunded Annual Leave represents a liability for earned leave and is reduced when leave is 

taken. At year end, the balance in the accrued annual leave account is adjusted to reflect the liability at 

current pay rates and leave balances. Accrued annual leave is paid from future funding sources and, 

accordingly, is reflected as a liability not covered by budgetary resources. Sick and other leave is 

expensed as taken. 
 Notes to Principal Financial Statements 

47 

 All other liabilities are considered to be covered by budgetary resources. 

NOTE 6. OPERATING LEASES 

OSC occupies office space under lease agreements in Washington, DC, Dallas, Oakland, and Detroit that 

are accounted for as operating leases. The DC lease term began on October 26, 2009 and expires on 

October 25, 2019. The original Dallas lease term began on December 9, 2002 and after the new lease was 

entered now expires on December 8, 2017. The Oakland lease term began on March 1, 2000 and expired 

on February 28, 2005. A new 60-month lease was entered into during FY05 for the Oakland office 

commencing on February 1, 2006 and expiring in BFY 2011. This lease was modified in FY06 with the 

period commencing on July 1, 2006 and expiring BFY 2011. The Detroit lease began on March 20, 2005 

and will expire on March 19, 2010. 

Lease payments are increased annually based on the adjustments for operating cost and real estate tax 

escalations. Below is a schedule of future payments for the terms of all the leases. 

(dollars in thousands)

Fiscal Year Total

2010 $ 1,542

2011 1,482

2012 1,451

2013 1,432

2014 1,439

Total Future Lease Payments $ 7,346

The operating lease amount does not include estimated payments for leases with annual renewal options. 

NOTE 7. CONTINGENCIES 

A contingency is an existing condition, situation or set of circumstances involving uncertainty as to 

possible payment by OSC. The uncertainty will ultimately be resolved when one of more future events 

occur or fail to occur. For pending, threatened or unasserted litigation, a liability/cost is recognized when 

a past transaction or event has occurred, a future outflow or other sacrifice of resources is probable, and 

the related future outflow or sacrifice of resources can be reasonably estimated. 

There are numerous legal actions pending against the United States in Federal courts in which claims 

have been asserted that may be based on action taken by OSC. Management intends to vigorously contest 

all such claims. Management believes, based on information provided by legal counsel, that losses, if 

any, for the majority of these cases would not have a material impact on the financial statements. 

NOTE 8. IMPUTED FINANCING SOURCES 

OSC recognizes as imputed financing the amount of accrued pension and post-retirement benefit 

expenses for current employees. The assets and liabilities associated with such benefits are the 

responsibility of the administering agency, the Office of Personnel Management. For the fiscal month 

ended September 30, 2009 and 2008, respectively, imputed financing from OPM were $805 and $797. 

NOTE 9. INTRAGOVERNMENTAL COSTS AND EXCHANGE REVENUE 
 Notes to Principal Financial Statements 

48 

Intragovernmental costs represent goods and services exchange transactions made between two reporting 

entities within the Federal government, and are in contrast to those with non-federal entities (the public). 

Such costs are summarized as follows: 

(dollars in thousands)

2009 2008

Investigations and Enforcements

 Intragovernmental Costs $ 2,458 $ 2,779

 Public Costs 15,337 15,007

Total Investigations and Enforcements $ 17,795 $ 17,786

 Intragovernmental Earned Revenue $ 59

Total Intragovernmental Earned Revenue $ - $ 59

NOTE 10. APPORTIONMENT CATEGORIES OF OBLIGATIONS INCURRED 

Obligations incurred reported on the Statement of Budgetary Resources in 2009 and 2008 consisted of the 

following: 

(dollars in thousands) 2009 2008

Direct Obligations:

 Category A $ 17,270 $ 17,736

Reimbursable Obligations:

 Category A 59

Total Obligations Incurred $ 17,270 $ 17,795

NOTE 11. EXPLANATION OF DIFFERENCES BETWEEN THE SBR AND THE BUDGET OF 

THE U.S. GOVERNMENT 

Statement of Federal Financial Accounting Standards No. 7, Accounting for Revenue and Other 

Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting, calls for 

explanations of material differences between amounts reported in the Statement of Budgetary Resources 

(SBR) and the actual balances published in the Budget of the United States Government (President’s 

Budget). However, the President’s Budget that will include FY09 actual budgetary execution information 

has not yet been published. The President’s Budget is scheduled for publication in February 2010 and 

can be found at the OMB website: http://www.whitehouse.gov/omb. The 2010 Budget of the United 

States Government, with the Actual column completed for 2008, has been reconciled to the Statement of 

Budgetary Resources and there were no material differences. 

NOTE 12. UNDELIVERED ORDERS AT THE END OF THE PERIOD 

Beginning with FY06, the format of the Statement of Budgetary Resources has changed and the amount 

of undelivered orders at the end of period is no longer required to be reported on the face of the statement. 

Statement of Federal Financial Accounting Standards No. 7, Accounting for Revenue and Other 

Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting, states that the 

amount of budgetary resources obligated for undelivered orders at the end of the period should be 
 Notes to Principal Financial Statements 

49 

disclosed. For the years ended September 30, 2009 and 2008, undelivered orders amounted to $2,069 and 

$1,588. 

NOTE 13. RECONCILIATION OF NET COST OF OPERATIONS (PROPRIETARY) TO 

BUDGET (FORMERLY THE STATEMENT OF FINANCING) 

In fiscal year 2006 this reconciliation was presented as a fifth statement, the Statement of Financing. In 

accordance with OMB Circular A-136, revised June 2007, presentation requirement for this information 

is now a footnote disclosure. Details of the relationship between budgetary resources obligated and the 

net costs of operations for the fiscal years ending September 30 are as follows: 
 Notes to Principal Financial Statements 

50 

2009 2008

Resources Used to Finance Activities

Current Year Gross Obligations 17,270$ 17,795$ 

Budgetary Resources from Offsetting Collections

Spending Authority from Offsetting Collections

 Earned

 Collected (59)

Recoveries of Prior Year Unpaid Obligations (34) (47)

Other Financing Resources

Imputed Financing Sources 805 797

Total Resources Used to Finance Activity 18,041 18,486

Resources Used to Finance Items Not Part of the Net Cost of Operations

Budgetary Obligations and Resources not in the Net Cost of Operations

Change in Undelivered Orders (166) (870)

Current Year Capitalized Purchases (133)

Components of Net Cost which do not Generate or Use Resources in the Reporting Period

Revenues without Current Year Budgetary Effect

Change in NonFederal Receivables - (15) 

Other Financing Sources Not in the Budget (805) (797)

Costs without Current Year Budgetary Effect

Depreciation and Amortization 72 66

Future Funded Expenses 44 41

Imputed costs 805 797

Other Expenses Not Requiring Budgetary Resources (63) 19

Net Cost of Operations 17,795$ 17,727$ 

Fiscal Year 2009