FY2006 Performance and Accountability Report 

November 15, 2006 

U.S. OFFICE OF SPECIAL COUNSEL 

1730 M Street, N.W., Suite 300 

Washington, D.C. 20036-4505 

(www.osc.gov) 
TABLE OF CONTENTS 

WWW.OSC.GOV 

Page 

Part 1: Message from the Special Counsel 4 

Part 2: Management Discussion and Analysis 5 

I. Agency at a Glance ..........................................................................................................................5 

II. Statutory Background ......................................................................................................................5 

III. The Mission of the U.S. Office of Special Counsel.........................................................................6 

IV. Organizational Structure of OSC.....................................................................................................7 

V. Performance Goals and Results.......................................................................................................9 

VI. OSC's Systems, Controls, and Legal Compliance .........................................................................12 

VII. Future Effects of Known Demands, Risks, Uncertainties, Events, Conditions, and Trends .........13 

VIII. Comments on Final FY 2006 Financial Statements.......................................................................15 

Part 3: Performance 17 

Goals: Prohibited Personnel Practices .................................................................................................... 17 

Goals: Hatch Act ..................................................................................................................................... 22 

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

Goals: USERRA ..................................................................................................................................... 31 

FY 2006 Performance and Accountability Report 2 
 40 

Page 

Part 4: Financial Section 

Independent Auditor’s Report ................................................................................................................ 40 

Independent Auditor’s Report on Compliance with Laws and Regulations ............................................ 44 

Independent Auditor’s Report on Internal Control ................................................................................... 46 

Financial Statements ................................................................................................................................ 48 

Notes to Financial Statements ................................................................................................................... 54

FY 2006 Performance and Accountability Report 3 
 A Message from the 

Special Counsel 

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

Report for Fiscal Year 2006. 

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 2006 marks only the third year the 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,

 Scott J. Bloch

 Special Counsel 

FY 2006 Performance and Accountability Report 4
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). 

OSC currently has approximately 108 FTE and three career staff vacancies. 

II. Statutory Background 

OSC was first established on January 1, 1979.1 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; provided advice on restrictions imposed by the Hatch Act on political activity 

by covered federal, state, and local government employees; and 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. 2 

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.3 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.4 

OSC’s 1994 reauthorization act expanded protections for federal employees, and defined 

FY 2006 Performance and Accountability Report 5 
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. 5 

In November of 2001, Congress enacted the Aviation and Transportation Security Act,6 

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. 

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. 

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. 

FY 2006 Performance and Accountability Report 6 
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 FY2005 include the Immediate Office of the Special Counsel 

(IOSC), five operating units/divisions and six 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 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.7 This unit is responsible for screening approximately 1,700 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.8 

Disclosure Unit. This unit is responsible for receiving and reviewing disclosures 

received from federal whistleblowers. It advises the Special Counsel on the appropriate 

disposition of the information disclosed (including possible referral to the head of the agency 

involved for an investigation and report to OSC; referral to an agency Inspector General; or 

closure). The unit also reviews agency reports of investigation, to determine whether they 

appear to be reasonable and in compliance with statutory requirements before the Special 

Counsel sends them to the President and appropriate congressional oversight committees. 

Investigation and Prosecution Division. The Investigation and Prosecution Division 

(IPD) is comprised of four field offices. The IPD conducts field investigations of matters 

referred after preliminary inquiry by the Complaints Examining Unit. Division attorneys 

conduct a legal analysis after investigations are completed to determine whether the evidence is 

sufficient to establish that a prohibited personnel practice (or other violation within OSC’s 

jurisdiction) has occurred. Investigators work with attorneys in evaluating whether a matter 

warrants corrective action, disciplinary action, or both. 

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

division attorneys represent the Special Counsel in litigation before the Merit Systems Protection 

Board. They also represent the Special Counsel when OSC intervenes, or otherwise participates, 

in other proceedings before the Board. Finally, division investigators and attorneys also 

investigate alleged violations of the Hatch Act and the Uniformed Services Employment and 

Reemployment Rights Act. However, under a new pilot program, most USERRA functions will 

be housed in a new USERRA unit in the Special Projects Unit to assure uniformity of policy 

regarding the new pilot. 

FY 2006 Performance and Accountability Report 7 
Hatch Act Unit. The unit issues advisory opinions to individuals seeking information 

about Hatch Act restrictions on political activity by federal, and certain state and local, 

government employees. The unit is also responsible for enforcing the act. It reviews complaints 

alleging a Hatch Act violation and, when warranted, investigates and prosecutes the matter (or 

refers the matter to the Investigation and Prosecution Division for further action). It will also 

oversee Hatch Act matters farmed out to the IPD. 

USERRA/Special Projects Unit. This unit uses senior trial lawyers to work cases of 

high priority and has also been used by the Special Counsel to conduct internal research on the 

processes and procedures of the operational units at OSC. In addition, this unit handles the new 

special project assigned by P.L. 108-454 that requires OSC to investigate the re-employment 

rights of military service members under USERRA, which involves new functions, increased 

caseload, and new personnel. 

SUPPORTING UNITS: 

Alternative Dispute Resolution Program In selected cases referred by the Complaints 

Examining Unit for further investigation, the agency contacts the complainant and the agency 

involved, and invites them to participate in OSC’s voluntary Mediation Program. If mediation 

resolves the complaint, the parties execute a written and binding settlement agreement; if not, the 

complaint is referred for further investigation. 

The mediation program for Alternative Dispute Resolution has been reorganized. Rather 

than have a single ADR specialist under the leadership of an SES employee, the agency has 

expanded the program through cross-training multiple individuals from each of OSC’s operating 

units. As a result the agency now has a broad pool of trained mediators with different legal areas 

of expertise. 

Legal Counsel and Policy Division. This division provides general counsel and policy 

services to OSC, including legal advice and support on management and administrative matters; 

legal defense of OSC in litigation filed against the agency; policy planning and development; and 

management of the agency ethics program. 

Management and Budget Division. This division provides administrative and 

management support services to OSC, in furtherance of program, human capital, and budget 

decisions. Division also includes the Information Technology Branch (formerly Information 

Systems Branch), Human Resources Branch, Document Control Branch and Budget and 

Procurement branch. The purpose of this division is to put the administrative support functions 

under one authority. 

Training Office. A training office has been created to train all new employees, cross 

train existing employees, and develop specialized training in areas such as litigation skills. 

Specifically, the Training Office will cross train attorneys and investigators to enable them to 

traverse organizational boundaries within the agency. They will develop sufficient expertise in 

several areas of the law, giving management the ability to detail employees to address any 

FY 2006 Performance and Accountability Report 8 
potential backlogs that could form in the various units. 

V. Performance Goals and Results 

In last year’s Performance and Accountability Report, OSC reported how the chronic 

problem of backlogged Prohibited Personnel Practice (PPP) cases, Hatch Act cases and 

Disclosure Unit cases had been reduced through tremendous effort by the entire agency over an 

18-month period. The good news to report in this year’s request is that the agency, again 

through hard work and diligence, has been successful in avoiding a recurrence of any of the three 

types of backlog. The streamlined processes and logically reorganized organizational structure 

put into place with the agency reorganization during FY 2005 were the other contributors to the 

agency’s ability to defy resurgent backlogs. 

While OSC continues to experience a high caseload level, the agency stands in a vastly 

improved position entering FY 2007 – with virtually no case backlogs. 

OSC’S results in FY 2006 include: 

1. The Special Counsel’s willingness to prosecute federal agencies for violations of the law 

again achieved strong results. Prior Special Counsels had never filed any USERRA 

enforcement actions with the U.S. Merit Systems Protection Board (since USERRA was 

passed in 1994). In FY 2005, OSC set a precedent by filing three USERRA cases in one 

year, receiving full corrective action in all three cases. In FY 2006, OSC filed and 

successfully prosecuted one USERRA appeal and obtained full corrective action on 

behalf of the claimant - who had been informed by the U.S. Department of Labor that his 

case had no merit. This willingness to prosecute USERRA violations also causes more 

corrective action settlements prior to litigation. OSC achieved a record 19 USERRA 

corrective actions in the first ten months of FY 2006. 

2. During FY 2006, the Special Counsel again focused on raising the profile of the Uniform 

Services Employment and Re-employment Rights Act (USERRA), so that returning 

reservists and veterans are aware of their rights and of the existence of OSC. In early 

2005, OSC’s role in enforcing USERRA again expanded. Pursuant to a demonstration 

project established by the Veterans Benefits Improvement Act of 2004 (VBIA), P.L. 108-

454, signed by President Bush on December 10, 2004, OSC, rather than the Department 

of Labor’s Veterans Employment and Training Service (DOL VETS), has the authority to 

investigate federal sector USERRA claims brought by persons whose social security 

number ends in an odd-numbered digit. Under the project, OSC also receives and 

investigates all federal sector USERRA claims containing a related prohibited personnel 

practice allegation over which OSC has jurisdiction regardless of the person’s social 

security number. During FY 2006, the second year of the demonstration project, OSC is 

on track to receive approximately 125 cases from DOL VETS, in addition to 

approximately 80 cases that come directly to OSC from veterans. This pilot project has 

already shortened the processing times for members of our armed forces who are 

FY 2006 Performance and Accountability Report 9 
discriminated against in employment. 

3. OSC’s Outreach Program efforts have succeeded in educating federal agency managers 

and employees concerning their responsibilities and rights. OSC also assisted federal 

agencies to fulfill their statutory obligation to consult with OSC concerning informing 

federal employees of their rights under the laws that OSC enforces.9

 OSC formally 

launched its government-wide 2302(c) Certification Program in October 2002. Since that 

time, 51 agencies (including Cabinet-level agencies such as the Departments of Labor, 

Energy, State, Transportation, Education, Health and Human Services and Veterans 

Affairs) have registered for the program. 

4. 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. 

5. The agency hired two extraordinarily qualified employees through the Federal Career 

Intern program and one highly qualified employee through the Veterans Recruitment 

Appointment (VRA) program. 

6. During FY 2006, OSC’s Strategic Plan was re-written and the agency’s Performance 

Goals were thoroughly re-designed. They are now measurable, finite, and tied directly to 

the four statutory missions of the agency. They deal with timeliness, quality, and 

outreach (where applicable) for each enforcement mission. The Senate Appropriations 

Committee expressed their satisfaction with the changes in the budget hearing in March 

of 2006. 

7. In November OSC won removal of an agency attorney in California who used his office 

to effect fundraising and organizing activities for his political party through his office 

computer during office hours. The Merit Systems Protection Board upheld this decision 

in August, 2006. 

8. In March Special Counsel Scott Bloch presented 2302(c) certification to MSPB 

Chairman Neil McPhie. OSC is certifying that MSPB has taken the required steps to 

ensure its employees are informed about their rights under the law. Increased outreach to 

inform federal workers of their rights has been cited as a major factor in ensuring that 

workers are aware of their rights and feel secure in exercising them. 

9. In March OSC won admission of guilt on Hatch Act violations from the former Mayor of 

Atlantic City, Lorenzo Langford. Langford is temporarily barred from government 

service. His position as mayor included administration of federal grants, rendering him 

covered by the Act. Langford had committed multiple violations, including ordering his 

subordinates to engage in political activities and abusing his office. 

10. In April Special Counsel Scott Bloch sat on a panel at the National Press Club with the 

MSPB Chairman, moderated by Bill Bransford of the Senior Executives Association. 

They discussed misconceptions among federal employees and managers that hamper the 

FY 2006 Performance and Accountability Report 10 
proper application of employee rights under the law. They also discussed potential 

changes to the law that would aid employees. 

11. In June OSC achieved corrective action (reinstatement, promotion, back pay) for 

serviceman Russell Jones from the Army Corps of Engineers. Jones had been told that 

his case was worthless, but OSC was able to obtain full corrective action on his behalf. 

12. In June the Special Counsel presented 2302(c) certification to the General Counsel for the 

Department of Homeland Security, Phil Perry. OSC is certifying that DHS has taken the 

required steps to ensure its employees are informed about their rights under the law. 

13. In July the Special Counsel testified before the House Government Reform Committee’s 

subcommittee on the federal workforce. The hearing was regarding a bill to create a 

commission, on which the Special Counsel would sit, that would study ways to improve 

the federal employee appeals process. The Special Counsel offered OSC’s own efforts at 

backlog resolution, including vigorous management and a well-regulated screening unit. 

He expressed an eager willingness to cooperate with the other agencies and the 

committee to find ways to improve the process. 

14. In September Leroy Smith received the Public Servant of the Year Award from OSC. As 

in past years, this award is presented to the public servant who has performed an 

outstanding service to the public through OSC. Smith blew the whistle on unsafe and 

potentially deadly activities at the Bureau of Prisons, where not only inmates but also 

staff were at risk due to dangerous chemical recycling operations. Currently, the Justice 

Department is investigating OSC’s allegations that BOP and Federal Prison Industries 

have failed to take corrective action. 

In spite of these successes, OSC faces serious challenges. For fiscal reasons OSC has not 

hired up to its approved level of 113 FTE during FY 2006. Several positions have been filled 

with part time employees, in order to further reduce salary and benefit expenditures. 

Although the elimination of backlogged cases has helped OSC achieve its strategic goals 

of protecting federal employees from PPPs, protecting the merit system, and guarding the public 

interest through its Disclosure Unit, there are other important ways in which the agency must 

gauge its success. OSC made progress on improving the timeliness to review PPP cases (89% 

processed in less than 240 days during FY 2006, a 22% improvement). OSC’s percentage of 

whistleblower disclosures handled in less than 15 days dropped slightly to 42% in FY 2006 

(down from 50% in FY 2005). A major focus of OSC during the next two years will be the 

measurable realization of more progress in this area. 

FY 2006 Performance and Accountability Report 11 
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 2006, 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 early 

October, 2006. 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: On October 15, 2004, GAO produced a correspondence 

entitled “U.S. Office of Special Counsel's Role in Enforcing Law to Protect 

Reemployment Rights of Veterans and Reservists in Federal Employment. GAO-05-

74R, which analyzes how OSC carries out its responsibilities under USERRA, 

including processing times and changes made by OSC to handle current claims and 

any increase in claims. 

This correspondence reported favorably on OSC’s processes and results, noting that 

OSC obtained corrective action from Federal Employers on all USERRA claims that 

had merit. It also outlined the possible benefits to service members from having OSC 

handle USERRA claims earlier in the process. This later became a reality with the 

passage of the Veterans Benefits Improvement Act of 2004, Pub. L. No. 108-454, § 

204, 118 Stat. 3606, which requires DOL and OSC to carry out a three-year 

demonstration program under which certain federal sector claims under USERRA are 

to be referred to OSC for initial investigation and resolution. 

Even though the demonstration project created by the VBIA is still in its third year, 

GAO is currently studying the results of the program so far, the reductions in 

processing times for the claims filed by the veterans and reservists, and the quality of 

the investigations. 

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

was in FY 2004. The auditors reported no material weaknesses in FY 2004 or FY 

2005. The FY 2006 audit addresses accounting and procurement procedures and 

operations, almost all of which were accomplished by the Bureau of Public Debt 

(BPD) at the Department of the Treasury under an interagency outsourcing 

agreement. The audit will not be completed until early December 2006. 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. 

FY 2006 Performance and Accountability Report 12 
4. OSC Capitalization Policy. In November of FY 2005, OSC created a capitalization 

policy for assets with purchase price over $50,000. This policy is in place and 

reviewed quarterly, to determine if OSC has additional assets to capitalize. 

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

signed an agreement for with the Department of Interior for the issuance of PIV cards 

to OSC employees. OSC met the October 2006 deadline to have a process in place 

and at least one card issued. 

In FY 2006, several OSC financial management activities including procurement, budget 

accounting, financial accounting, reporting accounting, and travel services were administered by 

BPD. OSC personnel and payroll data entry transactions were processed by the Department of 

Agriculture’s (USDA’s) National Finance Center (NFC). These operations were administered 

under cross-servicing agreements with both departmental entities. For information on any 

significant management control issues related to services provided under these agreements, OSC 

relies on information received from BPD and NFC, and any audits or other reviews issued by the 

Treasury and USDA OIGs, their Offices of the Chief Financial Officer (OCFO), and the General 

Accounting Office (GAO). 

On April 18, 2005, there was a GAO Correspondence entitled “Bureau of the Public 

Debt: Areas for Improvement in Information Security Controls” GAO-05-467R, which pointed 

out that the FY 2004 audit at BPD identified six new general information security control issues. 

It also states that BPD informed GAO that it has taken corrective action to address these issues, 

and further notes that BPD has made significant progress in addressing open recommendations 

from prior years’ audits. Additionally, the correspondence points out that none of these findings 

pose significant risk to the BPD financial systems. These GAO conclusions lead OSC to 

conclude that the objectives of its management control program for its transactions handled by 

BPD were met for FY 2006. 

Reports on NFC operations have identified internal control or other problems detailed in 

USDA OIG and/or OCFO reports required by law to be submitted to the President and Congress. 

These include OIG Report No. 11401-20-FM, “Fiscal Year 2004- Review of the National 

Finance Center General Controls” (October 2004). The report identifies eleven technical control 

issues. However, OSC transactions processed by NFC during FY 2006, however, do not appear 

to have been affected by the problems reported. OSC will, however, follow up on findings when 

warranted. 

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

Events, Conditions, and Trends 

In the past several years, the agency has experienced an increase in caseload level. There 

are a number of factors which have contributed to this level of complaint filings with OSC: 

y A string of Hatch Act cases involving high-profile employees over the last three years has 

FY 2006 Performance and Accountability Report 13 
resulted in significant national press coverage. There is now a heightened awareness of the 

Hatch Act among Federal employees. The number of Hatch Act complaints received in FY 

2006 (300) exceeds the numbers received previously in any year. Hatch Act complaints in 

FY 2008 are projected to be the highest number yet, due to the upcoming presidential 

election. 

y Due to OSC’s more vigorous focus on USERRA complaints from members of our armed 

forces, increased numbers of such complaints are being filed with OSC. 

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

increased national press coverage of OSC. FY 2006 continued this trend. 

y 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. 

y During FY 2006, OSC continued to certify more 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. 

y 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. 

The effect of these trends is that caseloads will continue increasing. OSC must therefore 

continue adding personnel with relevant skills who can contribute quickly when they come into 

the agency. 

The Special Counsel continues to stress the importance of further development of OSC’s 

agency-wide cross training program. This is an important initiative, which provided for 

unprecedented efficiency at OSC by developing the agency’s employees to the point where they 

have sufficient expertise to operate in more than one of OSC’s highly specialized units, and can 

therefore cross organizational boundaries to address the case backlogs in their initial stage. 

Since February 2005, OSC has been investigating certain federal sector USERRA claims 

under the demonstration project explained in the Performance Goals and Results section on page 

nine of this document. OSC, rather than the Department of Labor’s Veterans Employment and 

Training Service (VETS), has the authority to investigate federal sector USERRA claims brought 

by persons whose social security number ends in an odd-numbered digit. Under the project, OSC 

also receives and investigates all federal sector USERRA claims containing a related prohibited 

personnel practice allegation over which OSC has jurisdiction regardless of the person’s social 

security number. The demonstration project ends on September 30, 2007, and Congress will 

determine whether OSC will continue to have investigative responsibility over federal sector 

USERRA claims. The decision from Congress could bring with it the necessity for OSC to add 

staff to take on more than just the cases of those service members with odd-numbered social 

security numbers. 

FY 2006 Performance and Accountability Report 14 
VIII. Comments on Final FY 2006 Financial Statements 

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

with initial purchase price over $50,000. The agency’s phone system falls under this 

policy, and was initially capitalized in the amount of $108,650. Net book value is now 

$67,371. Additionally, $272,528 in various leasehold improvements were added to the 

list of capitalized assets during FY 2006. 

• 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 86% of the agency’s expenditures. 

So 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 agency’s planned Document Management System. 

• Under “Liabilities Not Covered by Budgetary Resources” in the Notes to the Financial 

Statements, unfunded leave balances at the end of FY 2006 are $704,595, an 8.1% 

increase over the unfunded leave balances at the end of FY 2005. This unfunded liability 

stems from the tremendous effort given by the OSC employees to accomplish the mission 

of the agency in a timely manner without the resurgence of backlogs. 

• 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. 

FY 2006 Performance and Accountability Report 15 
Endnotes 

1

 Reorganization Plan Number 2 of 1978. See 5 U.S.C.A. App.1, § 204. The Civil Service Reform Act of 1978 

(Public Law No. 95-454, 92 Stat. 1111) enlarged OSC’s functions and powers. 2 Public Law No. 101-12 (1989). Provisions setting forth OSC authorities and responsibilities were codified at 

5 U.S.C. § 1211, et seq. 3 Public Law No. 103-94 (1993), codified in scattered sections of 5 U.S.C. and 12 U.S.C. 4 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).). 5 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). 6 Public Law 107-71 (2001). 7 Unless noted otherwise, all references after this to prohibited personnel practice complaints include complaints 

alleging other violations of civil service law, rule, or regulation listed at 5 U.S.C. § 1216, except for alleged 

violations of the Hatch Act. 8 When the Complaints Examining Unit makes a preliminary determination to close a complaint without further 

investigation, it must by law provide complainants with a written statement of reasons, to which they may respond. 

On the basis of the response, if any, the unit decides whether to close the matter, or refer it to the Investigation and 

Prosecution Division. 9 “The head of each agency shall be responsible for the prevention of prohibited personnel practices, for the 

compliance with and enforcement of applicable civil service laws, rules, and regulations, and other aspects of 

personnel management, and for ensuring (in consultation with the Office of Special Counsel) that agency employees 

are informed of the rights and remedies available to them under this chapter and chapter 12 of this title.” 5 U.S.C. 

2302(c). 

FY 2006 Performance and Accountability Report 16 
OSC Statutory Missions: 

PPP ENFORCEMENT MISSION 

Goal 1: PROTECTION OF THE MERIT SYSTEM THROUGH TIMELY 

CASE PROCESSING 

PPP 

Enforcement 

Mission 

PERFORMANCE 

INDICATORS 

FY 2006 

TARGET 

FY 2006 

RESULTS 

FY 2007 

TARGET 

FY 2007 

RESULTS 

Prohibited 

Personnel 

Practices 

Cases 

Indicator A: 

Percentage of 

cases processed in 

less than 240 days. 85% 89% 95% 

Comments for Goal #1: 

1. Indicator A: PPP Cases. 

This timeliness indicator measures the combined effectiveness of both OSC’s Complaints 

Examining Unit (CEU) and OSC’s Investigation and Prosecution Division (IPD). 

OSC receives complaints of Prohibited Personnel Practices into the CEU. If, after initial 

screening, investigation, and legal analysis, a complaint meets the requirements for merit, 

it is internally referred to the IPD for further investigation. If the IPD investigates and 

determines the case does indeed have merit, the IPD either seeks relief for the claimant 

through mediation, settlement, or prosecution. 

The reason the target is less than 100% is because in some cases the settlement process 

can take a considerable amount of time. In cases involving litigation, the timeframe for 

events is no longer driven by the speed of work of OSC attorneys and investigators. To 

strive for 100% would carry the implicit assumption that OSC would not litigate any 

cases. 

The result for Goal 1 for FY 2006 surpassed the target. However, further efficiencies will 

need to be introduced during FY 2007, in order to meet the FY 2007 target, which is 

higher. 

FY 2006 Performance and Accountability Report 17 
Goal 2: PROMOTE JUSTICE THROUGH THE QUALITY OF 

INVESTIGATIONS AND ENFORCEMENTS 

PPP 

Enforcement 

Mission PERFORMANCE 

INDICATORS 

FY 2006 

TARGET 

FY 2006 

RESULTS 

FY 2007 

TARGET 

FY 2007 

RESULTS 

Prohibited 

Personnel 

Practices 

Cases 

Indicator A: 

% favorable outcomes in 

cases determined by 

OSC to be meritorious = 

(# successful mediations 

+ # of settlements 

achieved + # of 

successful litigations) / 

(# meritorious cases) 

99% 100% 99% 

Comments to Goal #2 

1. Performance Indicator A 

A meritorious case is one in which the Office of Special Counsel is satisfied that claimant 

is entitled to relief. In certain meritorious cases, OSC may endeavor to use mediation to 

secure relief for the claimant. If mediation was not appropriate or did not succeed, OSC 

may exercise its prosecutorial authority and file for corrective or disciplinary action before 

the MSPB. As prosecutor, OSC seeks to obtain full corrective action on behalf of 

claimants either by settlements with the involved federal employer or via litigation. 

Typically, OSC will prosecute cases it believes are meritorious but where the involved 

agency is unwilling to resolve them voluntarily. OSC is confident of its ability to 

prosecute successfully cases warranting corrective action. 

In FY 2006, OSC processed 47 meritorious PPP cases. There was one more case in which 

a stay was in place at the end of the year. Even though the stay was favorable action, we 

are not counting that case in the 06 numbers, because we won’t have completed its 

investigation of the case until FY 2007. 

In 46 of the 47 meritorious cases, OSC successfully achieved corrective action during or 

after the investigation of the case. The 47th case went to litigation, but was settled for 

corrective action prior to the conclusion of trial proceedings. Therefore, there were 47 

FY 2006 Performance and Accountability Report 18 
corrective actions achieved in 47 cases, which gives the percentage of 100% as the result 

in FY 2006. This percentage exceeded the previously established target. 

FY 2006 Performance and Accountability Report 19 
Goal 3: ENHANCE OUTREACH TO FEDERAL AGENCIES TO 

PROMOTE COMPLIANCE WITH THE STATUTES THAT OSC 

ENFORCES 

PPP 

Enforcement 

Mission 

PERFORMANCE 

INDICATORS 

FY 2006 

TARGET 

FY 2006 

RESULTS 

FY 2007 

TARGET 

FY 2007 

RESULTS 

Prohibited 

Personnel 

Practices 

Outreach 

Indicator A: 

# of new Federal 

agencies certified in 

the 2302 (c) Program 

by OSC. 5 6 5 

Comments to Goal #3 

OSC has statutory authority to administer the 2302(c) Program, which recognizes the 

federal sector’s need for awareness of Prohibited Personnel Practices and training in 

avoidance of committing them. However, OSC cannot force any agency to apply for 

certification. There are no statutory penalties for not being certified. This annual numeric 

target is not overly aggressive because 1) OSC cannot force compliance, and 2) the 

number of Federal agencies that may seek certification is limited by the number of 

agencies in existence. OSC already has 47 certified agencies, including most of the major 

ones. 

Other outreach activities: 

Additionally, members of the Investigation and Prosecution Division and the Complaints 

Examining Unit regularly accept invitations to provide outreach services designed to 

educate Federal personnel on these issues so that agencies comply with the law. 

Employees from OSC were able to educate employees of many agencies during a 

presentation at the Federal Dispute Resolution Conference (FDR). 

• OSC maintains a telephonic hotline for answering PPP-related questions from 

members of the Federal workforce. 

FY 2006 Performance and Accountability Report 20 
• OSC’s website provides a wealth of information regarding PPPs and is a valuable 

and constantly improving resource for educating the Federal workforce on this 

subject. Every year the website statistics for user sessions increase, with an 

average increase in activity of 15% each previous year. 

• The Go Learn project is a new initiative that will bring OSC expertise to 

thousands of Federal workers. OSC does not have responsibility for this project, 

other than providing expert content. 

The results for the number of certifications exceeded the previously set target of five 

agencies to be certified during FY 2006. 

FY 2006 Performance and Accountability Report 21 
OSC Statutory Missions: 

HATCH ACT MISSION 

Goal 1: TO DEFEND THE MERIT SYSTEM BY ENFORCING THE 

HATCH ACT - THROUGH TIMELY CASE PROCESSING 

HATCH 

ACT 

MISSION 

PERFORMANCE 

INDICATORS 

FY 2006 

TARGET 

FY 2006 

RESULTS 

FY 2007 

TARGET 

FY 2007 

RESULTS 

HATCH ACT 

WRITTEN 

ADVISORY 

OPINIONS 

See comment 1. 

HATCH ACT 

ORAL & 

EMAIL 

ADVISORY 

OPINIONS 

See comment 2. 

HATCH ACT 

COMPLAINTS 

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 days. 

Indicator C: 

Percentage of 

matters resolved 

in less than 365 

days. 

75% 

99% 

60%

 93% 

100% 

84% 

80% 

99% 

70% 

Comments for Goal #1: 

1. Performance Indicator A: written advisory opinions 

These are the requests for an advisory opinion that come in to OSC’s Hatch Act Unit that 

are very complex and require significant analysis before answering. 

FY 2006 Performance and Accountability Report 22 
2. Performance Indicator B: oral or e-mail advisory opinions 

If an oral or e-mail advisory opinion were to take longer than five days, generally it would 

be treated as a formal written advisory request and be captured by Indicator A. 

Several employees were detailed into the Hatch Act Unit to assist with the high volume of 

advisories, complaints, and cases. These employee details, and the extreme dedication of 

the employees of the Hatch Act Unit, made it possible to exceed all three timeliness targets 

for FY 2006. 

FY 2006 Performance and Accountability Report 23 
Goal 2: TO PROMOTE JUSTICE THROUGH THE QUALITY OF 

INVESTIGATIONS AND ENFORCEMENTS 

HATCH 

ACT 

MISSION 

PERFORMANCE 

INDICATORS 

FY 2006 

TARGET 

FY 2006 

RESULTS 

FY 2007 

TARGET 

FY 2007 

RESULTS 

HATCH ACT 

CASES 

See comment 1. 

Indicator A: 

% favorable outcomes 

in meritorious cases 90% 97% 90% 

Comments to Goal #2 

1. Meritorious cases 

A meritorious Hatch Act case is a case in which OSC finds a violation of the Hatch Act. A 

favorable outcome in a Hatch Act case is either (1) successful litigation of the case; (2) 

successful settlement of the case; or (3) successful corrective action (individual corrected 

his violation after receiving notice from OSC, for example, by withdrawing his candidacy 

or resigning from his employment). 

The results achieved by the Hatch Act Unit for Goal 2 exceeded the target by 7% for FY 

2006. 

FY 2006 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 

PERFORMANCE 

INDICATORS 

FY 2006 

TARGET 

FY 2006 

RESULTS 

FY 2007 

TARGET 

FY 2007 

RESULTS 

HATCH 

ACT 

OUTREACH 

VISITS 

HATCH 

ACT 

SECTION 

OF OSC 

WEBSITE 

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 

complex advisory 

opinions added 

every month to the 

website. 

90% 

1 

96% 

1 

90% 

1 

Comments to Goal #3 

1. Results: 

Indicator A: The outreach results for FY 2006 exceed the set target by 6%. 

Indicator B: Ten complex advisory opinions have been posted. This averages to one 

opinion per month, since these goals were established in February 2006. 

2. Outreach DVD 

In addition to the performance of outreach visits and the website enhancement described 

above, OSC has produced both a Federal Hatch Act DVD and a State & Local Hatch Act 

DVD that explains the basics of the Hatch Act. OSC is now able to mail the appropriate 

FY 2006 Performance and Accountability Report 25 
DVD to certain requestors who require a basic tutorial overview of the Hatch Act. 

3. Hatch Act poster 

OSC continues to provide free Hatch Act posters to requesting agencies, if the quantity 

requested is less than ten. If the quantity requested exceeds ten, the interested agency can 

use OSC’s rider at the Government Printing Office to order the required number of Hatch 

Act posters. 

FY 2006 Performance and Accountability Report 26 
FY 2006 Performance and Accountability Report 27

OSC Statutory Missions: 

WHISTLEBLOWER DISCLOSURE MISSION 

Goal 1: TO RECEIVE AND RESOLVE WHISTLEBLOWER 

DISCLOSURES WITH TIMELY PROCESSING

WHISTLEBLOWER 

DISCLOSURE 

MISSION PERFORMANCE 

INDICATORS 

FY 2006 

TARGET 

FY 2006 

RESULTS 

FY 2007 

TARGET 

FY 2007 

RESULTS

DISCLOSURES 

See comment 1. 

Indicator A: 

Percentage of 

disclosures 

resolved within 

the statutory 15 

day time frame.

50% 42% 50% 

Comments for Goal #1: 

1. Performance Indicator A: Timely Disclosure Processing 

Pursuant to § 1213(b), when the Special Counsel receives any disclosure of information 

by a federal employee, former federal employee or applicant for federal employment 

which the [employee] reasonably believes evidences: a violation of law, rule or regulation, 

gross mismanagement, a gross waste of funds, an abuse of authority, or a substantial and 

specific danger to public health or safety, the Special Counsel must review the information 

within 15 days and determine whether there is a substantial likelihood that the information 

discloses one or more of the above categories of wrongdoing. 

OSC handles these whistleblower disclosures under 5 U.S.C. § 1213 in one of three ways. 

If the Special Counsel makes a positive determination, he must transmit the information to 

the appropriate agency head, and require the agency head to conduct an investigation and 

submit a written report on the findings of the investigation. These referrals under § 1213 

represent a small percentage (approximately 8% for FY 2006) of the total number of cases 

resolved by OSC in any fiscal year. 

If the Special Counsel does not make a positive determination, the matter is closed. These 

closures make up the vast majority (92% for FY 2006) of the total number of cases 

resolved by OSC in any fiscal year. 
FY 2006 Performance and Accountability Report 28

If the Special Counsel is unable to make the substantial likelihood determination on the 

basis of the information supplied by the whistleblower, the matter may be informally 

referred to the Inspector General (IG) for the agency involved, with a request that the IG 

assist OSC in making a substantial likelihood determination. 

Because of the time involved in preparing cases for referral under § 1213 and in cases 

referred to the IG, the statutory 15-day time frame is difficult to achieve. As a result the 

Indicator for Goal #1, “[p]ercentage of disclosures processed within the statutory 15 day 

timeframe,” is intended to capture only those cases in which the substantial likelihood 

determination has not been met. Even in those cases, the actual percentage of cases 

resolved in less than 15 days is relatively low. It should also be noted that the Special 

Counsel is considering proposing a legislative change in the statutory language to enlarge 

the time frame from 15 days to 45 days, a number which would more accurately reflect the 

average amount of time required to resolve a whistleblower disclosure. 

Because of the issues identified above, the Disclosure Unit did not meet the target set for 

Goal 1 for FY 2006. 
FY 2006 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 

PERFORMANCE 

INDICATORS 

FY 2006 

TARGET 

FY 2006 

RESULTS

FY 2007 

TARGET 

FY 2007 

RESULTS

DISCLOSURES 

See comment 1. 

Indicator A: 

% of disclosures 

referred to agency 

head, pursuant to 

5 U.S.C. § 1213, or 

under the informal IG 

referral process.

7% 8% 7% 

Comments to Goal #2 

1. Indicator A: Whistleblower referrals: 

The U.S. Office of Special Counsel does not have investigative or enforcement authority 

under 5U.S.C. § 1213. As such, the Indicator for Goal #2 reflects a quality measure based 

on the number of cases referred under §1213, regardless of the outcome of the referral. 

The percentage of cases referred out of the total number of cases received in a fiscal year 

is a relatively low number historically, and as such, the FY 2006 and FY 2007 targets are 

low. Because OSC’s Disclosure Unit processes nearly 500 disclosures annually, this 

percentage can be seen as an indicator of the average relative height of the “substantial 

likelihood” bar in a given year. 

The Indicator for Goal #2 reflects only one way of measuring quality as defined in Goal 

#2, to “promote justice and protect the merit system.” Because the statutory mandate of 

§1213 contemplates that OSC make a determination whether there is a substantial 

likelihood that the information discloses wrongdoing, a negative determination under the 

statute, resulting in a closure, is as quality driven as a positive determination resulting in a 

referral. OSC’s analysis of a whistleblower disclosure may result in a determination not to 

burden an agency with an inappropriate referral, thus promoting justice and protecting the 

merit system. Notwithstanding this difficulty in identifying a measure of quality, the 

individual whistleblower who initiates the disclosure, thus accessing the statutory 

protections, is more inclined to measure quality by whether or not his or her disclosure is 

referred. As such, the Indicator for Goal #2 for now reflects this single measurement. 

The target for this goal was exceeded for FY 2006. 
FY 2006 Performance and Accountability Report 30

Goal 3: TO PROMOTE COMPLIANCE WITH THE STATUTES THAT 

OSC ENFORCES THROUGH ENHANCED OUTREACH TO FEDERAL 

AGENCIES

WHISTLEBLOWER 

DISCLOSURE 

MISSION PERFORMANCE 

INDICATORS 

FY 2006 

TARGET 

FY 2006 

RESULTS 

FY 2007 

TARGET 

FY 2007 

RESULTS

NA NA NA NA 

Comments to Goal #3 

1. Disclosure outreach: 

OSC’s Disclosure Unit does not have a statutorily defined mandate to perform compliance 

outreach, and as such does not regularly provide training or outreach to other government 

entities, with the exception of informational presentations to foreign delegations. 

OSC continues to provide free Whistleblower Disclosure Act posters to requesting 

agencies, if the quantity requested is less than ten. If the quantity requested exceeds ten, 

the interested agency can obtain extra copies from the Government Printing Office. 
FY 2006 Performance and Accountability Report 31

OSC Statutory Missions: 

USERRA MISSION

Explanatory Comments about the Four Types of USERRA Cases 

OSC receives four types of USERRA cases––RE, DP-OD, DP-MX, and DP-TSA––each 

of which are explained in detail below. Given the different nature of such cases, different 

performance indicators apply. 

1. RE Cases 

Under USERRA, certain federal sector claims are investigated by U.S. Department of 

Labor, Veterans’ Employment and Training Service (VETS). Pursuant to 38 U.S.C. § 

4324, in the event that VETS is unable to resolve such a claim, a claimant has a right to 

have his or her claim referred to OSC for a determination on whether OSC will represent 

the claimant before the U.S. Merit Systems Protection Board (MSPB). Such cases are 

identified by OSC as “RE cases.” 

RE cases have already been investigated by VETS and reviewed by a DOL Office of 

Regional Solicitor (RSOL). The USERRA Unit receives the VETS investigative file and a 

legal memorandum from RSOL indicating whether RSOL recommends that OSC 

represent the claimant. USERRA Unit reviews the information and make as “de novo” 

determination. 

Where the USERRA Unit disagrees with an RSOL determination that OSC should 

represent the claimant, the unit sends the RSOL a report setting forth the factual and legal 

basis of the unit’s preliminary determination not to represent the claim and invites the 

RSOL to respond. The unit considers any response received from the RSOL in making a 

final representation determination. The RSOL is typically given two weeks to respond to 

the report. 

It is to be noted that while RE cases have already been investigated by VETS, OSC has 

found that: further investigation is often warranted, e.g., key witnesses need interviewing; 

important documents need to be obtained; too much time lapsed between alleged initial 

violations and their referral to OSC. In such cases, the USERRA Unit will always contact 

the agency and relevant witnesses to obtain the information necessary to allow it to make a 

well-reasoned determination regarding the prosecutorial merit of a given claim. 

The need and extent of any supplemental investigation affects the processing time of RE 

cases and is reflected in the performance indicator. 

2. DP-OD cases 

In late 2004, Congress expanded OSC’s role in enforcing USERRA and protecting the 

employment rights of federal employees and applicants. Pursuant to a demonstration 

project established by section 204 of the Veterans Benefits Improvement Act of 2004 
FY 2006 Performance and Accountability Report 32

(VBIA), P.L. 108-454, OSC was given the exclusive authority to investigate federal sector 

USERRA claims brought by persons whose social security number ends in an oddnumbered digit. Under the demonstration project, OSC also investigates all federal sector 

USERRA claims containing a related prohibited personnel practice allegation over which 

OSC has jurisdiction regardless of the person’s social security number (so-called “mixed 

claims”). VETS’ investigative authority was limited to federal sector USERRA claims 

brought by persons whose social security number ends in an odd-numbered digit and who 

do not allege a prohibited personnel practice. Pursuant to section 204(d)(1) of VBIA, OSC 

shall administer the demonstration project and DOL shall cooperate with OSC in carrying 

out the demonstration project. The demonstration project began on February 8, 2005, and 

ends on September 30, 2007. 

Given the new, additional investigative responsibilities Congress assigned to OSC with the 

passing of the demonstration project and the Special Counsel’s desire to revitalize OSC’s 

enforcement of USERRA during his term, Special Counsel Bloch established the 

USERRA Unit as part of the January 6, 2005, directive reorganizing the agency. The 

USERRA Unit is the in-take, investigative, and prosecutorial unit for all matters pertaining 

to USERRA and veteran-related employment issues. The Unit is responsible for 

investigating USERRA claims to determine whether prosecution is warranted. 

DP-OD cases are federal sector USERRA claims filed by persons having an oddnumbered social security number. DP-OD cases typically come from two sources: 1) from 

VETS, where a claimant files a USERRA Form 1010 (i.e., a USERRA complaint form) 

with VETS and 2) directly from the claimant, where the claimant files with OSC the OMB 

approved form OSC-14 “Complaint of Possible violation of USERRA.” 

The USERRA Unit conducts an investigation of DP-OD cases and determines whether 

OSC will represent the claimant in an USERRA action before the MSPB. The 

performance indicator reflects the time reasonably expected to investigate such cases. 

3. DP-MX cases 

As stated above, OSC is responsible for investigating all federal sector USERRA claims 

where the claimant, regardless of his or her social security number, alleges a prohibited 

personnel practice over which OSC has jurisdiction. 

The USERRA Unit conducts an investigation of DP-MX cases and determines whether 

OSC will represent the claimant in an USERRA or prohibited personnel practice action 

before the MSPB. 

The processing time of DP-MX cases is affected by 1) additional complexity of such cases 

and 2) the USERRA Unit’s adoption of OSC’s practice in prohibited personnel practice 

cases of granting a claimant 13 days to respond to OSC’s preliminary determination 

regarding prohibited personnel practice allegations. The performance indicator 

incorporates those factors. 
FY 2006 Performance and Accountability Report 33

4. DP-TSA cases 

On June 9, 2005, the MSPB held in Spain v. Department of Homeland Security (MSPB 

Docket # PH-0353-04-0361-I-1) that USERRA does not apply to Transportation Security 

Administration (TSA) Security Screeners or TSA Supervisory Security Screeners and, 

therefore, the MSPB does not recognize jurisdiction over such cases. Consequently, OSC 

is unable to prosecute USERRA actions involving TSA Security Screeners or TSA 

Supervisory Security Screeners. 

Notwithstanding the Spain decision, TSA voluntarily permits OSC to investigate 

USERRA claims and reports it findings and recommendations for corrective action to TSA 

management officials (akin to the manner in which OSC is permitted to investigate and 

report on allegations of whistleblower reprisal). 

The performance indicator for these types of cases reflects the MSPB’s decision in the 

Spain case. 

Goal 1: TO ENFORCE THE UNIFORMED SERVICES EMPLOYMENT 

AND REEMPLOYMENT RIGHTS ACT THROUGH TIMELY CASE 

PROCESSING

USERRA 

MISSION PERFORMANCE 

INDICATORS 

FY 2006 

TARGET 

FY 2006 

RESULTS

FY 2007 

TARGET 

FY 2007 

RESULTS

USERRA 

A: RE Cases 

Cases received 

from DOL 

pursuant to 

38 U.S.C. § 4324.

Indicator A: 

Percentage of 

cases where the 

representation 

decision is made 

in 75 days or less. 

90% 50% 90% 

USERRA 

B: DP-OD 

Cases 

Cases received by 

OSC pursuant to 

the VBIA. 

Indicator A: 

Percentage of 

cases where the 

representation 

decision is made 

in 120 days or 

less. 

80% 62% 

 

80% 
FY 2006 Performance and Accountability Report 34

USERRA 

MISSION 

PERFORMANCE 

INDICATORS 

FY 2006 

TARGET 

FY 2006 

RESULTS

FY 2007 

TARGET 

FY 2007 

RESULTS

USERRA 

C: DP-MX 

Cases 

Cases received by 

OSC pursuant to 

the VBIA. 

Indicator A: 

Percentage of 

cases where the 

representation 

decision is made 

in 160 days or 

less. 

80% 74% 

 

80% 

USERRA 

D: DP-TSA 

Cases 

Cases received by 

OSC pursuant to 

the VBIA. 

Indicator A: 

Percentage of 

cases where a 

“no merit” 

determination is 

made or a request 

for voluntary 

corrective action 

is sent to TSA in 

120 days or less. 

80% 33% 

 

80% 

 

 

Comments for Goal #1: 

a. For RE cases, in 50% of them the representation decision was made within 75 days. 

y 5 RE cases were resolved in ≤ 75 days. 

y 5 RE cases were resolved in ≤ 75 days. 

y Average processing time to resolve these 10 RE cases was 71 days.

GOAL: 90% 

ASSESSMENT: USERRA Unit did not meet this aggressive target. 

b. For the DP-OD cases, in 62% of them the representation decision was made within 

120 days. 

y 91 DP-OD cases were resolved in ≤ 120 days. 
FY 2006 Performance and Accountability Report 35

y 56 DP-OD cases were not were resolved in ≤ 120 days. 

y Average processing time to close 147 DP-OD cases was 115 days. 

GOAL: 80% 

ASSESSMENT: USERRA Unit did not meet this aggressive target. 

c. For DP-MX cases, in 74% of them the representation decision was made within 160 

days. 

y 26 DP-MX cases were resolved in ≤ 160 days. 

y 9 DP-MX cases were not were resolved in ≤ 160 days. 

y Average processing time to close 35 DP-MX cases was 123 days. 

GOAL: 80% 

ASSESSMENT: USERRA Unit came very close to meeting this aggressive target. 

d. For DP-TSA cases, in 33% of them a “no merit” determination was made or a 

“request for voluntary corrective action” was sent to TSA within 120 days. 

y 2 TSA cases were resolved in ≤ 120 days. 

y 4 TSA cases were not were resolved in ≤ 120 days. 

y Average processing time to close 6 TSA cases was 161 days. 

GOAL: 80% 

ASSESSMENT: USERRA Unit did not meet this aggressive target. 

In general, the USERRA Unit did not meet the aggressive internal timeliness targets set 

forth last year because it is a start up unit. As with any “new business,” there are initial 

inefficiencies that adversely affect performance. As time goes by, those inefficiencies 

diminish, and the business becomes more efficient. 

In the case of the USERRA Unit, the inefficiencies stemmed from the need to assemble 

(hire, re-assign, or detail) and train a new staff of lawyers and investigators to handle the 

agency’s new mission of investigating USERRA cases. A lot of time has been spent 

training the staff on the substantive law. As the staff’s expertise in USERRA grows, so 

will its efficiency, and the goals should be attainable. 

Notwithstanding the failure to meet the aggressive timeliness targets for USERRA for 

FY 2006, it is important to note OSC’s average time to resolve a USERRA claim is 

exemplary and reflects the dedication of the USERRA Unit members. 
FY 2006 Performance and Accountability Report 36

Goal 2: TO PROMOTE JUSTICE THROUGH THE QUALITY OF 

INVESTIGATIONS AND ENFORCEMENTS

USERRA 

MISSION PERFORMANCE 

INDICATORS FY 2006 

TARGET

FY 2006 

RESULTS

FY 2007 

TARGET

FY 2007 

RESULTS

USERRA 

Cases 

Indicator A: 

% favorable outcomes in 

cases determined by OSC to 

be meritorious = 

(# successful mediations + # 

of settlements achieved + # 

of successful litigations) / 

(# meritorious cases) 

Indicator B (unquantifiable): 

# of “test cases” filed 

 

90% 

Inappropriate to 

set a 

specific 

target 

100% 

0 

 

90% 

Inappropriate to 

set a 

specific 

target 

Comments to Goal #2 

1. Performance Indicator A 

Where the Office of Special Counsel is satisfied that claimant is entitled to relief, then it 

may exercise its prosecutorial authority and represent the claimant before the MSPB and, 

in certain circumstances, the U.S. Court of Appeals for the Federal Circuit. See 38 U.S.C. 

§§ 4324(a)(2)(A) and (d)(2). As prosecutor, OSC seeks to obtain full corrective action on 

behalf of claimants either by settlements with the involved federal employer or via 

litigation. 

Typically, OSC will prosecute cases it believes are meritorious but where the involved 

agency is unwilling to resolve them voluntarily. OSC is confident of its ability to 

prosecute successfully cases warranting corrective action. “Meritorious cases” under this 

performance indicator are to be distinguished from the “test cases” found under 

Performance Indicator B. 
FY 2006 Performance and Accountability Report 37

Detail behind the percentage in the results for FY 2006 Indicator A: 

a. # of successful mediations n/a 

b. # of settlements achieved 36 

c. # of successful litigations 1 

d. # meritorious cases 37 

e. # test cases filed n/a 

GOAL = 50 % 

RESULTS = 100% (37/37) 

ASSESSMENT: USERRA Unit exceeded the target for this indicator. 

2. Performance Indicator B 

It is foreseeable that OSC will desire to file cases where the law is not clear (e.g., novel 

legal issues requiring “test cases” to define the bounds of the law) but will establish legal 

precedent benefiting all service members, if the litigation is successful. The outcomes of 

these types of cases do not depend on OSC’s skill in weighing of the evidence, applying of 

law, and trying the case. Instead, the cases involve questions of law. 

It is difficult to define a performance goal that accurately reflects “success” or “failure” of 

OSC’s identification of cases that are fertile for expanding the law. The mere fact of filing 

test litigation with an eye toward expanding the law, however, seems appropriate. 

Performance Indicator B captures this concept. OSC will track how often it files this type 

of case. However, a target can not be identified because OSC cannot determine how often 

appropriate “test cases” will come into the agency from claimants. 

OSC filed no USERRA test cases during FY 2006. 
FY 2006 Performance and Accountability Report 38

Goal 3: TO PROMOTE COMPLIANCE WITH THE STATUTES THAT 

OSC ENFORCES THROUGH ENHANCED OUTREACH TO FEDERAL 

AGENCIES

USERRA 

MISSION 

PERFORMANCE 

INDICATORS 

FY 2006 

TARGET 

FY 2006 

RESULTS 

FY 2007 

TARGET 

FY 2007 

RESULTS

USERRA 

Outreach 

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}) 

50% 

50% 

n/a 

100% 

90% 

50% 

Comments to Goal #3 

OSC recognizes the federal sector’s need for USERRA training although it has no 

statutory obligation to provide it. Thus, the USERRA Unit regularly accepts invitations to 

provide outreach services designed to educate federal personnel on USERRA issues so 

that agencies comply with the law. Such outreach efforts include USERRA seminars 

presented by OSC staff to the D.C. Bar, at the annual Federal Dispute Resolution 

Conference, and presentations at the Army’s Advanced Labor and Employment Law 

Course at the Judge Advocate General’s Legal Center and School in Charlottesville, 

Virginia. Additionally, the unit maintains a telephonic and web-based “hotlines” for 

answering USERRA-related questions from the public and private sectors. 

The performance indicators reflect the practical budgetary constraints of providing OSCsponsored USERRA training to all requesters and OSC ability and desire to provide such 

training. 
FY 2006 Performance and Accountability Report 39

Detail behind the results for FY 2006 Indicator A: 

 a. # of USERRA training & outreaches given, where inviter sponsors OSC = 0 

 b. # of invitations for USERRA training/outreach visits, where the inviter sponsors = 0 

GOAL = 80 % 

ASSESSMENT: N/A (No one invited OSC and offered to sponsor the outreach.) 

Detail behind the results for FY 2006 Indicator B: 

a. # of USERRA training & outreaches given, where OSC pays = 2 

b. # of invitations for USERRA training/outreach visits, where OSC pays = 2 

GOAL = 50 % 

RESULTS = 100% (2/2) 

ASSESSMENT: The USERRA Unit exceeded the target for this indicator. 
OFFICE OF SPECIAL COUNSEL 

Washington, D. C. 

INDEPENDENT AUDITOR’S REPORTS 

AND FINANCIAL STATEMENTS 

September 30, 2006 and 2005 
OFFICE OF SPECIAL COUNSEL 

INDEPENDENT AUDITOR’S REPORTS AND 

FINANCIAL STATEMENTS 

September 30, 2006 and 2005 

TABLE OF CONTENTS 

PAGE 

Independent Auditor’s Report..........................................................................................................1 

Independent Auditor’s Report on Compliance and Other Matters ..................................................3 

Independent Auditor’s Report on Internal Control..........................................................................5 

Financial Statements ........................................................................................................................7 
A1 

Independent Auditor’s Report 

To the Office of Special Counsel 

We have audited the accompanying balance sheets of the Office of Special Counsel (OSC) as of 

September 30, 2006 and 2005, and the related statements of net cost, changes in net position, 

budgetary resources, and statement of financing for the years 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 audits. 

We conducted our audits in accordance with auditing standards generally accepted in the United 

States of America; the standards applicable to the financial audits contained in Government 

Auditing Standards, issued by the Comptroller General of the United States; and the Office of 

Management and Budget (OMB) Bulletin No. 06-03, Audit Requirements for Federal Financial 

Statements. 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 audits provide 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, 2006 and 2005 and its net cost; changes in net 

position; budgetary resources; and reconciliation of net cost to budgetary resources for the years 

then ended in conformity with accounting principles generally accepted in the United States of 

America. 

In accordance with Government Auditing Standards, we have also issued our reports dated 

November 2, 2006 on our consideration of OSC’s internal control over financial reporting and on 

our tests of OSC’s compliance with certain provisions of laws, regulations, contracts, grant 

agreements and other matters. The purpose of those reports is to describe the scope of our 

testing of internal control over financial reporting and compliance and the results of that testing, 

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

Those reports are an integral part of our audit performed in accordance with Government 

Auditing Standards and should be considered in assessing the results of our audit. 

Offices in 15 states and Washington, DC 1 h 
Our audits were made for the purpose of forming an opinion on the basic financial statements 

taken as a whole. The Management Discussion and Analysis is not a required part of the basic 

financial statements but is supplementary information required by accounting principles 

generally accepted in the United States of America. We have applied certain limited procedures 

to such information, which consisted principally of inquiries of OSC management regarding the 

methods of measurement and presentation of this supplementary information. However, we did 

n

a

ot audit the information and express no opinion on it. 

Calverton, Maryland 

1 

November 2, 2006 

2 
A1 

Independent Auditor’s Report on Compliance and Other Matters 

To the Office of Special Counsel 

We have audited the financial statements of the Office of Special Counsel (OSC), as of and for 

the year ended September 30, 2006 and have issued our report thereon dated November 2, 2006. 

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 Office of Management 

and Budget (OMB) Bulletin No. 06-03, Audit Requirements for Federal Financial Statements. 

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, noncompliance with which could have a direct and material affect on the 

determination of financial statement amounts and certain other laws and regulations specified in 

OMB Bulletin No. 06-03, including the requirements referred to in the Federal Financial 

Management Improvement Act (FFMIA) of 1996. We limited our tests of compliance to these 

provisions and we did not test compliance with all laws and regulations applicable to OSC. 

The results of our tests of compliance with laws and regulations described in the preceding 

paragraph, exclusive of FFMIA, disclosed no instances of noncompliance with laws and 

regulations and other matters that are required to be reported under Government Auditing 

Standards and OMB Bulletin No. 06-03. 

Under FFMIA, we are required to report whether OSC’s financial management systems 

substantially comply with the Federal financial management systems requirements, applicable 

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

transaction level. To meet this requirement, we performed tests of compliance with FFMIA 

section 803(a) requirements. The results of our tests disclosed no instances in which OSC’s 

financial management systems did not substantially comply with the three requirements 

discussed above. 

Providing an opinion on compliance with certain provisions of laws and regulations was not an 

objective of our audit and, accordingly, we do not express such an opinion. 

Offices in 15 states and Washington, DC 3 h 
This report is intended solely for the information and use of the management of OSC, the Bureau 

of Public Debt, the Government Accountability Office, OMB and Congress, and is not intended 

t

a

o be and should not be used by anyone other than these specified parties. 

Calverton, Maryland 

1 

November 2, 2006 

4 
A1 

Independent Auditor’s Report on Internal Control 

To the Office of Special Counsel 

We have audited the financial statements of the Office of Special Counsel (OSC), as of and for 

the year ended September 30, 2006, and have issued our report thereon dated November 2, 2006. 

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

States of America; the standards applicable to the 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. 06-03, Audit Requirements for Federal Financial 

Statements. 

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

reporting by obtaining an understanding of OSC’s internal control, determined whether internal 

controls had been placed in operation, assessed control risk, and performed tests of controls in 

order to determine our auditing procedures for the purpose of expressing our opinion on the 

financial statements. We limited our internal control testing to those controls necessary to 

achieve the objectives described in OMB Bulletin No. 06-03. We did not test all internal 

controls relevant to operating objectives as broadly defined by the Federal Managers’ Financial 

Integrity Act (31 U.S.C. 3512), such as those controls relevant to ensuring efficient operations. 

The objective of our audit was not to provide assurance on internal control. Consequently, we do 

not provide an opinion on internal control. 

Our consideration of the internal control over financial reporting would not necessarily disclose 

all matters in the internal control over financial reporting that might be reportable conditions. 

Under standards issued by the American Institute of Certified Public Accountants, reportable 

conditions are matters coming to our attention relating to significant deficiencies in the design or 

operation of the internal control that, in our judgment, could adversely affect OSC’s ability to 

record, process, summarize, and report financial data consistent with the assertions by 

management in the financial statements. Material weaknesses are reportable conditions in which 

the design or operation of one or more of the internal control components does not reduce to a 

relatively low level the risk that misstatements caused by error or fraud in amounts that would be 

material in relation to the financial statements being audited may occur and not be detected 

within a timely period by employees in the normal course of performing their assigned functions. 

Because of inherent limitations in internal controls, misstatements, losses, or noncompliance may 

nevertheless occur and not be detected. We noted no matters involving the internal control and 

its operation that we consider to be material weaknesses. We noted other matters involving 

internal control and its operation that we have reported in a separate letter dated November 2, 

2006. 

Offices in 15 states and Washington, DC 5 h 
Finally, with respect to internal controls related to performance measures reported in OSC’s 

Management’s Discussion and Analysis, we obtained an understanding of the design of 

significant internal controls relating to the existence and completeness assertions, as required by 

OMB Bulletin No. 06-03. Our procedures were not designed to provide assurance on internal 

control over reported performance measures, and, accordingly, we do not provide an opinion on 

such controls. 

*************************************** 

This report is intended solely for the information and use of the management of OSC, the Bureau 

of Public Debt, the Government Accountability Office, OMB and Congress, and is not intended 

t

a

o be and should not be used by anyone other than these specified parties. 

Calverton, Maryland 

1 

November 2, 2006 

6 
OFFICE OF SPECIAL COUNSEL 

FINANCIAL STATEMENTS 

September 30, 2006 and 2005 

TABLE OF CONTENTS 

PAGE 

Balance Sheets .................................................................................................................................8 

Statements of Net Cost.....................................................................................................................9 

Statements of Changes in Net Position..........................................................................................10 

Statements of Budgetary Resources...............................................................................................11 

Statements of Financing.................................................................................................................12 

Notes to Financial Statements........................................................................................................13 

7 
OFFICE OF SPECIAL COUNSEL 

BALANCE SHEETS 

September 30, 2006 and 2005 

ASSETS 

Intragovernmental - Fund Balance with Treasury (Note 2) 

Accounts Receivable 

General Property, Plant and Equipment, Net (Note 3) 

TOTAL ASSETS 

2006 

$ 2,999,701 

11,171 

397,878 

$ 3,408,750 

$ 

$ 

2005 

3,325,060 

3,084 

67,371 

3,395,515 

LIABILITIES 

Intragovernmental liabilities (Note 4) 

Accounts Payable (Note 4) 

Other (Note 4) 

 Total Liabilities 

$ 191,804 

67,931 

1,081,307 

1,341,042 

$ 177,011 

175,142 

1,005,565

1,357,718 

NET POSITION 

Unexpended Appropriations 

Cumulative Results of Operations 

Total Net Position 

TOTAL LIABILITIES AND NET POSITION 

2,461,486 

(393,778) 

2,067,708 

$ 3,408,750 $ 

2,683,745 

(645,948) 

2,037,797 

3,395,515 

The accompanying notes are an integral part of these financial statements. 

8 
OFFICE OF SPECIAL COUNSEL 

STATEMENTS OF NET COST 

For the Years Ended September 30, 2006 and 2005 

PROGRAM COSTS 

Investigations & Enforcements 

Less: Earned Revenue 

2006 2005 

$ 16,068,378 $ 14,703,913 

(325,277) (184,272) 

NET COST OF OPERATIONS (Note 7) $ 15,743,101 $ 14,519,641 

The accompanying notes are an integral part of these financial statements. 

9 
OFFICE OF SPECIAL COUNSEL 

STATEMENTS OF CHANGES IN NET POSITION 

For the Years Ended September 30, 2006 and 2005 

2006 2005 

Cumulative Results of Operations: 

Beginning Balance $ (645,948) $ (679,383) 

Budgetary Financing Sources: 

Appropriations Used 15,284,585 13,849,357 

Other Financing Sources (Non-Exchange): 

Imputed Financing Sources 710,686 703,719 

Total Financing Sources 15,995,271 14,553,076 

Net Cost of Operations (15,743,101) (14,519,641) 

Net Change 252,170 33,435 

Cumulative Results of Operations (393,778) (645,948) 

Unexpended Appropriations: 

Beginning Balance 2,683,745 1,293,682 

Budgetary Financing Sources: 

Appropriations Received 15,325,000 15,449,000 

Permanently Not Available (262,674) (209,580) 

Appropriations Used (15,284,585) (13,849,357) 

Total Budgetary Financing Sources (222,259) 1,390,063 

Total Unexpended Appropriations 2,461,486 2,683,745 

Net Position $ 2,067,708 $ 2,037,797 

The accompanying notes are an integral part of these financial statements. 

10 
OFFICE OF SPECIAL COUNSEL 

STATEMENTS OF BUDGETARY RESOURCES 

For the Years Ended September 30, 2006 and 2005 

BUDGETARY RESOURCES 

Unobligated Balance Brought Forward, October 1: 

Recoveries of Prior Year Unpaid Obligations 

2006 2005 

$ 782,260 $ 861,990 

317,261 118,268 

Budget Authority 

Appropriation 

Spending Authority From Offsetting Collections - Collected 

Subtotal - Budget Authority 

Permanently Not Available 

Total Budgetary Resources (Note 9) 

15,325,000 15,449,000 

325,277 184,272 

15,650,277 15,633,272 

(262,674) (209,580) 

$ 16,487,124 $ 16,403,950 

STATUS OF BUDGETARY RESOURCES 

Obligations Incurred 

Direct 

Reimbursable 

Total Obligations Incurred 

Unobligated Balance - Apportioned 

Unobligated Balance - Not Available 

Total Status of Budgetary Resources (Note 9) 

$ 15,177,972 $ 15,437,418 

325,277 184,272 

15,503,249 15,621,690 

313,331 451,740 

670,544 330,520 

$ 16,487,124 $ 16,403,950 

CHANGE IN OBLIGATED BALANCE 

Obligated Balance, Net 

Unpaid Obligations, Brought Forward, October 1 

Total Unpaid Obligated Balance, Net 

$ 2,542,799 $ 1,077,561 

2,542,799 1,077,561 

Obligations Incurred, Net 

Less: Gross Outlays 

Less: Recoveries of Prior Year Unpaid Obligations, Actual 

15,503,249 

15,712,961 

317,261 

15,621,690 

14,038,184 

118,268 

Obligated Balance, Net, End of Period 

Unpaid Obligations 

Total, Unpaid Obligated Balance, Net, End of Period 

2,015,826 2,542,799 

$ 2,015,826 $ 2,542,799 

NET OUTLAYS 

Gross Outlays 

Less: Offsetting Collections 

Net Outlays (Note 9) 

$ 15,712,961 $ 14,038,184 

325,277 184,272 

$ 15,387,684 $ 13,853,912 

The accompanying notes are an integral part of these financial statements. 

11 
OFFICE OF SPECIAL COUNSEL 

STATEMENTS OF FINANCING 

For the Years Ended September 30, 2006 and 2005 

Resources Used to Finance Activities: 

Budgetary Resources Obligated 

Obligations Incurred 

Less: Spending Authority From Offsetting Collections and Recoveries 

Obligations Net of Offsetting Collections and Recoveries 

Less: Offsetting Receipts 

Net Obligations 

Other Resources 

Imputed Financing From Costs Absorbed by Others 

Net Other Resources Used to Finance Activities 

2006 

$ 15,503,249 

(642,538) 

14,860,711 

-

14,860,711 

710,686 

710,686 

$ 

2005 

15,621,690 

(302,540) 

15,319,150 

-

15,319,150 

703,719 

703,719 

Total Resources Used to Finance Activities 15,571,397 16,022,869 

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 Provided 

Resources That Fund Expenses Recognized in Prior Periods 

Resources That Finance the Acquisition of Assets 

(423,874) 

-

361,094 

1,511,202 

33,964 

-

Total Resources Used to Finance Items Not Part of the Net Cost of Operations (62,780) 1,545,166 

Total Resources Used to Finance the Net Cost of Operations 15,634,177 14,477,703 

Components of the Net Cost of Operations That Will Not Require or 

Generate Resources in the Current Period 

Components Requiring or Generating Resources in Future Periods 

Increase in Annual Leave Liability 

Other 

Total Components of Net Cost of Operations That Will Require or 

Generate Resources in Future Periods 

Components Not Requiring or Generating Resources: 

Depreciation and Amortization 

Other 

Total Components of Net Cost of Operations That Will Not Require or 

Generate Resources 

53,092 

33,331 

86,423 

30,587 

(8,086) 

22,501 

-

23,166 

23,166 

21,730 

(2,958) 

18,772 

Total Components of Net Cost of Operations That Will Not Require or 

Generate Resources in the Current Period 108,924 41,938 

Net Cost of Operations $ 15,743,101 $ 14,519,641 

The accompanying notes are an integral part of these financial statements. 

12 
OFFICE OF SPECIAL COUNSEL 

NOTES TO FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006 and 2005 

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. As of September 30, 2006 the agency employs approximately 109 employees to carry 

out its government-wide responsibilities in the headquarters office in Washington, D.C., and in 

the Dallas, San Francisco, 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, Statement of Budgetary Resources, and Statement of Financing. In accordance with 

OMB Circular A-136, the financial statements and associated notes are presented on a 

comparative basis. 

13 
OFFICE OF SPECIAL COUNSEL 

NOTES TO FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006 and 2005 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

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 pursuant to other OMB directives that are primarily 

used to monitor and control OSC’s use of budgetary resources. 

D. Revenues & Other Financing Sources 

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 postretirement benefit expenses for current employees paid on our behalf by the Office of Personnel 

Management (OPM). 

E. 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. 

F. 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. 

G. 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 

14 
OFFICE OF SPECIAL COUNSEL 

NOTES TO FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006 and 2005 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

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. 

H. General Property, Plant and Equipment 

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 

Leasehold Improvements 

Office Equipment 

Hardware 

Software 

Useful Life (years) 

10 

5 

5 

2 

I. 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. 

J. 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. 

15 
OFFICE OF SPECIAL COUNSEL 

NOTES TO FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006 and 2005 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

K. Accounts Payable 

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

L. 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 nonvested. 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. 

M. 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. 

N. 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 and 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. 

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. 

16 
OFFICE OF SPECIAL COUNSEL 

NOTES TO FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006 and 2005 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

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

active years of service. OPM actuaries determine pension cost factors by calculating the value of 

pension benefits expected to be paid in the future and communicates 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, is the responsibility of the OPM. 

O. Use of Estimates 

The preparation of financial statements in conformity with generally accepted accounting 

principles 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. 

P. 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 results of operations is the 

net result of OSC’s operations since inception. 

Q. 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 2006 and 2005 to the extent 

directed by OMB. 

R. 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 

17 
OFFICE OF SPECIAL COUNSEL 

NOTES TO FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006 and 2005 

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 

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 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. 

S. Reclassifications 

Statement of Budgetary Resources - The presentation used for the Statement of Budgetary 

Resources (SBR) prior to FY06 has been revised to reflect a new format required pursuant to the 

Office of Management and Budget (OMB) Circular A-136, Financial Reporting Requirements. 

Circular A-136 requires agencies to present both FY06 and FY05 SBR in the same format. 

Accordingly, certain reclassifications were made to the previously issued FY05 SBR to conform 

to the new format. 

Other - Certain fiscal year 2005 balances have been reclassified, retitled, or combined with other 

financial statement line items for consistency with the current year presentation. Due to a change 

in the accrual process, certain balances in Other Accrued Liabilities for fiscal year 2005 have 

been reclassified to Accounts Payable for consistency with the current year presentation. 

T. 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. 

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OFFICE OF SPECIAL COUNSEL 

NOTES TO FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006 and 2005 

NOTE 2 – FUND BALANCE WITH TREASURY 

Fund balance with Treasury account balances as of September 30, 2006 and 2005 were: 

2006 2005 

Fund Balances: 

Appropriated Funds $ 2,999,701 $ 3,325,060 

Status of Fund Balance with Treasury: 

Unobligated Balance 

Available $ 313,331 $ 451,740 

Unavailable 670,544 330,520 

Obligated Balance not yet Disbursed 2,015,826 2,542,800 

Total $ 2,999,701 $ 3,325,060 

Restricted unobligated fund balances represent 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 for paying claims attributable to the appropriations. 

NOTE 3 – GENERAL PROPERTY, PLANT AND EQUIPMENT 

Property, plant and equipment account balances as of September 30, 2006 and 2005 were as 

follows: 

Acquisition Accumulated Net 

Description Cost Depreciation Book Value 

September 30, 2006 

Office Equipment 

Leasehold Improvements 

$ 197,216 

272,528 

$ (71,866) 

-

$ 125,350 

272,528 

Total $ 469,744 $ (71,866) $ 397,878 

September 30, 2005 

Office Equipment $ 108,650 $ (41,279) $ 67,371 

Leasehold improvements relate to an office lease which OSC has not occupied as of September 

30, 2006; accordingly depreciation is not recorded. 

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OFFICE OF SPECIAL COUNSEL 

NOTES TO FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006 and 2005 

NOTE 4 – LIABILITIES 

The accrued liabilities for OSC are comprised of program expense 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. 

September 30 

2006 2005 

Intragovernmental: 

Accounts Payable $ 5,518 $ 29,668 

Payroll Taxes Payable 88,055 71,697 

Post-Employment Benefits - 10,747 

Unfunded FECA Liability 98,231 64,899 

Total Intragovernmental 191,804 177,011 

Accounts Payable 67,931 175,142 

Payroll Accrual 350,745 342,965 

Payroll Taxes Payable 25,967 11,097 

Unfunded Annual Leave 704,595 651,503 

Total Other Liabilities 1,149,238 1,180,707 

Total Liabilities $ 1,341,042 $ 1,357,718 

NOTE 5 – 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, 1999 

and expires on October 25, 2009. The Dallas lease term began on December 9, 2002 and expires 

on December 8, 2007. 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 on January 31, 2011. This lease was modified in 

FY06 with the period commencing on July 1, 2006 and expiring June 30, 2011. The Detroit 

lease began on March 20, 2005 and will expire on March 31, 2010. 

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OFFICE OF SPECIAL COUNSEL 

NOTES TO FINANCIAL STATEMENTS 

For The Years Ended September 30, 2006 and 2005 

NOTE 5 – LEASES (CONTINUED) 

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. 

Fiscal Year Totals 

2007 $ 1,082,090 

2008 1,027,790 

2009 1,031,021 

2010 153,141 

2011 98,477 

Total Future Payments $ 3,392,519 

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

options. 

NOTE 6 – LIABILITIES NOT COVERED BY BUDGETARY RESOURCES 

The liabilities on OSC’s Balance Sheet as of September 30, 2006 and 2005, 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. Intragovernmental liabilities not covered by budgetary resources consists 

entirely of FECA liabilities. Unfunded FECA liabilities are $98,231 and $64,899 as of 

September 30, 2006 and 2005, respectively. Other liabilities not covered by budgetary resources 

consist entirely of unfunded leave. Unfunded leave balances are $704,595 and $651,503 as of 

September 30, 2006 and 2005, respectively. 

NOTE 7 – INTRAGOVERNMENTAL COSTS AND EXCHANGE REVENUE 

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 

entitities (the public). Such costs are summarized as follows: 

2006 2005 

Investigations and Enforcements 

Intragovernmental Costs $ 5,240,996 $ 4,017,863 

Public Costs 10,827,382 10,686,050 

Total Investigations and Enforcements Costs 16,068,378 14,703,913 

Intragovernmental Earned Revenue (325,277) (184,272) 

Public Earned Revenue - -

Total Investigations and Enforcements Earned Revenue $ (325,277) $ (184,272) 

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OFFICE OF SPECIAL COUNSEL 

NOTES TO FINANCIAL STATEMENTS 

For the Years Ended September 30, 2006 and 2005 

NOTE 8 – 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 the 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 disclosed. For the years ended September 30, 2006 and 

2005, Undelivered Orders amounted to $1,477,612 and $1,901,485. 

NOTE 9 – BUDGETARY RESOURCE COMPARISONS TO THE BUDGET OF THE 

UNITED STATES 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 FY06 

actual budgetary execution information has not yet been published. The President’s Budget is 

scheduled for publication in February 2007 and can be found at the OMB Web site: 

http://www.whitehouse.gov/omb. The 2007 Budget of the United States Government, with the 

Actual Column completed for 2005, has been reconciled, and there were no material differences. 

NOTE 10 – 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 (OPM). For the 

fiscal years ended September 30, 2006 and 2005, respectively, imputed financing from OPM 

were $710,686 and $703,719. 

NOTE 11 – 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 or 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. 

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OFFICE OF SPECIAL COUNSEL 

NOTES TO FINANCIAL STATEMENTS 

For the Years Ended September 30, 2006 and 2005 

NOTE 11 – CONTINGENCIES (CONTINUED) 

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. For one case, legal counsel has indicated that a loss is “reasonably 

possible”, and has estimated the potential loss at approximately $600,000; however, no loss 

accrual has been made for this case outstanding at September 30, 2006. 

This information is an integral part of 

the accompanying financial statements. 

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