OFFICE OF THE 

CHIEF FINANCIAL OFFICER

MANAGEMENT ADVISORY COMMENTS IDENTIFIED 

IN THE ENGAGEMENT TO AUDIT THE 

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED SEPTEMBER 30, 2010 

 

 

 Date Issued: March 31, 2011 

 Report Number: 22-11-006-13-001

This report was prepared by KPMG LLP, under contract to the U.S. 

Department of Labor, Office of Inspector General, and by acceptance, it 

becomes a report of the Office of Inspector General. 

 ______________________________

 U.S. Department of Labor 

 Assistant Inspector General for Audit 

U.S. Department of Labor

Office of Inspector General—Office of Audit 

Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

1 Report Number: 22-11-006-13-001 

Table of Contents 

Page 

Executive Summary ...................................................................................................... 3

Letter to The Assistant Inspector General for Audit and 

The Chief Financial Officer ........................................................................................... 5

Exhibit I - Comments and Recommendations ............................................................ 7

1. Untimely Receipt of Prepared-by-Client (PBC) Items .................................... 7

 2. Unsupported and Incorrect Upward Adjustments........................................... 9

 3. Failure to Provide Sufficient Documentation for Certain 

 Non-Grant, Non-Benefit Expenses ............................................................. 11

4. Inadequate Review of Non-grant, Non-benefit New 

Obligations/Modifications ............................................................................ 13

 5. Lack of Monitoring over Grant Costs ............................................................ 14

 6. Lack of Controls over Grant Closeouts ........................................................ 17

 7. Inaccurate Calculation of Certain Schedule Award Payments ..................... 19

 8. Lack of Reconciliation of Child Agency Data Reported in the 

 DOL Trial Balance ...................................................................................... 20

 9. Reestablishment of the Unemployment Compensation 

 Advisory Council ......................................................................................... 22

 10. Insufficient Documentation Related to the Review of Payroll 

 Suspense Reports ...................................................................................... 24

Exhibit II - Prior Year Comments with Undetermined Status .................................. 27

Exhibit III - Status of Prior Year Comments .............................................................. 29

Appendix A

Acronyms and Abbreviations ............................................................................ 43
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

2 Report Number: 22-11-006-13-001 

THIS PAGE IS INTENTIONALLY LEFT BLANK
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

3 Report Number: 22-11-006-13-001 

Executive Summary 

KPMG LLP (KPMG), under contract to the United States Department of Labor (DOL or 

the Department), Office of Inspector General (OIG), was engaged to audit DOL’s 

consolidated financial statements as of and for the year ended September 30, 2010. 

Because of matters discussed in KPMG’s Independent Auditors’ Report, dated 

November 15, 2010, the scope of KPMG’s work was not sufficient for them to express, 

and they did not express, an opinion on the FY 2010 consolidated financial statements. 

In connection with the FY 2010 audit engagement, DOL’s internal control over financial 

reporting and DOL’s compliance with certain provisions of applicable laws, regulations, 

contracts, and grant agreements that could have a direct and material effect on the 

FY 2010 consolidated financial statements were also considered. Providing opinions on 

the effectiveness of DOL’s internal control over financial reporting and on compliance 

with laws, regulations, contracts, and grant agreements was not an objective of the 

engagement, and accordingly, such opinions were not provided. However, certain 

matters were noted involving (a) internal control and its operation that were considered 

to be material weaknesses and significant deficiencies, and (b) instances of 

noncompliance that were considered to be material. In addition, certain other matters 

were noted that were considered to be management advisory comments. 

This report was prepared to provide information to management that could help in the 

development of corrective actions for the management advisory comments identified in 

the engagement. A separate report will be issued to the Chief Information Officer and 

the Chief Financial Officer containing management advisory comments pertaining to the 

testing procedures performed over the Department’s general and application controls 

over information technology (IT) systems that support the consolidated financial 

statements. 

Details over the material weaknesses, significant deficiencies, and instances of material 

noncompliance, listed below, have been included in the Independent Auditors’ Report 

found in DOL’s FY 2010 Agency Financial Report. 

Material Weaknesses

1. Lack of Sufficient Controls over Financial Reporting 

2. Lack of Sufficient Controls over Budgetary Accounting 

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

4. Lack of Adequate Controls over Access to Key Financial and Support Systems 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

4 Report Number: 22-11-006-13-001 

Significant Deficiencies

5. Weakness Noted over Payroll Accounting 

6. Untimely and Inaccurate Processing of Property, Plant, and Equipment Transactions 

Instances of Material Noncompliance

1. Federal Managers’ Financial Integrity Act of 1982

2. Federal Financial Management Improvement Act of 1996

Management Advisory Comments 

We identified certain non-IT matters during the engagement that were not considered to 

be material weaknesses, significant deficiencies, or instances of material 

noncompliance, which we would like to bring to management’s attention. These findings 

and recommendations are presented in this report. 

Had KPMG been able to perform all of the procedures necessary to express an opinion 

on the FY 2010 consolidated financial statements, other matters involving internal 

control over financial reporting and instances of noncompliance may have been 

identified and reported. 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

5 Report Number: 22-11-006-13-001 

KPMG LLP 

2001 M Street, NW 

Washington, DC 20036-3389 

November 15, 2010 

Mr. Elliot P. Lewis, Assistant Inspector General for Audit 

Mr. James L. Taylor, Chief Financial Officer 

U.S. Department of Labor 

Washington, D.C. 20210 

Mr. Lewis and Mr. Taylor: 

We were engaged to audit the consolidated financial statements of the United States 

Department of Labor (DOL) for the fiscal year (FY) ended September 30, 2010. 

Because of matters discussed in our Independent Auditors’ Report, dated 

November 15, 2010, the scope of our work was not sufficient to enable us to express, 

and we did not express, an opinion on DOL’s FY 2010 consolidated financial 

statements. 

In connection with our FY 2010 audit engagement, we also considered DOL’s internal 

control over financial reporting and DOL’s compliance with certain provisions of 

applicable laws, regulations, contracts, and grant agreements that could have a direct 

and material effect on the FY 2010 consolidated financial statements. Providing 

opinions on the effectiveness of DOL’s internal control over financial reporting and on 

compliance with laws, regulations, contracts, and grant agreements was not an 

objective of our engagement, and accordingly, we do not express such opinions. We 

have not considered internal control since the date of our report. 

During our audit engagement, we noted certain matters involving internal control and 

other operational matters that do not relate to information technology and are presented 

for your consideration. These comments and recommendations, all of which have been 

discussed with the appropriate members of management and have been communicated 

through the issued Notifications of Findings and Recommendations, are intended to 

improve internal control or result in other operating efficiencies and are summarized in 

Exhibit I. These comments are in addition to the material weaknesses, significant 

deficiencies, and instances of material noncompliance presented in our Independent 

Auditors’ Report, dated November 15, 2010, included in the DOL’s FY 2010 Agency 

Financial Report. Exhibit II identifies the prior year comments for which we were not 

able to perform all audit procedures necessary to determine the FY 2010 status. We 

also summarized the status of all prior year comments in Exhibit III. Comments involving 

KPMG LLP is a Delaware limited liability partnership, 

the U.S. member firm of KPMG International Cooperative 

(“KPMG International”), a Swiss entity. 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

6 Report Number: 22-11-006-13-001 

internal control and other operational matters noted that relate to information technology 

will be presented in a separate letter to you and the Chief Information Officer. 

As described above, the scope of our work was not sufficient to enable us to express an 

opinion on DOL’s FY 2010 consolidated financial statements. Had we been able to 

perform all of the procedures necessary to express an opinion, other matters involving 

internal control over financial reporting and instances of noncompliance may have been 

identified and reported. We aim, however, to use our knowledge of DOL’s organization 

gained during our work to make comments and suggestions that we hope will be useful 

to you. 

We would be pleased to discuss these comments and recommendations with you at 

any time. 

This communication is intended solely for the information and use of DOL management 

and DOL’s Office of Inspector General, and is not intended to be and should not be 

used by anyone other than these specified parties. 

Very truly yours, 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

For the Year Ended September 30, 2010 

7 Report Number: 22-11-006-13-001 

Comments and Recommendations 

1. Untimely Receipt of Prepared-by-Client (PBC) Items

Before commencement of significant fieldwork for the fiscal year (FY) 2010 engagement 

to audit the United States (U.S.) Department of Labor (DOL) consolidated financial 

statements, the Office of the Chief Financial Officer (OCFO) was provided with a 

detailed listing of client-prepared documentation required to support the audit 

engagement. The prepared-by-client (PBC) list detailed the required items and their due 

dates, which were discussed in advance with the OCFO. 

During the FY 2010 engagement to audit the DOL‘s consolidated financial statements, 

the OCFO: 

• Provided numerous PBC items in an untimely manner. 

• Produced several PBC items that were not suitable and required significant 

revisions. 

• Did not effectively communicate anticipated delays in the submission of certain PBC 

items, and in certain cases did not request deadline extensions for PBC items until 

they were overdue. 

• Did not set realistic deadlines that were achievable when revising due dates for 

numerous PBC items. 

 

These matters were reported to the OCFO periodically throughout the audit 

engagement during the bi-weekly status meetings. 

As of October 26, 2010, 49% of the PBC items requested in support of the financial 

statement audit engagement were received late, overdue, or could not be provided. 

Furthermore, although the OCFO revised the due dates for numerous items needed at 

year end, 66% of those items were either provided after the revised due date or were 

not provided before the audit engagement ended. 

The PBC items were delayed because the OCFO was focused on addressing data and 

system issues related to the implementation of New Core Financial Management 

System (NCFMS), and lacked the resources to proactively monitor and adequately fulfill 

the PBC list. In addition, certain PBC items were incomplete and of poor quality 

because of the difficulties DOL encountered in retrieving complete and accurate 

information from NCFMS and the lack of sufficient review of PBC documentation prior to 

submission to us. 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

8 Report Number: 22-11-006-13-001 

DOL’s inability to timely provide PBC items, effectively communicate delays, and set 

revised due dates that were realistic resulted in significant delays in the audit 

engagement and impaired our ability to perform audit procedures over certain financial 

statement line items. 

The U.S. Government Accountability Office’s (GAO) Standards for Internal Control in 

the Federal Government (Standards) states that, “Internal control and all transactions 

and other significant events need to be clearly documented, and the documentation 

should be readily available for examination. The documentation should appear in 

management directives, administrative policies, or operating manuals and may be in 

paper or electronic form. All documentation and records should be properly managed 

and maintained.” 

Recommendations

We recommend that the Chief Financial Officer: 

1. Develop and implement a quality control process for reviewing PBC items prior to 

submission to the auditors. 

2. Improve monitoring of the PBC list by periodically reviewing it for items due in the 

upcoming weeks and following up with the responsible individuals prior to the due 

date to ensure they are tracked and to identify potential delays prior to the due date; 

and ensure the appropriate resources are in place to adequately fulfill the PBC list. 

3. Improve accountability for PBC items by coordinating with the appropriate Agency 

Heads to ensure they are properly monitoring those individuals responsible for 

delivering PBC items. 

4. Communicate PBC delays, which should be rare, as soon as they are identified, and 

provide a realistic alternative delivery date based on consultation with the auditors 

and individuals or agency responsible for providing the item. 

Management’s Response 

The difficulties experienced in providing PBC items were primarily due to the ongoing 

challenges resulting from the implementation of NCFMS. Revised procedures will be 

implemented to ensure that PBC items are reviewed and approved before they are 

submitted to the auditors, the PBC list is monitored, and delays and revised due dates 

are provided to the auditors based on our best estimates. 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

9 Report Number: 22-11-006-13-001 

Auditors’ Response 

Management has provided a corrective action plan to address our recommendations. 

FY 2011 audit procedures will determine whether these recommendations have been 

adequately addressed and can be considered closed. 

2. Unsupported and Incorrect Upward Adjustments

 

Upward adjustments are recorded by DOL when a modification is made to a prior year 

obligation in an expired fund. The transaction must be recorded to a valid, unclosed 

Treasury Appropriation Fund Symbol, and supported by adequate documentation, such 

as a modification. 

During our testing of a sample of 13 upward adjustments through March 31, 2010, we 

identified the following exceptions in the second quarter: 

• 3 upward adjustments totaling $45.2 million were recorded in the general ledger but 

were not supported by appropriate audit evidence to substantiate an upward 

adjustment transaction. 

• 10 instances totaling $48.3 million were new obligations related to grant activities 

that were recorded as upward adjustments (Account 4881) instead of increases to 

undelivered orders, unpaid (Account 4801). 

The activity for the third and fourth quarters was not material; therefore, no testing was 

performed over those periods. 

The 3 exceptions related to the $45.2 million in upward adjustments occurred because 

the OCFO recorded certain unsupported adjustments to the general ledger in order to 

pass the edit checks for the second quarter Federal Agencies Centralized Trial Balance 

System II (FACTS II) submission. In addition, certain upward adjustments were 

recognized in error in an attempt to correct a state unemployment insurance 

employment services operations (SUIESO) collection transaction that improperly 

excluded the budgetary accounts. 

The remaining 10 exceptions occurred because NCFMS was not properly configured to 

recognize new obligations related to multi-year funds. 

The cumulative effect of these discrepancies resulted in upward adjustments being 

overstated by $93.5 million as of March 31, 2010. In addition, the entries to record the 

new obligations were not in compliance with the U.S. Standard General Ledger 

(USSGL) at the transactional level. 

GAO’s Standards states, “Internal control and all transactions and other significant 

events need to be clearly documented, and the documentation should be readily 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

10 Report Number: 22-11-006-13-001 

available for examination. The documentation should appear in management directives, 

administrative policies, or operating manuals and may be in paper or electronic form. All 

documentation and records should be properly managed and maintained.” 

Office of Management and Budget (OMB) Circular No. A-11, Preparation, Submission, 

and Execution of the Budget, states, “Multi-year budget authority is available for 

obligation for the specified period of time in excess of one fiscal year. During the 

unexpired phase of a multi-year appropriation, the budget authority is available for 

incurring “new” obligations. Agencies may use expired authority to make adjustments to 

obligations or disbursements only during a period of five years after the last unexpired 

year.” 

In addition, USSGL (August 2009 version), Section III Account Transactions, transaction 

code B306 states, “To record current-year undelivered orders without an advance.” 

Budgetary Entry 

Debit 4610 Allotments – Realized Resources 

Debit 4620 Unobligated Funds Exempt From Apportionment 

Debit 4700 Commitments – Programs Subject to Apportionment 

Debit 4720 Commitments – Programs Exempt From Apportionment 

Credit 4801 Undelivered Orders – Obligations, Unpaid 

Recommendations 

We recommend that the Chief Financial Officer: 

1. Properly resolve all FACTS II edit check issues and only record adequately 

supported adjusting entries to the general ledger. 

2. Update the system configuration in NCFMS to record a credit to Account 4801 for 

activities related to new obligations for multi-year unexpired funds. 

Management’s Response 

We concur with recommendations and will implement revised procedures to ensure that 

FACTS II entries are properly supported. Changes to NCFMS have already been 

implemented. 

Auditors’ Response 

Management concurred with our comment and has provided a corrective action plan to 

address our recommendations. FY 2011 audit procedures will determine whether these 

recommendations have been adequately addressed and can be considered closed. 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

11 Report Number: 22-11-006-13-001 

3. Failure to Provide Sufficient Documentation for Certain Non-Grant, Non-Benefit 

Expenses

During our testing of 20 non-grant, non-benefit expense sample items for the period 

October 1, 2009, through December 31, 2009, we identified the following exceptions: 

• The Employment and Training Administration (ETA) was not able to provide 

evidence of review by an authorizing official for 2 of the 3 ETA sample items tested 

because ETA did not maintain sufficient supporting documentation authorizing the 

recording of the two transactions. 

• The Office of Job Corps (OJC or Job Corps) was not able to provide evidence of 

review by an authorizing official for 1 of the 11 Job Corps sample items tested 

because Job Corps was not able to locate the supporting documentation related to 

the transaction. 

• The Veteran’s Employment and Training Service (VETS) and Job Corps were not 

able to provide evidence of review by an authorizing official for 1 of the 2 VETS 

sample items and 2 of the 11 Job Corps sample items tested, respectively, in a 

timely manner. We submitted our samples to VETS and Job Corps on 

March 30, 2010, and requested that supporting documentation be provided by 

April 7, 2010. However, VETS and Job Corps did not provide the supporting 

documentation for these three items until September 9, 2010. These delays 

occurred because of the agencies’ inability to identify the appropriate personnel to 

provide the supporting documentation in a timely manner. 

We were unable to test non-grant, non-benefit expenses for the period January 1, 2010, 

through September 30, 2010. Therefore, we could not determine if similar exceptions 

occurred during that time period. 

Without adequate controls over the recording of expense transactions, material errors 

could occur and not be detected and corrected in a timely manner. In addition, the 

untimely retrieval of documentation caused delays in the completion of our FY 2010 

audit procedures. 

GAO’s Standards states, “Internal control and all transactions and other significant 

events need to be clearly documented, and the documentation should be readily 

available for examination. The documentation should appear in management directives, 

administrative policies, or operating manuals and may be in paper or electronic form. All 

documentation and records should be properly managed and maintained.” 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

12 Report Number: 22-11-006-13-001 

Recommendations 

We recommend that the: 

1. Assistant Secretary for Employment and Training reinforce policies and procedures 

and provide related training to address the minimum documentation requirements 

needed to sufficiently support recorded transactions. 

2. National Director of the Office of Job Corps reinforce policies and procedures to 

ensure supporting documentation for transactions are properly managed, 

maintained, and easily retrieved. 

3. Assistant Secretary for the Veteran’s Employment and Training Service and the 

National Director of the Office of Job Corps reinforce procedures to satisfy audit 

requests in a timely manner by (a) identifying the appropriate personnel to handle 

audit requests timely, (b) obtaining and providing supporting documentation to the 

auditors timely, and (c) requiring designated supervisors to regularly monitor the 

progress of audit request responses. 

Management’s Response 

Recommendation 1: ETA concurs with the recommendation to reinforce existing 

policies and procedures to ensure documentation exists to support recorded 

transactions. In the future, ETA will work with OCFO to ensure that adjustments posted 

on behalf of ETA are reviewed and approved by management prior to completion. 

Recommendation 2: The Office of Job Corps concurs with the recommendation to 

reinforce existing policies and procedures to ensure documentation exists to support 

recorded transactions. In the future, Job Corps will work with OCFO to ensure that 

adjustments posted on behalf of ETA are reviewed and approved by management prior 

to completion. 

Recommendation 3: The Office of Job Corps and VETS concur with this finding. 

Although the audit sample in questions was provided to KPMG on September 9, 2010, 

we acknowledge that the response was not provided in a timely manner. Procedures 

are in place to ensure that requests for audit sample data are routed to the appropriate 

responsible Job Corps staff. 

Auditors’ Response 

Management concurred with our comment and has provided a corrective action plan to 

address our recommendations. FY 2011 audit procedures will determine whether these 

recommendations have been adequately addressed and can be considered closed. 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

13 Report Number: 22-11-006-13-001 

4. Inadequate Review of Non-grant, Non-benefit New Obligations/Modifications

The majority of DOL procurements are managed through the E-Procurement System 

(EPS). To initiate an acquisition transaction for non-capitalized expenses, a requisition 

form or purchase order is completed electronically through EPS, which discloses a 

description of the purchase (e.g., number of units and price per unit), date, agency 

location code, object class code, accounting string, agency, amount, need, authorizing 

official, and requesting official. Upon completion by the purchaser, the requisition 

form/purchase order is reviewed and approved by an authorizing official (e.g., 

contracting officer or program manager). 

During our testing of 12 non-grant, non-benefit new obligations/modifications for the 

period October 1, 2009, through December 31, 2009, we identified 1 instance where the 

obligating document did not agree to the amount recorded in the Department of Labor 

Accounting and Related System (DOLAR$). Because of the exception noted above, we 

concluded this control was not operating effectively. Testing over the remaining sample 

was not performed since the exception identified resulted in the failure of the control. 

VETS informed us that this instance occurred because grant officers were allowed to 

make obligations for an amount less than the obligating document and a documented 

communication should exist to support it. However, in the above instance, VETS did not 

provide us any supporting documentation evidencing the communications to decrease 

the obligation. 

Without adequate controls over the non-grant, non-benefit new obligation/modification 

process, obligations may be intentionally or unintentionally misreported. As a result, 

undelivered orders may be invalid or inaccurate. 

U.S. Code Title 31 Section 1501, Documentary Evidence Requirement for Government 

Obligations, states, “An amount shall be recorded as an obligation of the United States 

Government only when supported by documentary evidence of a binding agreement 

between an agency and another person (including an agency) that is (a) in writing, in a 

way and form, and for a purpose authorized by law, and (b) executed before the end of 

the period of availability.” Section 1554, Audit, control and reporting, states, "The head 

of each agency shall establish internal controls to assure that an adequate review of 

obligated balances is performed to support the certification required by section 1108(c) 

of this title." 

In addition, GAO’s Standards states, “Internal control and all transactions and other 

significant events need to be clearly documented, and the documentation should be 

readily available for examination. The documentation should appear in management 

directives, administrative policies, or operating manuals and may be in paper or 

electronic form. All documentation and records should be properly managed and 

maintained.” 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

14 Report Number: 22-11-006-13-001 

GAO’s Standards also states, “Transactions should be promptly recorded to maintain 

their relevance and value to management in controlling operations and making 

decisions. This applies to the entire process or life cycle of a transaction or event from 

the initiation and authorization through its final classification in summary records. In 

addition, control activities help to ensure that all transactions are completely and 

accurately recorded.” 

Recommendation 

We recommend that the Assistant Secretary for the Veteran’s Employment and Training 

Service enhance policies and procedures to ensure that changes made to obligating 

documents are supported by documentation that is retained and readily available upon 

request. 

Management’s Response 

Although we have reviewed the transaction noted by the auditor and concluded that the 

transaction was properly obligated for the correct amount, VETS agrees to work with 

OASAM-OPS to better ensure that proper supporting documentation over changes to 

obligating documents is retained and readily available upon request.

Auditors’ Response 

Management has provided a corrective action plan to address our recommendation. FY 

2011 audit procedures will determine whether this recommendation has been 

adequately addressed and can be considered closed. 

5. Lack of Monitoring over Grant Costs

ETA grantees are required to submit quarterly Financial Status Reports (ETA 9130 or 

cost report), which document the costs incurred by the grantees, and performance 

reports (collectively referred herein as grant reports). Grant reports are due within 45 

days after the end of the quarter. The E-Grants application allows ETA’s grantees to 

directly submit the required grant reports via the internet. Once the grantee has 

submitted and certified the grant reports, the assigned Federal Project Officer (FPO) is 

required to perform a comprehensive review and analysis of the grant reports no later 

than 75 days after quarter end through a desk review. The FPO’s review and 

determinations are documented in the Grants e-Management System (GEMS). Once 

the FPO approves the cost report, the FPO accepts it in E-Grants, and it is 

automatically uploaded into DOL’s general ledger. 

For ETA grants, the FPOs are ultimately responsible for monitoring their grantees to 

ensure that the appropriate cost and performance reports are submitted in a timely 

manner. To aid in this monitoring, the Division of Financial and Systems Services 

(DFSS) generates quarterly from NCFMS the Delinquent Reporting Analysis, which 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

15 Report Number: 22-11-006-13-001 

identifies those grantees who are delinquent in submitting their cost reports as well as 

cost reports that have not yet been accepted by the assigned FPO. For those grants 

identified, the DFSS staff notifies the assigned FPO who is responsible for monitoring 

the grantee to ascertain the reason for the delinquency. 

During our FY 2010 engagement, we planned to select a sample of 45 grant reports 

submitted by grantees throughout the year to test ETA’s grant monitoring controls. For 

the first quarter, we selected 17 grant reports submitted from October 1, 2009, through 

December 31, 2009. For 1 of the 17 grant reports tested, we noted that a desk review 

was not completed by the assigned FPO. Because of the exception noted above, we 

concluded this control was not operating effectively. Testing over the remaining sample 

was not performed since the exception identified resulted in the failure of the control. 

The FPO responsible for the aforementioned desk review stated that he completed the 

desk review in a timely manner and submitted the review in GEMS, but that the review 

was not reflected in GEMS due to a system error. The FPO was not able to provide 

supporting documentation to substantiate this error. 

We also noted that ETA did not monitor its grantee delinquent cost reports from January 

2010 through August 2010. This process had historically been performed through 

review of the Delinquent Reporting Analysis. However, the OCFO deactivated the 

functionality in E-Grants that allowed FPOs to accept grantees’ cost reports because of 

significant interface issues encountered subsequent to the implementation of NCFMS. 

Since FPOs were unable to accept cost reports, the related data could not be 

transferred from E-Grants to the NCFMS general ledger. As a result, the Delinquent 

Reporting Analysis produced from NCFMS erroneously reported ETA 9130s as 

delinquent and therefore was unreliable. Although the OCFO re-activated the cost 

report acceptance function in July 2010, ETA informed us that the FPOs continued to 

experience issues accepting cost reports through September 30, 2010. However, ETA 

did begin producing and reviewing the Delinquent Reporting Analysis again in 

September 2010. 

Although E-Grants is capable of generating a report that identifies all cost reports not 

submitted for a specified quarter, ETA did not implement alternative procedures using 

this report because staff resources were needed to address other significant 

implementation issues related to NCFMS. 

The lack of adequate detective controls in the grant expense process may result in 

grantees intentionally or unintentionally misreporting grant expenses without the 

misstatement being detected by DOL. Additionally, without adequate grantee monitoring 

controls, grantees may misuse grant funds without detection by DOL, or fail to report 

grant expenditure details. As a result, ETA’s grant-related expenses, advances, 

payables, and undelivered orders could be misstated. 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

16 Report Number: 22-11-006-13-001 

DOL’s General Guidance on GEMS Usage for FY05 memorandum, which is DOL’s 

policy regarding desk reviews, states, “Desk reviews should be completed 30 days after 

receipt of the quarterly reports from grantees, but no later than 75 calendar days after 

the end of the calendar quarter.” 

ETA’s Delinquent Filers Monitoring Procedures state, “Each FPO is asked to contact the 

grantees and ensure that certified reports are submitted to ETA and are 

reviewed/accepted by the FPO through the cost reporting system.” 

In addition, GAO’s Standards states, “Control activities occur at all levels and functions 

of the entity. They include a wide range of diverse activities such as approvals, 

authorizations, verifications, reconciliations, performance reviews, maintenance of 

security, and the creation and maintenance of related records, which provide evidence 

of execution of these activities as well as appropriate documentation. Control activities 

may be applied in a computerized information system environment or through manual 

processes.” 

Furthermore, U.S. Code Title 31, Chapter 75 (commonly referred to as the "Single Audit 

Act'') states, “Each Federal agency shall, in accordance with guidance issued by the 

Director under section 7505, with regard to Federal awards provided by the agency – 

(1) monitor non-Federal entity use of Federal awards...” 

Recommendations 

We recommend that the Assistant Secretary for Employment and Training perform the 

following: 

1. Evaluate GEMS to determine the cause of the system error and develop appropriate 

corrective action to ensure that desk reviews submitted by FPOs are properly 

accepted by the system. 

2. Establish procedures in GEMS such that a confirmation is provided to the FPO upon 

review submission. 

3. Require supervisors to periodically review a sample of active grantees to confirm 

that the reports are being completed timely. This review should be documented. 

4. Work with the OCFO to ensure all interface issues have been resolved between EGrants and NCFMS. 

5. Develop and implement procedures to monitor grantees’ delinquent cost reports 

using data from E-Grants until all the issues impacting the Delinquent Reporting 

Analysis are resolved. 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

17 Report Number: 22-11-006-13-001 

Management’s Response 

Our regional management team will continue to check the completed Desk Reviews 

quarterly, as specified in their performance agreements, to ensure that these reports are 

completed timely, and documented in GEMs. In addition, management staff working 

with the FPOs continue to generate exception reports from GEMS to ensure that 

financial reports and performance reports are reviewed and certified by the FPOs 

timely. 

ETA developed and implemented alternative procedures to monitor grantees’ delinquent 

cost reports. These procedures were used to produce the “delinquent cost reports” for 

the quarters ending June 30th and September 30th. 

ETA worked with OCFO to correct the problems with the interface of E-Grants to 

NCFMS. As of the end of the Fiscal Year the error rate was less than 1% (.073). ETA 

will continue to work with OCFO to correct the remaining problems.

Auditors’ Response 

Management has provided a corrective action plan to address our recommendations. 

FY 2011 audit procedures will determine whether these recommendations have been 

adequately addressed and can be considered closed. 

6. Lack of Controls over Grant Closeouts

We identified several exceptions during our testing of ETA’s grant closeout process as 

of March 31, 2010. Specifically, we noted that the closeout process was not completed 

for 4 of the 25 grants tested and more than 12 months had passed since the grant 

expired. We did not perform grant closeout testing for the last six months of FY 2010 

because of the issues noted below. 

Because of significant interface issues subsequent to the implementation of NCFMS in 

January 2010, the OCFO deactivated the report acceptance feature within E-Grants, 

preventing FPOs from accepting ETA 9130s from February 2010 through June 2010. 

Since FPOs were unable to accept the final ETA 9130s, the ETA Closeout Unit was 

unable to complete grant closeouts within E-Grants and NCFMS. 

Although the OCFO re-activated the feature allowing FPOs to accept ETA 9130s within 

E-Grants, ETA continued to experience problems with the feature through 

September 30, 2010. As a result, the ETA Closeout Unit was unsuccessful in closing all 

expired grants. 

Without adequate controls to timely close out expired grants and deobligate any 

remaining funds, undelivered orders may be overstated. 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

18 Report Number: 22-11-006-13-001 

GAO’s Standards states, “Control activities occur at all levels and functions of the entity. 

They include a wide range of diverse activities such as approvals, authorizations, 

verifications, reconciliations, performance reviews, maintenance of security, and the 

creation and maintenance of related records, which provide evidence of execution of 

these activities as well as appropriate documentation. Control activities may be applied 

in a computerized information system environment or through manual processes.” 

GAO’s Standards also states, “Transactions should be promptly recorded to maintain 

their relevance and value to management in controlling operations and making 

decisions. This applies to the entire process or life cycle of a transaction or event from 

the initiation and authorization through its final classification in summary records. In 

addition, control activities help to ensure that all transactions are completely and 

accurately recorded.” 

Furthermore, ETA’s Closeout Manual provides the internally-developed closeout 

procedures and documentation on the timeframe for the assignment of grants 

scheduled to be closed, the receipt of closeout documents from the grantee, and the 

reconciliation of the closeout documents by the closeout specialist. The Closeout

Manual indicates that in accordance with the Department of Labor Manual Series 2, 

Chapter 800, Section 877 “Grants and agreements are to be closed within 12 months of 

the expiration or termination of the grant or agreement.” 

Recommendations

We recommend that the Assistant Secretary for Employment and Training perform the 

following: 

1. Evaluate E-Grants to determine the cause of the continuing system errors related to 

the acceptance of ETA 9130s, and develop and implement the appropriate 

corrective action. 

2. Develop and implement alternative procedures to closeout ETA grants until the 

system issues are corrected. 

Management’s Response 

As noted in the finding, during most of FY 2010, problems with NCFMS prevented the 

timely close-out of grants. ETA and OCFO management worked to correct some of 

those problems during the year. Currently most grant costs, payments, and obligations 

are accurate, and a procedure has been established to migrate in the grant closeout 

data that were not included in the original data migration. Due to these changes, most 

grant close-outs can be accomplished in a timely manner. The Closeout Unit will 

continue to work on reducing the backlog of grants as well as those due for closeout 

during FY 2011. 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

19 Report Number: 22-11-006-13-001 

Auditors’ Response 

Management has provided a corrective action plan to address our recommendations. 

FY 2011 audit procedures will determine whether these recommendations have been 

adequately addressed and can be considered closed. 

7. Inaccurate Calculation of Certain Schedule Award Payments 

During our FY 2010 testing over the Integrated Federal Employees Compensation 

System’s (iFECS) automatic calculation of Schedule Award payments, we noted that 

iFECS incorrectly calculated the amount of compensation paid to certain claimants. 

Specifically, claimants whose compensation period included a fraction of a day were 

underpaid by up to 1 day of compensation. 

For example, we identified a claimant who was entitled to 109.2 days of compensation 

at a daily rate of $70.35. The total compensation payment should have been $7,682; 

however, it was only $7,626 because iFECS calculated the payment using 108.4 days 

instead of 109.2 days. This resulted in the claimant being underpaid by $56. 

In the 50 Schedule Award payments selected for testing for the six month period ended 

March 31, 2010, we identified 14 instances where the claimant's compensation period 

included a fraction of a day. For the exceptions identified, the total amount calculated by 

iFECS and paid to the claimants was $540,756. However, the total amount paid should 

have been $541,519, resulting in underpayments of $763. We did not perform testing 

over this control for the last six months of FY 2010 because the exceptions identified 

resulted in the failure of the control. 

The underpayments occurred because iFECS was not properly configured to calculate 

Schedule Award payments for claimants whose compensation period included a fraction 

of a day. For such payments, the calculation within iFECS utilized the fractional day for 

both the first day of compensation and the final day of compensation rather than utilizing 

a full day of compensation for the first day and the fractional day of compensation for 

the final day. This resulted in iFECS calculating a lower compensation payment amount 

than was actually owed to the claimant. 

Section 2-0901-14 of the Division of Federal Employees' Compensation (DFEC) 

Procedure Manual (the Manual) states the following: 

a. “Beginning Date. Schedule awards begin on the date of maximum medical 

improvement unless circumstances show a later date should be used. 

b. Percentage of Loss. This percentage is applied to the number of weeks specified 

in section 8107 of the Act or in the regulations for total loss or loss of use of the 

body part or organ in question. The resulting number of weeks is multiplied by 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

20 Report Number: 22-11-006-13-001 

the weekly wage and the compensation rate (e.g., 205 weeks x 10 percent x 

$400 x 75 percent). 

c. Computing the Award. Given a starting date and a number of days of entitlement, 

the Compensation System will compute the ending date of an award and 

terminate payments accordingly. 

d. Fraction of Day (FOD). Where the award ends in a fraction of a day, line 3 of 

Form CA181, Schedule Award Decision, should include the phrase "fraction of a 

day. 

For example: An award for 15 percent loss of use of a foot is 30.75 weeks of 

compensation. The two-place decimal is retained, and the partial day it represents is 

called ‘fraction of a day,’ or FOD. The dates of payment might be shown as, 

'March 2, 2004 to October 4, 2004, fraction of a day.’” 

Recommendation 

We recommend that the Director of the Office of Workers’ Compensation Programs 

correct the system configuration in iFECS so it accurately calculates the full amount of 

Schedule Awards payments owed to the claimants in accordance with 

Section 2-0901-14 of the Manual. 

Management’s Response 

Management concurs with this finding. DFEC implemented a system change on July 

22, 2010, within iFECS to accurately calculate Schedule Award payments for a 

compensation period which includes a fraction of a day. It should be noted that the 

reported deficiency had a minimal impact on payments. The total underpayment 

represents only a 0.0038 of all monies paid out for Schedule Awards during the affected 

period. 

Auditors’ Response 

Management concurred with our comment and has provided a corrective action plan to 

address our recommendation. FY 2011 audit procedures will determine whether this 

recommendation has been adequately addressed and can be considered closed. 

8. Lack of Reconciliation of Child Agency Data Reported in the DOL Trial Balance

During our testing over the parent/child process in FY 2010, we noted that the U.S. 

Department of Agriculture U.S. Forest Service’s (USFS) December 31, 2009, trial 

balance provided to the OCFO was not reconciled to the USFS’ Job Corps Center 

Financial Reports (Forms 2110F) provided to OJC as of May 2010. 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

21 Report Number: 22-11-006-13-001 

The December 31, 2009, reconciliation was not performed as a result of a lack of 

communication between the OCFO and the OJC. In addition, neither OJC nor the 

OCFO have formulated any formal policies and procedures to perform the quarterly 

reconciliation. Failure to reconcile child agency data reported in the DOL financial 

statements in a timely manner may result in inaccurate financial reporting. Testing over 

the subsequent quarters was not performed because the exception identified resulted in 

the failure of the control. 

Per OMB Circular No. A-123, Management’s Responsibility for Internal Control, “The 

agency head must establish controls that reasonably ensure that obligations and costs 

are in compliance with applicable law, funds, property, and other assets are 

safeguarded against waste, loss, unauthorized use, or misappropriation, and revenues 

and expenditures applicable to agency operations are properly recorded and accounted 

for to permit the preparation of accounts and reliable financial and statistical reports....” 

OMB Circular No. A-123 further states, “Management is responsible for developing and 

maintaining effective internal control. Effective internal control provides assurance that 

significant weaknesses in the design or operation of internal control, that could 

adversely affect the agency’s ability to meet its objectives, would be prevented or 

detected in a timely manner.” 

Furthermore, GAO’s Standards states, “Internal control should generally be designed to 

assure that ongoing monitoring occurs in the course of normal operations. It is 

performed continually and is ingrained in the agency’s operations. It includes regular 

management and supervisory activities, comparisons, reconciliations, and other actions 

people take in performing their duties.” 

Recommendations 

We recommend that the Chief Financial Officer and the National Director of the Office of 

Job Corps determine the appropriate personnel to perform the reconciliation between 

the child agency’s Forms 2110F and the child agency’s trial balance. Once determined, 

we recommend that the appropriate office make the following improvements to its 

internal control structure: 

1. Formalize policies and procedures in writing related to the reconciliation of child 

agency data reported in the child agencies’ trial balance to the Forms 2110F, and 

ensure they are properly communicated to all appropriate individuals. 

2. Require in the procedures that the reconciliation be completed and reviewed prior to 

the end of the subsequent quarter (e.g., the June 30 reconciliation should be 

completed before September 30). 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

22 Report Number: 22-11-006-13-001 

3. Require in the procedures that a supervisor review the reconciliation for timeliness 

and accuracy. This review should be documented by the reviewer signing and dating 

the reconciliation. 

Management’s Response 

OCFO and OJC were in communication regarding the Parent/Child reconciliation 

process and other financial matters and there was no misunderstanding over OJC’s 

responsibility to perform the cost reports and the 2110 cost report reconciliations. 

OCFO assisted OJC with the reconciliation for the previous three years while OJC was 

in OSEC, by providing contractor support. In April 2010, OJC transitioned back into 

ETA and ETA’s accounting office again assumed responsibility for the reconciliation. 

While, the transition delayed the December 31, 2009, the reconciliation it has since 

been completed. 

Regarding the recommendations, ETA has reconciliation procedures in existence from 

when ETA previously performed this function on behalf of OJC. OJC will confirm that 

the procedures are formally documented and ensure that they are properly 

communicated to all appropriate individuals. In addition, OJC will ensure that the 

procedures: 

1. Require that the reconciliation be completed and reviewed prior to the end of the 

subsequent quarter; 

2. Require that a supervisor review the reconciliation for timeliness and accuracy and 

that this review is documented by the reviewer signing and dating the 

reconciliation. 

With the transition back into ETA, OJC will continue to work cooperatively with the 

Agency’s accounting office to make sure that the reconciliation is both timely and 

accurately completed and OJC will provide ETA with any documentation that may be 

needed to update the current procedures to further ensure accuracy. 

Auditors’ Response 

Management has provided a corrective action plan to address our recommendations. 

FY 2011 audit procedures will determine whether these recommendations have been 

adequately addressed and can be considered closed. 

9. Re-establishment of the Unemployment Compensation Advisory Council

According to section 908 of the Social Security Act, starting in 1992 and “every 4th year 

thereafter, the Secretary of Labor shall establish an advisory council to be known as the 

Advisory Council on Unemployment Compensation.” The purpose of this council is to 

“evaluate the unemployment compensation program, including the purpose, goals, 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

23 Report Number: 22-11-006-13-001 

countercyclical effectiveness, coverage, benefit adequacy, trust fund solvency, funding 

of State administrative costs, administrative efficiency, and any other aspects of the 

program and to make recommendations for improvement.” 

The last meeting of the Unemployment Compensation Advisory Council (UCAC) was in 

1997. 

Since the Social Security Act requires this council to meet every four years, ETA is not 

in compliance with this requirement of the Social Security Act. ETA does not believe 

that the UCAC is the most effective way to evaluate the unemployment compensation 

program. As a result, ETA has proposed an amendment to the Social Security Act in the 

Unemployment Compensation Program Integrity Act of 2005, 2006, 2008, 2009, and 

2010 that would permit the Secretary of the Department of Labor to establish an 

advisory council periodically instead of every four years, as follows: 

“Section 10 amends section 908 of the Social Security Act pertaining to the Advisory 

Council on Unemployment Compensation. Current law requires that the Secretary of 

Labor convene a new Council every four years. The amendments provide that the 

Secretary may periodically convene a Council and provides the Secretary the 

authority to define the scope of any such Council.” 

However, Congress has not yet approved this amendment. 

Recommendation 

We recommend that the Assistant Secretary for Employment and Training continue to 

pursue having the Social Security Act amended. 

Management’s Response 

ETA continues to pursue an amendment to the Social Security Act that would require 

the Secretary of the Department of Labor to establish an advisory council periodically 

instead of every four years. Such an amendment has been included in the 

Unemployment Compensation Program Integrity Act of 2005, 2006, 2008, and 2010, but 

has not been acted upon by Congress. Consistent with the recommendation, ETA will 

continue to work to advance an amendment to the Social Security Act. A similar 

proposal will be included as part of the FY 2011 legislative package and has been 

submitted to OMB for approval. 

Auditors’ Response 

Management has provided a corrective action plan to address our recommendation. FY 

2011 audit procedures will determine whether this recommendation has been 

adequately addressed and can be considered closed. 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

24 Report Number: 22-11-006-13-001 

10. Insufficient Documentation Related to the Review of Payroll Suspense Reports

During FY 2010, we tested the resolution process for personnel actions that were 

requested by DOL but were not processed by the U.S. Department of Agriculture’s 

National Finance Center (NFC), DOL’s third-party payroll service provider. Such items 

were summarized in a suspense report each pay period for each Human Resource (HR) 

office. We selected a sample of 40 payroll suspense reports as of September 30, 2010, 

and identified the following: 

• 9 instances where the HR offices did not have sufficient and appropriate 

documentation to support that errors were adequately researched and corrective 

actions were initiated for the suspense report requested. 

 

• 5 instances where the HR offices did not provide the requested suspense reports. 

These exceptions occurred because the Office of the Assistance Secretary for 

Administration and Management’s (OASAM) Standard Operating Procedures 

Guidelines for Human Resource Payroll Suspense Process does not specifically state 

the minimum documentation requirements for the review of suspense reports and the 

clearing of items listed on the suspense reports. Also, it does not contain document 

retention requirements. These omissions increase the risk that suspense reports are not 

being reviewed daily and appropriately corrected in a timely manner, which may result 

in misstatements. 

GAO’s Standards states, “Internal control and all transactions and other significant 

events need to be clearly documented, and the documentation should be readily 

available for examination. The documentation should appear in management directives, 

administrative policies, or operating manuals and may be in paper or electronic form. All 

documentation and records should be properly managed and maintained.” 

In addition, OASAM’s Standard Operating Procedures Guidelines for Human Resource 

Payroll Suspense Process states, “Each day the HR specialists will work actions in the 

PeoplePower application.” It also states, “If the actions fail, the status will be Suspense, 

the actions should be reviewed and researched to determine the appropriate 

correction/change necessary to allow the action to pass the edits.” 

Recommendation 

We recommend that the Assistant Secretary of Administration and Management update 

the Standard Operating Procedures Guidelines for the Human Resource Payroll 

Suspense Process to include minimum documentation requirements to support the 

review of suspense reports and the clearing of items listed on the suspense reports. 

The update should also include requirements related to the length and method of 

retention of such documentation. 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit I 

Management Advisory Comments 

 For the Year Ended September 30, 2010 

25 Report Number: 22-11-006-13-001 

Management’s Response 

The OASAM Human Resources Center (HRC) concurs with the finding that the 

referenced provisions of the Standard Operating Procedures Guidelines for the HR 

Suspense Process do not provide specific requirements with regard to documenting the 

actions taken by human resources offices (HROs) to resolve items that appear on the 

NFC Suspense Transactions Report. HRC also agrees that the specification of such 

requirements may improve the ability of HROs to produce evidence showing that 

suspense items were resolved in a timely and appropriate manner. 

HRC notes that this NFR does not cite any substantive issues with regard to the 

resolution of any suspense items for which documentation was provided. 

HRC will consult with the HROs and with the Office of the Chief Financial Officer 

(OCFO) to review the NFC Suspense Transaction Report and to determine what, if any, 

specific requirements should be instituted with regard to documenting the resolution of 

suspense items for audit purposes. HRC notes that HROs have expressed several 

concerns regarding this suspense report, including, among other things: (1) that 

generating and retaining such documentation is extremely labor-intensive and (2) that 

such documentation requirements could be overly burdensome in terms of the volume 

of hard copy documentation that must be retained on a daily basis. Accordingly, our 

review of the NFC Suspense Transaction Report and determination as to what, if any, 

documentation requirements should be instituted will be undertaken in consideration of 

these concerns and the costs/benefits associated with any documentation requirements 

that might be imposed. 

HRC will review the NFC Suspense Transaction Report in consultation with the OCFO 

and other stakeholders, including the HROs, and will develop an appropriate action plan 

by the end of Q3 FY 2011. 

Auditors’ Response 

Management concurred with our comment and has provided a corrective action plan to 

address our recommendation. FY 2011 audit procedures will determine whether this 

recommendation has been adequately addressed and can be considered closed.
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Management Advisory Comments 

For the Year Ended September 30, 2010 

26 Report Number: 22-11-006-13-001 

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Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Exhibit II 

Management Advisory Comments 

For the Year Ended September 30, 2010 

27 Report Number: 22-11-006-13-001 

Prior Year Comments with Undetermined 

Status 

We presented certain comments related to our audit of the United States Department of 

Labor’s (DOL) fiscal year (FY) 2009 consolidated financial statements in the 

Management Advisory Comments Identified in an Audit of the Consolidated Financial 

Statements for the Year Ended September 30, 2009, dated March 18, 2010, (MAC). 

Because of matters discussed in our Independent Auditors’ Report, dated 

November 15, 2010, the scope of our work was not sufficient to enable us to express, 

and we did not express, an opinion on DOL’s FY 2010 consolidated financial 

statements. As a result, we were not able to perform all of the procedures necessary to 

determine the FY 2010 status of certain findings reported in the FY 2009 MAC. 

Presented below are those FY 2009 findings for which we were not able to determine 

the FY 2010 status, with their related recommendations. 

Accounting for Certain Job Corps Contracts (FY 2009 Comment No. 8)

We recommended that the Interim National Director of the Office of Job Corps: 

Review the detail of Job Corps advances at September 30, 2009, identify all invalid 

advances, and post adjustments necessary to properly state the advance balance no 

later than March 31, 2010. 

Develop and implement policies and procedures to monitor Job Corps centers receiving 

advances and perform follow-up, as necessary, to ensure centers are reporting 

expenditures timely. 

Compliance with the Prompt Payment Act (FY 2009 Comment No. 9)

We recommended that the Acting Deputy Chief Financial Officer direct the Division of 

Client Accounting Services (DCAS) to adopt the following improvements to its internal 

control structure: 

1. Reinforce procedures with the regional offices that invoice received dates entered 

into Department of Labor Accounting and Related Systems (DOLAR$)1

 should 

reflect the date of receipt of a proper invoice by DOL. 

2. Develop and implement a periodic review process to verify that proper invoice 

received dates are entered into DOLAR$. 

 

1

 DOLAR$ was replaced in FY 2010 with the New Core Financial Management System. 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General

Management Advisory Comments 

For the Year Ended September 30, 2010 

28 Report Number: 22-11-006-13-001 

THIS PAGE IS INTENTIONALLY LEFT BLANK
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for the U.S. Department of Labor—Office 

Managemen

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Status of Prior Year CommentsThe status of comments reported in the Management Advisory Comments Identified in an Audit oFinancial Statements for the Year Ended September 30, 2009, dated March 18, 2010, (MAC), Assistant Inspector General for Audit and the Acting Deputy Chief Financial Officer, United States (ULabor (DOL), is summarized in the table below. For each comment, we provided the current year sta

2009 

Comment 

Number

Fiscal Year 

Comment 

Originated

Title of Comment 

Reported in FY 2009 

MAC Recommendation(s) Reported in the FY 2009 MAC

01 2006 Improvements 

Needed in Financial Reporting

We recommended that the Assistant Secretary for Administration and Management:1. Develop and implement procedures to better link 

the Statement of Net Cost to DOL’s strategic goals.

2. Follow up with the Office of Management and 

Budget (OMB) to reach a conclusion on whether or not Pension Benefit Guaranty Corporation performance information should be reported in DOL’s Performance and Accountability Report.

02 2006 Budgetary to 

Proprietary Analyses

We recommended that the Acting Deputy Chief Financial Officer:1. Complete the implementation of comprehensive 

quarterly budgetary to proprietary relationship analyses (including documented resolution of identified differences). These analyses should be documented, reviewed, and approved by an appropriate supervisor in a timely manner. In addition, documentation should be maintained to support these activities.
Pr

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30 Report Numb

2009 

Comment 

Number

Fiscal Year 

Comment 

Originated

Title of Comment 

Reported in FY 2009 

MAC Recommendation(s) Reported in the FY 2009 MAC

2. Formally document the relationship analyses 

procedures and the expected timeframe for completion and review for each quarter.

03 2008 Budget Reporting 

Processes

We recommended that the Assistant Secretary for Administration and Management provide Departmental Budget Center (DBC) staff and supervisors with specific guidance on proper preparation and review of the SF-132s and SF-133s prior to submitting the forms to OMB and the U.S. Department of the Treasury.

04 2008 Recording of Budget 

Authority

We recommended that the Acting Deputy Chief Financial Officer:1. Combine the transaction codes used to record 

budget authority so that such proprietary and budgetary entries are posted simultaneously.

2. Establish a transaction code to record budgetary 

resources approved by OMB for which Treasury Warrants had not yet been received in compliance with the U.S. Government Standard General Ledger.

In addition, we recommended that the Assistant Secretary for Administration and Management:1. Develop and implement procedures to consult with 

the Office of the Chief Financial Officer (OCFO) for guidance on appropriate transaction codes to be used to record economic events when the information is not available for DBC staff.

05 2006 Grant Closeouts and 

Deobligation of 

We recommended that the Assistant Secretary for Employment and Training improve the procedures for 
Pr

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 For the Year Ende

31 Report Numb

2009 

Comment 

Number

Fiscal Year 

Comment 

Originated

Title of Comment 

Reported in FY 2009 

MAC Recommendation(s) Reported in the FY 2009 MAC

Grant-related Undelivered Orders

deobligating Undelivered Orders (UDOs) related to expired grants and programs. These procedures should include:

1. Closeout supervisors review the Closeout 

Inventory Tracking System with the closeout specialists periodically to (a) determine the status of grant closeouts in conjunction with and/or in addition to regular monthly meetings, (b) follow-up on any grants that have not been closed within the established time frames to ensure timely resolution, and (c) initiate deobligations of invalid UDO balances for grants experiencing closeout delays.

2. Identification of grants with programs having 

varying expiration dates, and designation of appropriate personnel to initiate deobligations for these programs at the time of the program’s expiration.

3. Tracking and prompt resolution of rejected 

expiration notifications.

4. Review of all grants on a more frequent basis (e.g., 

quarterly) to (a) ensure that all grants nearing or past expiration are properly identified and assigned to a Closeout Specialist and (b) make appropriate deobligations when it is reasonably expected that the grantee will not be reporting any additional expenses even if the grant has not been fully closed out.
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2009 

Comment 

Number

Fiscal Year 

Comment 

Originated

Title of Comment 

Reported in FY 2009 

MAC Recommendation(s) Reported in the FY 2009 MAC

In addition, we recommended that the Assistant Secretary for the Veteran’s Employment and Training Service, in coordination with the Assistant Secretary for Administration and Management, develop and implement specific procedures to complete the grant closeout process within 12 months of each grant’s expiration in accordance with the Department of Labor Manual Series. These procedures should include: 

1. Continuing “clean up” of all expired grants to bring 

all grant closeouts up to date.

2. Deobligating funds when it is reasonably expected 

that the grantee will not be reporting any additional expenses.

06 2007 Grant Monitoring We recommended that the Assistant Secretary for 

Employment and Training ensure the following improvements are made to the Employment and Training Administration’s internal control structure:

1. Require supervisors to periodically review a sample 

of Federal Project Officer (FPO) desk reviews to confirm that the reviews are being completed timely. This review should be documented.

2. Develop an exception report in Grants 

eManagement System to note when desk reviews have not been performed by the FPO. The exception report should also highlight/track desk reviews that are close to or beyond the completion deadline of 75 calendar days after the end of the calendar quarter. Supervisors should review these 
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2009 

Comment 

Number

Fiscal Year 

Comment 

Originated

Title of Comment 

Reported in FY 2009 

MAC Recommendation(s) Reported in the FY 2009 MAC

reports periodically and follow-up with the FPOs as appropriate.

3. Reinforce procedures, especially in the national 

office, which require a detailed review of the Delinquent Reporting Analysis by the FPOs each quarter. In addition, develop and implement procedures for supervisors to perform a quarterly review of a sample of delinquent cost reports from the Delinquent Reporting Analysis to confirm that 

the FPOs are resolving delinquent reporting situations timely; this review should be documented.

4. Develop and implement procedures for FPOs, or 

other individuals contacting delinquent grantees, to maintain accurate and complete records of the communication and results. 

07 2009 Maintenance of 

Certain Expense Supporting Documents

We recommended that the Assistant Secretary for Employment and Training develop and implement procedures to identify the appropriate personnel to provide requested supporting documentation timely.In addition, we recommended that the Director of the Human Resources Center (HRC) reinforce audit response procedures to satisfy audit requests in a timely manner by:

1. Identifying the appropriate personnel to handle 

audit request timely.

2. Obtaining and providing supporting documentation 

to the auditors timely.
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2009 

Comment 

Number

Fiscal Year 

Comment 

Originated

Title of Comment 

Reported in FY 2009 

MAC Recommendation(s) Reported in the FY 2009 MAC

3. Providing answers to follow-up questions regarding 

audit samples timely.

4. Requiring designated supervisors to regularly 

monitor the progress of audit request responses.

08 2009 Accounting for 

Certain Job Corps Contracts

We recommended that the Interim National Director of the Office of Job Corps:

1. Review the detail of Job Corps advances at 

September 30, 2009, identify all invalid advances, and post adjustments necessary to properly state the advance balance no later than March 31, 2010.

2. Develop and implement policies and procedures to 

monitor Job Corps centers receiving advances and perform follow-up, as necessary, to ensure centers are reporting expenditures timely.

09 2009 Compliance with the 

Prompt Payment Act

We recommended that the Acting Deputy Chief Financial Officer direct the Division of Client Accounting Services (DCAS) to adopt the following improvements to its internal control structure:

1. Reinforce procedures with the regional offices that 

invoice received dates entered into Department of Labor Accounting and Related Systems (DOLAR$) should reflect the date of receipt of a proper invoice by DOL.

2. Develop and implement a periodic review process 

to verify that proper invoice received dates are entered into DOLAR$.

10 2009 Non-grant/NonUnemployment Trust We recommended that: 
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Fund Undelivered Orders 1. The Acting Deputy Chief Financial Officer direct DCAS to reinforce formal policies and procedures 

to distribute the Unliquidated Obligation Report the last week of each month.

2. The Acting Deputy Chief Financial Officer, the 

Acting Assistant Secretary for Occupational Safety and Health, the Assistant Secretary for Employment and Training, the Director of the Office of Workers’ Compensation Programs, and the Commissioner of the Bureau of Labor Statistics reinforce formal policies for each agency to adequately and timely review the monthly Unliquidated Obligation Report to identify expired UDOs for deobligation as necessary.

3. The Director of the Office of Workers’ 

Compensation Programs reinforce policies and procedures to maintain proper supporting documentation for all accounting transactions and balances.
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11 2008 Statement of 

Differences Reconciliation Process

We recommended that:1. The Assistant Secretary for Administration and 

Management ensure that staff implement existing procedures to ensure Statement of Differences (FMS-6652) reconciliations are being performed timely.

2. The Assistant Secretary for Administration and 

Management and the Acting Deputy Chief Financial Officer ensure that staff implement existing procedures that require the preparation and retention of supporting documentation evidencing timely completion and supervisory review of the FMS-6652 reconciliations, in order to substantiate that reconciliations were performed properly and that they were reviewed by personnel other than the preparer.

12 2009 Other Fund Balance 

with Treasury Reconciliations

We recommended that the Acting Deputy Chief Financial Officer:1. Develop and implement procedures to retain 

supporting documentation evidencing supervisory review of the quarterly fund balance with Treasury reconciliation, whether in electronic or hard copy format, to substantiate the reviews performed by personnel other than the preparer. 

2. Implement procedures to ensure that the monthly 

Government Wide Account Statement Expenditure Activity reconciliation is performed timely (i.e., before the end of the subsequent month) and supporting documentation is retained evidencing 
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the timely performance of the reconciliation, whether in electronic or hard copy format. 

13 2009 Untimely Clearing of 

the Capital Asset Tracking and Reporting System Holding File

We recommended that the Acting Deputy Chief Financial Officer:1. Develop and implement formal policies and 

procedures requiring capitalized asset management officers (CAMOs) to perform the review and clearing of Capital Asset Tracking and Reporting System (CATARS) holding file items timely (e.g., within 2 weeks after the end of the month). Documentation should be maintained to support these activities. 

2. Monitor agencies’ compliance with the developed 

policies and procedures.

14 2009 Property, Plant, and 

Equipment Additions

We recommended that:1. The Commissioner for the Bureau of Labor 

Statistics and the Acting Assistant Secretary for the Office of Safety and Health Administration develop and implement procedures to properly record capitalized costs in accordance with Statement of Federal Financial Accounting Standards (SFFAS) No. 6 and No.10.

2. The Acting Deputy Chief Financial Officer develop 

and implement procedures to monitor all DOL agencies’ compliance with SFFAS No.6 and No.10.

3. The Assistant Secretary for Administration and 

Management ensure that the staff in the Office of the Assistant Secretary for Administration and 
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Management’s maintain a complete set of supporting documentation for each transaction and that the supporting documentation is readily available for examination.

15 2009 Construction In 

Progress Transfers

We recommended that the Interim National Director for the Office of Job Corps implement policies and procedures requiring:

1. All parties reviewing the substantial completion 

document to complete their review within a specified timeframe (e.g., within 5 business days of receiving the document).

2. The CAMO entering the asset into CATARS and 

DOLAR$ to use the date of substantial completion as the depreciation start date.

3. The periodic review of Construction-In-Progress 

balances to identify any items that should be transferred to a depreciable asset account. This review should be documented.

16 2008 Review of Software 

Development Balances

We recommended that the Acting Deputy Chief Financial Officer enhance the Certification process by having agencies certify that software costs incurred in prior years continue to be valid capitalized costs for projects still in development or that those costs should be removed from software in development.

17 2009 Property, Plant, and 

Equipment Disposals

We recommended that the Interim National Director of the Office of Job Corps implement policies and procedures to perform a periodic review of asset disposals recorded during the fiscal year to ensure they are properly authorized.
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18 2009 Improvements 

Needed in Property, Plant, and Equipment Reconciliation Controls

We recommended that the Acting Deputy Chief Financial Officer:1. Reinforce policies and procedures requiring all 

agencies to provide completed CATARS to DOLAR$ reconciliations to the OCFO within 10 work days following the end of the quarter, including explanation of the identified reconciling items.

2. Amend the existing documented policies and 

procedures to include procedures that require the OCFO staff to complete the quarterly DOLAR$ to CATARS reconciliation by internal agency codes timely.

19 2009 Periodic 

Accountability Reviews

We recommended that the Director of the Office of Workers’ Compensation Programs implement procedures to ensure that the review of all Accountability Review reports is completed in accordance with the Division of Federal Employees Compensation Program’s Procedure Manual (Manual). 

20 2008 Controls over the 

Integrated Federal Employees Compensation System

We recommended that the Director of the Office of Workers’ Compensation Programs continue to stress the importance of Claims Examiner compliance with the Manual related to timely claim file review, follow-up on obtaining the information supporting claimants’ continuing eligibility (medical evidence and CA-1032, Request for Information on Earnings, Dual Benefits, Dependents and Third Party Settlements, or CA-12, Claim for Continuation of Compensation), and updates to the claimants’ pay rate based on the information provided in the CA-1032. 
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21 2009 Improvements 

Needed in Controls over Fiscal Year-End Estimates Related to the Federal Employees’ Compensation Act

We recommended that the Director of the Office of Workers’ Compensation Programs revise existing policies and procedures to require management to develop and implement a methodology for estimating the Federal Employees’ Compensation Act year-end accrual and allowance for doubtful accounts receivable that is supported by a documented analysis of historical trends. This analysis should be updated annually to take into consideration actual results and changes in the industry. 

22 2007 Reconciliation of 

Child Agency Data Reported in the DOL Trial Balance

We recommended that the Acting Deputy Chief Financial Officer and the Interim National Director of Job Corps determine the appropriate personnel to perform the reconciliation between the cost reports (Forms 2110F) and the child agency amounts reported in the DOL trial balance. Once determined, we recommended that the appropriate office make the following improvements to its internal control structure:

1. Formalize policies and procedures in writing related 

to the reconciliation of child agency data reported in the DOL trial balance to the Forms 2110F and ensure they are properly communicated to all appropriate individuals.

2. Require in the procedures that the reconciliation be 

completed and reviewed prior to the end of the subsequent quarter (e.g., the June 30 reconciliation should be completed before September 30).

3. Require in the procedures that a supervisor review 

the reconciliation for timeliness and accuracy. This 
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review should be documented by the reviewer signing and dating the reconciliation.

23 2009 Accounting for the 

State Unemployment Insurance and Employment Services Operations Activities

We recommended that the Acting Deputy Chief Financial Officer amend the current Department-wide policies and procedures in place to require that all manual journal entries generated by internallydeveloped programs are reviewed and approved by a supervisor or someone other than the preparer before they are posted to the general ledger.

24 1997 Reestablishment of 

the Unemployment Compensation Advisory Council

We recommended that the Assistant Secretary for Employment and Training continue to pursue having the Social Security Act amended.

25 2008 Process for 

Completing Background Checks Investigations

We recommended that the Assistant Secretary of Administration and Management, as the policy owner, continue to implement procedures to actively manage the background investigation process for all new hires. These procedures should ensure that the electronicOffice of Personnel Folder contains evidence that background investigations are initiated within 14 days of the individual’s hire date as required by the DOL Personnel Suitability and Security Handbook. 

2 Findings over General and Application Controls for Selected DOL Information Technology Systems Identified in the Eng

Consolidated Financial Statements for the Year Ended September 30, 2010 (FISCAM Report). 
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Management Advisory Comments 

For the Year Ended September 30, 2009 

 42 Report Number: 22-11-006-13-001

THIS PAGE IS INTENTIONALLY LEFT BLANK
Prepared by KPMG LLP

for the U.S. Department of Labor—Office of Inspector General 

Appendix A 

 Management Advisory Comments 

 For the Year Ended September 30, 2010 

 43 Report Number: 22-11-006-13-001 

Appendix A 

Acronyms and Abbreviations

CAMO Capitalized Asset Management Officer 

CATARS Capitalized Asset Tracking and Reporting System 

DBC Departmental Budget Center 

DCAS Division of Client Accounting Services 

DFEC Division of Federal Employees' Compensation 

DFSS Division of Financial and System Services 

DOL United States Department of Labor 

DOLAR$ Department of Labor Accounting and Related Systems 

EPS E-Procurement System 

ETA Employment and Training Administration 

FACTS Federal Agencies Centralized Trial Balance System 

FOD Fraction of Day 

FPO Federal Project Officer 

FY Fiscal Year 

GAO Government Accountability Office 

GEMS Grants e-Management System 

HR Human Resource 

HRC Human Resources Center 

iFECS Integrated Federal Employees Compensation System 

IT Information Technology 

MAC Management Advisory Comment 

NCFMS New Core Financial Management System 

NFC United States Department of Agriculture National Finance Center 

OASAM Office of the Assistant Secretary for Administration and Management 

OCFO Office of the Chief Financial Officer 

OERPS Office of Executive Resources and Personnel Security 

OIG Office of Inspector General 

OJC Office of Job Corps 

OMB Office of Management and Budget 

PBC Prepared by Client 

PP&E Property, Plant and Equipment 

SFFAS Statement of Federal Financial Accounting Standards 

SUIESO State Unemployment Insurance and Employment Services Operations 

UCAC Unemployment Compensation Advisory Council 

UDO Undelivered Orders 

U.S. United States 

USFS United States Department of Agriculture United States Forest Service 

USSGL United States Standard General Ledger 

VETS Veterans’ Employment and Training Service