OFFICE OF WORKERS’ 

COMPENSATION PROGRAMS

 

DISTRICT OF COLUMBIA WORKMEN’S

COMPENSATION ACT SPECIAL FUND

FINANCIAL STATEMENTS AND 

INDEPENDENT AUDITORS’ REPORT

September 30, 2010 and 2009 

 

 

Date Issued: June 10, 2011 

Report Number: 22-11-005-04-432 

Office of Inspector General—Office of Audit

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. 

 ____________________________ 

 Assistant Inspector General for Audit 

District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

_________________________________________________________________________________________ 

 U.S. Department of Labor – Office of Inspector General 

i Report Number: 22-11-005-04-432

DISTRICT OF COLUMBIA WORKMEN’S 

COMPENSATION ACT SPECIAL FUND 

TABLE OF CONTENTS 

Page 

ACRONYMS iii

Management’s Discussion and Analysis 

Mission and Organizational Structure 1 

Financial Highlights 2 

Performance Goals and Results 3 

Internal Controls and Systems 3 

Known Risks and Uncertainties 4 

Limitations of the Financial Statements 4 

Independent Auditors’ Report 5

FINANCIAL STATEMENTS 

Balance Sheets 11 

Statements of Net Cost 12 

Statements of Changes in Net Position 13 

Statements of Budgetary Resources 14 

NOTES TO THE FINANCIAL STATEMENTS 

Note 1 – Summary of Significant Accounting Policies 15 

Note 2 – Funds with U.S. Treasury 18 

Note 3 – Investments 19 

Note 4 – Accounts Receivable, Net 20 

Note 5 – Other Liabilities 21 

Note 6 – Status of Budgetary Resources 22 

Note 7 – Reconciliation of Budgetary Resources Obligated 

 to Net Cost of Operations 23 

Note 8 – Concentration of Risk 23 
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DISTRICT OF COLUMBIA WORKMEN’S 

COMPENSATION ACT SPECIAL FUND 

Acronyms 

AUP Agreed Upon Procedures 

DCCA District of Columbia Workmen’s Compensation Act 

DLHWC Division of Longshore and Harbor Workers’ Compensation 

DOL Department of Labor 

FY Fiscal Year 

LHWCA Longshore Harbor Workers’ Compensation Act 

OMB Office of Management and Budget 

OWCP Office of Workers’ Compensation Programs 

U.S.C. United States Code 

 
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District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

DISTRICT OF COLUMBIA WORKMEN’S 

COMPENSATION ACT SPECIAL FUND 

Management’s Discussion and Analysis 

September 30, 2010 and 2009

U.S. Department of Labor – Office of Inspector General 

1 Report Number: 22-11-005-04-432

Mission and Organizational Structure 

Two Special Funds are administered by the Office of Workers’ Compensation Program 

(OWCP) under Section 44 of the Longshore Harbor Workers’ Compensation Act 

(LHWCA); the Longshore and Harbor Workers’ Compensation Act Special Fund created 

under the original Act in 1927 and the Special Fund under the District of Columbia 

Workmen’s Compensation Act of 1928 (DCCA). These Funds were established for the 

primary purpose of equitably distributing among all employers the liabilities associated 

with second injury claims (a “second injury” is an injury to a worker which, in combination 

with an existing permanent partial impairment, results in the worker’s increased 

permanent disability or death). 

The reporting entity is the Fund. Organizationally the Fund is administered by the DOL, 

Office of Workers’ Compensation Programs (OWCP), Division of Longshore and Harbor 

Workers’ Compensation program (DLHWC). The DLHWC has direct responsibility for 

administration of the Fund. The mission of the Fund is to effectively administer a program 

of compensation and medical benefits to cover workers who are injured on the job or 

suffer from occupational disease. The DLHWC has direct responsibility for all aspects of 

the administration of the Fund. 

The Fund supports the program mission by providing compensation, and in certain 

cases, medical care payments to District of Columbia employees for work related injuries 

or death. Effective July 26, 1982, the District of Columbia became responsible for 

administration and operation of a separate special fund to cover post July 26, 1982, 

injury cases. 

The DCCA provides medical benefits, compensation for lost-wages and rehabilitation 

services for job-related injuries, diseases or death of certain private-sector workers in the 

District of Columbia. Generally, benefits are paid directly from private funds by an 

authorized self-insured employer or through an authorized insurance carrier. Cases 

meeting the requirements of the LHWCA as extended to DCCA are paid from the Fund 

comprised primarily of employer contributions (assessments) and administered by the 

DLHWC. In fiscal year (FY) 2010 and 2009, 529 and 550 injured workers and their 

dependants received compensation benefits from the Fund. 

Additionally, the District of Columbia Workmen’s Compensation Act incorporates Section 

10(h) of the LHWCA, which provides annual wage increase compensation (cost of living 

adjustments). Fifty percent of this annual wage increase for pre-1972 compensation 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

DISTRICT OF COLUMBIA WORKMEN’S 

COMPENSATION ACT SPECIAL FUND 

Management’s Discussion and Analysis 

September 30, 2010 and 2009

U.S. Department of Labor – Office of Inspector General 

2 Report Number: 22-11-005-04-432

cases is paid by Federal appropriated funds, and fifty percent is paid by the Fund through 

the annual assessment. 

Appropriated funding for Section 10(h) is not reflected in the accompanying financial 

statements. Appropriated funding is reflected in the Federal Employees Compensation 

Act’s Special Benefits Fund. 

Although the Fund is administered by the Secretary of Labor, the U.S. Treasury is the 

Custodian, holding the funds in trust. The Fund is not property of the United States, but 

can only be disbursed as specified in Section 44(i) of the LHWCA. Administrative 

services for operating the Fund are provided by the OWCP through direct Federal 

Appropriations. Appropriated funding for administrative services is not reflected in the 

accompanying financial statements. 

Financial Highlights 

The majority of the revenue of the Fund is generated through annual recurring 

assessments paid by self-insured employers and insurance carriers and totaled 

$8,431,773 in FY 2010. This compares with assessment revenue of $10,730,052 for FY 

2009. During FY2010 and FY2009 no recoveries were made for the Fund due to 

activities involving the application of Agreed Upon Procedures (AUP) on Forms LS-513, 

Report of Payments (used in the calculations of the annual assessments), and 

negotiation/collection of past due assessments. The AUP activities have uncovered 

common industry reporting errors and other industry record keeping mistakes made by 

carriers which, when discovered, have been eliminated. Recoveries, if any, have and will 

continue to reduce carrier assessments and are reflected in the Assessments line on the 

Statement of Changes in Net Position. 

In addition, investment income for the Fund was $4,773 for FY 2010 compared to $3,572 

for FY 2009. The average interest rate earned during FY 2010 was 0.10% compared to 

0.13% for FY 2009. 

The Fund’s costs remained relatively stable compared to FY 2009; $9,358,393 for FY 

2010 compared to $9,777,283 for FY 2009. Proceeds of the Fund are used for payments 

under: Section 8(f) for second injury claims; Section 10(h) for initial and subsequent 

annual adjustments in compensation for permanent total disability or related death from 

injuries which occurred prior to the effective date of the 1972 LHWCA amendments; and 

Section 18(b) for compensation to injured workers in cases of employer default. 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

DISTRICT OF COLUMBIA WORKMEN’S 

COMPENSATION ACT SPECIAL FUND 

Management’s Discussion and Analysis 

September 30, 2010 and 2009 

U.S. Department of Labor – Office of Inspector General 

3 Report Number: 22-11-005-04-432

Performance Goals and Results 

DCCA supports the Department of Labor’s Strategic Goal 4 – Strengthened Economic 

Protections. This goal broadly promotes the economic security of workers and families. In 

particular, the DCCA program supports Performance Goal 4B – Reduce the 

Consequences of Work-Related Injuries. The Department of Labor plays a large role in 

ensuring that worker benefits are protected and that employers administer benefit 

programs in an appropriate way. The DCCA program assists in meeting this outcome 

goal by establishing the long term performance goal of ensuring sufficient funds are 

assessed to fund the annual payments, and by prompt payment to the beneficiaries. 

These targets were achieved. The assessments were sufficient to cover the costs, and 

no beneficiaries suffered a delayed payment. 

Internal Controls and Systems 

The Longshore and Harbor Workers’ Compensation Division’s Branch of Financial 

Management, Insurance and Assessments is a very small unit comprised of four 

employees and one supervisor, all working in very close proximity to each other. Much of 

the oversight, evaluation, monitoring, and control and almost all of the supervisory 

activity is informal, done on a face-to-face basis. Similarly, each of the district offices is in 

itself a small unit, operating in the same fashion as the Branch of Financial Management, 

Insurance and Assessments. 

Cases paid by the Special Fund are paid as a result of a formal Compensation Order 

issued by a District Director or Administrative Law Judge, setting forth precisely what 

payment is due and to whom the payment is due. Each new case coming in for Special 

Fund payment is prepared and reviewed by a total of five different employees before 

payment is made, thus ensuring accuracy. 

With the exception of certain internal control deficiencies discussed in the Independent 

Auditors’ Report, monthly cash basis statements, monthly case management reports, 

quarterly review processes, biweekly payment summaries, the SF-224 report and 

statement of differences all provide current, reliable, and accurate information. 

Management communicates all procedural, policy, and operating goals to staff by means 

of weekly staff meetings, a written procedure manual, frequent e-mail communication, 

and frequent individual communications regarding changes, problems and issues. 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

DISTRICT OF COLUMBIA WORKMEN’S 

COMPENSATION ACT SPECIAL FUND 

Management’s Discussion and Analysis 

September 30, 2010 and 2009 

U.S. Department of Labor – Office of Inspector General 

4 Report Number: 22-11-005-04-432

Known Risks and Uncertainties 

The DCCA Fund makes assessments on authorized insurers and self-insurers one year 

at a time for current expenses; there is no reserve for future Fund obligations. In keeping 

with the requirement of Section 44 of the LHWCA, obligations are paid as they are 

incurred. Assessments are based on compensation and medical benefits paid in the prior 

calendar year. The District of Columbia Workmen’s Compensation Act of 1928 has been 

repealed and the DC Special Fund only assesses based on payments in cases that 

arose prior to July 26, 1982. The annual Special Fund assessment is assessed against a 

shrinking base of industry payments. These payments are concentrated among a 

relatively few insurance carriers and self insured employers. For example, the largest ten 

insurance carriers and self-insured employers alone fund over 63% of the District of 

Columbia assessments. If one or more of the largest payers became insolvent and was 

unable to pay their assessment obligations, temporary collection issues would result, 

necessitating special, unscheduled assessments or other actions to keep the Special 

Fund funded for current liabilities. 

 

Limitations of the Financial Statements 

The following limitations are part of the financial statements: 

 The financial statements have been prepared to report the financial position and 

results of operations of the entity, pursuant to the requirements of the Chief Financial 

Officers Act of 1990, United States Code U.S.C. 3515 (b). 

 While the statements have been prepared from the books and records of the Fund in 

accordance with the formats prescribed by the Office of Management and Budget, 

(OMB), the statements are different from the financial reports used to monitor and 

control budgetary resources which are prepared from the same books and records. 

 The statements should be read with the realization that they are for a component of 

the U.S. Government, a sovereign entity, that liabilities cannot be liquidated without 

the enactment of an appropriation, and that the payment of all liabilities other than for 

contracts can be abrogated by the sovereign entity. 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report

U.S. Department of Labor – Office of Inspector General 

5 Report Number: 22-11-005-04-432 

KPMG LLP 

2001 M Street, NW 

Washington, DC 20036-3389 

Independent Auditors’ Report

Mr. Gary A. Steinberg, Acting Director 

Office of Workers’ Compensation Programs, U.S. Department of Labor 

We have audited the accompanying balance sheets of the U.S. Department of Labor’s 

(DOL) District of Columbia Workmen’s Compensation Act Special Fund (the Fund) as of 

September 30, 2010 and 2009, and the related statements of net cost, changes in net 

position, and budgetary resources (hereinafter referred to as “financial statements”) for the 

years then ended. The objective of our audits was to express an opinion on the fair 

presentation of these financial statements. In connection with our fiscal year 2010 audit, we 

also considered the Fund’s internal control over financial reporting and tested the Fund’s 

compliance with certain provisions of applicable laws and regulations that could have a 

direct and material effect on these financial statements. 

Summary 

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

statements as of and for the years ended September 30, 2010 and 2009, are presented 

fairly, in all material respects, in conformity with U.S. generally accepted accounting 

principles. 

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

deficiencies that we consider to be a material weakness, as defined in the Internal Control 

Over Financial Reporting section of this report, as “Controls Over the Financial Reporting 

Process Need Improvement.” 

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

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

under Government Auditing Standards, issued by the Comptroller General of the United 

States, and Office of Management and Budget (OMB) Bulletin No. 07-04, Audit 

Requirements for Federal Financial Statements, as amended. 

The following sections discuss our opinion on the Fund’s financial statements; our 

consideration of the Fund’s internal control over financial reporting; our tests of the Fund’s 

compliance with certain provisions of applicable laws and regulations; and management’s 

and our responsibilities. 

KPMG LLP is a Delaware limited liability partnership, 

the U.S. member firm of KPMG International Cooperative 

(“KPMG International”), a Swiss entity. 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

U.S. Department of Labor – Office of Inspector General 

6 Report Number: 22-11-005-04-432

Opinion on the Financial Statements 

We have audited the accompanying balance sheets of the U.S. Department of Labor’s 

District of Columbia Workmen’s Compensation Act Special Fund as of September 30, 2010 

and 2009, and the related statements of net cost, changes in net position, and budgetary 

resources for the years then ended. 

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

respects, the financial position of the U.S. Department of Labor’s District of Columbia 

Workmen’s Compensation Act Special Fund as of September 30, 2010 and 2009, and its 

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

conformity with U.S. generally accepted accounting principles.

The information in the Management’s Discussion and Analysis is not a required part of the 

financial statements, but is supplementary information required by U.S. generally accepted 

accounting principles. We have applied certain limited procedures, which consisted 

principally of inquiries of management regarding the methods of measurement and 

presentation of this information. However, we did not audit this information and, 

accordingly, we express no opinion on it. 

Internal Control Over Financial Reporting 

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

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

deficiencies in internal control over financial reporting that might be significant deficiencies 

or material weaknesses and therefore, there can be no assurance that all deficiencies, 

significant deficiencies, or material weaknesses have been identified. However, in our fiscal 

year 2010 audit, we identified certain deficiencies in internal control over financial reporting 

that we consider to be a material weakness. 

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

allow management or employees, in the normal course of performing their assigned 

functions, to prevent, or detect and correct misstatements on a timely basis. A material 

weakness is a deficiency, or a combination of deficiencies, in internal control such that 

there is a reasonable possibility that a material misstatement of the entity’s financial 

statements will not be prevented, or detected and corrected on a timely basis. We consider 

the deficiencies described in Exhibit I to be a material weakness.

Compliance and Other Matters 

The results of our tests of compliance described in the Responsibilities section of this 

report, disclosed no instances of noncompliance or other matters that are required to be 

reported herein under Government Auditing Standards or OMB Bulletin No. 07-04. 

* * * * * * * 

 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

U.S. Department of Labor – Office of Inspector General 

7 Report Number: 22-11-005-04-432

Responsibilities 

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

establishing and maintaining effective internal control; and complying with laws and 

regulations applicable to the Fund. 

Auditors’ Responsibilities. Our responsibility is to express an opinion on the fiscal year 

2010 and 2009 financial statements of the Fund based on our audits. We conducted our 

audits in accordance with auditing standards generally accepted in the United States of 

America; the standards applicable to financial audits contained in Government Auditing 

Standards, issued by the Comptroller General of the United States; and OMB Bulletin 

No. 07-04. Those standards and OMB Bulletin No. 07-04 require that we plan and perform 

the audits to obtain reasonable assurance about whether the financial statements are free 

of material misstatement. An audit includes consideration of internal control over financial 

reporting as a basis for designing audit procedures that are appropriate in the 

circumstances, but not for the purpose of expressing an opinion on the effectiveness of the 

Fund’s internal control over financial reporting. Accordingly, we express no such opinion. 

An audit also includes: 

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

financial statements; 

 Assessing the accounting principles used and significant estimates made by 

management; and 

 Evaluating the overall financial statement presentation. 

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

In planning and performing our fiscal year 2010 audit, we considered the Fund’s internal 

control over financial reporting by obtaining an understanding of the Fund’s internal control, 

determining whether internal controls had been placed in operation, assessing control risk, 

and performing tests of controls as a basis for designing our auditing procedures for the 

purpose of expressing our opinion on the financial statements, but not for the purpose of 

expressing an opinion on the effectiveness of the Fund’s internal control over financial 

reporting. Accordingly, we do not express an opinion on the effectiveness of the Fund’s 

internal control over financial reporting. We did not test all controls relevant to operating 

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

As part of obtaining reasonable assurance about whether the Fund’s fiscal year 2010 

financial statements are free of material misstatement, we performed tests of the Fund’s 

compliance with certain provisions of laws and regulations, noncompliance with which 

could have a direct and material effect on the determination of the financial statement 

amounts, and certain provisions of other laws and regulations specified in OMB Bulletin 

No. 07-04. We limited our tests of compliance to the provisions described in the preceding 

sentence, and we did not test compliance with all laws and regulations applicable to the 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

U.S. Department of Labor – Office of Inspector General 

8 Report Number: 22-11-005-04-432

Fund. However, providing an opinion on compliance with laws and regulations was not an 

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

______________________________ 

The Fund’s response to the finding identified in our audit is presented in Exhibit I. We did 

not audit the Fund’s response and, accordingly, we express no opinion on it. 

This report is intended solely for the information and use of DOL’s management, DOL’s 

Office of Inspector General, OMB, the U.S. Government Accountability Office, and the U.S. 

Congress and is not intended to be and should not be used by anyone other than these 

specified parties. 

June 10, 2011 

 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

U.S. Department of Labor – Office of Inspector General 

9 Report Number: 22-11-005-04-432

Exhibit I 

Controls Over the Financial Reporting Process Need Improvement 

During our FY 2010 audit, we noted that the internal controls over the preparation and 

review of the Fund financial statements performed by the Office of Workers’ Compensation 

Programs (OWCP) Division of Longshore and Harbor Workers’ Compensation program 

(DLHWC) and Office of the Chief Financial Officer (OCFO), were not operating effectively. 

Specifically we identified the following deficiencies in internal controls over financial 

reporting that need to be improved: 

1. Reconciliations between the Fund’s general ledger account balances and balances 

reflected in subsidiary ledgers are not being prepared and reviewed consistently 

throughout the year; 

2. Supervisory review controls, including those over journal entries, are not consistently 

performed; 

3. Controls over the preparation and submission of the SF-224, Statement of 

Transactions are not consistently completed; and 

4. Controls need to be performed consistently to ensure that differences identified by 

Treasury are resolved on a timely basis. 

These deficiencies resulted in material errors in the Fund’s financial statements that DOL 

adjusted as a result of our observations. 

 

The Government Accountability Office (GAO), Standards for Internal Control in the Federal 

Government 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.” 

GAO’s Standards for Internal Control in the Federal Government 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.” 

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

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

in compliance with applicable laws; 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 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

U.S. Department of Labor – Office of Inspector General 

10 Report Number: 22-11-005-04-432

preparation of accounts and reliable financial and statistical reports . . .” 

During the prior fiscal year, OWCP was a component of the Employment Standards 

Administration (ESA), which was the agency within DOL responsible for preparing the 

Fund’s financial statements. Effective November 8, 2009, the ESA was abolished and 

OWCP began reporting directly to the Office of the Secretary of Labor. OWCP’s 

accounting staff was also reduced from 5 to 2 professionals during the reorganization. 

Subsequent to fiscal year end OWCP hired an additional accounting resource. 

Additionally, in January 2010, DOL implemented the New Core Financial Management 

System (NCFMS) to replace its legacy accounting and reporting system, the Department 

of Labor Accounting and Related Systems (DOLAR$). The implementation of NCFMS 

required significant involvement of OWCP’s accounting staff. These staffing reductions 

and the increase in demands on the remaining staff prevented OWCP from being able to 

dedicate sufficient resources to properly prepare and review the Fund’s financial 

statements. 

We recommend that DOL improve its internal controls over financial reporting to ensure 

that: 

1. Reconciliations between the Fund’s general ledger account balances and balances 

reflected in subsidiary ledgers are being prepared and reviewed consistently 

throughout the year; 

2. Supervisory review controls, including those over journal entries are being effectively 

performed; 

3. SF-224’s are being thoroughly reviewed prior to submission to Treasury; and 

4. Differences identified by Treasury are resolved on a timely basis. 

Management’s Response: 

DOL management concurs with the findings and corrective action will be taken and 

completed in the current fiscal year. 

Auditors’ Response: 

FY 2011 audit procedures will determine whether these recommendations have been 

adequately addressed and can be considered closed. 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

U.S. Department of Labor – Office of Inspector General 

11 Report Number: 22-11-005-04-432

DISTRICT OF COLUMBIA WORKMEN'S

COMPENSATION ACT SPECIAL FUND

Balance Sheets

September 30, 2010 and 2009

Assets 2010 2009

Intra-governmental assets:

Funds with U.S. Treasury (Note 2) $ 353,404 994,978 

Investments (Note 3) 5,143,000 5,228,000 

Total intra-governmental assets 5,496,404 6,222,978 

Accounts receivable, net of allowance (Note 4) 147,508 674,339 

Total assets $ 5,643,912 6,897,317 

Liabilities and Net Position

Liabilities:

Accrued benefits payable (Note 1f ) $ 26,076 — 

Deferred revenue 1,875,886 2,858,019 

Other liabilities (Note 5) 623,913 59,414 

Total liabilities 2,525,875 2,917,433 

Net position:

Cumulative results of operations 3,118,037 3,979,884 

Total liabilities and net position $ 5,643,912 6,897,317 

See accompanying notes to financial statements.
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

U.S. Department of Labor – Office of Inspector General 

12 Report Number: 22-11-005-04-432

DISTRICT OF COLUMBIA WORKMEN'S

COMPENSATION ACT SPECIAL FUND

Statements of Net Cost

Years ended September 30, 2010 and 2009

2010 2009

Special fund net cost of operations:

 Second injury compensation, Section 8(f) $ 8,568,690 8,881,018 

 Wage increase compensation, Section 10(h) 548,257 590,135 

Compensation payment for self-insurer in default,

Section 18(b) 241,446 306,130 

Net cost of operations $ 9,358,393 9,777,283 

See accompanying notes to financial statements.
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

U.S. Department of Labor – Office of Inspector General 

13 Report Number: 22-11-005-04-432

DISTRICT OF COLUMBIA WORKMEN'S

COMPENSATION ACT SPECIAL FUND

Statements of Changes in Net Position

Years ended September 30, 2010 and 2009

2010 2009

Cumulative results of operations, beginning $ 3,979,884 3,023,543 

Budgetary financing sources:

Non-exchange revenues:

Investment interest 4,773 3,572 

Fines & Penalties 60,000 50,000 

Assessments 8,431,773 10,680,052 

Total non-exchange revenues 8,496,546 10,733,624 

Net cost of operations (9,358,393) (9,777,283) 

Net position, end of period $ 3,118,037 3,979,884 

See accompanying notes to financial statements.
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

U.S. Department of Labor – Office of Inspector General 

14 Report Number: 22-11-005-04-432

DISTRICT OF COLUMBIA WORKMEN'S

COMPENSATION ACT SPECIAL FUND

Statements of Budgetary Resources

Years ended September 30, 2010 and 2009

2010 2009

Budgetary resources:

Unobligated balance, brought forward $ 6,224,904 5,256,086 

Budget authority

Appropriations received (assessments) 10,931,292 10,717,796 

Total budgetary resources $ 17,156,196 15,973,882 

Status of budgetary resources:

Obligations incurred (Note 6)

Direct $ 9,286,561 9,748,978 

Unobligated balances - available:

Other available - exempt from apportionment 7,869,635 6,224,904 

Total status of budgetary resources $ 17,156,196 15,973,882 

Change in obligated balance:

Obligated balance , net

Unpaid obligations, brought forward, October 1 $ — 344,739 

Obligations incurred, net 9,286,561 9,748,978 

Less: Gross Outlays (9,260,485) (10,093,717) 

Obligated balance, net, end of period

Unpaid obligations $ 26,076 — 

Outlays:

Gross Outlays $ 9,260,485 10,093,717 

Net outlays $ 9,260,485 10,093,717 

See accompanying notes to financial statements.
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

DISTRICT OF COLUMBIA WORKMEN’S 

COMPENSATION ACT SPECIAL FUND 

Notes to the Financial Statements 

Years ended September 30, 2010 and 2009

U.S. Department of Labor – Office of Inspector General 

15 Report Number: 22-11-005-04-432

(1) Summary of Significant Accounting Policies 

The principal accounting policies which have been followed by the Fund in preparing the 

accompanying financial statements are set forth below. 

(a) Reporting Entity 

These financial statements present the financial position, net cost of operations, 

changes in net position, and budgetary resources of the District of Columbia 

Workmen’s Compensation Act Special Fund (the Fund). Office of Workers’ 

Compensation Programs (OWCP), Division of Longshore and Harbor Workers’ 

Compensation program (DLHWC). The DLHWC has direct responsibility for 

administration of the Fund. The Fund offers compensation, and in certain cases, 

medical care payments to District of Columbia employees for work related injuries 

or death incurred on or before July 26, 1982. Effective July 26, 1982, the District of 

Columbia Workmen’s Compensation Act was amended whereby the Mayor of the 

District of Columbia became responsible for administration and operation of a 

separate special fund to cover post July 26, 1982, injury cases. 

Additionally, the District of Columbia Workmen’s Compensation Act Section 10(h) 

provides annual wage increase compensation (cost of living adjustments). Fifty 

percent of this annual wage increase for pre-1972 compensation cases is paid by 

Federal appropriated funds and fifty percent is paid by the Fund through the annual 

assessment. Appropriated funding for 10(h) is not reflected in the accompanying 

financial statements. Appropriated funding is reflected in the Federal Employees 

Compensation Act’s Special Benefit Fund. Also, these financial statements do not 

include the Special Fund administered by the Mayor of the District of Columbia for 

injury cases occurring after July 26, 1982. 

(b) Basis of Accounting and Presentation 

These financial statements present the financial position, net cost of operations, 

changes in net position and budgetary resources, in accordance with U.S. generally 

accepted accounting principles and the form and content requirements of OMB 

Circular A-136. These financial statements have been prepared from the books and 

records of the Fund. These financial statements are not intended to present, and do 

not present, the full cost of the District of Columbia Workmen’s Compensation 

(DCCA) program administered under the Longshore and Harbor Workers’ 

Compensation Act Program (Longshore Program). In addition to the Fund costs 

presented in these statements, the full cost of the DCCA portion of the Longshore 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

DISTRICT OF COLUMBIA WORKMEN’S 

COMPENSATION ACT SPECIAL FUND 

Notes to the Financial Statements 

Years ended September 30, 2010 and 2009

U.S. Department of Labor – Office of Inspector General 

16 Report Number: 22-11-005-04-432

Program would include certain direct costs of OWCP in the form of salaries and 

expenses for administration of the Longshore Program and allocated costs of 

OWCP and other DOL agencies incurred in support of the Longshore Program. The 

full cost of the DCCA portion of the Longshore Program is included in the DOL 

Consolidated Financial Statements and related notes. The Fund is considered a 

fiduciary activity of DOL, and is properly disclosed and reported in the consolidated 

financial statements of DOL as a fiduciary fund. 

U.S. generally accepted accounting principles encompass both accrual and 

budgetary transactions. Under accrual accounting, revenues are recognized when 

earned, and expenses are recognized when a liability is incurred. Budgetary 

accounting facilitates compliance with legal constraints on, and controls over, the 

use of federal funds. These financial statements are different from the financial 

reports, also prepared for the Fund pursuant to OMB directives, used to monitor the 

Fund’s use of budgetary resources. 

(c) Funds with U.S. Treasury 

The Fund does not maintain cash in commercial bank accounts. Cash receipts and 

disbursements are processed by the U.S. Treasury. The Funds with U.S. Treasury 

are trust funds that are available to pay current liabilities and finance authorized 

purchase commitments. 

(d) Investments 

Investments in U.S. Government securities are reported at cost, net of unamortized 

premiums or discounts, which approximate market value. Premiums or discounts 

are amortized on a straight-line basis, which approximates the effective interest 

method. The Fund’s intent is to hold investments to maturity, unless they are 

needed to finance claims or otherwise sustain the operations of the Fund. No 

provision is made for unrealized gains or losses on these securities because, in the 

majority of cases, they are held to maturity. 

(e) Accounts Receivable, Net of Allowance 

The amounts due as receivables are stated net of an allowance for uncollectible 

accounts. The allowance is estimated based on past experience in the collection of 

the receivables and an analysis of the outstanding balances. Accounts receivable 

are comprised of assessments receivable and Fund benefit overpayments to 

individuals primarily from awarded compensation orders and corrections of payment 

computations. 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

DISTRICT OF COLUMBIA WORKMEN’S 

COMPENSATION ACT SPECIAL FUND 

Notes to the Financial Statements 

Years ended September 30, 2010 and 2009

U.S. Department of Labor – Office of Inspector General 

17 Report Number: 22-11-005-04-432

(f) Accrued Benefits Payable 

The Fund provides compensation and medical benefits for work related injuries to 

employees of the District of Columbia that were incurred on or before July 26, 1982. 

The Fund recognizes a liability for disability benefits payable to the extent of unpaid 

benefits applicable to the current period. It does not include a liability for those 

estimated claims to be presented and paid by the fund related to covered workers in 

future years. Ultimate responsibility for the payment of such claims rests with the 

employer organizations. Accrued disability benefits payable as of September 30, 

2010 amounted to $26,076. All disability payments due and payable as of 

September 30, 2009 were paid as of September 30, 2009. 

(g) Assessment Overpayment by Carriers 

Assessment overpayments are current liabilities and are to be refunded upon 

insurance carrier or self-insured employer’s request or applied to reduce future 

assessments. The assessment overpayments are contained within the other 

liabilities line item on the balance sheet. 

(h) Deferred Revenue 

Deferred revenues represent the unearned assessment revenue as of 

September 30, the Fund’s accounting year end. The annual assessments cover a 

calendar year and, accordingly, the portion extending beyond September 30 has 

been deferred. Deferred revenues reported on the balance sheets are considered 

“Other Liabilities” under OMB Circular A-136. 

(i) Financing Sources Other Than Exchange Revenue 

Non-exchange revenues arise from the Federal government’s power to demand 

payments from and receive donations from the public. Non-exchange revenues are 

recognized by the Fund for assessments levied against the public and interest 

income from investments. 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

DISTRICT OF COLUMBIA WORKMEN’S 

COMPENSATION ACT SPECIAL FUND 

Notes to the Financial Statements 

Years ended September 30, 2010 and 2009

U.S. Department of Labor – Office of Inspector General 

18 Report Number: 22-11-005-04-432

The Fund’s primary source of revenue is annual assessments levied on insurance 

carriers and self-insured employers. Assessments are recognized as non-exchange 

revenue when due. The Fund also receives interest on Fund investments and on 

Federal funds in the possession of non-Federal entities. 

(2) Funds with U.S. Treasury 

Funds with U.S. Treasury at September 30, 2010 and 2009 consisted of cash deposits of 

$353,404 and $994,978 respectively. There was $60 in cash deposits at September 30, 

2010 and $5 in cash deposits at September 30, 2009 being held as security by authority 

of Section 32 of the Longshore and Harbor Workers’ Compensation Act in the Funds with 

U.S. Treasury balance. Section 32 funds relate to the default of self-insured employers 

and are available for payment of compensation and medical benefits to covered 

employees of the defaulted companies. 

Funds with U.S. Treasury at September 30, 2010 consisted of the following: 

Entity Assets

Unobligated Unobligated Obligated

Balance Balance Balance Not Total Non-entity

(In Dollars) Available Unavailable Yet Disbursed Entity Assets Assets Total

Special Fund $ — — 353,404 353,404 — 353,404 

Funds with U.S. Treasury at September 30, 2009 consisted of the following: 

Entity Assets

Unobligated Unobligated Obligated

Balance Balance Balance Not Total Non-entity

(In Dollars) Available Unavailable Yet Disbursed Entity Assets Assets Total

Special Fund $ — — 994,978 994,978 — 994,978 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

DISTRICT OF COLUMBIA WORKMEN’S 

COMPENSATION ACT SPECIAL FUND 

Notes to the Financial Statements 

Years ended September 30, 2010 and 2009

U.S. Department of Labor – Office of Inspector General 

19 Report Number: 22-11-005-04-432

(3) Investments 

Investments at September 30, 2010 and 2009 consisted of the following: 

September 30, 2010

Face Premium Net Market

(In Dollars) Value (Discount) Value Value

Intragovernmental securities:

Marketable $ 5,143,000 — 5,143,000 5,143,000 

September 30, 2009

Face Premium Net Market

(In Dollars) Value (Discount) Value Value

Intragovernmental securities:

Marketable $ 5,228,000 — 5,228,000 5,228,000 

Investments of $58,700 at September 30, 2010 and 2009 are being held as security by 

authority of Section 32 of the Longshore and Harbor Workers’ Compensation Act. 

Section 32 investments relate to the default of self-insured employers and are restricted. 

These investments are available for payment of compensation and medical benefits to 

covered employees of the defaulted companies. Investments at September 30, 2010 and 

2009 consist of overnight securities. Investments at September 30, 2010 bear an interest 

rate of 0.13 % compared to an interest rate of 0.07% at September 30, 2009. Interest 

rates on securities bought and sold during FY 2010 ranged from 0.01% to 0.17% 

compared to 0.01% to 1.03% for FY 2009. 

 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

DISTRICT OF COLUMBIA WORKMEN’S 

COMPENSATION ACT SPECIAL FUND 

Notes to the Financial Statements 

Years ended September 30, 2010 and 2009

U.S. Department of Labor – Office of Inspector General 

20 Report Number: 22-11-005-04-432

(4) Accounts Receivable, Net 

Accounts receivable at September 30, 2010 and 2009 consisted of the following: 

(In Dollars) 2010 2009

Entity assets:

Benefit overpayments $ 136,234 $ 164,184 

Assessments receivable 12,647 539,015 

Less: allowance for doubtful accounts (1,373) (28,860) 

Total accounts receivable from the public, net $ 147,508 $ 674,339 

Assessments receivable represent the unpaid annual assessments from the current and 

prior years. Accounts receivable from overpayments to claimants arise primarily from 

amended compensation orders and corrections of payment computations. These 

receivables are being primarily recovered by partial and total withholding of benefit 

payments. 

Changes in the allowance for doubtful accounts during FY 2010 and FY 2009 consisted 

of the following: 

2010

Allowance Write Revenue Allowance

(In Dollars) October 1, 2009 Offs Adjustment Bad Debt September 30, 2010

Entity assets:

Benefit overpayments $ (1,910) — — 853 (1,057) 

Assessment receivable (26,950) — — 26,634 (316) 

$ (28,860) — — 27,487 (1,373) 

2009

Allowance Write Revenue Allowance

(In Dollars) October 1, 2008 Offs Adjustment Bad Debt September 30, 2009

Entity assets:

Benefit overpayments $ (2,631) — — 721 (1,910) 

Assessment receivable — — — (26,950) (26,950) 

$ (2,631) — — (26,229) (28,860) 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

DISTRICT OF COLUMBIA WORKMEN’S 

COMPENSATION ACT SPECIAL FUND 

Notes to the Financial Statements 

Years ended September 30, 2010 and 2009

U.S. Department of Labor – Office of Inspector General 

21 Report Number: 22-11-005-04-432

(5) Other Liabilities 

Other liabilities at September 30, 2010 and 2009 consisted of the following current 

liabilities: 

(In Dollars) 2010 2009

Other liabilities:

Assessment overpayments by carriers $ 565,153 709 

Defaulted employer liability:

Held in investments 58,700 58,700 

Held in cash 60 5 

58,760 58,705 

Total other liabilities $ 623,913 59,414 

Assessment overpayments are to be refunded upon request or applied to reduce future 

assessments. 

Defaulted employer liability relates to the funds and investments held by the District of 

Columbia Special Fund which are being held as security by authority of Section 32 of the 

Act. These funds and investments are available for compensation and medical benefits 

to covered employees of the defaulted companies. Management estimates that these 

funds and investments held will be sufficient to cover the future benefits associated with 

the covered employees. 

 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

DISTRICT OF COLUMBIA WORKMEN’S 

COMPENSATION ACT SPECIAL FUND 

Notes to the Financial Statements 

Years ended September 30, 2010 and 2009

U.S. Department of Labor – Office of Inspector General 

22 Report Number: 22-11-005-04-432

(6) Status of Budgetary Resources 

(a) Apportionment Categories of Obligations Incurred 

Obligations incurred reported on the Statement of Budgetary Resources in FY 2010 

and FY 2009 consisted of the following: 

(In Dollars) 2010 2009

Direct Obligations:

Exempt from apportionment $ 9,286,561 9,748,978 

(b) Explanation of Differences Between the Statement of Budgetary Resources 

and the Budget of the United States Government 

A reconciliation of budgetary resources, obligations incurred and outlays, as 

presented in the Statement of Budgetary Resources to amounts included in the 

Budget of the United States Government for the year ended September 30, 2009 is 

shown below: 

2009

Budgetary Obligations

(Dollars in Millions) Resources Incurred Outlays

Statement of Budgetary Resources - LSHW $ 192 131 136 

Statement of Budgetary Resources - DCCA 16 10 10 

Total Statement of Budgetary Resources 208 141 146 

Budget of the United States Government $ 208 141 146 
District of Columbia Workmen’s Compensation Act Special Fund 

Financial Statements and Independent Auditors’ Report 

DISTRICT OF COLUMBIA WORKMEN’S 

COMPENSATION ACT SPECIAL FUND 

Notes to the Financial Statements 

Years ended September 30, 2010 and 2009

U.S. Department of Labor – Office of Inspector General 

23 Report Number: 22-11-005-04-432

(7) Reconciliation of Budgetary Resources Obligated to Net Cost of Operations 

2010 2009

Obligations incurred $ 9,286,561 9,748,978 

Total resources used to finance activities 9,286,561 9,748,978 

Resources used to finance items not part of the 

net cost of operations

Resources that finance the acquisition of assets — — 

Total resources used to finance items 

not part of the net cost of operations — — 

Total Resources used to finance the 

net cost of operations 9,286,561 9,748,978 

Components not requiring or generating resources:

Revaluation of assets and liabilities (853) — 

Other 72,685 28,305 

Total components of net cost of operations 

that will not require or generate resources 71,832 28,305 

in the current period

Net cost of operations $ 9,358,393 9,777,283 

(8) Concentration of Risk 

The Fund makes assessments to authorized insurers and self-insurers one year at a 

time for current expenses; there is no reserve for future Fund obligations. In keeping 

with the requirement of Section 44 of the Longshore and Harbor Workers’ Compensation 

Act, obligations are paid as they are incurred. Assessments are based on compensation 

and medical benefits paid in the prior calendar year. As previously discussed, the 

District of Columbia Workmen’s Compensation Act of 1928 has been repealed and the 

Fund only assesses based on payments in cases that arose on or before July 26, 1982. 

Therefore, the annual Special Fund assessment is assessed for a shrinking population of 

claims. These assessments are concentrated among a relatively few insurance carriers 

and self insured employers. For example, the largest ten insurance carriers and self 

insured employers alone fund over 64% of the Fund assessments.