FY 2013 AGENCY FINANCIAL REPORT

U.S. Department of Commerce
This report can be found on the Internet at 

http://www.osec.doc.gov/ofm/OFM_Publications.html.

If you have questions or comments regarding this 

report, please call the Department’s Office of Financial 

Management at (202) 482-1207 or email Atisha Burks at 

ABurks@doc.gov or Gordon Alston at GAlston@doc.gov.

Office of Financial Management

U.S. Department of Commerce

1401 Constitution Avenue, NW

Washington, DC 20230

(202) 482-1207
2013

FISCAL YEAR

AGENCY FINANCIAL REPORT

U.S. Department of Commerce
HISTORY AND ENABLING LEGISLATION 

The Department of Commerce was originally established by 

Congressional Act on February 14, 1903 as the Department 

of Commerce and Labor (32 Stat. 826; 5 U.S.C. 591) and was 

subsequently renamed the U.S. Department of Commerce by 

President William H. Taft on March 4, 1913 (15 U.S.C. 1512). 

The defined role of the new Department was “to foster, promote, 

and develop the foreign and domestic commerce, the mining, 

manufacturing, and fishery industries of the United States.” 

MISSION 

The Department of Commerce creates the conditions for economic 

growth and opportunity by promoting innovation, entrepreneurship, 

competitiveness, and stewardship.

Program Bureaus

■ Bureau of Industry and Security (BIS) 

■ Economic Development Administration (EDA) 

■ Economics and Statistics Administration (ESA) 

● Bureau of Economic Analysis (BEA) 

● Census Bureau

■ International Trade Administration (ITA) 

■ Minority Business Development Agency (MBDA) 

■ National Institute of Standards and Technology (NIST)

● National Technical Information Service (NTIS) 

■ National Oceanic and Atmospheric Administration 

(NOAA)

■ National Telecommunications and Information 

Administration (NTIA) 

■ U.S. Patent and Trademark Office (USPTO) 

STRATEGIC THEMES

PROGRAMMATIC THEMES

■ Economic Growth

■ Science and Information

■ Environmental Stewardship

MANAGEMENT THEMES

■ Customer Service

■ Organizational Excellence

■ Workforce Excellence

LOCATION 

The Department is headquartered in Washington, D.C., at the 

Herbert Clark Hoover Building, which is located on eight acres 

of land covering three city blocks. The Department also has field 

offices in all states and territories and maintains offices in more 

than 86 countries worldwide.

EMPLOYEES 

As of September 30, 2013, the Department had approximately 

46 thousand employees. 

BUDGET AUTHORITY 

The Department’s FY 2012 and FY 2013 net budget authority was 

approximately $8.0 billion.

INTERNET 

The Department’s Internet address is www.commerce.gov.

THE DEPARTMENT AT A GLANCE

II F Y 2013 AGENCY FINANCIAL REPORT
Table of Contents

Message from Secretary Pritzker IV

How to Use this Report VI

Management’s Discussion and Analysis 1

Mission and Organization 2

The Department of Commerce Process for Strategic Planning and Performance Reporting 3

FY 2013 Performance Summary 5

Management Controls 6

Federal Managers’ Financial Integrity Act (FMFIA) of 1982 7

Federal Financial Management Improvement Act (FFMIA) of 1996 16

Report on Audit Follow-up 16

Biennial Review of Fees 16

Financial Section 17

Message from the Chief Financial Officer 18

Financial Management and Analysis 19

Analysis of FY 2013 Financial Condition and Results 31

Summary of Stewardship Information 41

Principal Financial Statements 45

Consolidated Balance Sheets 47

Consolidated Statements of Net Cost 48

Consolidated Statements of Changes in Net Position 49

Combined Statements of Budgetary Resources 50

Notes to the Financial Statements 51

Consolidating Balance Sheet 113

Required Supplementary Information (Unaudited) 117

Required Supplementary Stewardship Information (Unaudited) 125

Other Information (Unaudited) 141

Independent Auditors’ Report 145

Appendices 163

Appendix A: FY 2013 Management Challenges and Actions Taken 165

Appendix B: FY 2014 Management Challenges 170

Appendix C: Improper Payments Information Act (IPIA) of 2002, as Amended, Reporting Details 220

Appendix D: Summary of Financial Statement Audit and Management Assurances 229

Appendix E: Glossary of Key Acronyms 230

Acknowledgements 232

III F Y 2013 AGENCY FINANCIAL REPORT
Message from Secretary Pritzker

I

 am pleased to present the Department of Commerce’s Agency 

Financial Report (AFR) for fiscal year (FY) 2013. The AFR is an 

opportunity for us to highlight the Department’s accomplishments 

and challenges in FY 2013. This report also provides information on our 

financial management and performance. 

When I came on board as Secretary this past summer, I hung a sign on 

my office door that says “Open for Business.” To me, this simple phrase 

reflects the Department’s focus on creating the right conditions for 

businesses to grow and hire. More than ever before, we are partnering 

with the private sector to foster a vibrant, innovative, and competitive 

American economy.

In FY 2013, the Department continued to help American businesses 

grow and succeed in the 21st century. In FY 2014, the Department will 

focus on priority areas of trade and investment, innovation, data, and the environment. With these priorities, we will 

continue to support our private sector, which has created 8 million jobs since 2010.

Our 46,000 employees will continue to play a crucial role. They are working harder than ever to put more and better 

tools in the hands of U.S. firms, despite a challenging fiscal environment. 

The Commerce Department remains committed to operational excellence and public accountability in everything we 

do. This report provides an important window of transparency for our key stakeholders and the American public to 

assess our financial information and performance for this past year. 

Our financial management systems have been found to be in substantial compliance with the Federal Financial 

Management Improvement Act (FFMIA) of 1996. In accordance with Office of Management and Budget (OMB) 

Circulars A-136 and A-11, the financial and performance data published in this report are substantially complete and 

reliable. 

These data provide an accurate and transparent accounting of the Department’s financial situation and high-level 

performance results. For the 15th year in a row, the independent auditors tasked with reviewing our financial 

statements have provided an unqualified opinion. However, the Department received a Significant Deficiency 

relating to needed improvement in two areas: (1) accounting for property at the National Oceanic and Atmospheric 

Administration, and (2) Department-wide information technology, relating to segregation of duties, access controls, 

and configuration management. 

IV F Y 2013 AGENCY FINANCIAL REPORT

MESSAGE FROM SECRETARY PRITZKER
Throughout FY 2013, we greatly improved the controls that surround property, evidenced by the reduction of the FY 2012 

Material Weakness to a Significant Deficiency. We will continue making improvements to our property and information 

technology, and we will continue to aggressively strengthen those controls in FY 2014.

The Federal Managers’ Financial Integrity Act of 1982 (FMFIA) and OMB Circular A-123 provide the framework within 

which Departmental and operating unit managers may determine whether adequate internal controls are in place and 

operating as they should. We rely on a wide range of studies conducted by programmatic and administrative managers, 

the Office of the Inspector General, the Government Accountability Office, and others to assist in this effort. Based on 

activities undertaken during FY 2013, the Department is able to provide an unqualified statement of assurance that its 

internal controls and financial management systems meet the objectives of FMFIA. 

More detailed performance information and results will be released in the Annual Performance Report in February 2014.

I am proud of the work we do and the progress we have made. I hope you find this report useful. 

Penny Pritzker

Secretary of Commerce

December 16, 2013

V F Y 2013 AGENCY FINANCIAL REPORT

MESSAGE FROM SECRETARY PRITZKER
HOW TO USE THIS REPORT

This Agency Financial Report (AFR) for the fiscal year ended 

September 30 (FY) 2013 provides the Department of Commerce’s 

financial and summary performance information in accordance 

with OMB Circular A-136, Financial Reporting Requirements.

Beginning in FY 2013, the Department has chosen to produce an 

Agency Financial Report (AFR) and Annual Performance Report (APR). 

The Department will include its FY 2013 APR with its Congressional 

Budget Justification and will post it on the Department’s Web site at 

http://www.osec.doc.gov/bmi/budget/.

The Department’s annual AFR is available on the Department’s Web site 

at http://www.osec.doc.gov/ofm/OFM_Publications.html. The Department 

welcomes feedback on the form and content of this report.

This report is organized into the following major components:

Statement from the Secretary of Commerce

The Secretary’s statement includes an assessment of the reliability and completeness of the financial and summary 

performance information presented in the report and a statement of assurance on the Department’s management 

controls as required by the FMFIA. 

Management’s Discussion and Analysis (MD&A)

This section provides an overview of the financial and summary-level performance information contained in the 

Performance Summary, Financial Section, and Appendices. MD&A includes an overview of the summary of the 

performance process and current status of systems and internal control weaknesses.

Financial Section

This section contains details of the Department’s finances in FY 2013. A message from the Department’s Chief 

Financial Officer (CFO) is followed by information on the Department’s financial management, analysis of FY 2013 

financial condition and results, audited financial statements, required supplementary information, other information, 

and the independent auditors’ report.

Appendices

This section provides a discussion of management challenges including actions taken to address them as well as 

the FY 2014 management challenges, financial information, and a glossary of key acronyms. 
Management’s

Discussion and

Analysis
MISSION AND ORGANIZATION

MISSION

The Department of Commerce creates the conditions for

economic growth and opportunity by promoting innovation, 

entrepreneurship, competitiveness, and stewardship.

2 F Y 2013 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
THE DEPARTMENT OF COMMERCE PROCESS FOR

STRATEGIC PLANNING AND PERFORMANCE REPORTING

STRATEGIC PLANNING AND PERFORMANCE REPORTING STRUCTURE

The Department of Commerce strategic plan is developed through meetings and 

retreats where leadership uses relevant data and stakeholder input to assess 

goals, objectives, and strategies. A new plan is developed at the beginning of 

a presidential term. Strategies are affected by bureaus or groups of bureaus, 

depending on the objective. 

The Department has a four-year strategic plan. However, the plan may 

be revised during the four years based on stakeholder feedback, 

evidence on the effectiveness of strategies, or changes in the 

economic environment. The point of departure for the plan is 

the Department’s mission. The plan has four goal areas: Trade 

and Investment, Innovation, Environment, and Data. A fifth 

goal area “Operational Excellence” provides strategies that 

affect mission delivery in all areas. It has the Department 

strategies for improving customer service, employee 

engagement, and work processes. In all five goals areas 

performance indicators are used to define the specific 

results a strategic objective should achieve. 

In February 2014, the Department of Commerce FY 2014 – FY 2018 Strategic Plan will be posted on 

www.Performance.gov. It will also be available on the Department’s Web site.

In addition to the Department structure of goals, objectives, and strategies, there are Agency Priority Goals (APG). These 

are two-year initiatives that have been earmarked for focus and close monitoring. The APGs and quarterly progress 

reports are posted on www.Performance.gov. 

The Congressional budget submission has bureau-specific performance measures required by the Government 

Performance and Results Act (GPRA measures). The bureau-specific measures and targets for performance are 

linked to resource requirements. The FY 2013 budget submission and associated performance plans can be found at 

http://www.osec.doc.gov/bmi/budget/. 

Performance measures in Senior Executive Service (SES) member performance plans are linked to the Department’s 

system of goals, objectives, APGs, and performance indicators. This supports deployment of strategic plans to bureau 

operations.

3 F Y 2013 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
How the Department‘s Objectives and Measures are Used

Data on performance measures/indicators are used to assess progress toward goals and objectives and how well 

strategies are working. When considered with business feedback and program evaluations, these measures give valuable 

insight into the effectiveness of Department programs and how to improve programs. Performance results for FY 2013 

and prior years are available in budget submissions. The budget documents also provide information on how results for 

each measure are verified. Department budget submissions can be found at www.osec.doc.gov/bmi/budget/. 

Performance Reviews

As required by the Government Performance and Results Modernization Act of 2010, Goal Leaders and the Department’s 

Chief Operating Officer (the Deputy Secretary) review progress on APGs. These quarterly reviews have also included other 

performance measures central to “mission health,” the efficiency of operations, Administration Initiatives, and employee 

engagement. During most of FY 2013, the bureau quarterly performance reviews were conducted by the Deputy Secretary 

at meetings with the leadership and staff of the bureau being reviewed. For fourth quarter of FY 2013, APG results were 

reviewed by the entire Executive Management Team; the team includes the leadership of all 12 Departmental bureaus. 

Performance data reviews are also conducted by bureaus, and councils of Chief Financial Officers, Chief Human Capital 

Officers, and Chief Information Officers.

Financial data are reviewed through audits and other financial management controls. During the FY 2012 Consolidated 

Financial Statement audit, tests and review of the core accounting system and internal controls were conducted as 

required by the Chief Financial Officers (CFO) Act. Further, the Department conducted its assessment of the effectiveness 

of internal control over financial reporting, which includes safeguarding of assets and compliance with applicable laws and 

regulations, in accordance with the requirements of Appendix A of Office of Management and Budget (OMB) Circular 

A-123, Management’s Responsibility for Internal Control. Based on the results of this evaluation, the Department provided 

reasonable assurance that its internal control over financial reporting was operating effectively.

4 F Y 2013 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
FY 2013 PERFORMANCE SUMMARY

Four Agency Priority Goals (APG) were selected by leadership for particular focus. Progress toward performance targets 

for the APGs has been monitored at quarterly meetings between the Department’s Chief Operating Officer (the Deputy 

Secretary) and Goal Leaders (bureau Under Secretary or Assistant Secretary). Results and goal descriptions are posted 

on www.Performance.gov. The following is a summary of FY 2013 APG results.

Expand broadband service to communities. Access to the Internet creates economic and educational opportunity. 

Therefore, $4.7 billion in American Recovery and Reinvestment Act of 2009 (ARRA) funds were provided to extend 

broadband service to unserved and underserved areas. The Broadband Technology Opportunities Program (BTOP) has 

exceeded expectations. A target was set to create 100 thousand additional miles of broadband access by September 

2013. By the end of FY 2013 (September 30, 2013), 110,900 miles had been added to the Nation’s broadband network. In 

addition, over 20 thousand public access centers have been created and 46 thousand new workstations added. The National 

Telecommunications and Information Administration (NTIA) continues to work with grantees to further increase these results.

Increase lead time for flash flood warnings. Flash floods claim more lives than any other type of extreme weather event. 

Therefore, an APG was established for the average amount of advanced warning the National Oceanic and Atmospheric 

Administration (NOAA) provides to areas subject to flash floods. The seasonal and annual number of weather events 

varies widely. This creates challenges for event forecasting and establishing targets. NOAA met and exceeded the target 

of 58 minutes; lead time at August 31, 2013 was 66 minutes.

Expand markets for U.S. exporters. Establishing targets for exports is challenging. Export levels are highly influenced 

by worldwide economic conditions and currency exchange rates. However, the International Trade Administration (ITA) 

established an APG for a subset of exports that could be influenced by focused efforts of its now Global Markets Program. 

ITA set a target for increasing the number of current exporters that it could help bring to additional markets. Companies 

already exporting have the soft and hard infrastructure to export. The cycle time for assisting them reach additional 

markets is often shorter that the time required to help a firm export for the first time. Given the need for short-term 

economic growth, focus was given to “new to market.” 

ITA essentially reached the target of bringing 6,121 exporters to a second market. By the end of FY 2013, ITA assisted 

6,024 firms reach additional markets. 

Reduce the patent backlog. Innovation makes U.S. companies competitive and creates jobs. Innovation is supported 

by a high functioning intellectual property protection system. Therefore, a FY 2013 APG was established to reduce the 

backlog of unexamined patent applications waiting for first action by the U.S. Patent and Trademark Office (USPTO) and 

reducing the time for processing patents. Major legislative changes and re-engineering of the patent review process 

are central to the approach for accelerating the patent process. The targets for FY 2013 were to reduce the backlog to 

529 thousand applications (from 670 thousand at the end of FY 2011). For optimum workload, the inventory of applications 

waiting to be processed would be 300 thousand. Another target was to reduce total pendency, or the time for a final 

determination on a patent, from 33.7 months (in FY 2011) to 30.1 months. Funding reductions affected progress; however, 

as of the fourth quarter of FY 2013, the backlog was decreased to 585 thousand. The average time for total pendency is 

currently 29.1 months, faster than the target time. This was accomplished in spite of a spike in new filings in March 2013; 

in that month filings were almost 60 percent above the monthly average for the last two fiscal years.

5 F Y 2013 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
MANAGEMENT CONTROLS

T

he Department’s management is responsible for establishing and maintaining effective internal control 

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

Act (FMFIA). During FY 2013, the Department assessed its internal control over the effectiveness and 

efficiency of operations and compliance with applicable laws and regulations in accordance with Office of 

Management and Budget (OMB) Circular A-123, Management’s Responsibility for Internal Control. As a result, 

to the best of my knowledge, the Department is able to provide an unqualified statement of assurance that its 

internal controls and financial management systems meet the objectives of FMFIA. 

During FY 2013, the National Oceanic and Atmospheric Administration (NOAA) successfully remediated the one 

FY 2012 material weakness identified in financial management oversight for the unauthorized reprogramming of 

funds at the National Weather Service. Corrective actions by NOAA include policy and procedural changes that 

increase internal controls. No significant findings were noted in the areas of budgetary controls and accounting 

for satellites and property when the Department assessed its internal control over the effectiveness and 

efficiency of operations and compliance with applicable laws and regulations in accordance with OMB Circular 

A-123.

The supplemental funding received under the American Recovery and Reinvestment Act of 2009 (ARRA) 

continued to receive comprehensive programmatic and administrative attention throughout the Department in 

order to achieve the legislative goals attributable to it. Funds have been awarded and expended for authorized 

purposes in as prompt and efficient a manner as possible while safeguarding against fraud, waste, and abuse. 

Reporting associated with this funding has been performed clearly, transparently, and comprehensively. 

Monitoring has been and will continue to be conducted to insure that recipients are meeting the goals stated in 

their application and as incorporated into award documents, and will also focus on the results of these activities. 

The Department also assessed the effectiveness of management and administrative internal controls. The Office 

of Human Resources Accountability coordinated and/or led six Delegated Examining on-site accountability and 

oversight audits at several bureaus and operating unit human resources offices. 

Based on reviews conducted by the Department, it has been able to determine that its financial systems are in 

conformance with government-wide requirements.

Penny Pritzker

Secretary of Commerce

December 16, 2013

6 F Y 2013 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
FEDERAL MANAGERS’ FINANCIAL INTEGRITY ACT (FMFIA) OF 1982

The objective of the Department’s management control system is to provide reasonable assurance that: 

● Obligations and costs are in compliance with applicable laws;

● Assets are safeguarded against waste, loss, and unauthorized use of appropriations; 

● Revenues and expenditures applicable to the Department’s operations are properly recorded and accounted for, 

permitting accurate accounts, reliable financial reports, and full accountability for assets; and 

● Programs are efficiently and effectively carried out in accordance with applicable laws and management policy. 

During FY 2013, the Department reviewed its management control system in accordance with the requirements of FMFIA, 

and OMB and Departmental guidelines. 

SECTION 2 OF FMFIA – INTERNAL MANAGEMENT CONTROLS

Section 2 of FMFIA requires that federal agencies report, on the basis of annual assessments, any material weaknesses 

that have been identified in connection with their internal and administrative controls. The efficiency of the Department’s 

operations is continually evaluated using information obtained from reviews conducted by the Government Accountability 

Office (GAO) and the Office of Inspector General (OIG), evaluations conducted by other federal agencies such as the Office 

of Personnel Management (OPM), and other specifically requested studies. The diverse reviews that took place during 

FY 2013 relative to non-financial controls provide assurance that Departmental systems and management controls comply 

with standards established under FMFIA.

The following table reflects the number of material weaknesses reported under Section 2 of FMFIA in recent years by 

the Department.

NUMBER OF MATERIAL WEAKNESSES UNDER SECTION 2

NUMBER AT BEGINNING 

OF FISCAL YEAR NUMBER CORRECTED NUMBER ADDED

NUMBER REMAINING AT 

END OF FISCAL YEAR

FY 2009 1 0 0 1

FY 2010 1 1 0 0

FY 2011 0 0 0 0

FY 2012 0 0 1 1

FY 2013 1 1 0 0

7 F Y 2013 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
Key Administrative and Management Internal Control Activities 

Human Resource Management

In compliance with FMFIA, the Office of Human Resources Management (OHRM) provides the following information 

regarding the adequacy of management and internal control systems. Highlights of OHRM’s FY 2013 accomplishments 

relative to management and internal controls are detailed below.

Strategic Human Capital Management. The Department developed a strategic approach to accountability in human 

capital management that proactively addresses the challenges of aligning human capital strategies with Department 

strategies, and to improve leadership, knowledge management, acquisition of talent, and performance. During FY 2013, 

OHRM leadership continued its focus on top-down reviews of systems, human resources (HR) practices, and HR service 

delivery, surveying managers and employees and implementing changes when needed, utilizing technology to run and 

monitor OHRM programs, and continuing to collaborate with business partners to identify customer needs and required 

oversight to mitigate potential risk.

Oversight and Accountability Audits. In accordance with Title 5, U.S. Code § 1104(a)(2) and Executive Order 13197, 

Government-wide Accountability for Merit Systems Principles; Workforce Information, dated January 18, 2001, and the 

Interagency Delegated Examining Agreement Number DOC-1, between OPM and the Department, and HR Bulletin 

036, FY 2006, Human Resources Management Accountability System, the Office of Human Resources Accountability 

coordinated and/or led six Delegated Examining on-site audits. The Delegated Examining audits have two fundamental 

responsibilities: (1) to ensure that the Department’s vacant positions are filled with the best-qualified persons from a 

sufficient pool or well-qualified, eligible persons; and (2) to uphold the laws, regulations, and policies of merit selections in 

accordance with federal laws, regulations, OPM procedures, and Departmental policies.

Administrative. During FY 2013, the Director for Human Resources Management continued to monitor internal controls 

for each OHRM office to mitigate risks identified. Weekly monitoring of OHRM’s budget was conducted by the Director 

and Deputy Director and quarterly meetings were held with staff from the Office of Financial Management. OHRM has 

a multi-level review process for all purchases. Typically, the signature from the requestor, the budget officer, the Deputy 

Director, and the Director are required before any funds are expended for equipment, supplies, or training. Property 

management continued to be a high priority for OHRM during FY 2013. All accountable property is physically signed down 

to an end-user after it has been assigned in Sunflower, the Department’s property management system. Training for new 

property custodians continued throughout the year. A complete physical inventory of OHRM’s property was completed 

in the fourth quarter of FY 2013.

Protecting Personally Identifiable Information (PII). OHRM and the Department remain vigilant to ensure that PII 

records are secure. This includes:

● Annual audit/review of users’ access and permissions to sensitive data;

● Identification, implementation, and communication of existing policies that are compliant with safeguarding PII;

● Exposure of security gaps and providing recommendations to patch the gaps; 

● Coordinate/conduct information technology (IT) security awareness training/briefings; and

● Communicate the need and monitor the completion of the Department-wide IT security awareness training.

8 F Y 2013 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
Administrative Services 

In June 2012, GAO reported on the accuracy of the Federal Real Property Profile (FRPP). While there was no explicit 

direction issued by OMB or the General Services Administration (GSA) regarding the data quality improvement in 2013, 

they did revise the 2013 FRPP guidance to eliminate specific data fields and revise data to be reported in other fields. 

The Office of Real Property Programs reviewed the real property database and, as part of the FRPP upload for 2013, 

updated 9,553 datum to correct identified anomalies as well as self-identified or required revisions in the real property 

inventory system. These changes improved the quality and reliability of the Department’s inventory. 

Acquisition Improvement Project (AIP) Scalable Acquisition Framework. The Office of Acquisition Management 

(OAM) successfully completed Department-wide policy for acquisition project management with the Deputy Secretary’s 

signing of the policy on Commerce Acquisition Project Management in November 2012. The remainder of FY 2013 was 

devoted to the policy’s implementation to bring about cultural change for its adoption and refinement of processes to make 

it work smoothly. OAM also completed all coordination for a complimentary policy on cost estimation and independent 

cost estimates. Its purpose is to establish a clear requirement and standard procedures for cost estimating work products 

and their review and approval. This policy responds to findings in 2012 by the GAO that identified that the Department did 

not have a clear requirement or policy for cost estimating, lacked a standard structure for defining cost estimating work 

products and their review and approval, and failed to comply with cost estimating best practices.

Grants Policies and Management. OAM continued its review of the Department’s Grants and Cooperative Agreements 

Manual to keep pace with the rapid growth and change in the government-wide financial assistance culture and policy. 

In FY 2012, a Department-wide project team, under the direction of OAM’s Grants Management Division, collaborated 

on a comprehensive review of all chapters of the manual resulting in significant updates to the document. The revised 

manual was issued in March 2013. 

The Department’s Financial Assistance Pre-award Notification Requirements for Grants and Cooperative Agreements 

informs the public of all statutory, regulatory, and certain other requirements associated with Department grants and 

cooperative agreements. This notice was last revised in FY 2008. The project team revisited and updated the notice to 

reflect the extensive changes in financial assistance law and policy that have emerged since FY 2008. Consequently, an 

update was issued by the Director of OAM and published in the Federal Register in December 2012.

The Department’s Financial Assistance Standard Terms and Conditions (STC), which had not been updated since March 

2008, were also subject to review and revision by the intra-agency project team. This work resulted in a significantly 

updated document resulting in the issuance of revised STCs in January 2013. 

OAM determined that policy revisions should be performed on a more consistent and predictable schedule going forward. 

In an effort to establish a more structured schedule to the Department’s STCs, Pre-award Notice, and the Grants Manual, 

guidance was issued by OAM requiring the review and revision of these key financial assistance policy documents 

annually. Therefore, all bureaus, including program offices and grant offices, and other collateral support offices related 

to financial assistance were directed in February 2013 to follow a specific schedule for update, review, and clearance of 

these policy documents. The schedule was provided via memorandum from OAM.

9 F Y 2013 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
ARRA Funds Management. Federally Awarded Contracts—a new C-Awards system (Comprizon) was deployed across 

NOAA, the National Institute of Standards and Technology (NIST), Census Bureau, and the Department in November 2011. 

This new version has improved the Department’s capacity to track the elements required for ARRA Reporting.

Purchase Card Program. OAM continuously monitors and updates internal control measures and processes to manage 

the Department’s Purchase Card Program and certifies that the appropriate policies and controls are in place and corrective 

actions have been taken to mitigate the risk of fraud and inappropriate charge card practices.

In FY 2013, the Department enhanced policy requirements, implemented structured procedures, and underwent an 

internal audit by the Department’s OIG to assess the effectiveness of the program’s internal controls. Enhancements 

to the purchase card program included: additional oversight of reconciliation process; development of customized 

classroom training course curriculum to cover various Department-specific aspects of the program; development of an 

online customized refresher training scenario-based course to provide cardholders with situational training; updated the 

Commerce Acquisition Management (CAM) Chapter to address audit findings; and implemented a cardholder community 

newsletter, “APC Digest,” to better communicate updates within the program to the cardholder community.

Property and Facilities. The Office of Facilities and Environmental Quality (OFEQ) addressed the Herbert C. Hoover 

Building (HCHB) Renovation Project concerns identified by the OIG. OFEQ specifically addressed issues referring to 

actions such as developing metrics for the HCHB renovation. Metrics were included in the Department’s balanced 

scorecard, and are measured to assess budget, schedule, project scope, and frequency of customer disruptions affiliated 

with the renovation.

In the FY 2012 FMFIA statement, there was mention that OMB and GSA were planning to issue directions that would 

respond to the GAO report on the quality of the facility data reported in the FRPP. While there was no explicit direction 

issued by OMB or GSA regarding the data quality improvement in 2013, they did revise the 2013 FRPP guidance to 

eliminate specific data fields and revise data to be reported in other fields. The Office of Real Property Programs reviewed 

the real property database and reported anomalies to the three bureaus with responsibilities for owned facilities and direct 

leases that are reported to FRPP. 

 IT Security Receives Continued Focus

The Office of the Chief Information Officer (OCIO) conducts reviews of its IT investments to ensure their efficiency 

and effectiveness in support of the Department’s missions. The Department, following OMB policies and guidelines1, 

and complying with Federal Information Security Management Act (FISMA) requirements, oversees and manages IT 

resources by establishing and implementing policies and controls to mitigate IT risks. 

Accomplishments resulting from the Department’s efforts to address the deficiencies include additional policies and 

guidance on password management, role-based training, account management and deactivation, and an annual 

assessment smart spot checklist. The Department continued to develop its HCHB IT Security Shared Services initiative 

including development of IT security policy and identification of common controls to be implemented. The Department 

began implementing an Enterprise Cyber security Monitoring and Operations (ECMO) tool to monitor and track continuous 

monitoring of IT security-related events throughout the Department. The Department continued to work toward 

10 F Y 2013 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS

1 OMB policy and guidelines, and key legislations are available at: http://www.whitehouse.gov/omb/inforeg/infopoltech.html.
launching an Enterprise Security Oversight Center (ESOC). To manage supply chain risks within certain IT acquisitions, 

the Department implemented a supply chain risk management process. The Department also worked with personnel 

with significant IT security roles and responsibilities through the CIOs’ Council, the IT Security Coordinating Committee, 

the IT Audit Working Group, and the IT Security Shared Services working group to devise enterprise-wide solutions to 

deficiencies.

While these improvements will allow the Department to elevate its IT security posture, more work remains to be 

accomplished. The OIG acknowledges progress the Department has made toward implementing ECMO and ESOC, 

which are critical to maintaining general network hygiene, implementing continuous monitoring, and providing timely 

cyber situational awareness across the Department. However, the OIG cautions that timely implementation of these 

initiatives is crucial to the Department’s cyber security program; particularly in light of the ever-increasing cyber threats 

facing government systems. Thus, the OIG encourages the Department to ensure that current efforts for these initiatives 

move forward as planned and that operating units cooperate and participate to the fullest extent. The OIG has ongoing 

audit work related to security incident response and recognizes progress the Department is making toward improving 

Department-wide incident response.

Accomplishments toward FMFIA

To ensure that the Department effectively manages the ongoing IT security concerns, the OCIO has been developing a 

Cyber Security Strategic Plan to strengthen its IT security posture and operations. Additionally, the OCIO security office 

continues to conduct rigorous IT security compliance reviews based on FISMA requirements, OMB policy, NIST standards 

and guidelines, and previous OIG recommendations.

In addition to completing most significant corrective actions addressing IT security deficiencies, the following are highlights 

significant to IT security accomplishments in FY 2013:

OCIO IT Security Performance Measures. New Department-wide metrics were developed for tracking operating unit 

program management and technical progress with the implementation of the Cross-Agency Goals for Cyber Security: 

Continuous Monitoring; Strong Authentication using Personal Identity Verification (PIV); and Trusted Internet Connection (TIC). 

Enterprise Initiatives. Migration of the HCHB network to a commercial TIC provider was completed. The Homeland 

Security Presidential Directive 12 (HSPD-12) PIV logical access control requirements were integrated with the Windows 7 

migration project undertaken by the Office of the Secretary. Participated in early engagement group for the Department 

of Homeland Security (DHS) Continuous Diagnostics and Mitigation program. Received annual DHS TIC Access Provider 

(TICAP) Cyber Security Capabilities Validation for the four NOAA TICAPs.

Department of Commerce Computer Security Incident Response Team (DOC-CIRT). Incident tracking system was 

implemented. A third-party assessment of the current DOC-CIRT policies, procedures, and capabilities was conducted. 

Staffing was increased with two certified incident handlers; quarterly federation of CIRT meetings was established. Revised 

DOC-CIRT Service Level Agreement to reflect Department-wide tiered service offerings.

IT Security Policy. Department policies were issued for: Information System Security Training for Significant Roles—an 

update to the existing Commerce Interim Technical Requirements (CITR)-006 policy and aims to replace inactive links with 

11 F Y 2013 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
a dynamic training list; Account Deactivation Timeframe Requirements and Reminder Joint Memo to All Staff— memo 

communicating benchmarks for account deactivations upon employee or contractor termination. This version includes 

separate provisions for the servicing HR office and/or Contracting Officer Technical Representative to notify the servicing 

IT office upon an employee or contractor’s departure; Prohibition of Personal E-mail for Official Communication— policy 

memo prohibiting the use of personal e-mail for official Department business; Waiver/Deviation Process—a standard 

recommended taxonomy and guidelines for the use of Departmental waivers and deviations; Password Management—

Departmental policy outlining requirements for password authentication to Department information systems; and, FAQ 

Guidance #2—frequently asked questions (FAQ) clarifying the Department’s CITR implementation.

Shared Services. Launched the IT Security Shared Services initiative to explore and expand IT security common control 

opportunities. Established and offered a set of HCHB operating unit common controls in Awareness and Training, Physical 

Security, and Policy and Procedures. Developed the IT Security Shared Services Policy. Created Security Shared Services 

procedures that align to NIST Special Publication 800-53 control families to complement the Security Shared Services IT 

Security Policy.

Compliance. Completed 34 IT security assessments, exceeding the FY 2013 target of 30 assessments including IT security 

checks of all Department operating units. Conducted pre-assessments of six financial systems in the areas of access and 

configuration management controls. Engaged DHS Risk Vulnerability Assessments for an assessment of the operating 

unit wireless system and two additional independent assessments. Migrated from the Cyber Security Assessment and 

Management (CSAM) 2.0 to CSAM 3.0. Created training manuals and conducted extensive user training. Performed monthly 

reviews of 34 Departmental IT investments and provided IT security program compliance ratings and nine Commerce 

Information Technology Review Board (CITRB) reviews of IT investments. Focused efforts on the Economic Development 

Administration (EDA) compliance and configuration management assessments to assist in recovery and reconstitution of 

EDA IT security infrastructure. Successfully solicited and coordinated the DHS external network vulnerability assessment 

for all of the Department’s operating units except the U.S. Patent and Trademark Office (USPTO).

IT Security Training. Role-based training to include instructor-led training and virtual Webinar courses on risk assessment, 

common controls, security categorization, risk management framework, and plan of actions and milestones, was expanded. 

Designated IT security administrator to handle training records management in the Commerce Learning Center (CLC) 

application. Integrated Department of Defense Federal Information Systems Security (ISS) Awareness Training in CLC. 

Launched the FY 2013 IT Security Awareness Campaign, which included security conferences, instructor-led trainings, 

and online Webinars. Developed an IT Security Awareness training Web page that provides the training schedule; and list 

of complimentary external security training opportunities. The Department Federal Virtual Training Environment (FedVTE) 

Community, which provides free supplemental online, on-demand cyber security training to the Department’s IT security 

workforce, was established.

IT Investment Review Process. Since IT expenditures constitute such a large portion of the Department’s annual 

budget (an IT portfolio of $1.64 billion for FY 2013), it is imperative that special management attention be given to the 

Department’s proposed and continuing IT investments. This is done through an OCIO-led Capital Planning and Investment 

Control process to provide timely analysis of the health, risk, and performance of IT investments, including projects under 

development, projects recently completed and deployed, as well as of the overall performance of the IT portfolio.

12 F Y 2013 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
This process is based on OMB Exhibit 300, “Capital Asset Plan and Business Case Summary,” and Exhibit 53, “Agency 

IT Investment Portfolio,” and has linkage to all Departmental IT planning processes and documents. In a cooperative 

effort with the Office of Budget and OAM, the OCIO established the OMB Exhibit 300 as the primary documentation 

for summarizing the business case for each IT project, and as the foundation for IT budget justifications, IT acquisition 

approvals, and major system reviews. This provides the Department with a consistent foundation for monitoring the 

selection, control, and evaluation of major IT investments, helping ensure that proposed investments contribute to the 

Department’s strategic vision, mission requirements, and performance goals. It also helps ensure that the operating units 

employ sound IT investment methodologies, comply with Departmental and federal architectures, and provide the highest 

return on the investment at acceptable project risk. 

The OCIO has worked closely with the Office of Budget to establish a framework and schedule for linking the IT 

investment review of proposed initiatives with the budget process. As initiatives are developed by the operating units for 

submission to the Department, those initiatives that have a significant IT component are reviewed by the OCIO. Major 

proposals are reviewed by the Department’s CITRB, which is co-chaired by the CIO and the Chief Financial Officer (CFO) 

and Assistant Secretary for Administration, and whose members include the Department’s Budget Officer, Procurement 

Executive, Director for the Office of Financial Management, and selected operating unit CIOs. The CITRB evaluates 

proposals relative to contribution to the mission, role in maintaining or achieving key performance results, IT security 

and privacy management and funding, risk management, acquisition strategy, the viability and appropriateness of the IT 

solution including conformance to Departmental and federal architectures, and overall project management. Guidance 

for improving project proposals is provided by the CITRB and OCIO staff. This process results in the identification of IT 

investment initiatives that have sound IT management proposals.

In addition to the aforementioned focus, the CITRB continues to place emphasis on the link between proposed IT 

investments and the qualifications of the IT project managers and contracting officers who manage the Department’s 

IT programs. The CITRB ensures that high-quality certification and accreditation packages, which are critical to the 

confidentiality, integrity, and availability of the Department’s IT investments, are in place. By ensuring that qualified 

managers are available for these programs, the risk associated with large-scale IT investments is significantly reduced. 

The OCIO leads a continuing training process for IT project managers, working together with the OHRM, to ensure that 

the Department has a pool of well-qualified IT project managers to be assigned to new or continuing projects. 

As part of the Department’s risk reduction efforts, the OCIO submits updated reporting and provides CIO ratings for 

32 business cases to the federal IT dashboard each month, demonstrating to the public the sound management of 

the Department’s IT investments. Based on the findings of the Department’s monthly dashboard review process, an 

investment may be identified as requiring either a CITRB review or for a specific major problem, a TechStat. The TechStat 

process is a face-to-face, risk-based review by the Department’s senior management that produces corrective action 

strategies for any of the Department’s major IT investments which are underperforming or at high risk of underperforming. 

On average, the Department achieved within 20 percent of its cost, schedule, and performance targets for the major IT 

investments undergoing development and enhancement. This was in large part due to the inability of investments to 

implement their original project plans due to drastic budget fluctuations in their budgets throughout the year because of 

the prolonged Continuing Resolution and then the sequester. 

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MANAGEMENT’S DISCUSSION AND ANALYSIS
To provide rigorous analysis of cost, schedule, and performance, in support of the risk review process, the Department 

systematically uses Earned Value Management (EVM) data for major IT investments under development. This provides 

regular monitoring of the performance of Departmental projects and early warning of projects that may not be meeting 

cost, schedule, or performance goals, allowing course correction to bring the development effort back on track, if needed. 

The EVM analysis has been supported by focused training sessions on EVM techniques. 

In addition, operating unit CIOs and major investment owners are required to conduct operational analyses to certify 

that steady-state investments meet cost, schedule, and performance goals. The operating unit reviews of proposed 

and continuing projects are also supplemented with formal evaluation or post-implementation reviews by the CITRB. 

The approach helps ensure all project managers can benefit from lessons learned from other implementation efforts.

Future Efforts

The Department is actively proceeding with future plans to respond to the ever changing IT security environment. 

Using new and existing tools and programs, the Department will continue to address significant areas of deficiency and 

strengthen its IT security posture in FY 2014. The Department will leverage the ECMO tool to gain visibility and oversight 

of continuous monitoring throughout the Department. The Department will also work to launch the ESOC to centralize 

management of IT security-related events and continue to implement the PIV program to deliver multifactor logical access 

to Office of the Secretary users.

The Department will continue to leverage its CSAM tool to track and manage risk and identify IT security weaknesses. 

The HCHB IT Security Shared Services working group will continue to identify common controls and shared services to 

improve and standardize IT security controls within participating bureaus. The Department is also moving forward with 

plans to update and revise the Department’s standards and policies as new guidelines become available. 

In conclusion, the OCIO is able to provide reasonable assurance that management controls are in place and operating 

effectively to oversee and manage the Department’s significant investments in IT. Where the cost, schedule, or 

performance goals of IT investments are not yet being fully achieved, the processes in place have detected the problems 

and directed corrective action. 

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MANAGEMENT’S DISCUSSION AND ANALYSIS
Other Internal Control Enhancement Activities Continue

 During FY 2013, the Department’s OMB Circular A-123 Appendix A review and assessment included the following: 

● Utilized the Senior Management Council to implement, direct, and oversee the assessment process, and the Senior 

Assessment Team to develop OMB Circular A-123 planning documentation, administer internal control test plans, and 

monitor and review the test work;

● Updated Departmental sampling plan and Department-wide testing templates for selected key processes/subprocesses; 

● Each of the Department’s bureaus has completed an entity-level controls assessment as required by OMB Circular 

A-123, Appendix A;

● Utilized contractor assistance with performing quarterly validation and verification of acquisition and administrative 

savings including selecting samples and reviewing supporting documentation; 

● Analyzed the results of the overall effort to assess and document the adequacy of the Department’s internal controls 

in order to develop the annual statement of assurance issued by the Secretary and published in the FY 2013 Agency 

Financial Report; 

● Utilized contractor assistance with consolidating and analyzing the OMB Circular A-123 Appendix A review lead sheet at 

each of the applicable bureaus including assessing and documenting the findings and recommendations for corrective 

actions (if applicable) at the Department level; and 

● Initiated the planning phase of the creation of the Office of Forensic Accounting (OFA). Throughout FY 2013, the 

Department has performed research into best practices in order to develop the roles and duties of OFA. 

SECTION 4 OF FMFIA – INTERNAL CONTROLS OVER FINANCIAL MANAGEMENT SYSTEMS 

As reflected in the following table, the Department has reported no material weaknesses under FMFIA Section 4 in 

recent years. 

NUMBER OF MATERIAL WEAKNESSES UNDER SECTION 4

NUMBER AT BEGINNING 

OF FISCAL YEAR NUMBER CORRECTED NUMBER ADDED

NUMBER REMAINING AT 

END OF FISCAL YEAR

FY 2009 0 0 0 0

FY 2010 0 0 0 0

FY 2011 0 0 0 0

FY 2012 0 0 0 0

FY 2013 0 0 0 0

Based on reviews conducted by the Department and its bureaus for FY 2013, the financial systems in the Department are 

compliant with GAO principles and standards, the requirements of the CFO Act, and OMB requirements. 

15 F Y 2013 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT (FFMIA) OF 1996

Under FFMIA, the Department is required to have financial management systems that comply with federal financial 

management system requirements, federal accounting standards, and the U.S. Government Standard General Ledger at 

the transaction level. In FY 2013, the Department remained in compliance with FFMIA. 

REPORT ON AUDIT FOLLOW-UP

The Inspector General Act, as amended, requires that the Secretary report to Congress on the final action taken for 

Inspector General audits. This report covers Commerce Department audit follow-up activities for the period June 1, 2012, 

through May 31, 2013. 

SUMMARY OF ACTIVITY ON AUDIT REPORTS

JUNE 1, 2012 THROUGH MAY 31, 2013

DISALLOWED COSTS1

FUNDS TO BE PUT TO 

BETTER USE2

NONMONETARY 

REPORTS3 TOTAL

NUMBER OF 

REPORTS DOLLARS

NUMBER OF 

REPORTS DOLLARS

NUMBER OF 

REPORTS REPORTS

Beginning Balance 20 $ 28,822,087 3 $ 709,996 27 50

New Reports 25 17,846,288 7 64,942,838 24 56

Total Reports 45 46,668,375 10 65,652,834 51 106

Reports Closed (14) (8,617,789) (3) (300,501) (23) (40)

Ending Balance 31 $ 38,050,586 7 $ 65,352,333 28 66

1. Disallowed costs are questioned costs that management has sustained or agreed should not be charged to the government.

2. “Funds to be Put to Better Use” refers to any management action to implement recommendations where funds should be applied 

to a more efficient use.

3. Includes management, contract, grant, loan, and financial statement audits with nonmonetary recommendations.

BIENNIAL REVIEW OF FEES

OMB Circular A-25 Revised, User Charges, requires the biennial review of agency programs to determine whether 

fees should be charged for government goods or services, and to ascertain that existing charges are adjusted to reflect 

unanticipated changes in costs or market values. 

The Department’s bureaus conduct reviews of its programs at least biennially, with some bureaus conducting annual reviews. 

The Department is in compliance with the requirement to adjust its fees to meet the Circular A-25 Revised requirement 

of full-cost recovery for user charges.

16 F Y 2013 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
Financial Section
18 F Y 2013 AGENCY FINANCIAL REPORT

MESSAGE FROM THE CHIEF FINANCIAL OFFICER

Message from the Chief Financial Officer

T

his FY 2013 Agency Financial Report provides financial and high-level program performance information to enable the 

Department’s stakeholders to understand and evaluate the Department’s achievements relative to its mission and 

resources. The Department is committed to operational excellence and providing outstanding service to our customers. 

This includes providing the public with highlights of our performance, and detailed financial information. This report also 

fulfills several statutory requirements, including the Reports Consolidation Act of 2000, the Chief Financial Officers Act, the 

Federal Managers’ Financial Integrity Act (FMFIA), and the Government Management Reform Act. 

For FY 2013, the Department achieved an unqualified audit opinion for the fifteenth consecutive year. The Department made 

significant progress toward remediating the material weakness identified in FY 2012 related to the National Oceanic and 

Atmospheric Administration (NOAA) financial management oversight. These efforts resulted in the material weakness being 

reduced to a significant deficiency relating to the accounting for property at NOAA. The Department continued to have a 

significant deficiency in Department-wide information technology (IT) relating to segregation of duties, access controls, and 

configuration management. We will continue making improvements as it relates to the accounting for property and IT, and 

will continue to aggressively strengthen those controls in FY 2014.

The Department is enhancing financial and non-financial controls under FMFIA and Office of Management and Budget (OMB) 

Circular A-123. The Department has provided an unqualified statement of assurance that its internal controls and financial 

management systems meet the objectives of FMFIA, and that internal controls operated effectively. 

The Department’s leadership continues its commitment to our employees and to providing our employees the tools and 

services they need to meet our mission. This includes streamlining internal processes and providing more effective enterprise 

approach for our key services. This will not only allow for better service delivery, but also smarter and more efficient, effective 

use of taxpayer resources. 

For example, in 2013 we continued to implement our enterprise-wide Human Resource System, moving from a manual-based 

human resource system into one Department-wide solution, with full implementation expected by the end of FY 2014. In 

FY 2013 we began the planning phase of the Business Application Solutions (BAS), which is an enterprise shared service 

approach with a federal partner agency. BAS will result in Department-wide data standardization supporting data transparency 

and enhanced information analysis and decision-making. We also fully implemented the Acquisition Improvement Policy, 

which is a Department-wide effort to provide more effective and timely oversight of major acquisition activities. We did this 

all while exceeding our target of $176 million in administrative savings. 

These are just a few examples that our talented and diverse workforce has demonstrated in FY 2013, with their commitment 

to integrity, first-rate customer service, effective stewardship of taxpayer resources, and overall operational excellence. 

We will continue this commitment in FY 2014. Our updated Strategic Plan which will be available in 2014 will provide direction 

for new initiatives and priorities and position the Department for continued success in the years ahead. 

 

Ellen Herbst

Chief Financial Officer 

and Assistant Secretary for Administration

December 16, 2013
FINANCIAL SECTION

Financial

Management

and Analysis

21 F Y 2013 AGENCY FINANCIAL REPORT

FINANCIAL MANAGEMENT AND ANALYSIS

FINANCIAL MANAGEMENT AND ANALYSIS

U

nder the Secretary’s leadership, the Department is continuing to give the highest priority to providing accurate financial 

data to its internal and external customers, and to its accountability for all assets. Ensuring that there are strong internal 

controls throughout the Department remains a priority. The Department has created a financial management environment 

that complies with federal laws and regulations and that provides its executives with timely, accurate financial and performance 

information. This is evidenced with the Department continuing to receive unqualified audit opinions, maintaining a single 

integrated financial system, and continuing its compliance with the Federal Financial Management Improvement Act (FFMIA). 

Highlights of accomplishments for FY 2013 and future initiatives are discussed further below.

FINANCIAL MANAGEMENT SYSTEMS

The Department maintains an FFMIA-compliant financial management system, the Commerce Business Systems (CBS). CBS 

provides reliable, timely information within a sophisticated security infrastructure. The system is capable of producing both 

financial and budget reports from information generated within the financial management system. CBS consists of a Core 

Financial System, including the Commerce Purchase Card System and the Budget and Execution Data Warehouse. CBS is 

interfaced with the Commerce Standard Acquisition and Reporting System (CSTARS), the National Finance Center Payroll System, 

and the Automated Standard Application for Payments (ASAP). 

The financial information from CBS is integrated in the Corporate Database for consolidated financial reporting, resulting in a 

single integrated financial management system. The Corporate Database is a commercial, off-the-shelf software package for 

consolidating financial data and producing financial reports. The Corporate Database is an integrated solution that provides 

financial statements and Adjusted Trial Balances reported at the Department, bureau, and U.S. Department of the Treasury 

(Treasury) Appropriation/Fund Group level. It also provides the ability to perform data analysis and produce the Department’s 

footnotes, financial analysis reports, and other additional information required for the government-wide financial statements. 

During FY 2013, the Department accomplished the following initiatives: 

● Continued Operations and Maintenance (O&M) activities for CBS; 

● Continued definition and planning for the Business Application Solutions (BAS) project that will modernize the Department’s 

financial and administrative business systems; 

● Completed Initiation and Discovery phases for BAS, including engagement with the U.S. Department of Transportation’s 

(DOT) Enterprise Services Center (ESC) to explore the feasibility of the Department using the DOT ESC Federal Shared 

Service Provider (FSSP) solution to modernize the Department’s core financial, acquisition, property, and data warehouse 

capabilities;

● Began the Planning phase to develop detailed plans for the implementation of BAS; 

● Continued maintenance for the C.Suite application—CSTARS contract writing and management system—for the National 

Oceanic and Atmospheric Administration (NOAA), Office of the Secretary, National Institute of Standards and Technology 

(NIST), and the Census Bureau; 
22 F Y 2013 AGENCY FINANCIAL REPORT

FINANCIAL MANAGEMENT AND ANALYSIS

● Completed the design, development, and testing of the Six-digit U.S. Standard General Ledger, Accelerated Payments to 

Small Businesses, Summary Level Transfer, and ASAP modifications to CBS and deployed into production; 

● Continued design and development of modifications to CBS to accommodate several new federal mandates, including 

the Government-wide Treasury Account Symbol Adjusted Trial Balance System (GTAS), Payment Application Modernization 

(PAM), and Central Contractor Registration – System for Award Management (CCR-SAM);

● Completed several technical CBS upgrades, including Fusion Middleware/WebLogic and Single Sign On to Oracle Access 

Manager upgrade; 

● Completed the Oracle database migration to 11g and the upgrade of two of the three bureau’s production environment 

hardware and operating systems; 

● Continued enhancement of the Commerce Community Connector, a central location for the Department’s financial 

and administrative management communities to share information about best practices, challenges and solutions, and 

deadlines; 

● Deployed the production version of the Process Toolbox that describes processes and provides the tools, templates, and 

samples to support the effective management of initiatives and provide guidance on how to perform project management 

and solution deployment activities; 

● Deployed content for the Department’s Enterprise Risk Management (ERM) Framework in the Process Toolbox that 

describes processes and provides the tools, templates, and samples to support the effective enterprise risk management 

in compliance with Department-approved ERM processes;

● Deployed the redesigned Project Dashboard that provides a Web-based, online graphical view of the Chief Financial Officer 

(CFO)/Assistant Secretary for Administration (ASA) Information Technology (IT) project portfolio, supports communication 

of project status, provides a project document repository, and facilitates IT project status review processes;

● Completed an inventory and analysis of all CFO/ASA IT systems and projects to support effective IT system portfolio 

management and decision-making;

● Created an initial draft of the CFO/ASA IT Governance Framework (in alignment with the Department Acquisition Framework 

Policy) to inform and support IT system and project decision-making and CFO/ASA IT planning, policy, and operations; 

ensure that risks are managed appropriately; and verify that resources are being used responsibly and strategically;

● Continued to assess the Invoice Processing Platform (formerly known as Internet Payment Platform) solution approach and 

next steps; and 

● Maintained and enhanced the Department’s Executive Dashboard application (DASHER). The DASHER provides a 

Department-wide, executive-level overview of the Department’s highest priority and highest risk mission and administrative 

initiatives, including High-Priority Performance Goals, Risk Management, Financial Management, Customer Service, Human 

Capital and Administrative Metrics, as well as more Operational Initiatives such as Acquisition Metrics, Sustainability, and 

Program Results.
23 F Y 2013 AGENCY FINANCIAL REPORT

FINANCIAL MANAGEMENT AND ANALYSIS

In FY 2014 and beyond, the Department will continue its efforts to enhance its financial systems. The Department plans to 

accomplish the following: 

● Continue O&M activities for CBS; 

● Continue Planning phase and begin Phase I Implementation for BAS;

● Continue stakeholder outreach, incorporate stakeholder feedback, and include additional process guidance in the production 

version of the process;

● Complete the design, development, and testing of the GTAS, PAM, ASAP Phase 2, and CCR-SAM modifications to CBS 

and deploy into production; 

● Deploy content for the Department Acquisition Framework Policy in the Process Toolbox that describes processes and 

provides the tools, templates, and samples to support stakeholder communication and organizational compliance with 

Department-approved policy; 

● Develop the initial functional and technical design for the redesigned Modernization Blueprint Portal that will provide CFO/

ASA IT system portfolio information;

● Continue to maintain and enhance the DASHER; and 

● Maintain and enhance the Commerce Community Connector. 

FINANCIAL REPORTING

The Department accomplished the following initiatives that resulted in meeting the aforementioned goals: 

● In 2013, the Department completed payment recapture audits of contracts/obligations for NIST and NOAA, and Departmentwide grants and other cooperative agreements; 

● Each of the Department’s bureaus/reporting entities continued to prepare or update improper payment risk assessments 

covering all programs/activities as required by the Office of Management and Budget (OMB) Circular A-123, 

Appendix C, Requirements for Effective Measurement and Remediation of Improper Payments. These improper payment 

risk assessments of the entity’s programs/activities also include assessments of the control, procurement, and grants 

management environments, and are now in the continuous process stage of being updated every three years, unless 

significant changes occur, in which case an assessment will be updated more quickly; 

● Implemented in FY 2013, for applicable bureau payment offices, pre-payment eligibility reviews in Treasury’s Do Not Pay 

portal solution; 

● Implemented, effective FY 2013, for NIST and NOAA, Technical Bulletin 2006-1, Recognition and Measurement of Asbestosrelated Cleanup Costs, which clarifies required recognition of liabilities and expenses for asbestos-related cleanup costs;
24 F Y 2013 AGENCY FINANCIAL REPORT

FINANCIAL MANAGEMENT AND ANALYSIS

● Piloted, across the Department, full reporting of accounting information on a transactional basis in Treasury’s financial 

systems;

● Continued to review and validate conference spending to confirm accuracy and compliance with Department policies, 

Federal Travel Regulation (FTR), Federal Acquisition Regulation (FAR), and regulations promulgated by other regulatory 

bodies;

● Facilitated intragovernmental transaction reconciliations using the Department’s Corporate Database application to 

collect, extract, and report on a quarterly basis its intragovernmental account balances, by trading partner, to Treasury. 

The Department took a proactive approach of initiating contact with all trading partner agencies to reconcile large 

differences. Although the Department has seen an improvement in trading partners’ participation, continued improvement 

is needed in order to reconcile all differences; 

● Quarterly financial metrics were compiled, analyzed, and reported to individual bureaus, which also included a status report 

comparing bureau results with Departmental goals. The results of bureaus’ metrics and any corrective actions needed 

were discussed at the bureau CFO’s individual monthly meetings; and

● Published guidance on the preparation and submission of financial statements, including a calendar of milestone dates. 

Each quarter, with the participation of all bureaus, guidance was reviewed and updated to reflect lessons learned and to 

identify best practices among the bureaus. When necessary, task forces were formed to resolve issues that could have 

impeded the Department’s ability to produce timely, accurate financial statements.

In FY 2014 and beyond, the Department plans to accomplish the following: 

● Continue to monitor and minimize improper payments, including the performance of payment recapture audits, and carry 

out the FY 2014 implementation for applicable bureau payment offices of pre-payment eligibility reviews in Treasury’s Do 

Not Pay portal solution; 

● Improve the appropriate use of the Purchase Card Convenience Checks by continuing to monitor and evaluate compliance of 

the Department’s Purchase Card Convenience Check usage with FAR, OMB Circular A-123 Appendix B Revised, Improving 

the Management of Government Charge Card Programs, and Commerce Acquisition Manual 1313.301, Purchase Card 

Program;

● Implementation across the Department of full reporting of accounting information on a transactional basis in Treasury’s 

financial systems;

● Improve safeguards and internal controls regarding the Department’s overall travel card program through the development 

of data analytics methodologies and metrics that will be used to monitor travel card transactions;

● Continue to work with OMB, Treasury Department, and the government-wide Central Reporting Team to improve the 

intragovernmental transactions reconciliation process; and 

● Continue to work with the Treasury Department to implement GTAS for production FY 2015, except for U.S. Patent and 

Trademark Office (USPTO), which will be implementing GTAS in FY 2014 for expenditure fund groups. 
25 F Y 2013 AGENCY FINANCIAL REPORT

FINANCIAL MANAGEMENT AND ANALYSIS

GRANT MANAGEMENT

Under the CFO/ASA, the Office of Acquisition Management (OAM) is responsible for the Department’s enterprise-wide grants 

management policy, projects, and oversight. The Department’s focus is to standardize policies and procedures for its grant 

and cooperative agreement programs in order to strengthen compliance, work toward a single automated grants management 

system, and enhance/formalize workforce education. Targeted efforts continue to transform the decentralized Department grants 

management community into an effective and efficient partnership. The sharing of resources and responsibilities to accomplish 

enterprise goals is a recurring theme throughout the partnership effort. 

An important feature of the Department’s effort to move aggressively into the world of electronic grants management is the 

continued use of NOAA’s Grants OnLine system. NOAA administers almost two-thirds of the Department’s financial assistance 

programs. Grants OnLine is designed to facilitate efficiencies through standardized business processes and provide a direct 

interface to other Departmental systems and with grant recipients. It continues to demonstrate significant success in reducing 

paperwork, increasing accountability, and simplifying the post award process. 

The Department is in the process of migrating NIST and the Economic Development Administration (EDA) to NOAA’s Grants 

Online. The current stove piped configuration of separate bureau grant management systems is not conducive to maximum 

efficiency in resource and time management. At this point, EDA has completed its charter for consolidation with Grants OnLine 

and NIST is in the process of completing its charter. 

OAM coordinates regular Departmental Grants Council meetings and works closely with the Office of Inspector General (OIG) 

and the Office of General Counsel (OGC) to implement sound policy and ensure consistency for the Department’s financial 

assistance programs. The Department is committed to the goal of strengthening its grant operations and improving its business 

processes to provide better services to its customers in the federal grant recipient community, and the Grants Council is OAM’s 

platform for achieving that goal. 

The Department revised its Pre-Award Notice, Grants, and Cooperative Agreements Manual (Grants Manual), and Standard 

Terms and Conditions resulting in the publication of these three critical policy guidance documents in the second quarter of 

FY 2013. OAM has established a schedule that updates these policy guidance documents on an annual basis that will keep the 

Department on pace with the rapidly changing federal financial assistance programs. 

The Grants Overview, established in FY 2012, strengthens oversight and provides insight into the extent to which the Department 

grants management process functions efficiently and effectively. The Grants Overview examined the status of awards by dollars 

in various phases of the grants management process. Risk factors were identified and shared with the Department grants 

community.

One of the risk factors identified by the Grants Overview revealed the significant backlog of expired and unexpired 

financial assistance awards that are pending closeout but the recipient organization is no longer in existence or is 

unresponsive to bureau notifications and requests for information and documentation relative to the closeout of the 

award. Accordingly, this information was shared with the Department grants community via the Grants Council and a 

tiger team was established to resolve the issue. As a result of this team’s efforts, the Policy for the Unilateral Termination 

and/or Administrative Closeout of Certain Financial Assistance Awards when a Recipient is No longer in Existence or 

is Unresponsive to Bureau Notifications and Requests for Information was implemented in August 2013. The guidance 

provides a policy for Department Grants Officers to effectuate a unilateral termination and/or an administrative closeout of: 
26 F Y 2013 AGENCY FINANCIAL REPORT

FINANCIAL MANAGEMENT AND ANALYSIS

1. Expired and unexpired awards pending closeout where the recipient is no longer in existence; and 

2. Expired awards pending closeout where the recipient is in existence, but is unresponsive to bureau notifications and 

attempts to contact.

This guidance does not apply to unexpired awards where the recipient is in existence, but is materially non-compliant with the 

terms and conditions of the award. In such cases, Grants Officers should take appropriate enforcement action under the award 

in accordance with 15 C.F.R. §§ 14.60 – 14.62 or 15 C.F.R. 24.43 (as applicable); the terms and conditions of the award; Chapter 

11, ‘Enforcement,” of the Grants Manual; and bureau policy. Once an active award is terminated, such an award may become 

subject to this guidance.

This guidance also does not apply to recipients that are a party to an active bankruptcy case which, in accordance with Chapter 

4.C.1.b.(4) of the Grants Manual should be coordinated with OGC’s General Litigation Division with such coordination generally 

through OGC’s Federal Assistance Law Division (FALD). OGC’s General Litigation Division (through FALD) will also be consulted 

where a recipient is dissolved or reorganized upon an order of the U.S. Bankruptcy Court.

Preliminary feedback from Department bureaus suggests that this new policy should facilitate expedited closeout of awards that 

fall within this category.

The Grants Overview also includes tracking of pre-award and post-award requirements such as audit resolution and compliance 

with negotiated indirect cost rate requirements. The Overview monitors and analyzes these two phases with monthly reports 

intended to prompt closer monitoring of the financial assistance award. These are just some of the examples of key activities 

of the grants life cycle addressed by the Grants Overview and the Grants Council. Note: in FY 2013 OAM transferred the 

responsibility for the negotiation of indirect cost rates back to the respective grant-making bureaus. The Departmental review 

concluded that decentralizing this function by moving it back to the bureau grant offices responsible for enforcing the requirement 

would result in stronger monitoring and a more efficient business process.

The Grants Overview is regularly updated and serves as a framework for OAM’s effort to reach out to the Department’s grantmaking bureaus to energize the oversight relationship. It has served as the basis for meetings and ongoing dialogue with 

each Department bureau to create a path forward for the development of more efficient business practices and tighter internal 

controls in the administration of Departmental financial assistance awards. 

As of FY 2013, the Department continues to be up-to-date with its three major grant making bureaus—NIST, NOAA, and EDA— 

providing accurate and complete prime federal award financial data to USAspending.gov, consistent with the goal established in 

the FY 2008 Performance and Accountability Report. The data is downloaded from their respective core financial systems and 

uploaded monthly to USASpending.gov through the Data System Validation Tool. In June 2013, the Deputy Controller of OMB 

transmitted a memorandum to all agency CFOs in an effort to improve the quality of financial data reported to USASpending.gov. 

The Department is in complete compliance with this directive. 

OAM will continue to actively seek opportunities to support government-wide goals of transparency and data quality management.
27 F Y 2013 AGENCY FINANCIAL REPORT

FINANCIAL MANAGEMENT AND ANALYSIS

HUMAN CAPITAL

Both the President and Congress recognize that the federal workforce is central to the delivery of services to the U.S. public. 

Acknowledging that people are the key to mission accomplishment, Departmental leadership continues to implement and 

evaluate programs to ensure that there is succession planning in the area of financial management. Internships, leadership 

development programs, technical training opportunities, telework, and succession plans are used as vehicles for making 

progress in the recruitment, development, and retention of a highly-skilled and diverse workforce. Internship programs provide 

students and recent graduates an opportunity to gain hands-on experience, while introducing potential future employees to 

the opportunities that exist at the Department. Ongoing training and development opportunities are offered as a component 

of continuous learning in the area of financial management. Telework is encouraged as a means of promoting a healthy work/

life balance for sustainable productivity. Succession plans are used to ensure a continuity of operations within the most critical 

financial management positions.

The Department continued its recruitment efforts in the area of financial management by hiring student and recent graduate 

trainees through the Pathways Programs—the Internship Program, Recent Graduates Program, and Presidential Management 

Fellows Program. Collectively, these programs offer federal internships for students in high school through post-graduate 

school and career opportunities for recent graduates, providing meaningful training and career development opportunities for 

individuals who are at the beginning of their federal service. In FY 2013, the Department hosted 14 Pathways Programs trainees 

as accountants and budget analysts, including seven new hires and two who were converted to permanent positions. Trainees 

were located within finance and accounting offices in the Bureau of Economic Analysis, Census Bureau, International Trade 

Administration, and NOAA.

Developmental opportunities for financial management professionals included the Department’s flagship leadership development 

programs, online training courses, and traditional classroom courses and seminars. As one of the Department’s recognized 

mission-critical occupations, accounting and budgeting series employees at the GS-13 through GS-15 and equivalent levels are 

eligible to apply for the following major leadership development programs: Executive Leadership Development Program and Senior 

Executive Service Candidate Development Program. Program activities include competency assessments, formal classroom 

training, developmental assignments, seminars, action learning task team projects, and mentoring sessions. The Commerce 

Learning Center (CLC), the Department’s Learning Management System, offers 69 Department-wide and bureau-specific online 

financial management courses that were completed by 71 employees in the 0500 accounting and budgeting occupational group 

and by an additional 502 employees in other occupations, during FY 2013. The CLC also recorded 187 employees in the 0500 

occupational group attending 77 financial management classroom courses. 

To maintain a highly-skilled financial management workforce, the Department’s retention and succession strategies include 

the increased use of telework and development of succession plans. In FY 2013, approximately 32 percent of accounting and 

budgeting employees engaged in telework, which is used by the Department to position itself as an “employer of choice” in 

attracting qualified employees, facilitating employee work/life balance, increasing employee satisfaction and engagement, and 

ultimately increasing employee productivity. Additionally, in accordance with the Balanced Scorecard’s Workforce Excellence 

guidance, the Office of the Secretary’s Office of Financial Management has developed a succession plan that focuses on 

high-impact, high-risk positions. The plan will be incorporated into the CFO/ASA Succession Plan by the end of FY 2013.
28 F Y 2013 AGENCY FINANCIAL REPORT

FINANCIAL MANAGEMENT AND ANALYSIS

RECEIVABLES AND DEBT MANAGEMENT

T

he Department provides policies and procedures for the management and collection of non-tax debts owed to Departmental 

entities in its debt collection regulations, Commerce Debt Collection, which adopts and incorporates all provisions of the 

Federal Claims Collections Standards (FCCS), which were jointly published by Treasury and the U.S. Department of Justice. 

The Department’s debt collection regulations supplement FCCS by prescribing procedures consistent with FCCS, as necessary 

and appropriate for Departmental operations. FCCS clarifies and simplifies federal debt collection procedures and reflects changes 

under the Debt Collection Improvement Act of 1996 and the General Accounting Office Act of 1996. The Department also 

provides guidance for debt management and collection in its Credit and Debt Management Operating Standards and Procedures 

Handbook, to ensure that consistent debt management practices are established and followed throughout the Department, and 

to establish and enhance Departmental management practices. 

The Debt Collection Improvement Act of 1996 established Treasury as the collection agency for eligible federal agency debts that 

are more than 180 days delinquent. It also established Treasury’s Financial Management Service as the federal government’s debt 

collection center. 

The Department’s gross receivables decreased 14.8 percent, from $620 million at September 30, 2012 to $528 million at September 

30, 2013, as reported on the Department’s Treasury Report on Receivables (TROR). TROR is the primary means for the Department 

to provide comprehensive information on its gross receivables and delinquent debt due from the public. Debt over 180 days 

delinquent increased from $2 million at September 30, 2012 to 

$6 million at September 30, 2013. Total delinquencies as a 

percentage of gross receivables increased from 1.0 percent at 

September 30, 2012 to 2.5 percent at September 30, 2013. 

Approximately $47 million in delinquent debt has been referred 

to Treasury for cross-servicing since FY 2002. 

Prescreening procedures, account-servicing standards, determined collection of delinquent debt, and extensive referrals of 

delinquent debt to Treasury which includes the Treasury Offset 

Program have all contributed to effective debt management.
29 F Y 2013 AGENCY FINANCIAL REPORT

FINANCIAL MANAGEMENT AND ANALYSIS

PAYMENT PRACTICES

Prompt Payment

T

he Prompt Payment Act of 1982 generally requires agencies 

to pay their bills to vendors on a timely basis (within 30 

days of receipt of relevant documents), and to pay interest 

penalties when payments are made late. The Department closely 

monitors its prompt payment performance, and the bureaus 

submit quarterly reports of prompt payment performance to the 

Deputy CFO.

The Department has maintained its prompt payment 

performance of 99 percent in FY 2013 from 99 percent in 

FY 2012. The number of invoices with late-payment interest 

penalties decreased significantly to 1,994 in FY 2013 from 2,562 in FY 2012. The Department continues to focus on improving 

its prompt payment percentage by working closely with its bureaus to identify opportunities for new or improved business 

processes. Most of the Department will be transitioning to DOT ESC which will become the Department’s federal shared-service 

provider for accounting services. As such, the Department would in large part adopt ESC’s Internet-based invoice processing 

system. USPTO will not be transitioning to ESC, and will instead maintain its own financial system. USPTO is planning to kick 

off a series of projects starting in 2015 with the purpose of implementing an Internet-based invoice processing system. 

A July 2012 OMB memorandum, Providing Prompt Payment to Small Business Subcontractors, established the executive branch 

policy, that, to the full extent permitted by law, agencies shall take steps to ensure that prime contractors are able to pay their 

small business subcontractors in a prompt fashion. In particular, agencies should, to the full extent permitted by law, temporarily 

for one year accelerate payments to all prime contractors, in order to allow them to provide prompt payments to small business 

subcontractors. Agencies shall make payments to all prime contractors as soon as practicable, with a goal of paying all prime 

contractors within 15 days of receiving proper documentation. The Department implemented in July 2012 this new payment 

policy for all prime contractors, and is monitoring bureaus’ monthly performance. A July 2013 OMB memorandum, Extension of 

Policy to Provide Accelerated Payment to Small Business Subcontractors, extends the temporary policy by one year, to July 11, 

2014. This extension will allow OMB and agencies to continue to evaluate the impact of accelerated payment on small business 

subcontractors. The Department’s acquisition offices are also taking appropriate actions with prime contractors regarding new 

and existing contracts to help maximize accelerated payments to small business subcontractors.

Bankcards

The Department is committed to the use of bankcards (purchase cards) as a means to improve mission support by streamlining 

the procurement and payment processes, and reducing administrative costs. The Department has implemented more effective 

training, oversight, and risk management reviews in order to enhance the purchase card program. Purchase card usage is closely 

monitored, and those accounts that are no longer needed are promptly closed. In addition, purchase card accounts without any 

activity within the preceding 18-month period are considered “inactive” and are closed unless there are extenuating circumstances. 

More customized training requirements for cardholders, approving officials, and program coordinators have been instituted in order 

to enhance knowledge of the use and management of the purchase card, administration of the purchase card program, and card 

maintenance. This has contributed to a steady decrease in the number of purchase cards issued and in use by the Department.
30 F Y 2013 AGENCY FINANCIAL REPORT

FINANCIAL MANAGEMENT AND ANALYSIS

Based on the results of OMB Circular A-123, Management’s Responsibility for Internal Control, Appendix A testing by the 

Department in FY 2012, the purchase card sub-process continued to present a significant deficiency for the Department. 

During FY 2013, OAM updated its purchase card policy to enhance the review and approval process. The Department also 

developed and implemented a customized in-class training curriculum and is in the process of developing online purchase card 

refresher training. The Department is additionally working closely with bureaus to ensure that appropriate planned corrective 

actions were implemented on time. The Department will continue to monitor the internal controls surrounding the purchase card 

program and perform the necessary testing to validate whether the proper controls are in place during FY 2014.

LIMITATIONS OF THE FINANCIAL STATEMENTS

T

hese financial statements have been prepared to report the overall financial position and results of operations of the 

Department, pursuant to the requirements of 31 U.S.C. 3515(b). While the statements have been prepared from the books 

and records of the Department in accordance with the form and content prescribed by OMB, the statements are in addition 

to the financial reports used to monitor and control budgetary resources that are prepared from the same books and records.

These financial statements should be read with the realization that they are for a component of the U.S. government, a sovereign 

entity. One implication of this is that liabilities cannot be liquidated without legislation that provides the resources to do so.
FINANCIAL SECTION

Analysis of FY 2013 

Financial Condition

and Results

33 F Y 2013 AGENCY FINANCIAL REPORT

ANALYSIS OF FY 2013 FINANCIAL CONDITION AND RESULTS

ANALYSIS OF FY 2013 FINANCIAL CONDITION AND RESULTS

Financial Highlights

(Dollars In Thousands)

Percentage 

Change FY 2013 FY 2012

As of September 30, 2013 and 2012

Condensed Balance Sheets:

FY 2013 FY 2012

TOTAL ASSETS

(In Millions) 

$30,038 $30,420

ASSETS:

Fund Balance with Treasury -7% $ 18,002,497 $ 19,261,281

General Property, Plant, and Equipment, Net 11% 11,103,844 10,000,512 

Direct Loans and Loan Guarantees, Net -6% 533,692 570,348 

Other -32% 398,278 587,406 

TOTAL ASSETS -0.1% $ 30,038,311 $ 30,419,547

LIABILITIES:

Unearned Revenue 5% $ 1,461,122 $1,386,503

Federal Employee Benefits 5% 897,191 851,211 

Accounts Payable 13% 513,815 452,901 

Accrued Grants -16% 536,711 635,856 

Debt to Treasury 4% 575,603 554,281 

Accrued Payroll and Annual Leave -19% 467,706 580,715 

Other 30% 314,082 241,846 

TOTAL LIABILITIES 1% $ 4,766,230 $ 4,703,313

NET POSITION:

Unexpended Appropriations -20% $ 5,340,879 $ 6,716,434

Cumulative Results of Operations 5% 19,931,202 18,999,800 

TOTAL NET POSITION -2% $ 25,272,081 $ 25,716,234

TOTAL LIABILITIES AND NET POSITION -0.1% $ 30,038,311 $ 30,419,547

For the Years Ended September 30, 2013 and 2012

Condensed Financing Sources:

Appropriations Received, Net of Reductions -2% $ 7,733,541 $ 7,878,808 

Imputed Financing Sources from Cost Absorbed by Others -1% 295,288 297,694 

Other -56% 183,372 413,840 

TOTAL FINANCING SOURCES -4% $ 8,212,201 $ 8,590,342

(continued on next page)
34 F Y 2013 AGENCY FINANCIAL REPORT

ANALYSIS OF FY 2013 FINANCIAL CONDITION AND RESULTS

(continued from previous page)

(Dollars In Thousands)

Percentage 

Change FY 2013 FY 2012

For the Years Ended September 30, 2013 and 2012

Condensed Statements of Net Cost:

Theme 1: Economic Growth Net Program Costs -29% $ 2,778,159 $ 3,902,083

Theme 2: Science and Information Net Program Costs -0.4% 3,619,659 3,635,663 

Theme 3: Environmental Stewardship Net Program Costs -3% 2,089,217 2,144,275 

TOTAL NET COST OF OPERATIONS -12% $ 8,487,035 $ 9,682,021

Total Gross Costs -7% $ 12,056,144 $ 13,018,305

Less: Total Earned Revenue 7% (3,569,109) (3,336,284)

Total Net Cost of Operations -12% $ 8,487,035 $ 9,682,021

For the Years Ended September 30, 2013 and 2012

Selected Budgetary Information:

Obligations Incurred 1% $ 12,354,766 $ 12,238,097

Outlays, Gross -7% $ 13,778,017 $ 14,754,794

Composition of Assets and Assets by Responsibility Segment

T

he composition (by percentage) and distribution (by responsibility segment) of the Department’s assets changed somewhat 

from September 30, 2012 to September 30, 2013. Fund Balance with Treasury decreased from 63 percent of total assets 

to 60 percent of total assets. General Property, Plant, and Equipment (General PP&E), Net of Accumulated Depreciation

increased from 33 percent of total assets to 37 percent of total assets. As a result of the above fluctuations (explained in Trends 

in Assets section on the following page), the National Oceanic and Atmospheric Administration’s (NOAA) assets increased from 

44 percent of total assets to 47 percent of total assets, and the National Telecommunications and Information Administration’s 

(NTIA) assets decreased from 35 percent of total assets to 32 percent of total assets.

Total assets amounted to $30.04 billion at September 30, 2013. Fund Balance with Treasury of $18.00 billion is the aggregate 

amount of funds available to make authorized expenditures and pay liabilities. General PP&E, Net of $11.10 billion includes 

$6.76 billion of Construction-in-progress, primarily of satellites and weather measuring and monitoring systems; $2.09 billion 

of Satellites/Weather Systems Personal Property; $1.28 billion of Structures, Facilities, and Leasehold Improvements; and 

$971 million of other General PP&E. Direct Loans and Loan Guarantees, Net of $534 million primarily relates to NOAA’s direct loan 

programs. Other Assets of $398 million primarily includes Accounts Receivable, Net of $156 million; Advances and Prepayments 

of $129 million; and Inventory, Materials, and Supplies, Net of $100 million. 
35 F Y 2013 AGENCY FINANCIAL REPORT

ANALYSIS OF FY 2013 FINANCIAL CONDITION AND RESULTS

Trends in Assets

Total Assets decreased $381 million or 0.1 percent, from $30.42 billion at September 30, 2012 to $30.04 billion at September 30, 

2013. Fund Balance with Treasury decreased $1.26 billion or 7 percent, from $19.26 billion to $18.00 billion, primarily due to a 

$959 million decrease in Fund Balance with Treasury for NTIA’s Broadband Technology Opportunities Program (BTOP) – American 

Recovery and Reinvestment Act of 2009 (ARRA) mainly due to payments to grantees for prior-years’ unpaid obligations; and 

also due to the Economic Development Administration (EDA) receiving a disaster relief and emergency assistance appropriation 

of $200 million in FY 2012 but not in FY 2013. General PP&E, Net increased $1.10 billion or 11 percent, from $10.00 billion to 

$11.10 billion, mainly due to an increase of $1.33 billion in NOAA Satellites/Weather Systems Personal Property. Other Assets 

decreased by $189 million or 32 percent, from $587 million to $398 million, primarily due to a decrease of $117 million in 

Intragovernmental Advances and Payments mainly consisting of a decrease of $74 million in NOAA advances to the Department 

of the Navy for the Pacific Region Center construction project and a $37 million decrease in NTIA advances to the U.S. Department 

of Transportation and the U.S. Department of Homeland Security for its Digital Television Transition and Public Safety Fund, which 

includes the Public Safety Interoperable Communications program and other programs. Other Assets also decreased due to 

a $41 million decrease in Accounts Receivable With the Public mainly resulting from a $53 million decrease in NOAA Accounts 

Receivable from an oil company for restoration activities in response to the 2010 Deepwater Horizon oil spill.
36 F Y 2013 AGENCY FINANCIAL REPORT

ANALYSIS OF FY 2013 FINANCIAL CONDITION AND RESULTS

Composition of Liabilities and Liabilities by Responsibility Segment

The composition (by percentage) and distribution (by responsibility segment) of the Department’s liabilities remained 

consistent from September 30, 2012 to September 30, 2013. Total liabilities amounted to $4.77 billion at September 30, 2013. 

Unearned Revenue of $1.46 billion represents the portion of monies received from customers for which goods and services have 

not been provided or rendered by the Department. Federal Employee Benefits Liability of $897 million is composed of the actuarial 

present value of projected benefits for the NOAA Corps Retirement System ($612 million) and the NOAA Corps Post-retirement 

Health Benefits ($42 million), and the Department’s Actuarial Federal Employees Compensation Act (FECA) Liability ($243 million), 

which represents the actuarial liability for future workers’ compensation benefits. Accrued Grants of $537 million, which relates 

to a diverse array of financial assistance programs and projects, includes EDA’s accrued grants of $406 million for its economic 

development assistance funding to state and local governments. Accrued Payroll and Annual Leave of $468 million includes 

salaries and wages earned by employees, but not disbursed as of September 30, 2013. Debt to Treasury of $576 million consists 

of $525 million borrowed for NOAA’s direct loan programs, and also includes $51 million borrowed for NTIA’s Public Safety Trust 

Fund and State and Local Implementation Fund. Accounts Payable of $514 million consists primarily of amounts owed for goods, 

services, or capitalized assets received, progress on contract performance by others, and other expenses due. Other Liabilities 

of $314 million primarily includes Environmental and Disposal Liabilities of $157 million, Accrued FECA Liability of $36 million, 

Accrued Benefits of $31 million, the International Trade Administration’s (ITA) Foreign Service Nationals’ Voluntary Separation Pay 

Liability of $12 million, Resources Payable to Treasury of $11 million, and Capital Lease Liabilities of $7 million.

Trends in Liabilities

Total Liabilities increased $63 million or 1 percent, from $4.70 billion at September 30, 2012 to $4.77 billion at September 

30, 2013. Environmental and Disposal Liabilities increased by $97 million or 161 percent, from $60 million to $157 million, 

primarily due to a Prior Period Adjustment of $93 million to record the FY 2013 beginning liability balance as of October 1, 2012 

for asbestos-related cleanup costs for the National Institute of Standards and Technology (NIST) and NOAA in conformity with 

Technical Bulletin 2006-1, Recognition and Measurement of Asbestos-related Cleanup Costs. Unearned Revenue increased by 

$75 million or 5 percent, from $1.39 billion to $1.46 billion, primarily due to an increase in the United States Patent and Trademark 

Office’s (USPTO) Unearned Revenue, largely from patent fees. Accounts Payable increased by $61 million or 13 percent, from 

$453 million to $514 million, primarily due to an increase of $65 million in NOAA Accounts Payable With the Public largely 

resulting from improvements to NOAA’s accrual methodology for Accounts Payable. Federal Employee Benefits Liability 

increased $46 million or 5 percent, from $851 million to $897 million, primarily due to an increase of $34 million in the NOAA 

Corps Retirement System Liability and a $14 million increase in the Department’s Actuarial FECA Liability.
37 F Y 2013 AGENCY FINANCIAL REPORT

ANALYSIS OF FY 2013 FINANCIAL CONDITION AND RESULTS

The increases described above for Total Liabilities are offset in large part by two substantial decreases. Accrued Payroll and 

Annual Leave decreased by $113 million or 19 percent, from $581 million to $468 million, due to a significant reduction in the 

number of days accrued at September 30, 2013 as compared to September 30, 2012. Accrued Grants decreased by $99 million 

or 16 percent, from $636 million to $537 million, in part due to a decrease of $34 million in NIST Accrued Grants which largely 

resulted from enhancements in NIST’s accrual methodology for Accrued Grants and from payments made to grantees for costs 

incurred for NIST’s ARRA funds for construction of research facilities. Accrued Grants also decreased due to a $25 million 

decrease in NOAA’s Accrued Grants mainly due to less grantee costs exceeding NOAA’s grant disbursements, and due to a 

$16 million decrease in NTIA’s Accrued Grants resulting from accrual methodology enhancements and a $9 million decrease due 

to the winding-down of the Public Telecommunications Facilities, Planning and Construction program and programs under the 

Digital Television Transition and Public Safety Fund. 

Composition of and Trends in Financing Sources

The composition by percentage of the Department’s financing sources 

remained consistent from FY 2012 to FY 2013. The Department’s Financing 

Sources, shown on the Consolidated Statements of Changes in Net 

Position, are traditionally obtained primarily from Appropriations Received, 

Net of Reductions. Appropriations Received, Net of Reductions decreased 

by $145 million or 2 percent, from $7.88 billion for FY 2012 to $7.73 billion 

for FY 2013, mainly due to funding decreases of $560 million resulting 

from significant sequestrations in budgetary resources as well as from 

across-the-board rescissions of 1.877 percent and 0.2 percent in certain 

discretionary accounts. These decreases were offset by $326 million of 

appropriations received by NOAA in FY 2013 as a result of the Hurricane 

Sandy supplemental appropriation. On January 29, 2013, the President 

signed into law the Disaster Relief Appropriations Act, which provides a 

total of $50.5 billion in aid for Hurricane Sandy disaster victims and their communities. NOAA received $326 million of funds 

under the act in FY 2013 for Hurricane Sandy recovery and other disaster-related activities. Other typical Financing Sources include 

net transfers to and from other federal agencies without reimbursement, and imputed financing sources from costs absorbed 

by other federal agencies. Other Financing Sources decreased by $230 million or 56 percent, from $414 million to $183 million, 

mainly due to a decrease of $239 million in NOAA Transfers In/Out Without Reimbursement, Net with the National Aeronautics 

and Space Administration related to a satellite. Total Financing Sources decreased by $378 million or 4 percent, from $8.59 billion 

to $8.21 billion, primarily due to decreases resulting from sequestrations, rescissions, and transfers, offset by the new Hurricane 

Sandy supplemental appropriation funding for NOAA in FY 2013. 
38 F Y 2013 AGENCY FINANCIAL REPORT

ANALYSIS OF FY 2013 FINANCIAL CONDITION AND RESULTS

Composition of FY 2013 Net Cost of Operations

In FY 2013, Net Cost of Operations amounted to $8.49 billion, which consists of Gross Costs of $12.06 billion less Earned 

Revenue of $3.57 billion.

Theme 1, Economic Growth, with Net Program Costs of $2.78 billion for 

the Department (Gross Costs of $5.67 billion less Earned Revenue of 

$2.90 billion), is related to enabling economic growth through innovation 

and entrepreneurship, market development and commercialization, and 

trade promotion and compliance. Theme 1 includes Net Program Costs 

of $(226) million (Gross Costs of $2.49 billion less Earned Revenue 

of $2.72 billion) for USPTO patents and trademark programs. The 

issuance of patents provides incentives to invent and invest in new 

technology by allowing innovators the opportunity to benefit from their 

discoveries. Registration of trademarks assists businesses in protecting 

their investments and safeguards consumers against confusion and 

deception in the marketplace by providing notice of trademarks in 

use. Through dissemination of patent and trademark information, the 

Department promotes a global understanding of intellectual property 

protection and facilitates the development and sharing of new technologies worldwide. Theme 1 also includes Net Program 

Costs of $665 million (Gross Costs of $728 million less Earned Revenue of $63 million) for NIST’s Measurement and Standards 

Laboratories. These laboratories are the stewards of the Nation’s measurement infrastructure, and provide measurement 

methods, reference materials, test procedures, instrument calibrations, fundamental data, and standards that comprise essential 

tools for research, production, and buyer-seller transactions. NTIA’s programs and activities also support Theme 1, with Net 

Program Costs of $1.05 billion (Gross Costs of $1.07 billion less Earned Revenue of $22 million), including $974 million of Gross 

Costs for BTOP – ARRA. NTIA serves as the principal adviser to the President on domestic and international communications 

and information policy-making, promotes access to telecommunications services for all Americans and competition in domestic 

and international markets, manages all federal use of the electromagnetic spectrum and generally promotes efficient use of 

spectrum, and conducts telecommunications technology research, including standards-setting in partnership with business and 

other federal agencies. ITA’s programs and activities also support Theme 1, with Net Program Costs of $456 million (Gross Costs 

of $478 million less Earned Revenue of $22 million). ITA assists the export growth of small and medium-sized businesses, 

enforces U.S. trade laws and trade agreements, monitors and maintains trading relationships with established markets, promotes 

new business in emerging markets, and improves access to overseas markets by identifying and pressing for the removal of 

trade barriers. Theme 1 also includes Net Program Costs of $418 million (Gross Costs of $430 million less Earned Revenue of 

$12 million) for EDA. EDA helps distressed communities address problems associated with long-term economic distress, as well 

as sudden and severe economic dislocations including recovering from the economic impacts of natural disasters, the closure of 

military installations and other federal facilities, changing trade patterns, and the depletion of natural resources.

Theme 2, Science and Information, with Net Program Costs of $3.62 billion for the Department (Gross Costs of $4.14 billion less 

Earned Revenue of $523 million), includes Net Program Costs of $2.38 billion (Gross Costs of $2.50 billion less Earned Revenue 

of $125 million) for NOAA’s programs and activities related to 1) improving weather, water quality, and climate reporting and 

forecasting; and 2) enabling informed decision-making through an expanded understanding of the U.S. economy, society, and 

environment by providing data, standards, and services. NOAA develops and procures satellite systems, aircraft, and ships to 

provide information to determine weather patterns and predict weather forecasts. The Census Bureau also supports Theme 2, 

with Net Program Costs of $1.10 billion (Gross Costs of $1.43 billion less Earned Revenue of $329 million). The Census Bureau 

carries out the Decennial Census, periodic censuses, and demographic and other surveys, and prepares and releases targeted 

data products for economic and other programs.
39 F Y 2013 AGENCY FINANCIAL REPORT

ANALYSIS OF FY 2013 FINANCIAL CONDITION AND RESULTS

Theme 3, Environmental Stewardship, with Net Program Costs of $2.09 billion for the Department (Gross Costs of $2.24 billion 

less Earned Revenue of $150 million), includes Net Program Costs of $2.05 billion (Gross Costs of $2.21 billion less Earned 

Revenue of $152 million) related to NOAA’s efforts to promote economically-sound environmental stewardship and science, 

including developing sustainable and resilient fisheries, habitats, and species; supporting climate adaption and mitigation; and 

supporting coastal communities that are environmentally and economically sustainable.

Trends in Net Cost of Operations

The Theme 1 decrease in FY 2013 Net Program Costs over FY 2012 of $1.12 billion or 29 percent, from $3.90 billion to $2.78 billion, 

is primarily due to a decrease in Gross Costs of $681 million for NTIA’s BTOP – ARRA as grant costs are decreasing significantly 

as the program progresses; a decrease in Gross Costs of $260 million for NTIA’s Digital Television Transition and Public Safety 

Fund as programs under this fund are winding-down; and an increase in Earned Revenue of $293 million for USPTO due to 

increased fee rates implemented as a result of the Leahy-Smith America Invents Act of 2011. Theme 2 Net Program Costs 

decreased slightly by $16 million or 0.4 percent, from $3.64 billion in FY 2012 to $3.62 billion in FY 2013. Theme 3 Net Program 

Costs decreased slightly by $55 million or 3 percent, from $2.14 billion to $2.09 billion.

Composition of Selected Budgetary Information

The distribution by responsibility segment of the Department’s Obligations Incurred remained consistent from FY 2012 to 

FY 2013, while the distribution by responsibility segment of the Department’s Outlays, Gross changed somewhat. NTIA’s Outlays, 

Gross decreased from 13 percent of the Departmental total to 8 percent due to significant decreases in NTIA’s Outlays, Gross as 

explained in the Trends in Selected Budgetary Information section below.

Trends in Selected Budgetary Information

The Department’s Obligations Incurred slightly increased by $117 million or 1 percent, from $12.24 billion in FY 2012 to 

$12.35 billion in FY 2013. Outlays, Gross decreased by $977 million or 7 percent, from $14.75 billion to $13.78 billion. The 

decrease in Outlays, Gross is primarily due to a decrease of $627 million in Outlays, Gross under NTIA’s BTOP – ARRA, from 

$1.59 billion to $962 million, mainly due to a decrease in payments to grantees for prior years’ unpaid obligations. The decrease 

in Outlays, Gross is also due to a decrease of $199 million in Outlays, Gross under NTIA’s Digital Television Transition and Public 

Safety Fund, from $220 million to $21 million, as programs under this fund are winding-down.
40 F Y 2013 AGENCY FINANCIAL REPORT

ANALYSIS OF FY 2013 FINANCIAL CONDITION AND RESULTS
FINANCIAL SECTION

Summary of

Stewardship

Information

43 F Y 2013 AGENCY FINANCIAL REPORT

SUMMARY OF STEWARDSHIP INFORMATION

SUMMARY OF STEWARDSHIP INFORMATION

Stewardship Property, Plant, and Equipment (Stewardship PP&E)

T

he Department has certain resources entrusted to it and certain stewardship responsibilities assumed by the Department. 

The physical properties of Stewardship PP&E resemble those of the General PP&E that is capitalized traditionally in the 

financial statements of federal entities. Given the nature of these assets, federal standard-setting bodies have determined 

that valuation is unduly burdensome and matching costs with specific periods is not meaningful. Therefore, federal accounting 

standards require the disclosure of the nature and quantity of these assets. The National Oceanic and Atmospheric Administration 

(NOAA) is the primary bureau within the Department that maintains Stewardship PP&E, while the National Institute of Standards 

and Technology (NIST) and the Census Bureau also maintain Stewardship PP&E. 

NOAA maintains the following Stewardship PP&E: 13 National Marine Sanctuaries; Marine National Monuments (Papahãnaumokuãkea; Rose Atoll; Marianas Trench; and Pacific Remote Islands); Aleutian Islands Habitat Conservation Area; California’s 

Russian River Watershed Habitat Focus Area; Heritage Assets (Galveston Laboratory; National Marine Fisheries Service (NMFS) 

St. George Sealing Plant; NMFS Cottage M, St. George; NMFS St. Paul Old Clinic/Hospital; NMFS Aquarium; and Great Lakes 

Environmental Research Laboratory, Lake Michigan Field Station); and Collection-type Heritage Assets (primarily included in the 

NOAA Central Library, the Thunder Bay Sanctuary Research Collection, and the National Climatic Data Center Library).

NIST maintains Collection-type Heritage Assets under its Museum and History Program, which collects, conserves, and exhibits 

artifacts and scientific instruments, equipment and objects, and historical books and manuscripts. The Census Bureau maintains 

collection-type heritage assets that help illustrate the social, educational, and cultural heritage of the Census Bureau, including 

artifacts, gifts, and collectable assets such as publications, books, manuscripts, photographs, and maps.

Stewardship Investments

Stewardship investments are substantial investments made by the federal government for the benefit of the nation, but are not 

physical assets owned by the federal government. Though treated as expenses when incurred to determine the Department’s 

Net Cost of Operations, these items merit special treatment, so that users of federal financial reports know the extent of 

investments that are made for the long-term benefit of the nation.

Investments in Non-federal Physical Property: These investments are for the purchase, construction, or major renovation of physical 

property owned by state and local governments. The Economic Development Administration (EDA) and NOAA have significant 

investments in non-federal physical property. EDA’s investments in FY 2013 totaled $348 million and included its Public Works 

program, Economic Adjustment Assistance program, Global Climate Change Mitigation Incentive Fund, and Disaster Recovery. 

NOAA’s investments in FY 2013 totaled $5 million and included the National Estuarine Research Reserves and the Coastal and 

Estuarine Land Conservation Program.

Investments in Human Capital: These investments are for education and training programs that are intended to increase or 

maintain national economic productive capacity and produce outputs and outcomes that provide evidence of the constant or 

increasing national productive capacity. These investments exclude education and training expenses for federal civilian and 

military personnel. The most significant dollar investments in human capital are by NOAA, whose investments in FY 2013 

totaled $20 million and included the National Sea Grant College Program, the National Estuarine Research Reserve Program, the 

Educational Partnership Program, the Ernest F. Hollings Undergraduate Scholarship Program, the Southeast Fisheries Science 

Center’s Recruiting Training Research Program, the Northeast Fisheries Science Center Partnership Education Program, and the 

Northeast Fisheries Science Center’s Bradford E. Brown Student Internship Program.
44 F Y 2013 AGENCY FINANCIAL REPORT

SUMMARY OF STEWARDSHIP INFORMATION

Investments in Research and Development (R&D): These investments include investments in basic research, applied research, and 

development, which are made with the expectation of maintaining or increasing national economic productive capacity and/

or yielding other future economic or societal benefits. The only significant investments in R&D are by NIST and NOAA. NIST’s 

investments in FY 2013 totaled $625 million, including $604 million for NIST laboratories and $21 million for its Technology 

Innovation Program. NOAA’s investments in FY 2013 totaled $513 million, which primarily included $326 million for environmental 

and climate programs, and also included $187 million for Fisheries, Marine Operations and Maintenance, Aircraft Services, 

National Weather Service, and other programs.
FINANCIAL SECTION

Principal

Financial

Statements

47 F Y 2013 AGENCY FINANCIAL REPORT

PRINCIPAL FINANCIAL STATEMENTS

United States Department of Commerce Consolidated Balance Sheets

As of September 30, 2013 and 2012 (In Thousands)

FY 2013 FY 2012

ASSETS

Intragovernmental:

Fund Balance with Treasury (Notes 2 and 18) $ 18,002,497 $ 19,261,281

Accounts Receivable (Note 3) 92,197 116,009

Advances and Prepayments 91,641 208,368

Total Intragovernmental 18,186,335 19,585,658

Cash (Note 4) 5,806 4,834

Accounts Receivable, Net (Note 3) 64,130 104,941

Direct Loans and Loan Guarantees, Net (Note 5) 533,692 570,348

Inventory, Materials, and Supplies, Net (Note 6) 99,607 104,978

General Property, Plant, and Equipment, Net (Note 7) 11,103,844 10,000,512

Other (Note 8) 44,897 48,276

TOTAL ASSETS $ 30,038,311 $ 30,419,547

Stewardship Property, Plant, and Equipment (Note 23)

LIABILITIES

Intragovernmental:

Accounts Payable $ 150,275 $ 156,032

Debt to Treasury (Note 10) 575,603 554,281

Other

Resources Payable to Treasury 11,267 12,862

Unearned Revenue 313,926 332,923

Other (Note 11) 74,505 102,412

Total Intragovernmental 1,125,576 1,158,510

Accounts Payable 363,540 296,869

Loan Guarantee Liabilities (Notes 5 and 16) 516 518

Federal Employee Benefits (Note 12) 897,191 851,211

Environmental and Disposal Liabilities (Note 13) 156,673 59,945

Other

Accrued Payroll and Annual Leave 467,706 580,715

Accrued Grants 536,711 635,856

Capital Lease Liabilities (Note 14) 7,021 8,377

Unearned Revenue 1,147,196 1,053,580

Other (Note 11) 64,100 57,732

TOTAL LIABILITIES $ 4,766,230 $ 4,703,313

Commitments and Contingencies (Note 16) 

NET POSITION – FY 2012 Restated

Unexpended Appropriations

Unexpended Appropriations - Funds from Dedicated Collections $ - $ -

Unexpended Appropriations - All Other Funds 5,340,879 6,716,434

Cumulative Results of Operations

Cumulative Results of Operations - Funds from Dedicated Collections (Note 21) 10,033,602 9,904,756

Cumulative Results of Operations - All Other Funds 9,897,600 9,095,044

Total Net Position – Funds from Dedicated Collections $ 10,033,602 $ 9,904,756

Total Net Position – All Other Funds $ 15,238,479 $ 15,811,478

TOTAL NET POSITION $ 25,272,081 $ 25,716,234

TOTAL LIABILITIES AND NET POSITION $ 30,038,311 $ 30,419,547

The accompanying notes are an integral part of these financial statements.
48 F Y 2013 AGENCY FINANCIAL REPORT

PRINCIPAL FINANCIAL STATEMENTS

United States Department of Commerce Consolidated Statements of Net Cost

For the Years Ended September 30, 2013 and 2012 (Note 17) (In Thousands) 

FY 2013 FY 2012

Theme 1: Economic Growth

Gross Costs $ 5,674,809 $ 6,531,035

Less: Earned Revenue (2,896,650) (2,628,952)

Net Program Costs 2,778,159 3,902,083

Theme 2: Science and Information

Gross Costs 4,142,171 4,156,232

Less: Earned Revenue (522,512) (520,569)

Net Program Costs 3,619,659 3,635,663

Theme 3: Environmental Stewardship

Gross Costs 2,239,164 2,331,038

Less: Earned Revenue (149,947) (186,763)

Net Program Costs 2,089,217 2,144,275

NET COST OF OPERATIONS $ 8,487,035 $ 9,682,021

The accompanying notes are an integral part of these financial statements.
49 F Y 2013 AGENCY FINANCIAL REPORT

PRINCIPAL FINANCIAL STATEMENTS

United States Department of Commerce Consolidated Statements of Changes in Net Position 

For the Years Ended September 30, 2013 and 2012 (In Thousands)

FY 2013 FY 2012

Funds from 

Dedicated 

Collections

(Note 21) 

All Other 

Funds

Consolidated 

Total

Restated 

Funds from 

Dedicated 

Collections

(Note 21) 

Restated

All Other 

Funds

Consolidated 

Total

Cumulative Results Of Operations:

Beginning Balance $ 9,904,756 $ 9,095,044 $ 18,999,800 $ 10,018,759 $ 7,569,497 $ 17,588,256

Changes in Accounting Principle (Notes 7 and 13) - (169,319) (169,319) - - -

Beginning Balance, as Adjusted 9,904,756 8,925,725 18,830,481 10,018,759 7,569,497 17,588,256

Budgetary Financing Sources:

Appropriations Used - 9,096,654 9,096,654 - 10,270,400 10,270,400

Non-exchange Revenue 101,468 3,754 105,222 222,492 12,541 235,033

Donations and Forfeitures of Cash and 

 Cash Equivalents - 11,400 11,400 - 5,303 5,303

Transfers In/(Out) Without Reimbursement, Net 3,650 132,720 136,370 13,058 109,751 122,809

Rescissions/Sequestrations (Note 18) - - - (350) (17,848) (18,198)

Other Budgetary Financing Sources/(Uses), Net - 137 137 - 6,208 6,208

Other Financing Sources (Non-exchange):

Donations and Forfeitures of Property - 856 856 - 579 579

Transfers In/(Out) Without Reimbursement, Net - (56,353) (56,353) - 182,220 182,220

Imputed Financing Sources from Cost Absorbed 

 by Others 44,818 250,470 295,288 - 297,694 297,694

Other Financing Sources/(Uses), Net 350 (2,168) (1,818) 19,480 (27,963) (8,483)

Total Financing Sources 150,286 9,437,470 9,587,756 254,680 10,838,885 11,093,565

Net Cost of Operations (21,440) (8,465,595) (8,487,035) (368,683) (9,313,338) (9,682,021)

Net Change 128,846 971,875 1,100,721 (114,003) 1,525,547 1,411,544

Cumulative Results of Operations – Ending Balance 10,033,602 9,897,600 19,931,202 9,904,756 9,095,044 18,999,800

Unexpended Appropriations:

Beginning Balance - 6,716,434 6,716,434 - 9,219,657 9,219,657

Budgetary Financing Sources:

Appropriations Received (Note 18) - 8,293,875 8,293,875 - 7,884,258 7,884,258

Appropriations Transferred In/(Out), Net - 27,299 27,299 - 23,223 23,223

Rescissions/Sequestrations of Appropriations (Note 18) - (560,334) (560,334) - (5,450) (5,450)

Other Adjustments - (39,741) (39,741) - (134,854) (134,854)

Appropriations Used - (9,096,654) (9,096,654) - (10,270,400) (10,270,400)

Total Budgetary Financing Sources - (1,375,555) (1,375,555) - (2,503,223) (2,503,223)

Unexpended Appropriations – Ending Balance - 5,340,879 5,340,879 - 6,716,434 6,716,434

NET POSITION $ 10,033,602 $ 15,238,479 $ 25,272,081 $ 9,904,756 $ 15,811,478 $ 25,716,234

The accompanying notes are an integral part of these financial statements.
50 F Y 2013 AGENCY FINANCIAL REPORT

PRINCIPAL FINANCIAL STATEMENTS

United States Department of Commerce Combined Statements of Budgetary Resources 

For the Years Ended September 30, 2013 and 2012 (Note 18) (In Thousands)

FY 2013 FY 2012

Budgetary

Non-budgetary Credit 

Program Financing Accounts Budgetary

Non-budgetary Credit 

Program Financing Accounts

BUDGETARY RESOURCES:

Unobligated Balance, Brought Forward, October 1 $ 10,352,397 $ 2 $ 9,995,115 $ 86

Adjustments to Unobligated Balance, Brought Forward (157) - 3 (1)

Unobligated Balance, Brought Forward, October 1, as Adjusted 10,352,240 2 9,995,118 85

Actual Recoveries of Prior-years Unpaid Obligations 253,455 6,355 298,066 4,561

Actual Nonexpenditure Transfers of Unobligated Balance, Net 10,647 - 17,329 -

Borrowing Authority Withdrawn - (6,355) - (4,561)

Other Changes in Unobligated Balance, Net (38,198) - (134,689) -

Unobligated Balance From Prior-years Budget Authority, Net 10,578,144 2 10,175,824 85

Appropriations 7,907,642 - 8,035,812 -

Borrowing Authority 251,231 48,029 2,538 71,668

Spending Authority From Offsetting Collections 4,232,937 38,558 4,270,868 33,701

TOTAL BUDGETARY RESOURCES $ 22,969,954 $ 86,589 $ 22,485,042 $ 105,454

STATUS OF BUDGETARY RESOURCES:

Obligations Incurred $ 12,268,184 $ 86,582 $ 12,132,645 $ 105,452

Unobligated Balance, End of Year

Apportioned 1,499,168 - 1,157,028 -

Exempt From Apportionment 3,848 - 136,995 -

Unapportioned 9,198,754 7 9,058,374 2

Total Unobligated Balance, End of Year 10,701,770 7 10,352,397 2

TOTAL STATUS OF BUDGETARY RESOURCES $ 22,969,954 $ 86,589 $ 22,485,042 $ 105,454

CHANGE IN UNPAID OBLIGATED BALANCE, NET:

Unpaid Obligations:

Unpaid Obligations, Brought Forward, October 1 $ 8,348,384 $ 130,136 $ 11,152,608 $ 145,079

Adjustments to Unpaid Obligations, Brought Forward 157 - 153 4

Obligations Incurred 12,268,184 86,582 12,132,645 105,452

Outlays, Gross (13,707,047) (70,970) (14,638,956) (115,838)

Actual Recoveries of Prior-years Unpaid Obligations (253,455) (6,355) (298,066) (4,561)

UNPAID OBLIGATIONS, END OF YEAR $ 6,656,223 $ 139,393 $ 8,348,384 $ 130,136

Uncollected Customer Payments: 

Uncollected Customer Payments, Brought Forward, October 1 $ (608,330) $ (494) $ (646,248) $ (390)

Adjustments to Uncollected Customer Payments, Brought Forward - - (158) (1)

Change in Uncollected Customer Payments 139,541 27 38,076 (103)

UNCOLLECTED CUSTOMER PAYMENTS, END OF YEAR $ (468,789) $ (467) $ (608,330) $ (494)

Unpaid Obligated Balance, Net, Brought Forward, October 1 $ 7,740,054 $ 129,642 $ 10,506,360 $ 144,689

Unpaid Obligated Balance, Net, End of Year $ 6,187,434 $ 138,926 $ 7,740,054 $ 129,642

BUDGET AUTHORITY, NET:

Budget Authority, Gross $ 12,391,810 $ 86,587 $ 12,309,218 $ 105,369

Actual Offsetting Collections (4,522,862) (98,154) (4,304,870) (104,012)

Change in Uncollected Customer Payments 139,541 27 38,076 (103)

BUDGET AUTHORITY, NET $ 8,008,489 $ (11,540) $ 8,042,424 $ 1,254

OUTLAYS, NET:

Outlays, Gross $ 13,707,047 $ 70,970 $ 14,638,956 $ 115,838

Actual Offsetting Collections (4,522,862) (98,154) (4,304,870) (104,012)

Outlays, Net 9,184,185 (27,184) 10,334,086 11,826

Distributed Offsetting (Receipts)/Outlays, Net (46,853) - (62,667) -

AGENCY OUTLAYS, NET $ 9,137,332 $ (27,184) $ 10,271,419 $ 11,826

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

Notes to

the Financial

Statements

53 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Notes to the Financial Statements

(All Tables are Presented in Thousands)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A Reporting Entity 

T

he Department of Commerce (the Department) is a cabinet-level agency of the Executive Branch of the U.S. government. 

Established in 1903 to promote U.S. business and trade, the Department’s broad range of responsibilities includes predicting 

the weather, granting patents and registering trademarks, measuring economic growth, gathering and disseminating 

statistical data, expanding U.S. exports, developing innovative technologies, helping local communities improve their economic 

development capabilities, promoting minority entrepreneurial activities, and monitoring the stewardship of national assets. 

The Department is composed of 12 bureaus, the Emergency Steel Loan Guarantee Program, and Departmental Management. 

For the Consolidating Statements of Net Cost (see Note 17), the Department’s entities have been grouped together as follows:

● National Oceanic and Atmospheric Administration (NOAA)

● U.S. Patent and Trademark Office (USPTO)

● Economics and Statistics Administration (ESA) — based on organizational structure

● Bureau of Economic Analysis (BEA)

● Census Bureau

● National Institute of Standards and Technology (NIST) 

● National Telecommunications and Information Administration (NTIA)1

● Others

● Bureau of Industry and Security (BIS) 

● Economic Development Administration (EDA)

● Emergency Steel Loan Guarantee Program (ELGP)

● International Trade Administration (ITA)

● Minority Business Development Agency (MBDA)

● National Technical Information Service (NTIS)

1 The Middle Class Tax Relief and Job Creation Act of 2012 created the First Responder Network Authority as an independent authority within 

NTIA, to provide emergency responders with the first high-speed, nationwide network dedicated to public safety.
54 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

● Departmental Management (DM)

● Franchise Fund

● Gifts and Bequests (G&B)

● Herbert C. Hoover Building Renovation Project (HCHB)

● Office of Inspector General (OIG)

● Salaries and Expenses (S&E)

● Working Capital Fund (WCF)

B Basis of Accounting and Presentation

The Department’s fiscal year ends September 30. These financial statements reflect both accrual and budgetary accounting 

transactions. Under the accrual method of accounting, revenues are recognized when earned and expenses are recognized 

when incurred, without regard to the receipt or payment of cash. Budgetary accounting is designed to recognize the obligation 

of funds according to legal requirements, which in many cases is made prior to the occurrence of an accrual-based transaction. 

Budgetary accounting is essential for compliance with legal constraints and controls over the use of federal funds. 

These financial statements have been prepared from the accounting records of the Department in conformance with U.S. 

generally accepted accounting principles (GAAP) and the form and content for entity financial statements specified by the Office 

of Management and Budget (OMB) in Revised Circular A-136, Financial Reporting Requirements. GAAP for federal entities 

are the standards prescribed by the Federal Accounting Standards Advisory Board, which is the official body for setting the 

accounting standards of the U.S. government.

Throughout these financial statements, intragovernmental assets, liabilities, earned revenue, and costs have been classified 

according to the type of entity with whom the transactions were made. Intragovernmental assets and liabilities are those from 

or to other federal entities. Intragovernmental earned revenue represents collections or accruals of revenue from other federal 

entities, and intragovernmental costs are payments or accruals to other federal entities.

The Department has allocation transfer transactions with other federal agencies as both a transferring (parent) entity and as a 

receiving (child) entity. Allocation transfers are legal delegations by one department of its authority to obligate budget authority 

and outlay funds to another department. A separate fund account (allocation account) is created in the U.S. Department of the 

Treasury (Treasury) as a subset of the parent fund account for tracking and reporting purposes. All allocation transfers of balances 

are credited to this account, and subsequent obligations and outlays incurred by the child entity are charged to this allocation 

account as they execute the delegated activity on behalf of the parent entity. Generally, all financial activity related to these 

allocation transfers (e.g., budget authority, obligations, and outlays) is reported in the financial statements of the parent entity, 

from which the underlying legislative authority, appropriations, and budget apportionments are derived. EDA allocates funds, 

as the parent, to the U.S. Department of Agriculture’s Rural Development Administration. Therefore, all financial activity related 

to these EDA funds are reported in the Department’s financial statements. NOAA, EDA, the Census Bureau, and BEA have 

received allocation transfers, as the child, from the U.S. General Services Administration (GSA), U.S. Environmental Protection 

Agency, Delta Regional Authority, Appalachian Regional Commission, and the Northern Border Regional Commission. Activity 

relating to these child allocation transfers is not reported in the Department’s financial statements, except that the Department 

has recognized Imputed Costs and Imputed Financing Sources From Cost Absorbed by Others for expenses, as the child, under 

GSA’s Federal Buildings Fund.
55 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

C Funds from Dedicated Collections

Effective FY 2013, the Department implemented Statement of Federal Financial Accounting Standards (SFFAS) 43, Funds from 

Dedicated Collections: Amending SFFAS 27, Identifying and Reporting Earmarked Funds, changing the name and description of 

Earmarked Funds. The financial statements affected by the change are the Consolidated and Consolidating Balance Sheets (Net 

Position section), and the Consolidated Statements of Changes in Net Position. 

Funds from Dedicated Collections are financed by specifically identified revenues, often supplemented by other financing sources 

that are originally provided to the federal government by a non-federal source, which remain available over time. These specifically 

identified revenues and other financing sources are required by statute to be used for designated activities, benefits, or purposes, 

and must be accounted for separately from the government’s general revenues.

Funds from Dedicated Collections include general funds, public enterprise revolving funds (not including credit reform financing 

funds), special funds, and a trust fund. (See Note 21, Funds from Dedicated Collections.)

In accordance with SFFAS 43, Funds from Dedicated Collections are restated for the comparative FY 2012 financial statements 

and Note 21.

D Elimination of Intra-entity and Intra-Departmental Transactions and Balances

Transactions and balances within a reporting entity (intra-entity) have been eliminated from the financial statements, except 

as noted below. Transactions and balances among the Department’s entities (intra-Departmental) have been eliminated from 

the Consolidated Balance Sheets, the Consolidated Statements of Net Cost, and the Consolidated Statements of Changes in 

Net Position. The Statements of Budgetary Resources are presented on a combined basis; therefore, intra-Departmental and 

intra-entity transactions and balances have not been eliminated from these statements.

E Fund Balance with Treasury

Fund Balance with Treasury is the aggregate amount of funds in the Department’s accounts with Treasury. Deposit Funds include 

amounts held in customer deposit accounts.

Treasury processes cash receipts and disbursements for the Department’s domestic operations. Cash receipts and disbursements 

for the Department’s overseas operations are primarily processed by the U.S. Department of State’s financial service centers.

F Accounts Receivable, Net

Accounts Receivable are recognized primarily when the Department performs reimbursable services or sells goods. Accounts 

Receivable are reduced to net realizable value by an Allowance for Uncollectible Accounts. This allowance is estimated periodically 

using methods such as the identification of specific delinquent receivables, and the analysis of aging schedules and historical 

trends adjusted for current market conditions.
56 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

G Advances and Prepayments

Advances are payments the Department has made to cover a part or all of a grant recipient’s anticipated expenses, or are advance 

payments for the cost of goods and services to be acquired. For grant awards, the recipient is required to periodically (monthly 

or quarterly) report the amount of costs incurred. Prepayments are payments the Department has made to cover certain periodic 

expenses before those expenses are incurred, such as subscriptions and rent. Advances and Prepayments are included in 

Other Assets.

H Direct Loans and Loan Guarantees, Net

A direct loan is recorded as a receivable after the Department disburses funds to a borrower. The Department also makes loan 

guarantees with respect to the payment of all or part of the principal or interest on debt obligations of non-federal borrowers to 

non-federal lenders. A borrower-defaulted loan guaranteed by the Department is recorded as a receivable from the borrower after 

the Department disburses funds to the lender. 

Interest Receivable generally represents uncollected interest income earned on loans. For past-due loans, only up to 180 days 

of interest income is generally recorded. 

Foreclosed Property is acquired primarily through foreclosure and voluntary conveyance, and is recorded at the fair market value 

at the time of acquisition. Foreclosed Property is adjusted to the current fair market value each fiscal year-end.

Direct Loans and Loan Guarantees Obligated before October 1, 1991 (pre-FY 1992): Loans Receivable are reduced by an Allowance for Loan 

Losses, which is based on an analysis of each loan’s outstanding balance. The value of each receivable, net of any Allowance for 

Loan Losses, is supported by the values of pledged collateral and other assets available for liquidation, and by the Department’s 

analysis of financial information of parties against whom the Department has recourse for the collection of these receivables. 

The Economic Development Revolving Fund is required to make annual interest payments to Treasury after each fiscal year-end, 

based on its outstanding receivables as of September 30. 

Direct Loans and Loan Guarantees Obligated after September 30, 1991 (post-FY 1991): Post-FY 1991 obligated direct loans and loan 

guarantees and the resulting receivables are governed by the Federal Credit Reform Act of 1990. 

For a direct or guaranteed loan disbursed during a fiscal year, a subsidy cost is initially recognized. Subsidy costs are intended 

to estimate the long-term cost to the U.S. government of its loan programs. The subsidy cost equals the present value of 

estimated cash outflows over the life of the loan, minus the present value of estimated cash inflows, discounted at the applicable 

Treasury interest rate. Administrative costs such as salaries are not included in the subsidy costs. Subsidy costs can arise from 

interest rate differentials, interest subsidies, delinquencies and defaults, loan origination and other fees, and other cash flows. 

The Department calculates its subsidy costs based on a model created and provided by OMB. 

A Loan Receivable is recorded at the present value of the estimated cash inflows less cash outflows. The difference between 

the outstanding principal of the loan and the present value of its net cash inflows is recorded as the Allowance for Subsidy Cost. 

A subsidy reestimate is normally performed annually, as of September 30. The subsidy reestimate takes into account all factors 

that may have affected the estimated cash flows. Any adjustment resulting from the reestimate is recognized as a subsidy 

expense (or a reduction in subsidy expense). The portion of the Allowance for Subsidy Cost related to subsidy modifications and 

reestimates is calculated annually, as of September 30.

The amount of any downward subsidy reestimates as of September 30 must be disbursed to Treasury in the subsequent 

fiscal year. Appropriations are normally obtained in the following fiscal year for any upward subsidy reestimates.
57 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

I Inventory, Materials, and Supplies, Net

Inventory, Materials, and Supplies, Net are stated at the lower of cost or net realizable value primarily under the average, 

weighted-average, and first-in, first-out methods, and are adjusted for the results of physical inventories. Inventory, Materials, 

and Supplies are expensed when consumed. There are no restrictions on their sale, use, or disposition.

J General Property, Plant, and Equipment, Net

General Property, Plant, and Equipment, Net (General PP&E) is composed of capital assets used in providing goods or services. 

General PP&E is stated at full cost, including all costs related to acquisition, delivery, and installation, less Accumulated 

Depreciation. General PP&E also includes assets acquired through capital leases, which are initially recorded at the amount 

recognized as a liability for the capital lease at its inception. 

Capitalization Threshold: The Department’s general policy is to capitalize General PP&E if the initial acquisition price is $25 thousand 

or more and the useful life is two years or more. NOAA, NIST and USPTO are an exception to this policy, based on a cost vs. 

benefits and materiality analysis given the size of these bureaus, having a capitalization threshold of $200 thousand for NOAA, 

and $50 thousand for NIST and USPTO. General PP&E with an acquisition cost less than the capitalization threshold is expensed 

when purchased. All bureaus other than NOAA have a personal property bulk purchase capitalization threshold of $250 thousand, 

and NOAA has a personal property bulk purchase capitalization threshold of $1 million.

Depreciation: Depreciation is recognized on a straight-line basis over the estimated useful life of the asset with the exception of 

leasehold improvements, which are depreciated over the remaining life of the lease or over the useful life of the improvement, 

whichever is shorter. Land and Construction-in-progress are not depreciated.

Real Property: GSA provides most of the facilities in which the Department operates, and generally charges rent based on 

comparable commercial rental rates. Accordingly, GSA-owned properties are not included in the Department’s General PP&E. 

The Department’s real property primarily consists of facilities for NIST and NOAA. Land Improvements consist of a retaining wall 

to protect against shoreline erosion.

Construction-in-progress: Costs for the construction, modification, or modernization of General PP&E are initially recorded as 

Construction-in-progress. The Department’s construction-in-progress consists primarily of satellites under development for 

NOAA, and major laboratory renovations and construction projects under development for NIST. Upon completion of the work, 

the costs are transferred to the appropriate General PP&E account.

For the completion of satellites, the Department has elected to change its method of accounting for transferring costs from 

Construction-in-progress to completed General PP&E. Historically, the Department generally views satellites as operational when 

all NOAA’s instruments associated with satellites are declared operational; however, in certain cases, effective for FY 2013, NOAA 

will declare certain instruments operational if the instruments are not interdependent.

K Notes Receivable

Notes Receivable, included in Other Assets, arise through the NOAA sale of foreclosed property to non-federal parties. 

The property is used as collateral, and an Allowance for Uncollectible Amounts is established if the net realizable value of 

the collateral is less than the outstanding balance of the Notes Receivable. An analysis of the collectability of receivables 

is performed periodically. Any gains realized through the sale of foreclosed property are initially deferred and recognized in 

proportion to the percentage of principal repaid.
58 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

L Non-entity Assets 

Non-entity assets are assets held by the Department that are not available for use in its operations, and for which a liability has 

been recorded. Non-entity Fund Balance with Treasury includes customer deposits held by the Department until customer orders 

are received, and monies payable to the Treasury General Fund for custodial activity and loan programs. Non-entity Direct Loans 

and Loan Guarantees, Net includes EDA’s Drought Loan Portfolio; the amount of the portfolio is also recorded as Resources 

Payable to Treasury. 

M Liabilities

A liability for federal accounting purposes is a probable and measurable future outflow or other sacrifice of resources as a result 

of past transactions or events. 

Accounts Payable: Accounts Payable are amounts primarily owed for goods, services, or capitalized assets received, progress on 

contract performance by others, and other expenses due. 

Debt to Treasury: The Department has borrowed funds from Treasury through the Fisheries Finance Financing Account for 

various NOAA direct loan programs, through the Fishing Vessel Obligation Guarantee (FVOG) loan guarantee program, and 

through NTIA’s Public Safety Trust Fund, and State and Local Implementation Fund. To simplify interest calculations, the 

Fisheries Finance Financing Account and FVOG borrowings are dated October 1. Interest rates are based on a weighted 

average of rates during the term of the borrowed funds. The weighted average rate for each cohort’s borrowing is recalculated 

at the end of each fiscal year during which disbursements are made. Annual interest payments on unpaid principal balances 

as of September 30 are required. Principal repayments are required only at maturity, but are permitted at any time during the 

term of the loan. The Department’s primary financing source for repayments of Debt to Treasury is the collection of principal 

on the associated Loans Receivable, and deposits from public safety communications and electromagnetic spectrum auction 

proceeds. Balances of any borrowed but undisbursed Fisheries Finance Financing Account and FVOG funds will earn interest 

at the same rate used in calculating interest expense. The amounts borrowed by NTIA are interest-free. The amounts 

reported for Debt to Treasury include accrued interest payable.

Resources Payable to Treasury: Resources Payable to Treasury includes liquidating fund assets in excess of liabilities that are being 

held as working capital for the Economic Development Revolving Fund loan programs and the FVOG loan guarantee program. 

EDA’s Drought Loan Portfolio is a non-entity asset; therefore, the amount of the Portfolio is also recorded as Resources Payable 

to Treasury. The Drought Loan Portfolio collections are returned to the Treasury General Fund annually, and the liability is reduced 

accordingly. 

Unearned Revenue: Unearned Revenue is the portion of monies received for which goods and services have not yet been provided 

or rendered by the Department. Revenue is recognized as reimbursable costs are incurred, and the Unearned Revenue balance 

is reduced accordingly. Unearned Revenue also includes the balances of customer deposit accounts held by the Department. 

The intragovernmental Unearned Revenue primarily relates to monies collected in advance under reimbursable agreements. 

The majority of the Unearned Revenue with the public represents patent and trademark application and user fees that are 

pending action.

Accrued FECA Liability: The Federal Employees Compensation Act (FECA) provides income and medical cost protection to covered 

federal civilian employees injured on the job, to employees who have incurred work-related occupational diseases, and to 

beneficiaries of employees whose deaths are attributable to job-related injuries or occupational diseases. The FECA program 

is administered by the U.S. Department of Labor (DOL), which pays valid claims against the Department and subsequently 

seeks reimbursement from the Department for these paid claims. Accrued FECA Liability, included in Intragovernmental Other 

Liabilities, represents amounts due to DOL for claims paid on behalf of the Department.
59 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Loan Guarantee Liabilities: Post-FY 1991 obligated loan guarantees are governed by the Federal Credit Reform Act of 1990. For a 

guaranteed loan disbursed during a fiscal year, a subsidy cost is initially recognized. Subsidy costs are intended to estimate the 

long-term cost to the U.S. government of its loan programs. The subsidy cost equals the present value of estimated cash outflows 

over the lives of the loans, minus the present value of estimated cash inflows, discounted at the applicable Treasury interest rate. 

Administrative costs such as salaries are not included in the subsidy costs. Subsidy costs can arise from interest rate differentials, 

interest subsidies, delinquencies and defaults, loan origination and other fees, and other cash flows. The Department calculates 

its subsidy costs based on a model created and provided by OMB. 

For a non-acquired guaranteed loan outstanding, the present value of the estimated cash inflows less cash outflows of the loan 

guarantee is recognized as a Loan Guarantee Liability. The Loan Guarantee Liability is normally reestimated annually each fiscal 

year, as of September 30. The subsidy reestimate takes into account all factors that may have affected the estimated cash flows. 

Any adjustment resulting from the reestimate is recognized as a subsidy expense (or a reduction in subsidy expense).

Federal Employee Benefits:

Actuarial FECA Liability: Actuarial FECA Liability represents the liability for future workers’ compensation (FWC) benefits, which 

includes the expected liability for death, disability, medical, and miscellaneous costs for approved cases. The liability is determined 

by DOL annually, as of September 30, using a method that utilizes historical benefits payment patterns related to a specific 

incurred period to predict the ultimate payments related to that period. For FY 2013, projected annual payments are discounted 

to present value based on OMB’s interest rate assumptions which are interpolated to reflect the average duration in years for 

income payments and medical payments. In FY 2012, these projected annual benefit payments were discounted to present 

value using OMB’s economic assumptions for ten-year Treasury notes and bonds.

To provide more specifically for the effects of inflation on the liability for FWC benefits, wage inflation factors (Cost of Living 

Allowance) and medical inflation factors (Consumer Price Index - Medical) are applied to the calculation of projected future 

benefits. The actual rates for these factors are also used to adjust the methodology’s historical payments to current-year constant 

dollars.

The model’s resulting projections are analyzed by DOL to ensure that the amounts are reliable. The analysis is based on four 

tests: 1) a sensitivity analysis of the model to economic assumptions; 2) a comparison of the percentage change in the liability 

amount to the percentage change in the actual incremental payments; 3) a comparison of the incremental paid losses per case (a 

measure of case severity) in charge back-year to the average pattern observed during the most current three charge back-years; 

and 4) a comparison of the estimated liability per case in the projection to the average pattern for the projections of the most 

recent three years.

NOAA Corps Retirement System Liability and NOAA Corps Post-retirement Health Benefits Liability: These liabilities are recorded at 

the actuarial present value of projected benefits, calculated annually, as of September 30. The actuarial cost method used to 

determine these liabilities is the aggregate entry age normal method. Under this method, the actuarial present value of projected 

benefits is allocated on a level basis over the earnings or the service of the group between entry age and assumed exit ages. 

The portion of this actuarial present value allocated to the valuation year is called the normal cost. For purposes of calculating the 

normal cost, certain actuarial assumptions utilized for the actual valuation of U.S. Military Retirement System are used. Actuarial 

gains and losses, and prior and past service costs, if any, are recognized immediately in the fiscal year they occur, without 

amortization. The medical claim rates used for the NOAA Corps Post-retirement Health Benefits Liability actuarial calculations 

are based on the claim rates used for the U.S. Department of Defense Medicare-Eligible Retiree Health Care Fund actuarial 

valuations. Demographic assumptions appropriate to covered personnel are also used. For background information about these 

plans, see Note 1.Q, Employee Retirement Benefits.
60 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Environmental and Disposal Liabilities: The Department has incurred asbestos-related cleanup costs related to the costs of 

removing, containing, and/or disposing of asbestos-containing materials from property, plant, and equipment; specifically, from 

facilities owned by NIST and NOAA, and from ships owned by NOAA. Effective FY 2013, as described in Note 13, Environmental 

and Disposal Liabilities, the Department implemented Technical Bulletin 2006-1, Recognition and Measurement of Asbestosrelated Cleanup Costs, which clarifies required recognition of liabilities and expenses for asbestos-related cleanup costs. The 

Department has estimated its liabilities for asbestos-related cleanup costs for both friable and nonfriable asbestos-related cleanup 

costs. Estimates of asbestos-related cleanup costs are reviewed periodically, and updated as appropriate, to account for actual or 

estimated increases or decreases in asbestos-containing materials, material changes due to inflation or deflation, and changes in 

regulations, plans, and/or technology. 

NIST operates a nuclear reactor licensed by the U.S. Nuclear Regulatory Commission, in accordance with NIST’s mission of 

setting standards and examining new technologies. The Department currently estimates the cost of decommissioning this facility 

to be $75.3 million. The NIST decommissioning estimate includes an assumption that an offsite waste disposal facility will 

become available, when needed, estimated in 2029. Currently, an offsite disposal location has not been identified, and the NIST 

environmental liability cost estimate includes an amount approved by the Nuclear Regulatory Commission for offsite waste 

disposal. The total estimated decommissioning cost is being accrued on a straight-line basis over the expected life of the facility. 

Under current legislation, funds to cover the expense of decommissioning the facility’s nuclear reactor should be requested in a 

separate appropriation when the decommissioning date becomes relatively certain.

The Department has incurred cleanup costs related to the costs of removing, containing, and/or disposing of hazardous waste 

from facilities used by NOAA. The Department has estimated its liabilities for environmental cleanup costs at all NOAA-used 

facilities, including the decommissioning of ships. The largest of NOAA’s environmental liabilities relates to the cleanup of the 

Pribilof Islands in Alaska, which contains waste from the U.S. Department of Defense’s use during World War II. The Department 

does not recognize a liability for environmental cleanup costs for NOAA-used facilities that are less than $25 thousand per project. 

When an estimate of cleanup costs includes a range of possible costs, the most likely cost is reported. When no cost is more 

likely than another, the lowest estimated cost in the range is reported. The liability is reduced as progress payments are made.

The Department may have liabilities associated with lead-based paints (LBP) at certain NOAA facilities.The Department has 

scheduled surveys to assess the potential for liabilities for LBP contamination. All known issues, however, are contained, and 

NOAA facilities meet current environmental standards. No cost estimates are presently available for facilities that have not yet 

been assessed for LBP issues.

Accrued Payroll and Annual Leave: These categories include salaries, wages, and other compensation earned by employees, but 

not disbursed as of September 30. Annually, as of September 30, the balances of Accrued Annual Leave are adjusted to reflect 

current pay rates. Sick leave and other types of non-vested leave are expensed as taken. 

Accrued Grants: The Department administers a diverse array of financial assistance programs and projects concerned with the entire 

spectrum of business and economic development efforts that promote activities such as expanding U.S. exports, creating jobs, 

contributing to economic growth, developing innovative technologies, promoting minority entrepreneurship, protecting coastal 

oceans, providing weather services, managing worldwide environmental data, and using telecommunications and information 

technologies to better provide public services. Disbursements of funds under the Department’s grant programs are generally 

made when requested by grantees. These drawdown requests may be received and fulfilled before grantees make the program 

expenditures. When the Department has disbursed funds but the grant recipient has not yet reported expenditures, these 

disbursements are recorded as advances. If a recipient, however, reports program expenditures that have not been advanced 

by the Department by September 30, such amounts are recorded as grant expenses and grants payable as of September 30. 
61 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Capital Lease Liabilities: Capital leases are leases for property, plant, and equipment that transfer substantially all the benefits and 

risks of ownership to the Department.

ITA Foreign Service Nationals’ Voluntary Separation Pay: This liability, included in Other Liabilities, is based on the salaries and benefit 

statuses of employees in countries where governing laws require a provision for separation pay.

Contingent Liabilities and Contingencies: A contingency is an existing condition, situation, or set of circumstances involving 

uncertainty as to possible gain or loss. The uncertainty will ultimately be resolved when one or more future events occur or fail 

to occur. A contingent liability (included in Other Liabilities) and an expense are recognized when a past event has occurred, and 

a future outflow or other sacrifice of resources is measurable and probable. A contingency is considered probable when the 

future confirming event or events are more likely than not to occur, with the exception of pending or threatened litigation and 

unasserted claims. For pending or threatened litigation and unasserted claims, the future confirming event or events are likely 

to occur. A contingency is disclosed in the Notes to the Financial Statements if any of the conditions for liability recognition are 

not met and there is at least a reasonable possibility that a loss or an additional loss may have been incurred. A contingency is 

considered reasonably possible when the chance of the future confirming event or events occurring is more than remote but less 

than probable. A contingency is not recognized as a contingent liability and an expense nor disclosed in the Notes to the Financial 

Statements when the chance of the future event or events occurring is remote. A contingency is considered remote when the 

chance of the future event or events occurring is slight.

Liabilities Not Covered by Budgetary Resources: These are liabilities for which congressional actions are needed before budgetary 

resources can be provided. The Department anticipates that liabilities not covered by budgetary resources will be funded from 

future budgetary resources when required. These amounts are detailed in Note 15.

Under accrual accounting, the expense for annual leave is recognized when the leave is earned. However, for most of the 

Department’s fund groups, appropriations are provided to pay for the leave when it is taken. As a result, budgetary resources do 

not cover a large portion of Accrued Annual Leave.

The Department generally receives budgetary resources for Federal Employee Benefits when they are needed for disbursements.

N Commitments

Commitments are preliminary actions that will ultimately result in an obligation to the U.S. government if carried through, such 

as purchase requisitions, estimated travel orders, or unsigned contracts/grants. Major long-term commitments are disclosed in 

Note 16, Commitments and Contingencies. 

O Net Position

Net Position is the residual difference between assets and liabilities, and is composed of Unexpended Appropriations and 

Cumulative Results of Operations. 

Unexpended Appropriations represent the total amount of unexpended budget authority that is classified as appropriations, both 

obligated and unobligated. Unexpended Appropriations is increased for Appropriations Received, is reduced for Appropriations 

Used, and is adjusted for other changes in appropriations, such as transfers and rescissions. Cumulative Results of Operations 

is the net result of the Department’s operations since inception.
62 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

P Revenues and Other Financing Sources

Appropriations Used: Most of the Department’s operating funds are provided by congressional appropriations of budget authority. 

The Department receives appropriations on annual, multiple-fiscal year, and no-year bases. Upon expiration of an annual or 

multiple-fiscal year appropriation, the obligated and unobligated balances retain their fiscal year identity, and are maintained 

separately within an expired account. The unobligated balances can be used to make legitimate obligation adjustments, but are 

otherwise not available for expenditures. Annual and multiple-fiscal year appropriations are canceled at the end of the fifth fiscal 

year after expiration. No-year appropriations do not expire. Appropriations of budget authority are recognized as used when 

costs are incurred, for example, when goods and services are received or benefits and grants are provided. 

Exchange and Non-exchange Revenue: The Department classifies revenue as either exchange revenue or non-exchange revenue. 

Exchange revenue is derived from transactions in which both the government and the other party receive value, including 

processing patents and registering trademarks, the sale of weather data, nautical charts, and navigation information, and other 

sales of goods and services. This revenue is presented on the Department’s Consolidated Statements of Net Cost, and serves 

to reduce the reported cost of operations borne by the taxpayer. Non-exchange revenue is derived from the government’s 

sovereign right to demand payment, including fines for violations of fisheries and marine protection laws. Non-exchange revenue 

is recognized when a specifically identifiable, legally enforceable claim to resources arises, and to the extent that collection 

is probable and the amount is reasonably estimable. This revenue is not considered to reduce the cost of the Department’s 

operations and is therefore reported on the Consolidated Statements of Changes in Net Position. 

In certain cases, law or regulation sets the prices charged by the Department, and, for program and other reasons, the Department 

may not receive full cost (e.g., the processing of patents and registering of trademarks, and the sale of weather data, nautical 

charts, and navigation information). Prices set for products and services offered through the Department’s working capital funds 

are intended to recover the full costs incurred by these activities. 

Imputed Financing Sources from Cost Absorbed by Others (and Related Imputed Costs): In certain cases, operating costs of the Department are paid for in full or in part by funds appropriated to other federal entities. For example, Civil Service Retirement System 

pension benefits for applicable Departmental employees are paid for in part by the U.S. Office of Personnel Management (OPM), 

and certain legal judgments against the Department are paid for in full from the Judgment Fund maintained by Treasury. 

The Department includes applicable Imputed Costs on the Consolidated Statements of Net Cost. In addition, an Imputed 

Financing Source from Cost Absorbed by Others is recognized on the Consolidated Statements of Changes in Net Position.

Transfers In/(Out): Intragovernmental transfers of budget authority (i.e., appropriated funds) or of assets without reimbursement 

are recorded at book value.

Q Employee Retirement Benefits

Civil Service Retirement System (CSRS) and Federal Employees Retirement System (FERS): Most employees of the Department participate 

in either the CSRS or FERS defined-benefit pension plans. FERS went into effect on January 1, 1987. FERS and Social Security 

automatically cover most employees hired after December 31, 1983. Employees hired prior to January 1, 1984 could elect to 

either join FERS and Social Security, or remain in CSRS.

The Department is not responsible for and does not report CSRS or FERS assets, accumulated plan benefits, or liabilities 

applicable to its employees. OPM, which administers the plans, is responsible for and reports these amounts.
63 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

For CSRS-covered regular employees, the Department was required to make contributions to the plan equal to 7 percent of an 

employee’s basic pay. Employees contributed 7 percent of basic pay. For each fiscal year, OPM calculates the U.S. government’s 

service cost for covered employees, which is an estimate of the amount of funds, that, if accumulated annually and invested over 

an employee’s career, would be enough to pay that employee’s future benefits. Since the U.S. government’s estimated service 

cost exceeds contributions made by employer agencies and covered employees, this plan is not fully funded by the Department 

and its employees. The Department has recognized an Imputed Cost and an Imputed Financing Source From Cost Absorbed by 

Others for the difference between the estimated service cost and the contributions made by the Department and its covered 

employees. 

For FERS-covered regular employees, for employees hired prior to January 1, 2013, the Department was required to make 

contributions of 11.9 percent of basic pay. Employees contributed 0.8 percent of basic pay. Effective January 1, 2013, for new 

employees as defined in Public Law 112-96, Section 5001, the Department was required to make contributions of 9.6 percent of 

basic pay. Employees contributed 3.1 percent of basic pay. For each fiscal year, OPM calculates the U.S. government’s service 

cost for covered employees. Since the U.S. government’s estimated service cost exceeds contributions made by employer 

agencies and covered employees, this plan was not fully funded by the Department and its employees. The Department has 

recognized an Imputed Cost and an Imputed Financing Source From Cost Absorbed by Others for the difference between the 

estimated service cost and the contributions made by the Department and its covered employees. 

Employees participating in FERS are covered under the Federal Insurance Contributions Act (FICA), for which the Department 

contributes a matching amount to the Social Security Administration. 

NOAA Corps Retirement System: Active-duty officers of the NOAA Corps are covered by the NOAA Corps Retirement System, 

an unfunded, pay-as-you-go, defined-benefit plan administered by the Department. Participants do not contribute to this plan. 

Plan benefits are based primarily on years of service and compensation. Participants, as of September 30, 2013, included 322 active

duty officers, 369 nondisability retiree annuitants, 16 disability retiree annuitants, and 51 surviving families. Key provisions include 

voluntary nondisability retirement after 20 years of active service, disability retirement, optional survivor benefits, Consumer Price 

Index (CPI) optional survivor benefits, and CPI adjustments for benefits. 

Foreign Service Retirement and Disability System, and the Foreign Service Pension System: Foreign Commercial Officers are 

covered by the Foreign Service Retirement and Disability System and the Foreign Service Pension System. ITA makes 

contributions to the systems based on a percentage of an employee’s pay. Both systems are multi-employer plans 

administered by the U.S. Department of State. The Department is not responsible for and does not report plan assets, 

accumulated plan benefits, or liabilities applicable to its employees. The U.S. Department of State, which administers the 

plan, is responsible for and reports these amounts. 

Thrift Savings Plan (TSP): Employees covered by CSRS and FERS are eligible to contribute to the U.S. government’s TSP, 

administered by the Federal Retirement Thrift Investment Board. A TSP account is automatically established for FERScovered employees, and the Department makes a mandatory contribution of one percent of basic pay. The Department 

also makes matching contributions of up to four percent of basic pay for FERS-covered employees. FERS and CSRScovered employees have no limit on the percentage of pay contributed to their TSP account. However, the total employee 

regular contribution for 2013 and 2012 may not exceed the IRS limit of $17.5 thousand and $17 thousand, respectively. The 

Department makes no matching contributions for CSRS-covered employees. TSP participants age 50 or older who are 

already contributing the maximum amount of contributions for which they are eligible may also make catch-up contributions, 

subject to the IRS dollar limit for catch-up contributions.
64 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Federal Employees Health Benefit (FEHB) Program: Most Departmental employees are enrolled in the FEHB Program, which provides 

post-retirement health benefits. OPM administers this program and is responsible for the reporting of liabilities. Employer agencies 

and covered employees are not required to make any contributions for post-retirement health benefits. OPM calculates the U.S. 

government’s service cost for covered employees each fiscal year. The Department has recognized the entire service cost of 

these post-retirement health benefits for covered employees as an Imputed Cost and an Imputed Financing Source From Cost 

Absorbed by Others.

NOAA Corps Post-retirement Health Benefits: Active-duty officers of the NOAA Corps are covered by the health benefits program for 

the NOAA Corps, which provides post-retirement health benefits. This is a pay-as-you-go plan administered by the Department. 

Participants do not make any contributions to this plan. 

Federal Employees Group Life Insurance (FEGLI) Program: Most Department employees are entitled to participate in the FEGLI 

Program. Participating employees can obtain basic term life insurance, with the employee paying two-thirds of the cost and the 

Department paying one-third. Additional coverage is optional, to be paid fully by the employee. The basic life coverage may be 

continued into retirement if certain requirements are met. OPM administers this program and is responsible for the reporting 

of liabilities. For each fiscal year, OPM calculates the U.S. government’s service cost for the post-retirement portion of basic life 

coverage. Because the Department’s contributions to the basic life coverage are fully allocated by OPM to the pre-retirement 

portion of coverage, the Department has recognized the entire service cost of the post-retirement portion of basic life coverage 

as an Imputed Cost and an Imputed Financing Source From Cost Absorbed by Others. 

R Use of Estimates

The preparation of financial statements requires the Department to make estimates and assumptions that affect these financial 

statements. Actual results may differ from those estimates. 

S Tax Status

The Department is not subject to federal, state, or local income taxes. Accordingly, no provision for income taxes is recorded.

T Fiduciary Activities

Fiduciary activities are the collection or receipt, and the management, protection, accounting, and disposition by the U.S. 

government of cash or other assets in which non-federal individuals or entities have an ownership interest that the U.S. government 

must uphold. Fiduciary cash and other assets are not assets of the U.S. government, and, accordingly, are not recognized in the 

accompanying consolidated financial statements.

The Department’s fiduciary activities consist of the following:

The Patent Cooperation Treaty authorizes USPTO to collect patent filing and search fees on behalf of the World Intellectual 

Property Organization (WIPO), European Patent Office, Korean Intellectual Property Office, and the Australian Patent Office, 

from U.S. citizens requesting an international patent. The Madrid Protocol Implementation Act authorizes USPTO to collect 

trademark application fees on behalf of the International Bureau of WIPO from U.S. citizens requesting an international trademark. 

These fiduciary activities are reported in Note 20.
65 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

NOTE 2. FUND BALANCE WITH TREASURY

Fund Balance with Treasury, by type, is as follows:

FY 2013 FY 2012

General Funds $ 7,903,145 $ 8,987,526

Revolving Funds 790,716 970,075

Special Funds

Digital Television Transition and Public Safety Fund 8,828,569 8,842,490

Patent and Trademark Surcharge Fund 233,529 233,529

Others 82,511 83,948

Deposit Funds 135,562 138,405

Trust Funds 28,427 4,611

Other Fund Types 38 697

Total $ 18,002,497 $ 19,261,281

Status of Fund Balance with Treasury is as follows:

FY 2013 FY 2012

Temporarily Precluded From Obligation $ 947,581 $ 796,526

Unobligated Balance

 Available 1,470,060 1,293,699

 Unavailable 9,126,545 9,058,369

Obligated Balance Not Yet Disbursed 6,089,565 7,740,057

Non-budgetary 368,746 372,630

Total $ 18,002,497 $ 19,261,281

See Note 18, Combined Statements of Budgetary Resources, for legal arrangements affecting the Department’s 

use of Fund Balance with Treasury for FY 2013 and FY 2012.
66 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

NOTE 3. ACCOUNTS RECEIVABLE, NET 

FY 2013

Accounts 

Receivable, 

Gross

Allowance for 

Uncollectible 

Accounts

Accounts 

Receivable, 

Net

Intragovernmental $ 92,197 $ - $ 92,197

With the Public $ 75,908 $ (11,778) $ 64,130

FY 2012

Accounts 

Receivable, 

Gross

Allowance for 

Uncollectible 

Accounts

Accounts 

Receivable, 

Net

Intragovernmental $ 116,009 $ - $ 116,009

With the Public $ 116,327 $ (11,386) $ 104,941

As a major partner in the federal response to the 2010 Deepwater Horizon oil spill, NOAA has incurred certain costs for providing 

coordinated scientific weather and biological response services to that region, for which it expects to be reimbursed. NOAA 

has receivables from an oil company (With the Public) for restoration activities that are winding down totaling $13.0 million and 

$66.0 million as of September 30, 2013 and 2012, respectively. NOAA believes these receivables are fully collectible, based on 

costs submitted to date, and reimbursements received. Therefore, no allowance for uncollectible accounts has been established 

for these receivables.

NOTE 4. CASH 

FY 2013 FY 2012

Cash Not Yet Deposited with Treasury $ 5,453 $ 4,463

Imprest Funds 353 371

Total $ 5,806 $ 4,834

Cash Not Yet Deposited with Treasury primarily represents patent and trademark fees that were not processed as of September 30, 

due to the lag time between receipt and initial review. Certain bureaus maintain imprest funds for operational necessity, such as 

law enforcement activities, and for environments that do not permit the use of electronic payments. 
67 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

NOTE 5. DIRECT LOANS AND LOAN GUARANTEES, NET

The Department operates the following direct loan and loan guarantee programs:

Direct Loan Programs:

EDA Drought Loan Portfolio

EDA Economic Development Revolving Fund

NOAA Alaska Purse Seine Fishery Buyback Loans

NOAA Bering Sea and Aleutian Islands Non-Pollock Buyback Loans

NOAA Bering Sea Pollock Fishery Buyback

NOAA Coastal Energy Impact Program (CEIP)

NOAA Crab Buyback Loans

NOAA Federal Gulf of Mexico Reef Fish Buyback Loans1

NOAA Fisheries Finance Individual Fishing Quota (IFQ) Loans

NOAA Fisheries Finance Traditional Loans

NOAA Fisheries Finance Tuna Fleet Loans

NOAA Fisheries Loan Fund

NOAA New England Groundfish Buyback Loans1

NOAA New England Lobster Buyback Loans1

NOAA Pacific Groundfish Buyback Loans

1 No loans have been issued under these programs as of September 30, 2013. 

Loan Guarantee Programs:

EDA Economic Development Revolving Fund

ELGP-Steel Emergency Steel Loan Guarantee Program

NOAA Fishing Vessel Obligation Guarantee Program (FVOG Program)

The net assets for the Department’s loan programs consist of:

FY 2013 FY 2012

Direct Loans Obligated Prior to FY 1992 $ 14,750 $ 17,062

Direct Loans Obligated After FY 1991 518,423 552,764

Defaulted Guaranteed Loans from Pre-FY 1992 Guarantees 3 4

Defaulted Guaranteed Loans from Post-FY 1991 Guarantees 516 518

Total $ 533,692 $ 570,348
68 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Direct Loans Obligated Prior to FY 1992 consist of:

FY 2013

Direct 

Loan Program

Loans 

Receivable, 

Gross

Interest 

Receivable

Allowance for 

Loan Losses

Value of Assets 

Related to 

Direct Loans, 

Net

CEIP $ 20,021 $ 5,222 $ (19,561) $ 5,682

Drought Loan Portfolio 5,684 - - 5,684

Fisheries Loan Fund 148 16 (164) -

Economic Development Revolving Fund 3,416 3 (35) 3,384

Total $ 29,269 $ 5,241 $ (19,760) $ 14,750

FY 2012

Direct 

Loan Program

Loans 

Receivable, 

Gross

Interest 

Receivable

Allowance for 

Loan Losses

Value of Assets 

Related to 

Direct Loans, 

Net

CEIP $ 20,124 $ 5,065 $ (19,404) $ 5,785

Drought Loan Portfolio 7,207 95 (73) 7,229

Fisheries Loan Fund 148 16 (164) -

Economic Development Revolving Fund 4,066 22 (40) 4,048

Total $ 31,545 $ 5,198 $ (19,681) $ 17,062
69 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Direct Loans Obligated After FY 1991 consist of: 

FY 2013

Direct Loan Program

Loans 

Receivable, 

Gross

Interest 

Receivable

Allowance for 

Subsidy Cost

(Present Value)

Value of Assets 

Related to 

Direct Loans, Net

Bering Sea and Aleutian Islands 

Non-Pollock Buyback Loans $ 33,468 $ 265 $ 4,862 $ 38,595

Bering Sea Pollock Fishery Buyback 38,070 37 2,294 40,401

Crab Buyback Loans 87,235 1,248 23,033 111,516

Fisheries Finance IFQ Loans 24,015 225 3,982 28,222

Fisheries Finance Traditional Loans 218,917 1,882 30,847 251,646

Pacific Groundfish Buyback Loans 29,498 46 7,845 37,389

Alaska Purse Seine Fishery Buyback Loans 10,106 15 533 10,654

Total $ 441,309 $ 3,718 $ 73,396 $ 518,423

FY 2012

Direct Loan Program

Loans 

Receivable, 

Gross

Interest 

Receivable

Allowance for 

Subsidy Cost

(Present Value)

Value of Assets 

Related to 

Direct Loans, Net

Bering Sea and Aleutian Islands NonPollock Buyback Loans $ 32,122 $ 72 $ 6,425 $ 38,619

Bering Sea Pollock Fishery Buyback 42,695 75 2,817 45,587

Crab Buyback Loans 89,533 2,786 24,424 116,743

Fisheries Finance IFQ Loans 24,803 240 4,054 29,097

Fisheries Finance Traditional Loans 240,004 1,964 29,876 271,844

Pacific Groundfish Buyback Loans 30,040 989 7,724 38,753

Alaska Purse Seine Fishery Buyback Loans 11,861 13 247 12,121

Total $ 471,058 $ 6,139 $ 75,567 $ 552,764

New Disbursements of Direct Loans (Post-FY 1991):

Direct Loan Program FY 2013 FY 2012

Fisheries Finance IFQ Loans $ 1,922 $ 5,595

Fisheries Finance Traditional Loans 18,181 56,734

Bering Sea and Aleutian Islands 

Non-Pollock Buyback Loans 2,700 -

Alaska Purse Seine Fishery Buyback Loans - 13,133

Total $ 22,803 $ 75,462
70 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Subsidy Expense for Direct Loans by Program and Component:

Subsidy Expense for New Disbursements of Direct Loans:

FY 2013

Direct Loan Program

Interest Rate

Differential Defaults

Fees and 

Other

Collections Other Total

Fisheries Finance IFQ Loans $ (419) $ 4 $ (13) $ 176 $ (252)

Fisheries Finance Traditional Loans (2,628) 11 (86) 804 (1,899)

Bering Sea and Aleutian Islands 

Non-Pollock Buyback Loans (843) 870 - - 27

Total $ (3,890) $ 885 $ (99) $ 980 $ (2,124)

FY 2012

Direct Loan Program

Interest Rate

Differential Defaults

Fees and 

Other

Collections Other Total

Fisheries Finance IFQ Loans $ (1,205) $ 11 $ (35) $ 472 $ (757)

Fisheries Finance Traditional Loans (8,017) 60 (194) 2,763 (5,388)

Total $ (9,222) $ 71 $ (229) $ 3,235 $ (6,145)

Modifications and Reestimates:

FY 2013 FY 2013

Direct Loan Program

Total

Modifications

Interest Rate

Reestimates

Technical

Reestimates

Total

Reestimates

Bering Sea and Aleutian Islands Non-Pollock 

Buyback Loans $ - $ - $ 1,206 $ 1,206

Bering Sea Pollock Fishery Buyback - - 30 30

Crab Buyback Loans - - 618 618

Fisheries Finance IFQ Loans - - (3) (3)

Fisheries Finance Traditional Loans - - (953) (953)

Pacific Groundfish Buyback Loans - - (465) (465)

Alaska Purse Seine Fishery Buyback Loans - - (462) (462)

Total $ - $ - $ (29) $ (29)

FY 2012 FY 2012

Direct Loan Program

Total

Modifications

Interest Rate

Reestimates

Technical

Reestimates

Total

Reestimates

Bering Sea and Aleutian Islands Non-Pollock 

Buyback Loans $ - $ - $ 523 $ 523

Bering Sea Pollock Fishery Buyback - - 911 911

Crab Buyback Loans - - (7,434) (7,434)

Fisheries Finance IFQ Loans - - 1,045 1,045

Fisheries Finance Traditional Loans - - 7,481 7,481

Fisheries Finance Tuna Fleet Loans - - - -

Pacific Groundfish Buyback Loans - - 552 552

Total $ - $ - $ 3,078 $ 3,078
71 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Total Direct Loan Subsidy Expense:

Direct Loan Program FY 2013 FY 2012

Bering Sea and Aleutian Islands Non-Pollock 

Buyback Loans $ 1,233 $ 523

Bering Sea Pollock Fishery Buyback 30 911

Crab Buyback Loans 618 (7,434)

Fisheries Finance IFQ Loans (255) 288

Fisheries Finance Traditional Loans (2,852) 2,093

Pacific Groundfish Buyback Loans (465) 552

Alaska Purse Seine Fishery Buyback Loans (462) -

Total $ (2,153) $ (3,067)

Subsidy Rates for Direct Loans by Program and Component:

Budget Subsidy Rates for Direct Loans for the Current Fiscal-year’s Cohorts:

FY 2013

Direct Loan Program

Interest Rate

Differential Defaults

Fees and 

Other 

Collections Other Total

Fisheries Finance IFQ Loans (10.87) % 0.10 % (0.40) % 8.47 % (2.70) %

Fisheries Finance Traditional Loans (7.95) % 0.06 % (0.49) % 3.55 % (4.83) %

FY 2012

Direct Loan Program

Interest Rate

Differential Defaults

Fees and 

Other 

Collections Other Total

Fisheries Finance IFQ Loans (23.54) % 0.19 % (0.79) % 11.34 % (12.80) %

Fisheries Finance Traditional Loans (18.46) % 0.06 % (0.53) % 5.16 % (13.77) %

Alaska Purse Seine Fishery Buyback Loans (3.24) % 4.24 % 0.00 % 0.00 % 1.00 %

The budget subsidy rates disclosed pertain only to the reporting period’s cohorts. These rates cannot be applied to the new 

disbursements of direct loans during the reporting period to yield the subsidy expense. The subsidy expense for new disbursements 

of direct loans for the reporting period could result from disbursements of loans from both the reporting period’s cohorts and prior 

fiscal-year(s) cohorts. The subsidy expense for the reporting period may also include modifications and reestimates.
72 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Schedule for Reconciling Allowance for Subsidy Cost (Post-FY 1991 Direct Loans):

FY 2013 FY 2012

Beginning Balance of the Allowance for Subsidy Cost $ 75,567 $ 80,837

Add Subsidy Expense for Direct Loans Disbursed During the 

Reporting Years by Component:

 Interest Rate Differential Costs 3,890 9,222

 Default Costs (Net of Recoveries) (885) (71)

 Fees and Other Collections 99 229

 Other Subsidy Costs (980) (3,235)

Total of the above Subsidy Expense Components 2,124 6,145

Adjustments:

 Loan Modifications - (131)

 Fees Received (96) (305)

 Subsidy Allowance Amortization (4,262) (7,901)

 Other 34 -

Total of Adjustments (4,324) (8,337)

Ending Balance of the Allowance for Subsidy Cost Before Reestimates 73,367 78,645

Add or Subtract Subsidy Reestimates by Component:

 Technical/Default Reestimates 29 (3,078)

Ending Balance of the Allowance for Subsidy Cost $ 73,396 $ 75,567

Defaulted Guaranteed Loans from Pre-FY 1992 Guarantees:

FY 2013

Loan Guarantee

Program

Defaulted

Guaranteed Loans

Receivable, Gross

Interest

Receivable

Allowance for 

Loan Losses

Value of Assets 

Related to Defaulted

Guaranteed Loans

Receivable, Net

FVOG Program $ 7,318 $ 1 $ (7,316) $ 3

FY 2012

Loan Guarantee

Program

Defaulted

Guaranteed Loans

Receivable, Gross

Interest

Receivable

Allowance for 

Loan Losses

Value of Assets 

Related to Defaulted

Guaranteed Loans

Receivable, Net

FVOG Program $ 7,318 $ 1 $ (7,315) $ 4
73 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Defaulted Guaranteed Loans from Post-FY 1991 Guarantees:

FY 2013

Loan Guarantee

Program

Defaulted

Guaranteed Loans

Receivable, Gross

Interest

Receivable

Allowance for 

Subsidy Cost

(Present Value)

Value of Assets 

Related to Defaulted 

Guaranteed Loans

Receivable, Net

FVOG Program $ 14,128 $ 1,254 $ (14,866) $ 516

FY 2012

Loan Guarantee

Program

Defaulted

Guaranteed Loans

Receivable, Gross

Interest

Receivable

Allowance for 

Subsidy Cost

(Present Value)

Value of Assets 

Related to Defaulted 

Guaranteed Loans

Receivable, Net

FVOG Program $ 14,128 $ 1,254 $ (14,864) $ 518

Loan Guarantees:

Guaranteed Loans Outstanding:

Outstanding non-acquired guaranteed loans as of September 30, 2013 and 2012, which are not reflected in the financial 

statements, are as follows: 

FY 2013 FY 2012

Loan Guarantee

Program

Outstanding

Principal of 

Guaranteed Loans,

Face Value

Amount of 

Outstanding

Principal 

Guaranteed

Outstanding

Principal of 

Guaranteed Loans,

Face Value

Amount of 

Outstanding

Principal 

Guaranteed

FVOG Program $ 1,195 $ 1,195 $ 1,613 $ 1,613

New Guaranteed Loans Disbursed:

There were no new guaranteed loans disbursed during FY 2013 and FY 2012.

Loan Guarantee Liabilities: 

FY 2013 FY 2012

Loan Guarantee Program

Loan Guarantee 

Liabilities for PostFY 1991 Guarantees, 

Present Value

Loan Guarantee 

Liabilities for PostFY 1991 Guarantees, 

Present Value

FVOG Program $ 516 $ 518
74 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Subsidy Expense for Loan Guarantees by Program and Component:

Subsidy Expense for New Loan Guarantees Disbursed:

As there were no new guaranteed loans disbursed during FY 2013 and FY 2012, there is not any related subsidy expense.

Modifications and Reestimates:

FY 2013 FY 2013

Loan Guarantee

Program

Total

Modifications

Interest Rate

Reestimates

Technical

Reestimates

Total 

Reestimates

FVOG Program $ - $ - $ - $ -

FY 2012 FY 2012

Loan Guarantee

Program

Total

Modifications

Interest Rate

Reestimates

Technical

Reestimates

Total 

Reestimates

FVOG Program $ - $ - $ (1) $ (1)

Total Loan Guarantee Subsidy Expense:

Loan Guarantee Program FY 2013 FY 2012

FVOG Program $ - $ (1)

Subsidy Rates for Loan Guarantees by Program and Component: 

Budget Subsidy Rates for Loan Guarantees for the Current Fiscal-year’s Cohorts:

There were no new cohorts of guaranteed loans during FY 2013 and FY 2012.

Schedule for Reconciling Loan Guarantee Liabilities (Post-FY 1991 Loan Guarantees):

FY 2013 FY 2012

Beginning Balance of Loan Guarantee Liabilities $ 518 $ 563

Adjustments:

Interest Accumulation on the Liabilities Balance - (45)

Other (2) -

Ending Balance of Loan Guarantee Liabilities $ 516 $ 518
75 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Administrative Expenses: 

Administrative expenses in support of the Department’s direct loan and loan guarantee programs consist of: 

Direct Loan Program FY 2013 FY 2012

Drought Loan Portfolio and 

Economic Development Revolving Fund $ 256 $ 696

NOAA Direct Loan Programs 3,147 2,780

Total $ 3,403 $ 3,476

Loan Guarantee Program FY 2013 FY 2012

FVOG Program $ 170 $ 141

NOTE 6. INVENTORY, MATERIALS, AND SUPPLIES, NET

Category Cost Flow Assumption FY 2013 FY 2012

Inventory

Items Held for Current Sale

NIST Standard Reference Materials Average $ 22,087 $ 21,612

Other Various 305 923

Allowance for Excess, Obsolete, and 

Unserviceable Items (60) (93)

Total Inventory, Net 22,332 22,442

Materials and Supplies

Items Held for Use

NOAA’s National Logistics Support Center Weighted-average 51,507 46,700

Other Various 5,168 4,902

Items Held for Repair

NOAA’s National Reconditioning Center Weighted-average 39,761 41,576

Allowance for Excess, Obsolete, and 

Unserviceable Items (19,161) (10,642)

Total Materials and Supplies, Net 77,275 82,536

Total $ 99,607 $ 104,978

NIST’s Standard Reference Materials Program provides reference materials for quality assurance of measurements, while NOAA’s 

Materials and Supplies are primarily repair parts for weather forecasting equipment. 
76 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

NOTE 7. GENERAL PROPERTY, PLANT, AND EQUIPMENT, NET

FY 2013

Category

Useful Life

(Years) Cost

Accumulated

Depreciation Net Book Value

Land N/A $ 16,632 $ - $ 16,632

Land Improvements 30-40 2,996 (1,563) 1,433

Structures, Facilities, and 

Leasehold Improvements 2-50 1,949,787 (670,153) 1,279,634

Satellites/Weather Systems 

Personal Property 3-20 5,999,648 (3,909,346) 2,090,302

Other Personal Property 2-30 2,876,375 (1,927,274) 949,101

Assets Under Capital Lease 3-40 23,237 (19,287) 3,950

Construction-in-progress N/A 6,762,792 - 6,762,792

Total $ 17,631,467 $ (6,527,623) $ 11,103,844

The Department elected to change its method of accounting for the completion of satellites, as discussed in Note 1J, General 

Property, Plant, and Equipment, Net. As a result, the FY 2013 Net Position – Cumulative Results of Operations beginning balance 

(as of October 1, 2012) is reduced for depreciation expense of $75.9 million, on the Changes in Accounting Principle line on the 

FY 2013 Consolidated Statement of Changes in Net Position. 

FY 2012

Category

Useful Life

(Years) Cost

Accumulated

Depreciation Net Book Value

Land N/A $ 16,733 $ - $ 16,733

Land Improvements 30-40 2,996 (1,471) 1,525

Structures, Facilities, and 

Leasehold Improvements 2-50 1,778,876 (616,975) 1,161,901

Satellites/Weather Systems 

Personal Property 3-20 4,734,829 (3,973,204) 761,625

Other Personal Property 2-30 2,697,484 (1,772,375) 925,109

Assets Under Capital Lease 3-40 23,182 (19,203) 3,979

Construction-in-progress N/A 7,129,640 - 7,129,640

Total $ 16,383,740 $ (6,383,228) $ 10,000,512
77 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

NOTE 8. OTHER ASSETS

FY 2013 FY 2012

With the Public

Advances and Prepayments $ 37,534 $ 40,220

Note Receivable 1,517 1,567

Bibliographic Database, Net 5,728 6,114

Other 118 375

Total $ 44,897 $ 48,276

As of September 30, 2013 and 2012, there is one Note Receivable with a maturity date of July 2024 and an interest rate of 

7.0 percent. The balance includes accrued interest.

The bibliographic database relates to NTIS’s scientific and technical information used to prepare products and services for sale. 

The database is stated at capitalized costs of $70.0 million and $67.8 million, less accumulated amortization of $64.3 million and 

$61.7 million, as of September 30, 2013 and 2012, respectively.

NOTE 9. NON-ENTITY ASSETS

The assets that are not available for use in the Department’s operations are summarized below:

FY 2013 FY 2012

Intragovernmental

Fund Balance with Treasury $ 121,319 $ 124,296

Accounts Receivable 7,222 10,496

Total Intragovernmental 128,541 134,792

With the Public

Cash 1,145 1,133

Accounts Receivable, Net 331 490

Direct Loans and Loan 

Guarantees, Net 8,407 7,229

Other 1,674 -

Total $ 140,098 $ 143,644
78 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

NOTE 10. DEBT TO TREASURY

FY 2013

Loan Program

Beginning

Balance

Net Borrowings

(Repayments)

Ending

Balance

Direct Loan Program

Fisheries Finance, Financing Account $ 551,742 $ (27,177) $ 524,565

Loan Guarantee Program

FVOG Program 1 (1) -

NTIA’s Public Safety Trust Fund, and 

State and Local Implementation Fund 2,538 48,500 51,038

Total $ 554,281 $ 21,322 $ 575,603

For the Direct Loan program, maturity dates range from September 2013 to September 2052, and interest rates range from 

2.59 to 5.84 percent. For NTIA’s Debt to Treasury, the maturity date is September 30, 2022, and the amounts borrowed 

are interest-free.

FY 2012

Loan Program

Beginning

Balance

Net Borrowings

(Repayments)

Ending

Balance

Direct Loan Program

Fisheries Finance, Financing Account $ 539,302 $ 12,440 $ 551,742

Loan Guarantee Program

FVOG Program 699 (698) 1

NTIA’s Public Safety Trust Fund, and 

State and Local Implementation Fund - 2,538 2,538

Total $ 540,001 $ 14,280 $ 554,281
79 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

NOTE 11. OTHER LIABILITIES

FY 2013 FY 2012

Current Portion

Non-current 

Portion Total Total

Intragovernmental

Accrued FECA Liability $ 27,103 $ 8,402 $ 35,505 $ 36,197

Accrued Benefits 30,608 - 30,608 53,117

Custodial Activity 230 - 230 490

Downward Subsidy Reestimates 

Payable to Treasury 7,222 - 7,222 10,496

Other 940 - 940 2,112

Total $ 66,103 $ 8,402 $ 74,505 $ 102,412

With the Public

ITA Foreign Service Nationals’ 

Voluntary Separation Pay $ 2,783 $ 9,439 $ 12,222 $ 11,745

Contingent Liabilities (Note 16) 625 - 625 502

Employment-related 5,842 - 5,842 4,295

Other 45,411 - 45,411 41,190

Total $ 54,661 $ 9,439 $ 64,100 $ 57,732

The Current Portion represents liabilities expected to be paid by September 30, 2014, while the Non-current Portion represents 

liabilities expected to be paid after September 30, 2014.
80 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

NOTE 12. FEDERAL EMPLOYEE BENEFITS

FY 2013 FY 2012

Actuarial FECA Liability $ 242,691 $ 228,211

NOAA Corps Retirement System Liability 612,200 577,900

NOAA Corps Post-retirement Health Benefits Liability 42,300 45,100

Total $ 897,191 $ 851,211

Actuarial FECA Liability:

Actuarial FECA liability is calculated annually, as of September 30. For discounting projected annual future benefit payments to 

present value, the interest rate assumptions used by DOL were as follows:

FY 2013 FY 2012

Year 1 2.73% 2.29%

Year 2 and Thereafter 3.13% 3.14%

The wage inflation factors (Cost of Living Allowance) and medical inflation factors (Consumer Price Index - Medical) applied to the 

calculation of projected future benefits, and also used to adjust the methodology’s historical payments to current-year constant 

dollars, were as follows:

FY 2013

Fiscal Year

Cost of Living 

Allowance

Consumer Price 

Index - Medical

2014 1.67% 3.46%

2015 1.80% 3.82%

2016 2.20% 3.83%

2017 2.20% 3.82%

2018 2.20% 3.82%

FY 2012

Fiscal Year

Cost of Living 

Allowance

Consumer Price 

Index - Medical

2013 2.83% 3.65%

2014 2.03% 3.66%

2015 1.93% 3.72%

2016 2.00% 3.73%

2017 2.03% 3.80%
81 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

NOAA Corps Retirement System Liability: 

This liability represents the unfunded actuarial present value of projected plan benefits. The actuarial calculation is performed 

annually, as of September 30. The September 30, 2013 and 2012 actuarial calculations used the following economic 

assumptions:

FY 2013 FY 2012

Discount Rate 4.23% 4.43%

Annual Basic Pay Scale Increases 2.93% 2.96%

Annual Inflation 2.43% 2.46%

Schedule for Reconciling NOAA Corps Retirement System Liability:

A reconciliation of the NOAA Corps Retirement System Liability from the beginning balance to the ending balance, including the 

components of the related pension costs included in the Consolidated Statements of Net Costs, follows:

FY 2013 FY 2012

Beginning Balance - NOAA Corps Retirement System Liability $ 577,900 $ 524,100

Add Pension Costs:

Normal Cost 11,900 10,600 

Interest on the Unfunded Liability 23,900 24,300 

Actuarial (Gains)/Losses, Net

From Experience 3,300 3,700 

From Discount Rate Assumption Change 17,100 24,100 

From Long-term Assumption Changes

Annual Inflation (1,900) 4,600

Annual Basic Pay Scale Increases (800) (800)

Demographic 3,100 9,800

Other 900 -

Total Pension Costs 57,500 76,300 

Subtract Benefit Payments (23,200) (22,500)

Ending Balance - NOAA Corps Retirement System Liability $ 612,200 $ 577,900 

NOAA Corps Post-retirement Health Benefits Liability: 

This liability represents the unfunded actuarial present value of projected post-retirement plan benefits. The actuarial calculation 

is performed annually, as of September 30. The actuarial calculations used the following economic assumptions: 

FY 2013 FY 2012

Discount Rate 4.21% 4.42%

Ultimate Medical Trend Rate 5.35% 5.25%
82 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Schedule for Reconciling NOAA Corps Post-retirement Health Benefits Liability:

A reconciliation of the NOAA Corps Post-retirement Health Benefits Liability from the beginning balance to the ending balance, 

including the components of the related post-retirement health benefits costs included in the Consolidated Statements of Net 

Costs, follows:

FY 2013 FY 2012

Beginning Balance - NOAA Corps Post-retirement Health 

Benefits Liability $ 45,100 $ 48,400 

Add Health Benefits Costs:

Normal Cost 1,400 1,400 

Interest on the Unfunded Liability 1,800 2,000 

Actuarial (Gains)/Losses, Net

From Experience 1,200 700 

From Discount Rate Assumption Change 600 1,200 

From Long-term Assumption Changes

Medical Claims Costs (5,300) (6,300)

Other 100 200 

Total Health Benefits Costs (200) (800)

Subtract Benefit Payments (2,600) (2,500)

Ending Balance - NOAA Corps Post-retirement Health 

Benefits Liability $ 42,300 $ 45,100 

 NOTE 13. ENVIRONMENTAL AND DISPOSAL LIABILITIES

FY 2013 FY 2012

Asbestos-related Cleanup Costs $ 95,832 $ -

Nuclear Reactor 56,232 55,036

Pribilof Islands 2,074 2,352

Other 2,535 2,557

Total $ 156,673 $ 59,945

The Department has incurred asbestos-related cleanup costs related to the costs of removing, containing, and/or disposing 

of asbestos-containing materials from property, plant, and equipment, specifically from facilities owned by NIST and NOAA 

and from ships owned by NOAA. Effective FY 2013, the Department implemented Technical Bulletin 2006-1, Recognition and 

Measurement of Asbestos-related Cleanup Costs, which clarifies required recognition of liabilities and expenses for asbestosrelated cleanup costs. Prior to this technical bulletin, most federal entities had recognized liabilities for the removal of asbestos 

that posed an immediate health threat (i.e., friable asbestos), but many federal entities had not prepared an estimate of cleanup 

costs for the future removal of asbestos that did not pose an immediate health threat (i.e., nonfriable asbestos). The Federal 

Accounting Standards Advisory Board determined that additional guidance was needed to clarify that federal entities need 

to estimate all asbestos-related cleanup costs, and not just those costs related to asbestos that require immediate cleanup. 

The FY 2013 beginning liability balance (as of October 1, 2012) for asbestos-related cleanup costs of $93.4 million is recorded as 

a Change in Accounting Principle on the FY 2013 Consolidated Statement of Changes in Net Position.
83 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

NOTE 14. LEASES

Capital Leases:

Assets under capital leases are as follows:

FY 2013 FY 2012

Structures, Facilities, and Leasehold Improvements $ 22,957 $ 22,902

Equipment 280 280

Less: Accumulated Depreciation (19,287) (19,203)

Net Assets Under Capital Leases $ 3,950 $ 3,979

Capital Lease Liabilities are primarily related to NOAA. NOAA has real property capital leases covering both land and buildings. 

The majority of these leases are for weather forecasting offices, but the leases are also for radar system sites, river forecasting 

centers, and National Weather Service enforcement centers. NOAA’s real property capital leases range from 10 to 40 years. 

Capital Lease Liabilities:

Future payments due under capital leases are as follows:

FY 2013

General PP&E Category

 Fiscal Year Real Property Personal Property Total

2014 $ 3,051 $ 317 $ 3,368

2015 1,886 293 2,179

2016 874 350 1,224

2017 808 - 808

2018 808 - 808

Thereafter 8,334 - 8,334

Total Future Lease Payments 15,761 960 16,721

Less: Imputed Interest (7,277) (25) (7,302)

Less: Executory Costs (2,398) - (2,398)

Net Capital Lease Liabilities $ 6,086 $ 935 $ 7,021
84 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

FY 2012

General PP&E Category

 Fiscal Year Real Property Personal Property Total

2013 $ 3,674 $ 95 $ 3,769

2014 2,985 - 2,985

2015 1,870 - 1,870

2016 874 - 874

2017 809 - 809

Thereafter 9,141 - 9,141

Total Future Lease Payments 19,353 95 19,448

Less: Imputed Interest (7,932) (6) (7,938)

Less: Executory Costs (3,127) (6) (3,133)

Net Capital Lease Liabilities $ 8,294 $ 83 $ 8,377

Operating Leases:

Most of the Department’s facilities are rented from GSA, which generally charges rent that is intended to approximate commercial 

rental rates. For federally owned property rented from GSA, the Department generally does not execute an agreement with 

GSA; the Department, however, is normally required to give 120 to 180 days notice to vacate. For non-federally owned property 

rented from GSA, an occupancy agreement is generally executed, and the Department may normally cancel these agreements 

with 120 days notice.

The Department’s 1) estimated real property rent payments to GSA for FY 2014 through FY 2018; and 2) future payments due 

under noncancellable operating leases (non-GSA real property) are as follows:

FY 2013

General PP&E Category

 Fiscal Year

GSA

Real Property

Non-GSA

Real Property

2014 $ 274,528 $ 23,515

2015 278,500 21,462

2016 274,168 17,144

2017 276,935 11,332

2018 280,041 11,091

Thereafter 1 87,132

Total Future Lease Payments $ 171,676

1 Not estimated.
85 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

NOTE 15. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

FY 2013 FY 2012

Intragovernmental

Accrued FECA Liability $ 35,408 $ 36,097

Total Intragovernmental 35,408 36,097

Accrued Payroll 50,955 39,450

Accrued Annual Leave 272,350 270,955

Federal Employee Benefits 897,191 851,211

Environmental and Disposal Liabilities 156,673 59,945

Contingent Liabilities 625 502

Unearned Revenue 489,275 592,829

ITA Foreign Service Nationals’ Voluntary Separation Pay 12,222 11,745

Other 100 3

Total $ 1,914,799 $ 1,862,737

Due to USPTO’s funding structure, budgetary resources do not cover a portion of its Unearned Revenue. The Unearned 

Revenue reported above is the portion of USPTO’s Unearned Revenue that is considered not covered by budgetary resources. 

USPTO’s Unearned Revenue is a liability for revenue received before the patent or trademark work has been completed. 

Budgetary resources derived from the current reporting period’s revenue have been partially used to cover the current reporting 

period’s costs associated with unearned revenue from a prior reporting period. In addition, the current patent fee structure sets 

low initial application fees that are followed by income from maintenance fees as a supplement in later years to cover the full cost 

of the patent examination and issuance processes. The combination of these funding circumstances requires USPTO to obtain 

additional budgetary resources to cover its liability for unearned revenue.
86 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

NOTE 16. COMMITMENTS AND CONTINGENCIES

Commitments:

The Department has entered into long-term contracts for the purchase, construction, and modernization of environmental 

satellites and weather measuring and monitoring systems. A summary of major long-term commitments as of September 30, 

2013 is shown below.

Major Long-term Commitments:

FY 2013

Description FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Thereafter Total

Geostationary Operational 

Environmental Satellites $ 977,700 $ 874,700 $ 810,700 $ 731,300 $ 603,700 $ 2,825,900 $ 6,824,000

Convergence Satellites 916,000 958,600 943,600 921,100 892,700 2,997,200 7,629,200

Polar Operational 

Environmental Satellites 29,400 32,200 28,100 5,700 - - 95,400

Ocean Surface Topography 37,000 25,700 7,500 7,300 7,300 7,200 92,000

Deep Space Climate 

Observatory 23,700 7,800 3,200 2,400 2,300 - 39,400

Weather Service 56,025 82,027 81,966 50,219 50,546 50,880 371,663

Total $ 2,039,825 $ 1,981,027 $ 1,875,066 $ 1,718,019 $ 1,556,546 $ 5,881,180 $ 15,051,663

Legal Contingencies: 

The Department is subject to potential liabilities in various administrative proceedings, legal actions, environmental suits, and 

claims brought against it. In the opinion of the Department’s management and legal counsel, the ultimate resolution of these 

proceedings, actions, suits, and claims will not materially affect the financial position or net costs of the Department.

Probable Likelihood of an Adverse Outcome: 

The Department is subject to potential liabilities where adverse outcomes are probable, and claims are approximately 

$625 thousand and $502 thousand as of September 30, 2013 and 2012, respectively. Accordingly, these contingent liabilities 

were included in Other Liabilities on the Consolidated Balance Sheets as of September 30, 2013 and 2012, respectively. For a 

majority of these claims, any amounts ultimately due will be paid out of Treasury’s Judgment Fund. For the claims to be paid by 

Treasury’s Judgment Fund, once the claims are settled or court judgments are assessed relative to the Department, the liability 

will be removed and an Imputed Financing Source From Cost Absorbed by Others will be recognized. 

Reasonably Possible Likelihood of an Adverse Outcome: 

The Department and other federal agencies are subject to potential liabilities for a variety of environmental cleanup costs, 

many of which are associated with the Second World War, at various sites within the U.S. Since some of the potential 

liabilities represent claims with no stated amount, the exact amount of total potential liabilities is unknown, but may 

exceed $235.5 million as of September 30, 2013. For these potential liabilities, it is reasonably possible that an adverse 

outcome will result. It is not possible, however, to speculate as to a range of loss. In the absence of a settlement 

agreement, decree, or judgment, there is neither an allocation of response costs between the U.S. government and other 

potentially responsible parties, nor is there an attribution of such costs to or among the federal agencies implicated in the 
87 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

claims. Although the Department has been implicated as a responsible party, the U.S. Department of Justice was unable 

to provide an amount for these potential liabilities that is attributable to the Department. Of these potential liabilities, all 

will be funded by Treasury’s Judgment Fund, if any amounts are ultimately due. 

The Department and other federal agencies are subject to other potential liabilities. Since some of the potential liabilities 

represent claims with no stated amount, the exact amount of total potential liabilities is unknown, but may exceed $95.3 million

as of September 30, 2013. For these potential liabilities, it is reasonably possible that an adverse outcome will result. It is not 

possible, however, to speculate as to a range of loss. Of these potential liabilities, most will be funded by Treasury’s Judgment 

Fund, if any amounts are ultimately due.

Guaranteed Loan Contingencies:

Fishing Vessels Obligation Guarantee Program: This loan guarantee program has outstanding non-acquired guaranteed loans (fully 

guaranteed by the Department) as of September 30, 2013 and 2012, with outstanding principal balances totaling $1.2 million 

and $1.6 million, respectively. A loan guarantee liability of $516 thousand and $518 thousand is recorded for the outstanding 

guarantees as of September 30, 2013 and 2012, respectively.

Restructuring the National Polar-orbiting Operational Environmental Satellite System (NPOESS) to the Joint 

Polar Satellite System (JPSS):

In 2010, the Executive Office of the President directed the restructure of the government’s approach to meeting its polar-orbiting 

environmental data collection needs, to put the critical program on a more sustainable path towards success and announced 

NOAA and the Air Force will cease the joint procurement of NPOESS.

NOAA, with the National Aeronautics and Space Administration (NASA) as its acquisition agent, is responsible for JPSS, which 

will fly in the afternoon orbit. The U.S. Department of Defense is responsible for the early morning orbit, and will continue to 

provide observations in the midmorning. The agencies will continue to partner in those areas that have been successful in the 

past, such as sharing a common ground system. NOAA and NASA will continue to partner to ensure a successful way forward 

for the respective programs, while utilizing international partnerships to sustain and enhance weather and climate observation 

from space.

The restructuring effort primarily occurred in FY 2011. During this time, NOAA and the Air Force continued to work together to 

decide which program components will transfer to NOAA to become part of JPSS. During FY 2011, the following equipment 

and instruments were transferred to NOAA under the NASA/NOAA Memorandum of Understanding and NASA contracts: 1) 

ground systems equipment; 2) Ozone Mapping and Profiler Suite; 3) Cross-track Infrared Sounder; and 4) Visible Infrared Imaging 

Radiometer Suite Flight Model 2 for JPSS-1. Advanced Technology Microwave Sounder was transferred to NOAA. As a result of 

the restructuring efforts, NOAA recorded additional impairment costs totaling $98.3 million in FY 2012.

NOAA/NASA will develop the JPSS-1 spacecraft based on the design used for the Suomi National Polar-orbiting Partnership 

(S-NPP) satellite, and NOAA is planning a request for proposal to compete contract construction for the spacecraft for JPSS-2 in 

FY 2014. NOAA/NASA launched the S-NPP satellite on October 28, 2011.

In FY 2013, NOAA placed the Common Ground System into service, at a cost of $1.07 billion. The Common Ground System will 

continue to undergo significant system development in the future, which will result in asset improvements. 
88 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

NOTE 17. CONSOLIDATED STATEMENTS OF NET COST

United States Department of Commerce Consolidating Statement of Net Cost

For the Year Ended September 30, 2013

 NOAA NTIA NIST USPTO ESA Others

Departmental 

Management

Combining

Total

IntraDepartmental 

Eliminations

 Consolidating 

Total

Theme 1: Economic Growth

Intragovernmental Gross Costs $ - $ 82,077 $ 128,948 $ 540,346 $ - $ 270,225 $ 78,968 $ 1,100,564 $ (99,147) $ 1,001,417 

Gross Costs With the Public - 990,514 882,595 2,000,081 - 772,969 27,233 4,673,392 - 4,673,392 

Total Gross Costs - 1,072,591 1,011,543 2,540,427 - 1,043,194 106,201 5,773,956 (99,147) 5,674,809 

Intragovernmental Earned 

Revenue - (21,847) (88,509) (8,841) - (21,530) (70,350) $(211,077) 99,147 (111,930)

Earned Revenue From the 

Public - (46) (59,174) (2,711,131) - (14,365) (4) (2,784,720) - (2,784,720)

Total Earned Revenue - (21,893) (147,683) (2,719,972) - (35,895) (70,354) (2,995,797) 99,147 (2,896,650)

Net Program Costs - 1,050,698 863,860 (179,545) - 1,007,299 35,847 2,778,159 - 2,778,159 

Theme 2: Science and Information

Intragovernmental Gross Costs 443,802 7,895 - - 386,840 7,354 78,968 924,859 (99,077) 825,782 

Gross Costs With the Public 2,058,890 10,923 - - 1,150,818 68,524 27,234 3,316,389 - 3,316,389 

Total Gross Costs 2,502,692 18,818 - - 1,537,658 75,878 106,202 4,241,248 (99,077) 4,142,171 

Intragovernmental Earned 

Revenue (114,026) (13,919) - - (323,196) (64,576) (70,350) (586,067) 99,077 (486,990)

Earned Revenue From the 

Public (11,139) (868) - - (12,878) (10,633) (4) (35,522) - (35,522)

Total Earned Revenue (125,165) (14,787) - - (336,074) (75,209) (70,354) (621,589) 99,077 (522,512)

Net Program Costs 2,377,527 4,031 - - 1,201,584 669 35,848 3,619,659 - 3,619,659 

Theme 3: Environmental 

Stewardship

Intragovernmental Gross Costs 335,498 - - - - - 78,982 414,480 (68,016) 346,464 

Gross Costs With the Public 1,865,448 - - - - - 27,252 1,892,700 - 1,892,700 

Total Gross Costs 2,200,946 - - - - - 106,234 2,307,180 (68,016) 2,239,164

Intragovernmental Earned 

Revenue (78,357) - - - - - (70,371) (148,728) 68,016 (80,712)

Earned Revenue From the 

Public (69,231) - - - - - (4) (69,235) - (69,235)

Total Earned Revenue (147,588) - - - - - (70,375) (217,963) 68,016 (149,947)

Net Program Costs 2,053,358 - - - - - 35,859 2,089,217 - 2,089,217 

NET COST OF OPERATIONS $ 4,430,885 $

 

1,054,729 $ 863,860 $ (179,545) $ 1,201,584 $ 1,007,968 $ 107,554 $ 8,487,035 $ - $ 8,487,035 
89 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

United States Department of Commerce Consolidating Statement of Net Cost

For the Year Ended September 30, 2012

 NOAA USPTO ESA NIST NTIA Others

Departmental 

Management

Combining

Total

IntraDepartmental 

Eliminations

 Consolidating 

Total

Theme 1: Economic Growth

Intragovernmental Gross Costs $ - $ 483,396 $ - $ 125,745 $ 345,827 $ 272,589 $ 79,800 $ 1,307,357 $ (95,034) $ 1,212,323

Gross Costs With the Public - 1,837,551 - 972,610 1,674,127 807,458 26,966 5,318,712 - 5,318,712

Total Gross Costs - 2,320,947 - 1,098,355 2,019,954 1,080,047 106,766 6,626,069 (95,034) 6,531,035

Intragovernmental Earned 

Revenue - (7,823) - (118,029) (26,001) (18,635) (71,877) $ (242,365) 95,034 (147,331)

Earned Revenue From the 

Public - (2,419,259) - (51,128) (11) (11,217) (6) (2,481,621) - (2,481,621)

Total Earned Revenue - (2,427,082) - (169,157) (26,012) (29,852) (71,883) (2,723,986) 95,034 (2,628,952)

Net Program Costs - (106,135) - 929,198 1,993,942 1,050,195 34,883 3,902,083 - 3,902,083

Theme 2: Science and Information

Intragovernmental Gross Costs 503,442 - 430,834 - 9,267 7,549 79,800 1,030,892 (87,433) 943,459

Gross Costs With the Public 1,971,193 - 1,142,989 - 13,120 58,505 26,966 3,212,773 - 3,212,773

Total Gross Costs 2,474,635 - 1,573,823 - 22,387 66,054 106,766 4,243,665 (87,433) 4,156,232

Intragovernmental Earned 

Revenue (121,911) - (311,753) - (15,641) (57,841) (71,877) (579,023) 87,433 (491,590)

Earned Revenue From the 

Public (13,415) - (4,863) - (215) (10,480) (6) (28,979) - (28,979)

Total Earned Revenue (135,326) - (316,616) - (15,856) (68,321) (71,883) (608,002) 87,433 (520,569)

Net Program Costs 2,339,309 - 1,257,207 - 6,531 (2,267) 34,883 3,635,663 - 3,635,663

Theme 3: Environmental 

Stewardship

Intragovernmental Gross Costs 336,681 - - - - - 79,823 416,504 (89,071) 327,433

Gross Costs With the Public 1,976,631 - - - - - 26,974 2,003,605 - 2,003,605

Total Gross Costs 2,313,312 - - - - - 106,797 2,420,109 (89,071) 2,331,038

Intragovernmental Earned 

Revenue (106,167) - - - - - (71,898) (178,065) 89,071 (88,994)

Earned Revenue From the 

Public (97,763) - - - - - (6) (97,769) - (97,769)

Total Earned Revenue (203,930) - - - - - (71,904) (275,834) 89,071 (186,763)

Net Program Costs 2,109,382 - - - - - 34,893 2,144,275 - 2,144,275

NET COST OF OPERATIONS $ 4,448,691 $ (106,135) $ 1,257,207 $ 929,198 $ 2,000,473 $ 1,047,928 $ 104,659 $ 9,682,021 $ - $ 9,682,021
90 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Major Programs: The following tables illustrate major programs of the Department. “Other Programs” refers to the other programs within 

each theme. The “Others” column refers to the Department’s reporting entities that are not listed. The Others column data and the 

Other Programs data are presented solely to reconcile these tables to the Combining Total columns on the Consolidating Statements of 

Net Cost. 

United States Department of Commerce Combining Statement of Net Cost by Major Program

For the Year Ended September 30, 2013

PROGRAM COSTS NOAA NTIA NIST

Census

Bureau USPTO Others

Combining

Total

Theme 1: Economic Growth

Measurements and Standards Laboratories

Gross Costs $ - $ - $ 728,183 $ - $ - $ - $ 728,183 

Less: Earned Revenue - - (62,933) - - - (62,933)

Net Program Costs - - 665,250 - - - 665,250 

Broadband Technology Opportunities Program

Gross Costs - 973,612 - - - - 973,612 

Less: Earned Revenue - - - - - - -

Net Program Costs - 973,612 - - - - 973,612 

Patents

Gross Costs - - - - 2,281,196 - 2,281,196 

Less: Earned Revenue - - - - (2,458,295) - (2,458,295)

Net Program Costs - - - - (177,099) - (177,099)

Trademarks

Gross Costs - - - - 213,147 - 213,147 

Less: Earned Revenue - - - - (261,677) (261,677)

Net Program Costs - - - - (48,530) - (48,530)

Other Programs

Gross Costs - 98,979 283,360 - 46,084 1,149,395 1,577,818 

Less: Earned Revenue - (21,893) (84,750) - (106,249) (212,892)

Net Program Costs - 77,086 198,610 - 46,084 1,043,146 1,364,926 

Net Program Costs for Theme 1 - 1,050,698 863,860 - (179,545) 1,043,146 2,778,159 

Theme 2: Science and Information

Decennial and Periodic Censuses

Gross Costs - - - 254,707 - - 254,707 

Less: Earned Revenue - - - - - -

Net Program Costs - - - 254,707 - - 254,707 

Weather, Water, and Climate

Gross Costs 1,345,237 - - - - - 1,345,237 

Less: Earned Revenue (65,093) - - - - - (65,093)

Net Program Costs 1,280,144 - - - - - 1,280,144 

Other Programs

Gross Costs 1,157,455 18,818 - 1,174,257 - 290,774 2,641,304 

Less: Earned Revenue (60,072) (14,787) - (329,153) - (152,484) (556,496)

Net Program Costs 1,097,383 4,031 - 845,104 - 138,290 2,084,808 

Net Program Costs for Theme 2 2,377,527 4,031 - 1,099,811 - 138,290 3,619,659 

Theme 3: Environmental Stewardship

Sustainable Fisheries

Gross Costs 1,222,506 - - - - - 1,222,506 

Less: Earned Revenue (112,206) - - - - - (112,206)

Net Program Costs 1,110,300 - - - - - 1,110,300 

Other Programs

Gross Costs 978,440 - - - - 106,234 1,084,674 

Less: Earned Revenue (35,382) - - - - (70,375) (105,757)

Net Program Costs 943,058 - - - - 35,859 978,917 

Net Program Costs for Theme 3 2,053,358 - - - 35,859 2,089,217 

NET COST OF OPERATIONS $ 4,430,885 $ 1,054,729 $ 863,860 $1,099,811 $ (179,545) $ 1,217,295 $ 8,487,035
91 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

United States Department of Commerce Combining Statement of Net Cost by Major Program

For the Year Ended September 30, 2012

PROGRAM COSTS NOAA

Census

Bureau NIST USPTO Others

Combining

Total

Theme 1: Economic Growth

Measurements and Standards Laboratories

Gross Costs $ - $ - $ 811,695 $ - $ - $ 811,695

Less: Earned Revenue - - (125,094) - - (125,094)

Net Program Costs - - 686,601 - - 686,601

Patents

Gross Costs - - - 2,079,357 - 2,079,357

Less: Earned Revenue - - - (2,180,532) - (2,180,532)

Net Program Costs - - - (101,175) - (101,175)

Trademarks

Gross Costs - - - 201,307 - 201,307

Less: Earned Revenue - - - (246,550) - (246,550)

Net Program Costs - - - (45,243) - (45,243)

Other Programs

Gross Costs - - 286,660 40,283 3,206,767 3,533,710

Less: Earned Revenue - - (44,063) - (127,747) (171,810)

Net Program Costs - - 242,597 40,283 3,079,020 3,361,900

Net Program Costs for Theme 1 - - 929,198 (106,135) 3,079,020 3,902,083

Theme 2: Science and Information

Decennial and Periodic Censuses

Gross Costs - 325,354 - - - 325,354

Less: Earned Revenue - - - - - -

Net Program Costs - 325,354 - - - 325,354

Weather, Water, and Climate

Gross Costs 1,186,688 - - - - 1,186,688

Less: Earned Revenue (67,816) - - - - (67,816)

Net Program Costs 1,118,872 - - - - 1,118,872

Other Programs

Gross Costs 1,287,947 1,134,931 - - 308,745 2,731,623

Less: Earned Revenue (67,510) (311,497) - - (161,179) (540,186)

Net Program Costs 1,220,437 823,434 - - 147,566 2,191,437

Net Program Costs for Theme 2 2,339,309 1,148,788 - - 147,566 3,635,663

Theme 3: Environmental Stewardship

Sustainable Fisheries

Gross Costs 1,262,385 - - - - 1,262,385

Less: Earned Revenue (126,357) - - - - (126,357)

Net Program Costs 1,136,028 - - - - 1,136,028

Other Programs

Gross Costs 1,050,927 - - - 106,797 1,157,724

Less: Earned Revenue (77,573) - - - (71,904) (149,477)

Net Program Costs 973,354 - - - 34,893 1,008,247

Net Program Costs for Theme 3 2,109,382 - - - 34,893 2,144,275

NET COST OF OPERATIONS $ 4,448,691 $ 1,148,788 $ 929,198 $ (106,135) $ 3,261,479 $ 9,682,021
92 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

NOTE 18. COMBINED STATEMENTS OF BUDGETARY RESOURCES

Budgetary Resources:

The amount of Budget Authority, Appropriations, on the Combined Statements of Budgetary Resources (SBR) reconciles to the 

amount of Budgetary Financing Sources, Appropriations Received, reported on the Consolidated Statements of Changes in Net 

Position (SCNP), as follows:

FY 2013 FY 2012

Budget Authority, Appropriations (SBR) $ 7,907,642 $ 8,035,812

Reconciling Items:

Appropriations for Receipts Unavailable for Obligation on SBR; 

$0 on SCNP (347) 4,302

Negative Appropriations for Permanent Reductions on SBR; 

$0 on SCNP as Classified as Rescissions/ Sequestrations 

of Appropriations on SCNP 560,334 5,450

Transfers In/Out, Net on SBR; 

$0 on SCNP as Classified as Transfers on SCNP (155,674) (124,628)

Appropriations for Temporary Reductions on SBR; 

$0 on SCNP 3,671 -

Appropriated Receipts for NOAA and DM/G&B on SBR; 

$0 on SCNP as Classified as Earned Revenue on Consolidated 

Statements of Net Cost (21,751) (36,678)

Budgetary Financing Sources, Appropriations Received (SCNP) $ 8,293,875 $ 7,884,258

Total borrowing authority available for NTIA’s Public Safety Trust Fund, and State and Local Implementation Fund amounted 

to $206.3 million and $0, while total borrowing authority available for NOAA’s loan programs amounted to $138.9 million 

and $129.6 million, as of September 30, 2013 and 2012, respectively. The Borrowing Authority amounts reported in the SBR 

Budgetary Resources section represent only borrowing authority realized during the fiscal year being reported. See Note 

1M, Debt to Treasury, for debt repayment requirements, financing sources for repayments, and other terms of borrowing 

authority used.

All of the Department’s reporting entities have one or more permanent no-year appropriations to finance operations.

Permanent reductions to the Department’s budgetary resources under Public Laws 113-6 and 113-2 amounted to $560.3 million 

for FY 2013, while permanent reductions for FY 2012 under Public Law 112-55 amounted to $23.6 million. These permanent 

reductions are included in the SBR Budgetary Resources section, and are also included on the Rescissions/Sequestrations lines 

of the SNCP when applicable.

Legal arrangements affecting the Department’s use of Unobligated Balances of Budget Authority and/or Fund 

Balance with Treasury during FY 2013 and FY 2012 include the following:

● The Department’s Deposit Funds, reported in Note 2, Fund Balance with Treasury, are not available to finance operating 

activities. These funds are also included in Note 2 on the line Non-budgetary (breakdown by status).
93 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

● The Department’s Fund Balance with Treasury as of September 30, 2013 and 2012 includes $790.1 million of USPTO 

offsetting collections exceeding the current fiscal year and prior fiscal years’ appropriations. USPTO may use these 

funds only as authorized by the U.S. Congress, and only as made available by the issuance of a Treasury warrant. 

These funds are included in Note 2 on the lines General Funds (breakdown by type), and Temporarily Precluded From 

Obligation (breakdown by status).

● The Omnibus Budget Reconciliation Act of 1990 established surcharges on certain statutory patent fees collected 

by USPTO. Subsequent legislation extended the surcharges through September 30, 1998. These surcharges were 

deposited into the Patent and Trademark Surcharge Fund, a Special Fund Receipt Account at Treasury. USPTO may use 

monies from this account only as authorized by Congress and made available by the issuance of a Treasury warrant. 

As of September 30, 2013 and 2012, $233.5 million is held in the Patent and Trademark Surcharge Fund. These funds 

are included in Note 2 on the lines Patent and Trademark Surcharge Fund - Special Funds section (breakdown by type), 

and Non-budgetary (breakdown by status). 

● The Department’s Fund Balance with Treasury as of September 30, 2013 includes $147.7 million of USPTO sequestered 

funds temporarily not available. These funds are included in Note 2 on the lines General Funds (breakdown by type), and 

Temporarily Precluded from Obligation (breakdown by status).

● The Department’s Fund Balance with Treasury as of September 30, 2013 and 2012 includes unapportioned funds for 

the Digital Television and Transition Public Safety Fund of $8.80 billion and $8.75 billion, respectively. These funds are 

included in Note 2 on the lines Digital Television and Transition Public Safety Fund - Special Funds section (breakdown by 

type), and Unobligated Balance - Unavailable (breakdown by status). 

● The Department’s Fund Balance with Treasury as of September 30, 2012 includes $17.8 million of funds temporarily not 

available for the Coastal Zone Management Fund, which accounts for the Coastal Energy Impact Program direct loans. 

These funds are included in Note 2 on the lines Revolving Funds (breakdown by type), and Temporarily Precluded From 

Obligation (breakdown by status). 

● For loan programs prior to the Federal Credit Reform Act of 1990 (pre-FY 1992 loans), most or all liquidating fund 

unobligated balances in excess of working capital needs are required to be transferred to Treasury as soon as practicable 

during the following fiscal year. 

● For direct loan programs under the Federal Credit Reform Act of 1990 (post-FY 1991 loans) that have outstanding debt 

to Treasury, regulations require that most unobligated balances be returned to Treasury on September 30, or require that 

the borrowing authority be cancelled on September 30.

● For loan guarantee programs under the Federal Credit Reform Act of 1990 that have outstanding debt to Treasury, 

regulations require that unobligated balances in excess of the outstanding guaranteed loans’ principal and interest be 

returned to Treasury on September 30.

Comparison to Budget of the U.S. Government: There are no material differences between the amounts reported 

in the FY 2012 and FY 2011 Combined Statement of Budgetary Resources and the actual FY 2012 and FY 2011 amounts 

reported in the FY 2014 and FY 2013 budget of the U.S. government, respectively. The President’s Budget that will report 

actual amounts for FY 2013 has not yet been published.
94 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Apportionment Categories of Obligations Incurred:

Category A apportionments distribute budgetary resources by fiscal quarters, whereas Category B apportionments typically 

distribute budgetary resources by activities, projects, objects, or a combination of these categories.

The amounts of Direct (i.e., derived from Appropriations) and Reimbursable (i.e., derived from Spending Authority From Offsetting 

Collections) Obligations Incurred by apportionment category are as follows:

FY 2013

Direct Reimbursable Total

Category A $ 2,661,918 $ 2,988,976 $ 5,650,894

Category B 5,582,690 939,840 6,522,530

Exempt from Apportionment 181,342 - 181,342

Total Obligations Incurred $ 8,425,950 $ 3,928,816 $ 12,354,766

FY 2012

Direct Reimbursable Total

Category A $ 2,878,116 $ 2,818,764 $ 5,696,880

Category B 5,397,788 968,668 6,366,456

Exempt from Apportionment 174,761 - 174,761

Total Obligations Incurred $ 8,450,665 $ 3,787,432 $ 12,238,097

Undelivered Orders: Undelivered orders were $5.73 billion and $7.35 billion as of September 30, 2013 and 2012, respectively.

Digital Television Transition and Public Safety Fund: NTIA’s Digital Television Transition and Public Safety Fund (Fund) was 

created by the Digital Television Transition and Public Safety Act of 2005. The Fund received proceeds from the auction of licenses 

for recovered analog spectrum from discontinued analog television signals, and provides funding for several programs from 

these receipts; as of September 30, 2013, payments for the programs under the Fund may not exceed $2.82 billion. The Federal 

Communications Commission (FCC) completed the auction of licenses for recovered analog spectrum in March 2008. The 

auction resulted in proceeds of $18.96 billion, which were deposited to the Fund by FCC on June 30, 2008. In September 2009, 

the Fund transferred $7.36 billion to the General Fund of the Treasury as required by the Act. The Department understands that 

Congress’ intent is for the Fund to further transfer funds beyond the needs of its programs to the General Fund of the Treasury. 

As of September 30, 2013, the Fund has a Net Position, Cumulative Results of Operations balance of $8.86 billion. 

NOTE 19. CUSTODIAL NONEXCHANGE ACTIVITY 

NOAA receives interest, penalties, and fines primarily related to its past due Accounts Receivable, while BIS receives civil 

monetary penalties from private entities that violate the Export Administration Act. These collections are required to be transferred 

to Treasury. For FY 2013, the Department has custodial nonexchange revenue of $6.5 million; custodial nonexchange revenue 

of $229 thousand was payable to Treasury as of September 30, 2013. For FY 2012, the Department had custodial nonexchange 

revenue of $8.8 million; custodial nonexchange revenue of $490 thousand was payable to Treasury as of September 30, 2012. 
95 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

NOTE 20. FIDUCIARY ACTIVITIES

Schedule of Fiduciary Activities for the Year Ended September 30, 2013:

FY 2013

Patent 

Cooperation 

Treaty

Madrid 

Protocol Total

Fiduciary Net Assets, Beginning Balance $ 12,620 $ 400 $ 13,020 

Contributions 162,565 17,451 180,016 

Disbursements to and on Behalf of Beneficiaries (160,821) (17,367) (178,188) 

Increase/(Decrease) in Fiduciary Net Assets 1,744 84 1,828

Fiduciary Net Assets, Ending Balance $ 14,364 $ 484 $ 14,848

Fiduciary Net Assets as of September 30, 2013: 

FY 2013

Patent 

Cooperation 

Treaty

Madrid 

Protocol Total

Fund Balance with Treasury $ 14,364 $ 484 $ 14,848

Schedule of Fiduciary Activities for the Year Ended September 30, 2012:

FY 2012

Patent 

Cooperation 

Treaty

Madrid 

Protocol Total

Fiduciary Net Assets, Beginning Balance $ 12,864 $ 338 $ 13,202 

Contributions 153,716 14,361 168,077 

Disbursements to and on Behalf of Beneficiaries (153,960) (14,299) (168,259) 

Increase/(Decrease) in Fiduciary Net Assets (244) 62 (182)

Fiduciary Net Assets, Ending Balance $ 12,620 $ 400 $ 13,020

Fiduciary Net Assets as of September 30, 2012:

FY 2012

Patent 

Cooperation 

Treaty

Madrid 

Protocol Total

Fund Balance with Treasury $ 12,620 $ 400 $ 13,020 
96 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

NOTE 21. FUNDS FROM DEDICATED COLLECTIONS

The following tables depict major funds from dedicated collections separately chosen based on their significant financial activity 

and importance to taxpayers. All other funds from dedicated collections not shown are aggregated as “Other Funds from 

Dedicated Collections.”

United States Department of Commerce Consolidating Balance Sheet – Funds from Dedicated Collections

As of September 30, 2013

USPTO Funds 

from Dedicated 

Collections

NTIA Digital 

Television 

Transition and 

Public Safety 

Fund

Damage 

Assessment 

and Restoration 

Revolving Fund

Environmental 

Improvement 

and 

Restoration 

Fund

Other 

Funds from 

Dedicated 

Collections 

Total Funds 

from Dedicated 

Collections

ASSETS 

Fund Balance with Treasury $ 1,879,152 $ 8,828,569 $ 199,417 $ 28,677 $ 51,831 $ 10,987,646

Cash 4,309 - - - - 4,309

Accounts Receivable, Net 177 - 1,496 - 196 1,869

General Property, Plant, and 

Equipment, Net 257,008 - - - - 257,008

Other 9,658 31,143 35 34 1,093 41,963

TOTAL ASSETS $ 2,150,304 $ 8,859,712 $ 200,948 $ 28,711 $ 53,120 $ 11,292,795

LIABILITIES 

Accounts Payable $ 80,399 $ 2 $ 255 $ - $ 3,224 $ 83,880

Debt To Treasury - - - - 51,038 51,038

Federal Employee Benefits 9,711 - - - - 9,711

Other 

 Accrued Payroll and Annual Leave 170,265 - 119 - 152 170,536

 Accrued Grants - 1,331 550 1,100 288 3,269

 Unearned Revenue 931,548 - - - - 931,548

 Other Liabilities 9,144 - 39 - 28 9,211

TOTAL LIABILITIES $ 1,201,067 $ 1,333 $ 963 $ 1,100 $ 54,730 $ 1,259,193

 NET POSITION 

Unexpended Appropriations $ - $ - $ - $ - $ - $ -

Cumulative Results of Operations 949,237 8,858,379 199,985 27,611 (1,610) 10,033,602

TOTAL NET POSITION $ 949,237 $ 8,858,379 $ 199,985 $ 27,611 $ (1,610) $ 10,033,602

TOTAL LIABILITIES AND 

NET POSITION $ 2,150,304 $ 8,859,712 $ 200,948 $ 28,711 $ 53,120 $ 11,292,795
97 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

United States Department of Commerce Consolidating Balance Sheet – Funds from Dedicated Collections

As of September 30, 2012 (Restated)

USPTO Funds 

from Dedicated 

Collections

NTIA Digital 

Television 

Transition and 

Public Safety 

Fund

Damage 

Assessment 

and Restoration 

Revolving Fund

Environmental 

Improvement 

and 

Restoration 

Fund

Other 

Funds from 

Dedicated 

Collections 

Total Funds 

from Dedicated 

Collections

ASSETS 

Fund Balance with Treasury $ 1,606,244 $ 8,842,490 $ 229,485 $ 36,197 $ 24,832 $ 10,739,248 

Cash 3,330 - - - - 3,330 

Accounts Receivable, Net 751 - 1,468 - 182 2,401

General Property, Plant, and 

Equipment, Net 236,979 - - - - 236,979 

Other 13,106 74,523 1 42 - 87,672 

TOTAL ASSETS $ 1,860,410 $ 8,917,013 $ 230,954 $ 36,239 $ 25,014 $ 11,069,630

LIABILITIES 

Accounts Payable $ 75,186 $ 1,346 $ 17,278 $ - $ 155 $ 93,965

Debt To Treasury - - - - 2,538 2,538 

Federal Employee and Veteran Benefits 8,209 - - - - 8,209 

Other 

 Accrued Payroll and Annual Leave 200,395 10 379 - - 200,784

 Accrued Grants - 7,093 586 1,172 244 9,095 

 Unearned Revenue 830,954 - - - - 830,954 

 Other Liabilities 18,792 - 115 - 422 19,329 

TOTAL LIABILITIES $ 1,133,536 $ 8,449 $ 18,358 $ 1,172 $ 3,359 $ 1,164,874

 NET POSITION 

Unexpended Appropriations $ - $ - $ - $ - $ - $ -

Cumulative Results of Operations 726,874 8,908,564 212,596 35,067 21,655 9,904,756

TOTAL NET POSITION $ 726,874 $ 8,908,564 $ 212,596 $ 35,067 $ 21,655 $ 9,904,756 

TOTAL LIABILITIES AND 

NET POSITION $ 1,860,410 $ 8,917,013 $ 230,954 $ 36,239 $ 25,014 $ 11,069,630

United States Department of Commerce Consolidating Statement of Net Cost – Funds from Dedicated Collections

For the Year Ended September 30, 2013

USPTO Funds 

from Dedicated 

Collections

NTIA Digital 

Television 

Transition and 

Public Safety 

Fund

Damage 

Assessment 

and Restoration 

Revolving Fund

Environmental 

Improvement 

and 

Restoration 

Fund

Other 

Funds from 

Dedicated 

Collections 

Total Funds 

from Dedicated 

Collections

Theme 1: Economic Growth

 Gross Costs $ 2,540,427 $ 50,185 $ - $ - $ 19,529 $ 2,610,141

 Less: Earned Revenue (2,719,972) - - - - (2,719,972)

 Net Program Costs (179,545) 50,185 - - 19,529 (109,831)

Theme 2: Science and Information

 Gross Costs - - - - - -

 Less: Earned Revenue - - - - - -

 Net Program Costs - - - - - -

Theme 3: Environmental Stewardship

 Gross Costs - - 113,041 7,456 10,774 131,271

 Less: Earned Revenue - - - - - -

 Net Program Costs - - 113,041 7,456 10,774 131,271

NET COST OF OPERATIONS $ (179,545) $ 50,185 $ 113,041 $ 7,456 $ 30,303 $ 21,440
98 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

United States Department of Commerce Consolidating Statement of Net Cost – Funds from Dedicated Collections

For the Year Ended September 30, 2012 (Restated)

USPTO Funds 

from Dedicated 

Collections

NTIA Digital 

Television 

Transition and 

Public Safety 

Fund

Damage 

Assessment 

and Restoration 

Revolving Fund

Environmental 

Improvement 

and 

Restoration 

Fund

Other 

Funds from 

Dedicated 

Collections 

Total Funds 

from Dedicated 

Collections

Theme 1: Economic Growth

 Gross Costs $ 2,320,947 $ 327,399 $ - $ - $ 391 $ 2,648,737

 Less: Earned Revenue (2,427,082) - - - - (2,427,082)

 Net Program Costs (106,135) 327,399 - - 391 221,655

Theme 2: Science and Information

 Gross Costs - - - - - - 

 Less: Earned Revenue - - - - - - 

 Net Program Costs - - - - - - 

Theme 3: Environmental Stewardship

 Gross Costs - - 127,756 9,746 9,526 147,028

 Less: Earned Revenue - - - - - - 

 Net Program Costs - - 127,756 9,746 9,526 147,028

NET COST OF OPERATIONS $ (106,135) $ 327,399 $ 127,756 $ 9,746 $ 9,917 $ 368,683

United States Department of Commerce Consolidating Statement of Changes in Net Position – 

Funds from Dedicated Collections

For the Year Ended September 30, 2013

USPTO 

Funds from 

Dedicated 

Collections

NTIA Digital 

Television 

Transition and 

Public Safety 

Fund

Damage 

Assessment 

and Restoration 

Revolving Fund

Environmental 

Improvement 

and 

Restoration 

Fund

Other 

Funds from 

Dedicated 

Collections 

Total Funds 

from Dedicated 

Collections

Cumulative Results of Operations: 

Beginning Balance $ 726,874 $ 8,908,564 $ 212,596 $ 35,067 $ 21,655 $ 9,904,756

Budgetary Financing Sources: 

Non-exchange Revenue - - 94,780 - 6,688 101,468

Transfers In/(Out) Without

Reimbursement, Net (2,000) - 5,650 - - 3,650

Other Financing Sources (Non-exchange): 

Imputed Financing Sources from Cost 

Absorbed by Others 44,818 - - - - 44,818

Other Financing Sources (Uses), Net - - - - 350 350

 Total Financing Sources 42,818 - 100,430 - 7,038 150,286

 Net Cost of Operations 179,545 (50,185) (113,041) (7,456) (30,303) (21,440)

 Net Change 222,363 (50,185) (12,611) (7,456) (23,265) 128,846

 Cumulative Results of 

 Operations - Ending Balance 949,237 8,858,379 199,985 27,611 (1,610) 10,033,602

 NET POSITION $ 949,237 $ 8,858,379 $ 199,985 $ 27,611 $ (1,610) $ 10,033,602
99 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

United States Department of Commerce Consolidating Statement of Changes in Net Position – 

Funds from Dedicated Collections 

For the Year Ended September 30, 2012 (Restated)

USPTO 

Funds from 

Dedicated 

Collections

NTIA Digital 

Television 

Transition and 

Public Safety 

Fund

Damage 

Assessment 

and Restoration 

Revolving Fund

Environmental 

Improvement 

and 

Restoration 

Fund

Other 

Funds from 

Dedicated 

Collections 

Total Funds 

from Dedicated 

Collections

Cumulative Results of Operations: 

Beginning Balance $ 602,260 $ 9,235,963 $ 123,522 $ 35,076 $ 21,938 $ 10,018,759 

Budgetary Financing Sources: 

Non-exchange Revenue - - 202,772 9,736 9,984 222,492

Transfers In/(Out) Without

Reimbursement, Net (1,000) - 14,058 - - 13,058

Rescissions/Sequestrations - - - - (350) (350)

Other Financing Sources (Non-exchange): 

Other Financing Sources/(Uses), Net 19,479 - - 1 - 19,480 

 Total Financing Sources 18,479 - 216,830 9,737 9,634 254,680

 Net Cost of Operations 106,135 (327,399) (127,756) (9,746) (9,917) (368,683)

 Net Change 124,614 (327,399) 89,074 (9) (283) (114,003)

 Cumulative Results of 

 Operations - Ending Balance 726,874 8,908,564 212,596 35,067 21,655 9,904,756 

 NET POSITION $ 726,874 $ 8,908,564 $ 212,596 $ 35,067 $ 21,655 $ 9,904,756

Below is a description of major Funds from Dedicated Collections shown in the above tables.

The USPTO Funds from Dedicated Collections consist of its Salaries and Expenses Fund, Patent and Trademark Fee Reserve Fund, 

and Patent and Trademark Surcharge Fund.

The Salaries and Expenses Fund contains monies used for the administering of the laws relevant to patents and trademarks 

and advising the Secretary of Commerce, the President of the United States, and the Administration on patent, trademark, 

and copyright protection, and trade-related aspects of intellectual property. This fund is used for USPTO’s three core business 

activities – granting patents; registering trademarks; and intellectual property policy, protection, and enforcement – that promote 

the use of intellectual property rights as a means of achieving economic prosperity. These activities give innovators, businesses, 

and entrepreneurs the protection and encouragement they need to turn their creative ideas into tangible products, and also 

provide protection for their inventions and trademarks. USPTO may use monies from this account only as authorized by Congress.

The Patent and Trademark Fee Reserve Fund is a provision that requires USPTO to deposit all patent and trademark fees collected 

in excess of the annual appropriation amount into the fund. Funds made available may only be used for expenses of the office 

relating to the processing of patent applications and for other activities, services, and materials relating to patents and applicable 

administrative costs.

The Patent and Trademark Surcharge Fund, a Special Fund Receipt Account at Treasury, is discussed in Note 18, Combined 

Statements of Budgetary Resources. USPTO may use monies from this account only as authorized by Congress and made 

available by the issuance of a Treasury warrant. As of September 30, 2013 and 2012, $233.5 million is held in this fund.
100 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

The NTIA Digital Television Transition and Public Safety Fund makes digital television available to every home in America, improves 

communications between local, state, and federal agencies, allows smaller television stations to broadcast digital television, 

and improves how warnings are received when disasters occur. NTIA received funding from borrowings from the Bureau 

of Public Debt, and repaid the Bureau of Public Debt from the proceeds of the auction of recovered analog spectrum which 

was completed in March 2008. The proceeds from the auction provide funding for several programs, and has been and is 

expected to be further used to reduce the National Deficit. The law establishing this program can be found in the Deficit 

Reduction Act of 2005 (Public Law 109-171), Sections 3001-3014.

The Damage Assessment and Restoration Revolving Fund receives monies for the reimbursement of expenses related to oil or 

hazardous substance spill response activities, or natural resource damages assessment, restoration, rehabilitation, replacement, 

or acquisition activities conducted by NOAA. The recovered sums by a federal, state, indian, or foreign trustee for natural resource 

damages is retained by the trustee and is only used to reimburse or pay costs incurred by the trustee for the damaged natural 

resources. The law establishing the Damage Assessment and Restoration Revolving Fund can be found in 33 USC Section 2706.

The Environmental Improvement and Restoration Fund makes available interest that was earned in the Fund in the previous fiscal 

year. 80 percent of such amounts shall be made available to be equally divided among the Directors of the National Park 

Service, the United States Fish and Wildlife Service, the Bureau of Land Management, and the Chief of the Forest Service 

for high-priority deferred maintenance and repairs and modernization of facilities that directly enhance the experience 

of visitors, including natural, cultural, recreational, and historic resources protection projects in National Parks, National 

Wildlife Refuges, and the public lands, and for payment to the State of Louisiana and its lessees for oil and gas drainage in 

the West Delta field. 20 percent of such amounts shall be made available to the Secretary of Commerce for the purpose 

of carrying out marine research activities in the North Pacific. The law establishing the Environmental Improvement and 

Restoration Fund can be found at 43 USC Section 1474d. 

NOTE 22. RECONCILIATION OF NET COST OF OPERATIONS TO BUDGET

The Reconciliation of Net Cost of Operations to Budget reconciles the Department’s Resources Used to Finance Activities

(first section), which consists of the budgetary basis of accounting Net Obligations plus the proprietary basis of accounting Other 

Resources, to the proprietary basis of accounting Net Cost of Operations. The second section, Resources Used to Finance 

Items Not Part of Net Cost of Operations, reverses out items included in the first section that are not included in Net Cost of 

Operations. The third section, Components of Net Cost of Operations that Will Not Require or Generate Resources in the Current 

Period, adds items included in Net Cost of Operations that are not included in the first section. 

The third section’s subsection, Components Requiring or Generating Resources in Future Periods, includes costs reported in the 

current period that are included in the Liabilities Not Covered by Budgetary Resources reported in Note 15. This subsection does 

not include costs reported in prior fiscal years that are also included in Liabilities Not Covered by Budgetary Resources.
101 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

The reconciliations of Net Cost of Operations to Budget for the years ended September 30, 2013 and 2012 are as follows:

FY 2013 FY 2012

Resources Used to Finance Activities:

Budgetary Resources Obligated:

Obligations Incurred $ 12,354,766 $ 12,238,097

Less: Spending Authority From Offsetting Collections and Actual Recoveries of Prior-years Unpaid Obligations (4,531,305) (4,607,196)

Obligations Net of Offsetting Collections and Actual Recoveries 7,823,461 7,630,901

Less: Distributed Offsetting (Receipts)/Outlays, Net (46,853) (62,667)

Net Obligations 7,776,608 7,568,234

Other Resources: 

Donations and Forfeitures of Property 856 579

Transfers In/(Out) Without Reimbursement, Net (56,353) 182,220

Imputed Financing Sources From Cost Absorbed by Others 295,288 297,694

Other Financing Sources/(Uses), Net (1,818) (8,483)

Net Other Resources Used to Finance Activities 237,973 472,010

Total Resources Used to Finance Activities 8,014,581 8,040,244

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

Change in Budgetary Resources Obligated for Goods, Services, and Benefits Ordered but Not Yet Provided 1,619,746 3,088,147

Resources that Fund Expenses Recognized in Prior Periods (1,819) (5,718)

Budgetary Obligations for Downward Subsidy Reestimates Payable to Treasury (21,447) (6,375)

Budgetary Offsetting Collections and Receipts that Do Not Affect Net Cost of Operations:

Distributed Offsetting (Receipts)/Outlays, Net (excludes Clearing Accounts’ Gross Costs) 46,853 62,667

 Credit Program Collections which Increase Loan Guarantee Liabilities or Allowance for Subsidy Cost 68,158 68,138

 Budgetary Financing Sources/(Uses), Net (113,241) 137,002

Resources that Finance the Acquisition of Assets (2,032,544) (2,231,293)

Other Resources or Adjustments to Net Obligated Resources that Do Not Affect Net Cost of Operations:

 Change in Unfilled Customer Orders 4,502 (15,472)

 Donations and Forfeitures of Property (856) (579)

 Transfers In/(Out) Without Reimbursement, Net 56,353 (182,220)

 Other Financing Sources/(Uses), Net 1,818 8,483

Other (5,027) (3,409)

Total Resources Used to Finance Items Not Part of Net Cost of Operations (377,504) 919,371

Total Resources Used to Finance Net Cost of Operations 7,637,077 8,959,615

(continued on next page)
102 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

(continued from previous page)

FY 2013 FY 2012

Components of Net Cost of Operations that Will Not Require or Generate Resources in the Current Period:

Components Requiring or Generating Resources in Future Periods:

Increase in Accrued Annual Leave Liability 1,395 394

Increase in Federal Employee Benefits 45,980 42,729

Increase in Environmental and Disposal Liabilities 4,473 -

Increase (Decrease) in Contingent Liabilities 123 (2,900)

Reestimates of Credit Subsidy Expense 1,801 3,440

Other 13,810 5,545

Total Components of Net Cost of Operations that Will Require or Generate Resources in Future Periods 67,582 49,208

Components Not Requiring or Generating Resources:

Depreciation and Amortization 736,100 551,210

NOAA Impairment of Construction-in-progress (Note 16) - 98,260

NOAA Issuances of Materials and Supplies 12,729 21,581

Revaluation of Assets or Liabilities 24,186 20,728

Other 9,361 (18,581)

Total Components of Net Cost of Operations that Will Not Require or Generate Resources 782,376 673,198

Total Components of Net Cost of Operations that Will Not Require or Generate Resources in the Current Period 849,958 722,406

NET COST OF OPERATIONS $ 8,487,035 $ 9,682,021

NOTE 23. STEWARDSHIP PROPERTY, PLANT, AND EQUIPMENT

This note provides information on certain resources entrusted to the Department and certain stewardship responsibilities 

assumed by the Department. The physical properties of Stewardship Property, Plant, and Equipment (Stewardship PP&E) 

resemble those of the General PP&E that is capitalized traditionally in the financial statements of federal entities. Due to the 

nature of these assets, however, valuation would be difficult and matching costs with specific periods would not be meaningful. 

Therefore, federal accounting standards require the disclosure of the nature and quantity of these assets. NOAA, NIST, and the 

Census Bureau are the only entities within the Department that have Stewardship PP&E. Additional information on Stewardship 

PP&E is presented in the Required Supplementary Information section. 

Stewardship Marine Sanctuaries, Marine National Monuments, Conservation Area, and Habitat Focus Area: 

Written policy statements or permit guidelines for the National Marine Sanctuaries and Marine National Monuments have been 

developed for the areas of acoustic impacts, artificial reefs, climate change, invasive species, and marine debris. The Office of 

Marine National Sanctuaries answers the most frequently asked questions related to alternative energy and oil and gas policy 

decisions for national marine sanctuaries.

NOAA maintains the following Stewardship PP&E, which are similar in nature to stewardship land: 

National Marine Sanctuaries: In 1972, Congress passed the Marine Protection, Research, and Sanctuaries Act (Act) in response 

to a growing awareness of the intrinsic environmental and cultural value of coastal waters. The Act authorized the Secretary 

of Commerce to designate special nationally-significant areas of the marine environment as national marine sanctuaries. 

These protected waters provide a secure habitat for species close to extinction, and also protect historically significant shipwrecks 

and prehistoric artifacts. National marine sanctuaries are also used for recreation (e.g., boating, diving, and sport fishing), and 

support valuable commercial industries such as fishing and kelp harvesting. As of September 30, 2013, 13 National Marine 
103 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Sanctuaries, which include both coastal and offshore areas, have been designated, covering a total area of nearly 32,685 square 

miles. This number includes the incorporation of a large area of the Rose Atoll Marine National Monument, discussed below, into 

the National Marine Sanctuary of American Samoa. Each individual sanctuary site (Monterey Bay, the Florida Keys, the Olympic 

Coast, and Channel Island are the largest four) conducts research and monitoring activities to characterize existing resources and 

document changes. 

Papahãnaumokuãkea Marine National Monument: The majority of all coral reef habitats located in U.S. waters surround the 

Northwestern Hawaiian Islands (NWHI). Papahãnaumokuãkea Marine National Monument was designated by Presidential 

Proclamation in 2006 and overlays several previously designated protected areas and forges a co-management regime for the 

entire area. The overlayed protected areas comprising the monument are the NWHI Coral Reef Ecosystem Reserve (from 3 

to 50 miles in federal waters from the corridor of islands of the NWHI); the National Wildlife Refuges (the islands, atolls and 

some federal waters); and the State of Hawaii Refuge and lands and waters. The Monument is co-managed by NOAA and the 

Department of the Interior, in close coordination with the state of Hawaii.

Rose Atoll Marine National Monument: On January 6, 2009, President Bush designated the Rose Atoll Marine National Monument 

in American Samoa. The monument is the largest and most comprehensive contiguous protected area in the region that 

overlays the pre-existing Rose Atoll National Wildlife Refuge and a majority of the area of the recently expanded National 

Marine Sanctuary of American Samoa Muliava Unit. It also includes 20 acres of land and 1,600 acres of lagoon and extends 

50 nautical miles seaward from the mean low water line of the atoll. It also includes one of the most pristine atolls in the 

world. The areas around the atoll support a dynamic reef ecosystem that is home to many land and marine species, many 

of which are threatened or endangered. The Department of the Interior has primary management responsibility of the atoll 

while NOAA has primary management responsibility for the marine areas of the monument seaward of mean low water, with 

respect to fishery-related activities regulated pursuant to the Magnuson-Stevens Fishery Conservation and Management Act 

(16 U.S.C. 1801 et seq.) and any other applicable authorities. An intergovernmental committee comprised of NOAA, Department 

of the Interior, and the American Samoa Government has been established to develop and coordinate management strategies. 

NOAA continues to progress with management planning and fisheries management strategies and published a final rule for 

non-commercial fishing in June 2013.

Marianas Trench Marine National Monument: On January 6, 2009, President Bush designated the Marianas Trench Marine National 

Monument. The Monument consists of approximately 96,000 square miles of submerged lands and waters of the Mariana 

Archipelago. It includes three units: the Islands Unit, the waters and submerged lands of the three northernmost Mariana Islands; 

the Volcanic Unit, the submerged lands within 1 nautical mile of 21 designated volcanic sites; and the Trench Unit, the submerged 

lands extending from the northern limit of the Exclusive Economic Zone of the United States in the Commonwealth of the 

Northern Mariana Islands (CNMI) to the southern limit of the Exclusive Economic Zone of the United States in the Territory of 

Guam. No waters are included in the Volcanic and Trench Units, and CNMI maintains all authority for managing the three islands 

within the Islands Unit (Farallon de Pajaros or Uracas, Maug, and Asuncion) above the mean low water line. The Department of 

the Interior, in consultation with NOAA, has management responsibility for the monument. With respect to fishery-regulated 

activities regulated pursuant to the Magnuson-Stevens Fishery Conservation and Management Act and any other applicable 

authorities, however, NOAA has primary management responsibility and when necessary consults with the Department of the 

Interior. The Marianas Trench Monument Advisory Council meets regularly to progress management planning and cooperative 

management of the monument. NOAA continues to progress with management planning and fisheries management strategies 

and published a final rule for non-commercial fishing in June 2013. 

Pacific Remote Islands Marine National Monument: On January 6, 2009, President Bush designated the Pacific Remote Islands 

Marine National Monument. The Pacific Remote Islands area consists of Wake, Baker, Howland, and Jarvis Islands, Johnston 

Atoll, Kingman Reef, and Palmyra Atoll, which lie to the south and west of Hawaii. The Monument overlays the existing National 
104 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

Wildlife Refuges and beyond, extending the marine protected area to 50 nautical miles from the center of each island or atoll. 

The Monument has endemic species, including corals, fish, shellfish, marine mammals, seabirds, water birds, land birds, insects, 

and vegetation not found elsewhere in the world.

The Department of the Interior has responsibility for management of the Monument in consultation with NOAA, including out to 

12 nautical miles from the mean low water lines of Wake, Baker, Howland, and Jarvis Islands, Johnston Atoll, Kingman Reef and 

Palmyra Atoll, pursuant to applicable legal authorities. NOAA continues to progress with management planning and fisheries 

management strategies and published a final rule for non-commercial fishing in June 2013.

Aleutian Islands Habitat Conservation Area: On July 28, 2006, NOAA formally established the Aleutian Islands Habitat Conservation 

Area in Alaska, which covers nearly 370,000 square miles and may harbor among the highest diversity of deep-water corals 

in the world. The conservation area established a network of fishing closures in the Aleutian Islands and Gulf of Alaska, and 

protects habitat for deep-water corals and other sensitive features that are slow to recover once disturbed by fishing gear or other 

activities. Six small areas that include fragile coral gardens discovered by NOAA Fisheries Service scientists are closed to all 

bottom-contact fishing gear. This effort is part of a network of new marine protected areas in Alaskan waters designed to protect 

essential fish habitat and prevent any further damage of the area. 

California’s Russian River Watershed Habitat Focus Area: The Habitat Focus Area provides a framework for NOAA to think and act 

strategically across all programs to increase the effectiveness of our efforts to improve habitat conditions for fisheries, marine 

life, and coastal communities. To that end, NOAA is identifying places where its offices can effectively focus their resources to 

meet their habitat conservation mandates on a watershed scale. 

Once the host of vibrant coho salmon and steelhead runs, the Russian River was a premiere recreational fishing destination. 

By 2000, coho salmon were virtually extinct from the river and the remaining habitats are badly degraded. Under the Endangered 

Species Act, California’s coho salmon are now listed as endangered and steelhead are listed as threatened. Heavy demand for 

and competing uses of the river’s water adds to the stress on fish. As a valuable resource for Sonoma and Mendocino County 

agriculture and viticulture, as well as domestic water supply, water extraction from the river and tributaries can leave fish stranded 

during periods of critical demand in the spring, summer, and early fall. Russian River Valley communities are also impacted by 

frequent flooding. Steep hills and numerous canyons make accurate rainfall predictions and flood forecasts difficult. 

NOAA’s expertise in flood and weather forecasting, integrated monitoring, habitat protection and restoration, stakeholder 

education, and coastal and ocean planning and management will be critical to addressing the issues that challenge this watershed.

NOAA’s goals in the Russian River watershed include:

● Rebuilding endangered coho and threatened chinook and steelhead stocks to sustainable levels;

● Improving rainfall, flooding, and frost forecasts in the Russian River watershed; 

● Increasing community resiliency to flood damage; and

● Improving planning and water management strategies.

Building on its efforts in the Russian River, NOAA will begin to select habitat focus areas in other coastal regions over the coming 

year, starting with Alaska and the Pacific Islands. 
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NOTES TO THE FINANCIAL STATEMENTS

Heritage Assets: 

Heritage assets are unique for their historical or natural significance, for their cultural, educational, or artistic importance, or for 

their significant architectural characteristics. The Department generally expects that these assets will be preserved indefinitely. 

In cases where a heritage asset also has a practical and predominant use for general government operations, the asset is 

considered a multi-use heritage asset. The cost of a multi-use heritage asset is capitalized as General PP&E and is depreciated 

over the useful life of the asset.

NOAA has established policies for heritage assets to ensure the proper care and handling of these assets under its control 

or jurisdiction. The Deputy Under Secretary of NOAA established the Heritage Assets Working Committee to administer 

NOAA’s stewardship policies and procedures. In carrying out these policies and procedures, the Working Committee: 

● Maintains a nationwide inventory of heritage assets, ensuring that they are identified and recorded in the Personal 

Property Heritage Asset Accountability System; 

● Establishes nationwide NOAA policies, procedures, and standards for the preservation, security, handling, storage, and 

display of NOAA heritage assets; 

● Tracks and updates each loan of NOAA heritage assets, including assigning current values and inventory numbers, and 

reporting the current conditions of heritage assets; 

● Determines the feasibility of new asset loans, such as meters, standard tide gauges, portraits, and books for exhibit 

loans; and

● Collects heritage assets and properties of historic, cultural, artistic, or educational significance to NOAA. 

NOAA maintains the following Heritage Assets:

Galveston Laboratory: Galveston Laboratory provides scientific information on the management of commercial and recreational 

shellfish and finfish; conservation of coastal habitats; and protection of threatened and endangered marine species of the Gulf of 

Mexico. Galveston Laboratory is comprised of seven buildings that were originally part of Fort Crockett, Texas, an army coastal 

defense facility built shortly after 1900. These buildings are eligible for placement on the National Register. The laboratory is 

situated on the site of the Historic Fort Crockett, one block from the Gulf of Mexico on Galveston Island, Texas, and is the only 

federal fisheries laboratory west of the Mississippi River on the Gulf. A high quality seawater system delivers as much as 

50,000 gallons daily and supplies large tanks, aquaria and raceways for experiments on estuarine and marine organisms making 

it the largest and most extensive federally operated sea water system in the southeastern United States. The lab occupies 

about 55,000 square feet of research and administrative space shared with Texas A&M University and the Texas Institute of 

Oceanography. It is equipped with two facilities for sea turtle research focused since 1978 on the endangered Kemp’s Ridley 

and is the only federal facility in the United States dedicated to captive rearing of sea turtles. NOAA’s sea turtle facility occupies 

the southwest corner of the campus and is co-located with Texas Marine Mammal Stranding Network. Due to its historic 

significance, exterior architectural features, and predominant use in government operations, Galveston Laboratory is considered 

a multi-use heritage asset. 

National Marine Fisheries Service (NMFS) St. George Sealing Plant: On St. George Island, in the Pribilof Islands group, Alaska, is the 

only remaining northern fur seal pelt processing building in the world. In 1986, the building was listed on the National Register 

of Historic Properties, within the Seal Islands National Historic Landmark. The Pribilof Islands commercial fur seal harvest was 

an extremely profitable business for the U.S. government, and, by the early 1900s, had covered the purchase price of Alaska. 

The building is the largest on the island, and is comprised of four distinct work areas from the seal pelt processing area. In 1950, 
106 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS

the original wood-framed pelt processing plant was destroyed in a fire and rebuilt in 1951 with concrete walls on remnants of the 

original foundation. Harsh weather and a lack of maintenance funding after the expiration of the Northern Fur Seal Convention in 

1985 resulted in significant deterioration of the building by the early 1990s. 

In November 1999, after numerous site surveys and assessments, the building’s crumbling foundation was stabilized and the 

building’s exterior was painted. This effort allowed for NOAA’s continued, but limited, use of the building by NMFS’s Alaska 

Region and Alaska Fisheries Science Center to achieve NOAA’s mission on St. George Island. In addition, the U.S. Fish and 

Wildlife Service (USFWS) Alaska Maritime National Wildlife Refuge used the building as a bunkhouse until 2006, when NOAA’s 

Safety Officer and the USFWS Safety Officer both determined the bunkhouse portion of the building lacked sufficient means 

of egress in the event of fire and deemed it to be unsafe for habitation. It was determined by USFWS that the cost of making 

the necessary modifications to the space was not fiscally justifiable. NOAA’s Preserve America program funded an interpretive 

display project in the Seal Plant to promote public outreach and education for the modest tourism program on St. George. 

NMFS Cottage M, St. George: The last remnants of the U.S. commercial harvest of northern fur seals can be found on St. George 

Island, in the Pribilof Islands group, Alaska. In 1986, Cottage M (locally known as Cottage C), was listed on the National Register 

of Historic Places within the Seal Islands National Historic Landmark. This building was constructed in the 1930s and was the 

residence of the island doctor and hospital through 1955, when the current clinic/hospital was built. Later, the construction of 

a health clinic on St. George Cottage M provided housing for government scientists and managers. In recent years, USFWS 

Alaska Maritime National Wildlife Refuge staff have also used the building. NMFS Cottage M is considered a multi-use heritage 

asset because of the critical housing for NOAA’s research and management staff, along with USFWS staff. 

NMFS St. Paul Old Clinic/Hospital: On St. Paul Island, in the Pribilof Islands group, Alaska, fewer historic structures remain than on 

St. George Island. In 1986, the clinic/hospital was listed on the National Register of Historic Places within the Seal Islands National 

Historic Landmark. The old clinic/hospital is the combination of three historic buildings (physician’s house, 1929; dispensary, 

1929; and hospital, 1934) connected in 1974 with an addition. The building was used as a clinic/hospital through 2006 under a 

Memorandum of Agreement between NMFS and the Department of Health, Education and Welfare, and later, the Indian Health 

Service/Bureau of Indian Affairs. Since August 2007, NMFS has maintained the facility. The facility is vacant and in significant need 

for repair before it can be utilized. During the winter of 2010, there was a freeze resulting in broken plumbing pipes and substantial 

flooding and icing throughout the building. All surface finishes on walls and most floors and most wall insulation have been 

removed. The electrical, heating, plumbing supply, waste drain, and fire sprinkling systems are non-functional. An engineering 

assessment has been completed which indicates that the north and south sections of the structure (built in 1929 and 1934) are 

in poor condition. The assessment recommended demolition vice repair of these sections due to the extensive amount of work 

required to bring these oldest portions of the structure to meet modern code compliance. The report recommended temporary 

shoring of the north and south sections to reduce the possibility of collapse until a decision is made with respect to the future 

renovation of the facility. Additional options are now under review regarding the future of the property. A cost-benefit evaluation 

of renovation of the facility to accommodate the future needs of St. Paul Island is on hold while these options are considered. 

NMFS Aquarium: In Woods Hole, Massachusetts, this aquarium was established in 1875 by Spencer Baird, the originator of NMFS. 

In addition to being part of the first laboratory of today’s NMFS, this aquarium is the oldest marine research display aquarium in 

the world. It is used to educate the public, raise public awareness of NMFS activities, and accommodate in-house research for 

the Northeast Fisheries Science Center. The aquarium houses 16 permanent exhibition tanks and approximately 12 freestanding 

aquaria and touch tanks holding more than 140 species of fish and invertebrates and, on occasion, sea turtles. The facility also has 

an exterior seal habitat that currently exhibits non-releasable harbor seals obtained through the NOAA marine mammal stranding 

network. The tanks range in size from 75 to 2,800 gallons. NMFS Aquarium is considered a multi-use heritage asset because it 

is also used for NOAA’s scientific research, which is part of its mission.
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NOTES TO THE FINANCIAL STATEMENTS

Great Lakes Environmental Research Laboratory (GLERL)/Lake Michigan Field Station (LMFS): In Muskegon, Michigan, the GLERL 

main building, constructed in 1904 by the U.S. Life Saving Service, is eligible for National Register designation and has been 

recognized by state and local historical societies for its maritime significance. With the creation of the U.S. Coast Guard in 

1915, the facility was transferred and served as a base for search and rescue operations for 75 years. In 2004, a renovation 

project was completed that restored the exterior to its original architecture and color scheme – a style that is considered 

rare. Today, GLERL carries out research and provides scientific products, expertise, and services required for effective 

management and protection of Great Lakes and coastal ecosystems. GLERL/LMFS includes three buildings and a research 

vessel dockage. The function of the field station is to provide a base of operations for GLERL’s primary research vessel, 

which is presently the Research Vessel Laurentian, and to provide a focal point for GLERL’s research on Lake Michigan. Due 

to its historic significance, exterior architectural features, and predominant use in government operations, GLERL/LMFS is 

considered a multi-use heritage asset.

Collection-type Heritage Assets: 

NOAA:

NOAA’s collection-type heritage assets are comprised primarily of books, journals, publications, photographs and motion pictures, 

manuscripts, records, nautical chart plates, and artifacts. Many of these heritage assets are maintained by the NOAA Central 

Library (Library). As evidenced by a search of international catalogs, 35 to 50 percent of the Library’s collection is unique. 

Historically, 40 percent of the items catalogued are not found anywhere else. Many older books cannot be replaced. The works 

include 17th century works of Francis Bacon and Robert Boyle, 18th century works of Daniel Bernouilli, Daniel Defoe, and Pierre 

Bougher, and 19th and 20th century works of Benjamin Franklin and George Washington Carver. The Library has an extensive 

collection of historical Coast and Geodetic Survey materials (from 1807) and Weather Bureau materials (from the 1830s), including 

foreign and historical meteorological data, information on instruments, and metadata. 

NOAA’s collection-type heritage assets include items in the Thunder Bay Sanctuary Research Collection (Collection). In 2004, the 

Thunder Bay National Marine Sanctuary (jointly managed by NOAA and the State of Michigan to protect and interpret a nationally 

significant collection of shipwrecks and other maritime heritage resources) established an agreement with the Alpena County 

George N. Fletcher Public Library to jointly manage this Collection. Amassed over a period of more than 40 years by historian 

C. Patrick Labadie, the Collection includes information about such diverse subjects as Great Lakes ports and waterways, docks, 

cargoes, ships, shipbuilders, owners and fleets, machinery and rigging, notable maritime personalities, and shipwrecks. Special 

features of the Collection are extensive collections of 1) data cards listing most of the ships on the Great Lakes before year 1900, 

a roster of some 15,000 vessels complete with descriptive data and highlights of the ships’ careers and their ultimate losses; 

and 2) ship photograph negatives of 19th and 20th century Great Lakes ships. Heritage assets also include copies of vessel 

ownership documents, contemporary ship photographs, books, and other items documenting the Great Lakes history.

NOAA’s collection-type heritage assets also include items in the National Climatic Data Center Library. Heritage assets include 

1) books, manuals, and slides; 2) thermometers, gauges, and radiosondes; and 3) laboratory equipment. 

Historical artifacts are designated collection-type heritage assets if they help illustrate the social, educational, and cultural heritage 

of NOAA and its predecessor agencies (Coast and Geodetic Survey, U.S. Fish Commission, the Weather Bureau, the Institutes 

for Environmental Research, the Environmental Science Services Administration, etc.). These include, but are not limited to, 

bells, gyrocompasses, brass citations, flags, pennants, chronometers, ship seals, clocks, compasses, fittings, miscellaneous ship 

fragments, lithographic plates, barometers, rain gauges, and any items that represent the uniqueness of the mission of NOAA 

and its predecessor agencies.
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NOAA’s Logistics Office continually conducts inventories of its collection-type heritage assets. Many items that were once 

classified as an individual collection are now included in existing collections. Other items are now deemed as not meeting the 

heritage asset criteria.

NIST: 

NIST currently maintains collection-type heritage assets under its Museum and History Program, which collects, conserves, 

and exhibits artifacts, such as scientific instruments, equipment, objects, and records of significance to NIST and predecessor 

agencies. This program provides institutional memory and demonstrates the contributions of NIST to the development of 

standards measurement, technology, and science. The Information Services Office (ISO) maintains the historical archives, rare 

book collection, and oversees the oral history program. The historical archives and rare book collection contain titles that are 

considered “classics” of historical scientific interest, books by prominent contemporary scientists, and books by NIST authors 

or about NIST work. Titles are recommended for inclusion by ISO staff and customers. Materials are not specifically purchased 

for the collection nor are funds specifically allocated for the collection. Photos and manuscripts include images of NIST staff, 

facilities, and artifacts that demonstrate NIST accomplishments. 

NIST’s Museum and History Program has policies in place for acquisitions and loans. Objects are either on display or in storage 

and are not used by visitors. Archives, including the historical book collection, are used according to established research library 

policies and procedures. When considering artifacts for accession, the following criteria are considered: 

● Direct connection to NIST program activity; 

● Direct connection to a NIST prominent person; 

● Physical size; and

● Safety considerations. 

Archive material is not loaned. Artifacts are rarely loaned, but can be loaned within established policies and procedures for 

educational purposes, scholarly research, and limited public exhibition to qualified institutions. The loan policy packet for these 

artifacts includes an introduction to the NIST Loan Program, Borrower Checklist, Artifact Loan Request, NIST Loan Policy, 

Insurance Requirements, Facilities Report, Outgoing Loan Agreement, Condition Report Form, and Outgoing Loan Process. 

ISO preserves and promotes the history of NIST through a program that collects, organizes, and preserves records of enduring 

value and encourages and supports their use by researchers. The policies and procedures cover such topics as submitting 

reference inquiries, regulations for use of the archives collection, scope of archives collection, criteria for accepting archival 

material, providing physical and bibliographic access, preservation, and reviewing the collection.

Census Bureau:

Collection-type heritage assets maintained by the Census Bureau are items considered unique for their historical, cultural, 

educational, technological, methodological, or artistic importance. They help illustrate the social, educational, and cultural 

heritage of the Census Bureau. Some items because of their age or obvious historical significance are inherently historical 

artifacts. Some examples of these historical artifacts include: 

1900 Hollerith Key Punch: Census Bureau clerks used the key punch during the 1900s to punch round holes into cards for tabulation 

by electric tabulating machines housed at the Census Bureau. The key punch increased the speed with which clerks could 

transfer data entered on census schedules to the punch cards used to tabulate census results.
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NOTES TO THE FINANCIAL STATEMENTS

Hollerith Tabulator (Dial): The Hollerith Tabulator dial was manufactured by the Tabulating Machine Company for the Census Bureau. 

The Hollerith Tabulator dial mechanically illustrated the data being read from punched paper cards entered into the tabulator. 

The holes punched in cards were sensed by pins or pointers making contact through the holes to a drum. The completion of an 

electric circuit through a hole advanced the counter on this dial representing data tabulated for a specific population, economic, 

or agriculture inquiry on the census schedule.

Gang Punch: The gang punch was manufactured by the Tabulating Machine Company for the Census Bureau. The gang punch was 

used for recording facts common to a number of punch cards, such as the month, day, year, etc. It is equipped with a number of 

moveable punches, which can easily be changed and set for any desired combination. Using the gang punch, clerks could punch 

a number of cards at once, thus speeding the transcription of data.

Pantograph: This item was manufactured by the Tabulating Machine Company for the Census Bureau. Census Bureau clerks used 

the pantograph, or keyboard punch, to transfer information on the census schedule to punch cards. To operate the pantograph, 

the clerk guided one end of the lever over a board showing the categories of information from the census (age, sex, place of 

birth, etc.) and depressed the lever at the appropriate position, punching a hole in the punch card. With the information found 

on the schedule translated into punch holes on cards, the data could then be read and the results tallied by tabulators designed 

to read the punch cards.

Census Bureau Enumerators Badge: The Census Bureau provided enumerators with badges during the 1900s and later censuses, 

and recipients were instructed to wear them when on duty. The 1900s instructions to enumerators noted that the badge offered 

additional evidence of the bearer’s authority to ask the question required by law. Furthermore, enumerators were instructed 

to wear the badge attached to the vest under the coat, and to exhibit it only when it would aid the enumerator in obtaining the 

information. Upon completion of the census, the Census Bureau permitted enumerators to keep the badge as a souvenir of their 

service.

Data Stewardship Button: The data stewardship button served as a visible reminder to employees that the Census Bureau complies 

with all federal legal requirements affecting the collection, handling, and dissemination of personal and business information. 

In addition, the Census Bureau believes that individuals and businesses have fundamental rights to be treated fairly and ethically 

when asked to provide their personal information to the government for statistical purposes.

Steel Hand Bander: The steel hand bander is used to secure paper, boxes, and other goods to pallets, via ribbons of steel, 

for shipment. The Census Bureau has used similar banders since the early 20th century to secure boxes of questionnaires, 

publications, etc., for shipment to census offices throughout the United States, Puerto Rico, and the Island Areas.

Unisys Tape and Reel: It is assumed that Unisys Corporation manufactured this tape and reel in the 1980s. This tape technology, 

released in 1964, introduced what is now generally known as 9-track tape. The magnetic tape is 1⁄2 inch wide, with eight data 

tracks and one parity track for a total of nine parallel tracks. Data is stored as 8-bit characters, spanning the full width of the tape 

(including the parity bit). Various recording methods are used to place the data on tape, depending on the tape speed and data 

density, including PE (phase encoding), GCR (group code recording), and NRZI (non-return-to-zero, inverted).

Film Optical Sensing Device for Input to Computers (FOSDIC): This 1980s file cabinet-sized version of FOSDIC was manufactured by the 

Census Bureau for the 1990 census. During the 1950s, the Census Bureau and the National Bureau of Standards developed the 

FOSDIC system, which took census and survey questionnaires that had been photographed onto microfilm, read blackened dots 

opposite the appropriate answers, and transferred that data to magnetic tape. These tapes constituted the input for the Census 

Bureau’s computers. One important result of this process was the elimination of most discrepancies in data records sent for 

processing. First used to process 1960 census results, FOSDIC played an integral part in the Census Bureau’s data processing 

system into the mid-1990s.
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NOTES TO THE FINANCIAL STATEMENTS

Artwork and Gifts: The Census Bureau’s artwork and gifts include items bequeathed to, given to, or commissioned by the agency, 

such as posters, paintings, sculptures, postage stamps, photographs, antiques, memorial plaques, cultural artifacts from other 

statistical agencies and countries, awards, time capsules, buttons and badges, and more.

The Census Bureau has developed a Project Charter for heritage assets which has developed policies and procedures for the 

acquisition and removal of Census Bureau’s heritage assets. If a Census Bureau employee receives a gift from a foreign government’s 

statistical agency or any other agency while on official government travel, the Census Bureau employee will deliver the item to a 

member of the Census Bureau’s Heritage Assets Committee (Committee) for review upon his or her return to the Census Bureau, 

if the item is valued at more than $25. The Committee will decide if the item meets the criteria for a heritage asset based on the 

uniqueness, historical age, and/or if the item helps to illustrate the Census Bureau’s historic contributions to the nation’s growth. 

If the item is deemed a heritage asset, the applicable property management office will ensure the heritage asset is catalogued 

and stored in a safe, secure environment, allowing for appropriate preservation and conservation. All necessary actions will be 

taken to reduce deterioration of heritage assets due to environmental conditions, and to limit damage, loss, and misuse of heritage 

assets. The Committee meets on a regular basis to determine if any heritage assets should be removed from the approved list, 

or if a newly arrived item should be classified as a heritage asset. Once a determination has been made to no longer classify an 

item as a heritage asset, the Census Bureau will follow any applicable established policies and procedures for surplus property.
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NOTES TO THE FINANCIAL STATEMENTS

The following table summarizes the Department’s Collection-type Heritage Assets activity and balances.

Collection-type Heritage Assets:

(In Actual Quantities)

Category Description of Assets

Quantity of 

Items Held 

September 30, 

2012

FY 2013 

Additions

FY 2013 

Withdrawals

Quantity of 

Items Held

September 30, 

2013

NOAA Central Library: 

Circulating Collection Books, journals, and other 

publications 1 N/A N/A 1

Rare Book Room 

Collection Books and publications 1 N/A N/A 1

Collection of 

Photographs and Motion 

Pictures Photographs and motion pictures 1 N/A N/A 1

Other Artifacts, documents, and other 

items 56 - - 56

National Ocean Service–

Thunder Bay Sanctuary 

Research Collection

Data cards, photograph negatives, 

document copies, photographs, 

books, and other items 106,254 - - 106,254

National Climatic Data 

Center Library 

Artifacts, books, documents, and 

other items 325 - 100 225

NOAA Others Artifacts, artwork, books, films, 

instruments, maps, and records 3,431 10 43 3,398

NIST Artifacts and 

Scientific Measures 

National Bureau of Standards 

(NBS)/NIST scientific instruments, 

equipment, and objects 1,015 32 - 1,047

NIST Historical Books 

and Manuscripts 

Books of historical scientific 

interest, books by prominent 

contemporary scientists, and 

books by NBS/NIST authors and 

manuscripts of NBS/NIST staff, 

facilities, and artifacts 61 - - 61

Census Bureau Artwork 

and Gifts 

Artifacts, artwork, books, films, 

instruments, and records 132 13 - 145

Census Bureau 

Collectable Assets 

Publications, books, manuscripts, 

photographs, and maps 30 3 1 32

Total 111,307 58 144 111,221

N/A - Not applicable; this category is reported as one collection. 

Additional information on the condition of the above Collection-type Heritage Assets is presented in the Required Supplementary 

Information section.
112 F Y 2013 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
Consolidating

Balance

Sheet

FINANCIAL SECTION

115 F Y 2013 AGENCY FINANCIAL REPORT

CONSOLIDATING BALANCE SHEET

United States Department of Commerce Consolidating Balance Sheet As of September 30, 2013 (In Thousands)

 Consolidating 

Total

 IntraDepartmental 

Eliminations BIS

Census

Bureau DM/G&B DM/S&E DM/WCF EDA ELGP ESA/BEA

Franchise 

Fund HCHB ITA MBDA NIST NOAA NTIA NTIS OIG USPTO

ASSETSIntragovernmental:Fund Balance with Treasury $ 18,002,497 $ - $ 22,740 $ 611,823 $ 4,776 $ 23,024 $ 55,796 $ 1,089,559 $ 291 $ 15,338 $ 2,906 $ 22,531 $ 123,047 $ 18,915 $ 712,598 $ 3,571,670 $ 9,683,276 $ 30,182 $ 17,289 $ 1,996,736 

Accounts Receivable 92,197 (16,648) 294 12,651 - 10,275 697 309 - - - - 4,361 - 6,582 67,623 137 5,791 78 47 Advances and Prepayments 91,641 (68,415) 3,643 30,392 - 6,980 504 1,109 - 922 164 - 9,524 1,573 4,911 57,971 39,277 480 880 1,726 

Total Intragovernmental 18,186,335 (85,063) 26,677 654,866 4,776 40,279 56,997 1,090,977 291 16,260 3,070 22,531 136,932 20,488 724,091 3,697,264 9,722,690 36,453 18,247 1,998,509 

Cash 5,806 - - - - - - - - - - - - - - 353 - 48 - 5,405 

Accounts Receivable, Net 64,130 - 4,248 9,034 - 6 49 103 - 40 - - 170 8 10,289 37,877 1,775 401 - 130 Direct Loans and Loan Guarantees, Net 533,692 - - - - - - 9,068 - - - - - - - 524,624 - - - - Inventory, Materials, and Supplies, Net 99,607 - - 91 - - 2 157 - - - - - - 27,164 72,107 - 86 - - General Property, Plant, and Equipment, Net 11,103,844 - 11 124,544 6,305 2,053 4,577 412 - 333 - 23,936 4,438 - 954,653 9,701,634 21,904 1,275 761 257,008 Other 44,897 - 1,188 81 4 2 - - - - - - 1,494 - 898 27,332 - 5,965 1 7,932 

TOTAL ASSETS $ 30,038,311 $ (85,063) $ 32,124 $ 788,616 $ 11,085 $ 42,340 $ 61,625 $ 1,100,717 $ 291 $ 16,633 $ 3,070 $ 46,467 $ 143,034 $ 20,496 $ 1,717,095 $ 14,061,191 $ 9,746,369 $ 44,228 $ 19,009 $ 2,268,984 

LIABILITIESIntragovernmental:Accounts Payable $ 150,275 $ (15,613) $ 1,190 $ 11,528 $ - $ 4,556 $ 1,042 $ 170 $ - $ $1,233 $ - $ - $ 2,342 $ 136 $ 2,116 $ 121,196 $ 2,553 $ 8,930 $ 789 $ 8,107 

Debt to Treasury 575,603 - - - - - - - - - - - - - - 524,565 51,038 - - - Other

Resources Payable to Treasury 11,267 - - - - - - 9,747 - - - - - - - 1,520 - - - - 

Unearned Revenue 313,926 (68,415) 293 161,685 - 8,023 45,268 40,677 - 99 164 - 586 5 61,275 20,214 32,133 5,041 944 5,934 

Other 74,505 (1,035) 1,051 22,619 - 1,985 1,765 281 - 877 - 9 4,046 546 5,913 25,917 891 167 329 9,144 

Total Intragovernmental 1,125,576 (85,063) 2,534 195,832 - 14,564 48,075 50,875 - 2,209 164 9 6,974 687 69,304 693,412 86,615 14,138 2,062 23,185 

Accounts Payable 363,540 - 991 48,318 (64) 288 6,106 579 - 1,245 - 114 6,376 365 12,731 205,162 3,181 3,431 2,425 72,292 

Loan Guarantee Liabilities 516 - - - - - - - - - - - - - - 516 - - - - Federal Employee Benefits 897,191 - 3,237 130,057 - 2,474 5,780 996 - 570 - 53 8,648 2,438 11,651 718,502 2,068 942 64 9,711 

Environmental and Disposal Liabilities 156,673 - - - - - - - - - - - - - 124,277 32,396 - - - - Other

Accrued Payroll and Annual Leave 467,706 - 4,533 82,245 60 2,934 5,688 2,183 - 5,268 - 88 21,110 615 31,350 134,546 3,324 1,120 2,377 170,265 

Accrued Grants 536,711 - - - - - - 406,336 - - - - 385 2,016 45,931 34,768 47,275 - - - Capital Lease Liabilities 7,021 - - - - - - - - - - - - - 936 6,085 - - - - 

Unearned Revenue 1,147,196 - 5,682 2,531 - - - 164 - - - - 15,433 - 45,071 29,364 327 4,330 - 1,044,294 

Other 64,100 - 39 4,740 - - - - - - - 1 12,221 - 6,469 40,629 - - 1 - 

TOTAL LIABILITIES $ 4,766,230 $ (85,063) $ 17,016 $ 463,723 $ (4) $ 20,260 $ 65,649 $ 461,133 $ - $ 9,292 $ 164 $ 265 $ 71,147 $ 6,121 $ 347,720 $ 1,895,380 $ 142,790 $ 23,961 $ 6,929 $ 1,319,747 

NET POSITIONUnexpended Appropriations

Unexpended Appropriations - Funds from

Dedicated Collections $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - 

Unexpended Appropriations - All Other Funds 5,340,879 - 21,993 269,943 - 24,473 - 641,878 291 11,816 - 22,371 105,192 17,678 478,863 2,990,087 748,303 - 7,991 - 

Cumulative Results of Operations

Cumulative Results of Operations - Funds from

Dedicated Collections 10,033,602 - - - - - - - - - - - - - - 245,906 8,838,459 - - 949,237 

Cumulative Results of Operations - All Other Funds 9,897,600 - (6,885) 54,950 11,089 (2,393) (4,024) (2,294) - (4,475) 2,906 23,831 (33,305) (3,303) 890,512 8,929,818 16,817 20,267 4,089 - 

Total Net Position - Funds from Dedicated Collections 10,033,602 - - - - - - - - - - - - - - 245,906 8,838,459 - - 949,237 Total Net Position - All Other Funds 15,238,479 - 15,108 324,893 11,089 22,080 (4,024) 639,584 291 7,341 2,906 46,202 71,887 14,375 1,369,375 11,919,905 765,120 20,267 12,080 - TOTAL NET POSITION $ 25,272,081 $ - $ 15,108 $ 324,893 $ 11,089 $ 22,080 $ (4,024) $ 639,584 $ 291 $ 7,341 $ 2,906 $ 46,202 $ 71,887 $ 14,375 $ 1,369,375 $ 12,165,811 $ 9,603,579 $ 20,267 $ 12,080 $ 949,237 

TOTAL LIABILITIES AND NET POSITION $ 30,038,311 $ (85,063) $ 32,124 $ 788,616 $ 11,085 $ 42,340 $ 61,625 $ 1,100,717 $ 291 $ 16,633 $ 3,070 $ 46,467 $ 143,034 $ 20,496 $ 1,717,095 $ 14,061,191 $ 9,746,369 $ 44,228 $ 19,009 $ 2,268,984 

See accompanying independent auditors’ report.
116 F Y 2013 AGENCY FINANCIAL REPORT

CONSOLIDATING BALANCE SHEET
FINANCIAL SECTION

Required

Supplementary

Information

(unaud i ted)

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REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)

Required Supplementary Information (Unaudited)

A Deferred Maintenance and Repairs 

Deferred Maintenance and Repairs are maintenance and repairs that were not performed when they should have been, that 

were scheduled and not performed, or that were delayed for a future period. Maintenance and Repairs are activities directed 

towards keeping Property, Plant, and Equipment (PP&E) in acceptable operating condition. These activities include preventive 

maintenance, normal repairs, replacement of parts and structural components, and other activities needed to preserve the asset 

so that it can deliver acceptable performance and achieve its expected life. Maintenance and Repairs exclude activities aimed 

at expanding the capacity of an asset or otherwise upgrading it to serve needs different from or significantly greater than those 

originally intended. Critical maintenance is defined as those projects where the required maintenance and repairs will have a 

critical impact on the public access, functionality and mission support, health and safety, and life cycle cost of a facility if the 

maintenance or repairs is not performed. The significant portions of Departmental Deferred Maintenance and Repairs relate to 

PP&E of both the National Oceanic and Atmospheric Administration (NOAA) and the National Institute of Standards and Technology 

(NIST). These two entities represent 96 percent of the Department’s General PP&E, Net balance as of September 30, 2013.

NOAA:

NOAA uses the Condition Assessment Survey (CAS) method to identify and quantify Deferred Maintenance and Repairs for 

assets meeting NOAA’s $200 thousand capitalization threshold. The CAS method employs a periodic inspection of real property, 

heritage assets, ships, and other applicable assets to determine its current condition and to estimate costs to correct any 

deficiencies. Estimated costs reflect potential costs variance of +/- 10 percent.

The following shows NOAA’s Deferred Maintenance and Repairs for projects with estimated costs greater than $50 thousand 

(Buildings and Structures; and Heritage Assets) and $25 thousand (Ships; and Other), as of September 30, 2013:

(In Thousands)

PP&E Category

Asset 

Condition

Estimated Cost to Return 

to Acceptable Condition

Buildings and Structures 3 $ 65,286 to $ 79,794

Heritage Assets 4, 3 11,756 to 14,369

Ships 2 24,545 to 29,999

Other 3 162 to 198

Total $ 101,749 to $ 124,360

The CAS method for all PP&E categories is based on a five-point scale, with 1 representing excellent condition; 

2 – good condition; 3 – fair condition; 4 – poor condition; and 5 – very poor condition. NOAA has established a “facility 

condition code” to classify the conditions of Buildings and Structures. Each building or structure is assessed an individual 

“facility condition code.” The average of the individual “facility condition codes” determines the CAS Asset Condition. The 

Deferred Maintenance and Repairs amounts reported represent non-critical maintenance and repairs to bring the Buildings 

and Structures to good condition. Buildings and Structures Deferred Maintenance and Repairs are comprised of projects 

submitted to the Capital Improvements Program. For Heritage Assets, the Deferred Maintenance and Repairs amounts 

reported represent non-critical maintenance to bring each class of Heritage Assets to an acceptable condition through 
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cleaning, restoration, and preservation. NOAA has established a “range of current asset condition code” to classify the 

conditions of Ships. The average of the individual “range of current asset condition codes” determines the CAS Asset 

Condition. 

NIST:

NIST also uses the CAS method to estimate Deferred Maintenance and Repairs. NIST values the condition of assets using a 

five-point scale, with 1 representing excellent condition; 2 – good condition; 3 – acceptable condition; 4 – poor condition; and 5 – very 

poor condition. Assets that are assessed at 4 or 5 require maintenance and repairs to increase their value to 3, or acceptable condition. 

The following shows NIST’s Deferred Maintenance and Repairs as of September 30, 2013:

(In Thousands)

PP&E Category Asset Condition

Estimated Cost to Return 

to Acceptable Condition

Mechanical and Electrical Devices 5 $ 162,539 to $ 179,649

Buildings (Internal Structures) 4 31,683 to 35,018

Buildings (External Structures) 4 10,036 to 11,092

Total $ 204,258 to $ 225,759

B Stewardship Marine Sanctuaries, Marine National Monuments, Conservation Area, and Habitat Focus Area

NOAA maintains the following sanctuaries, marine national monuments, and conservation area, which are similar in nature to 

stewardship land and which are more fully described in Note 23, Stewardship Property, Plant, and Equipment, of the Notes to 

the Financial Statements.

National Marine Sanctuaries: Marine sanctuaries provide protection for nationally significant natural areas, including species close 

to extinction, and protect historically significant shipwrecks and prehistoric artifacts. Each of the 13 sanctuaries, which may 

include habitats as diverse as near-shore coral reefs and open ocean, conducts research and monitoring activities to characterize 

existing resources and document changes. Resource status in the marine sanctuaries varies from good to poor, depending on 

resource type. Where conditions are compromised, they appear to reflect historical levels of use and development, and in some 

cases recent disturbances (e.g., diseases that have caused mass mortality of critically important species). The effects of recent 

disturbance may have been exacerbated by impaired environmental conditions in some areas. Human activities related to each 

of these threats are the focus of current management efforts, and favorable trends in resource quality appear to be the result of 

active management.

Papahãnaumokuãkea Marine National Monument: The majority of all coral reef habitats located in U.S. waters surround the 

Northwestern Hawaiian Islands (NWHI). The Papahãnaumokuãkea Marine National Monument, located off the coast of the NWHI, 

encompasses nearly 140,000 square miles of U.S. waters, including approximately 5,200 square miles of relatively undisturbed 

coral reef habitat that is home to more than 7,000 species. The condition of the Papahãnaumokuãkea Marine National Monument 

is good, but resources in the Monument are affected by an abundance of marine debris, and face emerging threats related to 

climate change (e.g., increasing temperature, acidification, and sea level). 

Rose Atoll Marine National Monument: The atoll includes the Rose Atoll National Wildlife Refuge. It also includes 20 acres of land 

and 1,600 acres of lagoon and extends 50 nautical miles seaward from the mean low water line of the atoll. It is one of the 

most pristine atolls in the world. The areas around the atoll support a dynamic reef ecosystem that is home to many land and 

marine species, many of which are threatened or endangered. The condition of the Rose Atoll Marine National Monument is 
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good, though it has apparently not recovered completely from the effects of a 1993 shipwreck and spill that altered community 

structure on a large portion of the reef.

Marianas Trench Marine National Monument: The Marianas Trench Marine National Monument consists of approximately 96,000 

square miles of submerged lands and waters of the Mariana Archipelago. It includes three units: the Islands Unit, the waters 

and submerged lands of the three northernmost Mariana Islands; the Volcanic Unit, the submerged lands within 1 nautical mile 

of 21 designated volcanic sites; and the Trench Unit, the submerged lands extending from the northern limit of the Exclusive 

Economic Zone of the United States in the Commonwealth of the Northern Mariana Islands (CNMI) to the southern limit of the 

Exclusive Economic Zone of the United States in the Territory of Guam. The condition of the Marianas Trench Marine National 

Monument is good. 

Pacific Remote Islands Marine National Monument: The Pacific Remote Islands area consists of Wake, Baker, Howland, and Jarvis 

Islands, Johnston Atoll, Kingman Reef, and Palmyra Atoll, which lie to the south and west of Hawaii. With the exception of Wake 

Island, these islands are administered as National Wildlife Refuges by the U.S. Fish and Wildlife Service of the Department of the 

Interior. They sustain many endemic species including corals, fish, shellfish, marine mammals, seabirds, water birds, land birds, 

insects, and vegetation not found elsewhere. The condition of the Pacific Remote Islands Marine National Monument is good.

Aleutian Islands Habitat Conservation Area: This conservation area in Alaska, which covers nearly 370,000 square miles, may harbor 

among the highest diversity of deep-water corals in the world, and protects habitat for deep water corals and other sensitive 

features that are slow to recover once disturbed by fishing gear or other activities. The condition of the Aleutian Islands Habitat 

Conservation Area is generally good, although some specific resources are threatened. For example, the conservation area 

contains six small areas of fragile coral gardens.

California’s Russian River Watershed Habitat Focus Area: Once the host of vibrant coho salmon and steelhead runs, the Russian River 

was a premiere recreational fishing destination. By 2000, coho salmon were virtually extinct from the river, and the remaining 

habitats are badly degraded. Heavy demand for and competing uses of the river’s water adds to the stress on fish. Russian River 

Valley communities are also impacted by frequent flooding. Steep hills and numerous canyons make accurate rainfall predictions 

and flood forecasts difficult. The condition of California’s Russian River Watershed Habitat Focus Area is fair. 

C Collection-type Heritage Assets

NOAA:

NOAA’s collection-type heritage assets are comprised primarily of books, journals, publications, photographs and motion pictures, 

manuscripts, records, nautical chart plates, and artifacts. Many of these heritage assets are maintained by the NOAA Central 

Library (Library). As evidenced by a search of international catalogs, 35 to 50 percent of the Library’s collection is unique. 

Historically, 40 percent of the items catalogued are not found anywhere else. The Library has an extensive collection of historical 

Coast and Geodetic Survey materials (from 1807) and Weather Bureau materials (from the 1830s), including foreign and historical 

meteorological data, information on instruments, and metadata. 

NOAA’s collection-type heritage assets include items in the Thunder Bay Sanctuary Research Collection, composed primarily of a) 

data cards listing most of the ships on the Great Lakes before 1900, a roster of some 15,000 vessels complete with descriptive 

data and highlights of the ships’ careers and their ultimate losses; and b) ship photograph negatives of 19th and 20th century 

Great Lakes ships.

NOAA’s collection-type heritage assets also include items in the National Climatic Data Center Library. Heritage assets include 

a) books, manuals, and slides; b) thermometers, gauges, and radiosondes; and c) laboratory equipment.
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NOAA uses the Condition Assessment Survey (CAS) method to describe the condition of its assets. The CAS method is based 

on a five-point scale with 1 representing excellent condition; 2 – good condition; 3 – fair condition; 4 – poor condition; and 5 – very 

poor condition. Assets with the condition assessment level between 1 through 3 are defined as being suitable for public display. 

The books, journals, and other publications that make up the majority of the NOAA Central Library collection-type heritage assets 

are in 4 – poor condition, and 5 – very poor condition. The heritage assets of the Thunder Bay Sanctuary Research Collection 

are in 2 – good condition, and the heritage assets of the National Climatic Data Center Library are generally in 3 – fair condition.

NIST:

NIST currently maintains the Museum and History Program, which collects, conserves, and exhibits artifacts such as scientific 

instruments, equipment, objects and records of significance to NIST and the National Bureau of Standards (NBS). This program 

provides institutional memory and demonstrates the contributions of NIST to the development of standards, measurement, 

technology, and science. Conditions of these artifacts are listed in the Registrar’s database and are generally fair.

NIST Information Services Office (ISO) maintains NIST Heritage Assets (artifacts), historical archives, a historical book collection, 

and oversees the oral history program. The book collection contains titles that are of historical scientific interest, rare titles, and 

books by NIST authors or about NIST work. Materials are not specifically purchased for the collection nor are funds specifically 

allocated for the collection. Conditions of the books are generally fair. The archives maintain photos of NIST staff, facilities, and 

artifacts that demonstrate NIST accomplishments. These images are in good condition.

Census Bureau: Heritage assets at the Census Bureau are items considered unique for their historical, cultural, educational, 

technological, methodological, or artistic importance. These assets help illustrate the social, educational, and cultural heritage of 

the Census Bureau. Some items, because of their age or obvious historical significance, are inherently historical artifacts. These 

historical artifacts include but are not limited to: Hollerith Key Punch, Hollerith Tabulator, Gang Punch, Pantograph, Census Bureau 

Enumerators Badge, Unisys Tape and Reel, Film Optical Sensing Device, Artwork and Gifts, and any items which represent the 

uniqueness of the mission of the Census Bureau. The heritage assets at the Census Bureau are classified as generally being in 

good condition. 

D Schedule of Budgetary Resources by Major Budget Account

The following table illustrates the Department’s FY 2013 budgetary resources by major budget account. The “Other Programs” 

column refers to the Department’s reporting entities and their budget accounts that are not listed.
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United States Department of Commerce Schedule of Budgetary Resources by Major Budget Account

For the Year Ended September 30, 2013 (In Thousands)

Combining 

Total

NOAA

Operations, 

Research, and

Facilities

USPTO

 Salaries

 and

Expenses

NOAA

Procurement,

Acquisition, 

and 

Construction

NTIA Digital 

Television 

Transition and 

Public Safety 

Fund

ITA

Operations

and

Administration

Census 

Bureau 

Periodic 

Censuses and 

Programs

EDA

Grant

Fund

NTIA 

Broadboand 

Technology 

Opportunities 

Program - 

ARRA

Other 

Programs

BUDGETARY RESOURCES:

Unobligated Balance, Brought Forward, October 1 $ 10,352,399 $ 243,147 $ 237,873 $ 42,232 $ 8,764,234 $ 29,632 $ 132,024 $ 184,312 $ 2,976 $ 715,969

Adjustments to Unobligated Balance, Brought Forward (157) - - - - - - (157) -

Unobligated Balance, Brought Forward, October 1, as Adjusted 10,352,242 243,147 237,873 42,232 8,764,234 29,632 132,024 184,155 2,976 715,969

Actual Recoveries of Prior-years Unpaid Obligations 259,810 38,051 21,351 27,088 21,443 14,962 25,367 47,162 2,036 62,350

Actual Nonexpenditure Transfers of Unobligated Balance, Net 10,647 - - - - 6,440 - - - 4,207

Borrowing Authority Withdrawn (6,355) - - - - - - - - (6,355)

Other Changes in Unobligated Balance, Net (38,198) (18,193) - (10,895) - (4,805) (1,428) - - (2,877)

Unobligated Balance From Prior-years Budget Authority, Net 10,578,146 263,005 259,224 58,425 8,785,677 46,229 155,963 231,317 5,012 773,294

Appropriations 7,907,642 3,237,440 - 1,903,988 4,300 439,862 620,728 182,017 - 1,519,307

Borrowing Authority 299,260 - - - - - - - - 299,260

Spending Authority From Offsetting Collections 4,271,495 216,209 2,672,335 2,790 7,039 14,671 5,952 2,649 2,640 1,347,210

TOTAL BUDGETARY RESOURCES $ 23,056,543 $ 3,716,654 $ 2,931,559 $ 1,965,203 $ 8,797,016 $ 500,762 $ 782,643 $ 415,983 $ 7,652 $ 3,939,071

STATUS OF BUDGETARY RESOURCES:

Obligations Incurred $ 12,354,766 $ 3,370,608 $ 2,489,268 $ 1,800,354 $ - $ 475,054 $ 643,417 $ 360,319 $ - $ 3,215,746

Unobligated Balance, End of Year 

Apportioned 1,499,168 268,474 442,291 138,923 - 14,170 3,087 48,571 - 583,652

Exempt From Apportionment 3,848 - - - - - - - - 3,848

Unapportioned 9,198,761 77,572 - 25,926 8,797,016 11,538 136,139 7,093 7,652 135,825

Total Unobligated Balance, End of Year 10,701,777 346,046 442,291 164,849 8,797,016 25,708 139,226 55,664 7,652 723,325

TOTAL STATUS OF BUDGETARY RESOURCES $ 23,056,543 $ 3,716,654 $ 2,931,559 $ 1,965,203 $ 8,797,016 $ 500,762 $ 782,643 $ 415,983 $ 7,652 $ 3,939,071

CHANGE IN UNPAID OBLIGATED BALANCE, NET:

Unpaid Obligations:

Unpaid Obligations, Brought Forward, October 1 $ 8,478,520 $ 1,947,905 $ 344,792 $ 1,208,910 $ 73,956 $ 91,352 $ 215,394 $ 1,099,997 $ 1,709,644 $ 1,786,570

Adjustments to Unpaid Obligations, Brought Forward 157 - (1) (1) (1) 1 - 155 1 3

Obligations Incurred 12,354,766 3,370,608 2,489,268 1,800,354 - 475,054 643,417 360,319 - 3,215,746

Outlays, Gross (13,778,017) (3,431,922) (2,547,148) (1,947,571) (20,960) (465,008) (685,617) (396,131) (962,052) (3,321,608)

Actual Recoveries of Prior-years Unpaid Obligations (259,810) (38,051) (21,351) (27,088) (21,443) (14,962) (25,367) (47,162) (2,036) (62,350)

UNPAID OBLIGATIONS, END OF YEAR $ 6,795,616 $ 1,848,540 $ 265,560 $ 1,034,604 $ 31,552 $ 86,437 $ 147,827 $ 1,017,178 $ 745,557 $ 1,618,361

Uncollected Customer Payments:

Uncollected Customer Payments, Brought Forward, October 1 $ (608,824) $ (453,844) $ (35) $ - $ - $ (17,125) $ - $ - $ - $ (137,820)

Adjustments to Uncollected Customer Payments, 

Brought Forward - - (1) - - - - - - 1

Change in Uncollected Customer Payments 139,568 104,072 (11) - - 7,368 - - - 28,139

UNCOLLECTED CUSTOMER PAYMENTS, END OF YEAR $ (469,256) $ (349,772) $ (47) $ - $ - $ (9,757) $ - $ - $ - $ (109,680)

Unpaid Obligated Balance, Net, Brought Forward, October 1 $ 7,869,696 $ 1,494,061 $ 344,757 $ 1,208,910 $ 73,956 $ 74,227 $ 215,394 $ 1,099,997 $ 1,709,644 $ 1,648,750

Unpaid Obligated Balance, Net, End of Year $ 6,326,360 $ 1,498,768 $ 265,513 $ 1,034,604 $ 31,552 $ 76,680 $ 147,827 $ 1,017,178 $ 745,557 $ 1,508,681

BUDGET AUTHORITY, NET:

Budget Authority, Gross $ 12,478,397 $ 3,453,649 $ 2,672,335 $ 1,906,778 $ 11,339 $ 454,533 $ 626,680 $ 184,666 $ 2,640 $ 3,165,777

Actual Offsetting Collections (4,621,016) (320,281) (2,822,057) (2,790) (7,039) (22,039) (5,952) (2,649) (2,640) (1,435,569)

Change in Uncollected Customer Payments 139,568 104,072 (11) - - 7,368 - - - 28,139

BUDGET AUTHORITY, NET $ 7,996,949 $ 3,237,440 $ (149,733) $ 1,903,988 $ 4,300 $ 439,862 $ 620,728 $ 182,017 $ - $ 1,758,347

OUTLAYS, NET:

Outlays, Gross $ 13,778,017 $ 3,431,922 $ 2,547,148 $ 1,947,571 $ 20,960 $ 465,008 $ 685,617 $ 396,131 $ 962,052 $ 3,321,608

Actual Offsetting Collections (4,621,016) (320,281) (2,822,057) (2,790) (7,039) (22,039) (5,952) (2,649) (2,640) (1,435,569)

Outlays, Net 9,157,001 3,111,641 (274,909) 1,944,781 13,921 442,969 679,665 393,482 959,412 1,886,039

Distributed Offsetting (Receipts)/Outlays, Net (46,853) - - - - - - - - (46,853)

AGENCY OUTLAYS, NET $ 9,110,148 $ 3,111,641 $ (274,909) $ 1,944,781 $ 13,921 $ 442,969 $ 679,665 $ 393,482 $ 959,412 $ 1,839,186
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FINANCIAL SECTION

Required

Supplementary

Stewardship

Information

(unaud i ted)

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Required Supplementary Stewardship Information (Unaudited)

Stewardship Investments

Stewardship investments are substantial investments made by the federal government for the benefit of the nation, but are not 

physical assets owned by the federal government. Though treated as expenses when incurred to determine the Department’s 

Net Cost of Operations, these items merit special treatment so that users of federal financial reports know the extent of 

investments that are made for the long-term benefit of the nation.

Investments in Non-federal Physical Property:

Non-federal physical property investments are expenses included in the Department’s Net Cost of Operations for the purchase, 

construction, or major renovation of physical property owned by state and local governments. Based on a review of the Department’s 

programs, the National Oceanic and Atmospheric Administration (NOAA) and the Economic Development Administration (EDA)

have significant investments in non-federal physical property.

NOAA:

National Estuarine Research Reserves (NERR): The NERR system consists of 28 estuarine reserves protected by federal, 

state, and local partnerships that work to preserve and protect the nation’s estuaries. The NERR system helps to fulfill 

NOAA’s stewardship mission to sustain healthy coasts by improving the nation’s understanding and stewardship of 

estuaries. Estuarine reserves are the areas where freshwater from rivers meet the ocean. These areas are known as 

bays, swamps, sloughs, and sounds. These important coastal habitats are used as spawning grounds and nurseries for 

the nation’s commercial fish and shellfish. Estuaries filter much of the polluted runoff from rivers and streams that would 

otherwise contaminate oceans. The reserves were created with the passage of the Coastal Zone Management Act of 

1972, and, as of September 30, 2013, encompassed approximately 1.4 million acres of estuarine waters, wetlands, and 

uplands. The most recent reserve, Lake Superior, WI, was designated on October 26, 2010. NERRs are state-operated and 

managed in cooperation with NOAA. NOAA’s investments in non-federal physical property are for the acquisition of lands 

and development or construction of facilities, auxiliary structures, and public access routes for any NERR site.

Coastal and Estuarine Land Conservation Program: This program was established under the Commerce, Justice, and State 

Appropriations Act of 2002, “for the purpose of protecting important coastal and estuarine areas that have significant 

conservation, recreation, ecological, historical, or aesthetic values, or that are threatened by conversion from their natural 

or recreational state to other uses.” The investments in non-federal physical property include matching grants awarded to 

state and local governments for land acquisition in coastal and estuarine areas. Since FY 2002, matching grants have been 

directed to 210 such projects.

Coastal Zone Management Fund: The Coastal Zone Management Program is authorized by the Coastal Zone Management Act of 

1972, and administered at the federal level by NOAA’s Office of Ocean and Coastal Resource Management. The investments 

in non-federal physical property include incidental expenses of land acquisition, and low-cost construction on behalf of 

various state and local governments, for the purpose of preservation or restoration of coastal resources and habitats. 

NOAA’s financing supports various coastal states in their redevelopment of deteriorating and urbanized waterfronts and 

ports, as well as providing for public access to beaches and coastal areas. The state and local governments receive funding 

for these investments through NOAA grant expenditures, and these grant expenditures also include funding for purposes 

other than the investments in non-federal physical property. There is currently not in place a mechanism for the state and 

local governments to determine and report to NOAA the amount of monies they expend for the investments in non-federal 
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physical property. The Department, accordingly, cannot report the amount of investments in non-federal physical property 

for the Coastal Zone Management Fund.

NOAA’s investments in non-federal physical property for FY 2009 through FY 2013 were as follows:

(In Millions)

Program FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Total

National Estuarine Research Reserves $ 11.7 $ 14.7 $ 5.5 $ 3.9 $ 2.4 $ 38.2

Coastal and Estuarine Land Conservation Program 21.6 32.4 6.9 8.8 5.7 75.4

Total $ 33.3 $ 47.1 $ 12.4 $ 12.7 $ 8.1 $ 113.6

EDA:

Public Works: The Public Works program promotes long-term economic development in distressed areas by providing 

investments for vital public infrastructure and development facilities. These critical investments enable communities to 

attract new, or support existing, businesses that will generate new jobs and income for unemployed and underemployed 

residents. Among the types of projects funded are water, sewer, fiber optics, access roads, and facilities such as industrial 

and business parks, business incubator and skill training facilities, and port improvements.

Economic Adjustment Assistance: The Economic and Adjustment Assistance program provides flexible investments for 

communities facing sudden or severe economic distress to diversify and stabilize their economies. Factors that seriously 

threaten the economic survival of communities include plant closures, military base closures or realignments, defense 

laboratory or contractor downsizings, natural resource depletion, out-migration, under-employment, and the impacts of 

foreign trade. 

Global Climate Change Mitigation Incentive Fund (GCCMIF): The GCCMIF program was established to strengthen the linkage 

between economic development and environmental quality. The purpose and mission of the GCCMIF program is to 

finance projects that foster economic development by advancing the green economy in distressed communities. The 

GCCMIF program is the development and use of products and services that contribute to economic growth and alleviate 

economic distress by respecting and revitalizing the environment. The GCCMIF program supports projects that create 

jobs through, and increase private capital investment in, efforts to limit the nation’s dependence on fossil fuels, enhance 

energy efficiency, curb greenhouse gas emissions, and protect natural systems.

Disaster Recovery: EDA supports the repair of infrastructure and economic development-related facilities damaged by 

floods and other natural disasters. Funding for Disaster Recovery is generally through supplemental appropriations from 

Congress for recovery efforts to save, sustain, and preserve private enterprise and job creation in economically distressed 

communities. 
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EDA’s investments in non-federal physical property for FY 2009 through FY 2013 were as follows:

(In Millions)

Program FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Total

Public Works $ 139.9 $ 175.8 $ 224.4 $ 160.7 $ 120.5 $ 821.3

Economic and Defense Adjustments 68.6 61.4 47.6 49.5 66.8 293.9

Global Climate Change Mitigation Incentive Fund 0.2 5.5 6.8 12.8 14.9 40.2

Disaster Recovery 6.3 32.4 85.1 111.0 146.2 381.0

Total $ 215.0 $ 275.1 $ 363.9 $ 334.0 $ 348.4 $ 1,536.4

The above investments require matching funds by state and local governments of 20 to 50 percent.

Investments in Human Capital:

Human capital investments are expenses, included in the Department’s Net Cost of Operations, for education and training 

programs that are intended to increase or maintain national economic productive capacity and produce outputs and outcomes that 

provide evidence of the constant or increasing national productive capacity. These investments exclude education and training 

expenses for federal civilian and military personnel. Based on a review of the Department’s programs, the most significant dollar 

investments in human capital are by NOAA.

NOAA:

National Sea Grant College Program: Sea Grant is a nationwide network, administered through NOAA, of 32 university-based 

programs that work with coastal communities. With the adoption in 1966 of the National Sea Grant College Act, Congress 

established an academic/industry/government partnership that would enhance the nation’s education, economy, and 

environment into the 21st century. The program supports activities designed to increase public awareness of coastal, ocean, 

and Great Lakes issues, to provide information to improve management decisions in coastal, ocean, and Great Lakes policy, 

and to train graduate students in marine and Great Lakes science. The Knauss Fellowship Program offers qualified masters 

and doctoral students the opportunity to spend a year working on marine and Great Lakes policy issues with the Executive 

and Legislative branches of the federal government. The program currently has 43 fellowships awarded: 12 fellowships 

funded by the National Sea Grant College Program, and 31 fellowships funded by other NOAA offices and other federal 

agencies. There is also a Graduate Fellowship Program for Ph.D. candidates in the specialized areas of population dynamics 

and marine resource economics. The Graduate Fellowship Program currently has 17 fellowships awarded. Participants in 

this program can receive up to three years of funding. 

National Estuarine Research Reserve Program: This program supports activities designed to increase public awareness of 

estuary issues, provide information to improve management decisions in estuarine areas, and train graduate students 

in estuarine science. The National Estuarine Research Reserve System’s Graduate Research Fellowship (GRF) Program 

offers qualified masters and doctoral students the opportunity to address scientific questions of local, regional, and national 

significance. The result is high-quality research focused on improving coastal management issues. All GRF projects must be 

conducted in a National Estuarine Research Reserve and enhance the scientific understanding of the reserve’s ecosystem. 

In FY 2013, 14 fellowships were awarded.

Educational Partnership Program: NOAA’s Educational Partnership Program (EPP) with Minority-serving Institutions (MSI) provides 

financial assistance through competitive processes to minority-serving institutions that support research and training of 

students in NOAA-related sciences. The program’s goal is to increase the number of trained and graduated students from 
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underrepresented communities in science and technology directly related to NOAA’s mission. EPP/MSI also seeks to 

increase collaborative research efforts between NOAA scientists and researchers at minority-serving academic institutions. 

Financial assistance is provided through four competitive program components: the Cooperative Science Centers, the 

Environmental Entrepreneurship Program, the Graduate Sciences Program, and the Undergraduate Scholarship Program. 

NOAA provides funding to eligible MSIs on a competitive basis to educate, train, and graduate students in NOAA sciences, 

particularly atmospheric, oceanic, environmental, living marine resources, remote sensing, and scientific environmental 

technology. The Cooperative Science Centers’ goals are to:

● Train and graduate students, particularly from underrepresented communities, in NOAA mission sciences;

● Develop expertise in a NOAA scientific area;

• Strengthen and build capacity in a NOAA scientific and management area; and

• Build research experience in a NOAA scientific and management area.

● Increase graduation rates of students from underrepresented communities in NOAA mission sciences;

● Impact NOAA workforce statistics by increasing representation from underrepresented communities in NOAA mission 

sciences; and

● Leverage NOAA funds to build the education and research capacity at MSIs.

In FY 2013, the Cooperative Science Centers awarded 89 degrees to students, and continued to support 265 students in 

post-secondary NOAA mission-relevant science, technology, resource management, and policy degree programs.

The Environmental Entrepreneurship Program (EEP) provides funding to eligible minority-serving institutions on a competitive 

basis to engage students to pursue advanced academic study and entrepreneurship opportunities in the NOAA-related 

sciences. EEP supports student training and experiential learning opportunities for the purpose of stimulating job creation 

and business development, and revitalizing local communities. EEP’s objective is to increase the number of students at 

MSIs proficient in environmental business enterprises.

The Graduate Sciences Program (GSP) is aimed primarily at increasing opportunities for students in NOAA mission fields 

to pursue research and educational training in atmospheric, environmental, remote sensing, and oceanic sciences at MSIs 

when possible. GSP offers between two years (master’s candidates) to four years (doctoral students) of NOAA-related 

research and training opportunities. GSP provides college graduates entry-level employment and hands-on research and 

work experience at NOAA. NOAA did not advertise for student applications in 2013, as it is unable to continue GSA in the 

same manner that it has operated recently due to federal government-wide changes being directed by the U.S. Office of 

Personnel Management. NOAA plans, however, to advertise a redesigned graduate program in the near future.

The Undergraduate Scholarship Program is designed to increase the number of students who undertake course work and 

graduate with degrees in the targeted areas integral to NOAA’s mission. Appointments are for two years, and are made 

to students who have recently declared or are about to declare a major in atmospheric, oceanic, or environmental science. 

The students participate in research, training, and development activities at NOAA offices and facilities during two summer 

internships. In FY 2013, 11 students were selected for the program.
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Ernest F. Hollings Undergraduate Scholarship Program: This program was established in 2005 to 1) increase undergraduate 

training in oceanic and atmospheric science, research, technology, and education, and foster multidisciplinary training 

opportunities; 2) increase public understanding and support for stewardship of the ocean and atmosphere and improve 

environmental literacy; 3) recruit and prepare students for public service careers with NOAA and other agencies at the 

federal, state, and local levels of government; and 4) recruit and prepare students for careers as teachers and educators 

in oceanic and atmospheric science and to improve scientific and environmental education in the U.S. Students live and 

attend universities across the U.S. They are majoring in the following science, technology, engineering, and mathematics 

fields: Mathematics; Meteorology; Engineering; Biology; Chemistry; Climatology; Computer Science; Earth Sciences; 

Economics; Science Teachers; Physical Sciences; and Science Policy. In FY 2013, the program added 128 students.

Southeast Fisheries Science Center’s Recruiting Training Research Program: This is a joint program between NOAA’s National 

Marine Fisheries Service (NMFS) and the University of Florida. The program had resided at Virginia Tech before moving to 

the University of Florida in December 2011. The objectives of the program are the following: 1) to recruit top undergraduate 

and graduate students into the field of fisheries population dynamics and careers with NMFS; 2) to train graduate students; 

and 3) to conduct population dynamics and stock assessment research in support of the NMFS mission. The program also 

offers graduate courses and workshops in computer programming, simulation modeling, and fish population dynamics. 

In FY 2013, 17 outstanding undergraduate students from across the country participated in a week-long undergraduate 

workshop. In June of 2013, 8 outstanding graduate students participated in a two-week summer program. Because of the 

workshop and summer program, 4 new students began SEFSC-related research in the fall of 2013. 

Northeast Fisheries Science Center (NEFSC) Partnership Education Program (PEP): The NEFSC of NOAA’s National Marine Fisheries 

Service leads a consortium of six science institutions in Woods Hole, MA., offering a ten-week summer program that 

combines undergraduate course work with research in marine and environmental science. Launched in 2009, PEP is 

an ongoing diversity program designed to recruit talent from minority groups that are under-represented in marine and 

environmental sciences. PEP recruitment targets college students with priority given to entering juniors and seniors 

majoring in the natural sciences who have had some course work in marine and/or environmental science. The program 

includes a credit course taught in Woods Hole by research scientists from Woods Hole science institutions, student research 

projects, and presentation of research results in a one-day seminar. Participants receive financial support for tuition, travel, 

and room and board, as well as a stipend. In FY 2013, 15 students participated in the ten-week summer program.

Northeast Fisheries Science Center Bradford E. Brown Student Internship Program: The NEFSC has named its student intern program 

after Dr. Bradford Brown, a retired NOAA Fisheries Service scientist who was a leader in recruiting young people into fishery 

science. The program is open to active undergraduate and graduate students. Research topics include population biology 

and dynamics, resource assessment and environmental surveys, taxonomy, physical and biological oceanography, social 

sciences, data management, larval fish/plankton ecology, large marine ecosystems, aquaculture, biotechnology, remote 

sensing, protected species, and apex predators. Summer positions are offered throughout NEFSC laboratories, which are 

located in Woods Hole, MA; Narragansett, RI; Milford, CT; Highlands, NJ; Washington, DC; and Orono, ME. In FY 2013, 

the program was not supported due to sequestration.

Woods Hole Science Aquarium (WHSA) High School Intern Program: WHSA offers three summer programs for students who 

have completed grades 10, 11, or 12. The programs are run by WHSA staff, and are projects of the NEFSC of NOAA’s 

National Marine Fisheries Service and the Marine Biological Laboratory. Interns selected for the five-week program work 

in the aquarium, help lead public collecting walks, and participate in the Careers in Marine Science seminars. The one and 

two-week Careers in Marine Science seminars consist of short presentations by marine scientists, activities, and field trips 

that introduce students to marine-related careers. All students learn basic animal husbandry and aquarist skills, visit the 

local Woods Hole research institutions, meet with working scientists in a variety of fields, and visit area aquariums, zoos, 

and waterfronts. In FY 2013, 17 students participated in the program.
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Pacific Islands Fisheries Science Center (PIFSC) Student Intern Program (PSIP): PSIP offers qualified college students professional 

work experience and formal training opportunities tailored to meet their educational and professional goals and interests. PSIP 

is a paid, summer-long (8-12 weeks) program that combines on-the-job training, formal training, one-to-one mentoring, and 

developmental assignments at PIFSC. Internship opportunities are established in specific PIFSC projects. Program components 

include: 

● Performance Plans to establish goals and timelines for the intern’s work assignments (established in meetings between 

intern and mentor); 

● Periodic meetings between intern and mentor to check on progress (includes a mid-point review and final review); 

● Inclusion of intern in PIFSC staff activities (division meetings, all-hands meetings, training, and other activities);

● Program wrap up: Interns and mentors hold a final meeting to review final products and discuss the internship 

experience; and 

● Evaluations: Interns and mentors complete a program evaluation to provide feedback that will help PIFSC improve the 

structure of the internship program.

In addition to the individual and group mentoring by PIFSC staff, PSIP interns are encouraged to synergize with each other 

and with other undergraduate and graduate interns at PIFSC. In FY 2013, PIFSC hosted 6 undergraduate summer interns: 

1 each in the Fisheries Research and Monitoring Division, Ecosystems and Oceanography Division, Coral Reef Ecosystem 

Division, and Human Dimensions Program; and 2 in the Protected Species Division.

The following table summarizes NOAA’s investments in human capital for FY 2009 through FY 2013:

(In Millions)

Program FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Total

National Sea Grant College Program $ 0.7 $ 0.9 $ 0.8 $ 0.7 $ 0.7 $ 3.8

National Estuarine Research Reserve Program 1.0 1.3 1.5 1.5 1.4 6.7

Educational Partnership Program 15.0 14.3 14.3 12.5 13.0 69.1

Ernest F. Hollings Undergraduate Scholarship Program 3.6 4.6 4.5 4.9 5.0 22.6

Southeast Fisheries Science Center’s Recruiting Training 

Research Program 0.4 0.5 0.5 0.5 0.5 2.4

Northeast Fisheries Science Center Partnership Education 

Program - - 0.2 0.2 0.2 0.6

Northeast Fisheries Science Center Bradford E. Brown 

Student Internship Program N/A N/A 0.2 0.2 - 0.4

Total $ 20.7 $ 21.6 $ 22.0 $ 20.5 $ 20.8 $ 105.6

N/A = Not Applicable
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The following table further summarizes NOAA’s human capital investments for FY 2009 to FY 2013 by performance outcome:

(In Millions)

Performance Outcome FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

Protect, Restore, and Manage the Use of Coastal and 

Ocean Resources $ 20.7 $ 21.6 N/A N/A N/A

Increase Scientific Knowledge and Provide Information 

to Stakeholders to Support Economic Growth and to 

Improve Innovation, Technology, and Public Safety N/A N/A $ 22.0 $ 20.5 $ 20.4

N/A = Not Applicable

Investments in Research and Development (R&D):

Investments in R&D are expenses that are included in the Department’s Net Cost of Operations. The investments 

are divided into three categories: 1) basic research, the systematic study to gain knowledge or understanding of the 

fundamental aspects of phenomena and of observable facts without specific applications toward processes or products in 

mind; 2) applied research, the systematic study to gain knowledge or understanding necessary for determining the means 

by which a recognized and specific need may be met; and 3) development, the systematic use of the knowledge and 

understanding gained from research for the production of useful materials, devices, systems, or methods, including the 

design and development of prototypes and processes. The investments are made with the expectation of maintaining or 

increasing national economic productive capacity, or yielding other future economic or societal benefits. Based on a review 

of the Department’s programs, the only significant investments in R&D are by NIST and NOAA.

NIST:

NIST Laboratories Program: 

For more than 100 years, NIST has maintained the national standards of measurement, a role that the U.S. Constitution 

assigns to the federal government. Today, NIST Laboratories address increasingly complex measurement challenges. For 

example, NIST develops measurements focusing on the very small (e.g., nanotechnology devices) and the very large (e.g., 

skyscrapers), the physical—methods for characterizing strands of DNA for forensic testing and the virtual—methods for 

testing electronic health record systems, and tests the performance of walk-through metal detectors.

● NIST Laboratories work at the frontiers of measurement science to ensure that the U.S. system of measurements is 

firmly grounded on a sound scientific and technical foundation. NIST promotes the use of measurements based on the 

international system of units (SI). The measurement science research at NIST is useful to all science and engineering 

disciplines.

● NIST Laboratories work to assure that the U.S. realization of the basic and derived measurement units is consistent with 

the realization in other nations. NIST Laboratories engage in a number of international activities to support trade and 

global science, and to promote the international acceptance of U.S. measurement standards.

● NIST Laboratories provide industry and academia with unique user facilities that support innovation in materials science, 

nanotechnology, and other emerging technology areas through the NIST Center for Neutron Research, which provides 

world class neutron measurement capabilities to the U.S. research community, and the NIST Center for Nanoscale 

Science and Technology, which supports nanotechnology development from discovery to production.
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● NIST Laboratories also support the development of standards and specifications that define technical and performance 

requirements for goods and services. These standards—also known as documentary standards—are often developed 

collaboratively with the private sector through an open, consensus-based process. NIST scientists and engineers 

lend their expertise to these efforts in order to promote standards that are based on sound science, and to ensure 

that the standards are supported by effective measurements and testing methods for conformity. In addition, NIST is 

designated under the National Technology Transfer Advancement Act as the coordinator for all federal agencies using 

documentary standards that are developed by private-sector consensus bodies to carry out their policy objectives.

Technology Innovation Program (TIP): 

NIST’s FY 2013 appropriations did not provide funding for TIP, and the program is currently undergoing a closeout planned 

from FY 2012 through FY 2015. NIST proposes to use unobligated balances (carryover funding), and funding from 

recoveries of prior-years unpaid obligations, to close out the program and to perform NIST’s fiduciary responsibilities. 

Advanced Manufacturing Technology Consortia (AMTech) Program: 

In FY 2013, Congress provided funding for the AMTech Program. The purpose of this program is to establish new, and 

strengthen existing, industry-led, technology consortia which will identify and prioritize research projects supporting longterm industrial research needs. The AMTech Program funding will enable consortia to develop advanced technologies to 

address major technological and related barriers that inhibit the growth of advanced manufacturing in the U.S. and the 

global competitiveness of U.S. companies. In 2011, NIST’s Visiting Committee on Advanced Technology issued a report 

that endorsed the AMTech Program as “a model public-private partnership for supporting technological innovation and 

facilitating its deployment to support advanced manufacturing.” There were not any significant R&D investments for the 

AMTech Program in FY 2013.

The following table summarizes NIST’s R&D investments for FY 2009 through FY 2013 by R&D Category: 

(In Millions)

NIST Laboratories Technology Innovation Program Total

R&D Category

FY

2009

FY

2010

FY

2011

FY

2012

FY

2013

FY

2009

FY

2010

FY

2011

FY

2012

FY

2013

FY

2009

FY

2010

FY

2011

FY

2012

FY

2013

Basic Research $ 144.9 $ 162.0 $ 185.3 $ 198.9 $ 206.4 $ - $ - $ - $ - $ - $ 144.9 $ 162.0 $ 185.3 $ 198.9 $ 206.4 

Applied Research 378.5 395.9 377.8 379.1 382.5 25.0 26.2 22.1 19.7 10.6 403.5 422.1 399.9 398.8 393.1 

Development 15.4 15.3 19.4 12.7 14.7 25.1 26.2 22.1 19.7 10.6 40.5 41.5 41.5 32.4 25.3 

Total $ 538.8 $ 573.2 $ 582.5 $ 590.7 $ 603.6 $ 50.1 $ 52.4 $ 44.2 $ 39.4 $ 21.2 $ 588.9 $ 625.6 $ 626.7 $ 630.1 $ 624.8 
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The following tables further summarize NIST’s R&D investments for FY 2009 through FY 2013 by performance outcome.

(In Millions)

FY 2013

Performance Outcome Basic

Research

Applied

Research Development Total

NIST Laboratories: Provide Measurement Tools and Standards 

to Strengthen Manufacturing, Enable Innovation, and Increase 

Efficiency $ 206.4 $ 382.5 $ 14.7 $ 603.6

Technology Innovation Program: Stimulate High-growth Business 

Formation and Entrepreneurship through Investing in High-risk, Highreward Technologies and by Removing Impediments to Accelerate 

Technology Commercialization - 10.6 10.6 21.2

Total $ 206.4 $ 393.1 $ 25.3 $ 624.8

(In Millions)

FY 2012

Performance Outcome Basic

Research

Applied

Research Development Total

NIST Laboratories: Provide Measurement Tools and Standards 

to Strengthen Manufacturing, Enable Innovation, and Increase 

Efficiency $ 198.9 $ 379.1 $ 12.7 $ 590.7

Technology Innovation Program: Stimulate High-growth Business 

Formation and Entrepreneurship through Investing in High-risk, Highreward Technologies and by Removing Impediments to Accelerate 

Technology Commercialization - 19.7 19.7 39.4

Total $ 198.9 $ 398.8 $ 32.4 $ 630.1

(In Millions)

FY 2011

Performance Outcome Basic

Research

Applied

Research Development Total

NIST Laboratories: Provide Measurement Tools and Standards 

to Strengthen Manufacturing, Enable Innovation, and Increase 

Efficiency $ 185.3 $ 377.8 $ 19.4 $ 582.5

Technology Innovation Program: Stimulate High-growth Business 

Formation and Entrepreneurship through Investing in High-risk, Highreward Technologies and by Removing Impediments to Accelerate 

Technology Commercialization - 22.1 22.1 44.2

Total $ 185.3 $ 399.9 $ 41.5 $ 626.7
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(In Millions)

FY 2010

Performance Outcome Basic

Research

Applied

Research Development Total

NIST Laboratories: Promote Innovation, Facilitate Trade, and 

Ensure Public Safety and Security by Strengthening the Nation’s 

Measurements and Standards Infrastructure $ 162.0 $ 395.9 $ 15.3 $ 573.2

Technology Innovation Program: Promote U.S. Competitiveness by 

Directing Federal Investment and R&D into Areas of Critical National 

Need that Support, Promote and Accelerate High-risk, High-reward 

Research in the United States - 26.2 26.2 52.4

Total $ 162.0 $ 422.1 $ 41.5 $ 625.6

(In Millions)

FY 2009

Performance Outcome Basic

Research

Applied

Research Development Total

NIST Laboratories: Promote Innovation, Facilitate Trade, and 

Ensure Public Safety and Security by Strengthening the Nation’s 

Measurements and Standards Infrastructure $ 144.9 $ 378.5 $ 15.4 $ 538.8

Technology Innovation Program: Promote U.S. Competitiveness by 

Directing Federal Investment and R&D into Areas of Critical National 

Need that Support, Promote, and Accelerate High-risk, High-reward 

Research in the United States - 25.0 25.1 50.1

Total $ 144.9 $ 403.5 $ 40.5 $ 588.9

NOAA:

NOAA conducts a substantial program of environmental R&D in support of its mission, much of which is performed to 

improve the United States’ understanding of and ability to predict environmental phenomena. The scope of research includes:

● Improving predictions and warnings associated with the weather, on timescales ranging from minutes to weeks;

● Improving predictions of climate, on timescales ranging from months to centuries; and

● Improving understanding of natural relationships to better predict and manage renewable marine resources and coastal 

and ocean ecosystems.

NOAA also conducts research that is intended to provide a solid scientific basis for environmental policy-making in 

government. Examples of this research include determining the stratospheric ozone-depleting potential of proposed 

substitutes for chlorofluorocarbons (CFCs), and identifying the causes of the episodic high rural ozone levels that significantly 

damage crops and forests.

NOAA conducts most R&D in-house; however, contractors to NOAA undertake most systems R&D. External R&D work 

supported by NOAA includes that undertaken through federal-academic partnerships such as the National Sea Grant College 

Program, the Cooperative Institutes of the Environmental Research Laboratories, the Climate and Global Change Program, 

and the Coastal Ocean Program.
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A brief description of the major R&D programs of NOAA follows:

Environmental and Climate: The Office of Oceanic and Atmospheric Research is NOAA’s primary research and development 

office. This office conducts research in three major areas: climate research; weather and air quality research; and ocean, 

coastal, and Great Lakes research. NOAA’s research laboratories, Climate Program Office, and research partners conduct 

a wide range of research into complex climate systems, including the exploration and investigation of ocean habitats and 

resources. NOAA’s research organizations conduct applied research on the upper and lower atmosphere as well as the 

space environment.

Fisheries: NMFS is responsible for the conservation and management of living marine resources and their habitat within the 

Nation’s Exclusive Economic Zone. NMFS manages these resources through science-based conservation and management 

to ensure their continuation as functioning components of productive ecosystems, while also affording economic 

opportunities and enhancing the quality of life for the American public. Fishery stocks and protected species are surveyed; 

catch, bycatch, incidental take, economic and social data are collected, and research is conducted to better understand the 

variables affecting the abundance and variety of marine fishes and protected species, their habitat, and the benefits they 

provide to society. Protection of endangered species, restoration of coastal and estuarine fishery habitats, and enforcement 

of fishery regulations are primary NOAA activities. The research and management of living marine resources is conducted 

in partnership with states, tribes, universities, other countries, international organizations, and a broad range of stakeholders 

who benefit from the use and existence of living marine resources and their habitat. 

Marine Operations and Maintenance and Aircraft Services: These efforts support NOAA’s programs requiring operating days and 

flight hours to collect data at sea and in the air. NOAA’s Marine and Aviation Operations manage a wide variety of specialized 

aircraft and ships to complete NOAA’s environmental and scientific missions. The aircraft collect the environmental and 

geographic data essential to NOAA hurricane and other weather and atmospheric research, conduct aerial surveys for 

hydrologic research to help predict flooding potential from snowmelt, and provide support to NOAA’s fishery research and 

marine mammal assessment programs. NOAA’s ship fleet provides oceanographic and atmospheric research and fisheries 

research vessels to support NOAA’s strategic plan elements and mission. 

Weather Service: The National Weather Service conducts applied research and development, building upon research 

conducted by NOAA laboratories and the academic community. Applied meteorological and hydrological research is integral 

to providing more timely and accurate weather, water, and climate services to the public.

Other Programs: As a national lead for coastal stewardship, National Ocean Service promotes a wide range of research 

activities to create the strong science foundation required to advance the sustainable use of precious coastal systems. 

Understanding of the coastal environment is enhanced through coastal ocean activities that support science and resource 

management programs. The National Environmental Satellite Data and Information Service, through its Office of Research 

and Applications, conducts atmospheric, climatological, and oceanic research into the use of satellite data for monitoring 

environmental characteristics and their changes. It also provides guidance for the development and evolution of spacecraft 

and sensors to meet future needs.
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NOAA’s R&D investments by program for FY 2009 through FY 2013 were as follows:

(In Millions)

Program FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Total

Environmental and Climate $ 337.0 $ 344.1 $ 395.3 $ 392.8 $ 326.3 $ 1,795.5

Fisheries 55.7 59.9 65.7 64.9 51.2 297.4

Marine Operations and Maintenance and 

Aircraft Services 38.4 34.3 34.3 33.3 32.4 172.7

Weather Service 58.4 53.9 54.7 36.4 28.6 232.0

Others 103.8 102.0 98.0 90.6 74.8 469.2

Total $ 593.3 $ 594.2 $ 648.0 $ 618.0 $ 513.3 $ 2,966.8

The following table summarizes NOAA’s R&D investments for FY 2009 through FY 2013 by R&D category:

(In Millions)

R&D Category FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Total

Applied Research $ 491.3 $ 452.4 $ 439.6 $ 426.5 $ 356.9 $ 2,166.7

Development 102.0 141.8 208.4 191.5 156.4 800.1

Total $ 593.3 $ 594.2 $ 648.0 $ 618.0 $ 513.3 $ 2,966.8

The following tables further summarize NOAA’s R&D investments from FY 2013 back to FY 2009 by performance outcome: 

(In Millions)

FY 2013

Performance Outcome Applied

Research Development Total

Increase Scientific Knowledge and Provide Information to Stakeholders to Support

Economic Growth and to Improve Innovation, Technology, and Public Safety $ 125.0 $ 7.1 $ 132.1

Enable Informed Decision-making through an Expanded Understanding of the U.S.

Economy, Society, and Environment by Providing Timely, Relevant, Trusted, and

Accurate Data, Standards, and Services 42.5 12.8 55.3

Improve Weather, Water, and Climate Reporting and Forecasting 7.6 21.0 28.6

Support Climate Adaptation and Mitigation 85.9 107.0 192.9

Develop Sustainable and Resilient Fisheries, Habitats, and Species 46.3 5.0 51.3

Support Coastal Communities that are Environmentally and Economically 

Sustainable 49.6 3.5 53.1

Total $ 356.9 $ 156.4 $ 513.3
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(In Millions)

FY 2012

Performance Outcome Applied

Research Development Total

Increase Scientific Knowledge and Provide Information to Stakeholders to Support

Economic Growth and to Improve Innovation, Technology, and Public Safety $ 148.1 $ 9.9 $ 158.0

Enable Informed Decision-making through an Expanded Understanding of the U.S.

Economy, Society, and Environment by Providing Timely, Relevant, Trusted, and

Accurate Data, Standards, and Services 45.2 12.6 57.8

Improve Weather, Water, and Climate Reporting and Forecasting 8.9 27.5 36.4

Support Climate Adaptation and Mitigation 104.4 127.5 231.9

Develop Sustainable and Resilient Fisheries, Habitats, and Species 56.1 8.8 64.9

Support Coastal Communities that are Environmentally and Economically 

Sustainable 63.8 5.2 69.0

Total $ 426.5 $ 191.5 $ 618.0

(In Millions)

FY 2011

Performance Outcome Applied

Research Development Total

Increase Scientific Knowledge and Provide Information to Stakeholders to Support

Economic Growth and to Improve Innovation, Technology, and Public Safety $ 149.5 $ 9.3 $ 158.8

Enable Informed Decision-making through an Expanded Understanding of the U.S.

Economy, Society, and Environment by Providing Timely, Relevant, Trusted, and

Accurate Data, Standards, and Services 48.0 12.6 60.6

Improve Weather, Water, and Climate Reporting and Forecasting 17.8 36.9 54.7

Support Climate Adaptation and Mitigation 101.2 141.4 242.6

Develop Sustainable and Resilient Fisheries, Habitats, and Species 59.1 6.7 65.8

Support Coastal Communities that are Environmentally and Economically 

Sustainable 64.0 1.5 65.5

Total $ 439.6 $ 208.4 $ 648.0

(In Millions)

FY 2010

Performance Outcome Applied

Research Development Total

Protect, Restore, and Manage the Use of Coastal and Ocean Resources $ 218.4 $ 6.8 $ 225.2

Advance Understanding of Climate Variability and Change 125.1 84.0 209.1

Provide Accurate and Timely Weather and Water Information 108.0 48.4 156.4

Support Safe, Efficient, and Environmentally Sound Commercial Navigation 0.9 2.6 3.5

Total $ 452.4 $ 141.8 $ 594.2
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(In Millions)

FY 2009

Performance Outcome Applied

Research Development Total

Protect, Restore, and Manage the Use of Coastal and Ocean Resources $ 211.5 $ 8.1 $ 219.6

Advance Understanding of Climate Variability and Change 140.4 60.5 200.9

Provide Accurate and Timely Weather and Water Information 138.9 32.7 171.6

Support Safe, Efficient, and Environmentally Sound Commercial Navigation 0.5 0.7 1.2

Total $ 491.3 $ 102.0 $ 593.3
FINANCIAL SECTION

Other

Information

(unaud i ted)

143 F Y 2013 AGENCY FINANCIAL REPORT

OTHER INFORMATION (UNAUDITED)

The Schedule of Spending by Major Budget Account presents an overview of how and where the Department is spending (i.e., obligating) 

money for the fiscal year, including amounts agreed to be spent during the fiscal year, how the money was spent, and who did the money 

go to. The Total Amounts Agreed to be Spent lines represent obligations incurred during the fiscal year.

United States Department of Commerce Schedule of Spending by Major Budget Account

For the Year Ended September 30, 2013 (In Thousands)

Combining 

Total

NOAA

Operations, 

Research, and

Facilities

USPTO

 Salaries

 and

Expenses

NOAA

Procurement,

Acquisition, 

and 

Construction

NTIA Digital 

Television 

Transition and 

Public Safety 

Fund

ITA

Operations

and

Administration

Census 

Bureau 

Periodic 

Censuses and 

Programs

EDA

Grant

Fund

NTIA 

Broadband 

Technology 

Opportunities 

Program - 

ARRA

Other 

Programs

WHAT MONEY IS AVAILABLE TO SPEND?

Total Resources $ 23,056,543 $ 3,716,654 $ 2,931,559 $ 1,965,203 $ 8,797,016 $ 500,762 $ 782,643 $ 415,983 $ 7,652 $ 3,939,071

Less: Amounts Available but Not Agreed to be Spent (1,503,016) (268,474) (442,291) (138,923) - (14,170) (3,087) (48,571) - (587,500)

Less: Amounts Not Available to be Spent (9,198,761) (77,572) - (25,926) (8,797,016) (11,538) (136,139) (7,093) (7,652) (135,825)

TOTAL AMOUNTS AGREED TO BE SPENT $ 12,354,766 $ 3,370,608 $ 2,489,268 $ 1,800,354 $ - $ 475,054 $ 643,417 $ 360,319 $ - $ 3,215,746

HOW WAS THE MONEY SPENT?

Contracts $ 5,144,541 $ 1,067,122 $ 726,537 $ 1,715,261 $ 5 $ 114,483 $ 110,633 $ - $ - $ 1,410,500

Grants 1,316,348 623,466 - 33,945 - 2,177 - 360,319 - 296,441

Loans and Guarantees 63,551 - - - - - - - - 63,551

Non-financial Assistance Direct Payments 5,300,695 1,679,371 1,761,128 50,204 (2) 281,074 234,560 - - 1,294,360

Other 529,631 649 1,603 944 (3) 77,320 298,224 - - 150,894

TOTAL AMOUNTS AGREED TO BE SPENT $ 12,354,766 $ 3,370,608 $ 2,489,268 $ 1,800,354 $ - $ 475,054 $ 643,417 $ 360,319 $ - $ 3,215,746

WHO DID THE MONEY GO TO?

Federal Government $ 3,587,932 $ 599,599 $ 193,313 $ 1,341,903 $ (4) $ 59,745 $ 332,370 $ - $ - $ 1,061,006

Non-federal 8,766,834 2,771,009 2,295,955 458,451 4 415,309 311,047 360,319 - 2,154,740

TOTAL AMOUNTS AGREED TO BE SPENT $ 12,354,766 $ 3,370,608 $ 2,489,268 $ 1,800,354 $ - $ 475,054 $ 643,417 $ 360,319 $ - $ 3,215,746
144 F Y 2013 AGENCY FINANCIAL REPORT

OTHER INFORMATION (UNAUDITED)

United States Department of Commerce Schedule of Spending by Major Budget Account

For the Year Ended September 30, 2012 (In Thousands)

Combining 

Total

NOAA

Operations, 

Research, and

Facilities

USPTO

 Salaries

 and

Expenses

NOAA

Procurement,

Acquisition, 

and 

Construction

NTIA Digital 

Television 

Transition and 

Public Safety 

Fund

ITA

Operations

and

Administration

Census 

Bureau 

Periodic 

Censuses and 

Programs

EDA

Grant

Fund

NTIA 

Broadband 

Technology 

Opportunities 

Program - 

ARRA

Other 

Programs

WHAT MONEY IS AVAILABLE TO SPEND?

Total Resources $ 22,590,496 $ 3,639,588 $ 2,612,628 $ 1,830,285 $ 8,782,695 $ 516,628 $ 830,647 $ 481,345 $ 2,976 $ 3,893,704

Less: Amounts Available but Not Agreed to be Spent (1,294,023) (176,593) (237,873) (23,226) (19,038) (19,888) (13,456) (178,237) - (625,712)

Less: Amounts Not Available to be Spent (9,058,376) (66,554) - (19,006) (8,745,196) (9,744) (118,568) (6,075) (2,976) (90,257)

TOTAL AMOUNTS AGREED TO BE SPENT $ 12,238,097 $ 3,396,441 $ 2,374,755 $ 1,788,053 $ 18,461 $ 486,996 $ 698,623 $ 297,033 $ - $ 3,177,735

HOW WAS THE MONEY SPENT?

Payroll $ 4,735,747 $ 1,556,546 $ 1,598,013 $ 50,122 $ 322 $ 264,441 $ 227,698 $ - $ - $ 1,038,605

Rent, Communications, and Utilities 548,590 212,849 119,925 9,240 41 19,763 19,337 - - 167,435

Travel 138,287 51,217 3,209 2,266 15 18,152 17,436 - - 45,992

Supplies 217,413 117,599 38,406 11,646 - 2,456 1,361 - - 45,945

Equipment 474,568 38,041 105,069 252,151 - 6,050 9,681 - - 63,576

Land, Buildings, and Structures 31,059 4,419 2,038 681 - - - - - 23,921

Contracts 4,674,706 909,632 362,229 1,358,562 200,826 78,625 143,857 - (44) 1,621,019

Grants 3,033,356 731,628 - 54,314 17,355 1,662 - 370,247 1,588,798 269,352

Loans 103,273 - - - - - - - - 103,273

Other 797,795 20,526 103,373 1,851 1,210 77,588 349,313 - - 243,934

Total Spending 14,754,794 3,642,457 2,332,262 1,740,833 219,769 468,737 768,683 370,247 1,588,754 3,623,052

Amounts Remaining to be Spent/(Amounts Spent 

Related to Prior Years’ Resources), Net (2,516,697) (246,016) 42,493 47,220 (201,308) 18,259 (70,060) (73,214) (1,588,754) (445,317)

TOTAL AMOUNTS AGREED TO BE SPENT $ 12,238,097 $ 3,396,441 $ 2,374,755 $ 1,788,053 $ 18,461 $ 486,996 $ 698,623 $ 297,033 $ - $ 3,177,735

WHO DID THE MONEY GO TO?

Federal Government $ 3,791,625 $ 613,745 $ 198,850 $ 1,260,248 $ 728 $ 79,377 $ 360,304 $ - $ - $ 1,278,373

Non-federal 8,446,472 2,782,696 2,175,905 527,805 17,733 407,619 338,319 297,033 - 1,899,362

TOTAL AMOUNTS AGREED TO BE SPENT $ 12,238,097 $ 3,396,441 $ 2,374,755 $ 1,788,053 $ 18,461 $ 486,996 $ 698,623 $ 297,033 $ - $ 3,177,735

HOW WAS THE MONEY ISSUED?

Contracts $ 5,458,134 $ 1,203,642 $ 760,431 $ 1,693,842 $ 570 $ 116,795 $ 131,250 $ - $ - $ 1,551,604

Grants 1,187,218 591,328 - 42,075 16,346 2,556 - 297,033 - 237,880

Loans and Guarantees 65,497 - - - - - - - - 65,497

Non-financial Assistance Direct Payments 4,919,799 1,603,805 1,613,088 52,021 337 287,263 241,915 - - 1,121,370

Other 607,449 (2,334) 1,236 115 1,208 80,382 325,458 - - 201,384

TOTAL AMOUNTS AGREED TO BE SPENT $ 12,238,097 $ 3,396,441 $ 2,374,755 $ 1,788,053 $ 18,461 $ 486,996 $ 698,623 $ 297,033 $ - $ 3,177,735
FINANCIAL SECTION

Independent

Auditors’ 

Report
146 F Y 2013 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT

December 16, 2013 

MEMORANDUM FOR: The Honorable Penny Pritzker 

Secretary of Commerce 

FROM: Todd J. Zinser 

SUBJECT: FY 2013 Consolidated Financial Statements 

Final Report No. OIG-14-007-A 

I am pleased to provide you with the attached audit report, which presents an unmodified 

opinion on the Department of Commerce’s fiscal year 2013 consolidated financial statements. 

KPMG LLP, an independent public accounting firm, performed the audit in accordance with U.S. 

generally accepted government auditing standards and Office of Management and Budget 

Bulletin 14-02, Audit Requirements for Federal Financial Statements. 

In its audit of the Department, KPMG 

 determined that the financial statements were fairly presented in all material respects

and in conformity with U.S. generally accepted accounting principles;

 identified two significant deficiencies in internal control over financial reporting related

to accounting for NOAA’s property and controls over information technology access,

configuration management, and segregation of duties;

 reported that potential Antideficiency Act compliance matters at NOAA, the Census

Bureau, and the Department are under review; and

 identified no instances in which the Department’s financial management systems did not

substantially comply with the requirements of the Federal Financial Management

Improvement Act of 1996.

My office oversaw the audit performance. We reviewed KPMG’s report and related 

documentation and made inquiries of its representatives. Our review disclosed no instances 

where KPMG did not comply, in all material respects, with U.S. generally accepted government 

auditing standards. However, our review, as differentiated from an audit in accordance with 

these standards, was not intended to enable us to express, and we do not express, any opinion 

on the Department’s consolidated financial statements, conclusions about the effectiveness of 

internal control, or conclusions on compliance with laws, regulations, contracts, and grant 

agreements. KPMG is solely responsible for the attached audit report, dated December 16, 

2013, and the conclusions expressed in it. 
147 F Y 2013 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT

In accordance with Department Administrative Order 213-5, please provide an action plan 

within 60 calendar days of the date of this memorandum addressing the significant deficiency in 

the accounting for NOAA’s property. The plan should outline the actions that NOAA plans to 

take to address each recommendation. The significant deficiency related to information 

technology controls will be addressed in a separate action plan. 

If you wish to discuss the contents of this report, please call me at (202) 482-4661, or Ann C. 

Eilers, Principal Assistant Inspector General for Audit and Evaluation, at (202) 482-2754. 

We appreciate the cooperation and courtesies the Department extended to both KPMG and 

my staff during the audit. 

Attachment 
148 F Y 2013 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT

KPMG LLP

Suite 12000

1801 K Street, NW 

Washington, DC 20006

KPMG LLP is a Delaware limited liability partnership,

the U.S. member firm of KPMG International Cooperative

(“KPMG International”), a Swiss entity.

Independent Auditors’ Report

Inspector General, U.S. Department of Commerce and

Secretary, U.S. Department of Commerce:

Report on the Financial Statements

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

of Commerce (Department), which comprise the balance sheets as of September 30, 2013 and 

2012, and the related consolidated statements of net cost, changes in net position, and 

combined statements of budgetary resources for the years then ended, and the related notes to 

the consolidated financial statements.

Management’s Responsibility for the Financial Statements

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

financial statements in accordance with U.S. generally accepted accounting principles; this 

includes the design, implementation, and maintenance of internal control relevant to the 

preparation and fair presentation of consolidated financial statements that are free from 

material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on 

our audits. We conducted our audits in accordance with auditing standards generally accepted 

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

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

Office of Management and Budget (OMB) Bulletin No. 14-02, Audit Requirements for 

Federal Financial Statements. Those standards and OMB Bulletin No. 14-02 require that we 

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

financial statements are free from material misstatement. 

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

disclosures in the consolidated financial statements. The procedures selected depend on the 

auditors’ judgment, including the assessment of the risks of material misstatement of the 

consolidated financial statements, whether due to fraud or error. In making those risk 

assessments, the auditor considers internal control relevant to the entity’s preparation and fair 

presentation of the consolidated financial statements in order to design audit procedures that 

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

effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An 

audit also includes evaluating the appropriateness of accounting policies used and the 

reasonableness of significant accounting estimates made by management, as well as 

evaluating the overall presentation of the consolidated financial statements. 
149 F Y 2013 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT

U.S. Department of Commerce 

Independent Auditors’ Report 

December 16, 2013 

Page 2 of 14 

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

basis for our audit opinion. 

Opinion on the Financial Statements

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

material respects, the financial position of the U.S. Department of Commerce as of 

September 30, 2013 and 2012, and its net costs, changes in net position, and budgetary 

resources for the years then ended, in accordance with U.S. generally accepted accounting 

principles. 

Emphasis of Matters 

As discussed in Note 1.C to the consolidated financial statements, in 2013 the Department

adopted Statement of Federal Financial Accounting Standards No. 43, Funds from Dedicated 

Collections: Amending Statement of Federal Financial Accounting Standards No. 27, 

Identifying and Reporting Earmarked Funds. The 2012 consolidated financial statements have 

been restated for the retrospective application of the new accounting guidance. Our opinion is 

not modified with respect to this matter.

As discussed in Note 13 to the consolidated financial statements, in 2013 the Department 

adopted Technical Bulletin 2006-1, Recognition and Measurement of Asbestos-related 

Cleanup Costs. Our opinion is not modified with respect to this matter.

As discussed in Note 7 to the consolidated financial statements, in 2013 the Department has 

elected to change its method of accounting for the completion of satellites. Our opinion is not 

modified with respect to this matter.

Other Matters

Required Supplementary Information 

U.S. generally accepted accounting principles require that the information in the 

Management’s Discussion and Analysis, (including the Financial Management and Analysis 

section), Required Supplementary Information, and Required Supplementary Stewardship 

Information sections be presented to supplement the basic consolidated financial statements. 

Such information, although not a part of the basic consolidated financial statements, is 

required by the Federal Accounting Standards Advisory Board who considers it to be an 

essential part of financial reporting for placing the basic consolidated financial statements in 

an appropriate operational, economic, or historical context. We have applied certain limited 

procedures to the required supplementary information in accordance with auditing standards 

generally accepted in the United States of America, which consisted of inquiries of 

management about the methods of preparing the information and comparing the information 
150 F Y 2013 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT

U.S. Department of Commerce 

Independent Auditors’ Report 

December 16, 2013 

Page 3 of 14 

for consistency with management’s responses to our inquiries, the basic consolidated financial 

statements, and other knowledge we obtained during our audits of the basic consolidated 

financial statements. We do not express an opinion or provide any assurance on the 

information because the limited procedures do not provide us with sufficient evidence to 

express an opinion or provide any assurance. 

Supplementary and Other Information 

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

financial statements as a whole. The September 30, 2013 consolidating balance sheet on page 

115, the information in the Appendices, the information on pages 18 and 31 through 44, and 

the Other Information section are presented for purposes of additional analysis and is not a 

required part of the basic consolidated financial statements. 

The September 30, 2013 consolidating balance sheet is the responsibility of management and 

was derived from and relates directly to the underlying accounting and other records used to 

prepare the basic consolidated financial statements. The September 30, 2013 consolidating 

balance sheet has been subjected to the auditing procedures applied in the audit of the basic

consolidated financial statements and certain additional procedures, including comparing and 

reconciling such information directly to the underlying accounting and other records used to 

prepare the basic consolidated financial statements or to the basic consolidated financial 

statements themselves, and other additional procedures in accordance with auditing standards 

generally accepted in the United States of America. In our opinion, the September 30, 2013

consolidating balance sheet is fairly stated in all material respects in relation to the basic 

consolidated financial statements as a whole. 

The information in the Appendices, the information on pages 18 and 31 through 44, and the 

Other Information has not been subjected to the auditing procedures applied in the audits of 

the basic consolidated financial statements, and accordingly, we do not express an opinion or 

provide any assurance on it.

Other Reporting Required by Government Auditing Standards

Internal Control Over Financial Reporting

In planning and performing our audit of the consolidated financial statements, we considered 

the Department’s internal control over financial reporting (internal control) to determine the 

audit procedures that are appropriate in the circumstances for the purpose of expressing our 

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

opinion on the effectiveness of the Department’s internal control. Accordingly, we do not 

express an opinion on the effectiveness of the Department’s internal control. We did not test 
151 F Y 2013 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT

U.S. Department of Commerce 

Independent Auditors’ Report 

December 16, 2013 

Page 4 of 14 

all internal controls relevant to operating objectives as broadly defined by the Federal 

Managers’ Financial Integrity Act of 1982.

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

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

prevent, or detect and correct, misstatements on a timely basis. A material weakness is a 

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

possibility that a material misstatement of the entity’s financial statements will not be 

prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, 

or a combination of deficiencies, in internal control that is less severe than a material 

weakness, yet important enough to merit attention by those charged with governance. 

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

paragraph of this section and was not designed to identify all deficiencies in internal control 

that might be material weaknesses or significant deficiencies and therefore, material 

weaknesses or significant deficiencies may exist that were not identified. Given these 

limitations, during our audit we did not identify any deficiencies in internal control that we 

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

control, described below and in more detail in Exhibit I, that we consider to be significant 

deficiencies.

• Accounting for the National Oceanic and Atmospheric Administration (NOAA) 

property needs improvement. NOAA made improvements in its satellite accounting 

during fiscal year 2013 including the formation of a Satellite Accounting Review Board to 

identify and deliberate on complex accounting issues regarding satellites. Despite those 

improvements, we identified control deficiencies related to accounting for property other 

than satellites, such as unclear policies, timeliness issues, and enforcement issues. In 

addition, we identified areas for improvement related to the consistent application of 

accounting standards for accounting for satellites. Because of these matters, NOAA needs 

to continue making improvements to effectively account for its property, including 

satellites. 

• Information technology (IT) access, configuration management and segregation of 

duties controls need improvement. During fiscal year 2013, while we noted some 

progress towards remediating prior year control deficiencies, we identified control 

deficiencies relating to systems access, configuration management, and segregation of 

duties that require management’s attention. Despite the progress made by the Department, 

the Department needs to make improvements in its general IT controls to fully ensure that 

financial data processed on the Department’s systems has integrity, is securely maintained, 

and is available only to authorized users. 
152 F Y 2013 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT

U.S. Department of Commerce 

Independent Auditors’ Report 

December 16, 2013 

Page 5 of 14 

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Department’s consolidated 

financial statements are free from material misstatement, we performed tests of the 

Department’s compliance with certain provisions of laws, regulations, contracts, and grant 

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

determination of financial statement amounts, and certain provisions of other laws and 

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

compliance with those provisions was not an objective of our audit, and accordingly, we do 

not express such an opinion. The results of our tests disclosed instances of noncompliance or 

other matters that are required to be reported under Government Auditing Standards or OMB 

Bulletin No. 14-02, and which are, described below.

• Other Matters: During fiscal year 2013, the Department informed us of potential 

Antideficiency Act compliance matters that are currently being reviewed for the following: 

NOAA - relating to the potential incorrect use of budgetary funding sources to support its 

programs; U.S. Census Bureau - relating to the timing of potential obligations for an 

interagency agreement in advance of receiving appropriations; and the Department level – 

relating to accepting terms of agreement on purchases made through the internet. Because 

these reviews are not complete, the ultimate outcome of these matters is not presently 

known. 

We also performed tests of the Department’s compliance with certain provisions referred to in 

Section 803(a) of the Federal Financial Management Improvement Act of 1996 (FFMIA). 

Providing an opinion on compliance with FFMIA was not an objective of our audit, and 

accordingly, we do not express such an opinion. The results of our tests of FFMIA disclosed 

no instances in which the Department’s financial management systems did not substantially 

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

Federal accounting standards, and (3) the United States Government Standard General Ledger 

at the transaction level.

The Department’s Responses to the Findings

The Department’s responses to the findings identified in our audit are described in Exhibit I. 

The Department’s responses were not subjected to the auditing procedures applied in the audit 

of the consolidated financial statements and, accordingly, we express no opinion on the 

responses.
153 F Y 2013 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT

U.S. Department of Commerce 

Independent Auditors’ Report 

December 16, 2013 

Page 6 of 14 

Purpose of the Other Reporting Required by Government Auditing Standards

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

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

compliance and the result of that testing, and not to provide an opinion on the effectiveness of 

the Department’s internal control or compliance. Accordingly, this communication is not 

suitable for any other purpose. 

December 16, 2013 

U.S. Department of Commerce 

Independent Auditors’ Report 

December 16, 2013 

Page 6 of 14 

Purpose of the Other Reporting Required by Government Auditing Standards

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

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

compliance and the result of that testing, and not to provide an opinion on the effectiveness of 

the Department’s internal control or compliance. Accordingly, this communication is not 

suitable for any other purpose. 

December 16, 2013 
154 F Y 2013 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT

U.S. Department of Commerce

Independent Auditors’ Report

December 16, 2013

Page 7 of 14

Exhibit I – Significant Deficiencies

A. Accounting for the National Oceanic and Atmospheric Administration (NOAA)’s 

Property Needs Improvement

The Department has a substantial investment in general property, plant, and equipment 

(PP&E). The National Oceanic and Atmospheric Administration (NOAA) accounts for 87

percent of the Department’s net PP&E of $11.1 billion as of September 30, 2013. During 

fiscal year 2013, we noted several matters at NOAA that highlighted the need for continued 

improvement in accounting for property, which are discussed below. Collectively, these 

matters are considered to be a significant deficiency in internal control over financial 

reporting.

Accounting for Property Other than Satellites. During our fiscal year 2013 audit, we 

identified issues at NOAA relating to (1) lack of clarity of the PP&E policies with regards to 

indirect cost allocation methodologies and describing the source documentation necessary to 

support various construction work in process (CWIP) transactions; (2) lack of clarity of PP&E 

procedures to account for personal property assets that have been permanently removed from 

service but not disposed; (3) failure by NOAA offices to consistently coordinate and resolve 

outstanding PP&E related accounting matters on a timely basis; (4) lack of appropriate 

training regarding accounting for general PP&E; and (5) failure to enforce completion of 

personal property inventories and certification of the Unreconciled Property Report (UPR) at 

certain locations.

Many of the accounting activities for real and personal property are decentralized at the line 

office level, and the NOAA Office of the Chief Financial Officer (OCFO) is reliant on those 

line offices as well as the NOAA Office of the Chief Administrative Officer (OCAO), which 

is responsible for property management, to provide it with information regarding property 

acquisitions and disposals. NOAA has recognized the difficulties in accounting for its property 

and has implemented certain corrective actions in prior years. However, more improvements 

and additional oversight and training are needed to strengthen controls over the Department’s 

significant property investment.

Accounting for Satellites. As of September 30, 2013, NOAA reported a balance of 

$6.5 billion in satellite CWIP and a balance of completed satellites and ground systems with a 

net book value of $1.6 billion. Accounting for satellites is highly complex; each satellite 

series/program is accounted for separately; each series/program has several instruments; and 

the construction spans many years, and involves significant contracts and arrangements with 

contractors and other government agencies. During our fiscal year 2013 audit, we identified 

the following issues relating to the accounting for satellites: 
155 F Y 2013 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT

U.S. Department of Commerce

Independent Auditors’ Report

December 16, 2013

Page 8 of 14

Exhibit I – Significant Deficiencies, Continued

• Application of accounting standards for accounting for satellites needs improvement.

During fiscal year 2013, NOAA increased the review of accounting matters for satellites. 

Despite such efforts, we noted the following instances of misapplication of generally 

accepted accounting principles.

o The Suomi–National Polar-Orbiting Partnership (S-NPP), which is a satellite carrying 

certain NOAA weather instruments, serves as a bridge between NOAA’s current polarorbiting operational environmental system of satellites and the planned Joint Polar 

Satellite System (JPSS) satellites. Four of NOAA’s instruments aboard the S-NPP will

support the National Weather Service (NWS) data collection and research. The 

remaining instrument aboard the S-NPP belongs to the National Aeronautics and Space 

Administration (NASA).

NOAA generally views satellites as operational when all NOAA’s instruments 

associated with satellites are declared operational; however, in certain cases, effective 

for fiscal year 2013, NOAA will declare certain instruments operational because the 

instruments are not interdependent. On September 24, 2013, the NWS informed the 

NOAA National Environmental Satellite, Data, and Information Service (NESDIS) 

that three weather instruments are operational, and the remaining weather instrument, 

the Ozone Mapping Profiler Suite (OMPS), was expected to be operational by October 

31, 2013 (fiscal year 2014). 

The NOAA Office of the Chief Financial Officer incorrectly reclassified the entire 

balance of $939 million for the four S-NPP instruments from CWIP to completed 

PP&E (specifically for satellites personal property category) effective September 30, 

2013, although only three weather instruments were declared operational. Based on 

discussions with NOAA about this matter, NOAA indicated that it had intentionally 

made the adjustment from CWIP to completed PP&E because NOAA believed it was a 

subsequent event that should be disclosed to the readers of the U.S. Department of 

Commerce consolidated financial statements (that is, NOAA believed it was applying 

the concept of substance over form when NOAA made the adjustment). However, we 

noted that generally accepted accounting principles, with regards to the treatment of 

subsequent events, were not followed because NOAA should not have reclassified the 

$125 million of costs associated with the instrument that was not operational as of 

September 30, 2013.
156 F Y 2013 AGENCY FINANCIAL REPORT

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U.S. Department of Commerce

Independent Auditors’ Report

December 16, 2013

Page 9 of 14

Exhibit I – Significant Deficiencies, Continued

As of result of our observations, NOAA reversed the reclassification of $125 million 

for OMPS to return that amount to CWIP.

o NOAA capitalized all invoiced costs from NASA for the Joint Polar Satellite System 

(JPSS) program, including line items, such as “Education and Public Outreach.”

Effective October 1, 2013, NOAA’s policy was changed to capitalize any costs 

reported by NASA that are associated with the JPSS program because 1) NASA is the 

vendor and 2) NOAA indicated that program offices within NESDIS need to be treated 

differently and all costs incurred by NASA, as an agent to NESDIS under the NASA 

Acquisition Management contract, represents direct and indirect costs that can be

capitalized. However, this practice is inconsistent with generally accepted accounting 

principles regarding the accounting for costs incurred to bring the PP&E to a form and 

location suitable for its intended use. We believe that the NASA invoices should be 

reviewed to determine that only capitalizable costs are recorded to the CWIP account.

While the impact of this treatment in any particular year may be inconsequential, the

cumulative effect for a program that has incurred costs of approximately $586 million 

to date and is expected to incur significant costs in the future, could result in 

inappropriately capitalized costs that is more than inconsequential as of a point in time 

if this policy continues and is not monitored.

• Review of all supporting documentation over NASA intra-governmental payments

needs improvement. As part of NOAA’s corrective action plans taken during fiscal year 

2013, NOAA coordinated with NASA to receive documentation supporting each Intragovernmental Payment and Collection (IPAC) payment. NOAA continued to work with 

NASA to receive supporting documentation for IPAC payments – particularly, those 

charges from the prime contractors. However, we noted that for 29 of the 31 NASA IPAC 

payments tested, NOAA management was unable to review the supporting documentation 

for all of the charges included in the IPAC payment because NOAA did not receive the 

supporting documentation from NASA. In addition, for NASA IPAC payments related to 

the construction of the Jason-3 and Deep Space Climate Observatory (DSCOVR) satellite 

programs, NOAA was unable to review certain documents because NOAA did not receive 

additional detailed reports/information from NASA. For the 29 IPAC payments tested, 

$182.6 million of non-prime contractor costs were not reviewed prior to our inquiry. We 

estimated that an additional $54 million may not have been reviewed at a sufficient level 

of detail for the non-prime contractor costs. 

NOAA management indicated that for non-prime contract costs in which NOAA does not 

receive detailed charge reports/information, they rely on NASA’s review and authorization 
157 F Y 2013 AGENCY FINANCIAL REPORT

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U.S. Department of Commerce

Independent Auditors’ Report

December 16, 2013

Page 10 of 14

Exhibit I – Significant Deficiencies, Continued

of these charges. However, NASA does not evaluate the accounting treatment for NOAA 

for such costs, including whether these costs should be capitalized or expensed. 

In light of the magnitude of the costs associated with satellites, the review of IPAC 

payments associated with the satellite program is important for proper recording of project

costs as either CWIP or expense. NASA IPAC payments typically include some cost that 

should be recorded as an expense.

We recommend that NOAA:

Recommendations

Relating to Accounting for Property Other than Satellites:

• Continue to perform and complete a comprehensive review of all property accounting 

policies, to ensure clarity of procedures and compliance with generally accepted 

accounting principles.

• Ensure greater coordination between the OCFO and OCAO regarding oversight of the line 

offices to resolve open issues and clarify policies and procedures.

• Continue training on property policies and procedures for appropriate personnel.

• Notify and hold accountable the line offices when the UPR and personal property 

inventory certifications are not received or not completed properly to ensure compliance 

with NOAA’s policies and procedures.

• Perform periodic reviews of impairment adjustments to determine whether the amounts 

recorded are accurate.

Relating to Accounting for Satellites:

• Implement training for personnel, as applicable, regarding researching generally accepted 

accounting principles for proper treatment of non-routine events. 

• Revise the CWIP policies to specify which satellite program costs should be capitalized

and to incorporate a written framework for determining whether to capitalize satellites 

costs based on the operational date for each instrument or as a single unit to ensure 

consistency in application.

• Strengthen the review process over contracts, purchase orders, invoices, and IPAC bills, as 

they pertain to their satellite programs, to determine which costs are incurred to bring the 

PP&E to a form and location suitable for its intended use, and which costs are incurred for 

operation, maintenance, and sustainment of a PP&E asset that has already been placed into 

service.
158 F Y 2013 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT

U.S. Department of Commerce

Independent Auditors’ Report

December 16, 2013

Page 11 of 14

Exhibit I – Significant Deficiencies, Continued

• Continue to work with NASA to obtain cost data and supporting documentation to support 

IPAC charges.

• Assess the potential accounting treatment of charges for cost date that cannot be obtained,

to determine which costs should be capitalized or expensed or work with NASA to make 

such assessments.

The Department concurs. We will develop corrective action plans and ensure timely 

implementation to address KPMG’s recommendations.

Management’s Response
159 F Y 2013 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT

U.S. Department of Commerce

Independent Auditors’ Report

December 16, 2013

Page 12 of 14

Exhibit I – Significant Deficiencies, Continued

B. Information Technology Access, Configuration Management and Segregation of 

Duties Controls Need Improvement

Information security is recognized as a top management challenge for the Department. For 

several years, the Department’s Office of Inspector General, and departmental selfassessments have identified weaknesses in the Department’s general information technology 

(IT) controls. While we observed improvements in the Department’s general IT controls 

related to financial systems, we identified new and repeat deficiencies during fiscal year 2013 

that require management’s attention. 

The general IT controls that we consider to be, collectively, a significant deficiency under 

standards issued by the American Institute of Certified Public Accountants and Government 

Auditing Standards, and our related findings, are as follows:

• Access controls. In close concert with an organization’s entity-wide information 

security program, access controls for general support systems and applications should 

provide reasonable assurance that computer resources such as data files, application 

programs, and computer-related facilities and equipment are protected against 

unauthorized modification, disclosure, or loss. Access controls are facilitated by an 

organization’s entity-wide security program. Such controls include physical controls, 

such as keeping computers in locked rooms to limit physical access, and logical 

controls, such as security software programs designed to prevent or detect 

unauthorized access to data. Similar to security management, inadequate access 

controls diminish the reliability and integrity of computerized data and increase the 

risk of destruction or inappropriate disclosure of information.

The objectives of limiting access are to ensure that users have only the access needed 

to perform their duties; that access to sensitive resources, such as security software 

programs, is limited to few individuals; and that employees are restricted from 

performing incompatible functions or duties beyond their responsibility. This is 

reiterated by Federal guidelines. For example, the OMB Circular A-130 and 

supporting National Institute of Standards and Technology publications provide 

guidance related to the maintenance of technical access controls. In addition, the

Department’s IT Security Program Policy contains requirements for operating 

Department IT devices in a secure manner.

We noted that access controls should be improved at four bureaus/centers, primarily in 

the areas of: (1) managing user accounts to appropriately disable and recertify network, 
160 F Y 2013 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT

U.S. Department of Commerce

Independent Auditors’ Report

December 16, 2013

Page 13 of 14

Exhibit I – Significant Deficiencies, Continued

financial system, database and operating system accounts, (2) improving logical 

controls over financial application and database access, (3) strengthening password 

controls, (4) improving data center recertification procedures, (5) ensuring compliance 

with audit log review requirements, (6) enforcing multi-factor authentication, (7) 

preventing the use of shared database accounts and passwords, and (8) improving 

incident response reporting. We recognize that the Department and its bureaus have 

certain compensating controls in place to help reduce the risk of the identified 

weaknesses, and we considered those compensating controls as part of our overall 

consolidated financial statement audit. 

• Configuration management. Configuration management involves the identification 

and management of security features for all hardware, software, and firmware 

components of an information system at a given point and systematically controls 

configuration changes throughout the system’s life cycle. Configuration settings and 

the related configuration management is a key component of many IT systems to 

ensure that hardware, software and firmware programs, and program modifications are 

properly authorized, tested, and approved, and that access to and distribution of 

programs is carefully controlled. Configuration settings may affect the design, 

implementation and/or operating effectiveness of application controls and may be 

subject to change control procedures to maintain the integrity of the application 

controls. Without proper controls, there is a risk that security features could be 

inadvertently or deliberately omitted or turned off, or that processing irregularities or 

malicious code could be introduced into the IT environment.

We noted that configuration management controls should be improved at four 

bureaus/centers, primarily in the areas of: (1) restricting access of a certain code to 

authorized individuals, (2) monitoring the unauthorized modification of that code, 

(3) addressing patch and configuration management vulnerabilities, (4) ensuring 

vulnerability scans are performed in accordance with Department policy, and 

(5) system baseline configurations are documented. We recognize that the Department 

and its bureaus have certain compensating controls in place to help reduce the risk of 

the identified weaknesses, and we considered those compensating controls as part of 

our overall consolidated financial statement audit.

• Segregation of Duties. A subset of internal control objectives is the safeguarding of 

assets, which includes controls over segregation of duties to minimize opportunities for 

individuals to be in a position to both perpetrate and conceal errors or fraud in the 

normal course of operations. Responsibilities for authorizing transactions, recording 
161 F Y 2013 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT

U.S. Department of Commerce

Independent Auditors’ Report

December 16, 2013

Page 14 of 14

Exhibit I – Significant Deficiencies, Continued

transactions, and maintaining custody of assets should be assigned to different 

individuals. Key areas of concern from an IT perspective involve duties among major 

operating and programming activities, including duties performed by users, application 

programmers, and data center staff. Policies outlining individual responsibilities 

should be documented, communicated, and enforced. Proper segregation of duties 

requires effective supervision and review by management, as well as formal operating 

procedures.

We noted that segregation of duties controls should be improved at three 

bureaus/centers, primarily in the areas of: (1) appropriately segregating duties within 

the production environments, (2) monitoring and controlling database activity, and 

(3) restricting the ability to process financial transactions to appropriate personnel. We 

recognize that the Department and its bureaus identified certain compensating controls 

in place to help reduce the risk of the identified weaknesses, and we considered those 

compensating controls as part of our overall consolidated financial statement audit.

Recommendations

We provided the Department specific recommendations to improve its general IT control 

related to financial systems in a separate limited distribution general IT controls report, issued 

as part of the fiscal year 2013 consolidated financial statement audit. The Department should 

monitor bureau actions to ensure effective implementation of our recommendations and to 

ensure continued compliance with the Federal Financial Management Improvement Act of 

1996.

The Department concurs. We will develop corrective action plans and ensure timely 

implementation of the recommendations presented in the separate limited distribution IT 

general controls report.

Management’s Response
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INDEPENDENT AUDITORS’ REPORT
Appendices
164 F Y 2013 AGENCY FINANCIAL REPORT
1

Top Management Challenges Facing the Department

The Reports Consolidation Act of 2000 requires inspectors general to identify the top 

management challenges facing their departments. In November 2012, the Department of 

Commerce OIG identified five challenges that require significant departmental attention in FY 

2013 and beyond.

Challenge 1: Stimulate economic growth in key Industries, increase exports, and 

enhance stewardship of marine fisheries.

OIG Statement

The Department engaged in multiple government-wide initiatives to implement the President's 

priorities. Successful implementation of these initiatives could have a profound impact on the 

nation’s economy; however, it required focused attention by senior management, close 

coordination with the private sector and other federal agencies, and sustained congressional 

support.

Bureau Responses

NIST has improved its support for advanced manufacturing through a portfolio of programs 

that spans the spectrum from cutting-edge research to services provided directly to 

manufacturers. The Hollings Manufacturing Extension Partnership (MEP) is supporting 

practices that increase competitiveness. The Baldrige Performance Excellence Program 

promotes excellence in organizational performance. The Advanced Manufacturing National 

Program Office (AMNPO) will strengthen strategic coordination among Federal agencies. The 

Advanced Manufacturing Technology Consortia (AMTech) program will provide funding to 

tackle long-term R&D challenges shared by industry.

USPTO continues to make significant progress in reducing the patent backlog. The agency has 

decreased the patent backlog to approximately 591,000 by the end of July 2013, a 20 percent 

reduction from FY2010. USPTO successfully implemented the Leahy-Smith America Invents 

Act, and extensively trained examiners about the new regulations. By the end of FY2013, the 

USPTO will increase the number of Administrative Patent Judges (APJs) by 15 percent.

ITA’s key functions efficiently support U.S. businesses and their workers, while advancing the 

President’s goals set forth in the National Export Initiative (NEI). To support the NEI, ITA's

U.S. and Foreign Commercial Service (US&FCS) unit began repositioning resources to highpriority markets and continued to make progress toward the President’s goal of doubling 

exports by the end of 2014. The Import Administration (IA) unit takes prompt and aggressive 

action against unfair foreign trade practices and foreign trade barriers by enforcing U.S. trade 

laws and trade agreements. 

F Y 2 01 3 M A N AG E M E N T C H A L L E N G E S A N D AC T I O N S TA K E N

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2

NOAA continues to make progress fulfilling the actions addressing the recommendations 

contained in the Office of the Inspector General’s January 2013 Report, “NOAA Needs to 

Continue Streamlining the Rulemaking Process and Improve Transparency and Consistency in 

Fisheries Management,” including reviewing and revising policy guidance on financial 

disclosures; providing annual briefings to Fisheries Management Council (FMC) members on 

financial interest and conflict of interest; reviewing and revising guidance to clarify criteria and 

requirements for review of financial disclosure submissions; reviewing and revising guidance 

for identifying and addressing conflicts of interest; reviewing experiences with the operational 

guidelines and develop new guidelines; developing regional operating agreements between 

each Region and FMC; conducting training on NOAA Guidelines for Compiling an Agency 

Administrative Record; and communicating records policy and procedures to NMFS 

employees, FMC members, and Council staff.

Challenge 2: Increase oversight of resources entrusted by the public and invest for 

long-term benefits.

OIG Statement

In an era of constrained budgets, there was a greater risk that management would take 

shortcuts, loosen internal controls, and deemphasize oversight in order to devote resources 

to other requirements. Concerns over conference spending and unauthorized reprogramming 

of funds highlighted the need for more effective oversight. Also, several planned modernization 

efforts, including redesign of the 2020 decennial census, provided significant long-term benefits 

but required increased management attention.

Bureau Responses

The Department has completed many key actions to address the concerns specifically related 

to the National Weather Service (NWS) Reprogramming. Reviews of Summary Level Transfer 

(SLT) use within the Department, review of bureau budget allocation methods, review of the 

Department’s budget formulation processes including financial managers’ ability to raise 

concerns about budget issues, development of training on core appropriations law concepts, 

and a review of the reporting structure of all bureaus to ensure that unit level CFO’s and 

finance staff are adequately supervised. NOAA has focused a tremendous amount of resources 

across every Line and Staff Office to ensure the corrective actions prescribed in the decision 

memorandums for the Deputy Secretary of Commerce and the NOAA Administrator are 

implemented timely and effectively. The effort was further amplified based on specific findings 

from the Consolidated Annual Financial Audit for NOAA’s budget execution processes. While 

this significant workload has stretched the limits of NOAA’s financial community, it has not 

been at the expense of management or staff attention to critical mission priorities. 

Simultaneous to implementing significant new internal control activities up, down and across 

the enterprise, NOAA senior leadership and senior financial managers have been guiding the 

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APPENDIX A: FY 2013 MANAGEMENT CHALLENGES AND ACTIONS TAKEN
3

agency through significant budgetary uncertainty with notable mission accomplishments. For 

example, the National Weather Service upgraded its supercomputers so they are now more 

than twice as fast in processing sophisticated computer models to provide more accurate 

forecasts further out in time.

DOC in concurrence with OMB, engaged with the Department of Transportation Enterprise 

Services Center (DOTESC) to adopt their shared service solution for core financials, 

acquisition, and property systems (personal, real and fleet) including an all-encompassing data 

warehouse. Under the Federal Shared Service Provider (FSSP) solution, DOC will adopt the 

FSSP’s existing business and administrative application standard processes.

The Census Bureau is implementing new planning, budgeting, research, and testing processes 

for the 2020 Census. These efforts support innovations under development that will hold the 

cost of the 2020 Census to 2010 levels while producing high quality data. The robust program 

management and systems engineering and integration infrastructure will provide the 

foundation for an effectively managed program. The American Community Survey (ACS) 

efforts continue to further the research goals of the 2020 Program. 

Challenge 3: Strengthen security and investments in information technology.

OIG Statement

Cyber attacks on bureau systems confirmed the urgent need to fix the Department's 

persistent security weaknesses. We supported senior management's actions to strengthen the 

departmental Chief Information Officer's governance, and continue to assess their 

effectiveness.

Bureau Responses

The Office of the Chief Information Officer (OCIO) has the following strategic initiatives: (1) 

IT Security Policy; (2) Department-Level Audit Management; (3) Work Force Improvements; 

(4) Enterprise Security and Incident Response. In June 2012, the Acting Secretary issued the 

“Department IT Portfolio Management Strategy,” This new IT Portfolio Management strategy is 

an important step. The Department’s IT review board, led by the CIO and Chief Financial 

Officer (CFO), reviews major IT investments for status updates and requests for additional 

spending authority and conducts TechStat reviews, which focus on putting troubled 

investments back on track. 

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4

Challenge 4: Implement framework for acquisition project management and 

improve contracts oversight.

OIG Statement

The Department issued an Acquisition Project Management Framework/Guidebook in 

response to a special study mandated by former Secretary Locke. The guidance provided

more-comprehensive coverage of acquisition life-cycle activities and, if implemented 

consistently, should help mitigate risks of cost overruns and schedule delays. Incorporating the 

new framework into the Department's acquisition policy and exercising relentless 

departmental oversight was and still is critical to the implementation's success.

Bureau Responses

The Office of Acquisition Management (OAM) successfully completed Department-wide policy 

for acquisition project management with the Deputy Secretary’s signing of the Policy on 

Commerce Acquisition Project Management. The Department’s Business Applications 

Solutions (BAS) project will consolidate the major IT business systems to integrate legacy and 

off-the-shelf systems for finance and accounting, contracting writing and procurement 

management (also termed acquisition), grants management, and associated data warehousing. 

The Department has ensured that all Project/Project Managers, Contracting Officers and 

Contracting Officer Representatives have the requisite education, training, and experience for 

Federal Acquisition Certification (FAC). Employees throughout the Department completed 

several training courses such as: Appropriations Law Training, Contracting Officer's 

Representative Course, Using the Department of Commerce Purchase Card. 

The Department has created the Suspension and Debarment Coordinator function and 

implemented a case referral process to ensure that processes and procedures are followed in 

a timely manner. 

Challenge 5: Reduce risks of cost overruns, schedule delays, and coverage gaps for 

NOAA’s satellite programs.

OIG Statement

Satellite programs remained the largest investment in the Department, comprising nearly 20 

percent of the Commerce budget. Preventing significant cost overruns and minimizing the 

impact of potential satellite coverage gaps continued to require top-level management 

attention.

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5

Bureau Responses

NOAA and the National Environmental Satellite, Data, and Information Service (NESDIS) take 

seriously the responsibility to provide strong program management and close oversight over 

the development and acquisition of the next-generation of weather satellites. The Joint Polar 

Satellite System (JPSS) Program hosts several regular meetings to ensure that stakeholders are 

up to date on the status of the program and aware of any changes to JPSS capabilities or 

timelines. Several activities are now being conducted to ensure communication with the 

stakeholders: the Low-Earth Orbiting Requirements Working Group (LORWG); the JPSS 

Coordination Group; and the Environmental Satellite Users Group (ESUG). JPSS reports 

quarterly at a summary level to DOC, OMB, and Congress to provide overall progress, 

performance, issues and risks. 

In response to Independent Review Team recommendations, a NOAA/NASA senior 

management team developed joint-agency recommendation resulting in two changes: The 

NOAA JPSS Director has responsibility and authority to direct all elements of the JPSS 

program and will work directly with NASA’s Joint Agency Satellite Division to direct 

coordination of the efforts between NOAA and NASA. The Systems Engineering team is an 

integrated NOAA-NASA team under a single JPSS Program Chief Systems Engineer. 

Changes are documented in the memorandum from NOAA DUS-O and NASA AA, dated 

October 22, 2012, directing immediate changes. The updated JPSS Management Control Plan 

(MCP), signed in July 2013, codifies these changes. As of August 2013, all NESDIS leadership 

positions have been filled with permanent civil servants, and the JPSS Director has been in 

place for almost 2 years. JPSS has also filled two key leadership positions with permanent staff, 

a Technical Director and a Chief Systems Engineer. 

NOAA’s plan to mitigate the effects of a possible gap includes a number of aspects. To 

support this planning, NOAA enlisted Riverside Technology to provide objective, independent, 

and detailed analyses of alternatives to mitigate the degradation of National Weather Service 

(NWS) products and services in the event of a gap in afternoon polar-orbiting satellite data. 

The GOES-R Series Program has and will continue to develop and present trade-off 

approaches to mitigate launch delays as a program management practice. It is difficult at this 

stage of development to generate a comprehensive set of trade-off approaches that don’t 

affect the launch schedule. The GOES-R Series Program has passed the point at which 

substantial budget reductions can be accommodated without impacting schedule, or major 

schedule changes can be made without impacting the budget.

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APPENDIX A: FY 2013 MANAGEMENT CHALLENGES AND ACTIONS TAKEN
FY 2014 MANAGEMENT CHALLENGES

170 F Y 2013 AGENCY FINANCIAL REPORT

APPENDIX B: FY 2014 MANAGEMENT CHALLENGES
• Strengthen Oversight of National Oceanic and Atmospheric 

Administration (NOAA) Programs to Mitigate Potential Satellite Coverage 

Gaps, Address Control Weaknesses in Accounting for Satellites, and 

Enhance Fisheries Management. Environmental satellites are essential to 

providing weather forecasting data used to track severe storms and predict 

climate. However, cost overruns and schedule slippage may delay the 

replacement of two of NOAA’s most vital satellite systems—which, at more 

than 20 percent of the Department’s 2014 budget request, are its largest 

investments. Separately, during FY 2012, an independent accounting firm 

noted several control weaknesses in NOAA’s accounting for satellites,

which must be addressed to ensure integrity, accountability, and 

transparency. In addition, NOAA must respond to challenges to its fisheries 

oversight. Commercial and recreational fishing have a value of more than $5

billion and support more than 1 million jobs. However, NOAA must balance 

the interests of the fishing community with conservation concerns.

• Continue Enhancing Cybersecurity and Management of Information 

Technology Investments. Our review of events surrounding the Economic 

Development Administration’s (EDA’s) cyber incident, which stemmed 

from a perceived December 2011 massive malware infection, found that 

critical incident response decisions were based on inaccurate information—

and that deficiencies in the Department’s incident response program 

impeded EDA’s incident response. The Department has several enterprise 

cybersecurity initiatives underway to address mandates from the Office of 

Management and Budget (OMB). Timely implementation of these initiatives 

is crucial to the Department’s cybersecurity program. While OMB increased 

the authority of federal CIOs to manage major IT investments,

1 the 

Department CIO’s responsibility to oversee certain satellite IT investments 

has been diminished. Overall, cost growth and schedule delays of the 

Department’s investment activity exceed the federal government average. 

More than one-fifth of the Department’s high-risk IT investments are 30 

percent or more behind schedule. 

• Exercise Strong Project Management Controls Over 2020 Census 

Planning to Contain Costs. By mid-decade, the Census Bureau must 

analyze 2020 decennial design alternatives and make timely design decisions 

based on the results of its research and testing phase. After conducting

1 See OMB, December 9, 2010. 25 Point Implementation Plan to Reform Federal Information 

Technology Management. Washington, DC: OMB, 28. See also OMB, August 8, 2011. Chief 

Information Officer Authorities, M-11-29. Washington, DC: OMB.

2

 

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APPENDIX B: FY 2014 MANAGEMENT CHALLENGES
several reviews of the Bureau’s approach and progress toward the planning 

and development of the 2020 decennial design, we noted significant 

schedule slippage in key research and testing programs. If continued, missed 

deadlines might result in a design similar to last decade’s design, which 

included a massive, costly end-of-decade field operation. In addition, the 

Bureau must resolve human capital issues related to maintaining a workforce 

with requisite skills and capabilities. Further, it must complete timely 

research for making evidence-based design decisions, as well as implement a 

stable, agile field-testing strategy.

• Continue to Foster a Culture of Management Accountability to Ensure 

Responsible Spending. As the government experiences an extended period 

of tightened budgets, it is imperative to foster a culture of management 

accountability. OIG operates a complaint hotline for employees and the 

public to submit information about alleged wrongdoing, misconduct, or 

mismanagement. OIG’s determination to audit, investigate, or provide the 

complaint information to Departmental or bureau management for 

appropriate action helps to instill a culture of ethical conduct and ensure that 

spending is appropriate, complies with laws and regulations, and promotes

investments with long-term benefits. The Department must continue to 

adequately address complaints of mismanagement of federal resources. In 

addition, the lack of centralized financial reporting capability impedes the 

Department’s ability to oversee and manage Department-wide financial 

activities. While the Department has developed plans to replace legacy 

systems, significant financial reporting challenges remain. Other priorities 

include stricter oversight of the Department’s annual acquisition of 

approximately $2.4 billion in goods and services and the need for 

appropriately qualified staff to oversee these acquisitions. Finally, an

additional challenge is to strengthen bureaus’ oversight of Departmental

programs that award grants or cooperative agreements due to the potential 

for misuse of federal funds by award recipients and to maintain 

professionally certified grant managers. 

We remain committed to keeping the Department’s decision-makers informed of 

problems identified through our audits and investigations, so that timely corrective 

actions can be taken. A copy of this report and the Department’s response to it 

(which appears as an appendix) will be included in the Department’s Performance 

and Accountability Report, as required by law.2

2 31 U.S.C. § 3516(d).

3

 

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APPENDIX B: FY 2014 MANAGEMENT CHALLENGES
We appreciate the cooperation received from the Department, and we look forward 

to working with you and the Secretarial Officers in the coming months. If you have 

any questions concerning this report, please contact me at (202) 482-4661.

cc: Patrick D. Gallagher, Acting Deputy Secretary of Commerce

Justin Antonipillai, Acting General Counsel

Simon Szykman, Chief Information Officer

Ellen Herbst, Chief Financial Officer and Assistant Secretary 

for Administration

Bruce Andrews, Chief of Staff to the Secretary

Operating Unit Heads

Operating Unit Audit Liaisons

4

173 FY 2013 AGENCY FINANCIAL REPORT

APPENDIX B: FY 2014 MANAGEMENT CHALLENGES
U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Contents 

Challenge 1: Strengthen Commerce Infrastructure to Support the Nation’s 

Economic Growth ......................................................................................................................... 1

Promoting U.S. Exports While Protecting National Security Interests ........................................................... 1 

Enhancing Economic Growth Through Intellectual Property and Wireless Initiatives ................................ 4 

Challenge 2: Strengthen Oversight of National Oceanic and Atmospheric Administration 

(NOAA) Programs to Mitigate Potential Satellite Coverage Gaps, Address Control 

Weaknesses in Accounting for Satellites, and Enhance Fisheries Management .................... 7

Enhancing Weather Satellite Development and Mitigating Coverage Gaps ................................................... 8 

Addressing Material Weakness over Satellite Accounting ................................................................................ 11 

Enhancing Fisheries Management ............................................................................................................................ 12 

Challenge 3: Continue Enhancing Cybersecurity and Management of Information 

Technology Investments ............................................................................................................ 15

Establishing a Robust Capability to Respond to Cyber Incidents .................................................................... 16 

Continuing Sustainable Implementation of Enterprise Cybersecurity Initiatives ......................................... 17 

Preserving the CIO’s Oversight Responsibility of Satellite-Related IT Investments ................................... 19 

Continuing Vigilant Oversight of IT Investments ................................................................................................ 20 

Maintaining Momentum in Consolidating Commodity IT to Cut Costs ........................................................ 21 

Challenge 4: Exercise Strong Project Management Controls over 2020 Census Planning 

to Contain Costs ......................................................................................................................... 23

Ensuring Timely Design Decision Making .............................................................................................................. 24 

Focusing on Human Capital Management, Timely Research, and Testing Implementation ...................... 25 

Challenge 5: Continue to Foster a Culture of Management Accountability to Ensure 

Responsible Spending ................................................................................................................. 30

Responding to Concerns of Mismanagement and Ethical Violations .............................................................. 31 

Implementing Stricter Controls over Funds ......................................................................................................... 33 

Modernizing the Enterprise Financial Management System to Strengthen Financial Oversight ............... 34 

Strengthening Controls over High-Risk Contract Actions and Developing the Acquisition 

Workforce .................................................................................................................................................................... 35 

Addressing Grant Management Issues ................................................................................................................... 37 

Acronym List ............................................................................................................................... 40

Appendix A: Related OIG Publications ..................................................................................... 42

Appendix B: Comparison Between FY 2013 and FY 2014 Challenges .................................. 44 

174 F Y 2013 AGENCY FINANCIAL REPORT

APPENDIX B: FY 2014 MANAGEMENT CHALLENGES
FINAL REPORT NO. OIG-14-002 1 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Challenge 1: 

Strengthen Commerce Infrastructure to Support the Nation’s Economic Growth 

As reflected in the President’s FY 2014 proposed budget, the Department is a key player in the 

federal government’s efforts to stimulate economic growth and job creation. Several bureaus, 

which hold pivotal roles in providing the infrastructure for economic growth, face a variety of 

challenges. 

The International Trade Administration (ITA)—along with 15 other federal government 

departments and agencies, as well as the nation—is not on track to meet the National Export 

Initiative’s goal of doubling U.S. export levels within 5 years, while the Bureau of Industry and 

Security (BIS) is planning for the increased licensing and enforcement workload resulting from 

the Export Control Reform Initiative. The U.S. Patent and Trademark Office (USPTO), in its 

mission to foster innovation through high-quality patent and trademark examination, must 

implement several remaining provisions of the 2011 America Invents Act and faces several 

difficulties in reducing backlogs associated with initial patent applications, requests for continued 

examination, and appeals. Due to the increase in spectrum demand and the limitations of 

available spectrum capacity, the National Telecommunications and Information Administration 

(NTIA) must increase spectrum access for commercial wireless broadband use—via sharing 

between federal and commercial users or sale of spectrum for commercial use—while 

protecting federal missions and overseeing development of a broadband network for public 

safety. In addition to these major initiatives, the Department’s National Institute of Standards 

and Technology (NIST) will face the challenge of implementing the National Network for 

Manufacturing Innovation,1 if Congress authorizes this program to innovate and expand 

advanced manufacturing technologies and processes to bring manufacturing jobs back to the 

United States. 

We have identified two key areas for management attention: 

• Promoting U.S. exports while protecting national security interests 

• Enhancing economic growth through intellectual property and wireless initiatives 

Promoting U.S. Exports While Protecting National Security Interests 

Promotion and regulation of U.S. exports are two critical missions of the Department. For FY 

2014, the Department has requested $632 million to support agencies that provide export 

promotion and regulation. ITA’s U.S. and Foreign Commercial Service provides a broad range 

of services and counseling to U.S. exporters while other ITA business units—such as Market 

Access and Compliance, Import Administration, and Manufacturing and Services—enforce trade 

agreements and protect domestic industries such as manufacturing and textiles. BIS provides 

export licensing and enforcement programs to ensure that trade in dual-use exports2

 is 

                                                            

1

 This $1 billion Presidential proposal brings together industry, colleges and universities, and all levels of 

government to support small- and medium-sized enterprises and start-ups in advanced manufacturing, workforce 

development, and the transfer of promising new processes and technologies to the marketplace. 

2 Dual-use refers to exports that have both civilian and military applications. 

175 FY 2013 AGENCY FINANCIAL REPORT

APPENDIX B: FY 2014 MANAGEMENT CHALLENGES
FINAL REPORT NO. OIG-14-002 2 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

consistent with national security interests. In FY 2014, ITA and BIS will undertake major 

activities that have potential long-term impact on the U.S. economy. 

Implementing the National Export Initiative Under a New Organizational Structure 

ITA plays a leading role as one of 16 executive departments and federal agencies that support 

the National Export Initiative (NEI), which was formalized by executive order in March 2010. 

The NEI aims to double 2009 U.S. export levels by the end of 2014—from $1.57 trillion to 

$3.14 trillion3

—and, in turn, help grow the nation’s $16.6 trillion economy.4 In 2012, the value 

of U.S. exports grew to a high of $2.2 trillion, representing 13.9 percent of gross domestic 

product. In the second quarter of 2013, U.S. exports equaled $564 billion, a quarterly record 

(see figure 1). However, as shown in figure 1, actual export growth has recently fallen below 

the expected rate of export growth needed to double U.S. exports by the end of 2014. This 

will require ITA, along with other federal agencies, to intensify their efforts to promote U.S. 

exports to meet the NEI’s goal. 

Figure 1. Export Growth—Expected Versus Actual (in Current Dollars) 

Source: OIG analysis of Census Bureau export data 

To support many of its priorities,5 the NEI called for enhanced collaboration among federal 

trade agencies and strategic partnerships with state, local, and other trade organizations. In our 

                                                            

3 See Export Promotion Cabinet, September 2010. Report to the President on the National Export Initiative: The Export 

Promotion Cabinet’s Plan for Doubling Exports in Five Years. Washington, DC: Trade Promotion Coordinating 

Committee, 1. 

4

 DOC Bureau of Economic Analysis. National Income and Product Accounts Tables: Table 1.1.5 Gross Domestic Product

[Online]. http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1#reqid=9&step=1&isuri=1 (revised July 31, 2013). 

Dollar amounts in this section are in current dollars. 

5

 The eight NEI priorities are (1) exports by small and medium-sized enterprises, (2) federal export assistance, (3) 

trade missions, (4) commercial advocacy, (5) increasing export credit, (6) macroeconomic rebalancing, (7) reducing 

barriers to trade, and (8) export promotion of services. 

1.81

2.08

2.40

2.76

3.17

1.57

1.84

2.11

2.21

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2009 2010 2011 2012 2013 2014

Value of U.S. Exports (in trillions $)

Year

Expected Value of U.S. Exports Actual Value of U.S. Exports

176 F Y 2013 AGENCY FINANCIAL REPORT

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U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

2012 review of the U.S. Export Assistance Centers we noted that, while protections of client 

data inhibited information sharing and guidance on collaboration was limited, fostering 

partnerships with other federal agencies such as the Small Business Administration and the 

Export–Import Bank can enhance service to exporters.6

 In FY 2014, ITA will be challenged to 

improve and build on the coordination and partnership efforts developed to date. 

ITA’s challenge is to sustain the momentum to increase exports to try to meet the goal of the 

NEI—and it must do so while, at the same time, managing an internal reorganization. Effective 

October 1, 2013, the Department consolidated ITA’s four existing business units into three to 

eliminate overlapping functions and streamline operations. ITA states that the functional 

realignment will consolidate regional expertise, strengthen industry expertise and strategic 

partnerships, and consolidate trade agreement compliance and trade law enforcement. 

Addressing Export Control Reform Changes Through Enhanced Licensing and Enforcement Activities 

The task of administering and enforcing dual-use export controls falls on the Bureau of 

Industry and Security. In FY 2012, BIS processed more than 23,000 license applications for 

exports valued at more than $200 billion.7

 Future trade in controlled dual-use exports is 

expected to increase significantly as a result of the current Export Control Reform Initiative. 

Launched by the Administration in 2010, the initiative aims to streamline the country’s export 

control system and facilitate U.S. export of high-tech goods while protecting U.S. national 

security interests. In the initiative’s first phase, BIS worked with federal partners to reconcile 

and revise export control policies and regulations. Currently, the bureau is also collaborating 

with its federal partners to revise the lists of controlled dual-use items (Commerce Control 

List) and munitions (U.S. Munitions List), which will result in increased trade for less-sensitive 

munitions. These less-sensitive munitions will transfer from the U.S. Munitions List to the 

Commerce Control List and BIS jurisdiction, while the Department of State maintains 

jurisdiction over more sensitive munitions. 

Beginning October 15, 2013, new rules will transfer the first of many items from the U.S. 

Munitions List to the Commerce Control List in a process expected to continue throughout FY 

2014.8

 To address the increase of licensable items under its jurisdiction, BIS has requested 

additional resources in its FY 2014 budget for its licensing and enforcement units. To complete 

its mission, BIS’ challenge is to coordinate with its federal partners, such as the Departments of 

Defense and State, to revise federal export control regulations to effectively implement export 

control reform. Such external collaboration can be difficult and time consuming. While BIS is 

planning and managing its new munitions licensing responsibilities, its current export regulations 

must continue to be administered and enforced. Finally, BIS will be challenged to enhance its 

existing outreach and enforcement activities delivered through exporter counseling, 

                                                            

6

 U.S. Department of Commerce Office of Inspector General, November 30, 2012. U.S. Export Assistance Centers 

(USEACs) Could Improve Their Delivery of Client Services and Cost Recovery Efforts, OIG-13-010-I. Washington, DC: 

DOC OIG. 

7

 Fergusson, I.F., and Kerr, P.K. April 19, 2013. The U.S. Export Control System and the President’s Reform Initiative, 

R41916. Washington, DC: Congressional Research Service, 3. 

8

 Bureau of Industry and Security, April 16, 2013, Revisions to the Export Administration Regulations: Initial 

Implementation of Export Control Reform, Federal Register 78, no. 73: 22660. 

177 FY 2013 AGENCY FINANCIAL REPORT

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teleconferences, and seminars to educate its stakeholders (primarily first-time dual-use 

exporters) about the detailed changes to the export regulations. Outreach and preventive 

enforcement will be critical to ensuring that all dual-use exporters understand and follow the 

revised regulations and avoid unintentional violations. 

Enhancing Economic Growth Through Intellectual Property and Wireless Initiatives 

Reducing Patent Application Backlogs and Improving Processing Times While Maintaining Quality 

USPTO, as the authority for reviewing and adjudicating all patent and trademark applications, 

must continue to focus on the challenge of reducing the time applicants wait before their patent 

applications or appeals are reviewed. The agency has stated that the passage and 

implementation of the America Invents Act (AIA), enacted on September 16, 2011, would allow 

the agency to process applications faster, reduce the patent backlog, increase patent quality 

through expedited patent challenges, and improve examiner recruitment and retention. 

The AIA included fundamental revisions to patent laws and USPTO practices, such as moving to 

a “first inventor to file” patent process to align the U.S. system with others worldwide, granting 

the agency authority to set and retain fees to ensure it has sufficient resources for its 

operations, and establishing satellite offices. As of August 20, 2013—in the nearly 2 years since 

the AIA’s enactment—USPTO has successfully implemented on time 28 of the 35 provisions 

they were responsible for; 5 are not yet due, and 2 are overdue. 

As USPTO completes its implementation of the remaining AIA provisions, the agency’s recent 

efforts to address its application and appeal backlogs and related pendency issues have yielded 

mixed results. Both the backlog and pendency for patent applications decreased in FY 2013 (see 

figure 2a). Between October 2009 and September 2013, the patent backlog decreased from 

approximately 720,000 unexamined new applications to approximately 585,000. The patent 

appeals backlog—which we reported on in our 2012 audit9

—has stabilized and, as of May 2013, 

stood at approximately 26,000, still more than twice the size of the backlog in October 2010. 

However, USPTO’s backlog for requests for continued examination (RCE) has grown from 

17,700 applications in October 2009 to approximately 78,000 in September 2013 (see figure 

2b), an increase of more than 340 percent. As a consequence, during the same period, the 

average waiting time between filing an RCE and receiving an initial decision has grown from 2.2 

to 7.8 months (see figure 2b). 

 

                                                            

9

 U.S. Department of Commerce Office of Inspector General, August 10, 2012. USPTO's Other Backlog: Past 

Problems and Risks Ahead for the Board of Patent Appeals and Interferences, OIG-12-032-A. Washington, DC: DOC 

OIG. 

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U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Figures 2a and 2b. Patent Backlog and Pendency Decreases (2a) and 

RCE Backlog and Pendency Increases (2b), FYs 2010–2013a

Figure 2a Figure 2b 

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

0

5

10

15

20

25

30

35

40

Applications

Months

Patent Backlog Patent Pendency without RCEs

Source: USPTO data a

 Graphs present full FY data from October 2010 to September2013.

To address the substantial increases in the RCE backlog and average waiting time, one action 

USPTO initiated was a series of outreach efforts to identify why applicants file RCEs. In June 

2013, OIG initiated an audit to evaluate the reason for the increase in the RCE backlog and 

review USPTO’s efforts to address the issue. 

As it works to reduce its patent backlog and pendency (see figure 2a), USPTO’s challenge is to 

ensure that the quality of its patent examination process is not adversely affected and to avoid 

requiring applicants and the public to file unnecessary and costly challenges to examiners’ 

decisions. 

Increasing Spectrum Usage Efficiency 

Radio frequency spectrum provides an array of wireless communications services critical to the 

U.S. economy and supports a variety of government functions.10 Spectrum capacity is needed to 

deliver the wireless broadband that stimulates economic growth, spurs job creation, and boosts 

the nation’s capabilities in education, healthcare, homeland security, and other areas.11 In June 

2010, the President requested that 500 megahertz (MHz) of federal or nonfederal spectrum be 

freed up for commercial wireless broadband. In response, NTIA announced in March 2012 that 

the federal government intends to repurpose 95 MHz of prime spectrum for commercial use. 

                                                            

10 U.S. Government Accountability Office, April 2011. Spectrum Management: Preliminary Findings on Federal 

Reallocation Costs and Auction Revenues, GAO-13-563T. Washington, DC: GAO, 1. 

11 President’s Council of Advisors on Science and Technology, July 2012. Realizing the Full Potential of GovernmentHeld Spectrum to Spur Economic Growth. Washington, DC: President’s Council of Advisors on Science and 

Technology, 11. 

0

20,000

40,000

60,000

80,000

100,000

120,000

0

1

2

3

4

5

6

7

8

9

Applications

Months

RCE Backlog RCE Pendency from Filing to Next Office Action

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However, the $18 billion that NTIA estimates it will cost to relocate existing federal users to 

other parts of the spectrum12 could make this cost prohibitive. 

Representing a continuation and expansion of the President’s June 2010 directive, a July 2012 

report by the President’s Council of Advisors on Science and Technology recommended that 

up to 1,000 MHz of federal spectrum be made available for a “shared use spectrum 

superhighway” between federal agencies and commercial providers.13 Recent technology 

advances will make such shared-use architecture feasible in the near future. NTIA collaborated 

with industry and government representatives, forming working groups of the Commerce 

Spectrum Management Advisory Committee. These working groups, along with the Federal 

Communications Commission and the White House, have made some progress toward finding 

ways to share spectrum with commercial users. However, many challenges—such as lack of 

incentive for commercial providers to bid for shared spectrum (that is, the cooperative use of 

common spectrum by accessing the same frequencies in different geographical areas or at 

different times), revenue generation, and rights-of-use issues—must be addressed to make this 

effort a possibility. Another challenge NTIA faces in its handling of federal spectrum involves 

the accuracy of data submitted by federal agencies on their requirements for and their usage of 

spectrum. NTIA’s efforts to address its challenges through the implementation of the Federal 

Spectrum Management System, a new data management system that uses IT applications to 

make the spectrum more effective and efficient, has encountered schedule delays and cost 

increases. 

Overseeing the First Responder Network Authority and the Implementation of the Public Safety 

Broadband Network 

On February 22, 2012, the President signed the Middle Class Tax Relief and Job Creation Act. 

This reallocated the “D-Block” spectrum and authorized $7 billion in funding for the 

establishment of an interoperable nationwide Public Safety Broadband Network (PSBN). The 

law requires NTIA to establish an independent authority called First Responder Network 

Authority (FirstNet) to oversee the existing public-safety spectrum and the establishment and 

deployment of the PSBN. FirstNet, which held its first meeting in September 2012, has started 

to implement and establish an organizational structure, hire staff to handle its day-to-day 

operations, and establish controls (for example, to develop its rules and regulations). FirstNet 

faces several challenges in establishing the PSBN, including (1) fostering cooperation among 

various state and local public-safety agencies, (2) integration of seven Broadband Technology 

Opportunities Program (BTOP) grants funded by the American Recovery and Reinvestment 

Act of 2009 into the PSBN, and (3) the physical construction of a nationwide long-term 

evolution network. 

 

                                                            

12 Ibid, iv, vi. 

13 U.S. Government Accountability Office, Spectrum Management, 1. 

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U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Challenge 2: 

Strengthen Oversight of National Oceanic and Atmospheric Administration 

(NOAA) Programs to Mitigate Potential Satellite Coverage Gaps, Address 

Control Weaknesses in Accounting for Satellites, and Enhance Fisheries 

Management 

NOAA plays a critical role in protecting life and property, as well as supporting national 

economic vitality. To achieve these missions, NOAA must overcome the challenges associated 

with the acquisition, accounting, and operation of weather satellites and has to balance the 

competing interests concerning marine fisheries. 

Environmental satellites are essential components in weather forecasting. They provide data 

used to track severe storms and predict climate. However, long-standing cost overruns and 

schedule delays—as well as the aging of the current constellation of satellites—are threatening 

adequate coverage of these critical functions. Cost increases and budget shortfalls may delay 

the development and launch of two of NOAA’s most vital satellite systems, the Joint Polar 

Satellite System (JPSS) and the Geostationary Operational Environmental Satellite-R Series 

(GOES-R). These two programs are the Department’s largest investments, accounting for more 

than 20 percent of its 2014 budget request. In response to last year's Top Management 

Challenges, NOAA improved its communication with stakeholders, as well as the efficacy of 

satellite program leadership and staffing, and developed a comprehensive polar satellite data gap 

mitigation plan. In addition, NOAA warned that the GOES-R program is at a stage in its 

development where launch delays cannot be avoided if its budget is reduced. 

The satellites program also faces accounting challenges. During FY 2012, an independent 

accounting firm noted several control weaknesses at NOAA related to accounting for satellites. 

The transactions in question originate in a NOAA line office where personnel do not have 

sufficient financial accounting experience and training, and the bureau’s Finance Office does not 

have sufficient oversight of the accounting for satellites. Further, satellite accounting involves 

significant contracts and arrangements with contractors and government agencies. 

Finally, NOAA must respond to challenges to its fisheries oversight. Vital to our ocean 

economy, commercial and recreational fishing have a value of more than $155 billion and 

support more than 28 million jobs. But coastal development, pollution, overfishing, and 

destruction by invasive species are contributing to the decline in the health of our oceans and 

coastal ecosystems. NOAA must balance the interests of the fishing community with 

conservation concerns regarding long-term sustainability. 

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U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

To strengthen oversight of NOAA programs, we have identified three areas for management 

attention: 

• Enhancing weather satellite development and mitigating potential coverage gaps 

• Addressing material weakness over satellite accounting 

• Enhancing fisheries management 

Enhancing Weather Satellite Development and Mitigating Potential Coverage Gaps 

Managing risks in the acquisition and development of the next generation of environmental 

satellites is a continuing challenge for the Department. In February 2013, GAO added 

“Mitigating Gaps in Weather Satellite Data” to its high-risk list.14 The two most prominent 

programs,15 the Joint Polar Satellite System (JPSS) and the Geostationary Operational 

Environmental Satellite-R series (GOES-R), together account for one-third of NOAA’s FY 2014 

budget request. They are also the largest investments in the Department, accounting for more 

than 20 percent of the Department’s $8.6 billion budget proposal. 

JPSS evolved from a predecessor program fraught with cost overruns and schedule delays. 

NOAA’s JPSS program uses the National Aeronautics and Space Administration (NASA) as its 

acquisition agent, leveraging that agency’s procurement and systems engineering expertise—an 

arrangement based on previous partnerships between the two agencies. In its FY 2014 budget 

submission, NOAA requested $824 million and reported that the JPSS program, running 

through 2025, would cost $11.3 billion. The first JPSS-developed satellite (JPSS-1) is scheduled 

for launch no later than the second quarter of FY 2017. GOES-R, with scope and importance 

comparable to JPSS, is experiencing development and budgetary challenges that could delay the 

launch of its first satellite from the first to the second quarter of FY 2016. NOAA requested 

$955 million for FY 2014 for the GOES-R series of satellites that will provide uninterrupted 

short-range severe weather warning and “now-casting” capabilities through 2036. With four 

satellites (the GOES-R, -S, -T, and -U), the program is estimated to cost $10.9 billion over the 

course of its life cycle. 

The satellites will provide data and imagery for weather forecasting—including severe-storm 

tracking and alerting—and the study of climate change. NOAA’s environmental satellite 

operations and weather forecasting are designated as primary, mission-essential functions of the 

Department because they help lead and sustain the nation during severe weather events. 

However, because of cost overruns, schedule delays, and the aging of NOAA’s current 

constellation of satellites, NOAA has had to take steps to mitigate potential coverage gaps for 

these critical assets. 

                                                            

14 U.S. General Accountability Office, February 2013. High-Risk Series: An Update, GAO-13-283. Washington, DC: 

GAO, 155-160. 

15 Other satellite acquisitions include Jason-3, which will measure sea surface height, and Deep Space Climate 

Observatory, which will provide advance warnings of solar storms affecting Earth. 

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Reducing Program Risks Associated with JPSS-1 Development 

Strong program management and close oversight of these programs are needed to reduce risks 

associated with their development. For JPSS, this requires that the program successfully execute 

to cost, schedule, and performance baselines established August 1, 2013. The program must 

also ensure that its flight and ground segments’ schedules are fully integrated. JPSS must also 

effectively coordinate with the newly established NOAA Polar Free Flyer program, the planned 

NASA climate instrument project,16 and NOAA’s data distribution and archive systems. 

NOAA needs to mitigate any degradation to weather forecasting capabilities during polar-orbit 

data coverage gaps through efficient use of supplemental funding it received as part of the 

Disaster Relief Appropriations Act, 2013. The bureau has developed a mitigation plan for polar 

satellite coverage gaps, but obtaining support from other reliable sources—one of its options—

could be time-consuming. 17 NOAA should ensure that the mitigation plan is executed before 

the November 2016 design-life end of Suomi National Polar-orbiting Partnership (NPP), a riskreduction satellite launched in October 2011 that is flying the first versions of JPSS sensors. 

Over the course of the JPSS program, we have analyzed Suomi NPP and JPSS schedules to 

assess potential gaps in weather forecast data. Consistent with our September 2012 JPSS audit 

report,18 we continue to project a 10–16-month gap between Suomi NPP’s end of design life

and when JPSS-1 satellite data become available for operational use (see figure 3). NOAA’s 

medium-range weather forecasting (3–7 days) could be significantly degraded during the period 

of time JPSS data are unavailable. 

                                                            

16 With the FY 2014 President’s Budget, NOAA removed five instruments from the JPSS budget and created a 

separate program, Polar Free Flyer, to develop and launch three of the instruments. It transferred to National 

Aeronautics and Space Administration (NASA) responsibility for two climate instruments. The JPSS ground system 

will still support the Polar Free Flyer satellite, and the two NASA climate instruments will be accommodated on 

the JPSS-2 satellite if their development schedules align with the satellite’s development. 

17 For example, using new or different data from the European Organization for the Exploitation of Meteorological 

Satellites or Japan Aerospace Exploration Agency requires establishing agreements, implementing communication 

links, updating data processing systems, and assimilating the data. 

18 U.S. Department of Commerce Office of Inspector General, September 27, 2012. Audit of the Joint Polar Satellite 

System: Continuing Progress in Establishing Capabilities, Schedules, and Costs Is Needed, OIG-12-038-A. Washington, 

DC: Department of Commerce OIG. 

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Figure 3. Potential Continuity Gaps for Polar-Satellite Operational Forecast Data 

Source: OIG analysis of NOAA data 

Reducing Program Risks Associated with GOES-R Development 

The GOES-R program must continue to manage its development to meet requirements within 

its long-standing baselines. The program also needs to ensure sufficient ground system, 

instrument, and spacecraft development maturity to enter and successfully complete the 

integration and test phase. In addition, the program must effectively manage activities between 

flight and ground projects in a compressed development schedule and constrained budget 

environment. 

In our 2013 GOES-R audit report,19 we found that schedule slips and a potential reduction in 

testing activities have raised concerns about the satellite’s readiness to launch. Funding stability 

is the program’s top risk; an appropriation amount below the FY 2014 requested level may 

delay launch. Scope reductions are diminishing the satellite’s operational capabilities. For these 

reasons, NOAA needs to implement a comprehensive plan to mitigate the risk of potential 

launch delays and communicate to users (e.g., in the National Weather Service and Department 

of Defense) and other stakeholders (e.g., the Administration, Congress) the changes that may 

be necessary to maintain GOES-R’s launch readiness date. 

                                                            

19 U.S. Department of Commerce Office of Inspector General, April 25, 2013. Audit of Geostationary Operational 

Environmental Satellite-R Series: Comprehensive Mitigation Approaches, Strong Systems Engineering, and Cost Controls Are 

Needed to Reduce Risks of Coverage Gaps, OIG-13-024-A. Washington, DC: Department of Commerce OIG. 

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NOAA’s policy for its geostationary satellites is to have three satellites in orbit—two 

operational satellites with overlapping coverage and one spare for backup. Currently, GOES-13, 

GOES-14, and GOES-15 are in orbit (see figure 4). However, GOES-13 is due to be retired in 

FY 2015, at which time GOES-14 is projected to become operational. GOES-15 is due to be 

retired in FY 2017. GOES-R is scheduled to be launched in October 2015, but there is a risk of 

launch delay. NOAA may not be able to meet its policy of having an on-orbit spare, even 

without a GOES-R launch delay, based on current GOES satellites’ projected retirement dates. 

Furthermore, a launch delay for GOES-R beyond October 2015 increases the risk that only one 

geostationary imager will be in orbit—which would severely limit NOAA’s capability to visualize 

and track severe weather events. 

Figure 4. Potential Policy Gaps for Geostationary Operational Satellites 

Source: OIG analysis of NOAA data 

Addressing Material Weakness over Satellite Accounting 

During FY 2012, the accounting firm KPMG noted several material control weaknesses at 

NOAA related to accounting for satellites. NOAA has a large investment in satellites and, as of 

the end of FY 2012, satellite construction work-in-progress amounted to $6.1 billion, with 

completed satellites and ground systems costing another $0.6 billion, totaling approximately 

more than one-fifth of the Department’s assets. In addition, NOAA’s accounting for satellites is 

highly complex. Such transactions originate in a NOAA line office where personnel do not have 

sufficient financial accounting experience and training, and NOAA’s Finance Office does not 

185 FY 2013 AGENCY FINANCIAL REPORT

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U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

have sufficient oversight of the accounting for satellites. Further, satellite accounting involves 

significant contracts and arrangements with contractors and other government agencies. 

These challenges have resulted in material deficiencies in NOAA’s satellite accounting during FY 

2012. Specifically, KPMG identified the incorrect classification of a satellite ground system, 

unrecorded transfer of a satellite from another federal agency, and corrections to the satellite 

impairment amount. These errors resulted in approximately $900 million in adjustments to 

correct the amount of satellites included in NOAA’s accounting records. In addition, KPMG 

identified uncapitalizable costs included in construction work-in-progress, as well as a lack of 

documentation evidencing review and approval of intragovernmental payments related to 

satellites. Although NOAA has developed a corrective action plan to address these conditions 

during FY 2013, we believe that these deficiencies highlight more than accounting challenges. 

The operation and management of NOAA’s satellite program needs strengthening to ensure 

integrity, accountability, and transparency. Public and Congressional confidence in the 

Department depends on these basic principles of stewardship. Therefore, program and finance 

officials must work together to ensure that satellite investments are accurately identified, 

recorded, and reported—a basic principle of asset management. We also identified additional 

challenges related to NOAA’s accounting and budgetary controls of funds in challenge 5 (see 

Continue to Foster a Culture of Management Accountability to Ensure Responsible Spending). 

Enhancing Fisheries Management 

In 2011, there were 51 million jobs in U.S. coastal shoreline counties. Of those, the commercial 

fishing industry accounted for approximately 1 million jobs and the recreational fishing industry 

accounted for 327,000 jobs. U.S. fishermen at ports in the 50 states brought in 9.9 billion 

pounds of fish valued at $5.3 billion in 2011—an increase of 1.63 billion pounds (up 19.7 

percent) and $769 million (up 17 percent) compared to 2010. Fishing is an important industry 

in our nation’s economy as a whole and in the many coastal communities and port towns, as 

shown in figure 5. 

 

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U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Figure 5. Dollar Value of Fish Landings at U.S. Ports 

Less than $10 million

$10–50 million

$50–100 million

More than $100 million

Source: NOAA Office of Science and Technology, National Marine Fisheries Service 

However, NOAA must also consider the health of our oceans and coastal ecosystems, which 

are impacted by coastal development, pollution, overfishing, and the destructive impact of 

invasive species. In U.S. waters, there are 74 listed endangered species and 62 marine mammals 

under the Marine Mammal Protection Act. There are 219 species under review or of concern 

to the National Marine Fisheries Service’s (NMFS’s) Office of Protected Resources. 

For several years, we have reported on NOAA’s challenges in balancing two competing 

interests: promoting commercial and recreational fishing as vital elements of our national 

economy and preserving populations of fish and other marine life. In recent years, members of 

the fishing industry and elected officials from the New England region have repeatedly 

questioned certain fishery regulations and whether NOAA has abandoned a core mission to 

develop the commercial fishing industry and increase industry participation. 

In January 2013, we reported on NOAA’s controls and processes surrounding fisheries 

rulemaking as the first phase of our assessment of transparency and the role of fishery 

187 FY 2013 AGENCY FINANCIAL REPORT

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U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

management councils (FMCs20) in rulemaking. An effective regulatory environment requires a 

fair and transparent rulemaking process. We learned that FMC members’ financial disclosures 

do little to increase transparency of the process—and NOAA performs minimal reviews of the 

information on the financial disclosure forms. NMFS has not implemented many of the 

regulatory changes designed to streamline its rulemaking, and rules packages and administrative 

records are inconsistently maintained among its regional offices. In response to last year’s 

challenge pertaining to fisheries management, NOAA reported that it continues to make 

progress in streamlining the rulemaking process and improving the transparency and 

consistency of fisheries management by addressing the relevant OIG recommendations. 

We also issued the results of our survey of fishery management council members and staff—

who, in general, supplied positive responses to the survey. Most survey participants were 

satisfied with their interactions with NMFS, as well as with the fishing industry and 

nongovernment organizations. Suggestions to improve collaboration between NMFS and FMCs 

mainly involved occurrence and methods of communication, participation from NOAA's Office 

of the General Counsel, and outreach and transparency to stakeholders. 

We are currently reviewing several of NOAA’s catch share programs to determine whether 

there are (1) adequate controls in place to prevent excessive ownership of limited shares and 

(2) adequate tools and processes in place to collect information needed to make decisions and 

to ensure adequate competition. 

Considering the importance of fisheries to the U.S. economy, it is critical that NOAA and the 

FMCs balance the interests of the fishing community with conservation concerns. Regardless of 

long-term sustainability and conservation concerns, many stakeholders claim that measures 

such as limiting catch in fisheries and enforcing limited access privilege programs have had a 

negative impact on some local fishing communities. NOAA’s challenge is to effectively balance 

those interests—and effectively communicate to stakeholders how the agency’s efforts serve 

the long-term economic interests of the fishing industry. 

 

                                                            

20 FMCs allow for regional, participatory governance by knowledgeable stakeholders. NMFS partners with FMCs—

along with state agencies and other federal bureaus—to develop fishery management strategies and rules for the 

commercial and recreational fishing industries. There are currently 46 fishery management plans, developed by the 

eight regional FMCs or the Office of the Secretary under certain circumstances, to manage fishery resources. 

188 F Y 2013 AGENCY FINANCIAL REPORT

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U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Challenge 3: 

Continue Enhancing Cybersecurity and Management of Information Technology 

Investments 

Pervasive and sustained cyber attacks against the United States could have a devastating effect 

on federal and nonfederal systems, disrupt the operations of governments and businesses, and 

impact the lives of the American people. The President’s FY 2014 budget requires that agencies 

eliminate duplicative or low-value IT investments while expanding efforts to counter current 

and evolving cyber threats. The administration has identified cybersecurity as among the most 

serious economic and national security challenges we face. To bolster the national 

cybersecurity program, federal agencies have been asked to implement cross-agency 

cybersecurity priorities—including strong authentication, Trusted Internet Connections (TIC), 

and continuous monitoring. In addition, the President has directed the National Institute of 

Standards and Technology (NIST) to develop a voluntary framework for reducing cyber risks to 

our nation’s critical infrastructure. 

We reported our concerns about the Department’s fragmented IT governance in previous 

years. In response to OMB direction, the Acting Secretary issued a June 2012 memorandum 

that described a strategy to strengthen the Department’s Chief Information Officer’s (CIO’s) 

ability to oversee the bureaus’ annual $2.5 billion IT investments.21 The CIO has leveraged this 

increased authority to lead the effort to consolidate commodity IT Department-wide—and 

continues to strengthen IT oversight through the Commerce IT Review Board. However, the 

CIO’s responsibility to oversee satellite IT investments has been diminished, and IT investments 

still need to close the gap between planned and actual schedule and cost performance. 

To help the Department counter current and evolving cybersecurity threats, as well as 

maximize the consolidation and oversight of its IT investments, we have identified five areas for 

management attention: 

• Establishing a robust capability to respond to cyber incidents 

• Continuing sustainable implementation of enterprise cybersecurity initiatives 

• Preserving the CIO’s oversight responsibility of satellite-related IT investments 

• Continuing vigilant oversight of IT investments 

• Maintaining momentum in consolidating commodity IT22 to cut costs 

                                                            

21 U.S. Department of Commerce, Office of Secretary, June 21, 2012. Department IT Portfolio Management Strategy. 

Washington, DC: DOC OS. 

22 According to OMB, commodity IT includes “IT infrastructure (data centers, networks, desktop computers and 

mobile devices); enterprise IT systems (e-mail, collaboration tools, identity and access management, security, and 

web infrastructure); and business systems (finance, human resources, and other administrative functions).” See 

Office of Management and Budget, August 8, 2011. Chief Information Officer Authorities, Memorandum M-11-29. 

Washington, DC: OMB, 2. 

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Establishing a Robust Capability to Respond to Cyber Incidents

In our FY 2013 Top Management Challenges report,23 we noted that, in January 2012, as a result 

of a perceived massive malware infection, the Economic Development Administration (EDA) 

disconnected its systems from the Internet, significantly affecting its ability to maintain normal 

business operations. Since issuing that report, we completed our review24 of the events 

surrounding EDA’s cyber incident and found that critical incident response decisions were 

based on inaccurate information—and that deficiencies in the Department's incident response 

program impeded EDA's incident response. Because of a series of missteps in responding to this 

incident, a common malware infection originally found on two EDA computers was portrayed 

as a widespread cyber attack on EDA’s IT infrastructure. This resulted in a prolonged disruption 

of normal business operations and the unnecessary expense of more than $2.7 million for 

recovery activities. 

Our review also highlighted challenges for the Department when responding to a cyber 

incident. We made recommendations to improve the Department’s Computer Incident 

Response Team (DOC CIRT), which provides response services to the seven bureaus located 

in the Department’s headquarters at the Herbert C. Hoover Building (HCHB). To begin 

addressing deficiencies in DOC CIRT incident response capabilities, the Department’s CIO

conducted an internal review of DOC CIRT’s practices and processes. The review identified 

areas for improvement and focused on strengthening DOC CIRT’s organizational structure; its 

roles and responsibilities; and operating unit procedures for incident identification, analysis, 

response, and reporting. The Department’s CIO has also taken steps to ensure that DOC CIRT 

staff members receive appropriate training, update DOC CIRT’s incident response procedures, 

develop agreements with external agencies to gain incident response expertise, and hire 

experienced incident response staff. 

The President has identified the cybersecurity threat as one of the most serious national 

security, public safety, and economic challenges we face. To deal successfully with the cyber 

threat, the Department needs to establish a robust incident response capability at DOC 

CIRT. Furthermore—because DOC CIRT primarily provides incident response services to 

bureaus located at HCHB—ensuring productive collaboration among all bureaus is critical 

for the Department to effectively respond to a cyber event. This includes bureaus that have 

their own CIRT capabilities, such as the Census Bureau, the International Trade 

Administration (ITA), NIST, the National Oceanic and Atmospheric Administration 

(NOAA), and the U.S. Patent and Trademark Office (USPTO). OIG is currently conducting 

an audit of the incident detection and response capabilities of several bureaus within the 

Department. Our audit should complement work already done by the Department and help 

to further improve its incident response program. 

                                                            

23 DOC Office of Inspector General, November 9, 2012. Top Management Challenges Facing the Department of 

Commerce, OIG-13-003. Washington, DC: OIG, 15.

24 DOC OIG, June 26, 2013. Malware Infections on EDA's Systems Were Overstated and the Disruption of IT Operations 

Was Unwarranted, OIG-13-027-A. Washington, DC: DOC OIG. 

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Continuing Sustainable Implementation of Enterprise Cybersecurity Initiatives 

The Department has three enterprise cybersecurity initiatives underway to address mandates 

from the Office of Management and Budget (OMB). The Enterprise Cybersecurity Monitoring 

and Operations (ECMO) and Enterprise Security Oversight Center (ESOC) initiatives support 

OMB’s mandate25 to continuously monitor security-related information from across the 

enterprise. The TIC initiative supports the mandate26 that federal agencies optimize and 

standardize their individual external network connections, including connections to the 

Internet. Collectively, these undertakings should significantly improve the Department’s 

cybersecurity posture. Table 1, below, provides the goal, implementation status, and issues for 

each: 

                                                            

25 Executive Office of the President Office of Management and Budget, April 21, 2010. FY 2010 Reporting Instructions 

for the Federal Information Security Management Act and Agency Privacy Management, Memorandum M-10-15. 

Washington, DC: OMB, 1. 

26 OMB, November 20, 2007. Implementation of Trusted Internet Connections (TIC), Memorandum M-08-05. 

Washington, DC: OMB, page 1. Also, see OMB, September 17, 2009. Update on the Trusted Internet Connections 

Initiative, Memorandum M-09-32. Washington, DC: OMB, 1. 

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Table 1. Department’s Enterprise Cybersecurity Initiatives 

Enterprise 

Initiatives Initiative Goal Implementation Status Issues 

ECMO 

Provide nearly real-time 

security status, support for 

patch management, and 

remediation of software 

configuration issues for 

Department-wide system 

components 

 Initial capability has been 

implemented on more than 

8,500 system components 

across HCHB operating units. 

 Upon full deployment in 

September 2014, ECMO will 

support more than 100,000 

system components 

throughout the Department. 

Delays in obtaining 

funding and participation 

commitments from 

USPTO and the Census 

Bureau in FY 2013 may 

result in missing the 

September 2014 deadline. 

ESOC 

Provide Department-wide 

security situational 

awareness to senior 

Departmental and operating 

unit managers

Currently in the planning stage, the 

Department is: 

 Doing a detailed assessment of 

incident handling capabilities in 

HCHB and NOAA, and a highlevel assessment across the 

Department. 

 Conducting a technical 

capabilities study.

The initiative faces 

challenges acquiring 

project resources.

TIC 

Consolidate Department 

external network 

connections and provide 

better monitoring of cyber 

threats from the Internet 

 All bureaus—except the 

Bureau of Industry and Security 

(BIS), the Census Bureau, and 

NOAA—have acquired a TIC 

service. 

 BIS will acquire TIC services by 

March 2014. 

 The Census Bureau has not 

implemented TIC because of 

concerns about third-party 

access to sensitive Title 1327

data. 

 NOAA has made progress 

becoming its own TIC access 

provider and will do so by 

March 2015. 

BIS is working with its 

selected service provider 

to resolve technical 

issues. 

Census is working with 

the Department of 

Homeland Security to 

develop a memorandum 

of understanding that 

would ensure that the 

confidentiality of Title 13 

data is protected. 

Source: Department of Commerce

Timely implementation of these initiatives is crucial to the Department’s cybersecurity program, 

particularly in light of the ever-increasing cyber threats facing government systems. The ECMO 

and ESOC initiatives are critical to maintaining cybersecurity best practices to protect network 

components, implementing continuous monitoring, and providing timely cyber situational 

awareness across the Department. Thus, the Department needs to ensure that current efforts 

                                                            

27 Title 13 guarantees the confidentiality of information obtained by the Census Bureau and establishes penalties for 

disclosing this information. 

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for these initiatives move forward as planned and that operating units cooperate and participate 

to the fullest extent. 

Since last year, NOAA has made progress toward becoming its own TIC provider by 

implementing about 72 percent of the required TIC capabilities. However, the Census Bureau 

and BIS have yet to acquire TIC services. The TIC initiative should significantly reduce the risks 

associated with external network and Internet connections. Accordingly, the Department needs 

to encourage NOAA to complete its TIC implementation quickly and should make every effort 

to enable the Census Bureau and BIS to expeditiously resolve their TIC issues. 

Preserving the CIO’s Oversight Responsibility of Satellite-Related IT Investments

Under the OMB IT reform plan28 and subsequent OMB guidance,29 agencies have been directed 

to expand federal CIO responsibility from a traditional role of policymaking and infrastructure 

maintenance to managing the agency’s entire major IT investment portfolio. The Department of 

Commerce CIO oversees major IT investment in three ways: (1) reviewing the capital asset 

plan (Exhibit 300) for the initiation or re-planning of each investment; (2) comparing the 

investment’s status against the asset plan monthly and submitting the assessment to the OMB IT 

Dashboard for public exposure; and (3) holding Commerce IT Review Board sessions 

periodically for an in-depth look at the investment and gauging when an investment is in trouble 

because it has significantly deviated from its plan. 

However, the CIO oversaw about a quarter fewer IT investments in FY 2013 than in FY 2012. 

In particular, in an effort to streamline oversight, the Department has waived the requirement 

to follow CIO oversight practices for six satellite-related investments totaling $642 million in FY 

2013 spending.30 Two of these investments, the development of the Geostationary Operational 

Environmental Satellite–R Series and Joint Polar Satellite System ground systems, are part of the 

acquisition of two new satellite series that undergo substantial oversight as part of the satellite 

acquisition process, including comprehensive milestone reviews by independent satellite 

experts. The other four satellite-related investments— the maintenance and enhancement of 

two satellite ground systems and two satellite data processing and distribution systems—do not 

receive such extensive oversight. Although the Department has established quarterly reviews 

for executives to discuss high-level investment issues, the reviews do not replace the CIO’s indepth tracking and evaluation of these satellite investments.31 The four satellite-related 

maintenance and enhancement investments are similar to other major IT investments overseen 

                                                            

28 OMB, December 9, 2010. 25 Point Implementation Plan to Reform Federal Information Technology Management. 

Washington, DC: OMB, 28. 

29 OMB, August 8, 2011. Chief Information Officer Authorities, M-11-29. Washington, DC: OMB. 

30 The satellite-related IT investments include (1) two satellite ground system development projects (Geostationary 

Operational Environmental Satellite–R series and Joint Polar Satellite System), (2) two ground system maintenance 

projects (Geostationary Operational Environmental Satellite and Polar Operational Environmental Satellite), and 

(3) maintenance of two systems that process and distribute satellite data products (NPOESS Data Exploitation 

Ground System and Environmental Satellite processing center). 

31 The Department has also established a Milestone Review Board for high-profile programs; however, it will only 

review the two new satellite series acquisitions, not the four satellite-related maintenance and enhancement 

investments. 

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by the CIO. The Department should reinstate the CIO oversight process for these four 

investments. 

Continuing Vigilant Oversight of IT Investments

We reported in our FY 2013 Top Management Challenges that the IT Review Board has 

improved its reviews of IT investments, leading to a greater likelihood that investments will 

progress more satisfactorily.32 The number of IT investments assessed as high-risk has 

substantially decreased, falling from six last year to only one investment this year: the National 

Weather Service (NWS) Telecommunication Gateway. Table 2 presents the current risk 

evaluation of investments that were at high risk in FY 2012: 

Table 2: Disposition of the Department’s FY 2012 High-Risk Investments 

Investment Current Risk Disposition 

Census Bureau American Community 

Survey Medium risk 

Census Bureau 2010 Decennial system 

design, integration, and evaluation Completed 

Census Bureau IT infrastructure Low risk 

NOAA National Weather Service 

Telecommunication Gateway High risk 

NOAA Joint Polar Satellite System 

Ground System 

Risk not evaluated by CIO due to 

oversight streamlining 

NOAA Weather Radio Improvement 

Project 

Risk not evaluated by CIO due to 

restructuring and the merging of this 

project with other investments 

Source: OIG, Top Management Challenges Facing the Department of Commerce, October 24, 2011, 

and OMB IT Dashboard, August 2013 

We remain concerned, as we reported last year, about IT investments with a history of being 

high-risk. For example, in December 2010, the Department’s CIO assessed the NWS 

Telecommunication Gateway and designated it a high-risk project. In that same year, OMB 

designated the Bureau of Industry and Security’s Commerce USXPORTS Exporter Support 

System as a high-risk Departmental project. Although both investments have made some 

progress since 2010, the Telecommunication Gateway is still assessed as a high-risk investment 

and USXPORTS recently ran into significant development roadblocks and was again evaluated 

high-risk for a short period in FY 2013 (see table 3). Both investments now require re-planning 

to move forward. 

                                                            

32 DOC OIG, November 9, 2012. Top Management Challenges Facing the Department of Commerce, OIG-13-003. 

Washington, DC: OIG, 18.

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Table 3: Department FY 2013 Investments with a High-Risk History 

Investments 

FY 2013 

Spend Plan 

($ Millions) 

FY 2014 to 

Completion 

($ Millions) 

Total LifeCycle Costs

($ Millions) 

NOAA NWS Telecommunication Gateway 21 165 403 

BIS Commerce USXPORTS Exporter 

Support System 6 5 17 

Source: Exhibit 300s for FY 2013 

The number of investment work activities that are behind schedule is somewhat reduced but 

more than one-fifth of them are still 30 percent or more behind schedule (see table 4). Overall, 

cost growth and schedule delays of the Department’s investment activities exceed the federal 

government average. 

Table 4: Investment Activity Cost and Schedule Variance 

Department of 

Commerce 

Federal 

Government 

Percentage of activities with cost 

growth greater than 30 percent 19 12 

Percentage of activities with schedule 

delays greater than 30 percent 22 15 

Source: OMB IT Dashboard (August 2013)

The challenge for Departmental IT investment oversight (CIO, IT Review board, and Milestone 

Review board) is to identify the fundamental reasons that high-risk projects continue not to 

make adequate progress; implement necessary changes to their acquisition approach, 

management structure, and development plans; and, if necessary, bring in outside expertise to 

identify weaknesses and recommend mitigation actions. 

Maintaining Momentum in Consolidating Commodity IT to Cut Costs

The Department CIO is leading the effort to reduce commodity IT costs per full-time 

equivalent by about 25 percent annually33 to be more in line with costs at comparable agencies. 

Departmental and bureau CIOs are employing three basic approaches to break down costly 

and inefficient IT: 

1. Consolidating infrastructure, including data centers and services (e.g., the Census Bureau is 

operating centralized Bureau-wide collaboration and content management services) 

2. Sharing procurement vehicles to leverage economies of scale (e.g., the use of Departmentwide Microsoft Office and McAfee SafeBoot contracts) 

                                                            

33 In FY 2011, the Department spent $8,884 per full-time equivalent, about $2,300 more than comparable agencies. 

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3. Hosting services for other Department bureaus (e.g., the Office of Secretary and NOAA 

are hosting all IT services for the Economic Development Administration) 

Department and bureau heads must ensure that their respective CIOs continue to have full 

cooperation in overcoming bureaucratic impediments to consolidating and sharing IT 

commodity resources. 

 

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Challenge 4: 

Exercise Strong Project Management Controls over 2020 Census Planning to 

Contain Costs 

The decennial census is a highly visible, decade-long program that requires extensive planning 

and testing. The 2020 Census process has already started building on 2010 Census lessons 

learned about late-stage design changes and higher-than-expected contractor expenses. Both 

contributed to pushing the final cost of the 2010 Census to more than $12 billion—nearly 

twice that of the 2000 Census (in nominal dollars). The Census Bureau has promised bold 

design changes for the 2020 Census, seeking to reduce per household costs (on an inflationadjusted basis) to an amount lower than the 2010 Census. To reach this goal, the Bureau must 

complete research and testing early enough in the decade to plan and build the necessary 

infrastructure for the projected workload and workforce. The Bureau will be making key 2020 

Census design decisions during FYs 2015–16 that drive the program’s methodology, quality, and 

cost for producing congressional apportionment data by December 31, 2020, and redistricting 

data by March 31, 2021.34

As a result of our 2010 Census oversight, we noted challenges the Census Bureau faces to 

innovate its 2020 Census design.35 Overcoming these challenges calls for fundamental 

improvements in decennial planning, management, testing, and transparency to help ensure that 

the missed opportunities of previous decades are not repeated in 2020. We identified 19 

recommendations categorized into 7 areas of improvement: 

1. Revamp cost estimation and budget processes to increase accuracy, flexibility, and 

transparency. 

2. Use the Internet and administrative records to contain costs and improve accuracy. 

3. Implement a more effective decennial test program using the American Community Survey 

as a test environment. 

4. Effectively automate field data collection. 

5. Avoid a massive end-of-decade field operation through continuous updating of address lists 

and maps. 

6. Implement improved project planning and management techniques early in the decade. 

7. Establish a Census Bureau director position that spans presidential administrations. 

The Census Bureau has made improvements since its 2010 decennial operation, including early 

monitoring of 2020 decennial risks, more open communication about progress and problems 

with stakeholders, and efforts to implement an Internet response option to its American 

Community Survey (ACS) that can serve as a model for 2020 decennial responses. In addition, 

                                                            

34 These delivery dates are mandated by law; see 13 U.S.C. § 141. 

35 U.S. Department of Commerce Office of Inspector General, June 27, 2011. Census 2010: Final Report to Congress, 

OIG-11-030-I. Washington, DC: DOC OIG. 

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Congress authorized a term-appointed Census Bureau director to oversee timely, critical 

decennial design decisions. A new director was appointed to this term position in July 2013. 

The Bureau has partially addressed some of our recommendations; however, more work 

remains. As the Bureau innovates a 2020 decennial design, we have identified two areas for 

management attention: 

• Ensuring timely design decision making 

• Focusing on human capital management, timely research, and testing implementation 

Ensuring Timely Design Decision Making 

The Census Bureau is approaching critical 2020 Census design decision points that require 

planning and developing a decennial census in a significantly more constrained budget 

environment than experienced during the 2010 Census. Soon, the Bureau must rapidly analyze 

2020 decennial design alternatives and make key design decisions based on the results of its 

research and testing phase. Components of this more than $1 billion effort (see figure 6) 

include: 

 2010 Census evaluations, referred to as the Census Program Evaluation and Experiments 

(CPEX) 

 The Geographic Support System (GSS), which provides the maps, address lists, geographic 

reference files, and associated processing systems to meet the geographic requirements 

of all Census Bureau programs. GSS priorities related to the decennial census include 

maintaining and updating the integrated database that contains the Master Address File 

(MAF)—an inventory of the nation’s addresses—as well as the Topologically Integrated 

Geographic Encoding and Referencing (TIGER), a national inventory of streets and map 

features. The GSS also includes an initiative intended to inform the Bureau on the 

viability of conducting a targeted rather than a full address canvassing operation in 2019 

in support of the 2020 Census. 

 2020 Census research and testing (R&T) projects that test new enumeration methods, new 

processes to support field operations, more cost-effective IT systems, and address and 

map improvements needed for the 2020 Census to supplement GSS efforts 

 Other Census Bureau-wide efforts, including development and processing infrastructure 

that supports Bureau surveys and leveraging work conducted on the ACS (e.g., adapting 

an online response option) 

 

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Figure 6. 2020 Census Design Decision Process 

2020 Census 

R&T projects

Life cycle cost:

$405 million

2010 Census Evaluations (CPEX)

Life cycle cost: $86 million

Other

(e.g., Center for 

Adaptive Design, 

ACS)

2020 Census 

Design Decision

Geographic 

Support System 

(GSS)

Life cycle cost: 

$674 million

Source: OIG analysis of Census Bureau documents available May 2013 

Our office has conducted several reviews of the Census Bureau’s approach and progress 

toward the planning and development of a new cost-effective 2020 decennial design (e.g, the 

CPEX,36 GSS,37 and R&T38 programs). We found that, as research and testing continues, the 

Bureau must contend with and plan for several challenges that could adversely impact the next 

decennial census. Like the rest of the federal government, the Bureau is operating in a 

constrained budget environment. It must therefore be strategic in how it spends available 

funding and provide the Secretary and Congress reliable and transparent budget requests. The 

Bureau must devote careful attention to its FYs 2015 and 2016 budget submissions, which will 

fund testing of new decennial design options that ultimately drive the cost trajectory for the 

2020 Census. 

Focusing on Human Capital Management, Timely Research, and Testing 

Implementation 

During our current 2020 Census redesign evaluation, we noted significant schedule slippage in 

the Census Bureau’s key research and testing programs. If continued, missed deadlines will 

translate into an untenable continuation of an already expensive design. The cost (in constant 

dollars) of counting each housing unit could reach $151, compared with $97 for 2010. Through 

                                                            

36 DOC OIG, April 5, 2012. 2020 Census Planning: Delays with 2010 Census Research Studies May Adversely Impact the 

2020 Decennial Census, OIG-12-023-1. Washington, DC: OIG. 

37 DOC OIG, May 10, 2012. High-Quality Maps and Accurate Addresses Are Needed to Achieve Census 2020 Cost-Saving 

Goals, OIG-12-024-I. Washington, DC: OIG. 

38 DOC OIG, September 17, 2013. 2020 Census Planning: Research Delays and Program Management Challenges 

Threaten Design Innovation (draft report). Washington, DC: OIG. 

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our ongoing work on the Bureau’s approach to and progress on planning for 2020 decennial 

census we have identified three time-sensitive Bureau management priorities: 

 Managing human capital to align with the Bureau’s mission and programmatic goals 

 Completing timely research for making evidence-based design decisions 

 Implementing a stable, agile field-testing strategy 

Managing Human Capital to Align with Bureau Mission and Programmatic Goals 

As part of the decennial census planning effort, the Census Bureau is striving to improve the 

management and culture of the decennial directorate. The Bureau’s two-pronged effort entails 

collaboration between its 2020 Census directorate and Human Resources division to (1) review 

required skills and competencies and (2) conduct a formal analysis to compare those requisite 

skills to the skills and capabilities of their current workforce. 

An objective and informative assessment of the Census Bureau’s current workforce is critical 

to containing 2020 Census costs. Like many federal agencies facing mandatory budget 

reductions, the Bureau must balance meeting critical mission requirements against ensuring the 

maintenance of its existing human capital. To implement the FY 2013 budget reductions, the 

Bureau (1) sought to “minimize the impact on our employees, seeking to avoid furloughs, while 

sustaining our core mission and preserving our most important programs within the limited 

flexibility provided,”39 (2) canceled or reduced the scope of, or decided not to award, more 

than $30 million in contracts for the second half of FY 2013, (3) froze hiring on all but the most 

mission-critical positions, and (4) did not fill more than 100 “critical vacancies.” With more 

budget reductions projected, the Bureau’s workforce assessment should help inform its longterm strategy to implement a decennial census that costs less than the 2010 Census. 

Completing Timely Research for Making Evidence-Based Design Decisions 

The Bureau’s research agenda includes capturing lessons learned from the last decennial census 

and conducting research and testing projects that emphasize containing costs without 

diminishing information quality (see table 5.) 

 

                                                            

39 Census Director’s blog on June 19, 2013; available at: http://directorsblog.blogs.census.gov/2013/06/19/censusbureau-budget-update-2/. 

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Table 5. Costly 2010 Census Operations and 

2020 Research Efforts to Address Them 

Source: OIG analysis of Census Bureau documents 

In addition to the cancellation of 20 of the original 109 studies aimed to measure the Bureau’s 

performance in the 2010 decennial, we found that the CPEX program results were often not 

implemented as designed to inform the 2020 R&T program. We also found the Census Bureau 

is experiencing schedule slippage and project delays in its R&T program that affect subsequent 

research phases and design decision points (see figure 7). The multifaceted and interrelated 

nature of the research program underscores the necessity of adhering to a schedule to make 

timely, evidence-based design decisions.

 

2010 Census Cost and Operation 2020 Research Aimed to Reduce Costs 

$2 billion Enumerating nonresponding 

households 

Can the number of household visits be reduced by finding 

an alternative, less costly response option? 

Can existing government records fill in missing 

information? 

$790 

million

Building a one-time-use field 

data collection automation 

system 

Can reusable enterprise-wide solutions be built and 

expanded to meet decennial needs? 

$473 

million

Ensuring that labor, systems, and 

development are in place to 

process and capture the data for 

more than 164 million paper 

questionnaires at three data 

centers 

Can the number of paper questionnaires be reduced 

through an Internet response option? 

Can an automated field data collection reduce the paper 

workload? 

Can the reduced paper workload result in fewer data 

capture centers? 

$444 

million

Having an end-of-decade 

address and geography updating 

operation 

Can Census maps and addresses be efficiently updated 

throughout the decade, with areas experiencing change 

accurately targeted to reduce the amount of end-ofdecade canvassing? 

$330 

million

Leasing 494 local and 12 regional 

Census offices 

Can distance management, training, and automated 

processes allow the Census Bureau to reduce the number 

of temporary Census offices? 

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Figure 7. Research and Testing Activity Delays 

Source: OIG from Census Bureau data

Another challenge identified in our recent report is to develop a schedule that provides 

managers and oversight stakeholders with valid, timely, accurate, and auditable performance 

information on which to base critical decisions. The Census Bureau alters baselines (i.e., rebaselines), which can conceal delays and give the appearance that schedules are met. For 

example, major decision points for the 2020 Census have been re-baselined three times, with 

original deadlines pushed back from September 2014 to September 2015 (see figure 8). 

Figure 8. Shifting Deadlines: The 2020 Census Design Decision 

Source: OIG analysis of Census Bureau documents 

 

Original 

Deadline: 

September 

2014

Delayed: 

May 2015

Current Deadline: 

September 2015

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Implementing a Stable, Agile Field-Testing Strategy 

Testing operations in real-life situations is critical to ensuring that research results yield 

improvements in the decennial census. However, field test plans are in flux: their schedule has 

been pushed back three times, with an FY 2016 completion date reflecting a year-and-a-half 

delay. Further, the Census Bureau canceled 13 of 25 scheduled field tests. Frequent schedule 

changes, testing delays, and cancellations threaten the Bureau’s ability to incorporate test 

results into subsequent research and design decisions. The Bureau cites the major impacts of 

the Congressional budget cut and sequestration as a cause for the changes in content and 

timing of its research and testing efforts. Nevertheless, budget reductions, continuing 

resolutions, and the sequestration (signed into law in August 2011) should have been planned 

for. 

To increase opportunities for testing, both the National Academy of Sciences and OIG have 

recommended using the ACS as a test environment for smaller trials of new processes, 

procedures, and systems for the decennial. The Census Bureau recently developed a small test 

that uses a modified ACS infrastructure—including ACS’s systems, questionnaire, and training 

materials. Previously, using the ACS as a test environment had been delayed to January 2015. In 

addition, several legislative proposals to eliminate or alter the quality of the data collected by 

the ACS threaten its use for decennial testing. The Bureau faces the challenge of implementing 

the ACS while conducting cost-effective, small-scale tests—or implementing separate largescale, more costly 2020 Census field tests—to evaluate new design features. With the 2020 

Census design still under development, it is unknown how legislatively-mandated changes to the 

ACS will impact the Bureau’s goal of containing the cost of the decennial census while 

preserving data quality. 

 

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Challenge 5: 

Continue to Foster a Culture of Management Accountability to Ensure 

Responsible Spending 

As the government experiences an extended period of tightened budgets, it is imperative to 

foster a culture of management accountability. OIG operates a complaint hotline for employees 

and the public to submit information about alleged wrongdoing, misconduct, or 

mismanagement. OIG’s determination to audit, investigate, or provide the complaint 

information to Departmental or bureau management for appropriate action helps to instill a 

culture of ethical conduct and ensure that spending is appropriate, complies with laws and 

regulations, and promotes investments with long-term benefits. 

While the Department has improved its ability to deal with hotline complaints, there has been 

an increasing number of complaints to OIG. In FY 2013, NOAA-related complaints represented 

the largest increase; those complaints comprise almost 40 percent of total complaints. OIG’s 

hotline also receives complaints related to the use of appropriated funds by other bureaus. 

These issues highlight the Department’s need to implement stricter control over funds 

Department-wide. The Department and most of its bureaus use outdated financial management 

systems. Limited system functionality and high support costs impede the Department’s ability to 

oversee and manage Department-wide financial activities. Plans to replace the legacy systems by 

FY 2018 face significant challenges. 

The Department’s annual acquisitions total approximately $2.4 billion and range from satellites, 

public safety networks and broadband technology opportunities to the construction of facilities. 

Last year the Department reported it exceeded its goals in reducing the dollar amount of highrisk contracts, per 2009 Office of Management and Budget guidance. However, our audits 

indicate that reducing the use of several types of high risk contracts remains a critical challenge. 

Oversight of these goods and services requires a qualified staff of appropriate numbers. 

However, budget constraints and uncertainties present significant roadblocks to recruiting 

competent staff, retaining mid-level staff, and adjusting to attrition. 

Finally, the potential misuse of federal funds by award recipients requires stronger oversight of 

Departmental programs that award grants or cooperative agreements. These awards amounted 

to $6.5 billion in the 3-year period ending June 30, 2013. In addition, American Recovery and 

Reinvestment Act of 2009 (Recovery Act)-funded Broadband Technology Opportunities 

Program (BTOP) awards, a $3.8 billion program, require oversight as they are closed out. 

 

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We have identified five key areas for management attention: 

• Responding to concerns of mismanagement and ethical violations 

• Implementing stricter controls over funds 

• Modernizing the enterprise financial management system to strengthen financial oversight 

• Strengthening controls over high-risk contract actions and developing the acquisition 

workforce 

• Addressing grant management issues 

Responding to Concerns of Mismanagement and Ethical Violations 

According to the Office of Management and Budget (OMB) Circular A-123, Management’s 

Responsibility for Internal Control, federal departments’ managements are responsible for 

establishing, maintaining, implementing, and continuously monitoring and improving internal 

control systems. Each year, in the Department’s financial statement audit, the Secretary and 

other management officials certify their responsibility for the design and implementation of 

programs and controls to prevent, deter, and detect fraud. OIG’s compliance and ethics hotline 

has helped the Department make progress toward this responsibility. 

Addressing Hotline Complaints 

OIG operates a hotline for employees and members of the public to report information about 

alleged wrongdoing, misconduct, waste, or mismanagement. Many hotline complaints become 

the basis of OIG audits and investigations. Complaints that detail management issues are 

provided promptly to Departmental and bureau leadership for inquiry and action. These 

referrals provide Departmental leadership with information regarding possible issues with their 

programs and operations and an opportunity to confront discrete issues before they develop 

into larger problems. 

Over the past year, bureaus have worked closely with OIG to look into and resolve many 

management issues raised through OIG’s hotline. Timely and thorough action to resolve these 

issues helps to create a culture of compliance and accountability in the Department. Examples 

of successful efforts to resolve such problems during FY 2013 include: 

 In March 2013, the National Oceanic and Atmospheric Administration (NOAA) 

confirmed information provided by OIG indicating that a team of university researchers 

had been improperly occupying space in a federal facility, subjecting NOAA to potential 

security and appropriations law issues. NOAA informed OIG that it discovered eight 

university employees improperly occupying space in a research facility since 2009 and, 

because an official agreement could not be reached with the university, the team 

vacated that space. 

 In November 2012, the Department, working through OIG’s complaint process, looked 

into and confirmed that an employee, using the identity of a former employee, applied 

for and received a Department of Commerce ID badge. The individual, granted access 

to a federal facility under a false identity, proceeded to access the facility using the 

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assumed identity repeatedly after normal business hours. The individual, when 

confronted by Department officials, lied about this activity and later resigned. 

 In January 2013, NOAA looked into, and substantiated, an OIG hotline allegation that 

employees in NOAA's Office of Marine and Aviation Operations (OMAO) sold scrap 

metal and expired pharmaceutical drugs and used the money to fund an employee social 

group. In November 2012, OMAO issued new policy and procedures to address the 

issues discovered during this inquiry to prevent future recurrence. NOAA is in the 

process of recovering almost $43,000 for return to the Treasury. 

While the Department’s management has increased its capacity and ability to deal with hotline 

complaints, employees and members of the public have provided an increasing volume of 

complaints to OIG. During FY 2013, OIG received 600 Department-related complaints, a 14 

percent increase over the previous year (526 complaints). Figure 9 shows the total volume of 

Department-related complaints over FYs 2012–2013; in FY 2013, 39 percent of total 

complaints related to NOAA. 

Figure 9. Department-Related Complaints Received by OIG 

(First Quarter, FY 2012–Fourth Quarter, FY 2013) 

Source: OIG (October 2013 data) 

In order to continue managing potential issues and resolving problems, Departmental 

management must remain vigilant in its efforts to seriously look into and address hotline 

complaints. 

 

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Results from OIG Investigations 

In addition to awarding funds to contractors and grantees, Departmental management is 

responsible for providing oversight and ensuring that these funds are properly spent. The 

following examples from OIG investigations underscore the need for stronger controls and 

more vigilant oversight to prevent fraud, waste, and abuse within the Department and among 

its grant recipients and contractors: 

 Two former executive directors of the Alaska Eskimo Whaling Commission were 

sentenced to 41 months and 6 months in prison, respectively, for their roles in 

defrauding the commission, a NOAA grantee, by money laundering and embezzlement. 

One of the former executive directors was convicted of misapplying almost $400,000 in 

funds from the Commission. 

 An engineering consultant on a National Telecommunications and Information 

Administration (NTIA) grant pled guilty to a felony count of theft of grant funds, which 

the consultant used for personal purposes. The consultant—who pled guilty and was 

sentenced to serve almost 4 months in jail—agreed to repay the Department of 

Commerce and the Indian Health Service more than $240,000 in restitution. 

 Former employees of the Upper Cumberland Development District in Tennessee, an 

Economic Development Administration (EDA) grantee, were indicted and await trial for 

substantial theft of government property, bank fraud, and an unlawful monetary 

transaction, as well as making false statements. 

Implementing Stricter Controls over Funds 

In response to hotline complaints about mismanagement of appropriated funds within National 

Oceanic and Atmospheric Administration’s (NOAA’s) National Weather Service (NWS) in 

2010 and 2011, the Department conducted a review that highlighted mismanagement of 

budgetary resources throughout NWS, including specific instances where accounting records 

were manipulated and the Antideficiency Act (ADA) was violated. The Department’s review, 

Internal Inquiry into Alleged Mismanagement of Funds at National Weather Service (May 11, 2012), 

found significant management, leadership, budget, and financial control problems at NWS. 

Further, the Department’s independent auditor reported a material weakness in internal 

controls over financial reporting in FY 2012, in part because NWS circumvented budgetary 

controls by inappropriately moving expenses between accounts to prevent budget authority 

from being exceeded. 

Addressing Issues Related to the Unauthorized Reprogramming of Funds 

Following the release of the May 11, 2012 report, then-Deputy Secretary Rebecca Blank and 

then-Under Secretary of Commerce for Oceans and Atmosphere Jane Lubchenco issued 

separate decision memorandums on May 24, 2012. Their memorandums required a total of 20 

specific actions for correcting the conditions that led to the report’s findings, including audits, 

organizational reporting adjustments, and budget formulation and execution process changes. In 

a recent review of these actions, we found that the Department and NOAA have taken steps 

to address the findings identified in the Department’s internal inquiry and completed many 

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action items, but additional work is needed to complete several key action plan items and 

ensure proper stewardship of funds and compliance with laws and regulations. Continued 

Departmental leadership attention is essential to ensuring a culture of transparency, 

accountability, and effective oversight. 

Modernizing the Enterprise Financial Management System to Strengthen Financial 

Oversight 

The financial control problems at NWS highlight the Department’s need to implement stricter 

control over funds Department-wide. A lack of centralized data systems poses reporting and 

oversight challenges to the Department, such as effectively reporting financial data and 

monitoring financial activity across its bureaus. 

The Department and most of its bureaus use a financial system developed with aging technology 

and augmented with in-house software that is increasingly difficult to maintain. This system 

currently addresses core financial accounting, financial management, grants management, 

acquisition management, and property management. However, limitations such as high support 

costs and a lack of system integration and lack of centralized reporting capability impede the 

Department’s ability to oversee and manage Department-wide financial activities. 

The Department plans to replace these legacy systems—collectively known as the Commerce 

Business System (CBS)—with Business Application Solutions (BAS), a commercially available 

system, by FY 2018. While the Department has provided OIG with regular updates on the 

status of this modernization project, significant challenges remain: 

 The implementation timetable is aggressive. The Department plans to implement the BAS 

component that handles the bulk of financial statement reporting at NOAA, the Census 

Bureau, and NIST—the only 3 bureaus that use CBS—in stages. Its aim is to complete 

NOAA by the end of FY 2015, the Census Bureau by the end of FY 2016, and NIST by 

the end of FY 2017. This modernization affects multiple bureaus and will involve defining 

new system requirements and identifying potential changes to business operations and 

processes across the Department. 

 The Census Bureau’s successful conversion is critical to its 2020 decennial readiness. The 

Census Bureau plans to implement BAS by the end of FY 2016. Any delays to this time 

frame could necessitate pushing back the implementation dramatically. Having a 

functional financial system in place prior to the 2020 decennial will be critical, as the 

decennial will likely monopolize available resources. 

 The Department plans to host the system with a shared-service provider instead of hosting it 

internally. The existing system is currently hosted and managed internally at each of the 

three bureaus that utilize CBS. Following OMB’s strategy for federal financial 

management systems, the Department plans to use the Department of Transportation 

Enterprise Service Center, which has been designated a “Center of Excellence” 

provider. As the Department moves to using this external shared-service provider, it 

faces the challenge of adapting to a new accounting environment within its bureaus and a 

modified role in responding to necessary system changes. 

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 CBS modernization will result in BAS, but there will continue to be separate component systems 

that will require interfacing with BAS. For example, CBS modernization will not integrate 

the U.S. Patent and Trademark Office and National Technical Information Service 

financial systems into BAS. Also, NOAA’s grants management system, which will serve 

all bureaus, will remain a separate system—although the plan is to interface the grants 

management system with BAS. The current acquisition system will be replaced with a 

system that will be integrated into BAS.

 The modernization requires adequate funding. Inadequately funding the modernization 

project could result in implementation delays—and in the Department being forced to 

continue using its legacy systems for longer than anticipated. This would lead to a much 

longer delay at the Census Bureau—which, constrained by decennial responsibilities, 

would take longer to begin focusing on its migration to BAS. As a result, the Bureau 

would need to maintain both the new and old systems concurrently. 

Strengthening Controls over High-Risk Contract Actions and Developing the Acquisition 

Workforce 

In FY 2012, the Department obligated about $2.4 billion for goods and services that include 

satellite acquisitions, intellectual property protection, broadband technology opportunities, 

management of coastal and ocean resources, information technology, and construction and 

facilities management. Although the Department’s requirements have not diminished, available 

funding resources likely will. Continuing to address high-risk contracts and maintaining a 

qualified acquisition workforce will enable better management of the Department’s day-to-day 

spending. 

Incurring Risk from the Use of High-Risk Contracts 

In July 2009, the Office of Management and Budget’s (OMB’s) Office of Federal Procurement 

Policy issued contracting guidance to chief acquisition officers and senior procurement 

executives. The guidance—stating that time and materials/labor hour (T&M/LH) contracts, costreimbursement contracts, and noncompetitive contracting pose special risks of overspending 

(see table 6)—directed agencies to reduce by at least 10 percent the use of high-risk 

contracting authorities for new contract actions. For FY 2012, the Department reported that it 

exceeded its goals in reducing the dollar amount of high-risk contracts, and it continues to 

track its goal based on OMB’s 2009 guidance. However, our audit results indicate that a critical 

challenge remains in the use of high-risk contracts such as T&M/LH contracts. 

 

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Table 6. High-Risk Contracts 

Type of Contract Definition High-Risk Factor

T&M/LH 

These contracts require 

contractors to provide their best 

effort to accomplish contract 

objectives up to the maximum 

number of hours authorized. 

Each hour of work authorizes a 

contractor to charge the 

government an established labor 

rate, which includes profit, along 

with reimbursement for the 

actual cost of materials used. 

The contractor’s profit is tied to 

the number of hours worked. As 

a result, these contracts pose a 

risk of overspending. 

Cost Reimbursement 

This type of contract provides 

for payment of allowable 

incurred costs, to the extent 

prescribed in the contract. 

Under this contract type, the 

contractor has minimal 

responsibility for the 

performance costs. There is no 

incentive for the contractor to 

control costs. 

Noncompetitive Contracts 

These procurements are 

awarded to a single contractor 

without requiring any 

competition. 

The government enters (or 

proposes to enter) into 

purchases of supplies or services 

after soliciting and negotiating 

with only one source. There is 

no direct market mechanism for 

setting the contract price. 

Source: OIG 

In a report issued in November 2013,40 we reported weaknesses in the awarding and 

administering of T&M/LH contracts. We found that Departmental contracting officers did not 

award T&M/LH contract actions in accordance with the requirements of the Federal 

Acquisition Regulation and the Commerce Acquisition Manual. T&M/LH contracts are 

considered high risk because the contractor’s profit is tied to the number of hours worked. We 

also noted that contract actions in our sample were incorrectly coded in the Federal 

Procurement Data System (FPDS). 

The Department’s challenge is to better monitor and evaluate its T&M/LH contracts through 

the acquisition review board and investment review board processes, which are used to 

manage the Department’s major acquisitions of goods and services. A further challenge it faces 

is to improve the processes for entering accurate and complete data in FPDS. Effective 

implementation of the Department’s measures will be crucial to ensuring that the Department 

properly awards, administers, and reports high-risk T&M/LH contracts. 

 

                                                            

40 DOC OIG, November 8, 2013. The Department’s Awarding and Administering of Time-and-Materials and Labor-Hours 

Contracts Needs Improvements, OIG-14-001-A. Washington, DC: OIG. 

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Needing a Sufficiently Staffed and Qualified Acquisition Workforce 

In a March 2009 memorandum,41 the President acknowledged that the federal government must 

maintain the workforce needed to carry out robust and thorough oversight of contracts to help 

program management achieve goals, avoid significant overcharges, and curb wasteful spending. 

However, the Department’s acquisition workforce faces major challenges to its capacity and 

capability to oversee and manage contracts because of budget constraints and uncertainties 

affecting recruitment. Although the Department has 215 contracting officers and specialists, 15 

more than projected, it could face an attrition of 70 retiring members by the end of 2014. Many 

of the bureau procurement officer corps consider the potential loss of approximately one-third 

of the workforce through attrition a catastrophic risk to their ability to support the 

Department’s mission. To develop mid-level staff under current budget conditions, the 

Department needs to continue recruitment at the entry levels and seek to retain that staff at 

higher certification levels. 

Addressing Grant Management Issues 

OIG also provides oversight of the Department’s management of more than 70 programs 

authorized to award grants or cooperative agreements. Each program has its own rules, 

regulations, and eligibility requirements. For the period July 1, 2010–June 30, 2013, these 

programs issued approximately 4,353 awards amounting to $6.5 billion. We review an average 

of 340 finding reports a year; of those, about 7–8 percent will have significant procedural or 

internal control findings. 

Tightening Controls over Use of Federal Funds by Award Recipients

Grant oversight requires that recipients of awards meeting certain dollar thresholds submit 

either a Circular A-133 single audit report or a program-specific audit report. These types of 

awards pose particular oversight challenges for the Department. OIG continues to review these 

audit reports to identify trends in findings across bureau programs, as well as to monitor 

whether findings are resolved in a timely manner. 

Table 7 presents averages of the single audit and program-specific audit reports that OIG 

reviewed during the period July 1, 2010–June 30, 2013, the number of material findings, and 

amounts of questioned costs and funds to be put to better use reported. We have noted a 

problematic indicator in the Economic Development Administration’s (EDA’s) revolving loan 

fund program, NTIA’s BTOP, and the National Institute of Standards and Technology’s (NIST’s) 

Advanced Technology/Technology Innovation Program. The most common types of findings 

across all Departmental programs involved violations of reporting requirements (e.g., deficient, 

late, or unfiled reports); noncompliance with cost principles pertaining to allowable costs; 

inadequate preparation of financial statements; the lack of, inadequate, or deficient internal 

control policies concerning segregation of duties; and not following, lacking, or having deficient 

policies and procedures on cash management. It is important that all Departmental program 

and grants management offices review these findings and implement internal controls to address 

                                                            

41 The White House, Office of the Press Secretary, March 4, 2009, “Memorandum for the Heads of Executive 

Departments and Agencies: Government Contracting.” 

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the root causes of the findings, which may require program or grant operations changes in 

order to improve grant recipients’ compliance with laws and regulations. 

Table 7. Analysis, by Bureau, of OIG-Reviewed Single Audit Reports: 

Annual Average (from July 1, 2010, Through June 30, 2013)a

Bureau Reports 

Reviewed 

Reports 

with 

Material 

Findingsb

Material 

Findings 

Questioned 

Costsc 

Funds Put 

to Better 

Used 

EDA 105 7 20 1,154 1,990 

NOAA 43 4 13 2,269 0 

NTIA 46 5 20 1,441 0 

NIST 76 10 23 1,045 96 

Other

e 72 0 0 0 0 

TOTAL 342 26 76 5, 909 2,086 

Source: OIG a

 The table does not include less significant procedural or internal control findings, the 

resolution of which OIG does not monitor; b material findings are those with 

questioned costs greater than or equal to $10,000 and/or significant nonfinancial 

findings; c questioned costs, shown here in thousands of dollars, are subject to change 

during the audit resolution/appeal process; d funds to be put to better use, shown here 

in thousands of dollars, are subject to change during the audit resolution/appeal 

processes; e other includes the International Trade Administration (ITA), the Minority 

Business Development Agency (MBDA), and multiple, which are single audit reviewed 

programs from more than one bureau. 

To improve controls over award recipients’ use of federal funds, bureaus need to review these 

single audit and program-specific audit reports and take action on the report findings. 

Maintaining Focus on the Broadband Technology Opportunities Program (BTOP) Through Grant 

Closeouts

With approximately $3.8 billion in grant awards, BTOP—funded by the Recovery Act—

represents the Department’s largest grant program. As of August 31, 2013, about 20 percent of 

BTOP funds remain to be disbursed. As these projects near their completion dates (as of 

June14, 2013, only 7 of approximately 230 projects had been closed, with another 36 in the 

closeout process), the potential lingers for fraud, waste, and abuse associated with such largedollar-amount awards (many of which are more than $25 million). Management must remain 

committed to monitoring BTOP recipient compliance with grant award terms and achievement 

of intended benefits. Awards for which the grantee has requested extensions to complete 

projects also merit close attention. 

The audit closeout process—how the award recipient and the grants office ensure that project 

activity is complete and the award recipient has met all the requirements under applicable laws, 

regulations, OMB circulars, and award terms and conditions—calls for particular attention. 

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OIG’s ongoing work indicates that the completion dates for many of the awards (112 as of 

September 13, 2013) have been extended and the BTOP award closeout process (a) is taking 

longer than expected, particularly with infrastructure projects and (b) could be improved by 

strengthening closeout policies and procedures and ensuring the consistent implementation of 

those policies and procedures in place. 

Potential consequences of not strengthening the closeout process at NTIA and the grants 

offices (NOAA and NIST) supporting NTIA in the implementation of BTOP include an 

increased likelihood that grants are closed without (a) obtaining and reviewing all required 

closeout documentation and determining that all award activity was completed and laws and 

regulations were complied with or (b) ensuring that the federal government’s interest in BTOP 

property was protected. In addition, the closeout process should help identify unused funds or 

funds not used in compliance with grant terms—both of which must be returned to the 

government. NTIA, NOAA, and NIST, in responding to our September 23, 2013, draft report, 

concurred with our findings and identified improvements they had taken or were in the process 

of taking to strengthen the closeout process. 

Maintaining a Professionally Certified Grants Management Workforce 

The quality and effectiveness of the grants management process depends on the development 

and maintenance of a qualified workforce. The Department’s grants management office (GMO) 

and grants program office (GPO) personnel have a fiduciary responsibility to manage resources 

appropriately, with assurance that proposed work is feasible and has verifiable merit. However, 

unlike acquisitions personnel, the approximately 1,119 personnel who monitor grants and 

cooperative agreements do not maintain their professional education through a formal, 

standardized certification program. 

In October 2008, the Office of Personnel Management initiated a government-wide study to 

identify critical competencies for grants management work. Based on this effort, the Grants 

Policy Committee42 developed a set of competencies for grants personnel serving as officers, 

government technical representatives, and program office staff. The resulting competency 

model forms the foundation upon which the Department based its Grants Management 

Certification Program43—which, once implemented,44 would establish policies and procedures 

for certification of GMO and GPO personnel.

 

                                                            

42 The Chief Financial Officers Council, which represents the 24 largest federal agencies, established a Grants Policy 

Committee to lead implementation of Public Law 106-107. With OMB providing oversight and technical assistance, 

the Committee’s workgroups of agency staff work to accomplish the grants streamlining required by the 

legislation. 

43 The GMCP develops and maintains a Departmental grants workforce through a formal, standardized grants 

education and certification program. Through the program, the grants workforce learns federal and Departmental 

requirements and regulations, as well as grants management best practices. 

44 The implementation of this important initiative may be delayed if bureaus do not have adequate funds for 

training. 

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Acronym List 

ACS American Community Survey 

AIA America Invents Act 

BAS Business Application Solutions 

BIS Bureau of Industry and Security 

BTOP Broadband Technology Opportunities Program 

CBS Commerce Business System 

CIO Chief Information Officer 

CPEX Census Program Evaluation and Experiments 

DOC CIRT Department of Commerce Computer Incident Response Team 

ECMO Enterprise Cybersecurity and Monitoring Operations 

EDA Economic Development Administration 

ESOC Enterprise Security Oversight Center 

FirstNet First Responder Network Authority 

FMC fishery management council 

FPDS Federal Procurement Data System 

FY fiscal year 

GMO grants management office 

GOES-R Geostationary Operational Environmental Satellite–R series 

GPO grants program office 

GSS Geographic Support System 

HCHB Herbert C. Hoover Building 

IT information technology 

ITA International Trade Administration 

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JPSS Joint Polar Satellite System 

MAF Master Address File 

MHz megahertz 

NASA National Aeronautics and Space Administration 

NEI National Export Initiative 

NIST National Institute of Standards and Technology 

NMFS National Marine Fishery Service 

NOAA National Oceanic and Atmospheric Administration 

NPP National Polar-orbiting Partnership 

NTIA National Telecommunications and Information Administration 

NWS National Weather Service 

OIG Office of Inspector General 

OMB Office of Management and Budget 

PSBN Public Safety Broadband Network 

R&T research and testing 

RCE request for continued examination 

T&M/LH time and materials/labor hour 

TIC Trusted Internet Connection 

TIGER Topologically Integrated Geographic Encoding and Referencing 

USPTO U.S. Patent and Trademark Office 

 

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Appendix A: Related OIG Publications 

This list presents OIG’s past and current work related to FY 2014’s top management 

challenges. These products can be viewed at www.oig.doc.gov. If the product contains 

information that cannot be released publicly, a redacted version or an abstract will be available 

on the website. 

Challenge 1: Strengthen Commerce Infrastructure to Support the Nation’s 

Economic Growth 

 USPTO Successfully Implemented Most Provisions of the America Invents Act, but Several 

Challenges Remain (OIG-13-032-A, September 30, 2013) 

 U.S. Export Assistance Centers Could Improve Their Delivery of Client Services and Cost 

Recovery Efforts (OIG-13-010-I, November 30, 2012) 

Challenge 2: Strengthen Oversight of National Oceanic and Atmospheric 

Administration (NOAA) Programs to Mitigate Potential Satellite Coverage Gaps, 

Address Control Weaknesses in Accounting for Satellites, and Enhance Fisheries 

Management 

 Audit of Geostationary Operational Environmental Satellite-R Series: Comprehensive Mitigation 

Approaches, Strong Systems Engineering, and Cost Controls Are Needed to Reduce Risks of 

Coverage Gaps (OIG-13-024-A, April 25, 2013) 

 IG’s Testimony on Commerce Department’s FY 2014 Budget Request: Senate 

Appropriations Committee (OIG-13-023-T, April 11, 2013) 

 Results of Commerce OIG’s Online Survey of Fishery Management Council Members 

and Staff (OIG-13-022-I, April 5, 2013) 

 Deputy IG’s Testimony on Top Challenges for Science Agencies: House Science, Space, 

and Technology Committee (OIG-13-018-T, February 28, 2013) 

 NOAA Needs to Continue Streamlining the Rulemaking Process and Improve Transparency and 

Consistency in Fisheries Management (OIG-13-011-I, January 16, 2013) 

Challenge 3: Continue Enhancing Cybersecurity and Management of Information 

Technology Investments 

 Malware Infections on EDA’s Systems Were Overstated and the Disruption of IT Operations 

Was Unwarranted (OIG-13-027-A, June 26, 2013) 

 USPTO Deployed Wireless Capability with Minimal Consideration for IT Security (OIG-13-014-

A, February 1, 2013) 

 

216 F Y 2013 AGENCY FINANCIAL REPORT

APPENDIX B: FY 2014 MANAGEMENT CHALLENGES
FINAL REPORT NO. OIG-14-002 43 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Challenge 4: Exercise Strong Project Management Controls over 2020 Census 

Planning to Contain Costs 

 IG’s Testimony on Top Management Challenges Facing the Department of Commerce in 

FY 2013: House Appropriations Committee (OIG-13-019-T, March 5, 2013) 

 Letter to Senator Coburn re: Improving the 2020 Census Through Administrative 

Records and Geospatial Information (OIG-13-002-M, October 25, 2012) 

Challenge 5: Continue to Foster a Culture of Management Accountability to 

Ensure Responsible Spending 

 The Department’s Awarding and Administering of Time-and-Materials and Labor-Hours 

Contracts Needs Improvements (OIG-14-001-A, November 8, 2013) 

 Status of Departmental Actions to Correct NWS Mismanagement of Funds (OIG-13-029-I, 

September 13, 2013) 

 Nonfederal Audit Results for the 6-Month Period Ending June 30, 2013 (OIG-13-030-M, 

September 9, 2013) 

 Monitoring of Obligation Balances Needs Strengthening (OIG-13-026-A, June 18, 2013) 

 Internal Controls for Purchase Card Transactions Need to Be Strengthened (OIG-13-025-A, 

May 2, 2013) 

 FY 2012 Compliance with Improper Payment Requirements (OIG-13-020-I, March 15, 2013) 

 Principal Asst. IG’s Testimony on Broadband Stimulus: House Energy and Commerce 

Committee (OIG-13-017-T, February 27, 2013) 

 Fourth Annual Assessment of the PSIC Grant Program (OIG-13-016-A, February 22, 2013) 

 Nonfederal Audit Results for the 6-Month Period Ending December 31, 2012 (OIG-13-

015-M, February 11, 2013) 

 Proper Classification and Strengthened Monitoring of Subrecipients Are Needed for the 

Broadband Technology Opportunities Program (OIG-13-013-A, January 31, 2013) 

 Letter to Chairmen Walden and Shimkus in response to their request to review the 

National Telecommunications and Information Administration’s (NTIA’s) Broadband 

Technology Opportunities Program (BTOP) grant awarded to the Executive Office of 

the State of West Virginia (OIG-13-012-I, January 23, 2013) 

 Quarterly Conference Reporting Processes Need Improvement (OIG-13-001-I, October 17, 

2012) 

 

217 FY 2013 AGENCY FINANCIAL REPORT

APPENDIX B: FY 2014 MANAGEMENT CHALLENGES
FINAL REPORT NO. OIG-14-002 44 

U.S. DEPARTMENT OF COMMERCE OFFICE OF INSPECTOR GENERAL

Appendix B: Comparison Between FY 2013 

and FY 2014 Challenges 

FY 2014 FY 2013

Strengthen Commerce infrastructure to support the 

nation’s economic growth: 

 Promoting U.S. exports while protecting national 

security interests 

 Enhancing economic growth through intellectual 

property and wireless initiatives 

Stimulate economic growth in key industries, increase 

exports, and enhance stewardship of marine fisheries:

 Growth in manufacturing, intellectual property, and 

wireless industries

 Export promotion and regulation

 Protection and promotion of marine fisheries

Strengthen oversight of National Oceanic and 

Atmospheric Administration (NOAA) programs to 

mitigate satellite coverage gaps, address control 

weaknesses in accounting for satellites, and enhance 

fisheries management: 

 Enhancing weather satellite development and mitigating 

potential coverage gaps 

 Addressing material weakness over satellite accounting 

 Enhancing fisheries management 

Increase oversight of resources entrusted by the public 

and invest for long-term benefits:

 Internal controls and oversight

 Investment for long-term benefits

 Design changes to contain 2020 decennial costs

Continue enhancing cybersecurity and management of 

information technology (IT) investments: 

 Establishing a robust capability to respond to cyber 

incidents 

 Continuing sustainable implementation of enterprise 

cybersecurity initiatives 

 Preserving the CIO’s oversight responsibility of satelliterelated IT investments 

 Continuing vigilant oversight of IT investments

 Maintaining momentum in consolidating commodity IT 

to cut costs 

Strengthen security and investments in IT:

 Addressing persistent IT security weaknesses

 Incident response and recovery capabilities

 IT governance for portfolio management

 Oversight of IT investments

Exercise strong project management controls over 

2020 Census planning to contain costs: 

 Ensuring timely design decision making 

 Focusing on human capital management, timely 

research, and testing implementation 

Implement framework for acquisition project 

management and improve contract oversight:

 Planned framework for acquisition management

 Oversight of high-risk contracts

 Acquisition workforce maintenance

 Implementation of suspension and debarment program

Continue to foster a culture of management 

accountability to ensure responsible spending: 

 Responding to concerns of mismanagement and ethical 

violations 

 Implementing stricter controls over funds 

 Modernizing the enterprise financial management 

system to strengthen financial oversight 

 Strengthening controls over high-risk contract actions 

and developing the acquisition workforce 

 Addressing grant management issues

Reduce risks of cost overruns, schedule delays, and 

coverage gaps for NOAA’s satellite programs:

 JPSS capabilities, schedule, and costs

 Leadership and governance structure over JPSS

 Weather forecasting during JPSS coverage gaps

 Risks associated with GOES-R development

218 F Y 2013 AGENCY FINANCIAL REPORT

APPENDIX B: FY 2014 MANAGEMENT CHALLENGES
MEMORANDUM FOR: Todd J. Zinzer

Inspector General

FROM: Penny Pritzker 

Secretary of Commerce

SUBJECT: Response to the OIG Report, “Top Management Challenges

Facing the Department of Commerce” in FY2014

Thank you for the opportunity to review the Office of Inspector General’s report, “Top 

Management Challenges Facing the Department of Commerce.” Every day the Department’s 

bureaus work with American businesses, communities, and private citizens to spur innovation, 

promote trade and investment, foster use of data, and ensure production of critical environmental 

products and services – and we want to do so in the most effective and efficient way possible. 

We are aware that we have challenges in the areas discussed in your report, and we realize that 

these areas require continued oversight, planning, and work. To that end, I have directed Ellen 

Herbst, our CFO and ASA, to focus on improving our oversight processes and internal controls at 

both the bureau and Department levels. Such oversight is critical to the success of our mission. 

We look forward to working with you to address the challenges identified in this year’s OIG

report, and we will document our progress in our Agency Financial Report for FY 2014.

219 FY 2013 AGENCY FINANCIAL REPORT

APPENDIX B: FY 2014 MANAGEMENT CHALLENGES
IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 20 02,

AS AMENDED, REPORTING DETAILS

I

PIA of 2002, as amended by the Improper Payments Elimination and Recovery Act (IPERA) of 2010 and the Improper 

Payments Elimination and Recovery Improvement Act of 2012, requires agencies to periodically review all programs 

and activities and identify those that may be susceptible to significant improper payments, take multiple actions when 

programs and activities are identified as susceptible to significant improper payments, and annually report information on 

their improper payments monitoring and minimization efforts. Office of Management and Budget (OMB) Circular A-123, 

Appendix C, Requirements for Effective Measurement and Remediation of Improper Payments, provides guidance to 

agencies to comply with IPIA, as amended, and for agency improper payments efforts. The Department has not identified 

any programs or activities susceptible to significant improper payments nor any significant problems with improper 

payments. 

On January 29, 2013, the President signed into law the Disaster Relief Appropriations Act (Act), which provides a total of 

$50.5 billion in aid for Hurricane Sandy disaster victims and their communities. The National Oceanic and Atmospheric 

Administration (NOAA) received $326 million of funds under the Act for Hurricane Sandy recovery and other disasterrelated activities. Pursuant to OMB Memorandum M-13-07, Accountability for Funds Provided by the Disaster Relief 

Appropriations Act, the Department in March 2013 submitted its final plan for accountability, internal controls, and other 

requirements, for funds provided to NOAA by the Act. The Act sets forth that programs and activities receiving funds 

under the Act shall be deemed to be susceptible to significant improper payments for the purposes of requirements 

under IPIA of 2002, as amended, and are required to calculate and report an improper payments estimate for the FY 2014 

reporting period, to the extent possible. The Department will develop and submit to OMB for its approval a sampling 

methodology plan for funds received under the Act by NOAA, which, when carried out, will result in a NOAA improper 

payments estimate that will be reported for the FY 2014 reporting period. 

The Department recognizes the importance of maintaining adequate internal controls to ensure proper payments, and 

the Department’s commitment to continuous improvement in the overall disbursement management process remains 

very strong. Each of the Department’s payment offices has implemented procedures to detect and prevent improper 

payments. For FY 2014 and beyond, the Department will continue its efforts to ensure the integrity of its disbursements.

I. Risk Assessment. Briefly describe the risk assessment(s) performed (including the risk factors examined, if 

appropriate) subsequent to completing a full program inventory. List the risk-susceptible programs (i.e., programs 

that have a significant risk of improper payments based on statutory thresholds) identified by the agency risk 

assessments or required by OMB to be included (OMB may determine, on a case-by-case basis, that certain 

programs that do not meet the thresholds requirements may still be subject to the annual reporting requirements). 

Any programs that had been previously identified in the former Section 57 of OMB Circular A-11, Preparation, 

Submission, and Execution of the Budget, shall continue to report improper payment estimates, unless OMB 

has granted relief from reporting requirements (as discussed in OMB Circular A-123, Appendix C). Highlight any 

changes to the risk assessment methodology or results that occurred since the last report.

The Department annually conducts an assessment of the effectiveness of internal control over financial reporting, in 

compliance with OMB Circular A-123, Management’s Responsibility for Internal Control. Furthermore, every three years, 

the assessment includes a review of internal controls over disbursement processes. The most recent review performed 

indicated that internal controls over disbursement processes were sound.

220 F Y 2013 AGENCY FINANCIAL REPORT

APPENDIX C: IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
Each of the Department’s bureaus/reporting entities periodically completes or updates, over a one to three-year period 

(depending on the size of the entity), improper payments risk assessments covering all of its programs/activities as required 

by OMB Circular A-123, Appendix C. These improper payments risk assessments of the entity’s programs/activities 

also include assessments of the control, procurement, and grants management environments. The improper payments 

program/activity risk assessments performed thus far revealed no program or activity susceptible to significant improper 

payments.

The results of Departmental assessments revealed no risk-susceptible programs/activities, and demonstrated that, overall, 

the Department has strong internal controls over disbursement processes, the amount of improper payments by the 

Department is immaterial, and the risk of significant improper payments is low.

II. Statistical Sampling. Any agency that has programs or activities that are susceptible to significant improper 

payments shall briefly describe the statistical sampling process conducted to estimate the improper payment 

rate for each program identified with a significant risk of improper payments. Please highlight any changes to the 

statistical sampling process that have occurred since the last report.

As discussed previously, the Department will develop and submit to OMB for its approval a sampling methodology plan 

for funds received by NOAA under the Disaster Relief Appropriations Act, which, when carried out, will result in a NOAA 

improper payment estimate that will be reported for the FY 2014 reporting period.

III. Corrective Actions. Any agency that has programs or activities that are susceptible to significant improper 

payments shall describe the corrective action plans for:

a. Reducing the estimated improper payment rate and amount for each type of root cause identified. Agencies 

shall report root cause information (including error rate and error amount) based on the following three 

categories: Administrative and Documentation errors; Authentication and Medical Necessity errors; and 

Verification errors. This discussion must include the corrective action(s), planned or taken, most likely to 

significantly reduce future improper payments due to each type of error an agency identifies, the planned or 

actual completion date of these actions, and the results of the actions taken to address these root causes. 

If efforts are ongoing, it is appropriate to include that information in this section, and to highlight current 

efforts, including key milestones. Agencies may also report root cause information based on additional 

categories, or sub-categories of the three categories listed above, if available.

b. Grant-making agencies with risk-susceptible grant programs shall briefly discuss what the agency has 

accomplished in the area of funds stewardship past the primary recipient. Discussion shall include the 

status of projects and results of any reviews.

There is not a need for corrective actions plans, as of December 2013, for funds received by NOAA under the Disaster 

Relief Appropriations Act. While the Department does not have a current need for corrective actions for improper payments 

for risk-susceptible programs/activities, the Department has, nevertheless, further enhanced its processes and is actively 

working with each of the Department’s payment offices to identify and implement additional procedures to prevent and 

detect improper payments. In FY 2013, the Department continued with the bureaus’ quarterly reporting of any improper 

payments to the Deputy Chief Financial Officer (CFO), along with identifying the nature and magnitude of any improper 

payments and identifying any necessary control enhancements. The Department has additionally reviewed all financial 

221 FY 2013 AGENCY FINANCIAL REPORT

APPENDIX C: IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
statement audit findings/comments and results of any other payment reviews for indications of breaches of disbursement 

controls. None of these audit findings/comments or reviews have uncovered any significant problems with improper 

payments or the internal controls that surround disbursements.

In 2013, the Department conducted a sampling process to draw and review random samples of disbursements from a 

Department-wide universe of disbursements. Grants and other cooperative agreements, travel payments, bankcards/

purchase cards, all procurement vehicles with other federal agencies, government bills of lading, and gifts and bequests 

were excluded from review. Each selected sample item was then subjected to a review of invoices and supporting 

documentation to determine that the disbursement was accurate, made only once, and that the correct vendor was 

compensated. The results of the Department’s review did not reveal any improper payments. The same results were 

achieved following a similar review in 2012.

IV. Recapture of Improper Payments Reporting.

a. An agency shall discuss payment recapture audit efforts, if applicable. The discussion should describe: 

the agency’s payment recapture audit program; the actions and methods used by the agency to recoup 

overpayments; a justification of any overpayments that have been determined not to be collectable; and any 

conditions giving rise to improper payments and how those conditions are being resolved (e.g., the business 

process changes and internal controls instituted and/or strengthened to prevent further occurrences). If the 

agency has excluded any programs or activities from review under its payment recapture auditing program 

(including any programs or activities where the agency has determined a payment recapture audit program 

is not cost-effective), the agency should list those programs and activities excluded from the review, as 

well as and the justification for doing so (i.e., a discussion of the analysis conducted to determine that a 

payment recapture audit program would not be cost-effective). Include in your discussion the dollar amount 

of cumulative payment recaptures collected beginning with FY 2004.

In conformity with IPIA of 2002, the Department has been performing, since 2005, payment recapture audits of closed 

contracts/obligations for many of the Department’s bureaus/reporting entities on a rotational basis. The payment recapture 

audits were performed by a contractor or by the Department’s Office of Financial Management. Payment recapture audits 

of contracts/obligations on a rotational basis will continue to be performed. Since 2005, cumulative recapture of improper 

payments is $96 thousand. Effective FY 2012, the scope of payment recapture audits of contracts/obligations has been 

expanded to additionally include contracts/obligations for which the period of performance ended and last payment was 

made, but for which the closeout process has not yet been completed.

As a result of the Department’s implementation of additional requirements under IPERA of 2010, payment recapture 

auditing is additionally performed, effective FY 2011, for the Department’s grants and other cooperative agreements 

(i.e., financial assistance). Per OMB’s IPERA implementation guidance, intragovernmental transactions and payments to 

employees are not required to be reviewed. With regard to loan disbursements, NOAA is currently the only bureau with 

loan disbursements. As part of NOAA’s internally-conducted reviews and testing processes, NOAA loan disbursements 

are significantly tested every three years for both internal controls and improper payments, and the disbursements testing 

for improper payments is considered to be essentially equivalent to a payment recapture audit. With regard to the NOAA 

Corps Retirement System and the NOAA Corps Health Benefits benefit programs, these programs are cross-serviced 

for disbursements by the Department of Defense, and therefore are not subject to payment recapture auditing by the 

Department.

222 F Y 2013 AGENCY FINANCIAL REPORT

APPENDIX C: IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
For payment recapture audits of contracts/obligations and grants and other cooperative agreements, the auditor analyzes 

the reasons why any payment errors occurred, and develops, presents, and documents any recommendations for costeffective controls to prevent improper payments in the future; and for enhancing the applicable bureau processes.

In November 2012, payment recapture audits of contracts/obligations were completed by an independent contractor for 

the Census Bureau and the Franchise Fund. Contracts/obligations greater than $100 thousand, which were closed out, 

or for which the period of performance ended and last payment was made but for which the closeout process has not yet 

been completed, after September 30, 2009 and through April 30, 2012, were reviewed. Intragovernmental transactions 

and payments to employees were excluded from review in conformity with OMB’s IPERA implementation guidance. 

Travel payments, bankcards/purchase cards, government bills of lading, and gifts and bequests were also excluded from 

review. The Department determined that, for these categories of transactions, the Department’s costs for the payment 

recapture audit activities would likely exceed the benefits of a payment recapture audit. As part of the payment recapture 

audit, vendor inquiries were performed for a sample of vendors to determine if the reporting entities had any open credits 

or debts with those vendors. Of the $277.8 million reviewed, no amounts were identified for payment recapture.

In December 2013, payment recapture audits of contracts/obligations were completed by an independent contractor 

for the National Institute of Standards and Technology (NIST) and NOAA. Contracts/obligations greater than $100 

thousand, which were closed out, or for which the period of performance ended and last payment was made but for 

which the closeout process has not yet been completed, after April 30, 2012 and through March 31, 2013, were reviewed. 

Intragovernmental transactions and payments to employees were excluded from review in conformity with OMB’s IPERA 

implementation guidance. Travel payments, bankcards/purchase cards, government bills of lading, and gifts and bequests 

were also excluded from review. The Department determined that, for these categories of transactions, the Department’s 

costs for the payment recapture audit activities would likely exceed the benefits of a payment recapture audit. As part 

of the payment recapture audit, vendor inquiries were performed for a sample of vendors to determine if the reporting 

entities had any open credits or debts with those vendors. Of the $48.5 million reviewed, $91 thousand was identified 

for payment recapture.

In December 2013, a payment recapture audit of Department-wide grants and other cooperative agreements was 

completed by an independent contractor. The applicable bureaus/entities are: Departmental Management, Economic 

Development Agency (EDA), International Trade Administration (ITA), Minority Business Development Administration 

(MBDA), NIST, NOAA, and National Telecommunications and Information Administration (NTIA). The audit consisted 

of two different populations: 1) sustained disallowed costs of $10 thousand or more for grants and other cooperative 

agreements per Single Audit Act audit reports, grant/cooperative agreement-specific audits, and Office of Inspector 

General (OIG) audits or reviews, issued between May 1, 2012 and through March 31, 2013; and 2) grants and other 

cooperative agreements for which the period of performance expired during the timeframe of February 1, 2012 through 

December 31, 2012, and greater than $100 thousand, and which were not subjected to any of the types of audits or 

reviews indicated in item 1) above. Of the $429.0 million reviewed, no amounts were identified for payment recapture.

223 FY 2013 AGENCY FINANCIAL REPORT

APPENDIX C: IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
b. Payment Recapture Audits Reporting Data. 

The following table presents a summary of results of the Department’s payment recapture audits that are reportable in 

FY 2013 (CY) and that was reportable in prior fiscal years (PYs).

(In Thousands)

Reporting Entity(s)

Amount 

Subject to 

Review for 

CY

Reporting

Actual 

Amount 

Reviewed 

for CY 

Reporting

Amounts 

Identified 

for Payment 

Recapture 

for CY 

Reporting

Amounts 

Recaptured 

for CY 

Reporting

Amounts 

Identified 

for 

Recapture 

in PYs 

Reporting

Amounts 

Recaptured 

in PYs 

Reporting

Cumulative 

Amounts 

Identified 

for 

Recapture 

(CY and PYs 

Reporting)

Cumulative 

Amounts 

Recaptured

(CY and PYs 

Reporting)

Payment Recapture Audits of Department-wide Grants and Other Cooperative Agreements:

Department-wide 

2013 Audit $ 1,247,808 $428,954 $ – N/A N/A N/A N/A N/A

Department-wide 

2012 and 2011 

Audits N/A N/A N/A N/A $ – N/A $ – N/A

Payment Recapture Audits of Contracts/Obligations:

NIST and NOAA $ 812,215 $48,525 $ 57 $ – N/A N/A $ 57 $ –

Census Bureau 

and Franchise 

Fund $1,805,658 $277,825 $ – N/A N/A N/A N/A N/A

OIG, MBDA, and 

USPTO N/A N/A N/A N/A $ – N/A $ – N/A

NTIA N/A N/A N/A N/A $ – N/A $ – N/A

BIS and NTIS N/A N/A N/A N/A $ 6 N/A $ 6 N/A

EDA/S&E and ITA N/A N/A N/A N/A $ – N/A $ – N/A 

DM/S&E, DM/WCF, 

and ESA/BEA N/A N/A N/A N/A $ – N/A $ – N/A 

Census Bureau, 

NIST, NOAA, and 

USPTO N/A N/A N/A N/A $ 96 $ 96 $ 96 $ 96

N/A – Not applicable

224 F Y 2013 AGENCY FINANCIAL REPORT

APPENDIX C: IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
c. Payment Recapture Audit Targets. If an agency has a payment recapture audit program in place, then the 

agency is required to establish annual targets to drive their annual performance. The targets shall be based 

on the rate of recapture. Agencies are expected to report current fiscal year amounts and rates, as well as 

recapture rate targets for three fiscal years.

The Department’s target payment recapture rate is 100 percent of amounts identified for recapture. Since 2005, the 

Department has recaptured $96 thousand of the $102 thousand identified for payment recapture in prior fiscal years’ 

reporting, and the remaining $6 thousand identified for payment recapture was subsequently determined by the 

Department to be proper payments not subject to payment recapture.

d. Aging of Outstanding Overpayments. In addition, agencies shall report the following information on 

their payment recapture audit programs, if applicable: An aging schedule of the amount of overpayments 

identified through the payment recapture audit program that are outstanding (i.e., overpayments that 

have been identified but not recaptured). Typically, the aging of an overpayment begins at the time the 

overpayment is detected—please indicate with a note whenever that is not the case.

The Department has recaptured all amounts that were subject to payment recapture in prior fiscal years’ reporting.

e. Disposition of Recaptured Funds. A summary of how cumulative amounts recaptured have been disposed 

of 

(if any of this information is not available indicate by note).

There has not yet been any recapture of overpayments that fall under the new IPERA requirements for disposition of 

recaptured funds.

f. Overpayments Recaptured Outside of Payment Recapture Audits. As applicable, agencies should also report 

on improper payments identified and recaptured through sources other than payment recapture audits. For 

example, agencies could report on improper payments identified through: statistical samples conducted 

under IPIA; agency post-payment reviews or audits; OIG reviews; Single Audit reports; self-reported 

overpayments; or reports from the public. Specific information on additional required reporting for contracts 

is included in Section 7 of OMB Memorandum M-11-04, Increasing Efforts to Recapture Improper Payments by 

Intensifying and Expanding Payment Recapture Audits, issued in November 2010. Reporting this information 

is required for FY 2011 reporting and beyond.

The Department has extensive improper payments monitoring and minimization efforts in place beyond payment 

recapture audits, including the identification of improper payments through bureau post-payment reviews, OIG audits or 

reviews, Single Audit Act audits of grants/cooperative agreements, other grants/cooperative agreements audits, contract 

closeout reviews, grants/cooperative agreements closeout reviews, other audits or reviews, and Departmental annual 

reviews of sample disbursements.

225 FY 2013 AGENCY FINANCIAL REPORT

APPENDIX C: IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
The following table summarizes the Department’s overpayments identified, and overpayments verified as recaptured, through 

sources other than payment recapture audits that are reportable in the current fiscal year (CY) and that was reported in prior fiscal 

years (PYs). Prior fiscal years’ amounts represent amounts reported for FY 2011 and FY 2012, as FY 2011 was the first fiscal 

year for this reporting requirement. 

(In Thousands)

Source of 

Overpayments

Amounts 

Identified for CY 

Reporting

Amounts 

Recaptured for 

CY Reporting

Amounts

 Identified in PYs 

Reporting

Amounts 

Recaptured in 

PYs Reporting

Cumulative 

Amounts

 Identified

(CY and PYs 

Reporting)

Cumulative 

Amounts 

Recaptured

(CY and PYs 

Reporting)

Post-payment 

Reviews $ 1,657 $ 1,423 $ 2,516 $ 2,251 $ 4,173 $ 3,674 

Closeout Reviews – – 611 611 611 611 

Audits and Other 

Reviews 5,836 1,930 141 141 5,977 2,071 

Reported by Grantees 

and Vendors 1,219 1,217 742 742 1,961 1,959 

Settlements with 

Vendors 440 427 600 600 1,040 1,027 

Other 3 – 100 100 103 100 

Total $ 9,155 $ 4,997 $ 4,710 $ 4,445 $ 13,865 $ 9,442

V. Accountability. Any agency that has programs or activities that are susceptible to significant improper payments 

shall describe the steps the agency has taken and plans to take (including timeline) to ensure that agency managers, 

accountable officers (including the agency head), programs, and States and localities (where appropriate), are held 

accountable for reducing and recapturing improper payments. Specifically, they should be held accountable for meeting 

applicable improper payments reduction targets and establishing and maintaining sufficient internal controls (including 

an appropriate control environment) that effectively prevents improper payments from being made and promptly detects 

and recaptures any improper payments that are made.

The Department has not identified any significant problems with improper payments; however, the Department recognizes the 

importance of maintaining adequate internal controls to ensure proper payments, and its commitment to continuous improvement 

in disbursement management processes remains very strong. The Department’s CFO has responsibility for establishing policies 

and procedures for assessing Departmental and program risks of improper payments, taking actions to reduce those payments, 

and reporting the results of the actions to Departmental management for oversight and other actions as deemed appropriate. 

The CFO has designated the Deputy CFO to oversee initiatives related to reducing improper payments within the Department, 

and to work closely with the bureau CFOs in this area.

In FY 2013, the Department continued its reporting procedures that required quarterly reporting to the Department by its bureaus 

on any improper payments, identifying the nature and magnitude of any improper payments along with any necessary control 

enhancements to prevent further occurrences of the types of improper payments identified. The Department’s analysis of the 

data collected from the bureaus shows that Department-wide improper payments were at or below one-tenth of one percent in 

FY 2013 and FY 2012. The bureau CFOs are accountable for internal controls over improper payments, and for monitoring and 

minimizing improper payments.

226 F Y 2013 AGENCY FINANCIAL REPORT

APPENDIX C: IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
For FY 2014 and beyond, the Department will continue its efforts to ensure the integrity of its disbursements.

VI. Agency Information Systems and Other Infrastructure.

a. Describe whether the agency has the internal controls, human capital, and information systems and other 

infrastructure it needs to reduce improper payments to the levels the agency has targeted.

b. If the agency does not have such internal controls, human capital, and information systems and other infrastructure, 

describe the resources the agency requested in its most recent budget submission to Congress to establish and 

maintain the necessary internal controls, human capital, and information systems and other infrastructure.

The Department has ensured that internal controls, manual as well as financial systems, relating to payments are in place 

throughout the Department, and has reviewed all financial statement audit findings/comments and results of any other payment 

reviews for indications of breaches of disbursement controls. None of these audit findings/comments or reviews have uncovered 

any significant problems with improper payments or the internal controls that surround disbursements.

VII. Barriers. Describe any statutory or regulatory barriers which may limit agency corrective actions in reducing improper 

payments and actions taken by the agency to mitigate the barriers’ effects.

The Department has not identified any significant barriers that limit actions to reduce improper payments.

VIII. Additional Comments. Discuss any additional comments on overall agency efforts, specific programs, best practices, 

or common challenges identified, as a result of IPIA implementation.

The Department’s Disbursement Best Practices. The following are some examples of internal control procedures used by the 

Department’s payment offices:

● Limited/controlled access to vendor files—access to basic vendor information (e.g., name, address, business size, etc.) is 

available to financial system users; access to banking information, however, is strictly limited by system security to certain 

Office of Finance staff.

● Controlled access to financial system accounts payable screens—authority to create, edit, approve, process, and amend 

payment records is limited to certain Office of Finance financial system users. Also, authority to add or revise records in the 

vendor database is limited to separate Office of Finance system users.

● Segregation of duties for financial system data entry and review prior to transmitting disbursement files to Treasury—data 

entry duties are assigned to technicians in the Office of Finance who do not have authority to review and process payments. 

Authority to approve and process payments is assigned to accountants in the Office of Finance. Both data entry and 

approval/processing of payments are separate functions from transmitting disbursement files to Treasury.

● Financial system edit reports highlight potential items that may result in improper payments (e.g., invoice amount and 

accrual amount are not the same). There is a daily Invoice Workload Report that displays open amounts (not closed by a 

payment) on all invoices. This report is reviewed and action is taken to resolve partially open invoices. Furthermore, system

settings prevent a payment in excess of the amount of the invoice.

227 FY 2013 AGENCY FINANCIAL REPORT

APPENDIX C: IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
● Daily pre-payment audit of invoices for accuracy, and corrective actions prior to disbursement, are in place, thereby preventing 

improper payments from occurring.

● Financial system edit checks if the vendor’s name on the payment does not agree with that on the obligation, or if the 

payment amount is greater than the obligation or accrual amount.

● The monthly vendor statement for purchase cards is interfaced into the financial system, thereby reducing data entry error.

● An accountant or supervisor reviews individual payments before releasing for payment to help ensure that the correct 

banking information or payment addresses are used, and that the correct amount will be paid.

● Monthly post-payment random sample audits are performed for detection purposes.

● Contracts include a clause requiring the contractor to notify the contracting officer if the government overpays when making 

an invoice payment or a contract financing payment.

228 F Y 2013 AGENCY FINANCIAL REPORT

APPENDIX C: IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
S U M M A R Y O F F I N A N C I A L S T A T E M E N T A U D I T 

AND MANAGEMENT ASSURANCES

P

resented below is a summary of financial statement audit and management assurances for FY 2013. Table 1 

relates to the Department’s FY 2013 financial statement audit, which resulted in an unqualified opinion with one 

material weakness. Table 2 presents the number of material weaknesses reported by the Department under 

Section 2 of the Federal Managers’ Financial Integrity Act (FMFIA)—either with regard to internal controls over operations 

or financial reporting, and Section 4, which relates to internal controls over financial management systems; as well as the 

Department’s compliance with the Federal Financial Management Improvement Act (FFMIA). 

Table 1. Summary of Financial Statement Audit

● Audit Opinion: ● Unqualified

● Restatement: ● No

Material Weaknesses Beginning Balance New Resolved Consolidated Ending Balance

NOAA Financial Management 

Oversight 1 0 1 0 0

Total Material Weaknesses 1 0 1 0 0

Table 2. Summary of Management Assurances

EFFECTIVENESS OF INTERNAL CONTROL OVER FINANCIAL REPORTING (FMFIA § 2)

Statement of Assurance: Unqualified

Material Weaknesses Beginning Balance New Resolved Consolidated Reassessed Ending Balance

NOAA Financial Management 

Oversight 1 0 1 0 0 0

Total Material Weaknesses 1 0 1 0 0 0

EFFECTIVENESS OF INTERNAL CONTROL OVER OPERATIONS (FMFIA § 2)

Statement of Assurance: Unqualified

Material Weaknesses Beginning Balance New Resolved Consolidated Reassessed Ending Balance

Total Material Weaknesses 0 0 0 0 0 0

CONFORMANCE WITH FINANCIAL MANAGEMENT SYSTEM REQUIREMENTS (FMFIA § 4)

Statement of Assurance: Systems conform with financial management system requirements

Non-Conformances Beginning Balance New Resolved Consolidated Reassessed Ending Balance

Total Non-Conformances 0 0 0 0 0 0

COMPLIANCE WITH FFMIA

Agency Auditor

1. System Requirements No noncompliance noted No noncompliance noted

2. Accounting Standards No noncompliance noted No noncompliance noted

3. U.S. Standard General Ledger 

 at Transaction Level

 

 No noncompliance noted

 

 No noncompliance noted

229 FY 2013 AGENCY FINANCIAL REPORT

APPENDIX D: SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT ASSURANCES
A AFR Agency Financial Report

APG Agency Priority Goals

APR Annual Performance Report

ARRA American Recovery and Reinvestment 

Act of 2009

ASAP Automated Standard Application for 

Payments

B BAS Business Application Solutions Project

BEA Bureau of Economic Analysis

BIS Bureau of Industry and Security

BTOP Broadband Technology Opportunities 

Program

C CAS Condition Assessment Survey

CBS Commerce Business Systems

CCR-SAM Central Contractor Registration – System 

for Award Management

CEIP Coastal Energy Impact Program (a NOAA 

direct loan program)

CFO Chief Financial Officer

CFO/ASA Chief Financial Officer and Assistant

Secretary for Administration (DM)

CITRB Commerce Information Technology 

Review Board

CLC Commerce Learning Center

CPI Consumer Price Index

CSRS Civil Service Retirement System

CSTARS Commerce Standard Acquisition and 

Reporting System

D DASHER Department’s Executive Dashboard 

Application

DM Departmental Management

GLOSSARY OF KEY ACRONYMS

DOL U.S. Department of Labor

DOT U.S. Department of Transportation

E ECMO Enterprise Cybersecurity Monitoring 

and Operations

EDA Economic Development Administratio

ELGP Emergency Steel Loan Guarantee Program

ERM Enterprise Risk Management

ESA Economics and Statistics Administration

ESC Enterprise Services Center (DOT)

ESOC Enterprise Security Oversight Center

F FAR Federal Acquisition Regulation

FCC Federal Communications Commission

FCCS Federal Claims Collection Standards

FECA Federal Employees Compensation Act

FEGLI Federal Employees Group Life Insurance 

Program

FEHB Federal Employees Health Benefit Program

FERS Federal Employees Retirement System 

FFMIA Federal Financial Management Improvement 

Act of 1996

FMFIA Federal Managers’ Financial Integrity Act 

of 1982

FTR Federal Travel Regulation

FVOG Fishing Vessel Obligation Guarantee Program 

(a NOAA loan guarantee program)

FWC Future Workers’ Compensation

FY Fiscal year ended September 30

G G&B Gifts and Bequests (a fund that is part of DM)

GAAP Generally Accepted Accounting Principles

GPRA Government Performance and Results Act 

of 1993

Abbreviation Title Abbreviation Title

230 F Y 2013 AGENCY FINANCIAL REPORT

APPENDIX E: GLOSSARY OF KEY ACRONYMS
Abbreviation Title Abbreviation Title

GSA U.S. General Services Administration

GTAS Government-wide Treasury Account Symbol 

Adjusted Trial Balance System (Treasury)

H HCHB Herbert C. Hoover Building Renovation 

Project (a reporting entity included in the 

financial statements)

HR Human Resource

I IFQ Individual Fishing Quota Direct Loans (a 

NOAA direct loan program)

IPIA Improper Payments Information Act of 2002

IT Information Technology

ITA International Trade Administration

J JPSS Joint Polar Satellite System (NOAA)

M MBDA Minority Business Development Agency

MD&A Management’s Discussion and Analysis

N NASA National Aeronautics and Space 

Administration

NBS National Bureau of Standards (former 

name of NIST)

NEFSC Northeast Fisheries Science Center (NOAA)

NERR National Estuarine Research Reserve

NIST National Institute of Standards and 

Technology

NMFS National Marine Fisheries Service (NOAA)

NOAA National Oceanic and Atmospheric 

Administration

NPOESS National Polar-orbiting Environmental 

Satellite System (NOAA)

NPP NPOESS Preparatory Project (NOAA)

NTIA National Telecommunications and 

Information Administration

NTIS National Technical Information Service

NWHI Northwestern Hawaiian Islands

O O&M Operations and Maintenance

OAM Office of Acquisition Management (DM)

OCIO Office of the Chief Information Officer (DM)

OFM Office of Financial Management (DM)

OGC Office of General Counsel (DM)

OHRM Office of Human Resources Management (DM)

OIG Office of Inspector General (DM)

OMB Office of Management and Budget

OPM U.S. Office of Personnel Management

P PAM Payment Application Modernization (Treasury)

PP&E Property, Plant, and Equipment, Net

PII Personally Identifiable Information

R R&D Research and Development

S S&E Salaries and Expenses (a fund that is part 

of DM)

SBR Combined Statements of Budgetary Resources

SCNP Consolidated Statements of Changes in 

Net Position

SFFAS Statement of Federal Financial Accounting 

Standards

T Treasury U.S. Department of the Treasury

TROR Treasury Report on Receivables

TSP Thrift Savings Plan

U USPTO U.S. Patent and Trademark Office

W WCF Working Capital Fund (a fund that is 

part of DM)

231 FY 2013 AGENCY FINANCIAL REPORT

APPENDIX E: GLOSSARY OF KEY ACRONYMS
232 F Y 2013 AGENCY FINANCIAL REPORT

ACKNOWLEDGEMENTS

ACKNOWLEDGEMENTS

This Agency Financial Report was prepared with the energies and talents of many 

Department of Commerce employees. To these individuals, the Office of Financial 

Management would like to offer our sincerest appreciation and recognition.

In particular, we would like to recognize the following organizations for their 

contributions:

The bureau finance offices, Office of the Secretary, Office of the Chief Financial 

Officer and Assistant Secretary for Administration, Office of Inspector General, 

Office of Acquisition Management, Office of Budget, Office of Human Resources 

Management, and Office of Performance, Evaluation, and Risk Management.

We also offer special gratitude and recognition to The DesignPond for their 

outstanding contributions in the design and production of this report.

U.S. DEPARTMENT OF COMMERCE

1401 Constitution Avenue, NW

Washington, DC 20230

(202) 482-2000

www.commerce.gov