FY 2014 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
U.S. DEPARTMENT OF COMMERCE 

FY 2014 AGENCY FINANCIAL REPORT
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.

The Department is composed of 12 bureaus, the Emergency Steel 

Loan Guarantee Program, and Departmental Management.

■ 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) 

■ Emergency Steel Loan Guarantee Program (ELGP)

■ Departmental Management (DM)

STRATEGIC GOALS

Strategic Goal 1: Trade and Investment

Strategic Goal 2: Innovation

Strategic Goal 3: Data

Strategic Goal 4: Environment

Strategic Goal 5: Operational 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, 2014, the Department had approximately 

46 thousand employees. 

BUDGET AUTHORITY

The Department’s FY 2014 net budget authority was approximately 

$10.21 billion.

INTERNET 

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

THE DEPARTMENT AT A GLANCE
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 2014 Performance Summary 6

Management Controls 9

Secretary’s Statement of Assurance 9

Federal Managers’ Financial Integrity Act (FMFIA) of 1982 10

Federal Financial Management Improvement Act (FFMIA) of 1996 15

Report on Audit Follow-up 15

Biennial Review of Fees 15

Financial Management and Analysis 16

Analysis of FY 2014 Financial Condition and Results 22

Summary of Stewardship Information 31

Financial Section 33

Message from the Chief Financial Officer 34

Independent Auditors’ Report 35

Principal Financial Statements 47

Consolidated Balance Sheets 48

Consolidated Statements of Net Cost 49

Consolidated Statements of Changes in Net Position 50

Combined Statements of Budgetary Resources 51

Notes to the Financial Statements 53

Required Supplementary Information (Unaudited) 107

Required Supplementary Stewardship Information (Unaudited) 113

Other Information 123

Schedule of Spending (Unaudited) 124

OIG Report on Management and Performance Challenges 125

Summary of Financial Statement Audit and Management Assurances 127

Improper Payments Information Act (IPIA) of 2002, as Amended, Reporting Details 128 

Freeze the Footprint 138

Glossary of Acronyms 139

Acknowledgements 142

FY 2014 AGENCY FINANCIAL REPORT | III
MESSAGE FROM SECRETARY PRITZKER

I

am pleased to present the Department of Commerce’s Agency 

Financial Report (AFR) for fiscal year (FY) 2014. The AFR is an 

opportunity for us to highlight the Department’s accomplishments 

and challenges in FY 2014. This report also provides information on 

our financial management and performance. 

Since I joined the Department as Secretary, I have met with over 1,200 

business leaders and one-third of Fortune 500 CEOs; I have traveled 

to more than 20 countries; and everywhere I go, the message is clear: 

America is Open for Business. And it is the Department’s mission 

to keep our country moving in the right direction, to help create the 

conditions for economic growth, and to expand opportunity for all of 

our businesses and entrepreneurs. 

In FY 2014, the Department continued to help American businesses grow, compete, and thrive. We launched our 

strategic plan, focused on the priority areas of trade and investment, innovation, data, and environment. This plan 

provides a broad foundation for spurring greater prosperity for businesses large and small, supporting a resilient 

private sector that has created more than 10 million jobs over 55 straight months of growth. 

Our 46,000 employees continue to play a crucial role. They are dedicated public servants who are committed to the 

important work of serving American businesses, communities, and our citizens. Their work truly epitomizes the 

idea of “mission first, people always.”

The Commerce Department also remains committed to operational excellence—another part of our strategic plan—

as we continue to focus on being accountable to the public 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.

IV | FY 2014 AGENCY FINANCIAL REPORT
These data provide an accurate and transparent accounting of the Department’s financial situation and high-level 

performance results. For the 16th year in a row, the independent auditors tasked with reviewing our financial statements 

have provided an unmodified opinion. However, the Department received significant deficiencies relating to needed 

improvement in two areas: (1) accounting for the Economic Development Administration (EDA) accrued grants needs 

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

configuration management. In FY 2015, the Department will continue making improvements to strengthen controls to 

our accrued grants and information technology areas.

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

activities undertaken during FY 2014, 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 2016 Congressional Budget Submission in 

February 2015.

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

November 14, 2014 

FY 2014 AGENCY FINANCIAL REPORT | V

MESSAGE FROM SECRETARY PRITZKER
HOW TO USE THIS REPORT

T

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

September 30 (FY) 2014 provides the Department of Commerce’s 

financial and summary performance information in accordance with 

OMB Circular A-136, Financial Reporting Requirements.

The Department has chosen to produce an AFR. The Department will 

provide performance results in the FY 2016 Congressional Budget in 

conjunction with performance plan information as the “FY 2016 Annual 

Performance Report” for each bureau and will post it on the Department’s 

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

The Department’s annual AFR is available on the Department’s website 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 Federal Managers’ Financial Integrity Act (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 Other Information. The MD&A includes an overview of the 

summary of the performance process and current status of systems, internal control weaknesses, information on 

the Department’s financial management, and analysis of FY 2014 financial condition and results.

Financial Section

This section contains details of the Department’s finances in FY 2014. A message from the Department’s Chief 

Financial Officer (CFO) is followed by the independent auditors’ report, audited financial statements and notes, 

and required supplementary information.

Other Information

This section provides an overview of spending, a discussion of management challenges, improper payments 

information, a federal real property “Freeze the Footprint” report, and a glossary of acronyms. 
Management’s

Discussion and

Analysis
MISSION AND ORGANIZATION

MISSION

To create the conditions for economic growth and opportunity. 

The Department works with businesses, universities, communities, and the

Nation’s workers to promote job creation, economic growth, sustainable

development, and improved standards of living for Americans.

U . S. D E P A R TMENT OF COMMERCE

Chief Financial Officer and

Assistant Secretary for

Administration

Chief Information Officer

Office of Public Affairs

Office of Business Liaison

Office of

White House Liaison

Office of Policy

and Strategic Planning

SECRETARY

Deputy Secretary

Under Secretary for

International Trade

International Trade

Administration

Under Secretary for Industry and Security

Bureau of

Industry and Security

Assistant

Secretary for

Export

Administration

Assistant

Secretary for Export

Enforcement

Chief

Economist

Director

Bureau of

the Census

Assistant

Secretary for 

Enforcement

and 

Compliance

Assistant

Secretary for

Industry and 

Analysis

Assistant Secretary for 

Trade Promotion and 

Director General of the 

U.S. Foreign and 

Commercial Service

Under Secretary for

Economic Affairs

Economics and

Statistics

Administration

Director 

Bureau of

Economic Analysis

Assistant Secretary for

Economic Development

Economic Development

Administration

National Director

Minority Business

Development Agency

Assistant Secretary for

Communications and Information

National Telecommunications

and Information Administration

Under Secretary for

Intellectual Property

and Director

United States Patent

and Trademark Office

Executive Secretariat

Chief of Staff

Assistant Secretary for

Legislative and

Intergovernmental Affairs

Inspector General

General Counsel

Director

National

Technical

Information 

Service

Under Secretary for

Standards and

Technology

National Institute for

Standards and

Technology

Under Secretary

and Administrator

National Oceanic and

Atmospheric Administration

Chief

Scientist

Assistant

Secretary for

Conservation 

and

Management/

Deputy

Administrator

Assistant

Secretary for

Environmental

Observation 

and Prediction/

Deputy

Administrator

2 | FY 2014 AGENCY FINANCIAL REPORT

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

PLANNING AND PERFORMANCE REPORTING

BACKGROUND ON THE FY 2014 – FY 2018 STRATEGIC PLAN

The Department of Commerce FY 2014 – FY 2018 strategic planning process was re-engineered in the summer of FY 2013. 

Newly confirmed, Secretary Penny Pritzker began her tenure with a national listening tour of businesses, Departmental 

leadership, and staff. The tour produced the outline of a new vision for the Department. The vision is a major departure 

from the previous strategic plan and has five goal areas: Trade and Investment, Innovation, Environment, Data, and 

Operational Excellence.

The outline the Office of the Secretary produced was refined and expanded upon by multi-bureau executive teams. 

The final product, published in March of FY 2014, requires an unprecedented level of bureau collaboration. All but three of 

18 strategic objectives involve more than one bureau; 12 involve three or more.

The bureau leadership development/writing teams became multi-bureau implementation teams that wrote action plans 

for each objective. The action plans included initiatives, initiative owners, milestones, and due dates. The action plans 

are on an online Executive Dashboard. The dashboard has been supplemented by a “Tracker” which lists actions that the 

Office of the Secretary regularly monitors.

ROUTINE MONITORING OF THE STRATEGIC PLAN

The Department’s Executive Management Team (EMT) monitors the strategic plan and refines strategies and tactics 

on an ongoing basis. The EMT meets every other week and includes the administration-appointed bureau leaders, the 

Secretary, her chief of staff, the Deputy Secretary, and principals of the Office of the Secretary. The Deputy Secretary 

chairs the meeting. At every EMT meeting, one to three strategic objectives are reviewed. Progress, challenges, and 

risks are discussed and benefit from the collective talents and resources of the group. Strategies and tactics may be 

revised or enhanced to accelerate progress or reduce risks. 

There are several mechanisms that are used to report and review strategic plan performance indicators and aligned 

program specific indicators. EMT presentations on strategic objectives include data on leading and lagging performance 

metrics. Data on those metrics are posted to the online Executive Dashboard available to the EMT, senior career leaders, 

and their staff. Data on Agency Priority Goals (APG), initiatives singled out for emphasis, and Cross-Agency Priority Goals 

(CAP), multi-agency priorities, are posted to a public website www.performance.gov. Before the data and explanations 

are published to the site, the tracking information is reviewed by both bureau and Department leadership and the Office 

of Management and Budget (OMB). Bureaus have internal bureau centric metric review processes and data on mission 

support initiatives (Human Resources, Acquisition, Information Technology, etc.) are tracked on online dashboards and 

reviewed at team meetings.

FY 2014 AGENCY FINANCIAL REPORT | 3

MANAGEMENT’S DISCUSSION AND ANALYSIS
ANNUAL STRATEGIC REVIEW PROCESS

Apart from the EMT review of strategic objectives, in FY 2014 the Department conducted an annual strategic review 

as required by OMB Circular A-11. FY 2014 was the first year federal agencies conducted these reviews following 

new guidance from OMB and the Federal Performance Improvement Council. The approach will evolve as it is used. 

The Department’s reviews were conducted in the following four steps:

● a survey of the appointed and career leaders to obtain their independent assessment of risks and challenges for 

each objective;

● a management retreat to discuss key issues identified in the surveys;

● development of action plans based on recommendations from the retreat; and

● synthesis of analysis from the EMT presentations, surveys, retreat recommendations, and action plans into a 

written assessment that categorized objectives as having: exceptional progress, progress as planned, or significant 

challenges.

Action plans for the strategic objectives will continue to be refined using the analysis from the strategic reviews and 

input at the EMT meetings. The strategic reviews and budget process will also generate a list of research and evaluation 

subjects that will be used to develop an agenda for developing “evidence” that can be used in refining operations.

On the following page is a summary of the strategic goals and objectives established in the FY 2014 – FY 2018 

Strategic Plan. The strategic plan can be found at http://www.commerce.gov/sites/default/files/documents/2014/march/

doc_fy2014-2018_strategic_plan.pdf.

4 | FY 2014 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
SUMMARY OF STRATEGIC GOALS AND OBJECTIVES

1 TRADE AND INVESTMENT

Expand the U.S. economy through 

increased exports and inward foreign 

investment that lead to more and 

better American jobs

2 INNOVATION

Foster a more innovative U.S. economy—one that is better at inventing, 

improving, and commercializing products and technologies that lead to 

higher productivity and competitiveness

1.1. Increase opportunities for U.S. 

companies by opening markets globally 

(ITA, NOAA, NTIA, USPTO)

1.2. Increase U.S. exports by broadening 

and deepening the U.S. exporter base 

(BIS, EDA, ESA, ITA, MBDA, OS)

1.3. Increase high-impact inward foreign 

direct investment into the United States 

(EDA, ESA, ITA)

1.4. Strengthen fair competition in 

international trade for U.S. firms 

and workers by addressing and 

resolving foreign unfair trade practices 

and enforcing international trade 

agreements (ITA)

2.1. Grow a more productive, agile, and high-value manufacturing sector through 

partnerships and collaborations that accelerate technology development and 

commercialization (NIST)

2.2. Increase the capacity of U.S. regional economies to accelerate the production 

of value-added goods and services by providing services to and investments 

in businesses and communities (EDA, ESA, MBDA, NIST, USPTO)

2.3. Strengthen the Nation’s digital economy by championing policies that will 

maximize the potential of the Internet, expanding broadband capacity, and 

enhancing cybersecurity (NIST, NTIA, USPTO)

2.4. Accelerate the development of industry-led skills strategies that result in 

a productive workforce for employers and high-quality jobs for workers 

(EDA, ESA, NIST)

2.5. Accelerate growth of innovation-intensive economic sectors by building 

public and private capacity to invent, improve, and commercialize new 

products and services (EDA, NIST, USPTO)

3 ENVIRONMENT

Ensure communities and businesses have the necessary 

information, products, and services to prepare for and prosper 

in a changing environment

4 DATA

Improve government, business, and 

community decisions and knowledge by 

transforming Department data capabilities 

and supporting a data-enabled economy

3.1. Advance the understanding and prediction of changes in the 

environment through world class science and observations (NIST, 

NOAA)

3.2. Improve preparedness, response, and recovery from weather and water 

events by building a Weather-Ready Nation (ESA, NOAA)

3.3. Strengthen the resiliency of communities and regions by delivering 

targeted services to build capacity (EDA, ESA, NIST, NOAA)

3.4. Foster healthy and sustainable marine resources, habitats, and 

ecosystems through improved management and partnerships (NOAA)

3.5. Enable U.S. businesses to adapt and prosper by developing 

environmental and climate-informed solutions (ESA, ITA, NIST, NOAA)

4.1. Transform the Department’s data capacity to 

enhance the value, accessibility and usability 

of Commerce data for government, business 

and the public (ESA, NIST, NOAA, NTIS)

4.2. Improve data-based services, decisionmaking, and data sharing within the 

Department and with other parts of the 

federal government (BIS, ESA, ITA)

4.3. Collaborate with the business community to 

provide more timely, accurate, and relevant 

data products and services for customers 

(ESA, NOAA)

5 OPERATIONAL EXCELLENCE

Deliver better services, solutions, and outcomes that benefit the American people

5.1. Strengthen organizational capabilities to drive customer-focused, outcomes-driven mission performance (OS, All Bureaus)

Note: ESA includes the Bureau of Economic Analysis (BEA) and the Census Bureau. OS indicates the Office of the Secretary, which is reported in the financial 

statements as Departmental Management (DM).

FY 2014 AGENCY FINANCIAL REPORT | 5

MANAGEMENT’S DISCUSSION AND ANALYSIS
FY 2014 PERFORMANCE SUMMARY

OVERVIEW OF PERFORMANCE

Because the Department’s new strategic plan is a significant departure from past plans; many of the supporting performance 

indicators are also new. Therefore, trends are often not available. However, when they are, they are included in the tables on the 

following pages, which serve as a compilation of data on the current Agency Priority Goals (APG) and other priority indicators. 

These tables do not include all the measures used to track progress at the Department. Additional measures are included in 

budget documents. Department budget submissions can be found at http://www.osec.doc.gov/bmi/budget/.

1. TRADE AND INVESTMENT 

The APG in the Trade and Investment goal area is “Percentage of Global Markets clients that achieved their export objectives.” 

This is a new measure that reflects Global Markets emphasis on customer service. “As of FY 2014, the target of 69 percent 

was met. Accomplishment will be pushed further as new service delivery processes are implemented in FY 2015 and when a 

new Customer Relations Management System is implemented in FY 2016. The percentage of clients highly likely to recommend 

Global Markets assistance compares favorably to the private sector and other federal agencies. The data on measures relating 

to strengthening fair competition show an improving trend for removing/preventing trade barriers.

AGENCY PRIORITY GOAL: COMPANIES ASSISTED BY GLOBAL MARKETS THAT ACHIEVE EXPORT OBJECTIVES

PERFORMANCE MEASURE FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Percentage of Global Markets clients that achieved their 

export objectives

N/A N/A 67% 68% 67% 73%

Percentage of clients highly likely to recommend 

Global Markets

75% 77% 79% 82% 78% 83%

Number of clients assisted by Global Markets N/A 18,784 20,143 18,945 18,126 17,593

2. INNOVATION

An APG for the Innovation goal area is for increased miles of broadband to unserved or underserved areas; the number of 

community anchor institutions connected is also measured. The targets for the measures were exceeded, thereby helping to 

bridge the “digital divide.” The National Institute of Standards and Technology (NIST) Hollings Manufacturing Extension Partnership 

(MEP) program hit an all-time high of assisting over eight thousand businesses improve their competitiveness.

The U.S. Patent and Trademark Office (USPTO) continues to reduce the patent backlog (another APG) and the time required for a 

patent determination. During FY 2015 – FY 2016, USPTO will produce major reductions as examiners gain experience with new 

processes and enabling technology. 

6 | FY 2014 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
AGENCY PRIORITY GOAL: EXPAND U.S. BROADBAND INFRASTRUCTURE

PERFORMANCE MEASURE FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Miles of broadband networks deployed (infrastructure projects) N/A 4,824 29,191 78,699 111,361 112,7071

Number of community anchor institutions connected 

(infrastructure projects)

N/A N/A 4,163 11,246 20,325 25,2521

Number of new subscribers to broadband N/A N/A 210,213 522,981 629,175 735,4971

1 Numbers shown are as of third quarter FY 2014. Year-end data will not be available until after this publication.

AGENCY PRIORITY GOAL: IMPROVE PATENT PROCESSING TIME AND QUALITY

PERFORMANCE MEASURE FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Patent first action pendency (months) 25.8 25.7 28.0 21.9 18.2 18.4

Patent total action pendency (months) 34.6 35.3 33.7 32.4 29.1 27.4

Patent backlog 718,835 708,535 669,625 608,283 584,998 605,646

3. ENVIRONMENT

One APG in the Environment goal area will have delayed results. The National Oceanic and Atmospheric Administration’s (NOAA) 

National Weather Service aims to produce reliable weather forecasts nine days in advance. Problems procuring the server power 

needed for the new improved forecasting model set the schedule back. The problem has been solved and nine-day forecasts 

with good “skill” scores will be achieved in FY 2016. 

The APG for enforcing monitoring fishing catch limits is right on target and the number of threatened species with improving 

population levels has a positive trend. Human sustainability is doing well too, based on the positive trend in community 

improvements in resiliency.

AGENCY PRIORITY GOAL: CONFIRM ELIMINATION OF OVERFISHING

PERFORMANCE MEASURE FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Number of domestic stocks, as of June 30, 2013, listed as 

subject to overfishing for which the annual catch does not 

exceed the overfishing limit

N/A N/A N/A N/A N/A 11

AGENCY PRIORITY GOAL: IMPROVE FORECASTING ACCURACY AND LEAD TIMES FOR SEVERE WEATHER

PERFORMANCE MEASURE FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

GFS 500 hPa anomaly correlation of forecast 

considered accurate

7.57 8.02 8.00 8.00 8.1 8.1

Hurricane forecasts track – 48 hour error 73 88 71 69 103 103

FY 2014 AGENCY FINANCIAL REPORT | 7

MANAGEMENT’S DISCUSSION AND ANALYSIS
4. DATA

The Data goal area has a much different emphasis than in the past. The Department has viewed its statistical and environmental 

data as a product. The new strategic plan presents data as a national asset that can increase competitiveness and save lives 

(weather data). The milestones have been met for creating a framework for making federal data interoperable and therefore more 

useful to both the private and public sector. The Census Bureau has met its milestones for progress toward the goal of a 2020 

Census that cost no more than the 2010 Census. 

In FY 2014, the new Chief Data Officer joined the Department to create a vision and a plan to put the Department ahead of the 

breakneck speed of information technology (IT) advances.

PERFORMANCE MEASURE FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Percentage of key activities for cyclical census programs 

completed on time to support effective decision-making 

by policymakers, businesses, and the public

At least 

90%

At least 

90%

At least 

90%

At least 

90%

At least 

90%

At least 

90%

Percentage of key data products for Census Bureau 

programs released on time to support effective decisionmaking of policymakers, businesses, and the public

• 100% for 

economic 

indicators

• 90% for 

other key 

surrveys

• 100% for 

economic 

indicators

• 90% for 

other key 

surrveys

• 100% for 

economic 

indicators

• 90% for 

other key 

surrveys

• 100% for 

economic 

indicators

• 90% for 

other key 

surrveys

• 100% for 

economic 

indicators

• 90% for 

other key 

surrveys

• 100% for 

economic 

indicators

• 90% for 

other key 

surrveys

5. OPERATIONAL EXCELLENCE 

There are many “granular” measures of the Operational Excellence goal area in mission support, i.e., customer satisfaction 

with processes and services, cycle-times, error rates. The strategic measures are milestones for creating new frameworks 

for: organizational development, common IT architecture, shared services, and results focus. Plans in these areas are on track 

and in line with government-wide initiatives. There are significant positive trends in the quality and quantity of service provided 

by www.Business.USA.gov. This is the Department’s one-stop shop website to access all federal services available to help 

American business.

PERFORMANCE MEASURE FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Business USA (Business.USA.gov) ability to find information:

Content subscribers N/A N/A N/A 35,000 70,388 103,903

Website visits N/A N/A N/A 628,000 1,370,000 2,362,313

8 | FY 2014 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 2014, 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. Based 

on the results of this evaluation, the Department can provide reasonable assurance that its internal control 

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

of September 30, 2014 was operating effectively and no material weaknesses were found in the design or 

operation of the internal controls. 

In addition, 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 OMB Circular A-123. Based on the results of this 

evaluation, the Department can provide reasonable assurance that its internal control over financial reporting 

as of June 30, 2014 was operating effectively and no material weaknesses were found in the design or 

operation of the internal control over financial reporting. Furthermore, no material weaknesses related to 

internal control over financial reporting were identified between July 1 and September 30. 

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

November 14, 2014

FY 2014 AGENCY FINANCIAL REPORT | 9

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 2014, 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 U.S. Government 

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

such as the U.S. Office of Personnel Management (OPM), and other specifically requested studies. The diverse reviews 

that took place during FY 2014 relative to non-financial controls provide assurance that Departmental systems and 

management controls comply with standards established under FMFIA.

Key Administrative and Management Internal Control Activities

In compliance with FMFIA, the following information regarding the adequacy of management and internal control systems 

relative to management and internal controls in FY 2014 is detailed below. 

HUMAN RESOURCE MANAGEMENT

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.

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, the Office 

of Human Resources Accountability coordinated, trained, and led the Department Human Capital Audit Team successfully 

through eight Delegated Examining on-site audits at the servicing human resources office. In addition, the audit team 

conducted two Human Capital Framework (HCF) assessments. 

The Department Human Capital Audit Team monitors and audits/evaluates the results of its human capital management 

policies, programs, and activities by analyzing compliance with merit system principles, federal regulations, OPM 

standards, and Departmental policy. During FY 2015, eight Delegated Examining and two HCF audits will be conducted.

10 | FY 2014 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
Protecting Personally Identifiable Information (PII). A quarterly analysis is conducted by an independent third-party 

vendor of all Department employee identities to ensure no organized misuse by fraudsters is occurring. In relation to 

specific breach or potential breach incidents, reports of “Harm” or “No Harm” are provided by the vendor to indicate if 

misuse of any employee identities is occurring as a result of the specific incident(s).

ACQUISITION MANAGEMENT 

The Office of Acquisition Management’s (OAM) internal control process is based on OMB-prescribed guidance on 

acquisition assessment with the following cornerstones: 

1. Organization Alignment and Leadership; 

2. Policies and Processes; 

3. Human Capital; and 

4. Information Management and Leadership. 

OAM’s structure directly addresses major initiatives such as implementation of the scalable framework for acquisition 

management, strategic sourcing initiatives and acquisition/administrative savings, risk management, and cost analysis 

and oversight. 

USASpending.gov. USAspending.gov, a single searchable website that is accessible to the public, receives and displays 

data pertaining to amounts awarded for federally sponsored projects during a given budget period. One of the main 

source systems which provides information to the USAspending.gov website is the Federal Procurement Data System 

(FPDS). The Department annually reviews and certifies its procurement data captured in FPDS in accordance with Office 

of Federal Procurement Policy guidance. This activity certifies the completeness, quality, accuracy, and timeliness of the 

Department’s data in FPDS. Accuracy is measured by reviewing a random sample of records for data elements prescribed 

by OMB. The Department has consistently maintained an accuracy rating of 95 percent or above. 

In addition, OAM conducts a quarterly FPDS verification and validation process. The quarterly reviews are used to evaluate 

the accuracy of the Department data in FPDS throughout the year. Data elements with accuracy rates that fall below 95 

percent are identified and targeted for improvement. The quarterly review process has helped to improve the accuracy of 

procurement data in FPDS.

The Department’s grant-making bureaus have engaged in considerable effort to improve the reliability and accuracy 

of USAspending.gov financial assistance award data. Each bureau has developed and implemented a comprehensive 

process to validate USAspending.gov prime federal award financial assistance data through a comparison against Federal 

Award Identification Numbers in their respective financial systems prior to uploading the data to USAspending.gov.

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

the Department’s Purchase Card Program, 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 2014, the Department continued its implementation efforts to enhance policy requirements and implement 

structured procedures. Enhancements to the purchase card program included development of customized virtual online 

training courses to highlight Department-specific policies and procedures of the program and enhance user training by 

FY 2014 AGENCY FINANCIAL REPORT | 11

MANAGEMENT’S DISCUSSION AND ANALYSIS
providing realistic scenario-based examples, updating the Commerce Acquisition Management (CAM) Chapter to address 

audit findings, a bureau management review to assess strengths and weaknesses of bureau programs, and development 

of a cardholder community newsletter to improve policy communication to the cardholder community.

American Reinvestment and Recovery Act (ARRA) Funds Management:

Federally Awarded Contracts – Recipient reporting for ARRA awards was repealed by Congress as of February 1, 2014. 

Therefore, the January 2014 reporting cycle was the last required reporting submission for ARRA awards and all input into 

FederalReporting.gov ceased on March 19, 2014. As part of the transparency and accountability initiative, the Department 

regularly provided summaries of reporting compliance results and issues to the Department Senior Accountable Official 

for ARRA and to OMB. Beginning in FY 2013, the Department implemented a reconciliation process on awards that 

were marked as having a Final Report submission which involved validating that the data reported and reflected on 

USASpending.gov were accurate and complete. By the sunset of the ARRA reporting era, OAM completed reconciliation 

on 84 percent of the Department Final Report submissions.

Financial Assistance – As of March 19, 2014, ARRA reporting was officially terminated. Since 2009, OAM’s Grants 

Management Division provided oversight for 483 grants valued at nearly $5 billion and coordinated the accurate and 

timely reporting of those dollars obligated and spent under ARRA. Additionally, the OAM Grants Management Division 

conducted weekly teleconferences with key bureau ARRA reporting personnel and provided them feedback on reporting 

issues and any new ARRA policies that had been issued.

Hurricane Sandy Funds Management:

Disaster Relief Act (Hurricane Sandy) Supplemental Funding – Supplemental funding received under the Disaster Relief 

Act (Hurricane Sandy) received comprehensive programmatic and administrative attention throughout the Department 

in order to achieve the legislative goals attributable to it. All Hurricane Sandy funds received by the Department were 

awarded or otherwise expended solely for authorized purposes, in as prompt and efficient manner as possible while 

safeguarding against fraud, waste, and abuse. Reporting associated with this funding is being performed transparently 

and comprehensively. Monitoring has been and will continue to be conducted to ensure the recipient is meeting goals 

as stated in its application and as incorporated into award documents, and will also focus on the effects Hurricane Sandy 

funding has had and will prospectively have on economic indicators.

FACILITIES MANAGEMENT

GAO has designated federal real property management as a high risk issue since 2003 due to long standing challenges, 

including unreliable data reported in the Federal Real Property Profile (FRPP).

In July 2014, GAO issued a report which concluded that data problems related to federal real property continue to be an 

issue. While OMB or the U.S. General Services Administration has not issued specific guidance regarding data quality 

improvements in 2014, the FRPP Guidance was released in July 2014. 

The 2014 FRPP guidance includes several changes intended to improve the consistency of reporting among agencies. 

These changes include revised definitions, modified data elements, and standardized processes and procedures for 

collecting and reporting data. The Office of Real Property Programs (ORPP) is currently reviewing all asset records in the 

Department’s Federal Real Property Management System (FRPMS) and has requested each bureau to individually certify 

and validate its data for accuracy and completeness.

12 | FY 2014 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
Also in an effort to improve data quality, personal identity verification cards will be required to gain access to Department 

networks and allow it to more accurately count the number of contractor and federal employees in its facilities. As a result, 

ORPP will have more accurate data necessary to calculate Department facility utilization rates that are reported in its OMB 

performance measures. Finally, in an effort to report more accurate data, ORPP directed the Department to improve its 

facility annual operating cost reporting by extracting data available in the Department’s financial system.

INFORMATION TECHNOLOGY (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 guidelines, 

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. In FY 2014, the Department made 

improvements to elevate the IT security program and address deficiencies in continuous monitoring, configuration, and 

vulnerability management and IT security general awareness and role-based training.

Accomplishments resulting from the Department’s efforts to address the deficiencies include developing a Cyber Strategic 

Plan in support of the Department’s missions and goals through FY 2018; and adopting a revised IT Security Program 

Policy and additional policies and guidance on safeguarding information on foreign travel, access and use, and telework. 

The Department continued to implement an Enterprise Cybersecurity Monitoring and Operations (ECMO) tool to monitor 

and track continuous monitoring of IT security-related events throughout the Department. 

The Department launched an Enterprise Security Oversight Center (ESOC) and continued making improvements to the 

Department’s Computer Incident Response Team (CIRT), and also worked with personnel with significant IT security roles 

and responsibilities through the CIOs’ Council, the IT Security Coordinating Committee, and the IT Audit Working Group to 

devise enterprise-wide solutions to deficiencies.

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

accomplished. Despite these improvements, the OIG found that critical security controls remain unimplemented, 

including remote access control, flaw remediation, and secure configuration settings in the FY 2014 FISMA Audits. The 

OIG acknowledges progress the Department has made implementing ECMO and ESOC and improving the CIRT, which are 

critical to maintaining general network hygiene, implementing continuous monitoring, providing timely cyber situational 

awareness, and addressing cyber incidents across the Department. However, the OIG encourages the Department to 

make a concerted effort to expedite ECMO deployment and maintain a fully operational and stable IT infrastructure at its 

headquarters.

IT 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, National 

Institute of Standards and Technology (NIST) standards and guidelines, and previous OIG recommendations.

FY 2014 AGENCY FINANCIAL REPORT | 13

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

During FY 2014, 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;

● Conducted risk assessment to include additional testing cycles; 

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

● Had each of the Department’s bureaus complete an entity-level controls assessment as required by OMB Circular 

A-123, Appendix A;

● Utilized contractor assistance in implementing the requirements of OMB Memorandum M-13-21 and evaluating 

internal controls over travel card management;

● Utilized contractor assistance to perform an analysis of the internal control over NIST’s grants and accounts payable 

accrual sub-processes. The final analysis will include a summary of the revised grants and accounts payable accrual 

sub-processes, enhanced reconciliations, and the process for future evaluations;

● 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 Agency Financial 

Report;

● Consolidated and analyzed the OMB Circular A-123 Appendix A review lead sheet at each of the applicable 

Department bureaus, including assessing and documenting the findings and recommendations for corrective 

actions (if applicable) at the Department level; 

● Performed reviews of working papers for select processes/cycles at the Census Bureau and the National Oceanic and 

Atmospheric Administration for completeness, accuracy, reliability, adequacy, and adherence to the Department’s 

Implementation Plan, Sampling Plan, and Work Paper Guide; and

● Furthered the initiative to establish an Office of Forensic Accounting. Through contractor support, the Department 

has focused on developing and solidifying an end-to-end monitoring process involving the analyses of Purchase 

Card, Travel Card, and Payroll processes within the Department.

SECTION 4 OF FMFIA – INTERNAL CONTROLS OVER FINANCIAL MANAGEMENT SYSTEMS 

The Department has reported no material weaknesses under FMFIA Section 4 in recent years. Based on reviews 

conducted by the Department and its bureaus for FY 2014, the financial systems in the Department are compliant with 

GAO principles and standards, the requirements of the Chief Financial Officers Act, and OMB requirements. 

14 | FY 2014 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 2014, 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, 2013, 

through May 31, 2014. 

SUMMARY OF ACTIVITY ON AUDIT REPORTS

JUNE 1, 2013 THROUGH MAY 31, 2014

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 Balance4 32 $46,668,970 8 $65,605,120 25 65

New Reports 16 4,336,874 4 163,515,149 13 33

Total Reports 48 51,005,844 12 229,120,269 37 98

Reports Closed (17) (10,303,653) (4) (5,495,642) (18) (39)

Ending Balance 31 $40,702,191 8 $223,624,627 20 59

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” are funds that could be used more efficiently if management took action to implement and 

complete the recommendation. Audits with “Funds to be Put to Better Use” may be non-federal audits of individual grant 

awards or performance audits of grant programs or other programs. Thus, the amount of “Funds to be Put to Better Use” 

among audits can vary widely.

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

4. The beginning balances reflect correction of user entry errors since the last reporting period. Corrective actions are 

planned to prevent similar errors in the future. 

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.

FY 2014 AGENCY FINANCIAL REPORT | 15

MANAGEMENT’S DISCUSSION AND ANALYSIS
FINANCIAL MANAGEMENT AND ANALYSIS

Under 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 2014 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, the U.S. Department of 

Agriculture’s National Finance Center Payroll System, and the U.S. Department of the Treasury’s (Treasury) 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 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 2014, the Department accomplished the following initiatives: 

● Initiated Planning phase for the Business Application Solutions (BAS) project that will modernize the Department’s 

financial and business systems; 

● Completed the design, development, and testing of the Six-Digit Standard General Ledger, Accelerated Payments to 

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

● 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 production 

environment hardware and operating system for the National Oceanic and Atmospheric Administration (NOAA), 

National Institute of Standards and Technology (NIST), and Census Bureau; 

16 | FY 2014 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
● Deployed online dashboards, tools, processes, and standardized templates improving the efficiency, effectiveness, 

governance, management, and delivery of the Chief Financial Officer and Assistant Secretary for Administration 

(CFO/ASA) capabilities and services; and

● Conducted design and development activities for the Department’s Executive Dashboard application. The Executive 

Dashboard provides a Department-wide, executive-level overview of the Department’s highest priority and highest 

risk mission and administrative initiatives. 

In FY 2015 and beyond, the Department will continue its efforts to enhance its financial systems. The Department plans 

to accomplish the following: 

● Complete Planning phase and begin Phase I implementation for BAS; and

● Complete the design, development, and testing of the Governmentwide Treasury Account Symbol Adjusted Trial 

Balance System (GTAS), Payment Application Modernization, ASAP Phase 2, and Shared Accounting Module 

modifications to CBS and deploy into production.

FINANCIAL REPORTING AND POLICY

The Department accomplished the following initiatives: 

● Implemented early, effective FY 2014, Federal Accounting Standard Advisory Board (FASAB) Statement of Federal 

Financial Accounting Standards (SFFAS) 42, Deferred Maintenance and Repairs, Amending Statements of Federal 

Financial Accounting Standards 6, 14, 29 and 32, to improve the measurement and reporting of deferred maintenance 

and repairs;

● Implemented early, effective FY 2014, FASAB SFFAS 44, Accounting for Impairment of General Property, Plant, and 

Equipment Remaining in Use, which establishes accounting and financial reporting standards for impairment of 

General Property, Plant, and Equipment (PP&E) remaining in use, except for internal use software;

● 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; 

● Completed and issued a significant revision of Chapter 7, Administrative Control of Funds, of the Department’s 

Accounting Principles and Standards Handbook;

● Each of the Department’s bureaus/reporting entities updated their scheduled improper payment risk assessments 

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

Management’s Responsibility for Internal Control, 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 quicker;

FY 2014 AGENCY FINANCIAL REPORT | 17

MANAGEMENT’S DISCUSSION AND ANALYSIS
● A contractor prepared a Statistical Sampling and Estimation Plan for NOAA Disaster Relief Appropriations Act 

FY 2013 disbursements in order to yield a statistically valid improper payments estimate, and performed FY 2013 

disbursements testing in accordance with the plan, which did not identify any improper payments; and

● Applicable bureaus prepared Credit Management and Debt Collection Plans which set forth their plans for effectively 

managing credit extension, account servicing, portfolio management, and delinquent debt collection—these plans 

will be updated at least every five years.

In FY 2015 and beyond, the Department plans to accomplish the following: 

● Complete an analysis of the Department’s capitalization thresholds for General Property, Plant, and Equipment, to 

determine if existing capitalization thresholds are appropriate or should be revised;

● Continue to work with Treasury to ensure proper implementation of GTAS effective FY 2015;

● Complete bureaus’ implementations of reporting Treasury Appropriation Symbols and Business Event Type Codes 

for each individual transaction for intragovernmental payments, collections, and disbursements; and

● Prepare biennial Credit Program Reviews for active credit programs. 

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 policy 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. 

In FY 2014, the Department started migrating the Economic Development Administration (EDA) and NIST to NOAA’s 

Grants Online. 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’s 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. 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. As of July 31, 2014, the implantation of this notice has resulted in 79 of these types of 

grants being administratively closed and/or terminated. 

OAM/Grants Management Division (GMD) is coordinating Department implementation of the requirements of the 

Omni-circular issued by OMB on December 26, 2013. The Omni-circular requires agencies to modify grant business 

processes to achieve the President’s goals of streamlining federal programs to establish more efficient and user friendly 

18 | FY 2014 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
requirements for Department customers. Pursuant to the requirements of the Omni-circular, OAM/GMD has collaborated 

with partners in the Department grants community to create an implementation plan that was submitted to OMB in June 

2014. Additionally, OAM/GMD is working with General Counsel and grant-making agencies of the Department to make 

modifications required to align Department financial assistance guidance with the requirements of the Omni-circular.

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. 

In FY 2014, the Department hosted 18 Pathway Program interns as accountants and budget analysts, including three new 

hires and seven who were converted to permanent positions. Trainees were located within finance and accounting offices 

in the Bureau of Economic Analysis (BEA), Census Bureau, EDA, the International Trade Administration (ITA), and NIST.

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 2014, approximately 46 percent of 

accounting and budgeting employees engaged in telework, which increased from 32 percent in FY 2013. Telework 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 potentially increasing employee productivity. 

Additionally, the Office of the Secretary’s Office of Financial Management fulfilled its planned action that was incorporated 

into the FY 2014 CFO/ASA’s Succession Plan.

RECEIVABLES WITH THE PUBLIC AND DEBT COLLECTION MANAGEMENT

The 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. This 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 debt collection management 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 collection 

management in its Credit and Debt Management Operating Standards and Procedures Handbook, to ensure that consistent 

debt collection management practices are established and followed throughout the Department, and to establish and 

enhance Departmental debt collection management practices.

Applicable bureaus prepared, in 2014, Credit Management and Debt Collection Plans, which set forth their plans for 

effectively managing credit extension, account servicing, and debt collection management. These plans are updated at 

least every five years.

FY 2014 AGENCY FINANCIAL REPORT | 19

MANAGEMENT’S DISCUSSION AND ANALYSIS
The Department’s total gross receivables with the public decreased $19 million or 3.8 percent, from $528 million as of 

September 30, 2013 to $509 million as of September 30, 2014, as reported on the Department’s Treasury Report on 

Receivables, which is the primary means for the Department to provide comprehensive information to Treasury on its 

receivables with the public. Total delinquencies with the public, as a percentage of total gross receivables with the public, 

increased from 2.5 percent as of September 30, 2013 to 2.8 percent as of September 30, 2014. Receivables with the public 

over 180 days delinquent, as a percentage of total gross receivables with the public, increased from 1.1 percent as of 

September 30, 2013 to 1.6 percent as of September 30, 2014. 

Prescreening procedures, account-servicing standards, 

determined collection of delinquent debt, and extensive 

referrals of delinquent debt to Treasury for cross-servicing, which includes Treasury referrals to the Treasury Offset Program and credit bureau reporting when deemed 

appropriate by Treasury, have all contributed to effective 

Departmental debt collection management. The Debt 

Collection Improvement Act of 1996 established Treasury 

as the debt collection agency for eligible federal agency 

debts that are more than 180 days delinquent. 

PAYMENT PRACTICES

PROMPT PAYMENT

The 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. 

20 | FY 2014 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
The Department’s prompt payment performance decreased from 98.8 percent in FY 2013 to 97.4 percent in FY 2014. The 

number of invoices with late-payment interest penalties increased from 1,994 in FY 2013 to 4,865 in FY 2014. The decrease 

in prompt payment performance was primarily due to delays in invoice processing caused by the October 2013 furlough of 

financial management staff. 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. The Department is currently 

exploring options to transition off its primary financial management system used by most of the bureaus and adopt a 

commercial off-the-shelf (COTS) product for those bureaus. As such, the Department would in large part adopt the COTS 

product’s solution for an electronic invoice processing system, if available. The U.S. Patent and Trademark Office (USPTO) 

will not be transitioning to a new financial management system, and will instead maintain its own financial management 

system. USPTO is planning to kick off a series of projects starting in 2015 with the purpose of implementing an Internetbased invoice processing system. 

The Department implemented in July 2012 a temporary payment policy whereby 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. A July 2014 OMB memorandum, Extension of Policy to Provide Accelerated Payment to Small Business 

Subcontractors, extends this temporary policy to December 31, 2016. The Department monitors bureaus’ monthly 

accelerated payments performance.

BANKCARDS

The Department remains 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 continues to carry 

out initiatives implemented in the last few fiscal years, including 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. This has contributed to 

a steady decrease in the number of purchase cards issued and in use by the Department.

Based on the results of prior year testing of purchase card processes under OMB Circular A-123, Appendix A, Internal 

Control Over Financial Reporting, the Department conducted testing of purchase card processes in FY 2014. The testing 

results showed purchase card sub-processes continued to present a significant deficiency for the Department in FY 2014. 

The Department will continue to work with bureaus in implementing corrective actions and monitoring the internal controls 

surrounding the purchase card program and perform necessary testing to ensure proper controls are in place during FY 2015.

LIMITATIONS OF THE FINANCIAL STATEMENTS

The principle financial statements in the financial section 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 generally accepted accounting 

principles (GAAP) for federal entities and the formats prescribed in OMB Circular A-136, Financial Reporting Requirements, 

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.

FY 2014 AGENCY FINANCIAL REPORT | 21

MANAGEMENT’S DISCUSSION AND ANALYSIS
ANALYSIS OF FY 2014 FINANCIAL CONDITION AND RESULTS

FINANCIAL HIGHLIGHTS

(Dollars In Thousands)

Percentage 

Change FY 2014 FY 2013

Condensed Balance Sheets:

As of September 30, 2014 and 2013

ASSETS:

Fund Balance with Treasury 14% $ 20,440,730 $ 18,002,497

General Property, Plant, and Equipment, Net 9% 12,107,752 11,103,844

Direct Loans and Loan Guarantees, Net -4% 512,588 533,692

Other -10% 356,634 398,278

TOTAL ASSETS 11% $ 33,417,704 $ 30,038,311

LIABILITIES:

Unearned Revenue 12% $ 1,641,577 $ 1,461,122

Federal Employee Benefits 0% 898,771 897,191

Accounts Payable 15% 592,999 513,815

Accrued Grants -11% 475,714 536,711

Debt to Treasury 128% 1,311,671 575,603

Accrued Payroll and Annual Leave 7% 500,082 467,706

Other -11% 279,110 314,082

TOTAL LIABILITIES 20% $ 5,699,924 $ 4,766,230

NET POSITION:

Unexpended Appropriations -1% $ 5,263,441 $ 5,340,879

Cumulative Results of Operations 13% 22,454,339 19,931,202

TOTAL NET POSITION 10% $ 27,717,780 $ 25,272,081

TOTAL LIABILITIES AND NET POSITION 11% $ 33,417,704 $ 30,038,311

Condensed Financing Sources:

For the Years Ended September 30, 2014 and 2013

Appropriations Received, Net of Reductions 7% $ 8,250,441 $ 7,733,541

Transfer In of Auction Proceeds from Federal 

Communications Commission N/A 1,221,000

 

–

Imputed Financing Sources from Cost Absorbed by Others 21% 357,022 295,288

Other 58% 289,260 183,372

TOTAL FINANCING SOURCES 23% $ 10,117,723 $ 8,212,201

(continued on next page)

22 | FY 2014 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
(continued from previous page)

(Dollars In Thousands)

Percentage 

Change FY 2014 FY 2013

Condensed Statements of Net Cost:

For the Years Ended September 30, 2014 and 2013

Total Gross Departmental Costs -5% $ 11,468,898 $ 12,056,144

Less: Earned Revenue 6% (3,796,874) (3,569,109)

NET COST OF OPERATIONS -10% $ 7,672,024 $ 8,487,035

Selected Budgetary Information:

For the Years Ended September 30, 2014 and 2013

Obligations Incurred 8% $ 13,363,956 $ 12,354,766

Outlays, Gross -6% $ 12,914,541 $ 13,778,017

COMPOSITION OF ASSETS AND ASSETS BY RESPONSIBILITY SEGMENT

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

consistent from September 30, 2013 to September 30, 2014. 

Total Departmental assets amounted to $33.42 billion as of September 30, 2014. Fund Balance with Treasury of $20.44 billion 

is the aggregate amount of funds available to make authorized expenditures and pay liabilities. General Property, Plant, 

and Equipment (General PP&E), Net of Accumulated Depreciation of $12.11 billion includes $7.68 billion of Constructionin-progress, primarily of satellites and weather measuring and monitoring systems; $1.97 billion of Satellites/Weather 

Systems Personal Property; $1.46 billion of Structures, Facilities, and Leasehold Improvements; and $1.00 billion of other 

General PP&E. Direct Loans and Loan Guarantees, Net of Allowances for Subsidy Cost (Present Value) and Loan Losses 

of $513 million primarily relates to the National Oceanic and Atmospheric Administration’s (NOAA) direct loan programs. 

FY 2014 AGENCY FINANCIAL REPORT | 23

MANAGEMENT’S DISCUSSION AND ANALYSIS
Other Assets of $357 million primarily includes Accounts Receivable, Net of Allowance for Uncollectible Accounts of 

$128 million, Advances and Prepayments of $113 million, and Inventory, Materials, and Supplies, Net of Allowance for 

Excess, Obsolete, and Unserviceable Items of $100 million.

TRENDS IN ASSETS

Total Departmental assets increased $3.38 billion or 11 percent, from $30.04 billion as of September 30, 2013 to 

$33.42 billion as of September 30, 2014. Fund Balance with Treasury increased $2.44 billion or 14 percent, from $18.00 billion 

to $20.44 billion, primarily due to an increase in the National Telecommunications and Information Administration’s (NTIA) 

Public Safety Trust Fund’s Fund Balance with Treasury of $1.93 billion as a result of a FY 2014 transfer in of $1.22 billion 

of auction proceeds from the Federal Communications Commission (FCC) and FY 2014 net borrowings from the U.S. 

Department of the Treasury (Treasury) of $740 million. The Public Safety Trust Fund provides funding to the First Responder 

Network Authority, an independent authority within NTIA created to provide emergency responders with the first highspeed nationwide network dedicated to public safety. Fund Balance with Treasury also increased due to the U.S. Patent 

and Trade Office’s (USPTO) increase of $508 million mainly as a result of increased fee rates implemented as a result of 

the Leahy-Smith America Invents Act of 2011. General PP&E, Net increased $1.00 billion or 9 percent, from $11.10 billion

to $12.11 billion, mainly due to increases of $860 million in NOAA’s Construction-in-progress and $382 million in NOAA’s 

Satellites/Weather Systems Personal Property. Other Assets decreased $42 million or 10 percent, from $398 million to 

$357 million, primarily due to a $17 million decrease in advances and prepayments with other federal entities in NTIA’s 

Digital Television Transition and Public Safety Fund, as programs under this budget account are winding down. Other Assets 

also decreased due to a $16 million decrease in NOAA’s accounts receivable with other federal entities primarily related to 

the National Weather Service’s Automated Surface Observing System and NOAA’s Deepwater Horizon oil spill response.

24 | FY 2014 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
COMPOSITION OF LIABILITIES AND LIABILITIES BY RESPONSIBILITY SEGMENT

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

somewhat from September 30, 2013 to September 30, 2014. Debt to Treasury increased from 12 percent of total liabilities to 

23 percent of total liabilities, primarily due to an increase in NTIA’s Public Safety Trust Fund’s Debt to Treasury of $740 million, 

from $39 million as of September 30, 2013 to $779 million as of September 30, 2014. As a result, NTIA’s liabilities increased 

from 3 percent of total liabilities as of September 30, 2013 to 15 percent of total liabilities as of September 30, 2014.

Total liabilities of the Department amounted to $5.70 billion as of September 30, 2014. Unearned Revenue of $1.64 billion 

represents the portion of monies received from customers for which goods and services have not been provided or rendered 

by the Department. Debt to Treasury of $1.31 billion includes $779 million borrowed for NTIA’s Public Safety Trust Fund, 

$511 million borrowed for NOAA’s direct loan programs, and $22 million borrowed for NTIA’s State and Local Implementation 

Fund. Federal Employee Benefits Liability of $899 million is comprised of the actuarial present value of projected benefits 

for the NOAA Corps Retirement System of $633 million and the NOAA Corps Post-retirement Health Benefits of $40 million, 

and the Department’s Actuarial Federal Employees Compensation Act (FECA) Liability of $226 million, which represents the 

actuarial liability for future workers’ compensation benefits. Accounts Payable of $593 million consists primarily of amounts 

owed for goods, services, or capitalized assets received, progress on contract performance by others, and other expenses 

due. Accrued Payroll and Annual Leave of $500 million includes salaries and wages earned by employees, but not disbursed 

as of September 30, 2014. Accrued Grants of $476 million, which relates to a diverse array of financial assistance programs 

and projects, includes the Economic Development Administration’s (EDA) Accrued Grants of $348 million for its grant 

investments that help communities generate jobs, retain existing jobs, and stimulate industrial and commercial growth. 

Other Liabilities of $279 million primarily includes Environmental and Disposal Liabilities of $158 million, Accrued Benefits 

of $40 million, Accrued FECA Liability of $34 million, Downward Subsidy Reestimates Payable to Treasury of $12 million, 

the International Trade Administration’s (ITA) Foreign Service Nationals’ Voluntary Separation Pay Liability of $11 million, and 

Resources Payable to Treasury of $9 million.

FY 2014 AGENCY FINANCIAL REPORT | 25

MANAGEMENT’S DISCUSSION AND ANALYSIS
TRENDS IN LIABILITIES

Total liabilities of the Department increased $934 million or 20 percent, from $4.77 billion as of September 30, 2013 

to $5.70 billion as of September 30, 2014. Unearned Revenue increased $180 million or 12 percent, from $1.46 billion 

to $1.64 billion, primarily due to an increase in USPTO’s unearned revenue of $173 million, in large part resulting from 

an increase in fee rates implemented as the result of the Leahy-Smith America Invents Act of 2011. Accounts Payable 

increased $79 million or 15 percent, from $514 million to $593 million, primarily due to the Census Bureau’s increase of 

$32 million resulting from accrual methodology improvements and NOAA’s increase of $29 million in Accounts Payable with 

the public primarily for its Operations, Research, and Facilities activities and Procurement, Acquisition, and Construction 

activities. Debt to Treasury increased $736 million or 128%, from $576 million to $1.31 billion, primarily due to NTIA’s Public 

Safety Trust Fund’s FY 2014 net borrowings of $740 million. The increases described above for Total Liabilities are offset by 

a decrease in Accrued Grants, which decreased $61 million or 11 percent, from $537 million to $476 million, mainly due to 

EDA’s $58 million decrease resulting from accrual methodology improvements. 

26 | FY 2014 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
COMPOSITION OF AND TRENDS IN FINANCING SOURCES

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. 

Additional financing sources typically include imputed financing 

sources from costs attributable to the Department that are 

absorbed by other federal entities, non-exchange revenue, 

transfers to and from other federal entities without reimbursement, 

and donations and forfeitures.

The composition by percentage of the Department’s financing 

sources changed somewhat from FY 2013 to FY 2014, due to the 

first transfer in of auction proceeds from FCC of $1.22 billion being 

received in FY 2014 by NTIA’s Public Safety Trust Fund. FCC carries

out auctions in accordance with the Middle Class Tax Relief and Job Creation Act of 2012, of which certain earned net 

auction proceeds (earned auction proceeds less any FCC administrative fees) are transferred from FCC to the Public Safety 

Trust Fund. As a result, Appropriations Received, Net of Reductions decreased from 94 percent of the Department’s 

financing sources in FY 2013 to 82 percent of the Department’s financing sources in FY 2014.

Total financing sources increased $1.91 billion or 23 percent, from $8.21 billion in FY 2013 to $10.12 billion in FY 2014. 

Appropriations Received, Net of Reductions increased $517 million or 7 percent, from $7.73 billion in FY 2013 to $8.25 billion 

in FY 2014, mainly due to a decrease in Rescissions/Sequestrations of Appropriations of $550 million, from $560 million 

in FY 2013 to $11 million in FY 2014. Imputed Financing Sources from Cost Absorbed by Others increased $62 million 

or 21 percent, from $295 million to $357 million, primarily due to increased legal judgments against the Department paid 

from the Judgment Fund maintained by Treasury. Other financing sources of the Department increased $106 million or 

58 percent, from $183 million to $289 million, primarily due to an increase of $78 million in NOAA’s non-exchange revenue, 

which includes an increase of $53 million in non-exchange revenue in its Damage Assessment and Restoration Revolving 

Fund mainly caused by increased monies received for costs related to the Deepwater Horizon oil spill response. 

COMPOSITION OF FY 2014 NET COST OF OPERATIONS AND NET COST OF OPERATIONS 

BY RESPONSIBILITY SEGMENT

In FY 2014, the Department’s Net Cost of Operations amounted 

to $7.67 billion, which consists of Gross Costs of $11.47 billion 

less Earned Revenue of $3.80 billion.

The distribution (by responsibility segment) of the Department’s 

Net Cost of Operations changed somewhat from FY 2013 to 

FY 2014, mainly due to a significant decrease in Gross Costs 

of $676 million in NTIA’s Broadband Technology Opportunities 

Program (BTOP) – American Recovery and Reinvestment Act 

of 2009 (ARRA), from $945 million in FY 2013 to $269 million 

in FY 2014, as the program’s costs to grantees have been 

decreasing in the last few years due to the grantees’ periods of 

FY 2014 AGENCY FINANCIAL REPORT | 27

MANAGEMENT’S DISCUSSION AND ANALYSIS
performance being in the later stages. As a result, NTIA’s Net Cost of Operations decreased from 12 percent of total Net 

Cost of Operations in FY 2013 to 5 percent of total Net Cost of Operations in FY 2014.

Note: The Gross Costs and Earned Revenue amounts presented in the following paragraphs include transactions with 

other Departmental entities (intra-Departmental transactions).

NOAA’s FY 2014 Net Cost of Operations was $4.67 billion (Gross Costs of $4.91 billion less Earned Revenue of $234 million). 

NOAA’s mission relates to science, service, and stewardship—to understand and predict changes in climate, weather, 

oceans, and coasts; to share that knowledge and information with others; and to conserve and manage coastal and 

marine ecosystems and resources. NOAA’s Gross Costs include costs related to improving weather, water quality, and 

climate reporting and forecasting; and enabling informed decision-making through an expanded understanding of the U.S. 

economy, society, and environment by providing data, standards, and services. NOAA also develops and procures satellite 

systems, aircraft, and ships to provide information to determine weather patterns and predict weather forecasts. Gross 

Costs also support 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.

USPTO’s FY 2014 Net Cost of Operations of $(286) million (Gross Costs of $2.73 billion less Earned Revenue of 

$3.02 billion) relates to its patents and trademark programs. USPTO is the federal agency for granting U.S. patents 

and registering trademarks. The strength and vitality of the U.S. economy depends directly on effective mechanisms 

that protect new ideas and investments in innovation and creativity. USPTO advises the President, the Secretary of 

Commerce, and U.S. government agencies on intellectual property (IP) policy, protection, and enforcement; and promotes 

the stronger and more effective IP protection around the world. USPTO furthers effective IP protection for U.S. innovators 

and entrepreneurs worldwide by working with other federal agencies to secure strong IP provisions in free trade and other 

international agreements. It also provides training, education, and capacity building programs designed to foster respect 

for IP and encourage the development of strong IP enforcement regimes by U.S. trading partners.

The Economics and Statistics Administration’s (ESA) FY 2014 Net Cost of Operations was $1.14 billion (Gross Costs of 

$1.41 billion less Earned Revenue of $268 million), which includes ESA, the Bureau of Economic Analysis (BEA), and 

Census Bureau. ESA plays three key roles within the Department. ESA provides timely economic analysis, disseminates 

national economic indicators, and oversees BEA and the Census Bureau. BEA promotes a better understanding of 

the U.S. economy by providing timely, relevant, and accurate economic accounts data in an objective and cost-effective 

manner. The Census Bureau’s FY 2014 Net Cost of Operations was $1.04 billion (Gross Costs of $1.30 billion less Earned 

Revenue of $264 million). The Census Bureau serves as the leading source of quality data about the Nation’s people and 

economy. Data the Census Bureau collects includes the Population and Housing Census (every 10 years), Economic 

Census (every 5 years), Census of Governments (every 5 years), American Community Survey (annually), demographic 

and economic surveys provided to survey sponsors, and economic indicators.

The National Institute of Standards and Technology’s (NIST) FY 2014 Net Cost of Operations was $775 million (Gross Costs 

of $1.04 billion less Earned Revenue of $263 million), which includes NIST and the National Technical Information Service 

(NTIS). NIST’s FY 2014 Net Cost of Operations was $777 million (Gross Costs of $926 million less Earned Revenue of 

$148 million). NIST promotes U.S. innovation and industrial competitiveness by advancing measurement science, standards, 

and technology in ways that enhance economic security and improve the Nation’s quality of life. NIST’s Gross Costs include 

costs for its NIST Laboratories program. The NIST Laboratories conducts world-class research, often in close collaboration 

with industry, which advances the Nation’s technology infrastructure and helps U.S. companies continually improve products 

and services. NTIS serves as the largest central resource for government-funded scientific, technical, engineering, and 

28 | FY 2014 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
business related information available today. For more than 60 years, NTIS has assured businesses, universities, and the 

public timely access to approximately 3 million publications covering over 350 subject areas. NTIS promotes the Nation’s 

economic growth by providing access to information that stimulates innovation and discovery.

ITA’s FY 2014 Net Cost of Operations was $459 million (Gross Costs of $481 million less Earned Revenue of $21 million). 

ITA strengthens the competitiveness of U.S. industry, promotes trade and investment, and ensures fair trade through the 

rigorous enforcement of the Nation’s trade laws and agreements. ITA works to improve the global business environment 

and helps U.S. organizations compete at home and abroad. ITA supports the President’s recovery agenda and the National 

Export Initiative to sustain economic growth and support American jobs.

NTIA’s FY 2014 Net Cost of Operations was $371 million (Gross Costs of $410 million less Earned Revenue of $39 million). 

NTIA is the federal agency that is principally responsible for advising the President on telecommunications and information 

policy issues. NTIA’s programs and policymaking focus largely on expanding broadband Internet access and adoption in 

America, expanding the use of spectrum by all users, and ensuring that the Internet remains an engine for continued 

innovation and economic growth. NTIA’s activities include managing the federal use of spectrum and identifying additional 

spectrum for commercial use, and administering grant programs that further the deployment and use of broadband and 

other technologies in America.

EDA’s FY 2014 Net Cost of Operations was $296 million (Gross Costs of $298 million less Earned Revenue of $3 million). 

EDA leads the federal economic development agenda by promoting innovation and competitiveness, preparing American 

regions for growth and success in the worldwide economy. EDA plays a critical role in fostering regional economic 

development efforts in communities across the nation. Through strategic investments that foster job creation and attract 

private investment, EDA supports development in economically distressed areas of the U.S. EDA works directly with 

local economic development officials to make grant investments that are well-defined, timely, and linked to a long-term, 

sustainable economic development strategy.

FY 2014 Net Cost of Operations for Departmental Management (DM) was $110 million (Gross Costs of $344 million less 

Earned Revenue of $234 million), which includes Gifts and Bequests, Herbert C. Hoover Building Renovation Project, Office 

of Inspector General, Salaries and Expenses, and Working Capital Fund. DM’s objective is to develop and provide policies 

and procedures for administrative planning, oversight, coordination, direction, and guidance to ensure implementation of 

the Department’s mission. 

FY 2014 Net Cost of Operations for the other Departmental bureaus was $132 million (Gross Costs of $134 million less 

Earned Revenue of $2 million), which is comprised of the Bureau of Industry and Security (BIS) and the Minority Business 

Development Agency (MBDA). BIS advances U.S. national security, foreign policy, and economic objectives by ensuring 

an effective export control and treaty compliance system and promoting continued U.S. strategic technology leadership. 

MBDA helps to create and sustain U.S. jobs by promoting the growth and global competitiveness of businesses owned 

and operated by minority entrepeneurs.

TRENDS IN NET COST OF OPERATIONS

The Department’s Net Cost of Operations decreased by $815 million or 10 percent, from $8.49 billion in FY 2013 to 

$7.67 billion in FY 2014. Total Gross Departmental Costs decreased by $587 million or 5 percent, from $12.06 billion in 

FY 2013 to $11.47 billion in FY 2014. The decrease in Gross Costs was mainly due to a significant decrease in Gross Costs 

of $676 million in NTIA’s BTOP – ARRA as previously described in the Composition of FY 2014 Net Cost of Operations 

and Net Cost of Operations by Responsibility Segment section above. The Department’s Earned Revenue increased by 

FY 2014 AGENCY FINANCIAL REPORT | 29

MANAGEMENT’S DISCUSSION AND ANALYSIS
$228 million or 6 percent, from $3.57 billion in FY 2013 to $3.80 billion in FY 2014. The increase in Earned Revenue is largely 

due to an increase in USPTO’s Earned Revenue of $298 million, from $2.72 billion in FY 2013 to $3.02 billion in FY 2014, 

primarily due to increased fee rates implemented as a result of the Leahy-Smith America Invents Act of 2011 that were in 

effect for the entire FY 2014 versus for only a portion of FY 2013. There was also an offsetting decrease in Census Bureau’s 

Earned Revenue of $65 million, from $329 million in FY 2013 to $265 million in FY 2014, mainly as a result of decreased 

reimbursable revenue with several federal entities due to the completion or winding down of projects.

SELECTED BUDGETARY INFORMATION BY RESPONSIBILITY SEGMENT

The distribution (by responsibility segment) of the Department’s Obligations Incurred remained consistent from FY 2013 

to FY 2014, while the distribution (by responsibility segment) of the Department’s Outlays, Gross changed somewhat from 

FY 2013 to FY 2014. NTIA’s Outlays, Gross decreased from 8 percent of the Departmental total in FY 2013 to 3 percent 

in FY 2014 due to a significant decrease 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 increased by $1.01 billion or 8 percent, from $12.35 billion in FY 2013 to $13.36 billion 

in FY 2014. The increase in Obligations Incurred is primarily due to increases in NOAA’s and USPTO’s Obligations Incurred. 

NOAA’s Obligations Incurred increased $563 million, from $5.48 billion in FY 2013 to $6.04 billion in FY 2014, largely 

due to increased Obligations Incurred in its Operations, Research, and Facilities budget account of $205 million, and in 

its Procurement, Acquisition, and Construction budget account of $250 million, as these budget accounts have received 

increased Appropriations and Unobligated Balance Brought Forward, including increased Obligations Incurred for funds 

received by NOAA under the Disaster Relief Appropriations Act. USPTO’s Obligations Incurred increased $508 million, from 

$2.49 billion in FY 2013 to $3.00 billion in FY 2014, due to increased Obligations Incurred in several areas, including information 

technology operations, maintenance, and support services; acquisitions of General PP&E; increased compensation to 

employees and federal benefits due to an increase in the average number of employees; patent operations; and patent 

printing. The Department’s Outlays, Gross decreased by $863 million or 6 percent, from $13.78 billion in FY 2013 to 

$12.91 billion in FY 2014, primarily due to a significant decrease of $682 million in Outlays, Gross in NTIA’s BTOP – ARRA, 

from $962 million in FY 2013 to $280 million in FY 2014, mainly due to a continued decrease in payments to grantees for 

prior years’ unpaid obligations, due to the grantees’ periods of performance being in the later stages. 

30 | FY 2014 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
SUMMARY OF STEWARDSHIP INFORMATION

STEWARDSHIP ASSETS

T

he Department has certain resources entrusted to it and certain stewardship responsibilities it assumes. 

The physical properties of Stewardship Assets resemble those of the General Property, Plant, and Equipment 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 Assets, while the National Institute of Standards and Technology (NIST) and the Census Bureau 

also maintains Stewardship Assets.

NOAA maintains the following Stewardship Assets: 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); 13 National Marine Sanctuaries; 

4 Marine National Monuments (Marianas Trench, Pacific Remote Islands, Rose Atoll, and Papahãnaumokuãkea); Aleutian 

Islands Habitat Conservation Area; NOAA Habitat Blueprint (7 Habitat Focus Areas); and Collection-type Heritage Assets, 

primarily included in the NOAA Central Library (mainly books, journals, publications, photographs, and motion pictures) and 

Thunder Bay Sanctuary Research Collection (data cards, photograph negatives, document copies, photographs, books, 

and other items). 

NIST maintains Collection-type Heritage Assets under its Museum and History Program, which collects, preserves, and 

exhibits artifacts, such as scientific instruments, equipment, objects, and records of significance to NIST and predecessor 

agencies. The Census Bureau maintains Collection-type Heritage Assets that help illustrate the social, educational, and 

cultural heritage of the Census Bureau, including artifacts, artwork, books, films, instruments, records, publications, 

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 2014 totaled $266 million 

and included its Public Works program ($114 million), Disaster Recovery ($99 million), Economic Adjustment Assistance 

program ($42 million), and Global Climate Change Mitigation Incentive Fund ($11 million). NOAA’s investments in FY 2014 

totaled $2 million and included the National Estuarine Research Reserves ($1 million) and the Coastal and Estuarine Land 

Conservation Program ($1 million). 

FY 2014 AGENCY FINANCIAL REPORT | 31

MANAGEMENT’S DISCUSSION AND ANALYSIS
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 investments in human capital are by NOAA, whose 

investments in FY 2014 totaled $23 million and included the Educational Partnership Program ($14 million), the Ernest 

F. Hollings Undergraduate Scholarship Program ($6 million), the National Sea Grant College Program ($1 million), the 

National Estuarine Research Reserve Program ($1 million), and the Southeast Fisheries Science Center’s Recruiting 

Training Research Program ($1 million).

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, 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 2014 totaled $665 million, and included $658 million for its NIST Laboratories 

Program and $7 million for its Technology Innovation Program. NOAA’s investments in FY 2014 totaled $460 million, 

which included Environmental and Climate ($294 million), Fisheries ($43 million), Marine Operations and Maintenance and 

Aircraft Services ($30 million), Weather Service ($29 million), and Other ($64 million). 

32 | FY 2014 AGENCY FINANCIAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS
Financial Section
MESSAGE FROM THE CHIEF FINANCIAL OFFICER

T

his FY 2014 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, with a focus on 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 2014, the Department achieved an unmodified audit opinion for the sixteenth consecutive year. The Department was 

able to eliminate the significant deficiency related to the accounting for property at the National Oceanic and Atmospheric 

Administration. However, while making progress towards its elimination, the Department continues to have a significant 

deficiency relating to needed improvement in Department-wide information technology (IT), relating to segregation of 

duties, access controls, and configuration management. The Department also received a significant deficiency related to 

improvements needed in the accounting for the Economic Development Administration’s accrued grants. We will continue 

to take corrective actions to strengthen controls to our accrued grants and IT areas in FY 2015. 

The Department will continue 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 improving the capacity to deliver our mission with customer 

focused outcomes. This starts with our most important assets—our people. The Department’s employees are committed to 

the Commerce mission and public service, and leadership is committed to engaging and empowering them to maximize their 

talents through continuous learning, collaboration, and innovation. 

This includes providing an up-to-date work environment and IT services that support collaboration amongst our employees 

in order to unleash their potential and creativity to solve common challenges. The Department’s headquarters, the Herbert 

C. Hoover Building, is undergoing a critical renovation that will support this environment. Our Office of the Chief Information 

Officer is modernizing our tools to enable best-in-class service through enterprise solutions, while also safeguarding against 

cyber threats. 

The Department’s management is also committed to looking at more efficient and effective ways to manage our processes 

as an enterprise for our key services. This includes using data to better manage for results and exploring opportunities for 

increased collaboration. This will not only allow for improved service delivery, but also smarter and more efficient, effective 

use of taxpayer resources.

Ellen Herbst

Chief Financial Officer 

and Assistant Secretary for Administration

November 14, 2014

34 | FY 2014 AGENCY FINANCIAL REPORT
FINANCIAL SECTION

Independent

Auditors’ 

Report
November 14, 2014

INFORMATION MEMORANDUM FOR THE SECRETARY

FROM: Todd J. Zinser

SUBJECT: Department of Commerce FY 2014 Consolidated Financial 

Statements—Final Report No. OIG-15-008-A

I am pleased to provide you with the attached audit report, which presents an 

unmodified opinion on the Department of Commerce’s FY 2014 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 the Department’s information technology controls and 

accounting for Economic Development Administration’s accrued grants,

which were not considered to be material weaknesses;

 identified a reportable instance of noncompliance with the Antideficiency 

Act, at the Census Bureau, and three potential Antideficiency Act 

compliance matters currently under review; and

 found 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.

Todd J. Zinser

36 | FY 2014 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT
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 

November 14, 2014, and the conclusions expressed in it.

We appreciate the cooperation and courtesies extended to KPMG during the audit.

Attachment

FY 2014 AGENCY FINANCIAL REPORT | 37

INDEPENDENT AUDITORS’ REPORT
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 consolidated balance sheets as of September 30, 2014 and 2013, and the 

related consolidated statements of net cost and 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. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our 

audit opinion.

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.

38 | FY 2014 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT
U.S. Department of Commerce

Independent Auditors’ Report

November 14, 2014

Page 2 of 8

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, 2014 and 2013, 

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.

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 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.

Other Information

Our audits were conducted for the purpose of forming an opinion on the basic consolidated financial 

statements as a whole. The information in the Message from Secretary Pritzker, the How to Use this Report 

section, the Message from the Chief Financial Officer, the Analysis of FY 2014 Financial Condition and 

Results section, the Other Information section, and the Appendices are presented for purposes of additional 

analysis and are not a required part of the basic consolidated financial statements. Such 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 as of and for the year ended 

September 30, 2014, 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 all internal controls 

relevant to operating objectives as broadly defined by the Federal Managers’ Financial Integrity Act of 

1982.

FY 2014 AGENCY FINANCIAL REPORT | 39

INDEPENDENT AUDITORS’ REPORT
U.S. Department of Commerce

Independent Auditors’ Report

November 14, 2014

Page 3 of 8

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. 

 Information technology (IT) access, configuration management and segregation of duties 

controls need improvement. During fiscal year 2014, while we noted continued progress towards 

remediating the prior year significant deficiency, the underlying control deficiencies relating to systems 

access, configuration management, and segregation of duties continue to require improvement. 

Specifically, the Department needs to continue making 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.

 Accounting for Economic Development Administration (EDA) accrued grants needs 

improvement. During fiscal year 2014, the National Oceanic and Atmospheric Administration 

(NOAA), one of EDA’s service providers, worked with EDA to refine the EDA grant accrual 

estimation methodology. However, NOAA and EDA did not establish an effective review process to 

ensure that the underlying data and assumptions in the grant accrual methodology are appropriate and 

the overall calculation is accurate. EDA needs to continue making improvements in the calculation and 

review of the EDA accrued grants.

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 its 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.

 Antideficiency Act - During our fiscal year 2014 financial statement audit, the Department 

informed us that it had reached a conclusion that the U.S. Census Bureau’s obligation of FY 2011

40 | FY 2014 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT
U.S. Department of Commerce

Independent Auditors’ Report

November 14, 2014

Page 4 of 8

funds in advance of their appropriation in the amount of $262,000 was an ADA violation. The 

obligations were charged to an incorrect fund code, which at the time had not received an 

appropriation. Accordingly, the Department has reported this violation of the Antideficiency Act, 

as required by Sections 1351 and 1517(b) of Title 31, of the United States Code. 

Other Matters: The Department also informed us of potential Antideficiency Act compliance matters that

are being reviewed by the Department’s Office of the Secretary and the Department’s Office of General 

Counsel as follows: (i) potential incorrect use of budgetary funding sources to support its programs; (ii) 

accepting terms of agreement on purchases made through the internet; and, (iii) an indemnification clause. 

Because these reviews are not complete, the ultimate outcomes of these potential matters are not presently 

known. 

We also performed tests of its 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 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.

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.

November 14, 2014

FY 2014 AGENCY FINANCIAL REPORT | 41

INDEPENDENT AUDITORS’ REPORT
U.S. Department of Commerce

Independent Auditors’ Report

November 14, 2014

Page 5 of 8

Exhibit I – Significant Deficiencies

A. 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 self-assessments have identified 

weaknesses in the Department’s general information technology (IT) controls. During our FY 2014 

financial statement audit, DOC implemented corrective actions to address the prior year deficiencies. 

However, the timing of implementation of the actions and remaining steps continue to indicate areas of 

improvement. Accordingly, we identified repeat deficiencies during fiscal year 2014 that continue to 

require management’s attention regarding the Department’s general IT controls related to financial 

systems.

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, primarily in the areas of: 1) reviewing user accounts

to appropriately disable and recertify financial system, database and operating system accounts, 2) 

strengthening password controls, 3) ensuring compliance with audit log review requirements, 4) 

enforcing multi-factor authentication, and 5) 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. 

42 | FY 2014 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT
U.S. Department of Commerce

Independent Auditors’ Report

November 14, 2014

Page 6 of 8

Exhibit I – Significant Deficiencies, continued

 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, primarily in the areas of: 1) 

enhancing policy and procedures for the review of certain code files over key financial statement areas, 

and 2) addressing patch and configuration management vulnerabilities. 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 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, primarily in the area of appropriately 

segregating duties within the production environment. We recognize that the Department and its bureau 

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 2014 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. 

FY 2014 AGENCY FINANCIAL REPORT | 43

INDEPENDENT AUDITORS’ REPORT
U.S. Department of Commerce

Independent Auditors’ Report

November 14, 2014

Page 7 of 8

Exhibit I – Significant Deficiencies, continued

Management’s Response

The Department concurs. We will develop corrective action plans and ensure timely implementation to 

address KPMG’s recommendations.

B. Accounting for EDA Accrued Grants Needs Improvement

Based on our prior year findings, NOAA, one of EDA’s service providers, worked with EDA to refine the 

EDA grant accrual estimation methodology. All of the programs were analyzed individually, with the 

exception of grants related to disaster relief grant programs, which were analyzed collectively. NOAA and 

EDA determined that the spending patterns of the disaster relief grant programs vary and it would be best 

to estimate the grant accrual by grouping the grant programs in homogenous pools/categories. However, 

EDA, in coordination with NOAA, did not establish an effective review process to ensure that the 

underlying data and assumptions in the grant accrual methodology are appropriate and the overall 

calculation is accurate. Specifically, we noted that:

 In some instances, the grant accrual amount calculated exceeded the undelivered order balance in the 

general ledger for certain fund code/ fiscal years, resulting in an overstatement of $55.1 million.

 Seven instances where the disbursement activity was incorrectly included in the grant accrual 

calculation, instead of the undelivered order activity.

 Based on our analysis of the average disbursement frequency of EDA’s grants, the year-end grant 

accrual may be overstated by $146 million. Subsequent to our review and inquiry, management 

performed a similar analysis but disaggregated the average disbursement frequency by award, year, and 

type of activity and estimated the potential overstatement to be $54.7 million. We were unable to test 

the underlying data associated with this estimate as management’s analysis was not received timely.

We do not believe that the financial statements are materially misstated as a result of these errors.

However, improvements are needed in the calculation and review of EDA’s accrued grants. Management is 

performing further analysis to determine what actions are needed to improve the accrual process for future 

years.

Recommendations 

We recommend that EDA:

1. Finance and grant program offices, with the assistance of NOAA, identify and document the nature of 

the spending patterns of the grant programs, other grant program trends, changes in grant programs

44 | FY 2014 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT
U.S. Department of Commerce

Independent Auditors’ Report

November 14, 2014

Page 8 of 8

Exhibit I – Significant Deficiencies, continued

and other relevant factors to develop EDA’s grant accrual methodology.

2. Test the completeness and accuracy of the underlying data used to determine the grant accrual.

3. Develop and implement policies requiring an EDA reviewer, with the assistance of NOAA, to:

 Agree each of the inputs and data from the accrual methodology to appropriate supporting 

documentation.

 Compare the accrual to other program information, such as grant obligations, undelivered orders, 

grant expenses, frequency and time period of grant disbursements. 

 Compare actual results to estimates to demonstrate accuracy of the methodology.

 Verify the mathematical accuracy of the grant accrual calculation.

4. Require reviewer(s) to document the procedures performed to review the grant accrual methodology, 

the assumptions used, and the reasonableness of the results.

5. Implement a process for monitoring and validating the accrual subsequent to the end of the reporting 

period.

6. Review the actions performed by NOAA, on behalf of EDA, related to the EDA grant accrual.

Management’s Response

The Department concurs. We will develop corrective action plans and ensure timely implementation to 

address KPMG’s recommendations.

FY 2014 AGENCY FINANCIAL REPORT | 45

INDEPENDENT AUDITORS’ REPORT
46 | FY 2014 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT
FINANCIAL SECTION

Principal

Financial

Statements
United States Department of Commerce Consolidated Balance Sheets

As of September 30, 2014 and 2013 (In Thousands)

FY 2014 FY 2013

ASSETS

Intragovernmental:

Fund Balance with Treasury (Notes 2 and 18) $ 20,440,730 $ 18,002,497

Accounts Receivable (Note 3) 79,756 92,197

Advances and Prepayments 75,948 91,641

Total Intragovernmental 20,596,434 18,186,335

Cash (Note 4) 5,444 5,806

Accounts Receivable, Net (Note 3) 48,201 64,130

Direct Loans and Loan Guarantees, Net (Note 5) 512,588 533,692

Inventory, Materials, and Supplies, Net (Note 6) 100,038 99,607

General Property, Plant, and Equipment, Net (Note 7) 12,107,752 11,103,844

Other (Note 8) 47,247 44,897

TOTAL ASSETS $ 33,417,704 $ 30,038,311

Stewardship Assets (Note 23)

LIABILITIES

Intragovernmental:

Accounts Payable $ 141,659 $ 150,275

Debt to Treasury (Note 10) 1,311,671 575,603

Other

Resources Payable to Treasury 8,674 11,267 

Unearned Revenue 348,361 313,926 

Other (Note 11) 85,953 74,505

Total Intragovernmental 1,896,318 1,125,576

Accounts Payable 451,340 363,540 

Loan Guarantee Liabilities (Notes 5 and 16) 516 516 

Federal Employee Benefits (Note 12) 898,771 897,191 

Environmental and Disposal Liabilities (Note 13) 157,503 156,673 

Other

Accrued Payroll and Annual Leave 500,082 467,706 

Accrued Grants 475,714 536,711 

Capital Lease Liabilities (Note 14) 6,345 7,021 

Unearned Revenue 1,293,216 1,147,196 

Other (Note 11) 20,119 64,100 

TOTAL LIABILITIES $ 5,699,924 $ 4,766,230 

Commitments and Contingencies (Note 16) 

NET POSITION 

Unexpended Appropriations

Unexpended Appropriations - Funds from Dedicated Collections (Note 21) $ - $ -

Unexpended Appropriations - All Other Funds 5,263,441 5,340,879

Cumulative Results of Operations

Cumulative Results of Operations - Funds from Dedicated Collections (Note 21) 11,592,944 10,033,602 

Cumulative Results of Operations - All Other Funds 10,861,395 9,897,600 

Total Net Position - Funds from Dedicated Collections 11,592,944 10,033,602 

Total Net Position - All Other Funds 16,124,836 15,238,479 

TOTAL NET POSITION $ 27,717,780 $ 25,272,081

TOTAL LIABILITIES AND NET POSITION $ 33,417,704 $ 30,038,311 

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

48 | FY 2014 AGENCY FINANCIAL REPORT

PRINCIPAL FINANCIAL STATEMENTS
United States Department of Commerce Consolidated Statements of Net Cost

For the Years Ended September 30, 2014 and 2013 (Note 17) (In Thousands) 

FY 2014 FY 2013

Gross Departmental Costs

National Oceanic and Atmospheric Adminstration (NOAA) $ 4,891,391 $ 4,688,372

U.S. Patent and Trademark Office (USPTO) 2,731,675 2,539,926

Economics and Statistics Adminstration (ESA) 1,402,443 1,525,920

National Institute of Standards and Technology (NIST) 1,017,709 1,067,704

National Telecommunications and Information Adminstration (NTIA) 406,530 1,085,663

Departmental Management 115,770 114,631

Others 903,380 1,033,928

Total Gross Departmental Costs 11,468,898 12,056,144

Less: Earned Revenue (3,796,874) (3,569,109)

NET COST OF OPERATIONS $ 7,672,024 $ 8,487,035 

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

FY 2014 AGENCY FINANCIAL REPORT | 49

PRINCIPAL FINANCIAL STATEMENTS
United States Department of Commerce Consolidated Statements of Changes in Net Position 

For the Years Ended September 30, 2014 and 2013 (In Thousands)

FY 2014 FY 2013

Funds from 

Dedicated Collections

(Note 21) All Other Funds

Consolidated 

Total

Funds from 

Dedicated Collections

(Note 21) All Other Funds

Consolidated 

Total

Cumulative Results Of Operations:

Beginning Balance $ 10,033,602 $ 9,897,600 $ 19,931,202 $ 9,904,756 $ 9,095,044 $ 18,999,800

Change in Accounting Principle (Notes 7 and 13) - - - - (169,319) (169,319)

Beginning Balance, as Adjusted 10,033,602 9,897,600 19,931,202 9,904,756 8,925,725 18,830,481

Budgetary Financing Sources:

Appropriations Used - 8,299,985 8,299,985 - 9,096,654 9,096,654

Non-exchange Revenue 176,145 6,630 182,775 101,468 3,754 105,222

Donations and Forfeitures of Cash and 

 Cash Equivalents - 4,749 4,749 - 11,400 11,400

Transfer In of Auction Proceeds from Federal 

 Communications Commission (Note 21) 1,221,000 - 1,221,000 - - -

Transfers In/(Out) Without Reimbursement, Net 3,768 129,540 133,308 3,650 132,720 136,370

Other Budgetary Financing Sources/(Uses), Net - - - - 137 137

Other Financing Sources (Non-exchange):

Donations and Forfeitures of Property - 1,296 1,296 - 856 856

Transfers In/(Out) Without Reimbursement, Net - 6,742 6,742 - (56,353) (56,353)

Imputed Financing Sources from Cost Absorbed 

 by Others 62,780 294,242 357,022 44,818 250,470 295,288

Other Financing Sources/(Uses), Net - (11,716) (11,716) 350 (2,168) (1,818)

Total Financing Sources 1,463,693 8,731,468 10,195,161 150,286 9,437,470 9,587,756

Net Cost of Operations 95,649 (7,767,673) (7,672,024) (21,440) (8,465,595) (8,487,035)

Net Change 1,559,342 963,795 2,523,137 128,846 971,875 1,100,721

Cumulative Results of Operations – Ending Balance 11,592,944 10,861,395 22,454,339 10,033,602 9,897,600 19,931,202

Unexpended Appropriations:

Beginning Balance - 5,340,879 5,340,879 - 6,716,434 6,716,434

Budgetary Financing Sources:

Appropriations Received (Note 18) - 8,261,101 8,261,101 - 8,293,875 8,293,875

Appropriations Transferred In/(Out), Net - 17,688 17,688 - 27,299 27,299

Rescissions/Sequestrations of Appropriations (Note 18) - (10,660) (10,660) - (560,334) (560,334)

Other Adjustments - (45,582) (45,582) - (39,741) (39,741)

Appropriations Used - (8,299,985) (8,299,985) - (9,096,654) (9,096,654)

Total Budgetary Financing Sources - (77,438) (77,438) - (1,375,555) (1,375,555)

Unexpended Appropriations – Ending Balance - 5,263,441 5,263,441 - 5,340,879 5,340,879

NET POSITION $ 11,592,944 $ 16,124,836 $ 27,717,780 $ 10,033,602 $ 15,238,479 $ 25,272,081

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

50 | FY 2014 AGENCY FINANCIAL REPORT

PRINCIPAL FINANCIAL STATEMENTS
United States Department of Commerce Combined Statements of Budgetary Resources 

For the Years Ended September 30, 2014 and 2013 (Note 18) (In Thousands)

FY 2014 FY 2013

Budgetary

Non-budgetary Credit 

Program Financing Accounts Budgetary

Non-budgetary Credit 

Program Financing Accounts

BUDGETARY RESOURCES:

Unobligated Balance, Brought Forward, October 1 $ 10,701,770 $ 7 $ 10,352,397 $ 2

Adjustments to Unobligated Balance, Brought Forward (2,721) - (157) -

Unobligated Balance, Brought Forward, October 1, as Adjusted 10,699,049 7 10,352,240 2

Actual Recoveries of Prior-years Unpaid Obligations 378,062 6,696 253,455 6,355

Actual Nonexpenditure Transfers of Unobligated Balance, Net 3,826 - 10,647 -

Borrowing Authority Withdrawn - (6,696) - (6,355)

Other Changes in Unobligated Balance, Net (46,094) - (38,198) -

Unobligated Balance From Prior-years Budget Authority, Net 11,034,843 7 10,578,144 2

Appropriations 8,429,193 - 7,907,642 -

Borrowing Authority 1,738,475 98,218 251,231 48,029

Spending Authority From Offsetting Collections 4,867,504 30,152 4,232,937 38,558

TOTAL BUDGETARY RESOURCES $ 26,070,015 $ 128,377 $ 22,969,954 $ 86,589

STATUS OF BUDGETARY RESOURCES:

Obligations Incurred $ 13,235,589 $ 128,367 $ 12,268,184 $ 86,582

Unobligated Balance, End of Year

Apportioned 3,449,315 - 1,499,168 -

Exempt From Apportionment 4,016 - 3,848 -

Unapportioned 9,381,095 10 9,198,754 7

Total Unobligated Balance, End of Year 12,834,426 10 10,701,770 7

TOTAL STATUS OF BUDGETARY RESOURCES $ 26,070,015 $ 128,377 $ 22,969,954 $ 86,589

CHANGE IN UNPAID OBLIGATED BALANCE, NET:

Unpaid Obligations:

Unpaid Obligations, Brought Forward, October 1 $ 6,656,223 $ 139,393 $ 8,348,384 $ 130,136

Adjustments to Unpaid Obligations, Brought Forward - - 157 -

Obligations Incurred 13,235,589 128,367 12,268,184 86,582

Outlays, Gross (12,835,886) (78,655) (13,707,047) (70,970)

Actual Recoveries of Prior-years Unpaid Obligations (378,062) (6,696) (253,455) (6,355)

UNPAID OBLIGATIONS, END OF YEAR $ 6,677,864 $ 182,409 $ 6,656,223 $ 139,393

Uncollected Customer Payments: 

Uncollected Customer Payments, Brought Forward, October 1 $ (468,789) $ (467) $ (608,330) $ (494)

Adjustments to Uncollected Customer Payments, Brought Forward 4,025 - - -

Change in Uncollected Customer Payments 16,101 - 139,541 27

UNCOLLECTED CUSTOMER PAYMENTS, END OF YEAR $ (448,663) $ (467) $ (468,789) $ (467)

Unpaid Obligated Balance, Net, Brought Forward, October 1 $ 6,191,459 $ 138,926 $ 7,740,054 $ 129,642

Unpaid Obligated Balance, Net, End of Year $ 6,229,201 $ 181,942 $ 6,187,434 $ 138,926

BUDGET AUTHORITY, NET:

Budget Authority, Gross $ 15,035,172 $ 128,370 $ 12,391,810 $ 86,587

Actual Offsetting Collections (4,886,210) (92,352) (4,522,862) (98,154)

Change in Uncollected Customer Payments 16,101 - 139,541 27

BUDGET AUTHORITY, NET $ 10,165,063 $ 36,018 $ 8,008,489 $ (11,540)

OUTLAYS, NET:

Outlays, Gross $ 12,835,886 $ 78,655 $ 13,707,047 $ 70,970

Actual Offsetting Collections (4,886,210) (92,352) (4,522,862) (98,154)

Outlays, Net 7,949,676 (13,697) 9,184,185 (27,184)

Distributed Offsetting (Receipts)/Outlays, Net (56,006) - (46,853) -

AGENCY OUTLAYS, NET $ 7,893,670 $ (13,697) $ 9,137,332 $ (27,184)

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

FY 2014 AGENCY FINANCIAL REPORT | 51

PRINCIPAL FINANCIAL STATEMENTS
52 | FY 2014 AGENCY FINANCIAL REPORT

PRINCIPAL FINANCIAL STATEMENTS
FINANCIAL SECTION

Notes to

the Financial

Statements
NOTES TO THE FINANCIAL STATEMENTS

(All Tables are Presented in Thousands Unless Otherwise Stated)

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 Consolidated Statements of Net Cost, 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) — based on organizational structure

● National Technical Information Service (NTIS)

● National Telecommunications and Information Administration (NTIA)1

● Departmental Management (DM)

● Franchise Fund

● Gifts and Bequests (G&B)

● Herbert C. Hoover Building (HCHB) Renovation Project

● Office of Inspector General (OIG)

● Salaries and Expenses (S&E)

● Working Capital Fund (WCF)

● 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)

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 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
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.

C Funds from Dedicated Collections

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.)

FY 2014 AGENCY FINANCIAL REPORT | 55

NOTES TO THE FINANCIAL STATEMENTS
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.

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.

56 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
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.

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. Acquisitions of General PP&E include assets purchased, or assets acquired through other means such as through 

transfer in from another federal entity, donation, devise (a will or clause of a will disposing of property), judicial process, exchange 

between a federal entity and a non-federal entity, and forfeiture. 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. 

FY 2014 AGENCY FINANCIAL REPORT | 57

NOTES TO THE FINANCIAL STATEMENTS
Capitalization Thresholds:

Single-asset Acquisitions: The Department’s policy is to capitalize single-asset acquisitions of General PP&E if the useful life 

is two years or more and the dollar amount meets the entity’s single-asset acquisition capitalization threshold. Based on a 

Department-wide capitalization thresholds review, which reflects materiality and cost-benefit analyses, the Department’s singleasset acquisition capitalization thresholds are as follows: NOAA—$200 thousand or more; NIST and USPTO—$50 thousand 

or more; and all other bureaus and Departmental Management—$25 thousand or more, except that NTIA’s First Responder 

Network Authority has a single-asset acquisition capitalization threshold of $5 thousand. 

Personal Property Bulk Acquisitions: NOAA has a personal property bulk acquisition capitalization threshold of $1 million, and all 

other bureaus and Departmental Management have a personal property bulk acquisition capitalization threshold of $250 thousand, 

except that USPTO has a furniture bulk acquisition capitalization threshold of $50 thousand and NTIA’s First Responder Network 

Authority has a personal property bulk acquisition capitalization threshold of $50 thousand.

General PP&E not meeting the applicable capitalization threshold is expensed.

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.

Effective FY 2013, for the completion of satellites, the Department 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 

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 | FY 2014 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. See Note 10, Debt to Treasury, for information regarding maturity dates.

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.

FY 2014 AGENCY FINANCIAL REPORT | 59

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. Projected annual payments were discounted 

to present value based on OMB’s interest rate assumptions which were interpolated to reflect the average duration in years for 

income payments and medical payments. 

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 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 chargeback year to the average pattern observed during the most current three chargeback 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 | FY 2014 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 $78.9 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 at certain NOAA facilities. The Department has scheduled 

surveys to assess the potential for liabilities for lead-based paint 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 lead-based paint 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. 

FY 2014 AGENCY FINANCIAL REPORT | 61

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.

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 | FY 2014 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.

FY 2014 AGENCY FINANCIAL REPORT | 63

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 regular 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. Section 401 of the Bipartisan Budget Act of 2013, 

signed into law by the President on December 26, 2013, made another change to FERS. Beginning January 1, 2014, new regular 

employees (as designated in the statute) have to pay higher employee contributions, an increase of 1.3 percent of salary above 

the percentage set for the FERS Revised Annuity Employee. Under this law, the employee contribution increased to 4.4 percent. 

The Department’s contribution remained at 9.6 percent. 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, 2014, included 

318 active duty officers, 376 nondisability retiree annuitants, 15 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 FERS-covered 

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 CSRS-covered employees have 

no limit on the percentage of pay contributed to their TSP account. However, the total employee regular contribution for 2014 

and 2013 may not exceed the IRS limit of $17.5 thousand. 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 | FY 2014 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, Russian Intellectual Property Organization, 

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.

FY 2014 AGENCY FINANCIAL REPORT | 65

NOTES TO THE FINANCIAL STATEMENTS
NOTE 2. FUND BALANCE WITH TREASURY

Fund Balance with Treasury, by type, is as follows:

FY 2014 FY 2013

General Funds $ 8,247,076 $ 7,903,145

Revolving Funds 906,953 790,716

Special Funds

Digital Television Transition and Public Safety Fund 8,822,152 8,828,569

Patent and Trademark Surcharge Fund 233,529 233,529

Others 110,312 82,511

Deposit Funds 154,037 135,562

Trust Funds

Public Safety Trust Fund 1,957,934 23,650

Other 4,674 4,777

Other Fund Types 4,063 38

Total $ 20,440,730 $ 18,002,497

Status of Fund Balance with Treasury is as follows:

FY 2014 FY 2013

Temporarily Precluded From Obligation $ 1,089,248 $ 947,581

Unobligated Balance

Available 3,452,709 1,470,060

Unavailable 9,381,382 9,126,545

Obligated Balance Not Yet Disbursed 6,126,726 6,089,565

Non-budgetary 390,665 368,746

Total $ 20,440,730 $ 18,002,497

See Note 18, Combined Statements of Budgetary Resources, for legal arrangements affecting the Department’s use of Fund 

Balance with Treasury for FY 2014 and FY 2013.

66 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
NOTE 3. ACCOUNTS RECEIVABLE, NET 

FY 2014

Accounts 

Receivable, 

Gross

Allowance for 

Uncollectible 

Accounts

Accounts 

Receivable, 

Net

Intragovernmental $ 79,756 $ - $ 79,756

With the Public $ 59,868 $ (11,667) $ 48,201

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

NOTE 4. CASH 

FY 2014 FY 2013

Cash Not Yet Deposited with Treasury $ 5,091 $ 5,453

Imprest Funds 353 353

Total $ 5,444 $ 5,806

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. 

FY 2014 AGENCY FINANCIAL REPORT | 67

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 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, 2014. 

Loan Guarantee Programs:

EDA Economic Development Revolving Fund

ELGP-Steel Emergency Steel Loan Guarantee Program

NOAA Fishing Vessel Obligation Guarantee Program (FVOG Program)

NOAA’s Fisheries Finance Loan programs provide direct loans for certain fisheries costs, including vessels, shoreside facilities, 

aquaculture, and Individual Fishing Quota (IFQ). Vessel financing is available for the purchase of used vessels or the reconstruction 

of vessels. Refinancing is available for existing debt obligations. The purpose of these loan programs is to contribute to stable 

fisheries and fishing communities, and ensure that fisheries are sustainable economic resources. NOAA’s various buyback loan 

programs address excess fishing capacity which decreases fisheries earnings, complicates fisheries management, and imperils 

fisheries conservation. Buyback loans are issued to fisheries to permanently remove vessels and/or permits and thus lower 

fishing effort in overcapitalized fisheries. Loans are repaid from fees collected on the ex-vessel value of the catch in the fishery.

68 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
The net assets for the Department’s loan programs consist of:

FY 2014 FY 2013

Direct Loans Obligated Prior to FY 1992 $ 11,771 $ 14,750

Direct Loans Obligated After FY 1991 500,298 518,423

Defaulted Guaranteed Loans from Pre-FY 1992 Guarantees 3 3

Defaulted Guaranteed Loans from Post-FY 1991 Guarantees 516 516

Total $ 512,588 $ 533,692

Direct Loans Obligated Prior to FY 1992 consist of:

FY 2014

Direct 

Loan Program

Loans 

Receivable, 

Gross

Interest 

Receivable

Allowance for 

Loan Losses

Value of Assets 

Related to 

Direct Loans, 

Net

CEIP $ 18,842 $ 5,474 $ (19,813) $ 4,503

Drought Loan Portfolio 4,257 - - 4,257

Fisheries Loan Fund 148 16 (164) -

Economic Development Revolving Fund 3,040 1 (30) 3,011

Total $ 26,287 $ 5,491 $ (20,007) $ 11,771

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 2014 AGENCY FINANCIAL REPORT | 69

NOTES TO THE FINANCIAL STATEMENTS
Direct Loans Obligated After FY 1991 consist of: 

FY 2014

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 $ 32,956 $ 85 $ 5,040 $ 38,081

Bering Sea Pollock Fishery Buyback 33,226 52 1,830 35,108

Crab Buyback Loans 83,006 1,481 19,945 104,432

Fisheries Finance IFQ Loans 23,237 233 4,102 27,572

Fisheries Finance Traditional Loans 225,699 2,015 22,979 250,693

Pacific Groundfish Buyback Loans 27,486 66 6,421 33,973

Alaska Purse Seine Fishery Buyback Loans 9,572 16 851 10,439

Total $ 435,182 $ 3,948 $ 61,168 $ 500,298

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 NonPollock 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

New Disbursements of Direct Loans (Post-FY 1991):

Direct Loan Program FY 2014 FY 2013

Fisheries Finance IFQ Loans $ 1,411 $ 1,922

Fisheries Finance Traditional Loans 42,563 18,181

Bering Sea and Aleutian Islands 

Non-Pollock Buyback Loans - 2,700

Total $ 43,974 $ 22,803

70 | FY 2014 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 2014

Direct Loan Program

Interest Rate

Differential Defaults

Fees and 

Other

Collections Other Total

Fisheries Finance IFQ Loans $ (5,366) $ 28 $ (217) $ 1,836 $ (3,719)

Fisheries Finance Traditional Loans (233) 2 (6) 85 (152)

Total $ (5,599) $ 30 $ (223) $ 1,921 $ (3,871)

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)

Modifications and Reestimates:

FY 2014 FY 2014

Direct Loan Program

Total

Modifications

Interest Rate

Reestimates

Technical

Reestimates

Total

Reestimates

Bering Sea and Aleutian Islands Non-Pollock 

Buyback Loans $ - $ - $ (594) $ (594)

Bering Sea Pollock Fishery Buyback - - (3) (3)

Crab Buyback Loans - - 2,883 2,883

Fisheries Finance IFQ Loans - - (328) (328)

Fisheries Finance Traditional Loans - - 9,125 9,125

Pacific Groundfish Buyback Loans - - 1,200 1,200

Alaska Purse Seine Fishery Buyback Loans - - (399) (399)

Total $ - $ - $ 11,884 $ 11,884

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)

Fisheries Finance Traditional Loans - - (465) (465)

Alaska Purse Seine Fishery Buyback Loans - - (462) (462)

Total $ - $ - $ (29) $ (29)

FY 2014 AGENCY FINANCIAL REPORT | 71

NOTES TO THE FINANCIAL STATEMENTS
Total Direct Loan Subsidy Expense:

Direct Loan Program FY 2014 FY 2013

Bering Sea and Aleutian Islands Non-Pollock 

Buyback Loans $ (594) $ 1,233

Bering Sea Pollock Fishery Buyback (3) 30

Crab Buyback Loans 2,883 618

Fisheries Finance IFQ Loans (481) (255)

Fisheries Finance Traditional Loans 5,407 (2,852)

Pacific Groundfish Buyback Loans 1,200 (465)

Alaska Purse Seine Fishery Buyback Loans (399) (462)

Total $ 8,013 $ (2,153)

Subsidy Rates for Direct Loans by Program and Component:

Budget Subsidy Rates for Direct Loans for the Current Fiscal-year’s Cohorts:

FY 2014

Direct Loan Program

Interest Rate

Differential Defaults

Fees and 

Other 

Collections Other Total

Fisheries Finance IFQ Loans (21.48) % 0.14 % (0.40) % 13.68 % (8.06) %

Fisheries Finance Traditional Loans (14.94) % 0.58 % (0.50) % 7.50 % (7.36) %

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) %

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 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
Schedule for Reconciling Allowance for Subsidy Cost (Post-FY 1991 Direct Loans):

FY 2014 FY 2013

Beginning Balance of the Allowance for Subsidy Cost $ 73,396 $ 75,567

Add Subsidy Expense for Direct Loans Disbursed During the 

Reporting Years by Component:

 Interest Rate Differential Costs 5,599 3,890

 Default Costs (Net of Recoveries) (30) (885)

 Fees and Other Collections 223 99

 Other Subsidy Costs (1,921) (980)

Total of the above Subsidy Expense Components 3,871 2,124

Adjustments:

 Fees Received (238) (96)

 Subsidy Allowance Amortization (3,980) (4,262)

 Other 3 34

Total of Adjustments (4,215) (4,324)

Ending Balance of the Allowance for Subsidy Cost Before Reestimates 73,052 73,367

Add or Subtract Subsidy Reestimates by Component:

 Technical/Default Reestimates (11,884) 29

Ending Balance of the Allowance for Subsidy Cost $ 61,168 $ 73,396

Defaulted Guaranteed Loans from Pre-FY 1992 Guarantees:

FY 2014

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 $ - $ (7,315) $ 3

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 2014 AGENCY FINANCIAL REPORT | 73

NOTES TO THE FINANCIAL STATEMENTS
Defaulted Guaranteed Loans from Post-FY 1991 Guarantees:

FY 2014

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 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

Loan Guarantees:

Guaranteed Loans Outstanding:

Outstanding non-acquired guaranteed loans as of September 30, 2014 and 2013, which are not reflected in the financial 

statements, are as follows: 

FY 2014 FY 2013

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 $ 157 $ 157 $ 1,195 $ 1,195

New Guaranteed Loans Disbursed:

There were no new guaranteed loans disbursed during FY 2014 and FY 2013.

Loan Guarantee Liabilities: 

FY 2014 FY 2013

Loan Guarantee Program

Loan Guarantee 

Liabilities for PostFY 1991 Guarantees, 

Present Value

Loan Guarantee 

Liabilities for PostFY 1991 Guarantees, 

Present Value

FVOG Program $ 516 $ 516

74 | FY 2014 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 2014 and FY 2013, there is not any related subsidy 

expense.

Modifications and Reestimates:

There were no modifications and reestimates for loan guarantees for FY 2014 and FY 2013.

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 2014 and FY 2013.

Schedule for Reconciling Loan Guarantee Liabilities (Post-FY 1991 Loan Guarantees):

FY 2014 FY 2013

Beginning Balance of Loan Guarantee Liabilities $ 516 $ 518

Adjustments:

Other - (2)

Ending Balance of Loan Guarantee Liabilities $ 516 $ 516

Administrative Expenses: 

Administrative expenses in support of the Department’s direct loan and loan guarantee programs consist of: 

Direct Loan Program FY 2014 FY 2013

Drought Loan Portfolio and 

Economic Development Revolving Fund $ 165 $ 256

NOAA Direct Loan Programs 3,374 3,147

Total $ 3,539 $ 3,403

Loan Guarantee Program FY 2014 FY 2013

FVOG Program $ 176 $ 170

FY 2014 AGENCY FINANCIAL REPORT | 75

NOTES TO THE FINANCIAL STATEMENTS
NOTE 6. INVENTORY, MATERIALS, AND SUPPLIES, NET

Category Cost Flow Assumption FY 2014 FY 2013

Inventory

Items Held for Current Sale

NIST Standard Reference Materials Average $ 22,379 $ 22,087

Other Various 325 305

Allowance for Excess, Obsolete, 

and Unserviceable Items (73) (60)

Total Inventory, Net 22,631 22,332

Materials and Supplies

Items Held for Use

NOAA’s National Logistics Support Center Weighted-average 51,020 51,507

Other Various 5,100 5,168

Items Held for Repair

NOAA’s National Reconditioning Center Weighted-average 36,332 39,761

Allowance for Excess, Obsolete, 

and Unserviceable Items (15,045) (19,161)

Total Materials and Supplies, Net 77,407 77,275

Total $ 100,038 $ 99,607

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 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
NOTE 7. GENERAL PROPERTY, PLANT, AND EQUIPMENT, NET

FY 2014

Category

Useful Life

(Years) Cost

Accumulated

Depreciation Net Book Value

Land N/A $ 16,633 $ - $ 16,633

Land Improvements 30-40 2,996 (1,655) 1,341

Structures, Facilities, and 

Leasehold Improvements 2-50 2,203,366 (739,337) 1,464,029

Satellites/Weather Systems 

Personal Property 3-20 6,381,184 (4,415,831) 1,965,353

Other Personal Property 2-30 2,945,075 (1,974,690) 970,385

Assets Under Capital Lease 3-40 30,408 (18,557) 11,851

Construction-in-progress N/A 7,678,160 - 7,678,160

Total $ 19,257,822 $ (7,150,070) $ 12,107,752

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

Effective FY 2013, 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 2014 AGENCY FINANCIAL REPORT | 77

NOTES TO THE FINANCIAL STATEMENTS
NOTE 8. OTHER ASSETS

FY 2014 FY 2013

With the Public

Advances and Prepayments $ 37,024 $ 37,534

Note Receivable 1,464 1,517

Bibliographic Database, Net 5,533 5,728

General PP&E Permanently Removed but 

Not Yet Disposed

2,679 114

Other 547 4

Total $ 47,247 $ 44,897

As of September 30, 2014 and 2013, 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 $72.4 million and $70.0 million, less accumulated amortization of 

$66.9 million and $64.3 million, as of September 30, 2014 and 2013, respectively.

NOTE 9. NON-ENTITY ASSETS

The assets that are not available for use in the Department’s operations are summarized below:

FY 2014 FY 2013

Intragovernmental

Fund Balance with Treasury $ 136,209 $ 121,319

Accounts Receivable 11,614 7,222

Total Intragovernmental 147,823 128,541

With the Public

Cash 769 1,145

Accounts Receivable, Net 471 331

Direct Loans and Loan 

Guarantees, Net 7,210 8,407

Advances and Prepayments 2,437 -

Other 1,464 1,674

Total $ 160,174 $ 140,098

78 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
NOTE 10. DEBT TO TREASURY

FY 2014

Loan Program

Beginning

Balance

Net Borrowings

(Repayments)

Ending

Balance

Direct Loan Program

Fisheries Finance, Financing Account $ 524,565 $ (13,694) $ 510,871

NTIA Public Safety Trust Fund 39,238 739,762 779,000

NTIA State and Local Implementation Fund 11,800 10,000 21,800

Total $ 575,603 $ 736,068 $ 1,311,671

For the direct loan program Debt to Treasury, maturity dates range from September 2017 to September 2052, and interest 

rates range from 2.11 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 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 Public Safety Trust Fund 2,238 37,000 39,238

NTIA State and Local Implementation Fund 300 11,500 11,800

Total $ 554,281 $ 21,322 $ 575,603

FY 2014 AGENCY FINANCIAL REPORT | 79

NOTES TO THE FINANCIAL STATEMENTS
NOTE 11. OTHER LIABILITIES

FY 2014 FY 2013

Current Portion

Non-current 

Portion Total Total

Intragovernmental

Accrued FECA Liability $ 24,896 $ 8,612 $ 33,508 $ 35,505

Accrued Benefits 39,718 - 39,718 30,608

Custodial Activity 62 299 361 230

Downward Subsidy Reestimates 

Payable to Treasury 11,614 - 11,614 7,222

Other 752 - 752 940

Total $ 77,042 $ 8,911 $ 85,953 $ 74,505

With the Public

ITA Foreign Service Nationals’ 

Voluntary Separation Pay $ 2,558 $ 8,678 $ 11,236 $ 12,222

Contingent Liabilities (Note 16) 409 - 409 625

Employment-related 1,416 - 1,416 5,842

Other 7,058 - 7,058 45,411

Total $ 11,441 $ 8,678 $ 20,119 $ 64,100

The Current Portion represents liabilities expected to be paid by September 30, 2015, while the Non-current Portion 

represents liabilities expected to be paid after September 30, 2015.

80 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
NOTE 12. FEDERAL EMPLOYEE BENEFITS

FY 2014 FY 2013

Actuarial FECA Liability $ 226,371 $ 242,691

NOAA Corps Retirement System Liability 632,800 612,200

NOAA Corps Post-retirement Health Benefits Liability 39,600 42,300

Total $ 898,771 $ 897,191

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 2014 FY 2013

Year 1 3.46% 2.73%

Year 2 and Thereafter 3.46% 3.13%

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 currentyear constant dollars, were as follows:

FY 2014

Fiscal Year

Cost of Living 

Allowance

Consumer Price 

Index - Medical

2015 1.73% 2.93%

2016 2.17% 3.76%

2017 2.13% 3.86%

2018 2.23% 3.90%

2019 2.30% 3.90%

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 2014 AGENCY FINANCIAL REPORT | 81

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, 2014 and 2013 actuarial calculations used the following 

economic assumptions:

FY 2014 FY 2013

Discount Rate 4.19% 4.23%

Annual Basic Pay Scale Increases 2.81% 2.93%

Annual Inflation 2.31% 2.43%

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 2014 FY 2013

Beginning Balance - NOAA Corps Retirement System Liability $ 612,200 $ 577,900

Add Pension Costs:

Normal Cost 12,600 11,900

Interest on the Unfunded Liability 25,200 23,900

Actuarial (Gains)/Losses, Net

From Experience (4,200) 3,300

From Discount Rate Assumption Change 6,000 17,100

From Long-term Assumption Changes

Annual Inflation (10,800) (1,900)

Annual Basic Pay Scale Increases (600) (800)

Demographic 16,600 3,100

Other - 900

Total Pension Costs 44,800 57,500 

Subtract Benefit Payments (24,200) (23,200)

Ending Balance - NOAA Corps Retirement System Liability $ 632,800 $ 612,200 

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 2014 FY 2013

Discount Rate 4.17% 4.21%

Ultimate Medical Trend Rate 5.15% 5.35%

82 | FY 2014 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 2014 FY 2013

Beginning Balance - NOAA Corps Post-retirement Health 

Benefits Liability $ 42,300 $ 45,100 

Add Health Benefits Costs:

Normal Cost 1,300 1,400 

Interest on the Unfunded Liability 1,800 1,800

Actuarial (Gains)/Losses, Net

From Experience 800 1,200

From Discount Rate Assumption Change 200 600

From Long-term Assumption Changes

Medical Claims Costs (4,500) (5,300)

Other 300 100

Total Health Benefits Costs (100) (200)

Subtract Benefit Payments (2,600) (2,600)

Ending Balance - NOAA Corps Post-retirement Health 

Benefits Liability $ 39,600 $ 42,300

 NOTE 13. ENVIRONMENTAL AND DISPOSAL LIABILITIES

FY 2014 FY 2013

Asbestos-related Cleanup Costs $ 85,907 $ 95,832

Nuclear Reactor 60,122 56,232

Pribilof Islands 1,950 2,074

Non-reactor Radiological Facilities 7,320 -

Other 2,204 2,535

Total $ 157,503 $ 156,673

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 asbestos-related 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 asbestosrelated 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.

FY 2014 AGENCY FINANCIAL REPORT | 83

NOTES TO THE FINANCIAL STATEMENTS
NOTE 14. LEASES

Capital Leases:

Assets under capital leases are as follows:

FY 2014 FY 2013

Structures, Facilities, and Leasehold Improvements $ 18,527 $ 22,957

Equipment 11,881 280

Less: Accumulated Depreciation (18,557) (19,287)

Net Assets Under Capital Leases $ 11,851 $ 3,950

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 2014

General PP&E Category

 Fiscal Year Real Property Personal Property Total

2015 $ 1,956 $ 1,280 $ 3,236

2016 904 449 1,353

2017 839 449 1,288

2018 839 - 839

2019 551 - 551

Thereafter 7,940 - 7,940

Total Future Lease Payments 13,029 2,178 15,207

Less: Imputed Interest (6,741) (39) (6,780)

Less: Executory Costs (2,082) - (2,082)

Net Capital Lease Liabilities $ 4,206 $ 2,139 $ 6,345

84 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
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

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 nonfederally 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 2015 through FY 2019; and 2) future payments 

due under noncancellable operating leases (non-GSA real property) are as follows:

FY 2014

General PP&E Category

 Fiscal Year

GSA

Real Property

Non-GSA

Real Property

2015 $ 273,919 $ 20,655

2016 271,859 16,475

2017 271,224 11,340

2018 271,244 11,093

2019 266,753 10,234

Thereafter 1 77,177

Total Future Lease Payments $ 146,974

1 Not estimated.

FY 2014 AGENCY FINANCIAL REPORT | 85

NOTES TO THE FINANCIAL STATEMENTS
NOTE 15. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

FY 2014 FY 2013

Intragovernmental

Accrued FECA Liability $ 33,413 $ 35,408

Total Intragovernmental 33,413 35,408

Accrued Payroll 55,470 50,955

Accrued Annual Leave 280,960 272,350

Federal Employee Benefits 898,771 897,191

Environmental and Disposal Liabilities 157,503 156,673

Contingent Liabilities 409 625

Capital Lease Liability 1,316 -

Unearned Revenue 439,031 489,275

ITA Foreign Service Nationals’ Voluntary Separation Pay 11,236 12,222

Other 2,437 100

Total $ 1,880,546 $ 1,914,799

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 | FY 2014 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, 2014 is 

shown below.

Major Long-term Commitments:

FY 2014

Description FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 Thereafter Total

Geostationary Operational 

Environmental Satellites $ 980,838 $ 886,791 $ 783,389 $ 523,049 $ 349,032 $ 2,195,419 $ 5,718,518

Joint Polar Satellite 

Systems 916,267 833,966 797,246 710,777 566,717 1,561,417 5,386,390

Satellite Ground Services 52,717 55,542 55,542 55,542 55,542 - 274,885

Ocean Service Topography 25,656 - - - - - 25,656

Deep Space Climate 

Observatory 21,100 3,200 2,400 2,069 - - 28,769

Projects, Planning, 

and Analysis 33,488 33,488 33,488 33,488 33,488 - 167,440

Solar Irradiance, Data, 

and Rescue 15,000 - - - - - 15,000

Constellation Observing 

System for Meteorology, 

Ionosphere, and 

Climate - 2 6,800 10,100 8,100 8,100 8,100 23,200 64,400

System Architecture and 

Advanced Planning 4,587 4,929 4,929 4,929 4,929 - 24,303

Other Weather Service 39,480 38,351 37,661 37,383 37,086 37,174 227,135

Total $ 2,095,933 $ 1,866,367 $ 1,722,755 $ 1,375,337 $ 1,054,894 $ 3,817,210 $ 11,932,496

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 

$409 thousand and $625 thousand as of September 30, 2014 and 2013, respectively. Accordingly, these contingent liabilities 

were included in Other Liabilities on the Consolidated Balance Sheets as of September 30, 2014 and 2013, 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.

FY 2014 AGENCY FINANCIAL REPORT | 87

NOTES TO THE FINANCIAL STATEMENTS
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 $267.2 million as of September 30, 2014. 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 

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 $540.6 million

as of September 30, 2014. 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, 2014 and 2013, with outstanding principal balances totaling $157 thousand 

and $1.2 million, respectively. A loan guarantee liability of $516 thousand is recorded for the outstanding guarantees as of 

September 30, 2014 and 2013.

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) the Ozone Mapping and Profiler Suite (OMPS); 3) the Cross-track Infrared Sounder; and 4) the Visible 

Infrared Imaging Radiometer Suite Flight Model 2 for JPSS-1. As a result of the restructuring efforts, NOAA recorded additional 

impairment costs totaling $98.3 million in FY 2012.

88 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
NOAA and NASA launched the Suomi National Polar-orbiting Partnership( S-NPP) satellite on October 28, 2011, and NOAA and 

NASA are continuing to develop the JPSS-1 instruments and the spacecraft, which is based on the design used for the S-NPP 

satellite. NOAA is planning a request for proposal to compete contract construction for the spacecraft for JPSS-2 in FY 2015. 

In FY 2013, NOAA placed the Common Ground System into service, at a cost of $1.37 billion. The Common Ground System will 

continue to undergo significant system development in the future, which will result in asset improvements. 

NOTE 17. CONSOLIDATED STATEMENTS OF NET COST

Major Programs: The following tables illustrate major functions of the Department. 

United States Department of Commerce Combining Statement of Net Cost by Major Budgetary Function

For the Year Ended September 30, 2014

Natural 

Resources and 

Environment/

Other Natural 

Resources

Other 

Advancement 

of Commerce

Area and 

Regional 

Development Others 

Combined

Total

IntraDepartmental 

Eliminations

Consolidated 

Total

Intragovernmental

Gross Costs $ 764,915 $ 1,564,233 $ 14,884 $ 48,338 $ 2,392,370 $ (286,047) $ 2,106,323

Less: Earned Revenue (160,330) (760,524) (3,216) 743 (923,327) 286,047 (637,280)

Intragovernmental, Net Costs 604,585 803,709 11,668 49,081 1,469,043 - 1,469,043

With the Public

Gross Costs 4,071,006 4,934,261 283,550 73,758 9,362,575 - 9,362,575

Less: Earned Revenue (49,009) (3,108,481) 446 (2,550) (3,159,594) - (3,159,594)

With the Public, Net Costs 4,021,997 1,825,780 283,996 71,208 6,202,981 - 6,202,981

Total Program Costs

Gross Costs 4,835,921 6,498,494 298,434 122,096 11,754,945 (286,047) 11,468,898

Less: Earned Revenue (209,339) (3,869,005) (2,770) (1,807) (4,082,921) 286,047 (3,796,874)

NET COST OF OPERATIONS $ 4,626,582 $ 2,629,489 $ 295,664 $ 120,289 $ 7,672,024 $ - $ 7,672,024

FY 2014 AGENCY FINANCIAL REPORT | 89

NOTES TO THE FINANCIAL STATEMENTS
United States Department of Commerce Combining Statement of Net Cost by Major Budgetary Function

For the Year Ended September 30, 2013 (Reclassified)1

Natural 

Resources and 

Environment/

Other Natural 

Resources

Other 

Advancement 

of Commerce

Area and 

Regional 

Development Others 

Combined

Total

IntraDepartmental 

Eliminations

Consolidated 

Total

Intragovernmental

Gross Costs $ 739,960 $ 1,609,483 $ 17,961 $ 72,499 $ 2,439,903 $ (266,240) $ 2,173,663

Less: Earned Revenue (190,824) (745,806) (8,391) (851) (945,872) 266,240 (679,632)

Intragovernmental, Net Costs 549,136 863,677 9,570 71,648 1,494,031 - 1,494,031

With the Public

Gross Costs 3,882,654 5,513,565 412,384 73,878 9,882,481 - 9,882,481

Less: Earned Revenue (56,121) (2,827,556) (3,170) (2,630) (2,889,477) - (2,889,477)

With the Public, Net Costs 3,826,533 2,686,009 409,214 71,248 6,993,004 - 6,993,004

Total Program Costs

Gross Costs 4,622,614 7,123,048 430,345 146,377 12,322,384 (266,240) 12,056,144

Less: Earned Revenue (246,945) (3,573,362) (11,561) (3,481) (3,835,349) 266,240 (3,569,109)

NET COST OF OPERATIONS $ 4,375,669 $ 3,549,686 $ 418,784 $ 142,896 $ 8,487,035 $ - $ 8,487,035

1 Certain prior year amounts have been reclassified to conform to the current year presentation.

NOTE 18. COMBINED STATEMENTS OF BUDGETARY RESOURCES

Appropriations: 

There are reconciling items from the amounts of the Budgetary Resources, Appropriations on the Combined Statements of 

Budgetary Resources (SBR) to the amounts of the Budgetary Financing Sources, Appropriations Received on the Consolidated 

Statements of Changes in Net Position (SCNP).

For FY 2014, the primary reconciling item is Transfers In/Out, Net of $149.8 million included in SBR Appropriations, which is $0 

on SCNP as classified as Transfers on SCNP. 

For FY 2013, the primary reconciling items are a) negative appropriations for permanent reductions included in SBR Appropriations

of $560.3 million, which is $0 on SCNP for Appropriations Received, as permanent reductions were classified on SCNP as 

Rescissions/Sequestrations of Appropriations; and b) Transfers In/Out, Net of $155.7 million included in SBR Appropriations, 

which is $0 on SCNP as classified as Transfers on SCNP. 

Borrowing Authority: Total borrowing authority available for NTIA’s State and Local Implementation Fund amounted to 

$ 102.7 million and $113.2 million as of September 30, 2014 and 2013, respectively. Total borrowing authority available for 

NTIA’s Public Safety Trust Fund amounted to $0 and $93.1 million as of September 30, 2014 and 2013, respectively. Total 

borrowing authority available for NOAA’s loan programs amounted to $181.9 million and $138.9 million as of September 30, 

2014 and 2013, 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.

90 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
Permanent, Indefinite Appropriations: All of the Department’s reporting entities have one or more permanent, indefinite 

appropriations to finance operations. Permanent, indefinite appropriations are appropriations that are available until expended.

Permanent Reductions to Budgetary Resources: Permanent reductions to the Department’s budgetary resources under Public 

Laws 113-76 and 112-96 amounted to $10.9 million for FY 2014, while permanent reductions for FY 2013 under Public Laws 

113-6 and 113-2 amounted to $560.3 million. These permanent reductions are included in the SBR Budgetary Resources section, 

and are also included on the Rescissions/Sequestrations lines of the SCNP when applicable.

Legal arrangements affecting the Department’s use of Unobligated Balances of Budget Authority and/or Fund Balance with 

Treasury during FY 2014 and FY 2013 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).

● The Department’s Fund Balance with Treasury as of September 30, 2014 and 2013 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, 2014 and 2013, $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, 2014 and 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).

● 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 2013 

and FY 2012 Combined Statements of Budgetary Resources and the actual FY 2013 and FY 2012 amounts reported in the 

FY 2015 and FY 2014 budgets of the U.S. government, respectively. The President’s Budget that will report actual amounts for 

FY 2014 has not yet been published. 

FY 2014 AGENCY FINANCIAL REPORT | 91

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 2014

Direct Reimbursable Total

Category A $ 2,905,239 $ 3,488,090 $ 6,393,329

Category B 5,910,848 1,219,303 7,130,151

Exempt from Apportionment (159,524) - (159,524)

Total Obligations Incurred $ 8,656,563 $ 4,707,393 $ 13,363,956

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

Undelivered Orders: Undelivered orders were $5.81 billion and $5.73 billion as of September 30, 2014 and 2013, 

respectively.

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 (EAA). These collections are required to be transferred 

to Treasury. For FY 2014, the Department has custodial nonexchange revenue of $63.2 million; custodial nonexchange revenue 

of $361 thousand was payable to Treasury as of September 30, 2014. For FY 2013, the Department had custodial nonexchange 

revenue of $6.5 million; custodial nonexchange revenue of $229 thousand was payable to Treasury as of September 30, 2013. 

The increase in custodial nonexchange revenue from FY 2013 to FY 2014, is primarily due to increased civil monetary penalties 

levied against private entities under EAA.

92 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
NOTE 20. FIDUCIARY ACTIVITIES

Schedule of Fiduciary Activities for the Year Ended September 30, 2014:

FY 2014

Patent Cooperation 

Treaty

Madrid 

Protocol Total

Fiduciary Net Assets, Beginning Balance $ 14,364 $ 484 $ 14,848

Contributions 186,630 21,818 208,448

Disbursements to and on Behalf of Beneficiaries (185,199) (21,790) (206,989) 

Increase/(Decrease) in Fiduciary Net Assets 1,431 28 1,459

Fiduciary Net Assets, Ending Balance $ 15,795 $ 512 $ 16,307

Fiduciary Net Assets as of September 30, 2014: 

FY 2014

Patent Cooperation 

Treaty

Madrid 

Protocol Total

Fund Balance with Treasury $ 15,795 $ 512 $ 16,307

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

FY 2014 AGENCY FINANCIAL REPORT | 93

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, 2014

USPTO Funds 

from Dedicated 

Collections

NTIA Digital 

Television 

Transition and 

Public Safety 

Fund

NTIA Public 

Safety Trust 

Fund

NOAA 

Damage 

Assessment 

and 

Restoration 

Revolving 

Fund

NOAA 

Environmental 

Improvement 

and 

Restoration 

Fund

Other 

Funds from 

Dedicated 

Collections 

Total Funds 

from Dedicated 

Collections

ASSETS 

Fund Balance with Treasury $ 2,372,126 $ 8,822,152 $ 1,957,934 $ 246,360 $ 37,843 $ 29,994 $ 13,466,409

Cash 4,322 - - - - - 4,322

Accounts Receivable, Net 255 - 277 1,336 - 3 1,871

General Property, Plant, and 

Equipment, Net 328,290 - 206 - - - 328,496

Other 8,695 14,357 1,702 26 26 53 24,859

TOTAL ASSETS $ 2,713,688 $ 8,836,509 $ 1,960,119 $ 247,722 $ 37,869 $ 30,050 $ 13,825,957

LIABILITIES 

Accounts Payable $ 112,810 $ - $ 5,330 $ 14 $ - $ 143 $ 118,297

Debt To Treasury - - 779,000 - - 21,800 800,800

Federal Employee Benefits 11,030 - - - - - 11,030

Other 

 Accrued Payroll and Annual Leave 192,942 - 843 166 - 115 194,066

 Accrued Grants - 2,345 - 512 1,024 3,354 7,235

 Unearned Revenue 1,089,812 - - - - - 1,089,812

Other Liabilities 11,686 - - 53 - 34 11,773

TOTAL LIABILITIES $ 1,418,280 $ 2,345 $ 785,173 $ 745 $ 1,024 $ 25,446 $ 2,233,013

 NET POSITION 

Unexpended Appropriations $ - $ - $ - $ - $ - $ - $ -

Cumulative Results of Operations 1,295,408 8,834,164 1,174,946 246,977 36,845 4,604 11,592,944

TOTAL NET POSITION $ 1,295,408 $ 8,834,164 $ 1,174,946 $ 246,977 $ 36,845 $ 4,604 $ 11,592,944

TOTAL LIABILITIES AND 

NET POSITION $ 2,713,688 $ 8,836,509 $ 1,960,119 $ 247,722 $ 37,869 $ 30,050 $ 13,825,957

94 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
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

NOAA

Damage 

Assessment 

and Restoration 

Revolving Fund

NOAA 

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 and Veteran 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

FY 2014 AGENCY FINANCIAL REPORT | 95

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, 2014

USPTO Funds 

from Dedicated 

Collections

NTIA Digital 

Television 

Transition and 

Public Safety 

Fund

 NTIA Public 

Safety Trust 

Fund

NOAA

 Damage 

Assessment 

and 

Restoration 

Revolving Fund

NOAA 

Environmental 

Improvement 

and 

Restoration 

Fund

Other 

Funds from 

Dedicated 

Collections 

Total 

Funds from 

Dedicated 

Collections

Intragovernmental

Gross Costs $ 584,745 $ 14,732 $ 8,649 $ 1,859 $ - $ 1,464 $ 611,449

Less: Earned Revenue (9,102) - (277) - - - (9,379)

Intragovernmental, Net Costs 575,643 14,732 8,372 1,859 - 1,464 602,070

With the Public

Gross Costs 2,147,634 9,483 19,663 105,194 9,159 20,091 2,311,224

Less: Earned Revenue (3,008,943) - - - - - (3,008,943)

With the Public, Net Costs (861,309) 9,483 19,663 105,194 9,159 20,091 (697,719)

Total Program Costs

Gross Costs 2,732,379 24,215 28,312 107,053 9,159 21,555 2,922,683

Less: Earned Revenue (3,018,045) - (277) - - - (3,018,322)

NET COST OF OPERATIONS $ (285,666) $ 24,215 $ 28,035 $ 107,053 $ 9,159 $ 21,555 $ (95,649)

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

NOAA

Damage 

Assessment 

and Restoration 

Revolving Fund

NOAA 

Environmental 

Improvement 

and 

Restoration 

Fund

Other 

Funds from 

Dedicated 

Collections 

Total Funds 

from Dedicated 

Collections

Intragovernmental

Gross Costs $ 540,346 $ 40,815 $ 3,007 $ - $ 2,677 $ 586,845

Less: Earned Revenue (8,841) - - - - (8,841)

Intragovernmental, Net Costs 531,505 40,815 3,007 - 2,677 578,004

With the Public

Gross Costs 2,000,081 9,370 110,034 7,456 27,626 2,154,567

Less: Earned Revenue (2,711,131) - - - - (2,711,131)

With the Public, Net Costs (711,050) 9,370 110,034 7,456 27,626 (556,564)

Total Program Costs

Gross Costs 2,540,427 50,185 113,041 7,456 30,303 2,741,412

Less: Earned Revenue (2,719,972) - - - - (2,719,972)

NET COST OF OPERATIONS $ (179,545) $ 50,185 $ 113,041 $ 7,456 $ 30,303 $ 21,440

96 | FY 2014 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, 2014

USPTO 

Funds from 

Dedicated 

Collections

NTIA Digital 

Television 

Transition 

and Public 

Safety Fund

NTIA Public 

Safety Trust 

Fund

NOAA 

Damage 

Assessment 

and 

Restoration 

Revolving 

Fund

NOAA 

Environmental 

Improvement 

and 

Restoration 

Fund

Other 

Funds from 

Dedicated 

Collections 

Total 

Funds from 

Dedicated 

Collections

Cumulative Results of Operations: 

Beginning Balance $ 949,237 $ 8,858,379 $ (17,894) $ 199,985 $ 27,611 $ 16,284 $ 10,033,602

Budgetary Financing Sources: 

Non-exchange Revenue - - - 148,277 18,393 9,475 176,145

Transfer In of Auction Proceeds from 

 Federal Communications 

 Commission - - 1,221,000 - - - 1,221,000

Transfers In/(Out) Without

Reimbursement, Net (2,000) - (400) 5,768 - 400 3,768

Other Financing Sources (Non-exchange): 

Imputed Financing Sources from Cost 

Absorbed by Others 62,505 - 275 - - - 62,780

 Total Financing Sources 60,505 - 1,220,875 154,045 18,393 9,875 1,463,693

 Net Cost of Operations 285,666 (24,215) (28,035) (107,053) (9,159) (21,555) 95,649

 Net Change 346,171 (24,215) 1,192,840 46,992 9,234 (11,680) 1,559,342

 Cumulative Results of 

 Operations - Ending Balance 1,295,408 8,834,164 1,174,946 246,977 36,845 4,604 11,592,944

 NET POSITION $ 1,295,408 $ 8,834,164 $1,174,946 $ 246,977 $ 36,845 $ 4,604 $ 11,592,944

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

NOAA 

Damage 

Assessment 

and Restoration 

Revolving Fund

NOAA 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

FY 2014 AGENCY FINANCIAL REPORT | 97

NOTES TO THE FINANCIAL STATEMENTS
Below is a description of major Funds from Dedicated Collections shown in the tables on the previous pages.

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 results from 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. 

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 initial 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 $7.36 billion was transferred in September 2009 to the General Fund of the Treasury as required by 

the Deficit Reduction Act of 2005 (Public Law 109-171). 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, 2014, 

the Fund has a Net Position, Cumulative Results of Operations balance of $8.83 billion. The law establishing this program 

can be found in the Deficit Reduction Act of 2005, Sections 3001-3014.

The NTIA Public Safety Trust Fund was created as a result of The Middle Class Tax Relief and Job Creation Act of 2012 (Act). 

The Act provides up to $7.00 billion in funding to be derived from the proceeds of Federal Communications Commission 

(FCC) auctions of spectrum licenses, to be deposited into the Public Safety Trust Fund. Prior to the receipt of auction 

proceeds from FCC, the Act provides authority to NTIA to borrow up to $2.00 billion from Treasury, interest-free. The Act 

directs the use of auction proceeds in an order of priority. After certain uses, $7.00 billion of auction proceeds are dedicated 

to public safety, including providing funding for the First Responder Network Authority (FirstNet), an independent authority 

within NTIA. The amounts borrowed are to be repaid from the auction proceeds. FirstNet shall ensure the establishment 

of a nationwide, interoperable broadband network to help police, firefighters, emergency medical service professionals, and 

other public safety officials stay safe and do their jobs. 

98 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
The Federal Communications Commission (FCC) carries out auctions in accordance with the Act, of which certain earned net 

auction proceeds (earned auction proceeds less any FCC administrative fees) are transferred from FCC to the Public Safety 

Trust Fund. A transfer in from FCC becomes a budgetary financing source on the Consolidated Statement of Changes in 

Net Position and a budgetary resource on the Combined Statement of Budgetary Resources (SBR) when the transfer in 

is provided as a budgetary resource by OMB. The first transfer in from FCC of $1.22 billion was received in FY 2014 and 

is included as a budgetary financing source on the FY 2014 Consolidated Statement of Changes in Net Position and as a 

budgetary resource on the FY 2014 SBR (Budget Authority, Appropriations). The Public Safety Trust Fund repaid $1.22 billion 

of Debt to Treasury in FY 2014, leaving a Debt to Treasury balance of $779 million as of September 30, 2014. This repayment 

of debt was included as a negative budgetary resource of $1.22 billion on the FY 2014 SBR (Budget Authority, Appropriations).

The NOAA 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 NOAA 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 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.

FY 2014 AGENCY FINANCIAL REPORT | 99

NOTES TO THE FINANCIAL STATEMENTS
The reconciliations of Net Cost of Operations to Budget for FY 2014 and 2013 are as follows:

FY 2014 FY 2013

Resources Used to Finance Activities:

Budgetary Resources Obligated:

Obligations Incurred $ 13,363,956 $ 12,354,766

Less: Spending Authority From Offsetting Collections and Actual Recoveries of Prior-years Unpaid Obligations (5,282,414) (4,531,305)

Obligations Net of Offsetting Collections and Actual Recoveries 8,081,542 7,823,461

Less: Distributed Offsetting (Receipts)/Outlays, Net (56,006) (46,853)

Net Obligations 8,025,536 7,776,608

Other Resources: 

Donations and Forfeitures of Property 1,296 856

Transfers In/(Out) Without Reimbursement, Net 6,742 (56,353)

Imputed Financing Sources From Cost Absorbed by Others 357,022 295,288

Other Financing Sources/(Uses), Net (11,716) (1,818)

Net Other Resources Used to Finance Activities 353,344 237,973

Total Resources Used to Finance Activities 8,378,880 8,014,581

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 (75,928) 1,619,746

Resources that Fund Expenses Recognized in Prior Periods (1,995) (1,819)

Budgetary Obligations for Downward Subsidy Reestimates Payable to Treasury (7,361) (21,447)

Budgetary Offsetting Collections and Receipts that Do Not Affect Net Cost of Operations:

Distributed Offsetting (Receipts)/Outlays, Net (excludes Clearing Accounts’ Gross Costs) 56,006 46,853

 Credit Program Collections which Increase Loan Guarantee Liabilities or Allowance for Subsidy Cost 66,792 68,158

 Budgetary Financing Sources/(Uses), Net 83,440 (113,241)

Resources that Finance the Acquisition of Assets (2,115,341) (2,032,544)

Other Resources or Adjustments to Net Obligated Resources that Do Not Affect Net Cost of Operations:

 Change in Unfilled Customer Orders 210,548 4,502

 Donations and Forfeitures of Property (1,296) (856)

 Transfers In/(Out) Without Reimbursement, Net (6,742) 56,353

 Other Financing Sources/(Uses), Net 11,716 1,818

Other (3,115) (5,027)

Total Resources Used to Finance Items Not Part of Net Cost of Operations (1,783,276) (377,504)

Total Resources Used to Finance Net Cost of Operations 6,595,604 7,637,077

(continued on next page)

100 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
(continued from previous page)

FY 2014 FY 2013

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 8,610 1,395

Increase in Federal Employee Benefits 1,580 45,980

Increase in Environmental and Disposal Liabilities 830 4,473

Increase (Decrease) in Contingent Liabilities (216) 123

Reestimates of Credit Subsidy Expense 5,136 1,801

Other 5,935 13,810

Total Components of Net Cost of Operations that Will Require or Generate Resources in Future Periods 21,875 67,582

Components Not Requiring or Generating Resources:

Depreciation and Amortization 1,017,300 736,100

NOAA Issuances of Materials and Supplies 19,135 12,729

Revaluation of Assets or Liabilities 20,239 24,186

Other (2,129) 9,361

Total Components of Net Cost of Operations that Will Not Require or Generate Resources 1,054,545 782,376

Total Components of Net Cost of Operations that Will Not Require or Generate Resources in the Current Period 1,076,420 849,958

NET COST OF OPERATIONS $ 7,672,024 $ 8,487,035

NOTE 23. STEWARDSHIP ASSETS

Preservation of Stewardship Assets promotes the Department’s mission of providing effective management and monitoring of 

our Nation’s resources and assets to support both environmental and economic health. The physical properties of Stewardship 

Assets 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 Assets. Additional information 

on Stewardship Assets is presented in the Required Supplementary Information section. 

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;

FY 2014 AGENCY FINANCIAL REPORT | 101

NOTES TO THE FINANCIAL STATEMENTS
● 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. 

Heritage Assets maintained by NOAA include 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 the Great Lakes Environmental 

Research Laboratory/Lake Michigan Field Station.

Stewardship National Marine Sanctuaries, Marine National Monuments, Conservation Area, and Habitat Blueprint

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 Assets: 

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, 2014, 13 National Marine 

Sanctuaries, which include both coastal and offshore areas, have been designated, covering a total area of nearly 33 thousand 

square miles.

Marine National Monuments: NOAA’s Marine National Monument Program implements the January 2009 Presidential 

Proclamations that established three Pacific Marine National Monuments—the Marianas Trench, Pacific Remote Islands, and 

Rose Atoll, and also co-manages the Papahãnaumokuãkea Marine National Monument, created in 2006. The Marine National 

Monuments were created to protect the abundant and diverse coral, fish, and seabird populations; to facilitate exploration and 

scientific research; and to promote public education regarding the value of these national treasures. The establishment of the 

Monuments provides the opportunity to protect areas of outstanding scientific, cultural, conservation, and aesthetic value, and 

provide for the long-term preservation of these natural and cultural legacies.

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.

102 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
NOAA Habitat Blueprint: Protecting our natural infrastructure is vital to protecting our communities and their economies as well 

as fisheries and recreational opportunities along our coasts. With continued widespread loss and deterioration of coastal and 

marine habitats, we are in danger of losing this infrastructure. Congress has charged NOAA with protecting habitat for fish, 

threatened and endangered species, marine mammals, and other natural resources within the coastal zone. NOAA needs to 

increase the sustainability and productivity of our fisheries by focusing on the habitat that fish need to spawn and grow, as well 

as protecting the coastal resources on which our communities depend. Recognizing the need for more concerted efforts to 

conserve, protect, and restore habitat, NOAA developed the NOAA Habitat Blueprint to build on existing programs, prioritize its 

activities, and guide its future actions. This is being accomplished by creating Habitat Focus Areas. There are currently seven 

Habitat Focus Areas:

● Penobscot River Watershed

● Choptank River Watershed

● Muskegon Lake

● St. Louis River Estuary

● Manell-Geus, Guam Watershed

● West Hawaii

● Russian River

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 thousand 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. 

FY 2014 AGENCY FINANCIAL REPORT | 103

NOTES TO THE FINANCIAL STATEMENTS
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.

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, preserves, 

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 and 

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 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 history and 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 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.

104 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
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.

The Census Bureau has developed a Project Charter that outlines policies and procedures for the acquisition and removal of 

Census Bureau’s heritage assets. The Census Bureau Heritage Assets Committee decides if an 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.

FY 2014 AGENCY FINANCIAL REPORT | 105

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, 

2013

FY 2014 

Additions

FY 2014 

Withdrawals

Quantity of 

Items Held

September 30, 

2014

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

NOAA National Ocean 

Service–Thunder Bay 

Sanctuary Research 

Collection

Data cards, photograph negatives, 

document copies, photographs, 

books, and other items

106,254 - - 106,254

NOAA National Climatic 

Data Center Library 

Artifacts, books, documents, and 

other items 225 - - 225

NOAA Others Artifacts, artwork, books, films, 

instruments, maps, and records 3,398 35 12 3,421

NIST Artifacts and 

Scientific Measures 

National Bureau of Standards 

(NBS)/NIST scientific instruments, 

equipment, and objects 1,047 76 - 1,123

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 145 14 - 159

Census Bureau 

Collectable Assets 

Publications, books, manuscripts, 

photographs, and maps 32 1 - 33

Total 111,221 126 12 111,335

N/A - Not applicable; this category is reported as one collection. 

106 | FY 2014 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
FINANCIAL SECTION

Required

Supplementary

Information

(unaud i ted)
REQUIRED SUPPLEMENTARY INFORMATION (Unaudited)

A Deferred Maintenance and Repairs 

Deferred Maintenance and Repairs (DM&R) 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 DM&R 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, 2014.

NOAA:

NOAA measures DM&R using Condition Assessment Surveys which are periodic visual (i.e., physical) inspections of 

PP&E and heritage assets to determine their current condition and estimated cost to correct any deficiencies. NOAA 

schedules its surveys, for real property on a cyclical basis, with each appropriate asset being surveyed every five years. 

For DM&R reporting purposes, NOAA completed a condition survey of the entire applicable inventory of its real property in 

FY 2011. The first complete cycle of annual testing of a fifth of the real property inventory will be completed no later than 

2016. Exceptions to the five-year cycle would be where factors indicate that a greater frequency of review is prudent for 

reasons such as age and/or poor condition. NOAA schedules it surveys for personal property on an annual basis. 

NOAA will perform Condition Assessment Surveys as necessary to measure and report DM&R for capitalized personal 

property, NOAA-owned buildings (including those fully depreciated), non-capitalized heritage assets, and capital leases 

that NOAA has executed and where NOAA has the financial responsibility for operations and maintenance of the asset. 

NOAA will additionally perform condition assessment surveys for capitalized personal property. For financial reporting 

purposes, NOAA does not report on DM&R of structures, non-heritage non-capitalized buildings, non-capitalized personal 

property, or stewardship land as they represent less than 10 percent of the acquisition value of NOAA’s DM&R inventory 

and therefore are considered immaterial. DM&R cost estimates will only be reported for individual real property items 

with estimates greater than $50 thousand. DM&R on capitalized personal property is reported with an estimated project 

cost of $25 thousand or more.

NOAA prioritizes maintenance and repair projects to sustain its inventory in good operating condition, including 

maintaining warranties. DM&R is impacted by funding shortfalls. As such, NOAA selects projects that will remedy life 

safety deficiencies and minimize risk of mission failure as real property enables the accomplishment of the mission. 

DM&R projects will not be addressed without a funding initiative. NOAA generally does not perform investment analyses 

in selecting projects. For financial reporting purposes, NOAA does not report on DM&R of structures, non-heritage 

non-capitalized buildings, non-capitalized personal property, or stewardship land as they represent less than 10% of the 

acquisition value our inventory and therefore are considered immaterial. 

108 | FY 2014 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
Acceptable condition standards are established by using building codes and/or industry standards for benchmarking and 

cost estimating. These standards are used to evaluate site and building conditions, which include the review of building 

systems such as civil, structure, architectural, life safety, mechanical, plumbing, elevators, electric, and others. 

NOAA has not significantly changed its policies, factors, or amounts that are subject to DM&R reporting requirements.

The following table shows NOAA’s DM&R as of September 30, 2014 and September 30, 2013:

(In Thousands)

Asset Category

Deferred Maintenance 

and Repairs as of 

September 30, 2014

Deferred Maintenance 

and Repairs as of 

September 30, 2013

Buildings $ 74,518 $ 72,545

Heritage Assets:

Documentary Artifacts 11,900 11,900

Pictures 1,000 1,000

Multi-use Heritage 90 176

Other 162 162

Ships 22,996 27,272

Total $ 110,666 $ 113,055

NIST:

NIST performs facility Condition Assessment Surveys for capitalized NIST-owned buildings (including those fully 

depreciated). NIST does not make a distinction between active or inactive assets for reporting DM&R. 

Specific to real property, DM&R estimates relate to capitalized, non-capitalized, and fully depreciated General PP&E. 

DM&R cost estimates are reported for individual items with estimates greater than $5 thousand identified in NIST-owned 

buildings and facilities. Items estimated to cost less than $5 thousand are shared with the facility managers for correction 

as emergency/service calls or minor work orders.

NIST prioritizes maintenance and repair projects to sustain its inventory in good operating condition, including maintaining 

warranties. DM&R is impacted by funding shortfalls. As such, NIST selects projects that will remedy life safety deficiencies 

and minimize risk of mission failure as real property enables the accomplishment of the mission. 

Individual maintenance and repair projects are prioritized using a risk matrix procedure which determines the severity of 

the risk-rank (i.e., minimal, low, medium, serious, or critical). Based on the type of project (maintenance and repair, code 

compliance and safety, or capacity) and the distress type, the appropriate risk matrix is used and a risk-rank assigned. 

Ranking can be adjusted to take into account current projects underway, prioritization of future candidate projects, and 

budgetary funding outlook.

Acceptable facility condition standards are established by using building codes and/or industry standards for benchmarking 

and cost estimating. These standards are used to evaluate site and interior conditions, life safety, mechanical and plumbing 

systems, elevator and conveying systems, electrical systems, structural systems, building envelope closure systems, etc.

FY 2014 AGENCY FINANCIAL REPORT | 109

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
Facility condition index (FCI) values are calculated for each NIST facility. The ratio of the cost of correcting all facility 

deficiencies in a building divided by the cost of replacing the building is expressed on a 100 percentage point scale. The 

FCI index is actually 100 minus this ratio of cost expressed. This is somewhat similar to a system described by the Building 

Research Board of the National Research Council. Generally, a facility with an index above 95 is considered excellent, 

between 95 and 90 is good, between 90 and 85 is fair, and below 85 is considered poor.

NIST DM&R increased significantly from $215.0 million as of September 30, 2013 to $297.0 million as of September 30, 

2014, an increase of $82.0 million. The increase is in part due to an increase in DM&R of $35.4 million associated with 

deficiencies in Building 245, a 50-year old, 210 thousand square foot building. In the past, the reported deficiencies of 

Building 245 included costs to conduct further study to quantify the extent of needed maintenance and repairs to the 

building’s aging mechanical, electrical, plumbing, and architectural systems. DM&R as of September 30, 2014 includes 

the estimated costs of needed maintenance and repairs and recommendations to meet current codes. Furthermore, the 

recalculation of previously recognized facility DM&R, using current fiscal year construction cost rates, and an improvement 

in the estimation methodologies, together resulted in an increase in DM&R of $29.0 million, and a more comprehensive 

approach to estimating road and parking lot DM&R resulted in an increase in DM&R of $14.4 million. 

The following table shows NIST’s DM&R as of September 30, 2014 and September 30, 2013:

(In Thousands)

Assets Category

Deferred Maintenance 

and Repairs as of 

September 30, 2014

Deferred Maintenance 

and Repairs as of 

September 30, 2013

Buildings $ 267,867 $ 204,635

Site Utilities and Infrastructure 29,107 10,373

Total $ 296,974 $ 215,008

B Schedule of Budgetary Resources by Major Budget Account

The following table illustrates the Department’s FY 2014 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.

110 | FY 2014 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
United States Department of Commerce Schedule of Budgetary Resources by Major Budget Account

For the Year Ended September 30, 2014 (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

Economic 

Development 

Assistance

Programs

NTIA 

Broadboand 

Technology 

Opportunities 

Program - 

ARRA

Other 

Programs

BUDGETARY RESOURCES:

Unobligated Balance, Brought Forward, October 1 $ 10,701,777 $ 346,046 $ 442,291 $ 164,849 $ 8,797,016 $ 25,708 $ 139,226 $ 55,664 $ 7,652 $ 723,325

Adjustments to Unobligated Balance, Brought Forward (2,721) - - (1) 1 - (1) - (1) (2,719)

Unobligated Balance, Brought Forward, October 1, as Adjusted 10,699,056 346,046 442,291 164,848 8,797,017 25,708 139,225 55,664 7,651 720,606

Actual Recoveries of Prior-years Unpaid Obligations 384,758 43,302 29,894 10,197 - 18,859 21,735 45,977 127,807 86,987

Actual Nonexpenditure Transfers of Unobligated Balance, Net 3,826 (484) - 484 - 550 - - - 3,276

Borrowing Authority Withdrawn (6,696) - - - - - - - - (6,696)

Other Changes in Unobligated Balance, Net (46,094) (17,398) - (13,601) - (3,272) (8,147) - - (3,676)

Unobligated Balance From Prior-years Budget Authority, Net 11,034,850 371,466 472,185 161,928 8,797,017 41,845 152,813 101,641 135,458 800,497

Appropriations 8,429,193 3,296,776 - 2,025,889 - 461,938 692,000 209,500 - 1,743,090

Borrowing Authority 1,836,693 - - - - - - - - 1,836,693

Spending Authority From Offsetting Collections 4,897,656 215,953 3,027,993 1,458 2,052 25,437 1,379 697 3 1,622,684

TOTAL BUDGETARY RESOURCES $ 26,198,392 $ 3,884,195 $ 3,500,178 $ 2,189,275 $ 8,799,069 $ 529,220 $ 846,192 $ 311,838 $ 135,461 $ 6,002,964

STATUS OF BUDGETARY RESOURCES:

Obligations Incurred $ 13,363,956 $ 3,576,044 $ 2,997,457 $ 2,050,281 $ 2,500 $ 482,409 $ 688,257 $ 243,731 $ - $ 3,323,277

Unobligated Balance, End of Year 

Apportioned 3,449,315 216,203 502,721 123,205 - 32,833 8,851 57,698 - 2,507,804

Exempt From Apportionment 4,016 - - - - - - - - 4,016

Unapportioned 9,381,105 91,948 - 15,789 8,796,569 13,978 149,084 10,409 135,461 167,867

Total Unobligated Balance, End of Year 12,834,436 308,151 502,721 138,994 8,796,569 46,811 157,935 68,107 135,461 2,679,687

TOTAL STATUS OF BUDGETARY RESOURCES $ 26,198,392 $ 3,884,195 $ 3,500,178 $ 2,189,275 $ 8,799,069 $ 529,220 $ 846,192 $ 311,838 $ 135,461 $ 6,002,964

CHANGE IN UNPAID OBLIGATED BALANCE, NET:

Unpaid Obligations:

Unpaid Obligations, Brought Forward, October 1 $ 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

Adjustments to Unpaid Obligations, Brought Forward - 1 - (1)

Obligations Incurred 13,363,956 3,576,044 2,997,457 2,050,281 2,500 482,409 688,257 243,731 - 3,323,277

Outlays, Gross (12,914,541) (3,386,312) (2,683,182) (1,990,003) (8,469) (465,750) (672,032) (321,156) (279,717) (3,107,920)

Actual Recoveries of Prior-years Unpaid Obligations (384,758) (43,302) (29,894) (10,197) - (18,859) (21,735) (45,977) (127,807) (86,987)

UNPAID OBLIGATIONS, END OF YEAR $ 6,860,273 $ 1,994,971 $ 549,941 $ 1,084,685 $ 25,583 $ 84,237 $ 142,317 $ 893,776 $ 338,033 $ 1,746,730

Uncollected Customer Payments:

Uncollected Customer Payments, Brought Forward, October 1 $ (469,256) $ (349,772) $ (47) $ - $ - $ (9,757) $ - $ - $ - $ (109,680)

Adjustments to Uncollected Customer Payments, 

Brought Forward 4,025 - - - - - - - 4,025

Change in Uncollected Customer Payments 16,101 9,991 (73) - - (1,566) - - - 7,749

UNCOLLECTED CUSTOMER PAYMENTS, END OF YEAR $ (449,130) $ (339,781) $ (120) $ - $ - $ (11,323) $ - $ - $ - $ (97,906)

Unpaid Obligated Balance, Net, Brought Forward, October 1 $ 6,330,385 $ 1,498,769 $ 265,513 $ 1,034,604 $ 31,552 $ 76,680 $ 147,827 $ 1,017,178 $ 745,557 $ 1,512,705

Unpaid Obligated Balance, Net, End of Year $ 6,411,143 $ 1,655,190 $ 549,821 $ 1,084,685 $ 25,583 $ 72,914 $ 142,317 $ 893,776 $ 338,033 $ 1,648,824

BUDGET AUTHORITY, NET:

Budget Authority, Gross $ 15,163,542 $ 3,512,729 $ 3,027,993 $ 2,027,347 $ 2,052 $ 487,375 $ 693,379 $ 210,197 $ 3 $ 5,202,467

Actual Offsetting Collections (4,978,562) (225,944) (3,029,920) (1,458) (2,052) (23,871) (1,379) (697) (3) (1,693,238)

Change in Uncollected Customer Payments 16,101 9,991 (73) - - (1,566) - - - 7,749

BUDGET AUTHORITY, NET $ 10,201,081 $ 3,296,776 $ (2,000) $ 2,025,889 $ - $ 461,938 $ 692,000 $ 209,500 $ - $ 3,516,978

OUTLAYS, NET:

Outlays, Gross $ 12,914,541 $ 3,386,312 $ 2,683,182 $ 1,990,003 $ 8,469 $ 465,750 $ 672,032 $ 321,156 $ 279,717 $ 3,107,920

Actual Offsetting Collections (4,978,562) (225,944) (3,029,920) (1,458) (2,052) (23,871) (1,379) (697) (3) (1,693,238)

Outlays, Net 7,935,979 3,160,368 (346,738) 1,988,545 6,417 441,879 670,653 320,459 279,714 1,414,682

Distributed Offsetting (Receipts)/Outlays, Net (56,006) - - - - - - - - (56,006)

AGENCY OUTLAYS, NET $ 7,879,973 $ 3,160,368 $ (346,738) $ 1,988,545 $ 6,417 $ 441,879 $ 670,653 $ 320,459 $ 279,714 $ 1,358,676

FY 2014 AGENCY FINANCIAL REPORT | 111

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
112 | FY 2014 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
FINANCIAL SECTION

Required

Supplementary

Stewardship

Information

(unaud i ted)
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 Economic Development Administration (EDA) and the National Oceanic and Atmospheric 

Administration (NOAA) have significant investments in non-federal physical property.

EDA’s and NOAA’s investments in non-federal physical property for FY 2010 through FY 2014 were as follows:

(In Millions)

Program FY 2014 FY 2013 FY 2012 FY 2011 FY 2010 Total

EDA:

Public Works $ 114.0 $ 120.5 $ 160.7 $ 224.4 $ 175.8 $ 795.4

Economic Adjustment Assistance 42.3 66.8 49.5 47.6 61.4 267.6

Global Climate Change Mitigation Incentive Fund 10.6 14.9 12.8 6.8 5.5 50.6

Disaster Recovery 98.7 146.2 111.0 85.1 32.4 473.4

EDA Subtotal 265.6 348.4 334.0 363.9 275.1 1,587.0

NOAA:

National Estuarine Research Reserves 1.1 2.4 3.9 5.5 14.7 27.6

Coastal and Estuarine Land Conservation Program 0.5 5.7 8.8 6.9 32.4 54.3

NOAA Subtotal 1.6 8.1 12.7 12.4 47.1 81.9

Total $ 267.2 $ 356.5 $ 346.7 $ 376.3 $ 322.2 $ 1,668.9

EDA:

EDA investments in non-federal physical property require matching funds by state and local governments of 20 to 50 percent.

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.

114 | FY 2014 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
Economic Adjustment Assistance: The Economic 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 finances projects that foster economic 

development by advancing the green economy in distressed communities and projects that develop and use 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. 

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, 2014, 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 212 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. 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, for the purpose of preservation or restoration of coastal resources and 

habitats. 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 physical property. The Department, accordingly, 

cannot report the amount of investments in non-federal physical property for the Coastal Zone Management Fund.

FY 2014 AGENCY FINANCIAL REPORT | 115

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
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 

investments in human capital are by NOAA.

The following table summarizes NOAA’s investments in human capital for FY 2010 through FY 2014:

(In Millions)

Program FY 2014 FY 2013 FY 2012 FY 2011 FY 2010 Total

National Sea Grant College Program $ 0.8 $ 0.7 $ 0.7 $ 0.8 $ 0.9 $ 3.9

National Estuarine Research Reserve Program 1.3 1.4 1.5 1.5 1.3 7.0

Educational Partnership Program 14.3 13.0 12.5 14.3 14.3 68.4

Ernest F. Hollings Undergraduate Scholarship Program 6.2 5.0 4.9 4.5 4.6 25.2

Southeast Fisheries Science Center’s Recruiting Training 

Research Program 0.5 0.5 0.5 0.5 0.5 2.5

Total $ 23.1 $ 20.6 $ 20.1 $ 21.6 $ 21.6 $ 107.0

N/A = Not Applicable

National Sea Grant College Program: Sea Grant is a nationwide network, administered through NOAA, of 32 universitybased 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 49 fellowships awarded: 12

fellowships funded by the National Sea Grant College Program and 37 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 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. The Graduate Research 

Fellowship Program ended in FY 2014. As a result, there were no fellowships awarded.

116 | FY 2014 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
Educational Partnership Program: The NOAA Educational Partnership Program 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 underrepresented communities in science and technology directly related to NOAA’s mission. The EPP/

MSI also seeks to increase collaborative research efforts between NOAA scientists and researchers at minority serving 

academic institutions. In FY 2014, the Cooperative Science Center awarded 104 degrees to students. 

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. In FY 2014, the program 

added 105 students.

Southeast Fisheries Science Center’s (SEFSC) 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 of 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 2014, 5 graduate students conducted SEFSC related research as part of the program, and 15 outstanding undergraduate 

students from across the country participated in a week long undergraduate workshop. In addition, a total of 7 University 

of Florida graduate students were funded or partially funded by the Recruiting Training Research Program.

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 the National Institute of Standards 

and Technology (NIST) and NOAA.

FY 2014 AGENCY FINANCIAL REPORT | 117

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
NIST:

The following table summarizes NIST’s R&D investments for FY 2010 through FY 2014:

(In Millions)

Performance Outcome FY 2014 FY 2013 FY 2012 FY 2011 FY 2010 Total

NIST Laboratories Program: Provide Measurement Tools 

and Standards to Strengthen Manufacturing, Enable 

Innovation, and Increase Efficiency

Basic $ 223.7 $ 206.4 $ 198.9 $ 185.3 $ 162.0 $ 976.3

Applied 420.2 382.5 379.1 377.8 395.9 1,955.5

Development 13.6 14.7 12.7 19.4 15.3 75.7

Technology Innovation Program: Stimulate High-growth 

Business Formation and Entrepreneurship through 

Investing in High-risk, High reward Technologies and 

by Removing Impediments to Accelerate Technology 

Commercialization

Basic 0.4 - - - - 0.4

Applied 3.5 10.6 19.7 22.1 26.2 82.1

Development 3.3 10.6 19.7 22.1 26.2 81.9

Total $ 664.7 $ 624.8 $ 630.1 $ 626.7 $ 625.6 $ 3,171.9

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, the NIST Laboratories address increasingly complex measurement challenges. 

NIST develops measurements focusing on the very small (e.g., nanotechnology devices), the very large (e.g., skyscrapers), 

the physical (e.g., methods for characterizing strands of DNA for forensic testing) and, the virtual (e.g., methods for testing 

electronic health record systems). 

● 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 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. 

● 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 (NTTAA) as the coordinator for all federal agencies using 

documentary standards that are developed by private-sector consensus bodies to carry out their policy objectives.

118 | FY 2014 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
Technology Innovation Program (TIP): 

The FY 2014 enacted appropriation provided no funding for the TIP program and the program is currently undergoing a 

closeout taking place through FY 2015. NIST uses unobligated balances (carryover funding), and funding from prior-year 

deobligations, to close out the program and to perform NIST’s fiduciary responsibilities. 

Advanced Manufacturing Technology Consortia (AMTech) Program: 

In FY 2014, Congress provided $15.0 million in 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 long-term 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, the NIST Visiting Committee on Advanced Technology 

(VCAT) 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.”

On July 30, 2014, NIST announced the 2014 competition and call for applications (proposals) for AMTech Planning Awards.

The Federal Funding Opportunity seeks applications to establish new and strengthen existing industry-driven consortia. 

These consortia identify and support basic and applied research on the development of enabling and pre-competitive, longterm technology for advanced manufacturing. NIST anticipates awarding a total of $5.6 million in two-year grants during 

the program’s second competition. Awards will range between about $250 thousand and $500 thousand, subject to the 

availability of funds. Pre-applications were due September 5, 2014 and full applications were due October 31, 2014. NIST 

hosted webinars on the AMTech funding opportunity on August 7 and 14, 2014. Selections will be announced during the 

first half of 2015.

NOAA:

NOAA’s R&D investments by program from FY 2010 through FY 2014 were as follows:

(In Millions)

Program FY 2014 FY 2013 FY 2012 FY 2011 FY 2010 Total

Environmental and Climate $ 294.1 $ 326.3 $ 392.8 $ 395.3 $ 344.1 $ 1,752.6

Fisheries 43.4 51.2 64.9 65.7 59.9 285.1

Marine Operations and Maintenance and Aircraft Services 29.7 32.4 33.3 34.3 34.3 164.0

Weather Service 29.3 28.6 36.4 54.7 53.9 202.9

Other 63.5 74.8 90.6 98.0 102.0 428.9

Total $ 460.0 $ 513.3 $ 618.0 $ 648.0 $ 594.2 $ 2,833.5

FY 2014 AGENCY FINANCIAL REPORT | 119

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
The following table summarizes NOAA’s R&D investments for FY 2011 through FY 2014 by R&D outcome:

(In Millions)

Performance Outcome FY 2014 FY 2013 FY 2012 FY 2011 Total

Increase Scientific Knowledge and Provide Information to 

Stakeholders to Support Economic Growth and to Improve 

Innovation, Technology, and Public Safety

Applied $ 132.2 $ 125.0 $ 148.1 $ 149.5 $ 554.8

Development 7.2 7.1 9.9 9.3 33.5

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

Applied 44.1 42.5 45.2 48.0 179.8

Development 9.8 12.8 12.6 12.6 47.8

Improve Weather, Water, and Climate Reporting and Forecasting 

Applied 6.1 7.6 8.9 17.8 40.4

Development 23.2 21.0 27.5 36.9 108.6

Support Climate Adaptation and Mitigation

Applied 79.4 85.9 104.4 101.2 370.9

Development 77.4 107.0 127.5 141.4 453.3

Develop Sustainable and Resilient Fisheries, Habitats, and Species

Applied 40.3 46.3 56.1 59.1 201.8

Development 3.1 5.0 8.8 6.7 23.6

Support Coastal Communities that are Environmentally 

and Economically Sustainable

Applied 32.3 49.6 63.8 64.0 209.7

Development 4.9 3.5 5.2 1.5 15.1

Total $ 460.0 $ 513.3 $ 618.0 $ 648.0 $ 2,239.3

120 | FY 2014 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
The following table summarizes NOAA’s R&D investments for FY 2010 by R&D outcome:

(In Millions)

Performance Outcome FY 2010

Protect, Restore, and Manage the Use of Coastal and Ocean Resources

Applied $ 218.4

Development 6.8

Advance Understanding of Climate Variability and Change

Applied 125.1

Development 84.0

Provide Accurate and Timely Weather and Water Information

Applied 108.0

Development 48.4

Support Safe, Efficient, and Environmentally Sound Commercial Navigation

Applied 0.9

Development 2.6

Total $ 594.2

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 and is intended to provide a 

solid scientific basis for environmental policy-making in government. 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.

Here is a brief description of the major R&D programs of NOAA:

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: NOAA’s National Marine Fisheries Service (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, by catch, 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 

FY 2014 AGENCY FINANCIAL REPORT | 121

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
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.

122 | FY 2014 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
Other Information
SCHEDULE OF SPENDING (Unaudited)

T

he Schedule of Spending by Major Budget Account (SOS) presents an overview of how and where the Department is spending 

(i.e., obligating) money for the fiscal year, on a budgetary basis, the same basis as the Combined Statement of Budgetary Resources 

(SBR). The schedule includes amounts agreed to be spent during the fiscal year, how the money was spent, and who did the money 

go to. Total Resources reported on SOS agrees to Total Budgetary Resources reported on SBR; Less: Amounts Available but Not Agreed 

to be Spent reported on SOS agrees to the total of Unobligated Balance, End of Year, Apportioned and Unobligated Balance, End of Year, 

Exempt from Apportionment reported on SBR; Less: Amounts Not Available to be Spent reported on SOS agrees to Unobligated Balance, 

End of Year, Unapportioned reported on SBR; and Total Amounts Agreed to be Spent reported on SOS agrees to Obligations Incurred

reported on SBR.

The Schedules of Spending by Major Budget Account for FY 2014 and FY 2013 are as follows:

United States Department of Commerce Schedule of Spending by Major Budget Account

For the Year Ended September 30, 2014 (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

Economic 

Development 

Assistance

Programs

NTIA 

Broadband 

Technology 

Opportunities 

Program - 

ARRA

Other 

Programs

WHAT MONEY IS AVAILABLE TO SPEND?

Total Resources $ 26,198,392 $ 3,884,195 $ 3,500,178 $ 2,189,275 $ 8,799,069 $ 529,220 $ 846,192 $ 311,838 $ 135,461 $ 6,002,964

Less: Amounts Available but Not Agreed to be Spent (3,453,331) (216,203) (502,721) (123,205) - (32,833) (8,851) (57,698) - (2,511,820)

Less: Amounts Not Available to be Spent (9,381,105) (91,948) - (15,789) (8,796,569) (13,978) (149,084) (10,409) (135,461) (167,867)

TOTAL AMOUNTS AGREED TO BE SPENT $ 13,363,956 $ 3,576,044 $ 2,997,457 $ 2,050,281 $ 2,500 $ 482,409 $ 688,257 $ 243,731 $ - $ 3,323,277

HOW WAS THE MONEY SPENT?

Contracts $ 5,989,613 $ 1,263,005 $ 1,115,497 $ 1,967,577 $ 2,500 $ 110,117 $ 153,063 $ - $ - $ 1,377,854

Grants 1,314,878 686,664 - 35,188 - 2,574 - 243,731 - 346,721

Loans and Guarantees 114,484 - - - - - - - - 114,484

Non-financial Assistance Direct Payments 5,424,341 1,625,653 1,880,188 46,322 - 286,380 241,332 - - 1,344,466

Other 520,640 722 1,772 1,194 - 83,338 293,862 - - 139,752

TOTAL AMOUNTS AGREED TO BE SPENT $ 13,363,956 $ 3,576,044 $ 2,997,457 $ 2,050,281 $ 2,500 $ 482,409 $ 688,257 $ 243,731 $ - $ 3,323,277

WHO DID THE MONEY GO TO?

Federal Government $ 3,863,582 $ 596,754 $ 226,502 $ 1,494,161 $ 2,500 $ 53,217 $ 375,936 $ - $ - $ 1,114,512

Non-federal 9,500,374 2,979,290 2,770,955 556,120 - 429,192 312,321 243,731 - 2,208,765

TOTAL AMOUNTS AGREED TO BE SPENT $ 13,363,956 $ 3,576,044 $ 2,997,457 $ 2,050,281 $ 2,500 $ 482,409 $ 688,257 $ 243,731 $ - $ 3,323,277

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

124 | FY 2014 AGENCY FINANCIAL REPORT

SCHEDULE OF SPENDING (UNAUDITED)
October 16, 2014

OIG’s Assessment of the Top Management Challenges Facing the Department of Commerce

The Reports Consolidation Act of 2000 requires federal inspectors general to identify the top management 

challenges facing their departments. The Top Management Challenges Facing the Department of Commerce report 

for fiscal year (FY) 2015 is aligned with the Department’s FYs 2014–2018 Strategic Plan and identifies challenges 

that must be addressed to attain each of the plan’s strategic goals. The full report can be found at www.oig.doc.gov. 

Summary of OIG’s Assessment of the Department of Commerce’s Major Challenges

Trade 

and 

Investment

• ITA faces the challenge of realizing the benefits of its consolidation and reorganization and 

improving its customer relationship management system.

• BIS must continue its work on migrating its export licensing functions to the Department of 

Defense’s USXPORTS system, and work to fully implement the changes called for by the 

Export Control Reform Initiative.

• EDA must address issues with management of its Revolving Loan Fund program.

• The Department will face challenges as its bureaus with grant programs assume new 

responsibilities regarding single audits of grants.

Innovation

• USPTO faces challenges in reducing waiting times for filings, advocating for greater global 

protection for IP rights, responding to stakeholder concerns about patent quality, and 

managing a large and dispersed workforce.

• NTIA faces challenges identifying spectrum for commercial broadband use, addressing the 

First Responder Network Authority’s implementation, and ensuring the sustainability of 

BTOP grants.

• NIST faces challenges in completing the re-competition of Manufacturing Extension Program 

centers.

Environment

NOAA faces challenges posed by 

• satellite acquisitions and development and potential data gaps; 

• efforts to improve forecast accuracy; and

• the competing needs among fisheries stakeholders and limited marine technology.

Data

• The Census Bureau faces the challenge of designing a more cost-effective 2020 decennial 

while resolving (a) research and testing delays and (b) a lack of cost and budget integration.

• The Census Bureau, NOAA, and other Departmental data providers must meet the 

demands of rapidly changing technology. 

• The Department—with the federal government-wide mandate to comply with the Digital 

Accountability and Transparency Act of 2014—faces the challenge of developing and 

implementing a vision for the future of the Department’s diverse data resources.

Operational 

Excellence

The Department faces the challenges of

• improving cybersecurity and IT management, including (a) enhancing the Department’s 

incident detection and response capabilities and overall cybersecurity posture, and (b) 

managing a fragmented governance structure;

• fostering a culture of accountability, including responding to OIG hotline complaint referrals;

• improving financial data quality by addressing (a) the lack of centralized data systems; (b) 

control weaknesses to the financial accounting for NOAA satellites; (c) financial management 

challenges within the Office of the Secretary’s Working Capital Fund; and (d) turnover 

within NOAA’s financial management leadership ranks; and

• reducing acquisition risk (including high-risk contract awards), as well as monitoring 

contractor performance and maintaining an acquisition workforce.

OIG REPORT ON MANAGEMENT AND PERFORMANCE CHALLENGES

FY 2014 AGENCY FINANCIAL REPORT | 125

OIG REPORT ON MANAGEMENT AND PERFORMANCE CHALLENGES
126 | FY 2014 AGENCY FINANCIAL REPORT

OIG REPORT ON MANAGEMENT AND PERFORMANCE CHALLENGES

October 27, 2014 

MEMORANDUM FOR: Todd J. Zinser

Inspector General

FROM: Penny Pritzker Secretary of Commerce

SUBJECT: OIG Report “Top Management Challenges

Facing the Department of Commerce” in FY 2015

Thank you for the Office of the Inspector General’s work in assessing the major management 

and performance challenges facing the Department as we begin the new fiscal year. We 

appreciate OIG’s audit and investigative work throughout the year. 

The alignment of challenges to the Department’s strategic plan will be particularly valuable to us 

in driving progress within our five priority areas. The Department’s bureaus continue to provide 

excellent service working with American businesses, communities, and private citizens to spur 

innovation; promote trade and investment; foster use of data; and provide critical environmental 

information, products, and services. OIG's work will help us do this in the most effective and 

efficient way possible. 

We are committed to focusing our resources on the issues related to these challenges as we work 

toward implementing our strategic plan in FY 2015.
SUMMARY OF FINANCIAL STATEMENT AUDIT 

AND MANAGEMENT ASSURANCES

P

resented below is a summary of financial statement audit and management assurances for FY 2014. Table 1 relates 

to the Department’s FY 2014 financial statement audit, which resulted in an unmodified opinion with no 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: ● Unmodified

● Restatement: ● No

Material Weaknesses Beginning Balance New Resolved Consolidated Ending Balance

Total Material Weaknesses 0 0 0 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

Total Material Weaknesses 0 0 0 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 lack of substantial compliance noted No lack of substantial compliance noted

2. Accounting Standards No lack of substantial compliance noted No lack of substantial compliance noted

3. U.S. Standard General Ledger 

 at Transaction Level

 

 No lack of substantial compliance noted

 

 No lack of substantial compliance noted

FY 2014 AGENCY FINANCIAL REPORT | 127

SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT ASSURANCES
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, 

Management’s Responsibility for Internal Control, 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 disaster-related 

activities. Pursuant to OMB Memorandum M-13-07, Accountability for Funds Provided by the Disaster Relief Appropriations 

Act (March 12, 2013), 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 submitted to OMB in June 2014 a sampling methodology plan for FY 2013 disbursements 

made under the Act by NOAA. In September 2014, testing of FY 2013 disbursements was performed by an independent 

contractor. See Section II, Statistical Sampling, for a brief discussion of the statistical sampling process performed, and see 

Section IV, Improper Payments Reporting, for the statistical sampling results of the FY 2013 disbursements testing.

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 policies and procedures to detect and prevent 

improper payments. For FY 2015 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. Furthermore, every three years, the assessment includes a review of internal controls 

IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002,

AS AMENDED, REPORTING DETAILS

128 | FY 2014 AGENCY FINANCIAL REPORT

IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
over disbursement processes, including Department-wide sample testing of disbursements for improper payments and for 

appropriate internal control attributes. The most recent review performed indicated that internal controls over disbursement 

processes were sound.

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 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 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 previously discussed, an independent contractor performed statistical sampling of FY 2013 NOAA disbursements 

of funds received under the Disaster Relief Appropriations Act, in order to yield a statistically valid improper payments 

estimate, as required by OMB Circular A-123, Appendix C. The independent contractor obtained the population of FY 2013 

disbursements, excluding disbursements within the federal government, and determined a pilot (that later could be 

expanded if necessary) single-stage stratified random sample using the absolute value of the disbursement amount 

to define the stratum dollar ranges. Stratified samples are highly efficient designs that allow required confidence and 

precision levels to be reached with smaller samples when compared to simple random sampling. A single certainty or 

take-all stratum was defined for disbursement amounts that are large relative to the rest of the population, to help ensure 

that large amounts would be covered in the sample review as well as help improve the precision of the statistical estimates 

at the time of estimation. The independent contractor tested each sample item selected for improper payments—see 

Section IV, Improper Payments Reporting, for a discussion of the statistical sampling results of the FY 2013 disbursements 

testing—and determined that the pilot sample did not need to be expanded.

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 causes 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.

FY 2014 AGENCY FINANCIAL REPORT | 129

IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
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 November 2014, 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 2014, the Department continued with the bureaus’ quarterly reporting of any improper 

payments, and payment recaptures data, 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 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.

IV. Improper Payments Reporting. The table that follows is required for each agency that has programs or activities 

that are susceptible to significant improper payments. Agencies must include the following information:

a. All risk-susceptible programs must be listed in this table whether or not an error measurement is being reported.

b. Where no measurement is provided, the agency should indicate the date by which a measurement is expected.

As previously discussed, an independent contractor performed statistical sampling of FY 2013 NOAA disbursements 

of funds received under the Disaster Relief Appropriations Act, in order to yield a statistically valid improper payments 

estimate as required by OMB Circular A-123, Appendix C. The independent contractor determined that all sample items 

tested for improper payments were found to be properly disbursed, and as a result, determined that the estimated 

amount improperly disbursed is zero. As no improper payments were found, the resulting precision of the estimate is 

zero percent (less than the required 2.5 percent), with 90 percent confidence. The following table is reported with regard 

to the funds received by NOAA under the Act.

IMPROPER PAYMENTS (IP) REDUCTION OUTLOOK (Dollars in Thousands)

Activity

FY 2013

Outlays,

Gross

FY 2013

IP

Percent

FY 2013

IP

FY 2014

Outlays,

Gross

Estimated 

FY 2014

IP

Percent

Estimated

FY 2014

IP

Estimated

FY 2015

Outlays,

Gross

Estimated

FY 2015

IP

Percent

Estimated

FY 2015

IP

Funds Received by NOAA under 

Disaster Relief Appropriations Act $ 9,405 0.00% $ – $80,769 0.00% $ – $143,305 0.00% $ –

(continued)

Activity

Estimated

FY 2016

Outlays,

Gross

Estimated

FY 2016

IP

Percent

Estimated

FY 2016

IP

Estimated

FY 2017

Outlays,

Gross

Estimated

FY 2017

IP

Percent

Estimated

FY 2017

IP

Funds Received by NOAA under 

Disaster Relief Appropriations Act $38,796 0.00% $ – $28,568 0.00% $ –

130 | FY 2014 AGENCY FINANCIAL REPORT

IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
V. Recaptures 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 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, as amended, the Department has been performing, since 2005, annual payment recapture audits of 

closed contracts/obligations for many of the Department’s bureaus/reporting entities on a rotational basis. In recent years, 

these payment recapture audits have been performed by an independent contractor; however, in the past, these payment 

recapture audits have also been conducted by the Department’s Office of Financial Management. Effective 2012, the scope of 

payment recapture audits of contracts/obligations was 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. Annual 

payment recapture auditing is additionally performed by an independent contractor, effective 2011, for Department-wide grants 

and other cooperative agreements (i.e., financial assistance).

Per OMB Circular A-123, Appendix C, intragovernmental transactions are not required to be reviewed. An Octoberber 2014 

update to OMB Circular A-123, Appendix C, expanded the definition of improper payments to include payments to employees. 

Future payment recapture audits, accordingly, will include payments to employees as appropriate. 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 disbursement testing for improper payments is considered to be essentially equivalent to a payment recapture 

audit. Regarding 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.

For payment recapture audits, the auditor analyzes the reasons why any payment errors occurred, and develops, presents, and 

documents any recommendations for cost-effective controls to prevent improper payments in the future and/or to enhance the 

applicable bureau processes.

Payment recapture audits of contracts/obligations are in process as of November 2014 by an independent contractor for 

Departmental Management (DM)/Salaries and Expenses (S&E), DM/Working Capital Fund, the Economic Development 

Administration (EDA/S&E), the Economics and Statistics Administration/Bureau of Economic Analysis (ESA/BEA), and the 

International Trade Administration (ITA). 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 1, 2013 and through March 31, 2014, are being reviewed. Intragovernmental transactions and payments to employees 

are excluded from review in conformity with the version of OMB Circular A-123, Appendix C in place at the commencement of 

these payment recapture audits. Travel payments, bankcards/purchase cards, government bills of lading, and gifts and bequests 

are 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 payment recapture audits. As part of the payment 

FY 2014 AGENCY FINANCIAL REPORT | 131

IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
recapture audits, vendor inquiries are performed for a sample of vendors to determine if the reporting entities have any 

open credits or debts with those vendors. 

A payment recapture audit of Department-wide grants and other cooperative agreements is in process as of November 

2014 by an independent contractor. The applicable bureaus/entities are: DM, EDA, ITA, Minority Business Development 

Agency (MBDA), National Institute of Standards and Technology (NIST), NOAA, and National Telecommunications and 

Information Administration (NTIA). The audit consists of two different populations: (a) 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 April 1, 2013 and 

through March 31, 2014; and (b) grants and other cooperative agreements for which the period of performance expired 

during the timeframe of January 1, 2013 through December 31, 2013, and greater than $100 thousand, and which were 

not subjected to any of the types of audits or reviews indicated in item (a) above.

Of the $159 thousand that was identified in previous payment recapture audits for recapture, $96 thousand has been 

recaptured to date, and $57 thousand was subsequently determined by the Department to be proper payments.

b. Payment Recapture Audits Reporting Data. 

The following table presents a summary of results of the Department’s completed payment recapture audits that were 

reported in prior fiscal years (PYs). There are no completed payment recapture audits reportable for the current fiscal year 

(CY), as payment recapture audits are in process as of November 2014.

(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:

2013, 2012, and 

2011 Audits N/A N/A N/A N/A $ – N/A $ – N/A

Payment Recapture Audits of Contracts/Obligations:

2013 Audits of 

NIST and NOAA N/A N/A N/A N/A $ 57 $ – $ 57 $ –

2012 Audits of 

Census Bureau 

and Franchise 

Fund N/A N/A N/A N/A $ – N/A $ – N/A

2012 Audits of OIG, 

MBDA, and USPTO N/A N/A N/A N/A $ – N/A $ – N/A

2011 Audit of NTIA N/A N/A N/A N/A $ – N/A $ – N/A

2010 Audits of BIS 

and NTIS N/A N/A N/A N/A $ 6 $ – $ 6 $ –

N/A – Not applicable (continued on next page)

132 | FY 2014 AGENCY FINANCIAL REPORT

IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
(continued from previous page)

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 Contracts/Obligations (continued): 

2009 Audits of 

EDA/S&E and ITA N/A N/A N/A N/A $ – N/A $ – N/A 

2008 Audits of 

DM/S&E, DM/WCF, 

and ESA/BEA N/A N/A N/A N/A $ – N/A $ – N/A 

2007 Audit of 

NOAA N/A N/A N/A N/A $ 96 $ 96 $ 96 $ 96

2006 Audits of 

Census Bureau, 

NIST, and USPTO N/A N/A N/A N/A $ 96 $ 96 $ 96 $ 96

N/A – Not applicable

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 improper payments identified for recapture in payment 

recapture audits. Since 2005, the Department has recaptured $96 thousand of the $159 thousand of improper payments 

identified for payment recapture; $57 thousand that was identified in previous payment recapture audits for recapture was 

subsequently determined by the Department to be proper payments.

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 not yet recaptured the $6 thousand of improper payments identified for recapture in the payment 

recapture audit of contracts/obligations of NIST completed in December 2013.

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 under payment recapture audits that fall under the IPERA 

requirements for disposition of recaptured funds.

FY 2014 AGENCY FINANCIAL REPORT | 133

IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
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; selfreported 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 Department-wide sample testing 

of disbursements.

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 FY 2014 (CY) and that was reported 

in prior fiscal years (PYs). Prior fiscal years’ amounts represent amounts reported for FY 2011 through FY 2013, as FY 2011 

was the first fiscal year for this reporting requirement. The Amounts Recaptured for CY Reporting column includes 

payment recaptures during FY 2014 of both improper payments reported in FY 2014 and improper payments previously 

reported in prior fiscal years. 

(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 $ 728 $ 692 $ 4,173 $ 3,674 $ 4,901 $ 4,366 

Closeout Reviews – – 611 611 611 611 

Audits and Other 

Reviews 3,360 1,294 5,977 2,071 9,337 3,365 

Reported by Grantees 

and Vendors 4,706 4,636 1,961 1,959 6,667 6,595 

Settlements with 

Vendors 645 626 1,040 1,027 1,685 1,653 

Other 6 – 103 100 109 100 

Total $ 9,445 $ 7,248 $ 13,865 $ 9,442 $ 23,310 $ 16,690

134 | FY 2014 AGENCY FINANCIAL REPORT

IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
VI. 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 improper 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 2014, 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 2014 and FY 2013. The bureau CFOs are accountable for internal controls over 

improper payments, and for monitoring and minimizing improper payments.

For FY 2015 and beyond, the Department will continue its efforts to ensure the integrity of its disbursements.

VII. 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.

VIII. 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.

FY 2014 AGENCY FINANCIAL REPORT | 135

IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
IX. Agency Reduction of Improper Payments with the Do Not Pay Initiative. The Improper Payments Elimination 

and Recovery Improvement Act of 2012 (IPERIA) requires OMB to submit to Congress an annual report, “which 

may be included as part of another report submitted to Congress by the Director, regarding the operation of the 

Do Not Pay Initiative, which shall: (A) include an evaluation of whether the Do Not Pay Initiative has reduced 

improper payments or improper awards; and (B) provide the frequency of corrections or identification of incorrect 

information.” To support this requirement, agencies shall provide a brief narrative discussing the agency’s actions 

attributable to the Do Not Pay Initiative and respective databases, to include an evaluation of whether the Do Not 

Pay initiative has reduced improper payments or improper awards; identifying the frequency of corrections 

or identification of incorrect information; and include a table reflecting the dollar amounts and the number of 

payments reviewed for improper payments in the fiscal year being reported on.

Pursuant to OMB Memorandum M-12-11 dated April 12, 2012, Reducing Improper Payments through the “Do Not Pay 

List,” the Department in December 2012 submitted a final plan to OMB for its use of the Do Not Pay Portal for pre-payment 

eligibility reviews. Furthermore, the Department at that time completed evaluations of the use of the Do Not Pay solution 

for pre-award eligibility reviews for contracts and grants. The evaluations were to determine if the benefits from the portal 

checking of available databases and/or the Data Analytics Services merit the additional procedures. The Department 

determined existing pre-award eligibility review processes and databases checked are adequate for preventing improper 

contract and grant awards. The Department determined, however, that Treasury’s Debt Check database may be a beneficial 

tool for use in pre-award evaluations of grant applications. Currently, the Department is in the process of implementing 

the use of the Do Not Pay portal for pre-award checking to Treasury’s Debt Check database for grants applications.

The Department’s payment offices, between January and June 2013, implemented the Department’s OMB-approved plan 

to perform weekly or daily (Census Bureau) pre-payment eligibility reviews to the following Do Not Pay portal databases 

for the Department’s domestic, non-classified, non-employee-related, non-intragovernmental disbursements: (a) Social 

Security Administration’s Death Master File (DMF); (b) the U.S. General Services Administration’s System for Award 

Management (SAM) Exclusion Records; and (c) SAM Entity Registration Records (excluding Census Bureau).

The pre-payment checking performed by the Department excludes pre-payment eligibility reviews of grantees under 

Treasury’s Automated Standard Application for Payments (ASAP), as Treasury performs continuous monitoring to the 

Do Not Pay portal of ASAP grantees. Bureau payment and acquisition offices, as appropriate, follow up on vendors initially 

matched to the Do Not Pay portal databases checked to, and perform further research as necessary to follow through 

and resolve the issues identified by the Do Not Pay portal matches. In most cases, the initial matches are subsequently 

determined by the Department to be false matches. Other Departmental offices are also consulted as appropriate.

Furthermore, effective with March 2013 payments made, the Department’s payment offices receive from Treasury monthly 

Do Not Pay portal reports listing any match results of payments made to the following databases: (a) DMF; and (b) SAM 

Exclusion Records. Payment offices research and follow up on matches, as appropriate, and submit to Treasury monthly 

Adjudication Reports summarizing the results of their efforts.

Since inception of payment offices’ Do Not Pay portal pre-payment eligibility reviews and reviews of Treasury’s postpayment match reports, the Department has not had any significant true matches to DMF and SAM Exclusion Records. 

While the Department’s use of the Do Not Pay portal since inception has not yet identified or led to the prevention of 

any significant improper payments, the Department supports the use of the Do Not Pay portal as a sound financial 

management practice to prevent improper payments.

136 | FY 2014 AGENCY FINANCIAL REPORT

IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
The following table shows the dollar amounts (in actual dollars) and the number of payments reviewed for improper 

payments in FY 2014, per the payment offices’ monthly Adjudication Reports submitted to Treasury.

Number of 

Payments 

Reviewed 

for Improper 

Payments

Dollars of 

Payments 

Reviewed 

for Improper 

Payments

Number of 

Improper 

Payments 

Stopped 

Dollars of 

Improper 

Payments 

Stopped

Number of 

Improper 

Payments 

Not Stopped

Dollars of 

Improper 

Payments 

Not Stopped

Reviews with DMF 179,055 $ 2,558,189,893 – $ – 2 $ 214

Reviews with SAM 

Exclusion Records 182,918 $ 2,563,743,299 – $ – – $ –

X. 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) 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 financial 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.

● 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.

FY 2014 AGENCY FINANCIAL REPORT | 137

IMPROPER PAYMENTS INFORMATION ACT (IPIA) OF 2002, AS AMENDED, REPORTING DETAILS
FREEZE THE FOOTPRINT

Chief Financial Officers (CFO) Act departments and agencies shall not increase the total square footage of their domestic 

office and warehouse inventory compared to the FY 2012 baseline, unless increased footage is offset through consolidation, 

co-location, or disposal of space from the inventory of that agency, per section 3 of the Office of Management and 

Budget (OMB) Memorandum 12-12, Promoting Efficient Spending to Support Agency Operations, and OMB Management 

Procedures Memorandum 2013-02, the Freeze the Footprint policy implementation guidance.

FREEZE THE FOOTPRINT BASELINE COMPARISONS

(In Millions)

FY 2012

Baseline FY 2013 +/- Change 

Square Footage 11.837 11.488 (0.349)

OPERATING COSTS OF OWNED AND DIRECT LEASE BUILDINGS SUBJECT TO FREEZE THE FOOTPRINT

(In Millions)

FY 2012

Reported Cost FY 2013 +/- Change 

Operation and Maintenance Costs $39.503 $36.5781 ($2.925)

The Department of Commerce’s FY 2012 baseline is 11.84 million square feet of office and warehouse space. The FY 2013 

area was 11.48 million square feet, which is about a three percent reduction to the baseline. Through FY 2016, the 

Department’s consolidated space planning numbers are predicting that the Department will remain below its baseline 

through reciprocal growth and offsetting reductions of nearly 1.5 million square feet apiece.

Operating costs have seen a slight reduction since the FY 2012 baseline, but this seems to be mostly due to direct leases 

being replaced with the U.S. General Services Administration (GSA). Through FY 2016, the addition of a large owned 

facility is expected to increase operating cost since it is replacing several GSA assignments. 

1 The amount reported in the FY 2013 Federal Real Property Profile database should have been $39.210. Two facilities costs 

were reported in error. Going forward, the reporting issue has been resolved.

138 | FY 2014 AGENCY FINANCIAL REPORT

FREEZE THE FOOTPRINT
A AFR Agency Financial Report

AmTech Advanced Manufacturing Technical Consortia 

Program (NIST)

APG Agency Priority Goal

ARRA American Recovery and Reinvestment Act 

of 2009

ASA Assistant Secretary for Administration

ASAP Automated Standard Application for 

Payments (Treasury)

B BAS Business Application Solutions

BEA Bureau of Economic Analysis

BIS Bureau of Industry and Security

BTOP Broadband Technology Opportunities 

Program (NTIA)

C CAM Commerce Acquisition 

Management

CAP Cross-Agency Priority Goal

CBS Commerce Business Systems

CEIP Coastal Energy Impact Program 

(a NOAA direct loan program)

CFO Chief Financial Officer

GLOSSARY OF ACRONYMS

Abbreviation Title Abbreviation Title

CFO/ASA Chief Financial Officer and Assistant 

Secretary for Administration (DM)

CIRT Computer Incident Response Team

CSRS Civil Service Retirement System

CY Current Fiscal Year ended September 30

D DM Departmental Management

DMF Death Master File (Social Security 

Administration) 

DM&R Deferred Maintenance and Repairs

DOC U.S. Department of Commerce

DOL U.S. Department of Labor

E ECMO Enterprise Cybersecurity Monitoring 

and Operations

EDA Economic Development Administration

ELGP Emergency Steel Loan Guarantee Program

EMT Executive Management Team

EPP Educational Partnership Program (NOAA)

ESA Economics and Statistics Administration

ESOC Enterprise Security Oversight Center

FY 2014 AGENCY FINANCIAL REPORT | 139

GLOSSARY OF ACRONYMS
Abbreviation Title Abbreviation Title

F 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

FICA Federal Insurance Contributions Act

FISMA Federal Information Security Management Act

FMFIA Federal Managers’ Financial Integrity Act 

of 1982

FPDS Federal Procurement Data System

FRPMS Federal Real Property Management System

FRPP Federal Real Property Profile

FSSI Fish Stock Sustainability Index

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

GAO U.S. Government Accountability Office

GCCMIF Global Climate Change Migration 

Incentive Fund

GMD Grants Management Division of OAM (DM)

GSA U.S. General Services Administration

GTAS Governmentwide Treasury Account Symbol 

Adjusted Trial Balance System (Treasury)

H HCF Human Capital Framework

HCHB Herbert C. Hoover Building

I IFQ Individual Fishing Quota Direct Loans 

(a NOAA direct loan program)

IP Intellectual Property

IPERA Improper Payments Elimination and Recovery 

Act of 2010

IPIA Improper Payments Information Act of 2002

ISO Information Services Office

IT Information Technology

ITA International Trade Administration

140 | FY 2014 AGENCY FINANCIAL REPORT

GLOSSARY OF ACRONYMS
Abbreviation Title Abbreviation Title

J JPSS Joint Polar Satellite System (NOAA)

M MBDA Minority Business Development Agency

MD&A Management’s Discussion and Analysis

MEP Manufacturing Extension Partnership

MSI Minority Serving Institutions

N NASA National Aeronautics and Space 

Administration

NBS National Bureau of Standards 

(former name of NIST)

NERR National Estuarine Research Reserves

NIST National Institute of Standards and Technology

NMFS National Marine Fisheries Service (NOAA)

NNMI National Network for Manufacturing 

Innovation 

NOAA National Oceanic and Atmospheric 

Administration

NPOESS National Polar-orbiting Operational 

Environmental Satellite System (NOAA)

NTIA National Telecommunications and Information 

Administration

NTIS National Technical Information Service

O OAM Office of Acquisition Management (DM)

OCIO Office of the Chief Information Officer (DM)

OIG Office of Inspector General (DM)

OMB Office of Management and Budget

OMPS Ozone Mapping Profiler Suite

OPM U.S. Office of Personnel Management

ORPP Office of Real Property Programs (DM)

P PP&E Property, Plant, and Equipment

PII Personally Identifiable Information

PY Prior Fiscal Year ended September 30

R R&D Research and Development

S S&E Salaries and Expenses

SAM System for Award Management (GSA) 

SBR Combined Statements of Budgetary Resources

SCNP Consolidated Statements of Changes 

in Net Position

SFFAS Statement of Federal Financial Accounting 

Standards

S-NPP Suomi National Polar-orbiting Partnership

FY 2014 AGENCY FINANCIAL REPORT | 141

GLOSSARY OF ACRONYMS
Abbreviation Title Abbreviation Title

T TIP Technology Innovation Program (NIST)

Treasury U.S. Department of the Treasury

TSP Thrift Savings Plan

U USPTO U.S. Patent and Trademark Office

V VCAT Visiting Committee on Advanced 

Technology (NIST)

W WCF Working Capital Fund 

(a fund that is part of DM)

142 | FY 2014 AGENCY FINANCIAL REPORT

GLOSSARY OF ACRONYMS
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, Office of Performance, Evaluation, and Risk Management, and Office 

of Administrative Services/Office of Real Property Programs.

We also offer special gratitude and recognition to The DesignPond for their 

outstanding contributions in the design and production of this report.

ACKNOWLEDGEMENTS
U.S. DEPARTMENT OF COMMERCE

1401 Constitution Avenue, NW

Washington, DC 20230

(202) 482-2000

www.commerce.gov