U.S. DEPARTMENT OF COMMERCE

FY 2018 AGENCY FINANCIAL REPORT
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 contact the Department’s 

Office of Financial Management 

by phone at (202) 482-1207 or 

by email at AFRcomments@doc.gov.

Office of Financial Management

U.S. Department of Commerce

1401 Constitution Avenue NW

Washington, DC 20230
U.S. DEPARTMENT OF COMMERCE

FY 2018 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.

ORGANIZATION

The Department is composed of 12 bureaus 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) 

■ Departmental Management (DM)

STRATEGIC GOALS

Strategic Goal 1: Accelerate American Leadership

Strategic Goal 2: Enhance Job Creation

Strategic Goal 3: Strengthen U.S. Economic and 

National Security

Strategic Goal 4: Fulfill Constitutional Requirements and 

Support Economic Activity

Strategic Goal 5: Deliver Customer-Centric Service 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, 2018, the Department had approximately 

46 thousand employees. 

BUDGET AUTHORITY

The Department’s FY 2018 net budget authority was approximately 

$16.86 billion.

INTERNET 

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

THE DEPARTMENT AT A GLANCE
TABLE OF CONTENTS

Message from Secretary Ross IV

How to Use this Report VI

Management’s Discussion and Analysis (Unaudited) 1

Mission and Organization 2

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

FY 2018 Performance Summary 6

Looking Forward 13

Management Controls 14

Secretary’s Statement of Assurance 14

Federal Managers’ Financial Integrity Act (FMFIA) of 1982 15

Federal Financial Management Improvement Act (FFMIA) of 1996 16

Biennial Review of Fees 16

Report on OIG Audit Follow-up 17

Financial Management and Analysis 18

Analysis of FY 2018 Financial Condition and Results 26

Summary of Stewardship Information 37

Financial Section 39

Message from the Chief Financial Officer (Unaudited) 40

Independent Auditors’ Report 41

Principal Financial Statements 49

Consolidated Balance Sheets 50

Consolidated Statements of Net Cost 51

Consolidated Statements of Changes in Net Position 52

Combined Statements of Budgetary Resources 53

Consolidated Statements of Custodial Activity 54

Notes to the Financial Statements 55

Required Supplementary Information (Unaudited) 113

Required Supplementary Stewardship Information (Unaudited) 119

Other Information (Unaudited) 129

Office of Inspector General Summary on Top Management and Performance Challenges 130

Summary of Financial Statement Audit and Management Assurances 139

Payment Integrity 140 

Fraud Reduction Report 148

Reduce the Footprint 149

Civil Monetary Penalties’ Adjustments for Inflation 150

Grants Oversight and New Efficiency (GONE) Act Requirements 156

Undisbursed Balances in Expired Grant Accounts 157

Glossary of Acronyms 161

Acknowledgements 167

FY 2018 AGENCY FINANCIAL REPORT III
I

am pleased to present the fiscal year (FY) 2018 Agency Financial 

Report (AFR) for the Department of Commerce. The AFR is an 

overview of how we manage our resources and provides some 

highlight of our accomplishments and plans.

The mission of the Department of Commerce is to create the 

conditions for economic growth and opportunity. In February of 

2018 we published our new Strategic Plan for carrying out that 

mission. The Strategic Plan for FY 2018 – 2022 structures our work 

into five goal areas that outline Department priorities: American 

Economic Leadership; Job Creation; Strong Economic and National 

Security; Constitutional and Economic Requirements for Data; and 

Service Excellence. Although we are in the first year of the plan, much has been accomplished. Now that 

Department leadership and implementation processes are in place, much more will be done.

The plan calls for strong enforcement of trade laws and scrutiny of technology that is exported. We promote 

exports and aim for U.S. companies to be preeminent in Space Commerce. We are facilitating aquaculture 

because of its potential for creating jobs and addressing the trade imbalance. Commerce scientists are at the 

bleeding edge of quantum computing and materials science and are working to speedup commercialization 

of our innovations. The level of effort to achieve cybersecurity has been intensified. The cost of doing 

business is being reduced by streamlining regulations. The Decennial Census will be completed using 

21st century technology.

This report creates transparency on the sources and uses of the taxpayer funds that support these efforts. 

The American public deserves no less.

I am pleased to report that our financial management systems have been found to be in substantial compliance 

with the Federal Financial Management Improvement Act (FFMIA) of 1996, applicable financial systems 

requirements, the federal accounting standards and the U.S. Standard General Ledger at the transaction 

level. In accordance with Office of Management and Budget (OMB) Circulars A-136 and A-11, the financial 

and performance data published in this report is substantially complete and reliable.

MESSAGE FROM SECRETARY ROSS

I V FY 2018 AGENCY FINANCIAL REPORT

MESSAGE FROM SECRETARY ROSS
For the twentieth year in a row, the independent auditors tasked with reviewing our financial statements 

have provided an unmodified opinion. However, the Department received a material weakness relating to 

needed improvements over the controls for capitalizing internal use software costs, a material weakness 

relating to the due diligence over accounting treatment of National Telecommunications and Information 

Administration’s (NTIA) Digital Television Transition and Public Safety Fund, and a significant deficiency relating 

to additional improvements needed in information technology general controls.

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 2018, the Department is able to 

provide an unmodified statement of assurance that its internal controls and financial management systems 

meet the objectives of FMFIA. Additional detailed performance information and results will be released in 

the Annual Performance Report in February 2019. 

I am proud of the work that employees of the Department of Commerce have achieved and look forward 

to seeing the accomplishments of the future.

Wilbur Ross

Secretary of Commerce

November 14, 2018

FY 2018 AGENCY FINANCIAL REPORT V

MESSAGE FROM SECRETARY ROSS
HOW TO USE THIS REPORT

T

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

September 30 (FY) 2018 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 2020 Congressional Budget in 

conjunction with performance plan information as the “FY 2020 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) (Unaudited)

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, information on management controls and 

the Department’s financial management, analysis of FY 2018 financial condition and results, and a summary of 

stewardship information.

Financial Section

This section contains details of the Department’s finances in FY 2018. A message from the Department’s Chief 

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

and notes, required supplementary information (unaudited), and required supplementary stewardship information 

(unaudited).

Other Information (Unaudited)

This section provides the Office of Inspector General’s (OIG) summary on top management and performance 

challenges, a summary of financial statement audit and management assurances, payment integrity information, 

a fraud reduction report, a real property “Reduce the Footprint” report, a schedule of civil monetary penalties’ 

adjustments for inflation, a summary of Grants Oversight and New Efficiency (GONE) Act requirements, a summary 

of undisbursed balances in expired grant accounts, a glossary of acronyms, and acknowledgements. 

V I FY 2018 AGENCY FINANCIAL REPORT
Management’s Discussion

and Analysis

(Unaudited)
MISSION AND ORGANIZATION

MISSION

To create the conditions for economic growth and opportunity.

MANAGEMENT’S DISCUSSION AND ANALYSIS

2 FY 2018 AGENCY FINANCIAL REPORT
THE DEPARTMENT OF COMMERCE PROCESS FOR STRATEGIC 

PLANNING AND PERFORMANCE REPORTING

BACKGROUND ON STRATEGIC PLANNING AND REQUIRED MONITORING

The Government Performance and Results Act (GPRA) and the Modernization Act of 2010 (GPRAMA) require that federal 

agencies publish a new strategic plan by the first Monday in February following the year in which the term of the President 

begins. In February 2018, the Secretary of Commerce issued a 2018 – 2022 Strategic Plan in accordance with GPRAMA 

and the rules and timetable established by the Office of Management and Budget (OMB). 

Prior to FY 2018, agency strategic plans were developed and published on different schedules. “Synchronizing” plans 

promoted coordination and collaboration among federal agencies. Further, OMB facilitated a multi-agency view by regularly 

bringing agency representatives together to discuss their plans as they evolved.

The Department’s Strategic Plan was developed by a team of representatives from across all bureaus in collaboration with 

the Office of the Secretary. The Secretary and his Office of Strategic Planning and Policy made final decisions on the plan’s 

structure, content, and emphasis.

In the spring of 2018, the Department conducted the OMB-required Annual Strategic Review (ASR) of progress implementing 

the Strategic Plan. The ASR report was delivered to OMB in May. Subsequently, Agency leadership met with OMB 

principals to review progress. 

During the summer of 2018, the Department developed a draft Annual Performance Plan and Report (APPR). The draft is 

sent to OMB in September with the budget proposal. It provides details on strategic objective milestones that have been 

achieved and sets performance metric targets for the next two fiscal years. The final APPR, which is sent to Congress with 

the President’s budget, also reports all performance metric results for the fiscal year that ended in the previous September. 

The published APPR is posted on www.performance.gov for public review.

This Annual Financial Report, issued in November, includes some data on FY 2018 accomplishments. However, in November, 

results for many performance indicators are not yet available. A full description of accomplishments and full year indicator 

results will be in the APPR.

COMMERCE SPECIFIC PLAN MONITORING

The Department’s Chief Operating Officer, the Acting Deputy Secretary, has established a series of meetings with the leads 

for the strategic objectives in the Department Strategic Plan. The meetings are being held between October and April and 

are used to review data on related performance indicators and progress on milestones.

Bureau-level metric review processes vary in approach and schedule but are systematic. Data on mission support initiatives 

(Human Resources, Acquisition, Financial Management, etc.) are tracked on an online dashboard and reviewed at quarterly 

meetings with the Chief Financial Officer/Assistant Secretary for Administration (CFO/ASA). The various “CXO” Councils 

(Human Resources, Information Technology, Acquisition, CFO) also review dashboards of metrics.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 3
AGENCY PRIORITY GOALS

The GPRAMA requires agencies to establish Agency Priority Goals (APG). APGs set two-year targets for initiatives that are 

significant and would benefit from a well-orchestrated sprint. Most major departments have three to five APGs that are 

selected by top leadership and approved by OMB, an extension of the White House. Available data on the FY 2018/2019 

APGs are in the Performance Summary section of this report. Quarterly performance indicator data on APGs and Cross-APGs 

(address multi-agency priorities) are posted to www.performance.gov. 

The Office of the Secretary will begin the process of developing APGs for FY 2020/2021 in January of 2019. The proposed 

APGs will be submitted to OMB for their review in September of 2019.

ORGANIZATION OF THE DEPARTMENT OF COMMERCE STRATEGIC PLAN

The FY 2018 – FY 2022 Department of Commerce Strategic Plan is organized by goal areas, strategic objectives, strategies, 

and performance indicators. This structure is standard for federal agencies and is established in guidance from OMB. 

The goal areas are major elements of the Department’s mission, i.e., Accelerate American Leadership, Enhance Job Creation, 

Strengthen U.S. Economic and National Security, Fulfill Constitutional Requirements and Support Economic Activity, and 

Deliver Customer-Centric Service Excellence. Strategic objectives (two to five per goal area) state specific important 

outcomes the Department aims to achieve, e.g., “Reduce and Streamline Regulations.” Strategies are the approaches that 

will be used to achieve a strategic objective, e.g., “Streamline permitting processes.” Performance indicators are measures 

of success, e.g., “cost savings from deregulatory action.” 

The chart on the following page summarizes the strategic goals and objectives established in the FY 2018 – FY 2022 Strategic 

Plan. The complete plan can be viewed online at https://www.commerce.gov/about/strategic-plan

MANAGEMENT’S DISCUSSION AND ANALYSIS

4 FY 2018 AGENCY FINANCIAL REPORT
SUMMARY OF STRATEGIC GOALS AND OBJECTIVES

Strategic Goal Strategic Objectives

Goal 1 –

Accelerate American Leadership

1.1 – Expand Commercial Space Activities

1.2 – Advance Innovation

1.3 – Strengthen Intellectual Property Protection

Goal 2 –

Enhance Job Creation

2.1 – Increase Aquaculture Production

2.2 – Reduce and Streamline Regulations

2.3 – Strengthen Domestic Commerce and the U.S. Industrial Base

2.4 – Increase U.S. Exports

2.5 – Increase Inward Investment Into the United States

Goal 3 –

Strengthen U.S. Economic 

and National Security

3.1 – Enforce the Nation’s Trade Laws and Security Laws

3.2 – Enhance the Nation’s Cybersecurity

3.3 – Reduce Extreme Weather Impacts

3.4 – Deploy Public Safety Broadband

Goal 4 –

Fulfill Constitutional Requirements 

and Support Economic Activity

4.1 – Conduct a Complete and Accurate Decennial Census

4.2 – Provide Accurate Data to Support Economic Activity

Goal 5 –

Deliver Customer-Centric 

Service Excellence

5.1 – Engage Commerce Employees

5.2 – Accelerate Information Technology Modernization

5.3 – Consolidate Functions for Cost Savings

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 5
FY 2018 PERFORMANCE SUMMARY

OVERVIEW

The performance indicators below are organized by the goal areas of the FY 2018 – FY 2022 Department Strategic Plan. They are 

a representative sample of the 170 measures that are tracked at the Departmental level. The indicators presented in this report 

were selected based on significance, the availability of FY 2018 data, and whether they are understandable to the general public. 

Full year data on FY 2018 were not available for many measures by the publication deadline for this report. The Department’s 

full set of performance metrics, trends, and results can be found in the Annual Performance Plan and Report that is part of the 

annual budget submission to Congress and posted for the public on www.performance.gov.

Note that “NA” on a graph means: the measure was not tracked that year; the measure was calculated differently in that year; 

or the program/initiative is new.

Measures that are an Agency Priority Goal (APG) will be identified with a gray star. 

Strategic Goal 1 – Accelerate American Leadership

The United States leads the world in research, invention, and innovation. To strengthen our leadership, the Department is 

supporting the growth of commercial space activities, investing in foundational research, and protecting intellectual property 

(IP) to ensure creators can be rewarded for their inventions.

The following are some of the measures/data the Department uses to assess its contribution to U.S. competitiveness. 

The National Institute of Standards and Technology (NIST) 

sets a very high standard for this measure. It compares how 

often NIST research is cited as compared to the best research 

centers in the country. The index shows that NIST research is 

being referenced more than publications of these prestigious 

institutions.

The International System of Units (SI) will be recast from 

being based on units with reference to artifacts, to being 

based on fundamental constants and laws of nature. NIST 

will revolutionize commerce through quantum measurement 

by leading the transition to the Quantum SI paradigm.

MANAGEMENT’S DISCUSSION AND ANALYSIS

6 FY 2018 AGENCY FINANCIAL REPORT
NIST promotes U.S. industrial leadership by making their unique 

research facilities available to research and development staff 

from business. Access to these facilities helps push U.S. 

business to the “bleeding edge” of innovation.

Accelerating patent processing helps businesses plan and 

bring innovation to market faster. The faster new ideas are 

commercialized, the better for the U.S. economy. Actual 

results that fall below target is an indication of faster patent 

processing.

Marketing matters. The U.S. Patent and Trademark Office 

(USPTO) quickly brands U.S. products so they benefit from 

their reputation for quality. Actual results that fall below target 

is an indication of faster trademark processing.

For several years, the National Telecommunications and 

Information Administration (NTIA) has been helping 

communities and businesses benefit from broadband access. 

As technology becomes a part of communities, even in rural 

areas, this technical assistance is less of a priority. However, 

targets for providing assistance where it is needed have been 

exceeded. 

Strategic Goal 2 – Enhance Job Creation

Job creation is fundamental to the Department mission. American workers thrive when they are free to develop our abundant 

natural resources, leverage broadband, use secure digital technology, and are not burdened by excessive regulations. We create 

these conditions and facilitate job creation through increased exports and foreign direct investment (FDI). Exports and FDI are 

proven job generators. Goods and services exported supported 10.7 million well-paying U.S. jobs in 2016. In 2015, majorityowned U.S. affiliates of foreign companies directly employed 6.8 million Americans. Our work also facilitates community efforts 

to attract investment and use the internet to create economic opportunity.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 7
The following are a few of the performance indicators used to monitor the progress of Departmental programs designed to 

increase employment.

The fastest growing markets are international markets. The 

International Trade Administration (ITA) helps U.S. business 

benefit from the expansion of consumer purchasing power 

abroad. They provide information and technical assistance to 

more businesses each year and using the internet are planning 

on vastly extending their reach.

ITA is not only expanding its reach but also the quality of the 

assistance it provides. Business ratings of their assistance 

have consistently increased.

Government contracts are often big deals. ITA advocates for 

U.S. businesses when other nations are shopping for vendors. 

Experience matters, the success of this advocacy work is 

measured in “WINs.”

Jobs are also created by foreign investment. When a new U.S. 

plant is created in partnership with an international company, 

jobs are created in the plant and the local service industries. 

The SeclectUSA program facilitates foreign investment in 

the United States and as its network expands, SelectUSA is 

becoming increasingly effective.

Strategic Goal 3 – Strengthen U.S. Economic and National Security

Economic security is national security. America is safer when important technology and essential products are produced 

domestically. Today, our Nation’s economic prosperity and security are challenged by competitors and adversaries that 

engage in illegal trade practices, steal intellectual property (IP), and engage in cybercrime. Extreme weather, such as the six 

Category 4 or higher hurricanes experienced in the United States during 2017, also challenge economic security. We operate 

on multiple fronts to protect Americans and the U.S. economy. We enforce compliance with trade laws, provide cybersecurity 

tools to thwart cybercrime, share accurate weather information, and are deploying a first-responder broadband network that 

will protect lives and property.

MANAGEMENT’S DISCUSSION AND ANALYSIS

8 FY 2018 AGENCY FINANCIAL REPORT
The Department measures it contribution to economic and personal safety; the following are a sample of those measures.

U.S. products can be blocked from a foreign market by plan or 

accident through rules, regulations, policies, and procedures. 

ITA carries on an active dialogue with businesses to identify 

these barriers and build strategies to remove them. When 

a barrier is removed an entire industry benefits, not just one 

business. Removing trade barriers is a FY 2018/2019 APG and 

the target for the goal has been exceeded.

It is in the national interest to regulate the export or products 

that can be used as weapons or as part of weapons. The Bureau 

of Industry and Security (BIS) plays a critical and expanding role 

in that regulation, as evidenced by the trend data.

New Cybersecurity standards will be ineffective if they are not 

disseminated and adopted. The performance indicator above 

measures deployment. The initial target has been exceeded.

In FY 2018, flooding had a devastating impact on several 

communities. The impact can be reduced, particularly the 

impact on personal safety, with accurate forecasts. For 

many years NOAA has tracked the accuracy and timeliness 

of forecasts. In addition, they have a FY 2018/2019 APG to 

create more detailed maps predicting flooding patterns and 

other tools for emergency preparedness. All the milestones 

for this initiative have been met and the effort will continue 

in FY 2019. (APG)

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 9
Strategic Goal 4 – Fulfill Constitutional Requirements and Support Economic Activity

“We the People” is America’s source of strength. As mandated in Article 1, Section 2 of the U.S. Constitution, every 10 years, 

we conduct a nationwide count of every person living in the United States. Data from the next census in 2020 will be used 

to allocate seats in the U.S. House of Representatives among the states. The demographic and housing data from the 2020 

Census will also help the federal, state, local, and tribal governments make better decisions about how they spend taxpayer 

money. These datasets, along with others developed by the Department, support research by the private sector and academic 

institutions, and inform critical business decisions across all sectors of the economy.

The Bureau of Economic Analysis (BEA) is not only delivering 

its economic statistics on time, it is creating new indicators 

for an economy that is changing rapidly as technology evolves. 

As the data above indicates, BEA has added indicators in some 

years and therefore exceeded its target for timely statistics. 

The Census Bureau has a perfect track record for releasing 

its economic indicators on time.

As the data above shows, economic indicators are the priority 

annual product of the Census Bureau. However, in FY 2018, 

their other key products achieved the 100 percent on time 

status. In FY 2018, their main focus was testing and refinement 

of all systems needed to “conduct a complete and accurate 

decennial census.” (APG) The Census Bureau met their 

many milestones and the process received oversight at the 

bureau, Department, and OMB levels. 

MANAGEMENT’S DISCUSSION AND ANALYSIS

1 0 FY 2018 AGENCY FINANCIAL REPORT
Strategic Goal 5 – Deliver Customer-Centric Service Excellence

The Department cannot meet its performance targets in Strategic Goals 1 through 4 without quality, timely human resources, 

information technology (IT), and acquisition services. Success also requires a workforce that is passionate about delivering 

value to the American public. The President’s Agenda directs federal agencies to increase the cost-effectiveness of services and 

improve human capital management. We are responding with strategies to improve service and efficiency using technology, 

and engage employees by better aligning their time and efforts to the Department’s priorities.

The Department remains above the government average 

for both the Employee Engagement Index (Government 68 

percent; Department 71 percent) and the Inclusion Quotient 

(Government 61 percent; Department 66 percent). The 

Employee Engagement Index measures the conditions that 

lead to engaged employees and are in three subcategories: 

Leaders Lead, Supervisors, and Intrinsic Work Experience. 

The Inclusion Quotient is built on the concept that individual 

behaviors, repeated over time, form habits that create an 

inclusive work environment. The Inclusion Quotient consists 

of 20 questions grouped into five habits of inclusion: Fair, 

Open, Cooperative, Supportive, and Empowering. 

Based on the results of the Federal Employee Viewpoint 

Survey, the Department remains one of the best places to 

work in the federal government. 

The percent of high-volume processes with a feedback loop 

demonstrates Department efforts to be customer focused. 

Feedback loops are also in place for the Department and 

bureau websites.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 1 1
Mission support services, formerly provided by bureaus, 

are incrementally being consolidated in the Department’s 

Enterprise Services (ES). Services are transitioned to ES when 

savings and efficiencies can be demonstrated. The acquisition 

and contracting activities of the new unit are maturing and 

achieved targets for savings and customer satisfaction. Human 

Resources functions are in the process of being moved, but 

some transactional activities are now in place in ES. Currently 

accuracy for processing Personal Action Requests is at the 

ambitious standard of 98 percent.

Efforts to modernize IT services and increase Department 

cybersecurity cannot easily be summarized in non-technical 

terms. Many best practice cybersecurity measures are being 

employed. Filtering out malicious activity from the Web is key 

among them. In addition to these security measures, plans 

are on track for over a score of modernization efforts including 

a Grants Enterprise Management System; a new Business 

Administrative System; Statistical Production Modernization; 

and Census Enterprise Data Collection. 

MANAGEMENT’S DISCUSSION AND ANALYSIS

1 2 FY 2018 AGENCY FINANCIAL REPORT
LOOKING FORWARD

The Department of Commerce is committed to creating the conditions for economic growth and opportunity. The strategies for 

meeting that commitment are in the Strategic Plan for FY 2018 –2022. It is a living plan that will be modified as assessments 

provide lessons learned. However, based on the first year executing the plan, the basic structure and approach are working 

well. The infrastructure for increased emphasis on Commercial Space, Aquaculture, and removing trade barriers is in place 

and now attention will be on increasing impact. The Decennial Census has been a focus at all levels of the organization; that 

focus will be even greater as 2020 approaches. Other challenges mentioned in Inspector General reports will be central 

to our management plan. Environmental Satellites, the Nationwide Public Safety Broadband Network, and Cybersecurity 

are inherently challenging and complex and will receive commensurate resources and disciplined program management. 

The President’s Management Agenda will continue to provide a framework for efforts to improve Information Technology (IT) 

Modernization; achieve Data, Accountability, and Transparency; and create a Workforce for the 21st Century. In response 

to the President’s agenda, there will be increased efforts to replace legacy IT systems; deploy data to businesses; and 

direct staff time and talents to the work that has the most value.

Over the next few years, data and stakeholder consultation will build evidence of what policies and practices create the 

best “conditions for economic growth and opportunity.” 

BALANCING RISK AND OPPORTUNITY

Departmental managers and leaders will continue to handle complex and risky mission and mission support activities, such 

as preparing for and responding to natural disasters, and managing secure IT systems. While it is not possible to eliminate 

all uncertainties in these types of projects, Department strategies for managing risk will continue to mature. 

Enterprise Risk Management (ERM) orchestrates those strategies. The ERM program creates a forum to openly identify 

and discuss risks and develop mitigation plans. There are cascading roles of leadership and responsibility for ERM across 

the Department and its bureaus including a governance structure. The chartered Department Management Council focuses 

on managing the Department’s top risks and challenges. 

Governance and oversight processes address: the Agency Risk Profile, Government Accountability Office (GAO) High-Risk 

List, and the Mission Critical Programs and Activities List. Aligned action plans heavily influence the allocation of leadership 

priorities and Department resources. 

FY 2018 Program Management Improvement and Accountability Act brought new federal emphasis on program management. 

The Department will continue to build upon its existing Commerce Program Acquisition Framework process, review, and 

oversight to manage Department initiatives on time, on budget, and on scope. 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 1 3
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 2018, 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 Enterprise Risk Management 

and 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, 2018 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 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 reporting as of June 30, 2018 was 

operating effectively and no material weaknesses were found in the design or operation of the internal control 

over 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.

Lisa Casias

Acting Chief Financial Officer/

 Assistant Secretary for Administration 

and Deputy Assistant Secretary for Administration

November 14, 2018

Wilbur Ross

Secretary of Commerce

November 14, 2018

MANAGEMENT CONTROLS

MANAGEMENT’S DISCUSSION AND ANALYSIS

1 4 FY 2018 AGENCY FINANCIAL REPORT
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, unauthorized use, or misappropriation; 

● Revenues and expenditures applicable to Agency 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 2018, 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. Based on their FY 2018 evaluations, 

the Department’s 12 bureaus signed, certified, and submitted their Statements of Assurance and can provide reasonable 

assurance that its internal control over the effectiveness and efficiency of operations and compliance with applicable laws 

and regulations was operating effectively and no material weaknesses were found in the design or operation of the internal 

controls. 

The efficiency of the Department’s operations is continually evaluated using information obtained from reviews conducted 

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

federal agencies such as the Office of Personnel Management, and other specifically requested studies. The diverse 

reviews that took place during FY 2018 that were key to the organization provide assurance that Department systems and 

management controls comply with standards established under FMFIA. 

The revised Appendix A to OMB Circular A-123, Management of Reporting and Data Integrity Risk, expands assurance for 

internal controls over reporting beyond the financial domain. In preparing the Department’s statement of assurance, attention 

was given to activities related to the Digital Accountability and Transparency Act of 2014 (DATA Act), OIG Top Management 

Challenges, GAO High Risk List, performance reporting, strategic plans and performance metrics, real property and asset 

management, and human resources reporting. Controls related to risks in the Department’s Risk Profile were also considered.

The Department is aware of a reoccurring material weakness over internal use software (IUS) at the Census Bureau. As 

noted in the auditors’ report, the Census Bureau has worked to improve controls which included training procurement 

officers. However, due to the inappropriate design of the new training and timing with completed corrective actions, IUS 

cost capitalization continues to be an issue at the Census Bureau. In FY 2019, the Department will work directly with the 

Senior Assessment Team (SAT) and internal audit team to remediate the IUS control deficiency.

The Department also received a material weakness over the due diligence over accounting treatment of National 

Telecommunications and Information Administration’s (NTIA) Digital Television Transition and Public Safety Fund in the 

Statement of Budgetary Resources. The presentation issue has been resolved following coordinating with OMB in FY 2018. 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 1 5
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 2018, the financial systems in the Department are compliant with GAO principles 

and standards, the requirements of the Chief Financial Officers (CFO) Act, and OMB requirements. 

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 2018, the Department remained in compliance with FFMIA. 

BIENNIAL REVIEW OF FEES

OMB Circular A-25 Revised, User Charges (July 8, 1993), requires the biennial review of agency programs to determine 

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

to reflect unanticipated changes in costs or market values.

The Department conducts a review of its programs at least biennially. With the exception of the International Trade 

Administration (ITA), the Department is in compliance with the requirement to adjust its fees to meet the OMB Circular A-25 

Revised requirement of full-cost recovery for user charges.

OMB has granted ITA an exception to the full cost recovery provisions of OMB Circular A-25 Revised for the user fees 

that ITA charges to small and medium enterprises until September 30, 2019. As ITA continues to review and update its 

fee structure, it is working towards improving data collection capabilities with regard to sensitivity analysis and revenue 

projections, with the goal of moving toward a model that more fully recovers the costs of the services it provides.

MANAGEMENT’S DISCUSSION AND ANALYSIS

1 6 FY 2018 AGENCY FINANCIAL REPORT
REPORT ON OIG AUDIT FOLLOW-UP

This report shows audit follow-up activity on OIG audits, as well as the amount of potential monetary benefits the OIG 

found could be achieved through implementing open recommendations in these reports. The report includes only audits 

for which there has been resolution, i.e., management and the auditor (OIG) have agreed on an action plan. Reports are 

closed when final action has been taken to implement all recommendations.

SUMMARY OF ACTIVITY ON AUDIT REPORTS

OCTOBER 1, 2017 THROUGH SEPTEMBER 30, 2018

NUMBER OF REPORTS1

POTENTIAL MONETARY BENEFITS 

OF OPEN RECOMMENDATIONS2

Beginning Balance 28 $ 87,094,835

New Reports 14 100,337,715

Total Reports Open During the Period 42 187,432,550

Total Reports Closed During the Period3 23 (169,361,948)

Ending Balance 19 $ 18,070,602

1 The table includes Performance Audits, Evaluations, and Inspections. Audits comply with standards established by the Comptroller General 

of the United States for audits of federal establishments, organizations, programs, activities, and functions. Evaluations and inspections 

include evaluations, inquiries, and similar types of reviews that do not constitute an audit or a criminal investigation.

2 In some audits, the OIG identifies potential monetary benefits that could be realized when or if the recommendations are implemented. 

Potential Monetary Benefits of open recommendations include Questioned Costs and Funds to Be Put to Better Use. 

• Questioned Costs: This is a cost questioned by the OIG because of (1) an alleged violation of a provision of a law, regulation, contract, 

grant, cooperative agreement, or other agreement or document governing the expenditure of funds; (2) a finding that, at the time 

of the audit, such cost is not supported by adequate documentation; or (3) a finding that an expenditure of funds for the intended 

purpose is unnecessary or unreasonable.

• Funds to Be Put to Better Use: This dollar value results from an OIG recommendation that funds could be used more efficiently if 

Departmental Management took action to implement and complete the recommendation. Such actions may include (1) reductions in 

outlays; (2) deobligation of funds from programs or operations; (3) withdrawal of interest subsidy costs on loans or loan guarantees, 

insurance, or bonds; (4) costs not incurred by implementing recommended improvements related to the Department, a contractor, 

or a grantee; (5) avoidance of unnecessary expenditures identified in preaward reviews of contracts or grant agreements; or 

(6) any other savings specifically identified. 

3 The Potential Monetary Benefits amount in this row includes potential monetary benefits of recommendations that were closed even 

though the corresponding reports remained open.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 1 7
FINANCIAL MANAGEMENT AND ANALYSIS

INTRODUCTION

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 unmodified 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 2018 and future initiatives are discussed further below.

FINANCIAL MANAGEMENT SYSTEMS

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

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

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

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

interfaced with the Commerce Standard Acquisition and Reporting System (CSTARS), the U.S. Department of Agriculture’s 

National Finance Center (NFC) Payroll System, and the U.S. Department of the Treasury’s (Treasury) Automated Standard 

Application for Payments. 

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. 

The Department continues to participate in a government-wide work group for Government Invoicing (G-Invoicing), a Treasuryled initiative to standardize the interagency agreement process across the government. The Department participates in this 

work group to help guide the implementation of the initiatives across the government as well as to plan for the changes 

needed to CBS so that the Department is ready to implement by the mandatory date. Additionally, the Department remains 

dedicated to providing quarterly submissions to meet the Digital Accountability and Transparency Act of 2014 (DATA Act) 

requirements, as well as addressing any necessary modifications as required.

During FY 2018, the Department accomplished the following initiatives: 

● Gathered requirements for changes to the CBS to implement the interface files to and from the SmartPay3 tool, 

the U.S. General Services Administration-led initiative to transition government purchase and travel cards from the 

current provider to a new provider; 

● Completed development and configuration for TIBCO upgrades, which is software used to translate and validate XML 

documents from CSTARS (the Department acquisition system) interfaced with CBS;

MANAGEMENT’S DISCUSSION AND ANALYSIS

1 8 FY 2018 AGENCY FINANCIAL REPORT
● Completed design, development, and implementation of the National Oceanic and Atmospheric Administration 

(NOAA) Corps Retirement System Interface changes to the NFC interface;

● Completed development for Mass Close functionality in E2, the Department’s electronic travel management system, 

which provides the ability to close multiple E2 Travel open obligations in one batch process. Working with bureaus 

to complete implementation process;

● Continued Tier 2/production support operations for E2; 

● Completed development and deployed functionality for Open Authorizations which will assist in last minute mission 

travel at the Department and increased flexibility for frequent Department travelers;

● Began requirements gathering, design, and development activities in E2 to support functionality for additional 

employees due to the Census Decennial (approximately 500 thousand new travelers);

● Began analysis and requirements activities to determine impacts of SmartPay3 on E2;

● Successfully led the Department in quarterly DATA Act submissions to Treasury;

● Completed requirements, design, development, and deployment of the Access Management Portal for the Department’s 

Office of Human Resource Management General Support Systems to facilitate user account management;

● Implemented code for Federal Funding Accountability and Transparency Act New Unique Identifier to include Activity 

Address Codes;

● Completed several technical CBS upgrades, including: 

■ Oracle 12C Forms and Reports

■ WebCenter 12.2.1.2 and WebCenter 12.2.1.3

■ Removal of Legacy Portal code

■ Oracle Rest Data Services 18.2

■ Java Runtime Environment/Java WebStart; and

● Conducted operations and maintenance activities for the Department’s Chief Financial Officer and Assistant Secretary 

for Administration (CFO/ASA) Dashboard application. The CFO/ASA Dashboard provides a Department-wide, executivelevel overview of the Department’s highest priority and highest risk mission and administrative initiatives. 

In FY 2019 and beyond, the Department will continue its efforts to enhance its financial systems. The Department plans 

to accomplish the following: 

● Deploy E2 functionality to support Census Decennial employees (approximately 500 thousand new travelers);

● Continue activities to support SmartPay3 implementation of the CBS interface files for both CBS and E2;

● Deployment of the ad hoc reporting capability in E2; 

● Continue working with the Office of Management and Budget (OMB) and Treasury to determine the next steps for 

the Business Application Solutions project;

● Begin requirements gathering for a Business Intelligence solution to meet the Department’s needs for DATA Act 

metrics reporting;

● Conduct analysis and perform requirements gathering and design for G-Invoicing; and

● Complete technical upgrades including: 

■ Oracle Database 12CR2

■ Oracle 12C Forms and Reports

■ NOAA and National Institute of Standards and Technology (NIST) hardware refresh.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 1 9
FINANCIAL REPORTING AND POLICY

The Department accomplished the following initiatives during FY 2018:

● Bureaus identified and reported improper payments data to the Department quarterly, including recaptures of 

improper payments data, identified reasons for improper payments, and continually implemented appropriate actions 

to minimize future improper payments. For more information on the Department’s payment integrity efforts during 

FY 2018, see the Payment Integrity subsection included in Other Information;

● Each of the Department’s bureaus/reporting entities updated or prepared in FY 2018 their scheduled program/activity 

improper payment risk assessments as required by OMB Circular A-123, Management’s Responsibility for Enterprise Risk 

Management and Internal Control, Appendix C, Requirements for Payment Integrity Improvement. The Department’s 

reporting entities’ improper payment risk assessments of their programs/activities are prepared over a one to three 

year cycle depending on the size of the reporting entity, and also include assessments of the control, procurement, 

and grants management environments. The Department’s improper payment risk assessments are now in the 

continuous process stage of being updated/prepared every three years, unless significant changes occur, in which case 

an assessment will be updated more frequently. For more information on the Department’s efforts during FY 2018 

regarding improper payments risk assessments, see the Payment Integrity subsection included in Other Information;

● Conducted a review of the criteria set forth in OMB A-123, Appendix C, Requirements for Payment Integrity 

Improvement, and determined that the Department is not able to conduct a cost-effective payment recapture audit 

program for Department-wide grants and other cooperative agreements and for contracts/obligations, as the costs 

of the payment recapture audits exceed the benefits. The Department informed both OMB and the Department’s 

Inspector General of this determination and provided the analysis used by the Department to reach the decision;

● Adjusted the Department’s civil monetary penalties for inflation in January 2018, in accordance with the Federal Civil 

Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996 and the 

Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. For more information on the Department’s 

civil monetary penalties as of January 15, 2018, see the Civil Monetary Penalties’ Adjustments for Inflation subsection 

included in Other Information; and

● Implemented, effective FY 2018, the Federal Accounting Standards Advisory Board’s (FASAB) Statement of Federal 

Financial Accounting Standards (SFFAS) 47, Reporting Entity, which sets forth guidance to include, in the Department’s 

financial statements or as footnote disclosures, “all organizations (1) budgeted for by elected officials of the federal 

government; (2) owned by the federal government; or (3) controlled by the federal government with risk of loss or 

expectation of benefits. As a result of the analysis conducted by the Department during the implementation of 

SFFAS 47, it was determined that there is one organization to be included in the notes to the financial statements 

as a disclosure entity. Additional information regarding the Department’s FY 2018 implementation of SFFAS 47 is 

provided in Notes 1A and 25 of the financial section of this report.

In FY 2019 and beyond, the Department plans to accomplish the following amongst other items:

● Adjust the Department’s civil monetary penalties for inflation in January 2019, in accordance with the Federal Civil 

Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996 and the 

Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015;

● Implement, effective FY 2019, SFFAS 49, Public-Private Partnerships: Disclosure Requirements, which “establishes 

principles to ensure that disclosures about Public-Private Partnerships (P3) are presented in the reporting entity’s 

general purpose federal financial reports (GPFFR). The principles guide financial reporting by establishing a P3 definition 

MANAGEMENT’S DISCUSSION AND ANALYSIS

2 0 FY 2018 AGENCY FINANCIAL REPORT
and identifying risk-based characteristics that need to exist before considering the P3 arrangement or transaction for 

disclosure. SFFAS 49 exempts certain arrangements or transactions from the P3 disclosure requirements contained 

herein. Such exempt arrangements or transactions are subject to existing disclosure requirements in other SFFASs 

applicable to such arrangements or transactions;”

● Implement, effective FY 2019, SFFAS 53, Budget and Accrual Reconciliation (BAR), which amends requirements 

for a reconciliation between budgetary and financial accounting information established by SFFAS 7, Accounting for 

Revenue and Other Financing Sources and Concepts for Reconciling Budgetary and Financial Accounting. To increase 

informational value and usefulness, and to support the government-wide financial statement reconciling net operating 

cost to the budget deficit, this statement provides for the BAR to replace Note 23, Reconciliation of Net Cost of 

Operations to Budget, in the financial section of this report. The BAR explains the relationship between an entity’s 

net outlays on a budgetary basis and its net cost of operations during the reporting period; and

● Implement, effective FY 2021, SFFAS 54, Leases, which revises the financial reporting standards for federal lease 

accounting. It provides a comprehensive set of lease accounting standards to recognize federal lease activities in a 

reporting entity’s general purpose federal financial reports and includes appropriate disclosures. 

GRANTS 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 financial assistance programs and to strengthen compliance. In addition, OAM’s targeted efforts continue to transform 

the decentralized Department grants management community into an effective and efficient partnership. 

In coordination with the Department’s Office of the Chief Information Officer and the Office of Financial Management, 

OAM is overseeing the development of a Grants Enterprise Management Solution (GEMS) which will be a common grants 

management system that will replace the currently separated grants management systems in use by the Department’s 

three major grant issuing bureaus, NOAA, NIST, and Economic Development Administration (EDA). The GEMS project 

has completed Milestone 0 (Concept Initiation) and is in its Conceptual Phase. The GEMS project’s development phase is 

expected to extend through FY 2023 with EDA, NIST and NOAA expected to begin transitioning from their current grants 

management systems to GEMS in FY 2020. 

OAM’s Grants Management Division (GMD) coordinates the Department’s implementation of all applicable statutes, regulations, 

Executive Orders, and OMB circulars, as well as the provisions of 2 CFR, Part 200 (Uniform Guidance), to establish more 

efficient and user-friendly requirements for both Department awarding units and recipients. OAM/GMD collaborates with 

partners in the Department’s financial assistance community to review and update the Department’s Grants and Cooperative 

Agreements Manual (Grants Manual) as well as develop updated Financial Assistance Standard Terms and Conditions (ST&C) 

consistent with the issued guidance—both the Grants Manual and the ST&Cs undergo annual reviews and updates.

Led by GMD, the Department implemented the Research Terms and Conditions (RT&C) for federal awards, effective 

October 1, 2017; the RT&Cs address and implement the Uniform Guidance issued by OMB. Additionally, the Department 

implemented the use of the Research Performance Progress Report (RPPR) on August 9, 2018; federal agencies began 

using a uniform format for reporting performance progress on federally-funded research projects, thereby making it easier 

for award recipients to administer federal financial assistance programs through standardization of the types of information 

required in performance reports. The use of the RPPR reduces award recipient’s administrative effort and costs and makes 

it easier to compare the outputs, outcomes, etc. of research and research-related programs across the government.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 2 1
GMD conducts Grants Management Reviews to evaluate the internal grants administration policies and procedures of 

the operating units, including field or remote locations. NIST, NOAA, and EDA grants operating units are evaluated once 

every three years and more frequent reviews are scheduled when justified by operational issues. The scope of the review 

includes but is not limited to compliance with applicable public laws, regulations, OMB circulars, the Grants Manual, as 

well as internal grants administration policies of the operating unit.

OAM/GMD is an active member of the Financial Assistance Committee for E-Government (FACE); the authority of the FACE 

flows from the Award Committee for E-Government, a governance group chartered under the Chief Acquisition Officers 

Council. OAM/GMD participates in numerous FACE subcommittees that represent the needs of the financial assistance 

community, serving as the community voice for the composition, review and feedback on financial assistance policy 

guidance; the analysis and reporting of outcomes from the Integrated Award Environment portfolio, grants.gov, and other 

government-wide systems; and, the requirement development and collection of government-wide financial assistance 

data—which supports the implementation of lessons learned from the DATA Act Pilot Program Report to Congress and 

the President’s Management Agenda Cross-Agency Priority Goal #8, Results-Oriented Accountability for Grants.

HUMAN CAPITAL

The Department of Commerce strives to be a model employer by building and maintaining a highly skilled and diverse 

workforce. The Department is integrating various aspects of the President’s Management Agenda, the OMB Memorandum 

M-17-22, Comprehensive Plan for Reforming the Federal Government and Reducing the Federal Civilian Workforce , and the 

Department Strategic Plan, including workforce planning for mission-critical occupations, maximizing employee performance, 

engaging employees in the missions of the bureaus, and applying the lessons learned from the Federal Employee Viewpoint 

Survey to ensure the Department remains an employer of choice for the next generation of civil servants. As a result, 

the Department takes pride in ranking 3rd out of 18 large federal agencies in the 2017 Best Places to Work, the most 

comprehensive and authoritative rating of employee satisfaction and commitment in the federal government produced 

by the Partnership for Public Service and American University’s Institute for the Study of Public Policy Implementation. 

Acknowledging that people are the key to mission accomplishment, the Department continues to implement and utilize 

various programs in order to recruit and retain a highly skilled and diverse workforce. In FY 2018, the Department hosted 

approximately 431 Pathway Program interns, recent graduates, and Presidential Management fellows. Of these, approximately 

nine served as accountants, budget analysts, and auditors, including six new hires and two who were converted to 

permanent positions, within finance and accounting offices in the Bureau of Economic Analysis (BEA), International Trade 

Administration (ITA), NIST, NOAA, and the Office of Inspector General. Telework is also 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. In FY 2018, approximately 46 percent of 

Departmental employees (72 percent of accounting and budgeting employees) engaged in telework. 

Central to the Department’s ability to execute strategic human capital is the continued progress with Enterprise Services (ES). 

ES supports the Department’s 2018–2022 Strategic Plan (Strategic Goal 5 – Deliver Customer-Centric Service Excellence), in 

its implementation of intra-departmental, multi-function enterprise service operations in the areas of human resources (HR), 

information technology (IT), acquisitions, and financial management to the Office of the Secretary (OS) and the Department’s 

12 bureaus. Specifically, in support of the Department’s HR program, in FY 2018, ES transitioned additional HR services and 

bureaus receiving those services. In April and May 2018, ES launched the ES Portal and transitioned payroll and benefits 

MANAGEMENT’S DISCUSSION AND ANALYSIS

2 2 FY 2018 AGENCY FINANCIAL REPORT
transactional services for the two servicing HR offices already receiving Position Action Request (PAR) processing from ES. 

In August 2018, ES transitioned PAR, payroll, and benefits services for two additional HR offices, bringing ES’ servicing 

population for PAR, payroll, and benefits processing to over 20 thousand employees in the following bureaus/organizational 

units: Bureau of Industry and Security, BEA, Census Bureau, EDA, ITA, Minority Business Development Agency, NOAA, 

National Telecommunications and Information Administration (NTIA) (including the First Responder Network Authority), and OS. 

The newly launched ES Portal is a one-stop shop that enables employees to initiate, manage, and track their payroll and 

benefits service requests; access HR tools, resources, training, and knowledge articles; and submit and track inquiries 

and incidents. Moving transactional work to ES allows HR professionals to focus on the high value, strategic services 

important to client bureaus in meeting their mission. Additionally, ES continued to be successful in delivering several 

critical services in the acquisitions and IT areas, yielding enterprise-wide benefits and cost savings for the Department. 

Efforts will continue in FY 2019, and beyond, to transition additional HR services (e.g., talent acquisition) and functions 

(e.g., financial management) to the ES service delivery model. The focus and benefits of ES is on enabling improvements 

to its customers’ experience, performance management, mission focus, and value.

Furthermore, in response to the Office of Personnel Management’s (OPM) revised 5 CFR 250 subpart b, requiring agencies 

to develop a Human Capital Operating Plan (HCOP), the Department submitted the first draft HCOP in November 2017. The 

Department HCOP is a four-year plan with annual reassessments, providing processes and measures for the implementation 

of human capital strategies essential to successfully carryout the Agency’s Strategic Plan and Performance Plan. In December 

2017, OPM provided feedback on the Department’s draft HCOP and in April 2018 the Department submitted the modified 

draft HCOP based on OPM’s feedback. The modified HCOP includes the action items, metrics, and deliverables for the 

following four HCOP goals (Workforce Analysis; Empower and Engage Commerce Employees; Improve Internal and External 

Service Delivery Processes; and Maximize Employee Performance) and two priorities based on OPM’s Federal Workforce 

Priorities Report (Deploying Communication Tools and Securing Technological Solutions for Human Capital Analysis). 

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. These regulations adopt and incorporate 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.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 2 3
The DATA Act required, effective FY 2016, that agencies report to Congress any instance in which federal agencies fail 

to refer legally enforceable, non-tax debts that are greater than 120 days delinquent to the Treasury Offset Program for 

administrative offset. 

The Department’s total gross receivables with the public increased $24 million, or 5.1 percent, from $447 million as of September 

30, 2017 to $471 million as of September 30, 2018, 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 1.3 percent as 

of September 30, 2017 to 2.3 percent as of September 30, 2018. Receivables with the public that were 120 days or more

delinquent as a percentage of total gross receivables with the public, increased from 0.7 percent as of September 30, 2017

to 1.7 percent as of September 30, 2018. 

Prescreening procedures, account-servicing standards, 

determined collection of delinquent debt, and extensive 

referrals of delinquent debt to 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. Once receivables are delinquent by 120 days 

(effective FY 2016) or more, in accordance with Treasury 

requirements, such receivables are referred to Treasury’s 

Bureau of the Fiscal Service for collection through its Crossservicing Program and/or its Treasury Offset Program.

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. 

MANAGEMENT’S DISCUSSION AND ANALYSIS

2 4 FY 2018 AGENCY FINANCIAL REPORT
The Department’s prompt payment performance decreased 

from 98.7 percent in FY 2017 to 98.2 percent in FY 2018. 

The number of invoices paid late increased from 2,976 in 

FY 2017 to 3,196 in FY 2018. The decrease in prompt 

payment performance was mainly the result of open 

accounts payable technician positions at NOAA that 

persisted for the final nine months of FY 2018. These 

positions are projected to be filled by the end of calendar 

year 2018. 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. Per OMB Memorandum M-15-19, 

Improving Government Efficiency and Saving Taxpayer Dollars Through Electronic Invoicing (July 17, 2015), federal agencies 

are required to transition to electronic invoicing for appropriate federal procurements by the end of FY 2018. 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. In 2017, the U.S. Patent and Trademark 

Office reviewed various electronic invoicing options and made a selection. The solution was in place by the end of FY 2018, 

and vendor adoption will occur in FY 2019.

OMB Memorandum M-17-26, Reducing Burden for Federal Agencies by Rescinding and Modifying OMB Memoranda

(June 15, 2017), encourages agencies to accelerate payments, to the best of their ability, to small businesses and prime 

contractors with small business subcontractors. This did not change an agency’s responsibility to comply with the Prompt 

Payment Act and OMB’s implementing regulations thereto (5 CFR Part 1315, Prompt Payment).

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 by reducing administrative costs. Based on the results 

of FY 2013 testing of purchase card processes under OMB Circular A-123, Appendix A, Internal Control Over Financial 

Reporting, the Department implemented a pilot data analytic program in FY 2015 that reviews Department-wide purchase 

and travel card transactions in an effort to identify patterns, trends, and anomalies for possible further investigation. The 

Department continued to work with the bureaus in implementing corrective actions, monitoring internal controls, performing 

data analytics, and conducting necessary reviews and testing to ensure proper internal controls are in place. In FY 2018, 

the Department prepared to transition to GSA as its bankcard program coordinator. The Department plans to begin using 

GSA’s SmartPay3 in spring 2019. The Department also continues to carry out initiatives which have been implemented in 

the last few fiscal years, including more effective training, oversight, and risk management reviews in order to enhance 

the purchase card program. These enhancements have led to, among other things, a steady decrease in the number of 

purchase cards issued and in use by the Department.

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. The financial statements should be read with the realization that they are for a component 

of the U.S. government.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 2 5
ANALYSIS OF FY 2018 FINANCIAL CONDITION AND RESULTS

FINANCIAL HIGHLIGHTS

(Dollars in Thousands)

Percentage

Change FY 2018 FY 2017

Condensed Balance Sheets:

As of September 30, 2018 and 2017

ASSETS:

Fund Balance with Treasury 15% $ 28,794,045 $ 25,030,940

General Property, Plant, and Equipment, Net 6% 16,286,411 15,402,997

Advances and Prepayments -88% 96,843 788,892

Direct Loans and Loan Guarantees, Net 6% 459,277 431,619

Investments, Net not meaningful 6,244,436 334,106

Cost Contribution to Buildout of Nationwide 

Public Safety Broadband Network, Net not meaningful 2,009,841 288,000

Other 7% 289,731 271,436

TOTAL ASSETS 27% $ 54,180,584 $ 42,547,990

LIABILITIES:

Unearned Revenue 13% $ 1,648,025 $ 1,455,417

Federal Employee Benefits Liabilities -0.4% 881,992 885,936

Accounts Payable 242% 2,049,213 599,637

Accrued Payroll and Annual Leave 3% 596,920 577,272

Debt to Treasury 5% 452,563 430,313

Liability to General Fund of the U.S. Government 

for Deficit Reduction not meaningful 6,244,436 336,188

Accrued Grants -5% 129,678 135,995

Other -5% 284,222 298,179

TOTAL LIABILITIES 160% $ 12,287,049 $ 4,718,937

NET POSITION:

Unexpended Appropriations 52% $ 9,091,775 $ 5,973,837

Cumulative Results of Operations 3% 32,801,760 31,855,216

TOTAL NET POSITION 11% $ 41,893,535 $ 37,829,053

TOTAL LIABILITIES AND NET POSITION 27% $ 54,180,584 $ 42,547,990

Condensed Financing Sources:

For the Years Ended September 30, 2018 and 2017

Appropriations Received, Net of Reductions 30% $ 12,188,389 $ 9,364,774

Imputed Financing Sources from Cost Absorbed by 

Others 50% 300,335 200,225

Transfer In of Auction Proceeds from Federal 

Communications Commission not meaningful 5,895,159 –

Financing Sources Used for Recognizing Liability 

to General Fund of the U.S. Government for 

Deficit Reduction not meaningful (5,908,248) (2,134)

Other 43% 190,954 133,984

TOTAL FINANCING SOURCES 31% $ 12,666,589 $ 9,696,849

(continued on next page)

MANAGEMENT’S DISCUSSION AND ANALYSIS

2 6 FY 2018 AGENCY FINANCIAL REPORT
(Dollars in Thousands)

Percentage

Change FY 2018 FY 2017

Condensed Statements of Net Cost:

For the Years Ended September 30, 2018 and 2017

Condensed Statements of Net Cost:

Gross Departmental Costs 4% $ 12,897,387 $ 12,413,842

Less: Earned Revenue 6% (4,295,280) (4,035,808)

NET COST OF OPERATIONS 3% $ 8,602,107 $ 8,378,034

Selected Budgetary Information:

For the Years Ended September 30, 2018 and 2017

New Obligations and Upward Adjustments 37% $ 21,920,632 $ 15,970,699

Outlays, Net -16% $ 8,612,798 $ 10,302,299 FY 2018 FY 2017

OUTLAYS, NET

(In Billions) 

$8.61 $10.30

COMPOSITION OF ASSETS AND ASSETS BY RESPONSIBILITY SEGMENT

Departmental assets amounted to $54.18 billion, as of September 30, 2018. Fund Balance with the U.S. Department of 

the Treasury (Treasury) of $28.79 billion is the aggregate amount of funds available to make authorized expenditures and 

pay liabilities. General Property, Plant, and Equipment (PP&E), Net of Accumulated Depreciation, of $16.29 billion, includes 

$7.95 billion of Satellites/Weather Systems Personal Property; $4.93 billion of Construction-in-progress, primarily of satellites 

and weather measuring and monitoring systems; $1.52 billion of Structures, Facilities, and Leasehold Improvements; and 

$1.89 billion of other General PP&E. Direct Loans and Loan Guarantees, Net of Allowances for Subsidy Cost (Present Value) 

and Loan Losses, of $459.3 million, primarily relates to NOAA direct loan programs. Investments, Net of $6.24 billion consists 

of a non-marketable, market-based one-day certificate investment in NTIA’s Public Safety Trust Fund of $5.91 billion, resulting 

from the August 2018 transfer in of $5.90 billion of auction proceeds from the Federal Communications Commission (FCC), 

and a non-marketable, market-based note investment of $338.5 million, also in NTIA’s Public Safety Trust Fund. Cost 

Contribution to Buildout of Nationwide Public Safety Broadband Network, Net (NPSBN) of $2.01 billion captures NTIA’s 

cumulative cost contributions for the buildout of the NPSBN. Other Assets of $289.7 million primarily includes Accounts 

Receivable, Net of Allowance for Uncollectible Accounts, of $150.0 million; and Inventory, Materials, and Supplies, Net of 

Allowance for Excess, Obsolete, and Unserviceable Items, of $125.7 million. 

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

from September 30, 2017 to September 30, 2018. Most notably, the addition of the one-day certificate investment of 

$5.91 billion in NTIA’s Public Safety Trust Fund, as discussed above, resulted in an increase in Investments, Net from 

(continued from previous page)

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 2 7
1 percent of the Department’s assets as of September 30, 2017 to 11 percent of the Department’s assets as of September 

30, 2018. This new NTIA investment during FY 2018, along with an increase of $1.72 billion in NTIA’s (Network Construction 

Fund) Cost Contribution to Buildout of NPSBN, Net as discussed in the Trends in Assets section, were the primary reasons 

that NTIA’s assets increased from 38 percent to 44 percent of the Department’s assets, with a corresponding decrease in 

NOAA’s assets from 45 percent to 38 percent of the Department’s assets. 

TRENDS IN ASSETS

Departmental assets increased $11.63 billion, or 

27 percent, from $42.55 billion as of September 30, 2017 

to $54.18 billion as of September 30, 2018. Fund Balance 

with Treasury increased $3.76 billion, or 15 percent, from 

$25.03 billion to $28.79 billion, primarily because of (a) an 

increase in Fund Balance with Treasury of $1.13 billion for 

Census Bureau, resulting largely from a significant increase 

in Appropriations Received of $1.34 billion for its Periodic 

Censuses and Programs fund group as explained in the 

Composition of and Trends in Financing Sources section; (b) an increase in Fund Balance with Treasury, of also $1.13 billion, 

for NOAA, resulting mainly from an increase in Appropriations Received of $622.8 million for NOAA as explained in the 

Composition of and Trends in Financing Sources section; (c) an increase in Fund Balance with Treasury of $608.4 million 

for EDA, resulting largely from a significant increase in Appropriations Received of $624.5 million for EDA, as explained 

in the Composition of and Trends in Financing Sources section; and (d) an increase in Fund Balance with Treasury of 

$469.2 million for NTIA, resulting largely from a net increase of $336.0 million in Fund Balance with Treasury related to the 

buildout of the NPSBN by AT&T under the previous contract between the U.S. Department of the Interior (DOI) and AT&T 

and under the current contract between the First Responder Network Authority and AT&T ($672.0 million refund collection 

from DOI under the previous contract, as discussed further below in this section, less $336.0 million of payments made 

by NTIA to AT&T during FY 2018 under the current contract). General PP&E, Net increased $883.4 million, or 6 percent, 

FY 2014 FY 2015 FY 2016 FY 2017 FY 2018

$54.18

$39.46

$33.42

$41.25

TRENDS IN TOTAL ASSETS AS OF SEPTEMBER 30 (In Billions)

$42.55

MANAGEMENT’S DISCUSSION AND ANALYSIS

2 8 FY 2018 AGENCY FINANCIAL REPORT
from $15.40 billion to 16.29 billion, primarily due to to an increase in Satellites/Weather System Personal Property cost of 

$2.05 billion, largely due to the capitalization of $2.01 billion of costs for NOAA’s Joint Polar Satellite System-1 (JPSS-1) 

placed in service during FY 2018, offset by a decrease of $775.7 million in NOAA’s Construction-in-progress, which was 

primarily due to the capitalization of the JPSS-1 satellite as discussed above, offset mainly by increases in Construction-inprogress of $815.3 million for JPSS remaining satellites and of $445.2 million for Geostationary Operational Environmental 

Satellites remaining satellites. Advances and Prepayments decreased $692.0 million, or 88 percent, from $788.9 million 

to $96.8 million, primarily due to DOI returning in FY 2018 advance funding of certain task orders under the previous DOI 

contract with AT&T for it to build, operate, and maintain the NPSBN. During FY 2018, FirstNet took over the contract with 

AT&T for it to build, operate, and maintain the NPSBN, thus reducing the remaining Advances and Prepayments balance 

of $672.0 million with DOI to zero in FY 2018 upon the Department’s receipt from DOI of the $672.0 million refund of the 

advance balance with DOI. Investments, Net increased $5.91 billion, from $334.1 million to $6.24 billion as previously 

discussed in the Composition of Assets and Assets by Responsibility section. Cost Contribution to Buildout of NPSBN, Net 

increased $1.72 billion, from $288.0 million to $2.01 billion, due to additional actual/estimated work completed in FY 2018 

by AT&T for its buildout of the NPSBN. 

COMPOSITION OF LIABILITIES AND LIABILITIES BY RESPONSIBILITY SEGMENT

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

from September 30, 2017 to September 30, 2018.

Liabilities of the Department amounted to $12.29 billion as of September 30, 2018. Unearned Revenue of $1.65 billion 

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

rendered by the Department, including customer deposits. This line primarily relates to patent and trademark application 

and user fees that are pending action, and it also includes monies collected in advance under reimbursable agreements. 

Federal Employee Benefits Liability of $882.0 million is comprised of the actuarial present value of projected benefits for the 

NOAA Corps Retirement System and NOAA Corps Blended Retirement System of $654.6 million and for the NOAA Corps 

Post-retirement Health Benefits of $40.3 million, and the Department’s Actuarial Federal Employees’ Compensation Act 

(FECA) Liability of $187.1 million, which represents the actuarial liability for future workers’ compensation benefits. Accounts 

Payable of $2.05 billion 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 $596.9 million includes 

Departmental

Management

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 2 9
salaries and wages earned by employees, but not disbursed, as of September 30, 2018. Debt to Treasury of $452.6 million 

represents borrowings for NOAA’s direct loan programs. Accrued Grants of $129.7 million relates to a diverse array of 

financial assistance programs and projects, including the Economic Development Administration’s (EDA) accrued grants of 

$49.9 million for its grant investments that help communities generate jobs, retain existing jobs, and stimulate industrial 

and commercial growth; NOAA’s accrued grants of $49.8 million for grants awarded to state and local governments, nonprofit research institutions, and colleges and universities for research and conservation initiatives; and National Institute of 

Standards and Technology’s (NIST) accrued grants of $26.1 million for its grant investments and cooperative agreements 

that fund programs in a variety of fields such as energy, food safety, and electronics research, strategic manufacturing 

technology, and the Hollings Manufacturing Extension Partnership. NTIA’s Public Safety Trust Fund has a Liability to General 

Fund of the U.S. Government for Deficit Reduction of $6.24 billion—Priority 8 of Section 6413 of the Middle Class Tax Relief 

and Job Creation Act of 2012 specifies that any remaining funds deposited in NTIA’s Public Safety Trust Fund be deposited 

in the General Fund of the U.S. Government for deficit reduction after the end of FY 2022. Other Liabilities of $284.2 million 

primarily includes Environmental and Disposal Liabilities of $145.7 million, including $72.2 million for asbestos-related cleanup 

costs, and $61.9 million for a nuclear reactor operated by NIST; Accrued Benefits of $54.6 million; Accrued FECA Liability of 

$25.3 million; and ITA’s Foreign Service Nationals’ Voluntary Separation Pay Liability of $12.1 million. 

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

from September 30, 2017 to September 30, 2018. Due to the substantial changes in liabilities discussed in the below Trends 

in Liabilities section, the Liability to General Fund of the U.S. Government for Deficit Reduction increased from 8 percent 

of the Department’s liabilities to 63 percent of the Department’s liabilities; Unearned Revenue decreased from 31 percent 

of the Department’s liabilities to 13 percent of the Department’s liabilities; Federal Employee Benefits Liability decreased 

from 19 percent of the Department’s liabilities to 7 percent of the Department’s liabilities; and Accrued Payroll and Leave 

decreased from 12 percent of the Department’s liabilities to 5 percent of the Department’s liabilities. NTIA’s liabilities increased 

from 8 percent of the Department’s liabilities to 63 percent of the Department’s liabilities; NOAA’s liabilities decreased from 

39 percent of the Department’s liabilities to 15 percent of the Department’s liabilities; and USPTO’s liabilities decreased from 

31 percent of the Department’s liabilities to 12 percent of the Department’s liabilities.

TRENDS IN LIABILITIES

Liabilities of the Department increased $7.57 billion, 

or 27 percent, from $4.72 billion as of September 30, 

2017 to $12.29 billion as of September 30, 2018. 

Unearned Revenue increased $192.6 million, or 

13 percent, from $1.46 billion to $1.65 billion, primarily 

due to (a) unearned revenue of $120.0 million as 

of September 30, 2018 in NTIA’s budget account 

titled “First Responder Network Authority” under the 

contract with AT&T to build, operate, and maintain the 

NPSBN, whereas, there was no similar unearned revenue as of September 30, 2017; (b) an increase in unearned revenue 

for Census Bureau of $31.8 million, primarily related to increased projects with the U.S. Department of Housing and Urban 

Development related to the 2020 Decennial Census; and (c) an increased in unearned revenue of $30.1 million for USPTO 

primarily due to increased patent fees transaction volume and also due to patent fee increases that took place in January 

2018. Accounts Payable increased $1.45 billion, or 242 percent, from $599.6 million to $2.05 billion, primarily due to an 

accrual of actual/estimated work completed by AT&T for buildout of the NPSBN of $1.40 billion as of September 30, 2018, 

whereas, as of September 30, 2017, there was no similar liability accrual because there was rather an Advance (asset) 

$12.29

$4.46 $5.70 $4.74

FY 2014 FY 2015 FY 2016 FY 2017 FY 2018

TRENDS IN TOTAL LIABILITIES AS OF SEPTEMBER 30 (In Billions)

$4.72

MANAGEMENT’S DISCUSSION AND ANALYSIS

3 0 FY 2018 AGENCY FINANCIAL REPORT
balance with DOI to fund the previous contract with DOI and AT&T to build, maintain, and operate the NPSBN. Liability 

to General Fund of the U.S. Government for Deficit Reduction increased $5.91 billion, from $336.2 million to $6.24 billion, 

mainly due to NTIA Public Safety Trust Fund’s receipt during FY 2018 of auction proceeds from FCC of $5.90 billion as 

previously discussed in the Composition of Assets and Assets by Responsibility Segment section.

COMPOSITION OF AND TRENDS IN FINANCING SOURCES

The composition by percentage of the Department’s financing sources, as reported in the Department’s Consolidated 

Statements of Changes in Net Position, changed significantly from FY 2017 to FY 2018. For FY 2018, there was a $5.90 billion 

transfer in of auction proceeds from FCC received by NTIA’s Public Safety Trust Fund, as compared to none in FY 2017. 

Total financing sources of the Department increased $2.97 billion, or 31 percent, from $9.70 billion in FY 2017 to $12.67 billion 

in FY 2018. Appropriations Received, Net of Reductions increased $2.82 billion, or 30 percent, from $9.36 billion in FY 2017 

to $12.19 billion in FY 2018, primarily due to (a) a significant increase in Appropriations Received of $1.34 billion for Census 

Bureau’s Periodic Censuses and Programs budget account, from $1.20 billion in FY 2017 to $2.54 billion in FY 2018, including 

a large increase for the 2020 Decennial Census; (b) a significant increase in Appropriations Received of $625.5 million 

for EDA’s Economic Development Assistance Programs budget account, from $237.0 million in FY 2017 to $862.5 million 

in FY 2018, due largely to new disaster relief funds of $600.0 million received in FY 2018 under the Bipartisan Budget 

Act of 2018; and (c) an increase in Appropriations Received of $534.2 million for NOAA, from $5.82 billion in FY 2017 to 

$6.35 billion in FY 2018, due mainly to new disaster relief funds of $400.1 million received in FY 2018 under the Bipartisan 

Budget Act of 2018. Imputed Financing Sources from Cost Absorbed by Others increased $100.1 million, or 50 percent, 

from $200.2 million to $300.3 million, primarily due to (a) significant increases, from FY 2017 to FY 2018, in the imputed 

cost factors provided by the U.S. Office of Personnel Management for the Civil Service Retirement System (14 percent 

increase), Federal Employees Retirement System (10 percent increase), and the Federal Employees Health Benefits Program 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 3 1
(32 percent increase); (b) the effect on the imputed cost calculations of higher dollar levels of basic pay in FY 2018 versus 

FY 2017; and (c) a significant increase of $10.1 million in USPTO’s imputed costs with Treasury for collections processing. 

Transfer In of Auction Proceeds from FCC increased from none at FY 2017 to $5.90 billion in FY 2018 because of August 

2018 transfer in to NTIA’s Public Safety Trust Fund of $5.90 billion of auction proceeds from FCC. The most recent previous 

transfers in of auction proceeds from FCC to NTIA’s Public Safety Trust Fund were in FY 2016. Financing Sources Used 

for Recognizing Liability to General Fund of the U.S. Government for Deficit Reduction increased $5.91 billion, from 

$2.1 million to $5.91 billion, because in FY 2018 there was $5.90 billion of auction proceeds transferred in from FCC to 

NTIA’s Public Safety Trust Fund as previously discussed. This FY 2018 transfer in results in additional excess funds (Priority 

8) in NTIA’s Public Safety Trust Fund over the Fund’s priorities 1 through 7, per the originating Middle Class Tax Relief and 

Job Creation Act of 2012 (Public Law 112-96).

Other Financing Sources increased by $57.0 million, or 

43 percent, from $134.0 million in FY 2017 to $191.0 million 

in FY 2018, primarily due to an increase in transfers in/(out), 

net across the Department of $38.3 million from FY 2017

to FY 2018, and a decrease in cancellations and other 

adjustments of appropriations of $23.1 million across the 

Department from FY 2017 to FY 2018.

COMPOSITION OF FY 2018 NET COST OF OPERATIONS AND 

NET COST OF OPERATIONS BY RESPONSIBILITY SEGMENT

In FY 2018, the Department’s Net Cost of Operations amounted 

to $8.60 billion, which consists of Gross Costs of $12.90 billion, 

less Earned Revenue of $4.30 billion.

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

Net Cost of Operations remained consistent from FY 2017 to 

FY 2018.

Note: The Gross Costs and Earned Revenue amounts presented in the 

following paragraphs include transactions with other Departmental 

entities (intra-Departmental transactions). As a result, the Gross Costs 

amounts discussed below may not agree with the Gross Costs presented 

on the Department’s FY 2018 Consolidated Statement of Net Cost, which 

excludes intra-Departmental transactions.

NOAA’s FY 2018 Net Cost of Operations was $5.06 billion (Gross 

Costs of $5.31 billion less Earned Revenue of $245.9 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 

MANAGEMENT’S DISCUSSION AND ANALYSIS

3 2 FY 2018 AGENCY FINANCIAL REPORT
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. NOAA’s Gross Costs also support its 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 2018 Net Cost of Operations of $12.1 million (Gross Costs of $3.32 billion less Earned Revenue of $3.31 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 federal 

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 the Nation’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 the Nation’s trading partners.

The Economics and Statistics Administration’s (ESA) FY 2018 Net Cost of Operations was $1.49 billion (Gross Costs of 

$1.79 billion less Earned Revenue of $307.1 million), which includes ESA, the Bureau of Economic Analysis (BEA), and the 

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 

Nation’s economy by providing timely, relevant, and accurate economic accounts data in an objective and cost-effective 

manner. The Census Bureau’s FY 2018 Net Cost of Operations was $1.38 billion (Gross Costs of $1.68 billion less Earned 

Revenue of $303.2 million). The Census Bureau serves as the leading source of quality data about the Nation’s people and 

economy. Data that 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), economic 

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

NIST’s FY 2018 Net Cost of Operations was $967.8 million (Gross Costs of $1.23 billion less Earned Revenue of $266.4 million), 

which includes NIST and the National Technical Information Service (NTIS). NIST’s FY 2018 Net Cost of Operations, by itself, 

was $966.8 million (Gross Costs of $1.12 billion less Earned Revenue of $156.9 million). NIST promotes American 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 American companies continually improve products and services. NTIS serves as the 

largest central resource for government-funded scientific, technical, engineering, and 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 2018 Net Cost of Operations was $486.8 million (Gross Costs of $509.4 million less Earned Revenue of $22.6 million). 

ITA fosters economic growth and prosperity through global trade by strengthening the competitiveness of American industry, 

promoting trade and investment, and ensuring fair trade through the rigorous enforcement of the Nation’s trade laws and 

agreements. ITA leads the Department’s export and investment platform, working with several other bureaus, inside and 

outside the Department, including working with the U.S. Trade Representative, to provide greater access to markets and 

customers by removing trade barriers.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 3 3
EDA’s FY 2018 Net Cost of Operations was $283.9 million (Gross Costs of $297.5 million less Earned Revenue of $13.6 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 United States. Through strategic investments that foster job creation and 

attract private investment, EDA supports development in economically distressed areas of the United States. 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.

NTIA’s FY 2018 Net Cost of Operations was $35.0 million (Gross Costs of $200.3 million less Earned Revenue of $165.3 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.

FY 2018 Net Cost of Operations for DM was $115.8 million (Gross Costs of $421.1 million less Earned Revenue of 

$305.4 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 2018 Net Cost of Operations for the other Departmental bureaus was $152.9 million (Gross Costs of $155.7 million less 

Earned Revenue of $2.7 million), which is comprised of the Bureau of Industry and Security (BIS) and the Minority Business 

Development Agency (MBDA). BIS advances the Nation’s national security, foreign policy, and economic objectives by 

ensuring an effective export control and treaty compliance system and promoting continued strategic technology leadership 

by the United States. MBDA helps to create and sustain American jobs by promoting the growth and global competitiveness 

of businesses owned and operated by minority entrepreneurs.

TRENDS IN NET COST OF OPERATIONS

The Department’s Net Cost of Operations increased by 

$224.1million, or 3 percent, from $8.38 billion in FY 2017 

to $8.60 billion in FY 2018. Gross Costs increased by 

$483.5 million, or 4 percent, from $12.41 billion in FY 2017 

to 12.90 billion in FY 2018. Earned Revenue increased by 

$259.5 million, or 6 percent, from $4.04 billion in FY 2017 

to $4.30 billion in FY 2018. 

The increase in Earned Revenue from FY 2017 to FY 2018 

of $259.5 million is primarily due to an increase in USPTO’s 

Earned Revenue of $204.3 million, from $3.10 billion in FY 2017 to $3.31 billion in FY 2018, mainly resulting from a patent 

revenue increase due to increased transaction volume, and also resulting from a patent revenue increase due to fee 

increases that took place in January 2018.

MANAGEMENT’S DISCUSSION AND ANALYSIS

3 4 FY 2018 AGENCY FINANCIAL REPORT
SELECTED BUDGETARY INFORMATION BY RESPONSIBILITY SEGMENT

The distribution (by responsibility segment) of the Department’s New Obligations and Upward Adjustments changed 

significantly from FY 2017 to FY 2018. Due to the substantial changes in New Obligations and Upward Adjustments 

discussed in the below Trends in Selected Budgetary Information section, NTIA’s portion increased from 7 percent of the 

Departmental total in FY 2017 to 29 percent of the Departmental total in FY 2018, and NOAA’s portion decreased from 

40 percent of the Departmental total in FY 2017 to 30 percent of the Departmental total in FY 2018.

The distribution (by responsibility segment) of the Department’s Outlays, Net (which is comprised of Outlays, Gross less 

Actual Offsetting Collections) also changed significantly from FY 2017 to FY 2018. Due to the substantial changes in Outlays, 

Net discussed in the below Trends in Selected Budgetary Information section, NTIA’s portion decreased from 12 percent of 

the Departmental total in FY 2017 to negative 5 percent of the Departmental total in FY 2018, and NOAA’s portion increased 

from 53 percent of the Departmental total in FY 2017 to 63 percent of the Departmental total in FY 2018.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 3 5
TRENDS IN SELECTED BUDGETARY INFORMATION

The Department’s New Obligations and Upward 

Adjustments increased by $5.95 billion, or 37 percent, 

from $15.97 billion in FY 2017 to $21.92 billion in FY 2018, 

primarily due to a significant increase of $5.17 billion for 

NTIA’s Network Construction Fund, from $1.06 billion in 

FY 2017 to $6.23 billion in FY 2018. This large increase 

resulted mainly from a large new obligation in FY 2018 

of $5.50 billion under the First Responder Network 

Authority contract with AT&T to build, maintain, and 

operate the NPSBN. 

The Department’s Outlays, Net decreased by $1.69 billion, or 16 percent, from $10.30 billion in FY 2017 to $8.61 billion in 

FY 2018, primarily due to (a) NTIA’s Network Construction Fund in FY 2018 received a refund (Actual Offsetting Collections) 

of $672.0 million from DOI returning advance funding of certain task orders under the previous DOI contract with AT&T, 

as previously discussed; (b) NTIA’s Network Construction Fund experienced a decrease of $661.1 million in Outlays, Gross, 

primarily as a result of a decrease in Outlays, Gross of $664.0 million for the previous and current contracts for AT&T to 

build, maintain, and operate the NPSBN; and (c) NTIA received in FY 2018 $240.0 million of Actual Offsetting Collections 

under the contract(s) for AT&T to build, maintain, and operate the NPSBN, whereas there was no such Actual Offsetting 

Collections in FY 2017.

MANAGEMENT’S DISCUSSION AND ANALYSIS

3 6 FY 2018 AGENCY FINANCIAL REPORT
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 standardsetting 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 Woods Hole 

Science Aquarium; and Great Lakes Environmental Research Laboratory, Lake Michigan Field Station); 13 National Marine 

Sanctuaries; 5 Marine National Monuments (Marianas Trench, Pacific Remote Islands, Rose Atoll, Papahãnaumokuãkea, and 

the Northeast Canyons and Seamounts); Aleutian Islands Habitat Conservation Area; NOAA Habitat Blueprint (10 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 2018 totaled $250.9 million and 

included its Public Works program ($136.2 million), Disaster Recovery ($66.5 million), Economic Adjustment Assistance 

program ($23.6 million), and Assistance to Coal Communities ($24.6 million). NOAA’s investments in FY 2018 totaled 

$2.3 million for the National Estuarine Research Reserves. 

MANAGEMENT’S DISCUSSION AND ANALYSIS

FY 2018 AGENCY FINANCIAL REPORT 3 7
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 2018 

totaled $23.8 million and included the Educational Partnership Program ($15.3 million), Ernest F. Hollings Undergraduate 

Scholarship Program ($5.9 million), National Sea Grant College Program ($0.9 million), and the National Estuarine Research 

Reserve Program ($1.7 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 significant investments in R&D are by NIST and NOAA. 

NIST’s R&D investments (basic, applied, and development) in FY 2018 totaled $777.0 million and included $733.2 million 

for its NIST Laboratories Program, $7.6 million for its Manufacturing USA, Advanced Manufacturing Technology Consortia, 

and Technology Innovation Program, and $36.2 million for its Public Safety Communications Research Program. NOAA’s 

R&D investments (applied and development) in FY 2018 totaled $774.2 million, which included Environmental and Climate 

($488.6 million), Fisheries ($60.1 million), Marine Operations and Maintenance and Aircraft Services ($66.9 million), 

Weather Service ($19.5 million), and Other ($139.1 million).

MANAGEMENT’S DISCUSSION AND ANALYSIS

3 8 FY 2018 AGENCY FINANCIAL REPORT
Financial Section
MESSAGE FROM THE CHIEF FINANCIAL OFFICER (Unaudited)

T

his FY 2018 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 2018, the Department achieved an unmodified audit opinion for the twentieth consecutive year. However, the 

Department received two material weaknesses: one relating to the implementation of controls over the identification, and 

subsequent capitalization of internal use software within one bureau, and one relating to the due diligence over accounting 

treatment of National Telecommunications and Information Administration’s (NTIA) Digital Television and Public Safety 

Fund. Additionally, there is one significant deficiency relating to Department-wide information technology (IT) general 

controls. We will continue to take corrective actions to strengthen controls in these areas in FY 2019. 

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 unmodified statement of assurance that its internal 

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

with no identified material weaknesses. 

The Department’s leadership continues its commitment to improving the capacity to deliver our mission with customerfocused 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. 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 processes as an 

enterprise for key services. The Department’s Enterprise Services (ES) was successfully launched in FY 2017 and continued 

to introduce additional efficiencies during FY 2018. In the human resources (HR) area, the Department’s first Web-based 

self-service portal was launched, allowing for customers to initiate HR actions and track status in real time. Additionally, 

ES leveraged the buying power of the entire Department for commodity purchases, helping to avoid millions of dollars in 

costs, while providing acquisition and procurement services to the nine bureaus that do not have their own procurement 

authority. In FY 2019 and beyond, ES will continue to expand in the arenas of IT shared services, talent acquisition, and 

financial management. This will not only allow for improved service delivery, but also smarter, more efficient, and more 

effective use of taxpayer resources. 

Lisa Casias

Acting Chief Financial Officer/

 Assistant Secretary for Administration 

and Deputy Assistant Secretary for Administration 

November 14, 2018

4 0 FY 2018 AGENCY FINANCIAL REPORT

MESSAGE FROM THE CHIEF FINANCIAL OFFICER (UNAUDITED)
Independent Auditors’ Report

FINANCIAL SECTION
November 15, 2018 

INFORMATIONAL MEMORANDUM FOR SECRETARY ROSS

FROM: Peggy E. Gustafson 

Inspector General

SUBJECT: Department of Commerce FY 2018 Consolidated Financial 

Statements, Final Report No. OIG-19-005-A 

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

on the Department of Commerce’s fiscal year 2018 consolidated financial statements. KPMG 

LLP (KPMG), an independent public accounting firm, performed the audit in accordance with 

U.S. generally accepted auditing standards, standards applicable to financial audits contained in 

Government Auditing Standards, and Office of Management and Budget Bulletin No. 19-01, 

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 material weaknesses in internal control over financial reporting related to

capitalizing internal use software costs and accounting treatment for the Digital

Television Transition and Public Safety Fund;

• identified a significant deficiency in internal control over financial reporting related to

information technology general controls in the areas of access controls, configuration

management, and security management; and

• identified no instances of reportable noncompliance with applicable laws, regulations,

contracts, and grant agreements, as well as no instances in which the Department’s

financial management systems did not substantially comply with certain provisions of the

Federal Financial Management Improvement Act of 1996.

My office oversaw the audit performance. We reviewed KPMG’s report and related 

documentation, and made inquiries of its representatives. Our review disclosed no instances 

where KPMG did not comply, in all material respects, with 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 financial statements, conclusions about the effectiveness of internal control over 

financial reporting, or conclusions on compliance with applicable laws, regulations, contracts, 

and grant agreements. KPMG is solely responsible for the attached audit report and the 

conclusions expressed in it. 

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

Attachment

4 2 FY 2018 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT
KPMG LLP is a Delaware limited liability partnership and the U.S. member

firm of the KPMG network of independent member firms affiliated with 

KPMG International Cooperative (“KPMG International”), a Swiss entity. 

KPMG LLP

Suite 12000

1801 K Street, NW

Washington, DC 20006

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, 2018 and 2017, and the 

related consolidated statements of net cost, changes in net position, and custodial activity, 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, 

in accordance with the standards applicable to financial audits contained in Government Auditing Standards

issued by the Comptroller General of the United States, and in accordance with Office of Management and 

Budget (OMB) Bulletin No. 19-01, Audit Requirements for Federal Financial Statements. Those standards and 

OMB Bulletin No. 19-01 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. 

Opinion 

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, 2018 and 2017, and its net 

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

accordance with U.S. generally accepted accounting principles. 

FY 2018 AGENCY FINANCIAL REPORT 4 3

INDEPENDENT AUDITORS’ REPORT
Other Matters 

Interactive Data

Management has elected to reference to information on websites or other forms of interactive data outside the

Agency Financial Report to provide additional information for the users of its financial statements. Such 

information is not a required part of the basic consolidated financial statements or supplementary information 

required by the Federal Accounting Standards Advisory Board. The information on these websites or the other 

interactive data has not been subjected to any of our auditing procedures, and accordingly we do not express 

an opinion or provide any assurance on it.

Required Supplementary Information 

U.S. generally accepted accounting principles require that the information in the Management’s Discussion and 

Analysis, 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 Message from Secretary Ross, How to Use this Report, the Message from the Chief Financial 

Officer, and the Other Information sections, 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, 2018, 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.

Our consideration of internal control was for the limited purpose described in the preceding paragraph 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 have not been

identified. However, as described in the accompanying Exhibit I and Exhibit II, we did identify certain 

deficiencies in internal control that we consider to be material weaknesses and a significant deficiency. 

4 4 FY 2018 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT
A deficiency in internal control exists when the design or operation of a control does not allow management or 

employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, 

misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in 

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

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

described in the accompanying Exhibit I to be material weaknesses. 

The Department’s management did not report the material weaknesses described in the accompanying Exhibit I 

in its Federal Managers’ Financial Assurance Statement, Management Controls, included in the Management’s 

Discussion and Analysis section of the accompanying Agency Financial Report.

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. We 

consider the deficiencies described in the accompanying Exhibit II to be a significant deficiency. 

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

Government Auditing Standards or OMB Bulletin No. 19-01.

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 

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. 

Management’s Responses to Findings 

Management’s responses to the findings identified in our audit are described in the accompanying Exhibits I

and II. Management’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

results 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, 2018 

FY 2018 AGENCY FINANCIAL REPORT 4 5

INDEPENDENT AUDITORS’ REPORT
Exhibit I – Material Weaknesses 

A. Controls over Accounting for Internal Use Software

Controls over accounting for the Census Bureau’s (Census’s) internal use software (including “in 

development”), which represents $584 million of the Department’s general property, plant, and equipment as 

of September 30, 2018, need further improvement as described herein. 

Census did not consistently capitalize internal use software (IUS) costs despite implementing several controls 

in fiscal year (FY) 2018 to address the prior year material weakness. As part of its corrective action plan 

(CAP), Census performed a risk assessment and implemented enterprise-wide IUS training, including all 

division procurement officers and division program management. Census also enhanced its process to 

require divisions to report quarterly IUS costs through the training and one-on-one meetings with responsible 

personnel. 

As a result of our testing as of June 30, 2018 on a sample basis, we determined that Census Finance did not 

capitalize $3.5 million of IUS because the divisions excluded these costs from their quarterly submissions. 

In August 2018, as part of its CAP, Census Finance completed a review of one material service contract and 

a sampling of other potential IUS disbursements for the period October 2017 to June 2018 to determine 

whether all IUS costs were appropriately capitalized. Accordingly, their sampling did not occur concurrently 

with the review of the quarterly IUS submissions and thus, did not identify and correct misstatements in a 

timely manner for all of FY 2018. 

As a result of the analysis described above, Census recorded adjustments in the general ledger for $114 

million of previously uncapitalized IUS costs. Per review of the support for these entries, the uncapitalized 

costs were incurred for IUS contracts over the period of July 2017 through February 2018, further evidencing 

that controls were not operating in a timely manner. 

As a result of our testing as of September 30, 2018 on a sample basis, we determined that Census Finance 

did not capitalize another $8.0 million of IUS costs that were improperly deemed to not meet the definition of 

IUS. Additionally, Census did not have controls in place to maintain sufficient documentation supporting the 

amounts capitalized. As a result, Census was unable to evidence whether certain costs were properly 

capitalized and to evidence whether certain costs remained properly classified. 

The relevant criteria is the Federal Accounting Standards Board’s Statement of Federal Financial Accounting 

Standards No. 10, Accounting for Internal Use Software. 

Recommendations 

We recommend that Census management: 

1. Continue to develop, document, and implement the quarterly review of the divisions’ IUS submissions to

enable Census Finance to detect and correct omitted or inaccurate IUS costs in a timely manner.

2. Enhance the training on the relevant criteria and how to appropriately apply them for recognizing IUS,

particularly as they relate to material service contracts with IUS assets embedded within the contractual

requirements, and enhance the training materials to clearly document and communicate to IUS points of

contact all requirements of the IUS points of contact (e.g. retrospective review).

3. Implement a requirement for new IUS points of contact to attend relevant training prior to assuming IUS

responsibilities.

4. Update its IUS policies and implement procedures to address retaining documentation that sufficiently

supports IUS activity and balances.

4 6 FY 2018 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT
Exhibit I – Material Weaknesses, Continued 

Management’s Response

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

address KPMG’s recommendations.

B. Due Diligence over Accounting Treatment

The Department did not perform a sufficient due diligence process prior to revising its accounting treatment of 

$8.8 billion for the Digital Television Transition and Public Safety Fund (the fund). The Department initially

overstated its budgetary resources by presenting this amount in the “unobligated balance from prior-years

budgetary authority” caption and the “unapportioned – unexpired” caption on the statement of budgetary 

resources for the fund. This presentation was inconsistent with the FY 2017 statement of budgetary 

resources, which presented zero budgetary resources to be carried forward for this fund in FY 2018 (that is, 

effectively, removing it as a budgetary resource at the end of FY 2017). In addition, this matter impacted the

status of fund balance with Treasury footnote disclosure for FY 2018 where the Department had initially 

reclassified the amount from “not available” to “unobligated balance - unavailable.”

In FY 2018, the Department focused on the OMB Circular No. A-11 provision related to the lack of an

apportionment for its conclusion in recognizing $8.8 billion in the “unapportioned, expired” caption and 

reinstating the $8.8 billion as a budgetary resource. However, given the full context of OMB Circular No. A-11

and the nature of the proceeds associated with this fund, the focus on the concept of apportionment did not 

consider whether budgetary resources exist in order to seek apportionment. The Department stated that 

certain provisions in OMB Circular No. A-11 need to be updated as it relates to the facts and circumstances 

for this fund. 

Subsequently, based on our inquiry and the Department’s further coordination with OMB, the Department 

adjusted the statement of budgetary resources to present zero in budgetary resources and zero in status of

budgetary resources for this fund and reversed the reclassification that was made to the fund balance with 

Treasury footnote. 

The net effect of the Department’s initial treatment was $8.8 billion presented as budgetary resources that 

were unapportioned (that is, not available) and the Department’s adjusted treatment was exclusion of the $8.8 

billion from budgetary resources and status (that is, not available). 

The relevant criteria is the Federal Accounting Standards Board’s Statement of Federal Financial Accounting 

Standards No. 7, Accounting for Revenue and Other Financing Sources and Concepts for Reconciling 

Budgetary and Financial Accounting and OMB Circular No. A-11, Preparation, Submission, and Execution of

the Budget.

Recommendations 

We recommend that the Department: 

5. Request any updates that the Department believes is needed to OMB Circular No. A-11.

6. Update the Department’s policies and procedures to address treatment needed for these types of fund

situations.

Management’s Response

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

address KPMG’s recommendations.

FY 2018 AGENCY FINANCIAL REPORT 4 7

INDEPENDENT AUDITORS’ REPORT
Exhibit II – SigniÞcant DeÞciency 

Information Technology General Controls 

During FY 2018, certain deficiencies surrounding information technology (IT) general controls associated with 

the Department’s financial management systems and supporting infrastructure exists that we considered 

collectively to be a significant deficiency under the standards issued by the American Institute of Certified 

Public Accountants. Specifically, the deficiencies are, as follows: 

 Access controls: 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; access is appropriately reviewed and monitored, and that employees are restricted from

performing incompatible functions or duties beyond their responsibility. The areas of deficiencies are: (1)

application, database, and operating system password controls, (2) application, database, and operating

system access administration controls, (3) application, database, and operating system audit log review

controls, and (4) source code recertification.

 Configuration management: The objectives of configuration management are to ensure that hardware,

software and firmware programs, and program modifications are properly authorized, tested, and approved;

that access to and distribution of programs is carefully controlled; and that integrity of the application

controls is maintained. The area of deficiency is in configuration management change controls.

 Security management: The objective of security management is to support data reliability. The areas of

deficiencies are: (1) the Department’s monitoring of compliance with some internal policies, and (2) the

authorization to operate process.

The relevant criteria is Department-wide and bureau-level policies and various Federal standards and guidance 

such as (1) The U.S. Government Accountability Office’s (GAO’s) Standards for Internal Control in the Federal 

Government, dated September 2014, (2) GAO’s Federal Information System Controls Audit Manual, dated 

February 2009, and (3) National Institute of Standards and Technology Special Publication 800-53 Rev. 4, 

Security and Privacy Controls for Federal Information Systems and Organizations. 

Recommendations 

Due to the sensitive nature of IT controls, certain information has been omitted from this report. We provided 

the Department’s management with a separate limited use report that includes specific information about the 

control deficiencies, our understanding of the cause of the control deficiencies, and our recommendations. 

Management’s Response

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

KPMG’s recommendations.

4 8 FY 2018 AGENCY FINANCIAL REPORT

INDEPENDENT AUDITORS’ REPORT
Principal Financial Statements

FINANCIAL SECTION
United States Department of Commerce Consolidated Balance Sheets

As of September 30, 2018 and 2017 (In Thousands)

FY 2018 FY 2017

ASSETS

Intragovernmental:

Fund Balance with Treasury (Notes 2 and 19) $ 28,794,045 $ 25,030,940

Investments, Net (Notes 3 and 22 – NTIA’s Public Safety Trust Fund) 6,244,436 334,106

Accounts Receivable (Note 4) 104,745 100,522

Advances and Prepayments (Note 22 – NTIA’s Network Construction Fund) 42,051 752,189

Total Intragovernmental 35,185,277 26,217,757

Cash (Note 5) 8,768 5,736

Accounts Receivable, Net (Note 4) 45,297 46,376

Direct Loans and Loan Guarantees, Net (Note 6) 459,277 431,619

Inventory, Materials, and Supplies, Net (Note 7) 125,675 108,063

General Property, Plant, and Equipment, Net (Note 8) 16,286,411 15,402,997

Cost Contribution to Buildout of Nationwide Public Safety Broadband Network, Net 

(Note 22 – NTIA’s Network Construction Fund) 2,009,841 288,000

Other (Note 9) 60,038 47,442

TOTAL ASSETS $ 54,180,584 $ 42,547,990

Stewardship Assets (Note 24)

LIABILITIES

Intragovernmental:

Accounts Payable $ 97,337 $ 155,968

Debt to Treasury (Note 11) 452,563 430,313

Other

Unearned Revenue 338,477 309,006

Liability to General Fund of the U.S. Government for Deficit Reduction 

(Note 22 – NTIA’s Public Safety Trust Fund) 6,244,436 336,188

Custodial Payable to Treasury (Note 20) 376 848

Other (Note 12) 117,010 93,652

Total Intragovernmental 7,250,199 1,325,975

Accounts Payable 1,951,876 443,669

Federal Employee Benefits Liabilities (Note 13) 881,992 885,936

Environmental and Disposal Liabilities (Note 14) 145,677 145,147

Other

Accrued Payroll and Annual Leave 596,920 577,272

Accrued Grants 129,678 135,995

Capital Lease Liabilities (Note 15) 21 273

Unearned Revenue 1,309,548 1,146,411

Other (Note 12) 21,138 58,259

TOTAL LIABILITIES $ 12,287,049 $ 4,718,937

Commitments and Contingencies (Note 17) 

NET POSITION 

Unexpended Appropriations

Unexpended Appropriations – Funds from Dedicated Collections (Note 22) $ – $ –

Unexpended Appropriations – All Other Funds 9,091,775 5,973,837

Cumulative Results of Operations

Cumulative Results of Operations – Funds from Dedicated Collections (Note 22) 17,459,157 17,424,679

Cumulative Results of Operations – All Other Funds 15,342,603 14,430,537

Total Net Position – Funds from Dedicated Collections 17,459,157 17,424,679

Total Net Position – All Other Funds 24,434,378 20,404,374

TOTAL NET POSITION $ 41,893,535 $ 37,829,053

TOTAL LIABILITIES AND NET POSITION $ 54,180,584 $ 42,547,990

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

5 0 FY 2018 AGENCY FINANCIAL REPORT

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

For the Years Ended September 30, 2018 and 2017 (Note 18) (In Thousands) 

FY 2018 FY 2017

National Oceanic and Atmospheric Administration

Gross Costs $ 5,292,544 $ 4,875,892

Less: Earned Revenue (232,410) (252,722)

Net Cost of Operations 5,060,134 4,623,170

U.S. Patent and Trademark Office

Gross Costs 3,320,953 3,192,586

Less: Earned Revenue (3,308,867) (3,104,522)

Net Cost of Operations 12,086 88,064

Economics and Statistics Administration

Gross Costs 1,788,973 1,752,410

Less: Earned Revenue (301,267) (323,000)

Net Cost of Operations 1,487,706 1,429,410

National Institute of Standards and Technology

Gross Costs 1,213,544 1,280,432

Less: Earned Revenue (245,739) (289,850)

Net Cost of Operations 967,805 990,582

International Trade Administration

Gross Costs 496,280 494,014

Less: Earned Revenue (9,506) (9,996)

Net Cost of Operations 486,774 484,018

Economic Development Administration

Gross Costs 297,513 291,424

Less: Earned Revenue (13,575) (5,716)

Net Cost of Operations 283,938 285,708

National Telecommunications and Information Administration

Gross Costs 195,702 261,214

Less: Earned Revenue (160,726) (39,096)

Net Cost of Operations 34,976 222,118

Departmental Management

Gross Costs 136,352 117,062

Less: Earned Revenue (20,605) (8,432)

Net Cost of Operations 115,747 108,630

Others

Gross Costs 155,526 148,808

Less: Earned Revenue (2,585) (2,474)

Net Cost of Operations 152,941 146,334

Total Gross Departmental Costs 12,897,387 12,413,842

Less: Total Earned Revenue (4,295,280) (4,035,808)

NET COST OF OPERATIONS $ 8,602,107 $ 8,378,034

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

FY 2018 AGENCY FINANCIAL REPORT 5 1

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

For the Years Ended September 30, 2018 and 2017 (In Thousands)

FY 2018 FY 2017

Funds from 

Dedicated 

Collections

(Note 22) 

All Other 

Funds

Consolidated 

Total

Funds from 

Dedicated 

Collections

(Note 22) 

All Other 

Funds

Consolidated 

Total

Unexpended Appropriations:

Beginning Balance $ – $ 5,973,837 $ 5,973,837 $ – $ 5,840,085 $ 5,840,085

Budgetary Financing Sources:

Appropriations Received (Note 19) – 12,199,709 12,199,709 – 9,399,154 9,399,154

Appropriations Transferred In/(Out), Net – 10,622 10,622 – (257,053) (257,053)

Rescissions/Sequestrations of Appropriations (Note 19) – (11,320) (11,320) – (34,380) (34,380)

Cancellations and Other Adjustments – (58,538) (58,538) – (72,878) (72,878)

Appropriations Used – (9,022,535) (9,022,535) – (8,901,091) (8,901,091)

Total Budgetary Financing Sources – 3,117,938 3,117,938 – 133,752 133,752

Unexpended Appropriations – Ending Balance – 9,091,775 9,091,775 – 5,973,837 5,973,837

Cumulative Results of Operations:

Beginning Balance 17,424,679 14,430,537 31,855,216 17,724,210 12,945,943 30,670,153

Budgetary Financing Sources:

Appropriations Used – 9,022,535 9,022,535 – 8,901,091 8,901,091

Non-exchange Revenue 34,996 9,010 44,006 36,895 7,005 43,900

Donations and Forfeitures of Cash and Cash Equivalents – 38 38 – 3,188 3,188

Transfer In of Auction Proceeds from Federal 

Communications Commission (Note 22 – NTIA’s 

Public Safety Trust Fund) 5,895,159 – 5,895,159 – – –

Transfers In/(Out) Without Reimbursement, Net 31,212 167,379 198,591 (2,669) 439,369 436,700

Other Budgetary Financing Sources/(Uses), Net 8,821 (8,821) – – – –

Other Financing Sources (Non-exchange):

Donations and Forfeitures of Property – 449 449 – 399 399

Transfers In/(Out) Without Reimbursement, Net (466) 2,389 1,923 (725) (6,175) (6,900)

Imputed Financing Sources from Cost Absorbed by Others 70,752 229,583 300,335 20,986 179,239 200,225

Financing Sources Used for Recognizing Liability to General 

Fund of the U.S. Government for Deficit Reduction 

(Note 22 – NTIA’s Public Safety Trust Fund) (5,908,248) – (5,908,248) (2,134) – (2,134)

Other Financing Sources/(Uses), Net (18) (6,119) (6,137) (2) (13,370) (13,372)

Total Financing Sources 132,208 9,416,443 9,548,651 52,351 9,510,746 9,563,097

Net Cost of Operations (97,730) (8,504,377) (8,602,107) (351,882) (8,026,152) (8,378,034)

Net Change 34,478 912,066 946,544 (299,531) 1,484,594 1,185,063

Cumulative Results of Operations – Ending Balance 17,459,157 15,342,603 32,801,760 17,424,679 14,430,537 31,855,216

NET POSITION $ 17,459,157 $ 24,434,378 $ 41,893,535 $ 17,424,679 $ 20,404,374 $ 37,829,053

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

5 2 FY 2018 AGENCY FINANCIAL REPORT

PRINCIPAL FINANCIAL STATEMENTS
FY 2018 AGENCY FINANCIAL REPORT 5 3

PRINCIPAL FINANCIAL STATEMENTS

United States Department of Commerce Combined Statements of Budgetary Resources 

For the Years Ended September 30, 2018 and 2017 (Note 19) (In Thousands)

FY 2018 FY 2017

Budgetary

Non-budgetary Credit 

Program Financing 

Accounts Budgetary

Non-budgetary Credit 

Program Financing 

Accounts

BUDGETARY RESOURCES:

Unobligated Balance From Prior-years Budget Authority, Net $ 9,464,287 $ 2,159 $ 9,828,931 $ 5,488

Appropriations 18,291,399 – 9,524,248 –

Borrowing Authority – 57,537 – 76,637

Spending Authority From Offsetting Collections 5,426,037 20,882 4,977,307 24,295

TOTAL BUDGETARY RESOURCES $33,181,723 $ 80,578 $24,330,486 $ 106,420

 MEMORANDUM: Net Adjustments to Unobligated Balance, 

Brought Forward, October 1 $ 1,000,239 $ – $ 317,586 $ –

STATUS OF BUDGETARY RESOURCES:

New Obligations and Upward Adjustments $21,840,166 $ 80,466 $15,866,438 $ 104,261

Unobligated Balance, End of Year

Apportioned, Unexpired Accounts 4,555,064 – 7,547,610 –

Exempt From Apportionment, Unexpired Accounts 634 – 1,415 –

Unapportioned, Unexpired Accounts 6,432,965 112 565,555 2,159

Unobligated Balance, End of Year, Unexpired Accounts 10,988,663 112 8,114,580 2,159

Unobligated Balance, End of Year, Expired Accounts 352,894 – 349,468 –

Total Unobligated Balance, End of Year 11,341,557 112 8,464,048 2,159

TOTAL STATUS OF BUDGETARY RESOURCES $33,181,723 $ 80,578 $24,330,486 $ 106,420

OUTLAYS, NET:

Outlays, Net $ 8,588,501 $ 24,297 $10,343,862 $ (41,563)

Distributed Offsetting (Receipts)/Outlays, Net (37,765) – (40,066) –

AGENCY OUTLAYS, NET $ 8,550,736 $ 24,297 $10,303,796 $ (41,563)

The accompanying notes are an integral part of these financial statements.
United States Department of Commerce Consolidated Statements of Custodial Activity

For the Years Ended September 30, 2018 and 2017 (Note 20) (In Thousands)

FY 2018 FY 2017

Custodial Revenue Activity:

Sources of Cash Collections:

Fines and Penalties $ 1,001,983 $ 375,958

Other 7,166 12,589

Total Cash Collections 1,009,149 388,547

Accrual Adjustment (468) (11,827)

Total Custodial Revenue 1,008,681 376,720

Disposition of Custodial Revenue:

Transferred to the General Fund of the U.S. Government 566,186 388,544

Transferred to the U.S. Department of Justice 442,965 –

Increase/(Decrease) in Amounts Yet to be Transferred to Other Federal Entities (470) (11,824)

Total Disposition of Collections 1,008,681 376,720

NET CUSTODIAL ACTIVITY $ – $ –

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

5 4 FY 2018 AGENCY FINANCIAL REPORT

PRINCIPAL FINANCIAL STATEMENTS
Notes to the Financial

Statements

FINANCIAL SECTION
Note 1. Summary of Significant Accounting Policies 57

Note 2. Fund Balance with Treasury 71

Note 3. Investments, Net 72

Note 4. Accounts Receivable, Net 72

Note 5. Cash 73

Note 6. Direct Loans and Loan Guarantees, Net 73

Note 7. Inventory, Materials, and Supplies, Net 79

Note 8. General Property, Plant, and Equipment, Net 80

Note 9. Other Assets 81

Note 10. Non-entity Assets 81

Note 11. Debt to Treasury 82

Note 12. Other Liabilities 82

Note 13. Federal Employee Benefits Liabilities 83

Note 14. Environmental and Disposal Liabilities 85

Note 15. Leases 86

Note 16. Liabilities Not Covered by Budgetary Resources 88

Note 17. Commitments and Contingencies 89

Note 18. Consolidated Statements of Net Cost by Major Budgetary Function 90

Note 19. Combined Statements of Budgetary Resources 91

Note 20. Consolidated Statements of Custodial Activity 94

Note 21. Fiduciary Activities 94

Note 22. Funds from Dedicated Collections 96

Note 23. Reconciliations of Net Cost of Operations to Budget 104

Note 24. Stewardship Property, Plant, and Equipment 106

Note 25. Disclosure Entity 111

NOTES TO THE FINANCIAL STATEMENTS

(Dollars in Tables are Presented in Thousands)

5 6 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
(Dollars in Tables are Presented in Thousands)

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A Reporting Entity 

T

he Department of Commerce (the Department) is a cabinet-level agency of the Executive Branch of the U.S. government. 

Established in 1903 to promote U.S. business and trade, the Department’s broad range of responsibilities includes predicting 

the weather, granting patents and registering trademarks, measuring economic growth, gathering and disseminating 

statistical data, expanding U.S. exports, developing innovative technologies, helping local communities improve their economic 

development capabilities, promoting minority entrepreneurial activities, and monitoring the stewardship of national assets. 

The Department is composed of 12 bureaus 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)

● International Trade Administration (ITA)

● Economic Development Administration (EDA)

● National Telecommunications and Information Administration (NTIA)1

● Departmental Management (DM)

■ Gifts and Bequests

■ Herbert C. Hoover Building Renovation Project

■ Office of Inspector General (OIG)

■ Salaries and Expenses (S&E)

■ Working Capital Fund (WCF)

● Others

■ Bureau of Industry and Security (BIS) 

■ Minority Business Development Agency (MBDA)

1 The Middle Class Tax Relief and Job Creation Act of 2012 created the First Responder Network Authority (FirstNet), included in 

these financial statements, as an independent authority within NTIA, to provide emergency responders with the first high-speed, 

nationwide network dedicated to public safety.

FY 2018 AGENCY FINANCIAL REPORT 5 7

NOTES TO THE FINANCIAL STATEMENTS
Disclosure Entities: The Federal Accounting Standards Advisory Board’s (FASAB) Statement of Federal Financial Accounting 

Standards (SFFAS) 47, Reporting Entity, is effective for the Department’s FY 2018 financial reporting (earlier implementation not 

permitted). This standard is intended to guide federal agencies in recognizing complex, diverse organizations possessing varying legal 

designations (e.g., government agencies, not-for-profit organizations, and corporations) that are involved in addressing public policy 

challenges. It provides guidance for determining what organizations should be included in a federal agency’s financial statements 

(consolidation entities) and footnote disclosures (disclosure entities; and related parties) for financial accountability purposes, and 

is not intended to establish whether an organization is or should be considered a federal agency for legal or political purposes.

The standard sets forth guidance to include, as a consolidation entity or disclosure entity, in the appropriate federal agency’s 

financial reporting, (a) an organization with an account or accounts listed in the Budget of the U.S. Government, unless it is a nonfederal organization receiving federal financial assistance; (b) an organization for which the federal governments holds a majority 

interest; and (c) an organization that is controlled by the federal government with risk of loss or expectation of benefit—the power 

to impose will on and/or govern, whether or not that ability is actively exercised, the financial and/or operating policies of another 

organization with the potential to be obligated to provide financial support or assume financial obligations or obtain financial 

resources or nonfinancial benefits. SFFAS 47 additionally establishes that an organization should be included as a consolidation 

entity or disclosure entity if it would be misleading to exclude it even though it does not meet one of the three inclusion principles.

The standard further provides guidance for determining if an organization should be reported as a consolidation entity or disclosure 

entity, including guidance for the performance of an assessment, as a whole, of the degree to which the following characteristics 

are met: (a) the organization is financed through taxes and other non-exchange revenues; (b) the organization is governed by 

Congress and/or the President; (c) the organization imposes or may impose risks and rewards to the federal government; and 

(d) the organization provides goods and services on a non-market basis. Some organizations are to a large degree insulated from 

political influence and are not intended to be funded primarily by taxes and other non-exchange revenue. Information about these 

types of discrete organizations should generally be disclosed in the footnotes as disclosure entities.

SFFAS 47 lastly sets forth guidance on footnote disclosure requirements for significant relationships with other parties. It requires 

footnote disclosures “if one party to an established relationship has the ability to exercise significant influence over the other party 

in making policy decisions, and the relationship is of such significance that it would be misleading to exclude information about it.” 

Effective with the Department’s FY 2018 financial reporting, the Department performs evaluations at least annually to determine 

if there are any organizations that should be included in the Department’s financial reporting as consolidation entities, disclosure 

entities, and/or related parties.

Based on the Department’s evaluation for FY 2018, the Department did not identify any consolidation entities or related parties 

for inclusion in the Department’s FY 2018 financial reporting. See Note 25, Disclosure Entity, for information for the organization 

identified as a disclosure entity for the Department’s FY 2018 financial reporting.

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. 

5 8 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
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 Circular A-136, Financial Reporting Requirements. GAAP for federal entities are 

the standards prescribed by FASAB, which is the official body for setting the accounting standards of the U.S. government.

Throughout these financial statements, intragovernmental assets, liabilities, gross costs, earned revenue, transfers, and other 

activity represent activity or balances with 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., budgetary resources, obligations incurred, gross costs, and outlays, gross) is reported in the financial 

statements of the parent entity, from which the underlying legislative authority, appropriations, and OMB apportionments are 

derived. EDA allocates funds, as the parent, to the U.S. Department of Agriculture’s Rural Development Administration; all financial 

activity related to these EDA funds is reported in the Department’s financial statements. EDA has received allocation transfers, 

as the child, from the Appalachian Regional Commission. Census Bureau has received allocation transfers, as the child, from the 

U.S. Department of Health and Human Services.

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 federal government’s general revenues.

Funds from Dedicated Collections include general funds, revolving funds (not including credit reform financing funds), special 

funds, and trust funds. (See Note 22, Funds from Dedicated Collections.)

D Elimination of Intra-entity and Intra-Departmental Transactions and Balances

Transactions and balances within a reporting entity (intra-entity), and transactions and balances among the Department’s entities 

(intra-Departmental), have been eliminated from the Consolidated Balance Sheets and Consolidated Statements of Net Cost, and 

are excluded from the consolidated total column of 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 Assignment of Assets to Bureaus/Reporting Entities

A Departmental asset is normally assigned by default to the bureau/reporting entity that authorized its acquisition and controls 

the asset. In situations where an asset is not directly obtained by a bureau/reporting entity or for any other situation where the 

assignment of the asset to a bureau(s)/reporting entity(ies) is an issue, the Department’s Office of Financial Management (OFM) 

will gather relevant information from all appropriate sources to perform an evaluation of the appropriate assignment of the asset to 

bureau(s)/reporting entity(ies). OFM’s evaluation will include collaboration within the Department and with others as appropriate. 

FY 2018 AGENCY FINANCIAL REPORT 5 9

NOTES TO THE FINANCIAL STATEMENTS
Upon the completion of OFM’s evaluation, OFM will determine the appropriate assignment of the asset to bureau(s)/reporting 

entity(ies) and will communicate such results within the Department. There were not any significant assets assigned by the 

Department in FY 2018 and FY 2017.

F 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.

G Investments, Net

Investments in federal securities consists of a non-marketable, market-based one-day certificate, and a non-marketable, marketbased note, purchased by NTIA’s Public Safety Trust Fund from Treasury.

Market-based One-day Certificate: The proceeds of the Federal Communications Commission’s (FCC) broadcast incentive auctions 

were transferred to NTIA in August 2018, totaling $5.90 billion. NTIA on a temporary basis, including on September 30, 2018, 

invested the funds in market-based one-day certificates purchased from Treasury, also referred to as overnight investments, at par 

value. The one-day certificates mature the next business day, earning interest at the daily Federal Reserve purchase agreement rate. 

Each business day, NTIA invested the principal balance plus interest earned. This investment is presented on the Department’s 

Consolidated Balance Sheet at acquisition cost. In October and November 2018, NTIA replaced the investments in one-day 

certificates with investments in market-based notes.

Market-based Note: The note consists of an interest-bearing, market-based Treasury security purchased from Treasury at a discount. 

This investment is presented on the Department’s Consolidated Balance Sheet at acquisition cost, net of amortization of the discount. 

The discount is amortized over the life of the note using the interest method. Under the interest method, the effective interest rate 

(the actual interest yield on amounts invested) multiplied by the carrying amount of the note at the start of the accounting period 

equals the interest income recognized during the period (the carrying amount changes each period by the amount of the amortized 

discount). The amount of the amortization of the discount is the difference between the effective interest recognized for the period 

and the nominal interest for the note. The market value of the note is not recorded on the Consolidated Balance Sheet because this 

investment is expected to be held to maturity. See Note 3, Investments, Net for disclosure of the market value of the note, which 

was provided by Treasury. For purposes of determining market values, investments should be grouped by the type of security, such 

as market-based or marketable Treasury securities. The market value of investments in a group is calculated by the market price 

of securities of that group at the financial reporting date multiplied by the number of securities held at the financial reporting date.

See Note 22, Funds from Dedicated Collections – NTIA’s Public Safety Trust Fund, for more information on the Public Safety Trust Fund. 

H 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, when appropriate. 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.

6 0 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
I 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 (for example, 

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.

J Direct Loans and Loan Guarantees, Net

A direct loan is recorded as a receivable after the Department disburses funds to a borrower. The Department also makes loan 

guarantees with respect to the payment of all or part of the principal or interest on debt obligations of non-federal borrowers to 

non-federal lenders. A borrower-defaulted loan guaranteed by the Department is recorded as a receivable from the borrower after 

the Department disburses funds to the lender. 

Interest Receivable generally represents uncollected interest income earned on loans. For past-due loans, only up to 180 days 

of interest income is generally recorded. 

Foreclosed Property is acquired primarily through foreclosure and voluntary conveyance, and is recorded at the fair market value 

at the time of acquisition. Foreclosed Property is adjusted to the current fair market value each fiscal year-end.

Direct Loans and Loan Guarantees Obligated before October 1, 1991 (pre-FY 1992): Loans Receivable are reduced by an Allowance for 

Loan Losses, which is based on an analysis of each loan’s outstanding balance. The value of each receivable, net of any Allowance for 

Loan Losses, is supported by the values of any 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. 

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 amounts 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.

FY 2018 AGENCY FINANCIAL REPORT 6 1

NOTES TO THE FINANCIAL STATEMENTS
K 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, weightedaverage, and deemed cost 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.

L General Property, Plant, and Equipment, Net

General Property, Plant, and Equipment, Net (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. 

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 Departmentwide capitalization thresholds review, which reflects materiality and cost-benefit analyses, the Department’s single-asset acquisition 

capitalization thresholds for both FY 2018 and FY 2017 are as follows: NOAA—$200 thousand or more; NIST—$100 thousand 

or more; USPTO—$50 thousand or more; and all other bureaus and Departmental Management—$25 thousand or more, except 

that NTIA’s First Responder Network Authority had a single-asset acquisition capitalization threshold of $5 thousand for FY 2017. 

Personal Property Bulk Acquisitions: For FY 2018 and FY 2017, NOAA has a personal property bulk acquisition capitalization threshold 

of $1.0 million or more where individual items cost $25 thousand or more but less than $200 thousand; NIST has a personal 

property bulk acquisition capitalization threshold of $500 thousand or more. All other bureaus and Departmental Management 

have a personal property bulk acquisition capitalization threshold of $250 thousand or more, except that USPTO has a furniture bulk 

acquisition capitalization threshold of $50 thousand or more and NTIA’s First Responder Network Authority has a personal property 

bulk acquisition capitalization threshold of $150 thousand or more for FY 2018 ($50 thousand for FY 2017).

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 on a straight-line basis over the remaining life of the lease or over the useful life of the 

improvement, whichever is shorter. Land, Construction-in-progress, and Internal Use Software in Development are not depreciated.

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.

Internal Use Software: Internal Use Software includes purchased commercial off-the-shelf (COTS) software and internally or contractordeveloped software solely to meet the Department’s internal or operational needs. Internally developed software includes the 

full cost (direct and indirect cost) incurred during the software development stage. For contractor-developed software, capitalized 

costs include the costs for the contractor to design, program, install, and implement the software.

6 2 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
Real Property: GSA provides most of the facilities in which the Department operates, and generally charges rent based on 

comparable commercial rental rates under operating leases. Accordingly, GSA-owned properties under operating leases are not 

included in the Department’s General PP&E. The Department’s real property primarily consists of facilities for NIST and NOAA. 

M Cost Contribution to Buildout of Nationwide Public Safety Broadband Network, Net

This asset captures NTIA’s cumulative cost contributions for the buildout of the Nationwide Public Safety Broadband Network 

(NPSBN) as described in Note 22, Funds from Dedicated Collections – NTIA’s Network Construction Fund, less accumulated 

amortization. Amortization of the cost contributions began in FY 2018. The cost contributions that are recorded as an asset include 

(a) costs incurred for completed and accepted AT&T contract performance for the buildout of the NPSBN under the First Responder 

Network Authority (FirstNet) to buildout, operate, and maintain the NPSBN; and (b) accrued costs for estimated, unbilled AT&T 

contract performance progress for buildout of the NPSBN.

An asset is recognized primarily because the cost contributions for the buildout of the NPSBN embodies (a) future economic benefits 

to NTIA from AT&T made possible in part by NTIA’s cost contributions, as there are expected future revenue streams from AT&T to 

NTIA; and (b) future expected services to be received by NTIA from AT&T made possible in part by NTIA’s cost contributions, as AT&T, 

will buildout, maintain, and operate the NPSBN, thereby assisting NTIA’s FirstNet with achieving its important mission of ensuring 

the building, deployment, and operation of the first high-speed, nationwide wireless broadband network dedicated to public safety.

Amortization of the cost contributions is recorded for each completed/accepted milestone on a straight-line basis over the remaining 

time frame of the AT&T contract.

N Non-entity Assets 

Non-entity assets, included in the Department’s Consolidated Balance Sheets, 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 General Fund of the U.S. Government for 

custodial activity and loan programs. 

O 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. To simplify interest calculations, the Fisheries Finance Financing Account 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. Balances of any borrowed but undisbursed Fisheries Finance 

Financing Account debt will earn interest at the same rate used in calculating interest expense. The amounts reported for Debt to 

Treasury include accrued interest payable. See Note 11, Debt to Treasury, for information regarding maturity dates.

FY 2018 AGENCY FINANCIAL REPORT 6 3

NOTES TO THE FINANCIAL STATEMENTS
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.

Liability to General Fund of the U.S. Government for Deficit Reduction: NTIA’s Public Safety Trust Fund was created as a result of Section 

6413 of the Middle Class Tax Relief and Job Creation Act of 2012 (Act). The Act provides funding for specified programs and activities, 

to be derived from the proceeds of Federal Communications Commission auctions of spectrum licenses, to be deposited into the 

Public Safety Trust Fund. The Act directs the use of auction proceeds in an order of priority after the repayment of borrowings from 

Treasury (priority 1), which was fully completed in September 2015. Priority 8 of the Act specifies that any remaining amounts 

deposited into the Public Safety Trust Fund shall be deposited in the General Fund of the U.S. Government for deficit reduction. 

The Act further specifies that any amounts remaining in the Public Safety Trust Fund after the end of FY 2022 shall be deposited 

in the General Fund of the U.S. Government for deficit reduction. The Department records a liability (not covered by budgetary 

resources) to the General Fund of the U.S. Government for the monies owed for priority 8. A corresponding use of financing sources 

is recorded on the Consolidated Statement of Changes in Net Position, Other Financing Sources (Non-exchange) section. See 

Note 22, Funds from Dedicated Collections – NTIA’s Public Safety Trust Fund, for more information on the Public Safety Trust Fund.

Custodial Payable to Treasury: Custodial Payable to Treasury represents the amount of applicable custodial non-exchange or exchange 

revenue yet to be transferred to the General Fund of the U.S. Government. See the Consolidated Statements of Custodial Activity

and related Note 20 for more information on the Department’s custodial activity.

Resources Payable to Treasury: Resources Payable to Treasury primarily includes assets in excess of liabilities that are being held as 

working capital in the Department’s liquidating fund groups, which account for loan programs prior to October 1, 1991 (pre-FY 1992). 

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.

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 

Adjustment) 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.

6 4 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
For FY 2018, to test the reliability of the model, DOL performed comparisons between projected payments in the last year to 

actual amounts, by agency. Changes in the liability from last year’s analysis to this year’s analysis were also examined by DOL, 

by agency, with any significant differences by agency inspected in greater detail. The same reliability testing was performed in 

FY 2017. The model has been stable, and has projected the actual payments by agency well.

NOAA Corps Retirement System and NOAA Corps Blended Retirement System Liabilities, 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 

the 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 MedicareEligible Retiree Health Care Fund actuarial valuations. Demographic assumptions appropriate to covered personnel are also used. 

For background information about these plans, see Note 1.S, Employee Retirement Benefits.

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. 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. NIST’s Environmental and Disposal Liability estimates were updated for FY 2018, 

pursuant to U.S. Nuclear Regulatory Commission Regulation-1307, Rev 16, which states: “licenses must annually adjust the 

estimate of the cost of decommissioning their plants in dollars of the current year, as a part of the process to provide reasonable 

assurance that adequate funds for decommissioning will be available when needed.” The Department currently estimates the 

cost of decommissioning this facility to be $75.0 million. NIST’s decommissioning estimate includes an assumption that an offsite 

waste disposal facility will become available (estimated in 2029), when needed. Currently, an offsite disposal location has not 

been identified, and NIST’s Environmental and Disposal Liability 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. Such cleanup 

activities are the responsibility of the Department because it became the successor agency of the waste generated from 

war-related programs. 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.

FY 2018 AGENCY FINANCIAL REPORT 6 5

NOTES TO THE FINANCIAL STATEMENTS
The Department may have liabilities associated with lead-based paints at certain NOAA facilities. All known issues are contained 

and NOAA facilities meet current environmental standards. No cost estimates are presently available because no facilities are 

currently identified.

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 recipients. These drawdown requests may be fulfilled before recipients make the expenditures under the grant. 

When the Department has disbursed funds but the recipient has not yet incurred expenses, these disbursements are recorded as 

advances to the recipient. If a recipient, however, has expenditures under the grant as of September 30 that have not been advanced 

by the Department as of September 30, such amounts are recorded as grant expenses and Accrued Grants as of September 30. 

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, a contingency is considered probable when 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, included in the Department’s Consolidated Balance Sheets, 

for which 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 16.

NTIA’s Public Safety Trust Fund has assets on hand as of September 30 for its Liability to General Fund of the U.S. Government 

for Deficit Reduction; however, budgetary resources will need to be apportioned by OMB in order for the Public Safety Trust Fund 

to transfer funds against this liability.

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 the Department’s Accrued Annual Leave liability.

The Department generally receives budgetary resources for its Federal Employee Benefits liability when needed for disbursements.

6 6 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
Due to USPTO’s funding structure, budgetary resources do not cover a portion of its Unearned Revenue. The Unearned Revenue 

reported in Note 16 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.

P 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 17, Commitments and Contingencies. 

Q 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.

R 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 multiplefiscal 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 federal government and the other party receive value, including 

processing patents and registering trademarks, the sale of weather data, nautical charts, and navigation information, reimbursable 

revenue, and other sales of goods and services. Exchange revenue is presented in the Department’s Consolidated Statements of 

Net Cost. Non-exchange revenue is derived from the federal government’s sovereign right to demand payment; and, for example, 

includes revenue of NOAA’s Damage Assessment and Restoration Revolving Fund as reported and described in Note 22, Funds 

from Dedicated Collections. 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. Non-exchange revenue 

is not considered to reduce the cost of the Department’s operations and is therefore reported in the Consolidated Statements of 

Changes in Net Position as a financing source.

FY 2018 AGENCY FINANCIAL REPORT 6 7

NOTES TO THE FINANCIAL STATEMENTS
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 in the Consolidated Statements of Net Cost. In addition, Imputed Financing 

Sources from Cost Absorbed by Others is recognized in the Consolidated Statements of Changes in Net Position as an other 

financing source (non-exchange).

Transfers In/(Out): Intragovernmental transfers, for example, of budgetary resources, or of assets without reimbursement that 

are recorded at book value, are reported in the Consolidated Statements of Changes in Net Position.

S 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.

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. 

Effective October 1, 2014, for FERS-covered regular employees hired prior to January 1, 2013, the Department was required to 

make contributions of 13.2 percent of basic pay. Employees contributed 0.8 percent of basic pay. For regular employees hired 

after December 31, 2012, as defined in Public Law 112-96, Section 5001, the Department was required to make contributions of 

11.1 percent of basic pay. Regular employees hired between December 31, 2012 and December 31, 2013 contributed 3.1 percent 

of basic pay. Regular employees hired after December 31, 2013 contributed 4.4 percent of basic pay. For each fiscal year, OPM 

calculates the U.S. government’s service cost for covered employees. Since the U.S. government’s estimated service cost 

exceeds contributions made by employer agencies and covered employees, this plan was not fully funded by the Department and 

its employees. The Department has recognized an imputed cost, and an imputed financing source from cost absorbed by others, 

for the difference between the estimated service cost and the contributions made by the Department and its covered employees. 

6 8 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
Employees participating in FERS are covered under the Federal Insurance Contributions Act, for which the Department contributes 

a matching amount to the Social Security Administration. 

NOAA Corps Retirement System and NOAA Corps Blended Retirement System Liabilities: Active-duty officers of the NOAA Corps are 

covered by the legacy NOAA Corps Retirement System or the new NOAA Corps Blended Retirement System (BRS). The NOAA 

Corps Retirement System and the defined benefit portion of the NOAA Corps BRS is an unfunded, pay-as-you-go, defined benefit 

plan administered by the Department with the same features; participants do not contribute to the defined benefit plan for both 

of these retirement systems. Plan benefits are based primarily on years of service and compensation. Total participants for the 

two plans, as of September 30, 2018, included 315 active duty officers, 388 nondisability retiree annuitants, 15 disability retiree 

annuitants, and 62 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.

The NOAA Corps BRS began on January 1, 2018. It is a new retirement plan that was implemented for members of the Uniformed 

Services, including NOAA Corps active-duty officers. This retirement system blends together the defined benefits of the legacy 

NOAA Corps Retirement System along with automatic and matching contributions to the Thrift Savings Plan (TSP) and a mid-career 

continuation pay bonus. All new hires on January 1, 2018 and after will automatically be enrolled into the NOAA Corps BRS. For 

those NOAA Corps active-duty officers with fewer than 12 years of service on December 31, 2017, there is an opportunity to opt 

into the NOAA Corps BRS at any time during calendar year 2018. NOAA Corps BRS will not only continue to award those who 

are vested at 20 years but will allow service members who choose to depart early to leave with some retirement savings and 

start on the path to a financially successful future.

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, FERS, and NOAA Corps BRS are eligible to contribute to the U.S. government’s 

TSP, administered by the Federal Retirement Thrift Investment Board. The Department makes no matching contributions for CSRScovered employees. A TSP account is automatically established for FERS-covered employees and NOAA Corps BRS members, and 

the Department makes a mandatory contribution of one percent of basic pay upon eligibility. The Department also makes matching 

contributions of up to four percent of basic pay upon eligibility for FERS-covered employees and NOAA Corps BRS members. 

NOAA Corps BRS members entering service on or after January 1, 2018 will not begin receiving matching contributions until after 

completing two years of service. 

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. 

FY 2018 AGENCY FINANCIAL REPORT 6 9

NOTES TO THE FINANCIAL STATEMENTS
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.

T 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. 

U Tax Status

The Department is not subject to federal, state, or local income taxes. Accordingly, no provision for income taxes is recorded.

V Fiduciary Activities

Fiduciary activities are the collection or receipt, and the management, protection, accounting, and disposition by the federal 

government of cash or other assets in which non-federal individuals or entities have an ownership interest that the federal 

government must uphold. Fiduciary cash and other assets are not assets of the federal government, and are not recognized in 

the Department’s 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, Israeli 

Patent Office, Japanese Patent Office, Intellectual Property Office of Singapore, and 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 21, Fiduciary Activities.

7 0 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
NOTE 2. FUND BALANCE WITH TREASURY

Fund Balance with Treasury, by type, is as follows:

FY 2018 FY 2017

General Funds $ 12,310,834 $ 9,109,913

Revolving Funds

NTIA’s Network Construction Fund (Note 22) 5,893,821 5,574,439

Other Revolving Funds 1,170,015 849,618

Special Funds

NTIA’s Digital Television Transition and Public Safety Fund (Note 22) 8,820,778 8,821,057

USPTO’s Patent and Trademark Surcharge Fund (Note 22) 233,529 233,529

Other Special Funds 122,629 133,158

Deposit Funds 147,382 148,538

Trust Funds

NTIA’s Public Safety Trust Fund (Note 22) 77,944 145,427

Other Trust Funds 687 1,528

Other Fund Types 16,426 13,733

Total $ 28,794,045 $ 25,030,940

Status of Fund Balance with Treasury is as follows:

FY 2018 FY 2017

Reduction of Budgetary Resources

Not Available

Digital Television Transition and Public Safety Fund $ 8,807,394 $ 8,807,394

Temporarily Precluded from Obligation 953,497 952,159

Unobligated Balance

Available 4,555,699 7,519,504

Unavailable 544,172 613,380

Obligated Balance Not Yet Disbursed

Network Construction Fund 5,853,492 34,959

Other 7,684,897 6,710,530

Non-budgetary

Patent and Trademark Surcharge Fund 233,529 233,529

Deposit Funds, and General Fund Receipt Accounts 161,365 159,485

Total $ 28,794,045 $ 25,030,940

Unobligated Balance and Obligated Balance Not Yet Disbursed amounts reported above do not agree with related amounts included 

in the Status of Budgetary Resources and Change in Unpaid Obligated Balance, Net sections of the Combined Statements of 

Budgetary Resources (SBR), respectively, primarily because the budgetary amounts reported in the SBR are also supported by 

amounts other than Fund Balance with Treasury—Investments, Net and Borrowing Authority.

See Note 19, Combined Statements of Budgetary Resources, for legal arrangements affecting the Department’s use of Fund 

Balance with Treasury for FY 2018 and FY 2017.

FY 2018 AGENCY FINANCIAL REPORT 7 1

NOTES TO THE FINANCIAL STATEMENTS
See Note 22, Funds from Dedicated Collections, for more information regarding the Network Construction Fund, the Digital 

Television Transition and Public Safety Fund, the Patent and Trademark Surcharge Fund, the USPTO Salaries and Expenses Fund, 

and the Public Safety Trust Fund.

NOTE 3. INVESTMENTS, NET 

FY 2018

Investments in 

Federal Securities Cost

Amortization 

Method

Amortized 

Discount

Interest 

Receivable

Investments, 

Net

Other 

Adjustments

Market Value 

Disclosure

Intragovernmental

Non-marketable

Market-based 

One-day 

Certificate $ 5,905,274 Not applicable $ — $ 689 $ 5,905,963 $ – $ 5,905,274

Market-based Note 336,174 Interest Method 613 1,686 338,473 – 335,067

Total $ 6,241,448 $ 613 $ 2,375 $ 6,244,436 $ – $ 6,240,341

FY 2017

Investment in Federal 

Securities Cost

Amortization 

Method

Amortized 

Discount

Interest 

Receivable

Investment, 

Net

Other 

Adjustments

Market Value 

Disclosure

Intragovernmental

Non-marketable

Market-based Note $ 333,013 Interest Method $ 52 $ 1,041 $ 334,106 $ – $ 334,106

NOTE 4. ACCOUNTS RECEIVABLE, NET 

FY 2018

Accounts 

Receivable, 

Gross

Allowance for 

Uncollectible 

Accounts

Accounts 

Receivable, 

Net

Intragovernmental $ 104,745 $ – $ 104,745

With the Public $ 54,757 $ (9,460) $ 45,297

FY 2017

Accounts 

Receivable, 

Gross

Allowance for 

Uncollectible 

Accounts

Accounts 

Receivable, 

Net

Intragovernmental $ 100,522 $ – $ 100,522

With the Public $ 56,580 $ (10,204) $ 46,376

7 2 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
NOTE 5. CASH 

FY 2018 FY 2017

Cash Not Yet Deposited with Treasury $ 8,401 $ 5,359

Imprest Funds 342 338

Other Cash 25 39

Total $ 8,768 $ 5,736

Cash Not Yet Deposited with Treasury primarily represents patent and trademark fees that were not processed as of September 30, 

2018 and 2017, due to the lag time between receipt and initial review. Certain bureaus maintain Other Cash for operational necessity, 

such as law enforcement activities and for environments that do not permit the use of electronic payments. 

NOTE 6. 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

Loan Guarantee Programs:

EDA Economic Development Revolving Fund

NOAA Fishing Vessel Obligation Guarantee (FVOG) Program

1 No loans have been issued under these programs as of September 30, 2018. 

NOAA’s Fisheries Finance Loan programs provide direct loans for certain fisheries costs, including vessels, shoreside facilities, 

aquaculture, and Individual Fishing Quota. 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.

FY 2018 AGENCY FINANCIAL REPORT 7 3

NOTES TO THE FINANCIAL STATEMENTS
EDA currently has three loan types: (1) public works loans, which the majority of these loans are to utility companies, mainly 

water companies, and a few loans to children’s centers; (2) grant and civil debt loans, which are being paid back either because 

grants were misused or because excess money was disbursed; and (3) drought loans made to water districts.

The net assets for the Department’s loan programs consist of:

FY 2018 FY 2017

Direct Loans Obligated Prior to FY 1992 $ 3,175 $ 4,545

Direct Loans Obligated After FY 1991 456,098 427,070

Defaulted Guaranteed Loans from Pre-FY 1992 Guarantees 4 4

Total $ 459,277 $ 431,619

Direct Loans Obligated Prior to FY 1992 consist of:

FY 2018

Direct 

Loan Program

Loans 

Receivable, 

Gross

Interest 

Receivable

Allowance for 

Loan Losses

Value of Assets 

Related to 

Direct Loans, 

Net

CEIP $ 17,508 $ 4,576 $ (18,978) $ 3,106

Drought Loan Portfolio – – – –

Economic Development Revolving Fund 70 – (1) 69

Fisheries Loan Fund 148 16 (164) –

Total $ 17,726 $ 4,592 $ (19,143) $ 3,175

FY 2017

Direct 

Loan Program

Loans 

Receivable, 

Gross

Interest 

Receivable

Allowance for 

Loan Losses

Value of Assets 

Related to 

Direct Loans, 

Net

CEIP $ 17,634 $ 4,413 $ (18,015) $ 4,032

Drought Loan Portfolio 288 – – 288

Economic Development Revolving Fund 222 5 (2) 225

Fisheries Loan Fund 148 16 (164) –

Total $ 18,292 $ 4,434 $ (18,181) $ 4,545

7 4 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
Direct Loans Obligated After FY 1991 consist of: 

FY 2018

Direct Loan Program

Loans 

Receivable, 

Gross

Interest 

Receivable

Allowance for 

Subsidy Cost

(Present Value)

Value of Assets 

Related to 

Direct Loans, Net

Alaska Purse Seine Fishery Buyback Loans $ 8,873 $ 6 $ 703 $ 9,582

Bering Sea and Aleutian Islands 

Non-Pollock Buyback Loans 29,203 295 4,340 33,838

Bering Sea Pollock Fishery Buyback 8,800 10 390 9,200

Crab Buyback Loans 68,170 1,380 12,816 82,366

Fisheries Finance IFQ Loans 17,135 159 1,061 18,355

Fisheries Finance Traditional Loans 258,817 1,895 17,382 278,094

Pacific Groundfish Buyback Loans 21,458 25 3,180 24,663

Total $ 412,456 $ 3,770 $ 39,872 $ 456,098

FY 2017

Direct Loan Program

Loans 

Receivable, 

Gross

Interest 

Receivable

Allowance for 

Subsidy Cost

(Present Value)

Value of Assets 

Related to 

Direct Loans, Net

Alaska Purse Seine Fishery Buyback Loans $ 9,051 $ 1 $ 728 $ 9,780

Bering Sea and Aleutian Islands 

Non-Pollock Buyback Loans 29,978 83 4,455 34,516

Bering Sea Pollock Fishery Buyback 15,802 15 804 16,621

Crab Buyback Loans 69,259 1,511 9,767 80,537

Fisheries Finance IFQ Loans 17,260 144 707 18,111

Fisheries Finance Traditional Loans 222,707 1,333 16,418 240,458

Pacific Groundfish Buyback Loans 23,266 40 3,741 27,047

Total $ 387,323 $ 3,127 $ 36,620 $ 427,070

New Disbursements of Direct Loans (Post-FY 1991):

Direct Loan Program FY 2018 FY 2017

Fisheries Finance IFQ Loans $ 2,609 $ 1,441

Fisheries Finance Traditional Loans 96,465 16,326

Total $ 99,074 $ 17,767

FY 2018 AGENCY FINANCIAL REPORT 7 5

NOTES TO THE FINANCIAL STATEMENTS
Subsidy Expense for Direct Loans by Program and Component:

Subsidy Expense for New Disbursements of Direct Loans:

FY 2018

Direct Loan Program

Interest Rate

Differential Defaults

Fees and 

Other

Collections Other Total

Fisheries Finance IFQ Loans $ (525) $ 9 $ (12) $ 311 $ (217)

Fisheries Finance Traditional Loans (14,719) 835 (404) 10,042 (4,246)

Total $ (15,244) $ 844 $ (416) $ 10,353 $ (4,463)

FY 2017

Direct Loan Program

Interest Rate

Differential Defaults

Fees and 

Other

Collections Other Total

Fisheries Finance IFQ Loans $ (279) $ 2 $ (7) $ 233 $ (51)

Fisheries Finance Traditional Loans (2,261) 157 (83) 2,049 (138)

Total $ (2,540) $ 159 $ (90) $ 2,282 $ (189)

Reestimates:

FY 2018

Direct Loan Program

Technical

Reestimates

Alaska Purse Seine Fishery Buyback Loans $ (30)

Bering Sea and Aleutian Islands Non-Pollock Buyback Loans (257)

Bering Sea Pollock Fishery Buyback 197

Crab Buyback Loans (3,480)

Fisheries Finance IFQ Loans (497)

Fisheries Finance Traditional Loans (637)

Pacific Groundfish Buyback Loans 261

Total $ (4,443)

FY 2017

Direct Loan Program

Technical

Reestimates

Alaska Purse Seine Fishery Buyback Loans $ (23)

Bering Sea and Aleutian Islands Non-Pollock Buyback Loans 121

Bering Sea Pollock Fishery Buyback (14)

Crab Buyback Loans 5,655

Fisheries Finance IFQ Loans 54

Fisheries Finance Traditional Loans (11,884)

Pacific Groundfish Buyback Loans 1,113

Total $ (4,978)

7 6 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
There were no interest rate reestimates for FY 2018 and FY 2017.

Total Direct Loan Subsidy Expense:

Direct Loan Program FY 2018 FY 2017

Alaska Purse Seine Fishery Buyback Loans $ (30) $ (23)

Bering Sea and Aleutian Islands Non-Pollock 

Buyback Loans (257) 121

Bering Sea Pollock Fishery Buyback 197 (14)

Crab Buyback Loans (3,480) 5,655

Fisheries Finance IFQ Loans (714) 3

Fisheries Finance Traditional Loans (4,883) (12,022)

Pacific Groundfish Buyback Loans 261 1,113

Total $ (8,906) $ (5,167)

Subsidy Rates for Direct Loans by Program and Component:

Budget Subsidy Rates for Direct Loans for the Current Fiscal-year’s Cohorts:

FY 2018

Direct Loan Program

Interest Rate

Differential Defaults

Fees and 

Other 

Collections Other Total

Fisheries Finance IFQ Loans (24.26) % 0.55 % (0.42) % 10.46 % (13.67) %

Fisheries Finance Traditional Loans (16.46) % 0.77 % (0.29) % 6.40 % (9.58) %

FY 2017

Direct Loan Program

Interest Rate

Differential Defaults

Fees and 

Other 

Collections Other Total

Fisheries Finance IFQ Loans (21.74) % 0.08 % (0.69) % 22.13 % (0.22) %

Fisheries Finance Traditional Loans (14.32) % 0.94 % (0.52) % 13.54 % (0.36) %

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 years’ cohorts. The subsidy expense for the reporting period may also include modifications and reestimates.

FY 2018 AGENCY FINANCIAL REPORT 7 7

NOTES TO THE FINANCIAL STATEMENTS
Schedule for Reconciling Allowance for Subsidy Cost (Post-FY 1991 Direct Loans):

FY 2018 FY 2017

Beginning Balance of the Allowance for Subsidy Cost $ 36,620 $ 32,364

Add Subsidy Expense for Disbursements of Direct Loans 

During the Year by Component:

 Interest Rate Differential 15,244 2,540

 Defaults (844) (159)

 Fees and Other Collections 416 90

 Other (10,353) (2,282)

Total of the above Subsidy Expense Components 4,463 189

Adjustments:

 Fees Received (436) (103)

 Loans Written Off 761 (7)

 Subsidy Allowance Amortization (5,980) (869)

 Other 1 68

Total of Adjustments (5,654) (911)

Ending Balance of the Allowance for Subsidy Cost Before Reestimates 35,429 31,642

Add or Subtract Subsidy Reestimates by Component:

 Technical Reestimates 4,443 4,978

Ending Balance of the Allowance for Subsidy Cost $ 39,872 $ 36,620

Defaulted Guaranteed Loans from Pre-FY 1992 Guarantees:

FY 2018

Loan Guarantee

Program

Defaulted

Guaranteed Loans

Receivable, Gross

Interest

Receivable

Allowance for 

Loan Losses

Value of Assets 

Related to Defaulted

Guaranteed Loans

Receivable, Net

FVOG Program $ 7,318 $ 1 $ (7,315) $ 4

FY 2017

Loan Guarantee

Program

Defaulted

Guaranteed Loans

Receivable, Gross

Interest

Receivable

Allowance for 

Loan Losses

Value of Assets 

Related to Defaulted

Guaranteed Loans

Receivable, Net

FVOG Program $ 7,318 $ 1 $ (7,315) $ 4

7 8 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
Administrative Expenses: 

Administrative expenses in support of the Department’s direct loan and loan guarantee programs consist of: 

Direct Loan Program FY 2018 FY 2017

Drought Loan Portfolio and 

Economic Development Revolving Fund $ 174 $ 250

NOAA Direct Loan Programs 3,636 3,113

Total $ 3,810 $ 3,363

Loan Guarantee Program FY 2018 FY 2017

FVOG Program $ 74 $ 68

NOTE 7. INVENTORY, MATERIALS, AND SUPPLIES, NET

Category Cost Flow Assumption FY 2018 FY 2017

Inventory

Items Held for Current Sale

NIST Standard Reference Materials Average $ 27,363 $ 25,603

Other Various 3 3

Allowance for Excess, Obsolete, 

and Unserviceable Items – –

Total Inventory, Net 27,366 25,606

Materials and Supplies

Items Held for Use

NOAA’s National Logistics Support Center Weighted-average 46,892 50,097

Census Bureau Deemed cost 33,924 –

Other Various 5,927 6,012

Items Held for Repair

NOAA’s National Reconditioning Center Weighted-average 34,810 33,005

Allowance for Excess, Obsolete, 

and Unserviceable Items (23,244) (6,657)

Total Materials and Supplies, Net 98,309 82,457

Total $ 125,675 $ 108,063

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. Items held for repair are valued 

at the direct method. The cost of items held in repair is the issue cost, which is the weighted average of the procurement 

costs for each line, adjusted by the cost to repair the item. The Census Bureau provides materials and supplies that are 

primarily used for the 2020 Decennial.

FY 2018 AGENCY FINANCIAL REPORT 7 9

NOTES TO THE FINANCIAL STATEMENTS
NOTE 8. GENERAL PROPERTY, PLANT, AND EQUIPMENT, NET

FY 2018

Category

Useful Life

(Years) Cost

Accumulated

Depreciation Net Book Value

Land N/A $ 16,309 $ – $ 16,309 

Structures, Facilities, and 

Leasehold Improvements 2-50 2,566,986 (1,042,754) 1,524,232 

Satellites/Weather Systems 

Personal Property 2-25 14,232,226 (6,279,583) 7,952,643 

Other Personal Property 2-30 2,140,515 (1,432,871) 707,644 

Internal Use Software 3-15 1,620,353 (1,231,058) 389,295 

Assets Under Capital Lease 3-40 10,475 (9,683) 792 

Construction-in-progress N/A 4,928,425 – 4,928,425

Internal Use Software in 

Development N/A 767,071 – 767,071 

Total $ 26,282,360 $ (9,995,949) $ 16,286,411 

FY 2017

Category

Useful Life

(Years) Cost

Accumulated

Depreciation Net Book Value

Land N/A $ 16,628 $ – $ 16,628 

Land Improvements 30-40 2,996 (1,931) 1,065 

Structures, Facilities, and 

Leasehold Improvements 2-50 2,481,373 (945,442) 1,535,931 

Satellites/Weather Systems 

Personal Property 2-25 12,179,831 (5,540,563) 6,639,268 

Other Personal Property 2-30 2,043,943 (1,306,831) 737,112 

Internal Use Software 3-15 1,498,376 (1,088,742) 409,634 

Assets Under Capital Lease 3-40 10,475 (7,849) 2,626 

Construction-in-progress N/A 5,685,616 – 5,685,616 

Internal Use Software in 

Development N/A 375,117 – 375,117 

Total $ 24,294,355 $ (8,891,358) $ 15,402,997 

8 0 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
NOTE 9. OTHER ASSETS

FY 2018 FY 2017

With the Public

Advances and Prepayments $ 54,792 $ 36,703

Note Receivable 1,219 1,286

Bibliographic Database, Net 2,816 3,859

General PP&E Permanently Removed 

but Not Yet Disposed 281

4,528

Other 930 1,066

Total $ 60,038 $ 47,442

The Bibliographic Database relates to NTIS scientific and technical information used to prepare products and services 

for sale. The database is stated at capitalized costs of $77.8 million and $77.6 million, less accumulated amortization of 

$75.0 million and $73.7 million, as of September 30, 2018 and 2017, respectively.

NOTE 10. NON-ENTITY ASSETS

The assets that are not available for use in the Department’s operations, included in the Department’s Consolidated Balance 

Sheets, are summarized below:

FY 2018 FY 2017

Intragovernmental

Fund Balance with Treasury $ 167,736 $ 152,795

Investments, Net 6,244,436 334,106

Total Intragovernmental 6,412,172 486,901

With the Public

Cash 1,836 1,321

Accounts Receivable, Net 329 818

Other 1,223 1,578

Total Non-entity Assets 6,415,560 490,618

Total Entity Assets 47,765,024 42,057,372

Total Assets $ 54,180,584 $ 42,547,990

FY 2018 AGENCY FINANCIAL REPORT 8 1

NOTES TO THE FINANCIAL STATEMENTS
NOTE 11. DEBT TO TREASURY

FY 2018

Loan Program

Beginning

Balance

Net Borrowings

(Repayments)

Ending

Balance

Direct Loan Program

Fisheries Finance, Financing Account $ 430,313 $ 22,250 $ 452,563

Maturity dates range from September 2025 to September 2052, and interest rates range from 1.44 to 6.13 percent.

FY 2017

Loan Program

Beginning

Balance

Net Borrowings

(Repayments)

Ending

Balance

Direct Loan Program

Fisheries Finance, Financing Account $ 475,207 $ (44,894) $ 430,313

NOTE 12. OTHER LIABILITIES

FY 2018 FY 2017

Current Portion

Non-current 

Portion Total Total

Intragovernmental

Accrued FECA Liability $ 17,240 $ 8,068 $ 25,308 $ 26,427

Accrued Benefits 54,615 – 54,615 55,222

Downward Subsidy Reestimates 

Payable to Treasury 9,576 – 9,576 9,888

Resources Payable to Treasury 168 1,223 1,391 1,922

Other 8,893 17,227 26,120 193

Total $ 90,492 $ 26,518 $ 117,010 $ 93,652

With the Public

ITA Foreign Service Nationals’ 

Voluntary Separation Pay $ 2,758 $ 9,356 $ 12,114 $ 11,624

Contingent Liabilities (Note 17) 300 – 300 39,472

Employment-related 3,172 – 3,172 1,512

Other 5,552 – 5,552 5,651

Total $ 11,782 $ 9,356 $ 21,138 $ 58,259

The Current Portion represents liabilities expected to be paid by September 30, 2019, while the Non-current Portion 

represents liabilities expected to be paid after September 30, 2019.

8 2 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
NOTE 13. FEDERAL EMPLOYEE BENEFITS LIABILITIES

FY 2018 FY 2017

Actuarial FECA Liability $ 187,092 $ 200,336

NOAA Corps Retirement System and NOAA Corps 

Blended Retirement System Liabilities 654,600 644,200

NOAA Corps Post-retirement Health Benefits Liability 40,300 41,400

Total $ 881,992 $ 885,936

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 2018 FY 2017

Year 1 and Thereafter 2.72% 2.68%

The wage inflation factors (Cost of Living Adjustment) and medical inflation factors (Consumer Price Index – Medical) 

applied to the calculation of projected future benefits, and also used to adjust the methodology’s historical payments to 

current-year constant dollars, were as follows:

FY 2018

Fiscal Year

Cost of Living 

Adjustment

Consumer Price 

Index - Medical

2019 1.31% 3.21%

2020 1.51% 3.48%

2021 1.89% 3.68%

2022 2.16% 3.71%

2023 2.21% 4.09%

FY 2017

Fiscal Year

Cost of Living 

Adjustment

Consumer Price 

Index - Medical

2018 1.22% 3.20%

2019 1.35% 3.52%

2020 1.59% 3.80%

2021 1.99% 3.99%

2022 2.26% 3.91%

FY 2018 AGENCY FINANCIAL REPORT 8 3

NOTES TO THE FINANCIAL STATEMENTS
NOAA Corps Retirement System and NOAA Corps Blended Retirement System Liabilities: 

These liabilities represent the unfunded actuarial present value of projected plan benefits. The actuarial calculations 

are performed annually, as of September 30. The September 30, 2018 and 2017 actuarial calculations used the 

following economic assumptions:

FY 2018 FY 2017

Discount Rate 3.42% 3.60%

Annual Basic Pay Scale Increases 1.85% 2.09%

Annual Inflation 1.35% 1.59%

Schedule for Reconciling NOAA Corps Retirement System and NOAA Corps Blended Retirement System Liabilities:

A reconciliation 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 2018 FY 2017

Beginning Balance $ 644,200 $ 633,000

Add Pension Costs:

Normal Cost 13,800 12,800

Interest on the Unfunded Liability 22,700 23,600

Actuarial (Gains)/Losses, Net

From Experience 9,600 (7,500)

From Blended Retirement System (3,000) –

From Discount Rate Assumption Change 17,100 19,200

From Long-term Assumption Changes

Annual Inflation (22,800) (10,800)

Annual Basic Pay Scale Increases (900) (900)

Total Pension Costs 36,500 36,400

Subtract Benefit Payments (26,100) (25,200)

Ending Balance $ 654,600 $ 644,200 

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 2018 FY 2017

Discount Rate 3.38% 3.55%

Ultimate Medical Trend Rate 4.20% 4.45%

8 4 FY 2018 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 2018 FY 2017

Beginning Balance $ 41,400 $ 36,500

Add Health Benefits Costs:

Normal Cost 1,300 1,300

Interest on the Unfunded Liability 1,400 1,300

Actuarial (Gains)/Losses, Net

From Experience 1,100 900

From Discount Rate Assumption Change (2,900) 500

From Long-term Assumption Changes

Medical Claims and Trend Rate 500 3,100

Mortality – –

Total Health Benefits Costs 1,400 7,100

Subtract Benefit Payments (2,500) (2,200)

Ending Balance $ 40,300 $ 41,400

NOTE 14. ENVIRONMENTAL AND DISPOSAL LIABILITIES

Environmental and disposal liabilities are primarily comprised of cleanup costs incurred from removing, containing, and/or 

disposing of asbestos-containing materials from facilities owned by NOAA and NIST and ships owned by NOAA. Estimated 

costs associated with the future decommissioning of a NIST operated nuclear reactor are additionally included. 

Environmental and Disposal Liabilities are summarized below:

FY 2018 FY 2017

Asbestos-related Cleanup Costs $ 72,188 $ 72,991

Nuclear Reactor 61,937 60,725

Non-reactor Radiological Facilities 8,672 8,330

Pribilof Islands 1,066 1,326

Other 1,814 1,775

Total $ 145,677 $ 145,147

FY 2018 AGENCY FINANCIAL REPORT 8 5

NOTES TO THE FINANCIAL STATEMENTS
NOTE 15. LEASES

Capital Leases:

Assets under capital leases are as follows:

FY 2018 FY 2017

Structures, Facilities, and Leasehold Improvements $ 1,942 $ 1,942

Equipment 8,533 8,533

Less: Accumulated Depreciation (9,683) (7,849)

Net Assets Under Capital Leases $ 792 $ 2,626

Capital Lease Liabilities:

Future payments due under capital leases are as follows:

FY 2018

General PP&E 

Category

 Fiscal Year

Real Property 

Non-Federal

2019 $ 26

Total Future Lease Payments 26

Less: Imputed Interest –

Less: Executory Costs (5)

Net Capital Lease Liabilities $ 21

FY 2017

General PP&E 

Category

 Fiscal Year Real Property

2018 $ 314

2019 26

Total Future Lease Payments 340

Less: Imputed Interest (7)

Less: Executory Costs (60)

Net Capital Lease Liabilities $ 273

Operating Leases:

Most of the Department’s facilities are rented from GSA, which generally charges rent that is intended to approximate 

commercial rental rates. For federally owned property rented from GSA, the Department generally does not execute 

an agreement with GSA; the Department, however, is normally required to give 120 to 180 days notice to vacate. For 

non-federally owned property rented from GSA, an occupancy agreement is generally executed, and the Department may 

normally cancel these agreements with 120 days notice.

8 6 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
The Department’s (1) estimated real property rent payments to GSA for FY 2019 through FY 2023; and (2) future payments 

due under noncancellable operating leases (non-GSA real property) are as follows:

FY 2018

General PP&E Category

 Fiscal Year

GSA

Real Property 

Leases

Non-GSA 

Real Property 

Federal 

Leases

Non-GSA 

Real Property 

Non-federal 

Leases

Total 

Non-GSA 

Real Property 

Leases

2019 $ 294,038 $ 306 $ 13,694 $ 14,000

2020 299,242 314 13,991 14,305

2021 293,640 323 12,322 12,645

2022 287,795 333 11,635 11,968

2023 291,246 342 9,900 10,242

Thereafter 1 352 30,146 30,498

Total Future Operating Lease Payments $ 1,970 $ 91,688 $ 93,658

1 Not estimated

FY 2018 AGENCY FINANCIAL REPORT 8 7

NOTES TO THE FINANCIAL STATEMENTS
NOTE 16. LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

The liabilities that are not covered by budgetary resources, included in the Department’s Consolidated Balance Sheets, are 

summarized below:

FY 2018 FY 2017

Intragovernmental

Liability to General Fund of the U.S. Government 

for Deficit Reduction $ 6,244,436 $ 336,188

Accrued FECA Liability 25,200 26,333

Other 26,227 1,875

Total Intragovernmental 6,295,863 364,396

Accrued Payroll 64,933 63,206

Accrued Annual Leave 323,389 309,015

Federal Employee Benefits 880,822 884,845

Environmental and Disposal Liabilities 145,677 145,147

Contingent Liabilities 300 39,472

Unearned Revenue 524,232 563,481

ITA Foreign Service Nationals’ Voluntary Separation Pay 12,114 11,624

Other 7,256 7,286

Total Liabilities Not Covered by Budgetary Resources 8,254,586 2,388,472

Total Liabilities Covered by Budgetary Resources 4,032,463 2,330,465

Total Liabilities $ 12,287,049 $ 4,718,937

8 8 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
NOTE 17. 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, 2018 is shown below.

Major Long-term Commitments:

FY 2018

Description FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 Thereafter Total

Polar Follow-on $ 329,956 $ 416,000 $ 458,000 $ 412,000 $ 435,000 $ 4,501,923 $ 6,552,879

Joint Polar Satellite Systems 548,035 445,082 383,436 263,013 154,521 318,213 2,112,300

Geostationary Operational 

Environmental Satellites 408,380 304,056 292,500 292,500 250,000 176,052 1,723,488

Comprehensive Large Arraydata Stewardship System 52,332 52,332 52,332 52,332 52,332 – 261,660

Weather Service 29,846 32,762 36,196 37,605 37,833 – 174,242

Satellite Projects, Planning, 

and Analysis 36,539 27,200 27,200 27,200 27,200 – 145,339

Space Weather Follow-on 10,000 10,000 10,000 10,000 10,000 – 50,000

Constellation Observing 

System for Meteorology, 

Ionosphere, and 

Climate - 2 5,892 8,100 8,100 8,100 8,100 – 38,292

System Architecture and 

Advanced Planning 4,929 4,929 4,929 4,929 4,929 – 24,645

Commercial Weather 

Data Pilot 3,000 3,000 3,000

 

3,000 3,000 – 15,000

Satellite Command and Data 

Acquisition Facility 2,450 2,450 2,450 2,450 2,450 – 12,250

Cooperative Data and

Rescue Services 500 – – – – – 500

Total $ 1,431,859 $ 1,305,911 $ 1,278,143 $ 1,113,129 $ 985,365 $ 4,996,188 $ 11,110,595

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 $300 thousand 

and $39.5 million as of September 30, 2018 and 2017, respectively, and which are included as Contingent Liabilities in the Department’s 

Consolidated Balance Sheets. For most of these claims, any amounts ultimately due will be paid out of Treasury’s Judgment Fund. 

FY 2018 AGENCY FINANCIAL REPORT 8 9

NOTES TO THE FINANCIAL STATEMENTS
For certain 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. 

However, agencies are required to reimburse the Judgment Fund for payments pursuant to the Contract Disputes Act and the 

Notification and Federal Employees Antidiscrimination and Retaliation Act of 2002. 

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 

$280.3 million as of September 30, 2018. 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 $39.8 million as of 

September 30, 2018. 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.

NOTE 18. CONSOLIDATED STATEMENTS OF NET COST BY MAJOR BUDGETARY FUNCTION

The following tables illustrate the Department’s Consolidated Statements of Net Cost by Major Budgetary Function, with Gross 

Costs and Earned Revenue further broken down by Intragovernmental and With the Public. The classification of Gross Costs as 

Intragovernmental or With the Public is based on the source of goods and services received by the Department and is not based on 

the classification of the related revenue. The classification of costs or revenue as Intragovernmental or With the Public is defined 

on a transaction-by-transaction basis based upon with whom the transaction is with. The purpose of this classification is to enable 

the Department to prepare consolidated financial statements, not to match the intragovernmental and public revenue with the 

costs that are incurred to produce the intragovernmental and public revenue. 

9 0 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
United States Department of Commerce Consolidating Statement of Net Cost by Major Budgetary Function

For the Year Ended September 30, 2018

Natural 

Resources and 

Environment/

Other Natural 

Resources

Other 

Advancement 

of Commerce

Area and 

Regional 

Development Others 

Combined

Total

IntraDepartmental 

Eliminations

Consolidated 

Total

Total Program Costs

Gross Costs $ 5,249,107 $ 7,560,938 $ 297,513 $ 132,935 $13,240,493 $ (343,106) $ 12,897,387

Less: Earned Revenue (228,678) (4,393,828) (13,575) (2,305) (4,638,386) 343,106 (4,295,280)

NET COST OF OPERATIONS $ 5,020,429 $ 3,167,110 $ 283,938 $ 130,630 $ 8,602,107 $ – $ 8,602,107

United States Department of Commerce Consolidating Statement of Net Cost by Major Budgetary Function

For the Year Ended September 30, 2017

Natural 

Resources and 

Environment/

Other Natural 

Resources

Other 

Advancement 

of Commerce

Area and 

Regional 

Development Others 

Combined

Total

IntraDepartmental 

Eliminations

Consolidated 

Total

Total Program Costs

Gross Costs $ 4,811,090 $ 7,536,623 $ 291,436 $ 129,456 $ 12,768,605 $ (354,763) $ 12,413,842

Less: Earned Revenue (245,752) (4,137,445) (5,728) (1,646) (4,390,571) 354,763 (4,035,808)

NET COST OF OPERATIONS $ 4,565,338 $ 3,399,178 $ 285,708 $ 127,810 $ 8,378,034 $ – $ 8,378,034

NOTE 19. COMBINED STATEMENTS OF BUDGETARY RESOURCES

The presentation of the FY 2018 and FY 2017 Combined Statements of Budgetary Resources (SBR) has changed considerably from 

the previous SBR presentation included in the Department’s FY 2017 Agency Financial Report, due to revisions to the SBR format 

included in the July 2018 issuance of OMB Circular A-136, Financial Reporting Requirements. In the Budgetary Resources section 

of the SBR, the new format collapsed previous SBR lines for various current fiscal year adjustments to unobligated balance, brought 

forward, October 1 into a newly captioned line, Unobligated Balance From Prior-years Budget Authority, Net. The adjustments are 

also aggregated and reported in the new memorandum line, Net Adjustments to Unobligated Balance, Brought Forward, October 1. 

The new SBR eliminated the previous Change in Unpaid Obligated Balance, Net section and the Budget Authority, Net section. 

Lastly, the new SBR does not display the calculation of Outlays, Net, which is Outlays, Gross, less Actual Offsetting Collections.

Unobligated Balance From Prior-years Budget Authority, Net: This budgetary resources line consists of unobligated balance, brought 

forward as of October 1, as adjusted by current fiscal year activity related to the unobligated balance brought forward—typical 

items include recoveries of prior years’ unpaid obligations, downward adjustments of prior years’ paid obligations, transfers of 

prior-years’ balances, and cancellations of annual or multi-year appropriations. The current fiscal year activity that is adjusting 

the unobligated balance brought forward is shown for informational purposes on the line MEMORANDUM: Net Adjustments to 

Unobligated Balance, Brought Forward, October 1.

Appropriations: 

Appropriations for FY 2018 include a transfer in of auction proceeds from FCC of $5.90 billion, whereas there was no such transfer(s) 

in FY 2017. See Note 22, Funds from Dedicated Collections, NTIA’s Public Safety Trust Fund subsection, for more information on 

this FY 2018 transfer in.

FY 2018 AGENCY FINANCIAL REPORT 9 1

NOTES TO THE FINANCIAL STATEMENTS
There are reconciling items from the amounts of the Budgetary Resources, Appropriations on the SBR to the amounts of the 

Budgetary Financing Sources, Appropriations Received on the Consolidated Statement of Changes in Net Position (SCNP).

For FY 2018, the primary reconciling item is a transfer in of auction proceeds from the Federal Communications Commission to 

NTIA’s Public Safety Trust Fund of $5.90 billion, which is included as Appropriations on the SBR, and is included as a budgetary 

transfer in on the SCNP (see Note 22, Funds from Dedicated Collections, for more information on the Public Safety Trust Fund).

For FY 2017, the primary reconciling item is transfers of current year authority in the amount of $178.6 million, which is included 

in the SBR as Appropriations and is included as transfers on the SCNP.

Borrowing Authority: Total borrowing authority available for NOAA’s loan programs amounted to $61.9 million and $116.2 million 

as of September 30, 2018 and 2017, 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 1.O, Debt to Treasury, for debt 

repayment requirements, financing sources for repayments, and other terms of borrowing authority used. 

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 primarily under 

Public Law 115-141 amounted to $11.3 million for FY 2018, while permanent reductions for FY 2017 under Public Law 115-31 

amounted to $34.38 million. These permanent reductions are included in the SBR Budgetary Resources section, and are also 

included in the SCNP.

Legal and/or budgetary arrangements affecting the Department’s use of Unobligated Balances of Budget Authority and/or Fund 

Balance with Treasury during FY 2018 and FY 2017 include the following:

● The Department’s Fund Balance with Treasury includes for NTIA’s Digital Television Transition and Public Safety Fund, as 

of September 30,2018 and 2017, $8.81 billion of funds that are not available (reduction of budgetary resources).

● The Department’s Fund Balance with Treasury for 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, 2018 and 2017 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, 2018 and 

2017, $233.5 million of Fund Balance with Treasury 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, 2018 and 2017 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).

9 2 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
● 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.

Comparison to Budget of the U.S. Government:

A comparison was performed between the amounts reported in the FY 2017 SBR and the actual FY 2017 amounts reported in 

the FY 2019 Budget of the U.S. Government for SBR lines Total Budgetary Resources; New Obligations and Upward Adjustment; 

Outlays, Net; and Distributed Offsetting (Receipts)/Outlays, Net. There was one explained material difference of $358 million 

primarily related to Total Budgetary Resources balances for expired accounts that are appropriately included in the SBR, and 

that are appropriately not included in the FY 2019 Budget of the U.S. Government. The President’s Budget that will report 

actual amounts for FY 2018 has not yet been published, and will be made available on OMB’s President’s Budget Web page at 

https://www.whitehouse.gov/omb/budget/.

Apportionment Categories of New Obligations and Upward Adjustments:

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 (for example, derived from Appropriations) and Reimbursable (for example, derived from Spending Authority 

From Offsetting Collections) New Obligations and Upward Adjustments by apportionment category are as follows:

FY 2018

Direct Reimbursable Total

Category A $ 1,370,047 $ 3,751,423 $ 5,121,470

Category B 9,635,967 7,162,252 16,798,219

Exempt from Apportionment 943 – 943

Total New Obligations and Upward Adjustments $ 11,006,957 $ 10,913,675 $ 21,920,632

FY 2017

Direct Reimbursable Total

Category A $ 2,840,592 $ 3,761,272 $ 6,601,864

Category B 7,401,041 1,963,764 9,364,805

Exempt from Apportionment 4,030 – 4,030

Total New Obligations and Upward Adjustments $ 10,245,663 $ 5,725,036 $ 15,970,699

Undelivered Orders: 

The following table summarizes Undelivered Orders as of September 30, 2018:

FY 2018 AGENCY FINANCIAL REPORT 9 3

NOTES TO THE FINANCIAL STATEMENTS
Undelivered Orders FY 2018

Undelivered Orders, Federal Paid $ 195,952

Undelivered Orders, Federal Unpaid 1,972,165

Undelivered Orders, Non-federal Paid 80,258

Undelivered Orders, Non-federal Unpaid 9,788,719

Total $ 12,037,094

Undelivered Orders (paid and unpaid) totaled $7.43 billion as of September 30, 2017.

NOTE 20. CONSOLIDATED STATEMENTS OF CUSTODIAL ACTIVITY 

Custodial activity represents revenue (non-exchange and exchange) that was or will be collected on behalf of another entity and 

the disposition of that revenue to Treasury (General Fund of the U.S. Government), a trust fund, or other recipient entities. The 

Department’s custodial activity is reported in the Consolidated Statements of Custodial Activity.

The Department’s custodial revenue in FY 2018 was $1.01 billion, almost entirely received by BIS. BIS primarily receives custodial 

revenue from civil monetary penalties assessed to private entities that violate the Export Administration Act. In FY 2018, BIS assessed 

and collected an additional $1.00 billion in civil monetary penalties from a Chinese cellular phone manufacturer for making false 

statements to the U.S. government following a March 2017 settlement agreement. The $1.00 billion collected from the manufacturer 

was transferred in FY 2018 to Treasury ($557.0 million) and to the U.S. Department of Justice ($443.0 million). In addition to the 

penalties assessed, BIS required the company to place $400.0 million in suspended penalties money in escrow held by Treasury, 

$300.0 million of which was previously suspended from the March 2017 agreement. The Department’s custodial payable to Treasury 

and to the public for custodial activity was $376 thousand and $24 thousand, respectively, as of September 30, 2018.

The Department’s custodial revenue in FY 2017 was $376.7 million, primarily received by BIS. In FY 2017, BIS assessed a civil 

monetary penalty on a Chinese cellular phone manufacturer for multiple violations of the Export Administration Act. The company 

agreed to a civil penalty of $661.0 million, of which $361.0 million was collected by BIS and was transferred to Treasury on 

September 30, 2017. Payment to BIS for the remaining $300.0 million was suspended until March 2024 and waived on the condition 

that the company abide by the probationary conditions until such date. See updated information regarding this manufacturer in the 

paragraph above discussing FY 2018 transactions. The Department’s custodial payable to Treasury and to the public for custodial 

activity was $848 thousand and $22 thousand, respectively, as of September 30, 2017.

NOTE 21. FIDUCIARY ACTIVITIES

Fiduciary activities are the collection or receipt, and the management, protection, accounting, and disposition by the federal government 

of cash or other assets in which non-federal individuals or entities have an ownership interest that the federal government must 

uphold. Fiduciary cash and other assets are not assets of the federal government and accordingly are not recognized on the proprietary 

financial statements. The Patent Cooperation Treaty authorized 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, Australian Patent Office, Israeli Patent Office, Japanese Patent Office, and Intellectual Property Office of Singapore 

from U.S. citizens requesting an international patent. The Madrid Protocol Implementation Act authorized USPTO to collect trademark 

application fees on behalf of the International Bureau of the WIPO from U.S. citizens requesting an international trademark.

9 4 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
Schedule of Fiduciary Activities for the Year Ended September 30, 2018:

FY 2018

Patent Cooperation 

Treaty

Madrid 

Protocol Total

Fiduciary Net Assets, Beginning Balance $ 13,831 $ 542 $ 14,373

Contributions 154,525 27,043 181,568

Disbursements to and on Behalf of Beneficiaries (154,494) (26,881) (181,375) 

Increase/(Decrease) in Fiduciary Net Assets 31 162 193

Fiduciary Net Assets, Ending Balance $ 13,862 $ 704 $ 14,566

Fiduciary Net Assets as of September 30, 2018: 

FY 2018

Patent Cooperation 

Treaty

Madrid 

Protocol Total

Fund Balance with Treasury $ 13,862 $ 704 $ 14,566

Schedule of Fiduciary Activities for the Year Ended September 30, 2017:

FY 2017

Patent Cooperation 

Treaty

Madrid 

Protocol Total

Fiduciary Net Assets, Beginning Balance $ 14,459 $ 451 $ 14,910

Contributions 151,264 22,812 174,076

Disbursements to and on Behalf of Beneficiaries (151,892) (22,721) (174,613) 

Increase/(Decrease) in Fiduciary Net Assets (628) 91 (537)

Fiduciary Net Assets, Ending Balance $ 13,831 $ 542 $ 14,373

Fiduciary Net Assets as of September 30, 2017:

FY 2017

Patent Cooperation 

Treaty

Madrid 

Protocol Total

Fund Balance with Treasury $ 13,831 $ 542 $ 14,373

FY 2018 AGENCY FINANCIAL REPORT 9 5

NOTES TO THE FINANCIAL STATEMENTS
NOTE 22. 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.” The 

funds from dedicated collections reported in these tables are fully included in the Department’s Consolidated Balance Sheets, Consolidated 

Statements of Net Cost, and Consolidated Statements of Changes in Net Position.

United States Department of Commerce Combining Balance Sheet – Funds from Dedicated Collections

As of September 30, 2018

 NIST 

Wireless 

Innovation 

Fund 

 NOAA 

Damage 

Assessment 

and 

Restoration 

Revolving 

Fund 

 NTIA Digital 

Television 

Transition 

and Public 

Safety Fund 

NTIA First 

Responder 

Network 

Authority Fund 

 NTIA 

Network 

Construction 

Fund 

 NTIA Public 

Safety Trust 

Fund 

 USPTO 

Funds from 

Dedicated 

Collections 

 Other 

Funds from 

Dedicated 

Collections 

 Combined 

Total 

Funds from 

Dedicated 

Collections 

ASSETS 

Fund Balance with Treasury $ 229,135 $ 170,862 $ 8,820,778 $ 239,963 $ 5,893,821 $ 77,944 $ 2,242,959 $ 105,494 $ 17,780,956

Cash – – – – – – 6,836 – 6,836

Investments, Net – – – – – 6,244,436 – – 6,244,436

Accounts Receivable, Net – 37 – – 33 86 402 1,807 2,365

Advances and Prepayments 9 24 208 – 2,461 17 17,433 200 20,352

General Property, Plant, and 

Equipment, Net – – – – 4,145 511 527,081 – 531,737

Cost Contribution to 

Buildout of Nationwide 

Public Safety Broadband 

Network, Net – – – – 2,009,841 – – – 2,009,841

Other – – – – 925 – – – 925

TOTAL ASSETS $ 229,144 $ 170,923 $ 8,820,986 $ 239,963 $ 7,911,226 $ 6,322,994 $ 2,794,711 $ 107,501 $ 26,597,448

LIABILITIES 

Accounts Payable $ 92 $ 30 $ – $ (37) $ 1,403,316 $ 378 $ 112,662 $ 53 $ 1,516,494

Federal Employee Benefits – – – – – – 12,633 – 12,633

Other 

Accrued Payroll and 

Annual Leave 206 106 – – 2,798 645 246,101 160 250,016

Accrued Grants 1,595 499 245 – 957 – – 1,013 4,309

Unearned Revenue – – – 120,000 – – 970,889 – 1,090,889

Liability to General 

Fund of the 

U.S. Government 

for Deficit Reduction – – – – – 6,244,436 – – 6,244,436

Other Liabilities – 37 – – 405 173 18,849 50 19,514

TOTAL LIABILITIES $ 1,893 $ 672 $ 245 $ 119,963 $ 1,407,476 $ 6,245,632 $ 1,361,134 $ 1,276 $ 9,138,291

 NET POSITION 

Unexpended Appropriations $ – $ – $ – $ – $ – $ – $ – $ – $ –

Cumulative Results of 

Operations 227,251 170,251 8,820,741 120,000 6,503,750 77,362 1,433,577 106,225 17,459,157

TOTAL NET POSITION $ 227,251 $ 170,251 $ 8,820,741 $ 120,000 $ 6,503,750 $ 77,362 $ 1,433,577 $ 106,225 $ 17,459,157

TOTAL LIABILITIES AND 

NET POSITION $ 229,144 $ 170,923 $ 8,820,986 $ 239,963 $ 7,911,226 $ 6,322,994 $ 2,794,711 $ 107,501 $ 26,597,448

9 6 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
United States Department of Commerce Combining Balance Sheet – Funds from Dedicated Collections

As of September 30, 2017

 NIST 

Wireless 

Innovation 

Fund 

 NOAA 

Damage 

Assessment 

and 

Restoration 

Revolving 

Fund 

 NTIA Digital 

Television 

Transition 

and Public 

Safety Fund 

 NTIA 

Network 

Construction 

Fund 

 NTIA Public 

Safety Trust 

Fund 

 NTIA State 

and Local 

Implementation 

Fund 

 USPTO 

Funds from 

Dedicated 

Collections 

 Other 

Funds from 

Dedicated 

Collections 

 Combined 

Total 

Funds from 

Dedicated 

Collections 

ASSETS 

Fund Balance with Treasury $ 269,704 $ 162,207 $ 8,821,057 $ 5,574,439 $ 145,427 $ 58,850 $ 2,126,008 $ 64,310 $ 17,222,002

Cash – – – – – – 4,038 – 4,038

Investment, Net – – – – 334,106 – – – 334,106

Accounts Receivable, Net – 37 – 31 34 – 334 182 618

Advances and Prepayments 257 29 2,513 678,295 682 246 27,740 – 709,762

General Property, Plant, and 

Equipment, Net – – – 4,307 1,301 – 523,842 – 529,450

Cost Contribution to 

Buildout of Nationwide 

Public Safety Broadband 

Network, Net – – – 288,000 – – – – 288,000

Other – – – 1,059 – – 1 29 1,089

TOTAL ASSETS $ 269,961 $ 162,273 $ 8,823,570 $ 6,546,131 $ 481,550 $ 59,096 $ 2,681,963 $ 64,521 $ 19,089,065

LIABILITIES 

Accounts Payable $ 308 $ (92) $ – $ 4,539 $ 1,168 $ 56 $ 101,703 $ 6 $ 107,688

Federal Employee Benefits – – – – – – 12,020 – 12,020

Other 

Accrued Payroll and 

Annual Leave 167 124 – 636 2,580 19 235,389 154 239,069

Accrued Grants 3,424 471 601 4,199 – 3,835 – 934 13,464

Unearned Revenue – – – – – – 936,854 – 936,854

Liability to General 

Fund of the U.S. 

Government for 

Deficit Reduction – – – – 336,188 – – – 336,188

Other Liabilities – 41 – 397 163 – 18,447 55 19,103

TOTAL LIABILITIES $ 3,899 $ 544 $ 601 $ 9,771 $ 340,099 $ 3,910 $ 1,304,413 $ 1,149 $ 1,664,386

 NET POSITION 

Unexpended Appropriations $ – $ – $ – $ – $ – $ – $ – $ – $ –

Cumulative Results of 

Operations 266,062 161,729 8,822,969 6,536,360 141,451 55,186 1,377,550 63,372 17,424,679

TOTAL NET POSITION $ 266,062 $ 161,729 $ 8,822,969 $ 6,536,360 $ 141,451 $ 55,186 $ 1,377,550 $ 63,372 $ 17,424,679

TOTAL LIABILITIES AND 

NET POSITION $ 269,961 $ 162,273 $ 8,823,570 $ 6,546,131 $ 481,550 $ 59,096 $ 2,681,963 $ 64,521 $ 19,089,065

FY 2018 AGENCY FINANCIAL REPORT 9 7

NOTES TO THE FINANCIAL STATEMENTS
United States Department of Commerce Combining Statement of Net Cost – Funds from Dedicated Collections

For the Year Ended September 30, 2018

NIST 

Wireless 

Innovation 

Fund 

NOAA 

Damage 

Assessment 

and 

Restoration 

Revolving 

Fund 

NTIA Digital 

Television 

Transition 

and Public 

Safety Fund 

NTIA First 

Responder 

Network 

Authority Fund 

NTIA 

Network 

Construction 

Fund 

NTIA 

Public 

Safety 

Trust Fund 

USPTO 

Funds from 

Dedicated 

Collections 

Other 

Funds from 

Dedicated 

Collections 

Combined 

Total 

Funds from 

Dedicated 

Collections 

Total Program Costs

Gross Costs $ 38,804 $ 24,063 $ 2,228 $ – $ 86,877 $ 11,598 $ 3,321,475 $ 40,322 $ 3,525,367

Less: Earned Revenue – 1,906 – (120,000) – (154) (3,309,389) – (3,427,637)

NET COST OF OPERATIONS $ 38,804 $ 25,969 $ 2,228 $(120,000) $ 86,877 $ 11,444 $ 12,086 $ 40,322 $ 97,730

United States Department of Commerce Combining Statement of Net Cost – Funds from Dedicated Collections

For the Year Ended September 30, 2017

 NIST 

Wireless 

Innovation 

Fund 

 NOAA 

Damage 

Assessment 

and 

Restoration 

Revolving 

Fund 

 NTIA Digital 

Television 

Transition 

and Public 

Safety Fund 

 NTIA 

Network 

Construction 

Fund 

 NTIA 

Public 

Safety 

Trust Fund 

 NTIA State 

and Local 

Implementation 

Fund 

 USPTO 

Funds from 

Dedicated 

Collections 

 Other 

Funds from 

Dedicated 

Collections 

 Combined 

Total 

Funds from 

Dedicated 

Collections 

Total Program Costs

Gross Costs $ 24,742 $ 60,580 $ 1,980 $ 124,783 $ 14,202 $ 21,723 $ 3,193,411 $ 18,835 $ 3,460,256

Less: Earned Revenue – (2,969) – – (58) – (3,105,347) – (3,108,374)

NET COST OF OPERATIONS $ 24,742 $ 57,611 $ 1,980 $ 124,783 $14,144 $ 21,723 $ 88,064 $ 18,835 $ 351,882

9 8 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
United States Department of Commerce Combining Statement of Changes in Net Position – Funds from Dedicated Collections

For the Year Ended September 30, 2018

 NIST 

Wireless 

Innovation 

Fund 

 NOAA 

Damage 

Assessment 

and 

Restoration 

Revolving 

Fund 

 NTIA Digital 

Television 

Transition and 

Public Safety 

Fund 

 NTIA First 

Responder 

Network 

Authority Fund 

 NTIA 

Network 

Construction 

Fund 

 NTIA

Public Safety 

Trust Fund 

 USPTO 

Funds from 

Dedicated 

Collections 

 Other 

Funds from 

Dedicated 

Collections 

 Combined 

Total 

Funds from 

Dedicated 

Collections 

Cumulative Results of Operations: 

Beginning Balance $ 266,062 $ 161,729 $ 8,822,969 $ – $ 6,536,360 $ 141,451 $ 1,377,550 $ 118,558 $ 17,424,679

Budgetary Financing Sources: 

Non-exchange Revenue – 9,008 – – – 13,090 – 12,898 34,996

Transfer in of Auction Proceeds 

from Federal Communications 

Commission – – – – – 5,895,159 – – 5,895,159

Transfers In/(Out) Without

Reimbursement, Net – 25,942 – – 54,268 (54,268) (1,000) 6,270 31,212

Other Budgetary Financing 

Sources/(Uses), Net – – – – – – – 8,821 8,821

Other Financing Sources 

(Non-exchange): 

Transfers In/(Out) Without 

Reimbursement, Net (7) (459) – – – – – – (466)

Imputed Financing Sources from 

Cost Absorbed by Others – – – – – 1,639 69,113 – 70,752

Financing Sources Used for 

Recognizing Liability to General 

Fund of the U.S. Government 

for Deficit Reduction – – – – – (5,908,248) – – (5,908,248)

Other Financing 

Sources/(Uses), Net – – (1) (17) – – (18)

Total Financing Sources (7) 34,491 – – 54,267 (52,645) 68,113 27,989 132,208

Net Cost of Operations (38,804) (25,969) (2,228) 120,000 (86,877) (11,444) (12,086) (40,322) (97,730)

Net Change (38,811) 8,522 (2,228) 120,000 (32,610) (64,089) 56,027 (12,333) 34,478

Cumulative Results of 

Operations – Ending Balance 227,251 170,251 8,820,741 120,000 6,503,750 77,362 1,433,577 106,225 17,459,157

NET POSITION $ 227,251 $ 170,251 $ 8,820,741 $ 120,000 $ 6,503,750 $ 77,362 $ 1,433,577 $ 106,225 $ 17,459,157

FY 2018 AGENCY FINANCIAL REPORT 9 9

NOTES TO THE FINANCIAL STATEMENTS
United States Department of Commerce Combining Statement of Changes in Net Position – Funds from Dedicated Collections

For the Year Ended September 30, 2017

 NIST 

Wireless 

Innovation 

Fund 

 NOAA 

Damage 

Assessment 

and 

Restoration 

Revolving 

Fund 

 NTIA Digital 

Television 

Transition and 

Public Safety 

Fund 

 NTIA 

Network 

Construction 

Fund 

 NTIA Public 

Safety Trust 

Fund 

 NTIA State 

and Local 

Implementation 

Fund 

 USPTO 

Funds from 

Dedicated 

Collections 

 Other 

Funds from 

Dedicated 

Collections 

 Combined 

Total 

Funds from 

Dedicated 

Collections 

Cumulative Results of Operations: 

Beginning Balance $ 277,831 $ 198,953 $ 8,824,949 $ 6,661,242 $ 176,125 $ 76,909 $ 1,447,520 $ 60,681 $ 17,724,210

Budgetary Financing Sources: 

Non-exchange Revenue – 13,236 – – 2,133 – – 21,526 36,895

Transfers In/(Out) Without

Reimbursement, Net 13,600 7,151 – – (21,420) – (2,000) – (2,669)

Other Financing Sources 

(Non-exchange): 

Transfers In/(Out) Without 

Reimbursement, Net (627) – – (98) – – – – (725)

Imputed Financing Sources from 

Cost Absorbed by Others – – – – 892 – 20,094 – 20,986

Financing Sources Used for 

Recognizing Liability to General 

Fund of the U.S. Government 

for Deficit Reduction – – – – (2,134) – – – (2,134)

Other Financing Sources/(Uses), 

Net – – – (1) (1) – – – (2)

Total Financing Sources 12,973 20,387 – (99) (20,530) – 18,094 21,526 52,351

Net Cost of Operations (24,742) (57,611) (1,980) (124,783) (14,144) (21,723) (88,064) (18,835) (351,882)

Net Change (11,769) (37,224) (1,980) (124,882) (34,674) (21,723) (69,970) 2,691 (299,531)

Cumulative Results of 

Operations – Ending Balance 266,062 161,729 8,822,969 6,536,360 141,451 55,186 1,377,550 63,372 17,424,679

NET POSITION $ 266,062 $ 161,729 $ 8,822,969 $ 6,536,360 $ 141,451 $ 55,186 $ 1,377,550 $ 63,372 $ 17,424,679

Below is a description of major Funds from Dedicated Collections shown in the table above and on the previous pages:

NIST’s Wireless Innovation Fund was created in order for NIST, in consultation with the Federal Communications Commission (FCC), 

the Secretary of Homeland Security, and the National Institute of Justice of the U.S. Department of Justice, to conduct research 

and assist with the development of standards, technologies, and applications to advance wireless public safety communications. 

Section 6413 of the Middle Class Tax Relief and Job Creation Act of 2012 required NTIA to make available $300.0 million to the 

Director of NIST as amounts are deposited into NTIA’s Public Safety Trust Fund to carry out public safety research. The Wireless 

Innovation Fund in FY 2017 received transfers in totaling $13.6 million from NTIA’s Public Safety Trust Fund, and also through FY 2016 

similarly received transfers in totaling $286.4 million from NTIA’s Public Safety Trust Fund. The law establishing this program can 

be found in Section 6303 of the Middle Class Tax Relief and Job Creation Act of 2012.

NOAA’s 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, tribal, 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 U.S.C. Section 2706.

100 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
NTIA’s Digital Television Transition and Public Safety Fund made digital television available to every home in America, improved 

communications between local, state, and federal agencies, allowed smaller television stations to broadcast digital television, 

and improved how warnings are received when disasters occur. NTIA received initial funding from borrowings from Treasury, 

and repaid Treasury from the proceeds of the auction of recovered analog spectrum which was completed in March 2008. The 

proceeds from the auction provided funding for several programs, and $7.36 billion was transferred in September 2009 to the 

General Fund of the U.S. Government as required by the Deficit Reduction Act of 2005. The Fund has a Fund Balance with Treasury 

balance of $8.82 billion, and Net Position, Cumulative Results of Operations balance of $8.82 billion, included in the Balance 

Sheet as of September 30, 2018 reported in this Note, of which $8.81 billion is not available (reduction of budgetary resources) 

as of September 30, 2018. The law establishing programs under this fund can be found in the Deficit Reduction Act of 2005, 

Sections 3001-3014. For FY 2018 budgetary financial information for the Digital Television Transition and Public Safety Fund, see 

the Combining Schedule of Budgetary Resources by Major Budget Account (unaudited), included in Required Supplementary 

Information (Unaudited).

NTIA’s Network Construction Fund and First Responder Network Authority fund primarily provide funding for the federal portion 

of cost contributions towards buildout of the Nationwide Public Safety Broadband Network (NPSBN) and for operations of the 

First Responder Network Authority (FirstNet), an independent authority within NTIA. 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.

Network Construction Fund

The Network Construction Fund in FY 2018 received transfers in totaling $54.3 million from NTIA’s Public Safety Trust Fund, and 

also through FY 2016 similarly received transfers in from NTIA’s Public Safety Trust Fund totaling $6.77 billion.

Advances and Prepayments reported on the Balance Sheet as of September 30, 2017 in this Note included $672.0 million for 

the balance of an advance payment made by the Network Construction Fund to the U.S. Department of the Interior (DOI) for the 

advance funding of certain task orders under the previous DOI contract with AT&T for it to build, operate, and maintain the NPSBN. 

During FY 2018, FirstNet took over the contract with AT&T for it to build, operate, and maintain the NPSBN, thus reducing the 

remaining Advances and Prepayments balance of $672.0 million with DOI to zero in FY 2018 upon the Department’s receipt from 

DOI of the $672.0 million refund of the advance balance with DOI.

Cost Contribution to Buildout of NPSBN, Net is included as an asset in the September 30, 2018 and 2017 Balance Sheets reported 

in this Note, amounting to $2.01 billion and $288.0 million, respectively, which is net of accumulated amortization of $15.4 million 

and zero, respectively. The Department’s cost contribution to buildout of the NPSBN includes (a) completed and accepted AT&T 

contract performance for buildout of the NPSBN; and (b) accrued costs for estimated, unbilled AT&T contract performance progress. 

See Note 1.M for information regarding the classification of these cost contributions as an asset, and the related amortization of 

the cost contributions. 

The law establishing the Network Construction Fund can be found under Section 6206 of the Middle Class Tax Relief and Job 

Creation Act of 2012. For FY 2018 budgetary financial information for the Network Construction Fund, see the Combining Schedule 

of Budgetary Resources by Major Budget Account (unaudited), included in Required Supplementary Information (Unaudited).

First Responder Network Authority fund

FirstNet is authorized to assess and collect fees, and also collects annual revenue from AT&T under the terms of its contract with 

AT&T to build, operate, and maintain the NPSBN. This fund received $120.0 million of earned revenue for FY 2018 as reported 

on the FY 2018 Combining Statement of Net Cost reported in this Note, and this fund also received $120.0 million of unearned 

revenue for FY 2019 as reported on the Balance Sheet as of September 30, 2018 in this Note.

FY 2018 AGENCY FINANCIAL REPORT 101

NOTES TO THE FINANCIAL STATEMENTS
The First Responder Network Authority fund was established primarily pursuant to Sections 6206 and 6208 of the Middle Class 

Tax Relief and Job Creation Act of 2012.

NTIA’s Public Safety Trust Fund was created as a result of Section 6413 of the Middle Class Tax Relief and Job Creation Act of 

2012 (Act). The Act provides funding for specified programs and activities to be derived from the proceeds of 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 provided authority to NTIA to borrow up to $2.00 billion from Treasury, 

interest-free, with the debt to be repaid from auction proceeds as the first priority. The Public Safety Trust Fund borrowed 

$2.00 billion from Treasury through FY 2014, which was repaid in full as of September 30, 2015.

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 SCNP and a budgetary resource on the SBR when the transfer is received. A transfer in 

of auction proceeds from FCC of $5.90 billion was received in FY 2018, which is not available for obligation and which was not 

apportioned by OMB for FY 2018 for this fund, and is included as a budgetary financing source on the FY 2018 SCNP reported 

in this Note and as a budgetary resource on the FY 2018 SBR (Appropriations). The $5.90 billion of auction proceeds received in 

FY 2018 are excess funds beyond the needs of priorities 1 through 7 discussed below, and is invested in a market-based, one-day 

certificate as of September 30, 2018—see discussion further below about investments of the Public Safety Trust Fund. Transfers 

in of auction proceeds from FCC totaling $28.28 billion through FY 2016 were previously received.

The Act directs the use of auction proceeds in an order of priority after the repayment of borrowings from Treasury (priority 1):

● Priority 1, the repayment of borrowings from Treasury, was fully completed as of September 30, 2015 as previously discussed.

● In FY 2015, the Public Safety Trust Fund transferred out $130.9 million, net of sequestration, to NTIA’s State and Local 

Implementation Fund, fully completing priority 2.

● In FY 2018, the Public Safety Trust Fund transferred out a total of $54.3 million to NTIA’s Network Construction Fund, 

toward priority 3 of up to $7.00 billion. These transfers out are included in the FY 2018 SCNP reported in this Note. The 

Public Safety Trust Fund also similarly transferred out a total of $6.77 billion to the Network Construction Fund through 

FY 2016 toward priority 3.

● In FY 2017, the Public Safety Trust Fund transferred out a total of $13.6 million to NIST’s Wireless Innovation Fund, fully 

completing priority 4 and priority 7 totaling $300.0 million for transfers to NIST to carry out public safety research. These 

transfers are included in the FY 2017 SCNP reported in this Note. The Public Safety Trust Fund also similarly transferred 

out a total of $286.4 million to the Wireless Innovation Fund through FY 2016 toward priority 4 and priority 7.

● Priority 5 specifies that the Public Safety Trust Fund is to deposit a total of $20.40 billion in the General Fund of the U.S. 

Government for deficit reduction. Fully completing this priority, the Public Safety Trust Fund transferred out a total of 

$20.40 billion during FY 2016 and FY 2015 to a receipt account utilized for transferring these funds to the General Fund 

of the U.S. Government, and the receipt account transferred a total of $20.40 billion during FY 2016 and FY 2015 to the 

General Fund of the U.S. Government. 

● Priority 6 specifies that the Public Safety Trust Fund make available $115.0 million to the Assistant Secretary (NTIA) and 

the Administrator of the National Highway Traffic Safety Administration (NHTSA) to carry out the grant program of Next 

Generation 9-1-1. Fully completing this priority, the Public Safety Trust Fund transferred out $7.8 million in FY 2017 and 

$104.4 million in FY 2016 to NHTSA, and made available in FY 2016 $2.8 million within the Public Safety Trust Fund for 

the Assistant Secretary (NTIA). 

102 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
● Priority 8 specifies that any remaining amounts deposited in the Public Safety Trust Fund shall be deposited in the General 

Fund of the U.S. Government for deficit reduction. The Act further specifies that any amounts remaining in the Public 

Safety Trust Fund after the end of FY 2022 shall be deposited in the General Fund of the U.S. Government for deficit 

reduction. Toward priority 8, the Public Safety Trust Fund has recorded a liability (not covered by budgetary resources) 

to the General Fund of the U.S. Government of $6.24 billion and $336.2 million as of September 30, 2018 and 2017, 

respectively, as reported in the Balance Sheets in this Note. The large increase in the liability during FY 2018 was caused 

by the $5.90 billion of auction proceeds received in FY 2018 as previously discussed. The corresponding FY 2018 and 

FY 2017 financing sources used to increase the liability for additional remaining amounts in the Fund are reported in the 

FY 2018 and FY 2017 SCNP reported in this Note, Other Financing Sources (Non-exchange) section.

The Act specifies that amounts in the Public Safety Trust Fund be invested in accordance with 31 U.S.C. Section 9702. The Public 

Safety Trust Fund has investment(s) in market-based Treasury securities totaling $6.24 billion and $334.1 million as of September 30, 

2018 and 2017, respectively; see Note 1.G, Investments, Net and Note 3 for more information. The federal government does not set 

aside assets to pay future expenditures associated with the Public Safety Trust Fund. The dedicated cash receipts collected from 

the public into the Public Safety Trust Fund are deposited with Treasury, which uses the cash for general government purposes. 

Treasury securities are issued to the Public Safety Trust Fund as evidence of its receipts. Treasury securities are an asset to the 

Public Safety Trust Fund, and Treasury securities are a liability of Treasury. Because the Public Safety Trust Fund and Treasury are 

both parts of the federal government, these assets and liabilities offset each other from the standpoint of the federal government 

as a whole. For this reason, they do not represent an asset or a liability in the U.S. government-wide financial statements. 

Treasury securities provide the Public Safety Trust Fund with authority to draw upon Treasury to make future expenditures. When 

the Public Safety Trust Fund requires redemption of these securities to make expenditures, the federal government finances 

those expenditures out of accumulated cash balances by raising taxes or other receipts, by borrowing from the public or repaying 

less debt, or by curtailing other expenditures. This is the same way that the federal government finances all other expenditures.

For FY 2018 budgetary financial information for the Public Safety Trust Fund, see the Combining Schedule of Budgetary Resources 

by Major Budget Account (unaudited) included in Required Supplementary Information (Unaudited).

NTIA’s State and Local Implementation Fund includes a matching grants program to states, carried out by NTIA, in consultation with 

FirstNet, to assist state, regional, tribal, and local jurisdictions to identify, plan, and implement the most efficient and effective 

way for such jurisdictions to utilize and integrate the infrastructure, equipment, and other architecture associated with the NPSBN 

to satisfy the wireless communications and data services needs of that jurisdiction, including with regards to coverage, siting, 

and other needs. The program was initially funded by borrowings from Treasury, without interest, which had been fully repaid 

in FY 2015. The State and Local Implementation Fund in FY 2015 received transfers in totaling $130.9 million from NTIA’s Public 

Safety Trust Fund. If there is a balance remaining in the Fund on September 30, 2022, the Fund shall transfer such balance to the 

General Fund of the U.S. Government for deficit reduction. The law establishing this program can be found in Sections 6301 and 

6302 of the Middle Class Tax Relief and Job Creation Act of 2012.

USPTO’s Funds from Dedicated Collections consist of its Salaries and Expenses Fund, Patent and Trademark Surcharge Fund, and 

Patent and Trademark Fee Reserve 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 

FY 2018 AGENCY FINANCIAL REPORT 103

NOTES TO THE FINANCIAL STATEMENTS
inventions and trademarks. USPTO may use monies from this account only as authorized by Congress. For FY 2018 budgetary 

financial information for the Salaries and Expenses Fund, see the Combining Schedule of Budgetary Resources by Major Budget 

Account (unaudited), included in Required Supplementary Information (Unaudited).

The Patent and Trademark Surcharge Fund, a Special Fund Receipt Account at Treasury, is discussed in Note 19, Combined 

Statements of Budgetary Resources. USPTO may use monies from this account only as authorized by Congress and made 

available by the issuance of a Treasury warrant. As of September 30, 2018 and 2017, $233.5 million of Fund Balance with Treasury 

is held in this fund. The law establishing the Patent and Trademark Surcharge Fund is the Omnibus Budget Reconciliation Act of 

1990, Title X, Subtitle B, Section 10101 (Public Law 101-508).

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 USPTO relating to the processing of patent applications and for other activities, services, and materials relating to patents and 

applicable administrative costs. No monies have been deposited into this Fund through September 30, 2018. The law establishing 

the Patent and Trademark Fee Reserve Fund can be found in 35 U.S.C. Section 42(c).

NOTE 23. RECONCILIATIONS 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 and Upward Adjustments (composed of items 

reported in the Department’s SBR) plus the proprietary basis of accounting Other Resources (as reported in the Department’s 

SCNP), to the proprietary basis of accounting Net Cost of Operations as reported in the Department’s Consolidated Statement of 

Net Cost. 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 16. This subsection does not include 

all costs reported in prior fiscal years that are also included in Liabilities Not Covered by Budgetary Resources reported in Note 16.

104 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
The reconciliations of Net Cost of Operations to Budget for FY 2018 and 2017 are as follows:

FY 2018 FY 2017

Resources Used to Finance Activities:

Budgetary Resources Obligated:

New Obligations and Upward Adjustments $ 21,920,632 $ 15,970,699

Less: Spending Authority From Offsetting Collections and Actual Recoveries of Prior-years Unpaid Obligations (5,783,390) (5,292,233)

New Obligations and Upward Adjustments Net of Offsetting Collections and Actual Recoveries 16,137,242 10,678,466

Less: Distributed Offsetting (Receipts)/Outlays, Net (37,765) (40,066)

Net Obligations and Upward Adjustments 16,099,477 10,638,400

Other Resources: 

Donations and Forfeitures of Property 449 399

Transfers In/(Out) Without Reimbursement, Net 1,923 (6,900)

Imputed Financing Sources From Cost Absorbed by Others 300,335 200,225

Financing Sources Used for Recognizing Liability to General Fund of the U.S. Government for Deficit Reduction (5,908,248) (2,134)

Other Financing Sources/(Uses), Net (6,137) (13,372)

Net Other Resources Used to Finance Activities (5,611,678) 178,218

Total Resources Used to Finance Activities 10,487,799 10,816,618

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 (5,278,605) (953,133)

Resources that Fund Expenses Recognized in Prior Periods (20,786) (7,046)

New Obligations for Downward Subsidy Reestimates Payable to Treasury (7,445) (15,299)

New Obligation for a Transfer Out to National Highway Traffic Safety Administration 

(Note 22 – NTIA’s Public Safety Trust Fund) – (7,820)

Budgetary Offsetting Collections and Receipts that Do Not Affect Net Cost of Operations:

Distributed Offsetting (Receipts)/Outlays, Net (excludes Clearing Accounts’ Gross Costs) 37,765 40,066

Credit Program Collections 81,700 75,300

Budgetary Financing Sources/(Uses), Net 43,466 (54,327)

Resources that Finance the Acquisition of Assets (4,020,734) (2,431,084)

Other Resources or Adjustments to Net Obligated Resources that Do Not Affect Net Cost of Operations: 

Change in Unfilled Customer Orders 85,470 31,611

Donations and Forfeitures of Property (449) (399)

Transfers In/(Out) Without Reimbursement, Net (1,923) 6,900

Financing Sources Used for Recognizing Liability to General Fund of 

the U.S. Government for Deficit Reduction 5,908,248 2,134

Other Financing Sources/(Uses), Net 6,137 13,372

Other 402 1,789

Total Resources Used to Finance Items Not Part of Net Cost of Operations (3,166,754) (3,297,936)

Total Resources Used to Finance Net Cost of Operations 7,321,045 7,518,682

(continued on next page)

FY 2018 AGENCY FINANCIAL REPORT 105

NOTES TO THE FINANCIAL STATEMENTS
FY 2018 FY 2017

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 14,374 7,553

Increase in Federal Employee Benefits – 8,734

Increase in Environmental and Disposal Liabilities 530 2,047

Increase/(Decrease) in Contingent Liabilities (39,172) 17,215

Other 40,821 3,558

Total Components of Net Cost of Operations that Will Require or Generate Resources in Future Periods 16,553 39,107

Components Not Requiring or Generating Resources:

Depreciation and Amortization 1,241,008 793,047

NOAA Issuances of Materials and Supplies 36,319 33,117

Revaluation of Assets or Liabilities 7,439 6,623

Other 9,577 6,363

Total Components of Net Cost of Operations that Will Not Require or Generate Resources 1,294,343 839,150

Total Components of Net Cost of Operations that Will Not Require or Generate Resources in the Current Period 1,310,896 878,257

Negative Gross Costs for Recoveries of Prior-years Delivered Orders that are Excluded from 

Net Obligations and Upward Adjustments (29,834) (18,905)

NET COST OF OPERATIONS $ 8,602,107 $ 8,378,034

NOTE 24. STEWARDSHIP PROPERTY, PLANT, AND EQUIPMENT

Preservation of stewardship property, plant, and equipment (PP&E) 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 PP&E resemble those of General PP&E that is capitalized traditionally in the Balance Sheet 

of the financial statements of federal entities. Due to the nature of these assets, however, valuation would be difficult and 

matching costs with specific periods would not be meaningful. Therefore, federal accounting standards require the disclosure of 

the nature and quantity of these assets. NOAA, NIST, and the Census Bureau are the only entities within the Department that 

have stewardship PP&E. 

Heritage Assets

Heritage assets are unique for their historical or natural significance, cultural, educational, or artistic importance, or 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 federal government operations, the 

asset is considered a multi-use heritage asset. The cost of acquisition, improvement, reconstruction, or renovation of a 

multi-use heritage asset is capitalized as General PP&E and is depreciated over its estimated useful life.

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:

(continued from previous page)

106 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
● Maintains a nationwide inventory of heritage assets, ensuring that they are identified and recorded in the Personal Property 

Heritage Asset Accountability System;

● Establishes nationwide NOAA policies, procedures, and standards for the preservation, security, handling, storage, and 

display of NOAA heritage assets;

● Tracks and updates each loan of NOAA heritage assets, including assigning current values and inventory numbers, and 

reporting the current conditions of heritage assets;

● Determines the feasibility of new asset loans, such as meters, standard tide gauges, portraits, and books for exhibit 

loans; and

● Collects heritage assets and properties of historic, cultural, artistic, or educational significance to NOAA. 

Heritage Assets maintained by NOAA include the Galveston Laboratory; National Marine Fisheries Service (NMFS) St. George 

Sealing Plant; NMFS St. George Cottage; NMFS St. Paul Old Clinic/Hospital; NMFS Woods Hole Science Aquarium; and Great 

Lakes Environmental Research Laboratory/Lake Michigan Field Station.

Information regarding deferred maintenance and repairs for heritage assets is included in the Required Supplementary 

Information (Unaudited) section.

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, 2018, 13 National Marine 

Sanctuaries, which include both coastal and offshore areas, have been designated, as follows:

● Channel Islands National Marine Sanctuary

● Cordell Bank National Marine Sanctuary

● Florida Keys National Marine Sanctuary

● Flower Garden Banks National Marine Sanctuary

● Gray’s Reef National Marine Sanctuary

● Greater Farallones National Marine Sanctuary

● Hawaiian Island Humpback Whale National Marine Sanctuary

● Monitor National Marine Sanctuary

● Monterey Bay National Marine Sanctuary

● National Marine Sanctuary of American Samoa

● Olympic Coast National Marine Sanctuary

● Stellwagen Bank National Marine Sanctuary

● Thunder Bay National Marine Sanctuary

FY 2018 AGENCY FINANCIAL REPORT 107

NOTES TO THE FINANCIAL STATEMENTS
Marine National Monuments: 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. There 

are currently five Marine National Monuments, as follows:

● Marianas Trench Marine National Monument 

● Northeast Canyons and Seamounts Marine National Monument 

● Pacific Remote Islands Marine National Monument 

● Papahãnaumokuãkea Marine National Monument 

● Rose Atoll Marine National Monument 

Aleutian Islands Habitat Conservation Area: On July 28, 2006, NOAA formally established the Aleutian Islands Habitat Conservation 

Area in Alaska. 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. This effort is part of a network of marine protected areas in Alaskan waters designed to protect essential fish habitat 

and prevent any further damage of the area.

NOAA Habitat Blueprint: NOAA has responsibility for protecting habitat for fish, threatened and endangered species, marine 

mammals, and other natural resources within the coastal zone. 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 10 Habitat Focus 

Areas, as follows:

● Penobscot River Watershed, ME

● Choptank River Watershed, MD/DE

● Muskegon Lake, MI

● St. Louis River Estuary, MN/WI

● Russian River Watershed, CA

● Kachemak Bay, AK

● West Hawaii, HI 

● Manell-GeusWatershed, GU

● Biscayne Bay, FL

● Northeast Reserves and Culebra Island, PR

Collection-type Heritage Assets: 

NOAA:

NOAA’s 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 artifacts include, but 

are not limited to: books, journals, publications, photographs, motion pictures, manuscripts, records, nautical chart plates, 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. 

108 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
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. 

National Climatic Data Center Library: By the late 1700s, accurate weather instruments, such as thermometers, were available to 

professional and amateur scientists. For the next two centuries, these weather observations accumulated in archives scattered 

across the country. In 1951, the federal government moved all weather records to Asheville, NC, where the archives were combined 

to form the National Weather Records Center, a predecessor agency to the National Climatic Data Center (NCDC). NCDC archives 

data from all over the world including from land-based stations, ships, buoys, weather balloons, radars, satellites, sophisticated 

weather and climate models, and even environmental recorders like tree rings and earth cores. NCDC’s collection of heritage 

assets includes books, manuals, slides, thermometers, gauges, radiosondes, and laboratory equipment. 

The Florida Keys National Marine Sanctuary (FKNMS) collection-type heritage assets include artifacts from shipwreck and wrecking 

events occurring in the Florida Keys over a 500-year period. FKNMS is an abundant mixture of natural and cultural, historical 

resources that include prehistoric cultures, and maritime history.

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, and objects 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. The collection-type heritage assets listed in the table that follows is a subset of the total collection 

within the Museum and History Program.

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. 

FY 2018 AGENCY FINANCIAL REPORT 109

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 in place 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.

The following tables summarize the Department’s Collection-type Heritage Assets activity and balances.

Collection-type Heritage Assets: Collections

(In Actual Quantities)

Category Description of Assets

Quantity of 

Items Held 

September 30, 

2017

FY 2018 

Additions

FY 2018 

Withdrawals

Quantity of 

Items Held

September 30, 

2018

NOAA Central Library: 

Circulating Collection

Books, journals, and other 

publications 1 N/A1 N/A1 1

Rare Book Room Collection Books and publications 1 N/A1 N/A1 1

Collection of Photographs 

and Motion Pictures Photographs and motion pictures 1 N/A1 N/A1 1

Total 3 – – 3

1 N/A – Not applicable; this category is reported as one collection. 

110 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
Collection-type Heritage Assets: Individual Items

(In Actual Quantities)

Category Description of Assets

Quantity of 

Items Held 

September 30, 

2017

FY 2018 

Additions

FY 2018 

Withdrawals

Quantity of 

Items Held

September 30, 

2018

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 Central Library – Other 

Artifacts, documents, and 

other items 28 1 – 29

NOAA National Climatic Data 

Center Library 

Artifacts, books, documents, and 

other items 66 – – 66

Florida Keys National 

Marine Sanctuary Artifacts 253 – – 253

NOAA Others 

Artifacts, artwork, books, films, 

instruments, maps, and records 3,1631 1 – 3,164

NIST Artifacts and 

Scientific Measures 

National Bureau of Standards2/

NIST scientific instruments, 

equipment, and objects 1,385 8 – 1,393

NIST Historical Books 

and Manuscripts 

Books/manuscripts of historical 

scientific interest by prominent 

scientists 61 – – 61

Census Bureau Artwork 

and Gifts 

Artifacts, artwork, books, films, 

instruments, and records 159 – – 159

Census Bureau 

Collectable Assets 

Publications, books, manuscripts, 

photographs, and maps 33 – – 33

Total 111,402 10 – 111,412

1 As adjusted.

2 National Bureau of Standards is the former name of NIST.

NOTE 25. DISCLOSURE ENTITY

The Department’s evaluation for the initial FY 2018 implementation of SFFAS 47, Reporting Entity, identified the organization 

discussed below that should be included, as a disclosure entity, in the Department’s notes to the financial statements for FY 2018.

The Corporation for Travel Promotion (CTP), also doing business as Brand USA, was established by the Travel Promotion Act of 

2009 (TPA) as the Nation’s first public-private partnership to spearhead a globally coordinated marketing effort to promote the 

United States as a premier travel destination and to communicate U.S. visa and entry policies. CTP is a non-profit corporation 

that was incorporated in the District of Columbia and began operations in May 2011. As the destination marketing organization for 

the United States, CTP’s mission is to increase incremental international visitation, spend, and market share to fuel the Nation’s 

economy and to enhance the image of the U.S. worldwide. CTP’s programs, activities, and operations are managed and primarily 

supported from its office in Washington, DC.

FY 2018 AGENCY FINANCIAL REPORT 111

NOTES TO THE FINANCIAL STATEMENTS
TPA set forth that the Secretary of Commerce shall appoint all 11 members of CTP’s board of directors (after consultation 

with the Secretary of Homeland Security and the Secretary of State) and can remove board members with good cause. TPA’s 

accountability measures included that CTP’s board of directors shall establish annual objectives for the corporation for each 

fiscal year subject to approval by the Secretary of Commerce (after consultation with the Secretary of Homeland Security and 

the Secretary of State), that CTP shall provide an annual budget to the Secretary of Commerce, that CTP shall undergo annual 

financial audits of its operations, and that CTP shall submit an annual report to the Secretary of Commerce for transmittal to 

Congress.

The Travel Promotion, Enhancement, and Modernization Act of 2014 amended TPA, and its provisions included requirements for 

CTP to establish performance metrics and to establish a competitive procurement process.

The Department does not provide any funding to CTP. CTP currently receives federal funding, under a matching requirement, 

from the federal government’s Travel Promotion Fund, which receives a designated portion of each fee collected by the federal 

government from international visitors who visit the United States under the Visa Waiver Program. The Travel Promotion Fund is 

not part of the Department and is not included in the Department’s financial statements. The Travel Promotion, Enhancement, 

and Modernization Act of 2014 extended the sunset date of the federal government’s designated fee (for deposit to the Travel 

Promotion Fund) from September 30, 2015 (under TPA) to September 30, 2020. ITA receives and processes, including supporting 

documentation, requests from CTP for funding from the Travel Promotion Fund. CTP will receive from the Travel Promotion Fund 

a matching portion of designated fees, equal to the amount collected from non-federal sources, not to exceed $100.0 million 

annually, less any sequestrations. TPA’s current matching requirement, in effect since the Travel Promotion, Enhancement, 

and Modernization Act of 2014 amended TPA, is that CTP shall provide matching amounts from non-federal sources that in the 

aggregate equals 100 percent of the amount transferred to CTP from the Travel Promotion Fund. In-kind matching contributions 

cannot account for more than 70 percent of the matching requirement. 

CTP is included in the Department’s FY 2018 financial reporting as a disclosure entity because it meets the inclusion principle of 

an organization that is controlled by the federal government with risk of loss or expectation of benefit—including because the 

Secretary of Commerce appoints all 11 members of the board of directors and can remove board members with good cause, 

while the federal government receives financial and/or nonfinancial benefits from CTP as a result of CTP furthering the federal 

government’s objectives regarding increasing U.S. economic activity and economic benefits to the Nation.

Assets, liabilities, revenue, expenses, gains, and/or losses of CTP have no impact on the Department’s financial statements.

The primary financial and/or nonfinancial exposures to the federal government regarding CTP appear to relate to the federal 

government’s interest in ensuring that CTP is eligible for the federal funds it requests and receives from the Travel Promotion 

Fund, including CTP’s proper meeting of matching requirements, and that CTP carries out its operations in accordance with the 

provisions of TPA, as amended. TPA, as amended, established several previously discussed accountability measures for CTP that 

will help the federal government monitor CTP’s compliance with its provisions.

For more information about CTP, please see the following Web page: https://www.thebrandusa.com.

112 FY 2018 AGENCY FINANCIAL REPORT

NOTES TO THE FINANCIAL STATEMENTS
Required Supplementary

Information

(Unaudited)

FINANCIAL SECTION
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, 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. 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 

comprise 92 percent of the Department’s General PP&E, Net balance as of September 30, 2018.

NOAA:

NOAA measures DM&R using Condition Assessment Surveys, which are periodic visual (i.e., physical) inspections of 

applicable PP&E to determine their current condition and estimated cost to correct any deficiencies, and by collecting 

information from its line offices. NOAA schedules its surveys for real property on a cyclical basis, with each appropriate 

asset being surveyed every five years. NOAA completed a condition survey of the entire applicable real property inventory in 

FY 2011. In FY 2015, NOAA started completing a new round of facility condition assessments (FCA), and plans to complete 

assessments of the applicable inventory by the end of FY 2020. NOAA plans to continue a five-year assessment cycle so 

that the entire applicable inventory is assessed approximately every five years.

NOAA performs condition assessment surveys for capitalized NOAA-owned buildings, structures with acquisition cost over 

$200 thousand, heritage assets, and properties covered by capital lease that NOAA has executed. For financial reporting 

purposes, NOAA does not report on DM&R for:

● Owned real property that has been permanently removed from service or which NOAA is planning to permanently 

remove from service within five years;

● Structures with acquisition cost under $200 thousand; and

● Land and Stewardship Land as land does not have deferred maintenance.

NOAA prioritizes maintenance and repair projects to sustain its PP&E 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. 

Acceptable condition standards are established for real property 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.

In measuring DM&R, FCAs report physical deficiencies that cannot be remedied with normal operating maintenance, 

excluding de minimis conditions that generally do not present a material physical deficiency to the subject property. 

Actionable items are typically considered to be (1) material existing or potential unsafe conditions; (2) material building or 

114 FY 2018 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
fire code violations as revealed by municipal agencies; or (3) conditions that if left unremedied, have the potential to result 

in or contribute to critical element or system failure in the near term, or shall result most probably in a significant escalation 

of its remedial cost.

NOAA made changes in the method of calculating DM&R in the fourth quarter of FY 2017 to more accurately report 

DM&R. As discussed above, DM&R is not being reported for real property that is permanently removed from service or 

for which NOAA plans to permanently remove from service within five years. NOAA has added, to its reporting, DM&R 

for structures that are above the $200 thousand acquisition cost threshold. In addition, as a large number of FCAs have 

now been completed, NOAA reviewed all DM&R data and recalculated escalations as described below. 

The fourth quarter FY 2018 balance estimated cost is composed of DM&R for the applicable inventory from FCAs completed 

in FY 2015, FY 2016, FY 2017, and FY 2018. FCAs completed in FY 2015 utilized cost databases from 2014, and FCAs 

completed in FY 2016 and FY 2017 used a 2016 cost database. DM&R estimates have been escalated based on changes 

to the “Engineering News-Record” construction cost index changes since January 2014, January 2016, and January 2018 

for FCAs completed in FY 2015, FY 2016/FY 2017, and FY 2018 respectively. If an asset has yet to be assessed, the DM&R 

estimate from the Integrated Facilities Inspection Program in FY 2011 was utilized and escalated. All data has been escalated 

through September 2018.

Specific to personal property, DM&R relates solely to capitalized personal property meeting the $200 thousand threshold 

criteria. DM&R on capitalized personal property is reported with an estimated project cost of $25 thousand or more. 

With the exception of NOAA’s vessels, most of NOAA’s capitalized personal property, such as weather systems, is required 

to be maintained on a regular basis as the public relies on information from these systems for their safety and livelihood. 

It is imperative that NOAA ensures that the systems are functioning properly. Therefore, maintenance on these systems 

is rarely deferred. Capitalized personal property is normally maintained through maintenance contracts, when appropriate. 

NOAA performs Condition Assessment Surveys to determine the status of ships according to the priorities shown below:

Urgent and Immediate: Program has stopped until maintenance is performed.

Important: Maintenance must be performed within six months or program will stop.

Medium: Maintenance must be performed within two years or program will stop.

Low: Maintenance must be performed within five years or program will stop.

Very Low: Maintenance can be delayed indefinitely. No threat to program.

The following table shows NOAA’s DM&R as of September 30, 2018 and September 30, 2017:

(In Thousands)

Asset Category

Deferred Maintenance 

and Repairs as of 

September 30, 2018

Deferred Maintenance 

and Repairs as of 

September 30, 2017

Buildings $ 94,798 $ 90,178

Multi-use Heritage Assets 545 529

Ships 26,095 28,8081

Other Personal Property 25 –

Total $ 121,463 $ 119,515

1 As adjusted.

FY 2018 AGENCY FINANCIAL REPORT 115

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
NIST:

NIST measures DM&R (related to real property) using FCA surveys, which are periodic visual inspections of PP&E to 

determine their current condition, and estimates the costs to correct identified deficiencies. NIST accomplishes its FCAs 

by contract. NIST originally scheduled its surveys on a cyclical basis with each appropriate asset being surveyed once every 

three years. For DM&R reporting purposes, NIST completed a baseline condition survey of the entire applicable inventory 

for the Gaithersburg, MD campus in 2011 and for the Boulder, CO campus in 2013. A third of the Gaithersburg inventory 

was reassessed in the third quarter of FY 2013, in the third quarter of FY 2014, and in the first quarter of FY 2015. A third 

of the Boulder inventory was reassessed in the second quarter of FY 2015, in the fourth quarter of FY 2016, and in the first 

quarter of FY 2017. 

Deficiencies can be added to the respective location’s backlog in years when contractor inspections are not scheduled. 

During the scheduled on-site assessment, the contract inspector estimates the remaining useful life of various components 

that comprise a building’s mechanical or electrical or architectural system, and records this information in the assessment 

software program. When a particular building system nears the end of its useful life, a new self-generated (by the software 

program) facility deficiency is added to the backlog list.

With the end of the Gaithersburg FCAs contract in 2016 and the end of the Boulder contract in mid FY 2018, NIST’s next 

contract will encompass both campuses within the same contract, unlike in the past where FCAs were conducted through 

separate, individual campus-focused contracts. The Federal Real Property Council’s latest guidance requires facility assessments 

for each facility every five years if using condition assessments for reporting DM&R needs. NIST, in coordination with the 

Department, migrated its facility condition assessments data over to the U.S. Army Corps of Engineer’s BUILDER Sustainment 

Management System (SMS). The BUILDER SMS uses a knowledge-based philosophy that does not rely on fixed frequencies 

of inspections or assessments. It is widely accepted and being used by all branches of the U.S. Department of Defense, the 

National Nuclear Security Administration within the U.S. Department of Energy, and other Executive Branch offices of the 

U.S. Government. During FY 2018, our existing database of backlog deficiencies was migrated from VFA facility software 

to the Army Corps of Engineers’ BUILDER SMS. In FY 2019, we plan to competitively award a Capital Asset Management 

contract to a firm that is well versed in BUILDER SMS. Over the next two years, FY 2019 and FY 2020, we plan to issue task 

orders to the selected consulting firm to have them review/become familiar with the deficiency backlog that was migrated to 

BUILDER SMS and to assess the condition of our facilities and infrastructure at our two main campuses. NIST will perform 

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.

DM&R relates to capitalized, non-capitalized, and fully depreciated real property. DM&R for real property is reported for 

individual items with DM&R estimates greater than $25 thousand ($5 thousand for FY 2017). Items estimated to cost 

$25 thousand or less are shared with the facility managers for correction as emergency/service calls or minor work orders. 

Examples of the types of items that do not exceed the $25 thousand threshold include minor repairs to interior finishes 

and doors, caulk replacement, crack repairs, minor pipe and valve leaks, and minor mechanical and electrical repairs and 

replacements.

NIST prioritizes maintenance and repair projects to sustain its real property 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. 

116 FY 2018 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
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, operational support, or capacity) and the distress type, the appropriate risk matrix is used and 

a risk-rank assigned. A ranking can be adjusted to take into account current projects underway, prioritization of future 

candidate projects, and budgetary funding outlook.

Acceptable real property 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.

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 

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 

considered good, between 90 and 85 is considered fair, and below 85 is considered poor.

DM&R has significantly increased from $357.5 million as of September 30, 2017 to $675.8 million as of September 30, 2018. 

This increase in backlog of deficiencies is primarily due to (1) increased dollar amount of Buildings DM&R associated with 

senior facility managers applying their cost estimating experience to update DM&R cost estimates, including the updating of 

Plant Replacement Values within the last year; and (2) increased DM&R for site utilities and infrastructure findings, primarily 

due to significant efforts in the last year to more completely and accurately estimate DM&R for major utility systems and 

condition of the roads, parking lots, sidewalks, etc. at the Gaithersburg, MD and Boulder, CO campuses..

The following table shows NIST’s DM&R as of September 30, 2018 and September 30, 2017:

(In Thousands)

Assets Category

Deferred Maintenance 

and Repairs as of 

September 30, 2018

Deferred Maintenance 

and Repairs as of 

September 30, 2017

Buildings $ 544,733 $ 331,737

Site Utilities and Infrastructure 131,027 25,777

Total $ 675,760 $ 357,514

B Combining Schedule of Budgetary Resources by Major Budget Account

The table on the following pages illustrates the Department’s FY 2018 budgetary resources by major budget account.

FY 2018 AGENCY FINANCIAL REPORT 117

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
United States Department of Commerce Combining Schedule of Budgetary Resources by Major Budget Account

For the Year Ended September 30, 2018 (In Thousands)

Combined 

Total

Census 

Bureau 

Periodic 

Censuses and 

Programs 

EDA Economic 

Development 

Assistance 

Programs 

NOAA 

Operations, 

Research, 

and Facilities

NOAA 

Procurement, 

Acquisition, 

and 

Construction 

 NTIA Digital 

Television 

Transition 

and Public 

Safety Fund 

 NTIA 

Network 

Construction 

Fund 

 NTIA Public 

Safety Trust 

Fund 

 USPTO 

Salaries and 

Expenses 

Other 

Budget 

Accounts

BUDGETARY RESOURCES:Unobligated Balance From Prior-years Budget Authority, Net $ 9,466,446 $ 29,043 $ 76,249 $ 386,442 $ 432,784 $ 3,005 $ 6,216,233 $ 475,017 $ 409,654 $ 1,438,019Appropriations 18,291,399 2,545,420 850,000 3,846,004 2,366,244 – – 5,906,354 – 2,777,377Borrowing Authority 57,537 – – – – – – – – 57,537Spending Authority From Offsetting Collections 5,446,919 – – 245,146 – – 54,393 175 3,341,661 1,805,544TOTAL BUDGETARY RESOURCES $ 33,262,301 $ 2,574,463 $ 926,249 $ 4,477,592 $ 2,799,028 $ 3,005 $ 6,270,626 $ 6,381,546 $ 3,751,315 $ 6,078,477 MEMORANDUM: Net Adjustments to Unobligated Balance, 

Brought Forward, October 1 $ 1,000,239 $ 9,363 $ 32,111 $ 42,020 $ 34,139 $ 3,005 $ 676,753 $ 2,554 $ 36,079 $ 164,215

STATUS OF BUDGETARY RESOURCES:New Obligations and Upward Adjustments $ 21,920,632 $ 1,522,164 $ 396,653 $ 4,011,131 $ 2,296,827 $ – $ 6,230,297 $ 65,041 $ 3,304,480 $ 4,094,039Unobligated Balance, End of Year 

Apportioned, Unexpired Accounts 4,555,064 1,036,627 529,408 379,512 490,502 – 40,298 77,550 446,835 1,554,332Exempt From Apportionment, Unexpired Accounts 634 – – – – – – – – 634Unapportioned, Unexpired Accounts 6,433,077 – 188 – 31 3,005 31 6,238,955 – 190,867

Unobligated Balance, End of Year, Unexpired Accounts 10,988,775 1,036,627 529,596 379,512 490,533 3,005 40,329 6,316,505 446,835 1,745,833Unobligated Balance, End of Year, Expired Accounts 352,894 15,672 – 86,949 11,668 – – – – 238,605Total Unobligated Balance, End of Year 11,341,669 1,052,299 529,596 466,461 502,201 3,005 40,329 6,316,505 446,835 1,984,438TOTAL STATUS OF BUDGETARY RESOURCES $ 33,262,301 $ 2,574,463 $ 926,249 $ 4,477,592 $ 2,799,028 $ 3,005 $ 6,270,626 $ 6,381,546 $ 3,751,315 $ 6,078,477OUTLAYS, NET:Outlays, Net $ 8,612,798 $ 1,455,444 $ 240,079 $ 3,521,531 $ 1,738,235 $ 279 $ (319,382) $ 65,401 $ (117,951) $ 2,029,162Distributed Offsetting (Receipts)/Outlays, Net (37,765) – – – – – – – – (37,765)AGENCY OUTLAYS, NET $ 8,575,033 $ 1,455,444 $ 240,079 $ 3,521,531 $ 1,738,235 $ 279 $ (319,382) $ 65,401 $ (117,951) $ 1,991,397

118 FY 2018 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED)
Required Supplementary

Stewardship Information

(Unaudited)

FINANCIAL SECTION
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 2014 through FY 2018 were as follows:

(In Millions)

Program FY 2018 FY 2017 FY 2016 FY 2015 FY 2014 Total

EDA:

Public Works $ 136.2 $ 121.3 $ 113.8 $ 101.0 $ 114.0 $ 586.3

Economic Adjustment Assistance 23.6 16.3 25.4 32.5 42.3 140.1

Global Climate Change Mitigation Incentive Fund – – – – 10.6 10.6

Assistance to Coal Communities 24.6 20.3 8.5 – – 53.4

Disaster Recovery 66.5 7.7 15.6 8.8 98.7 197.3

EDA Subtotal 250.9 165.6 163.3 142.3 265.6 987.7

NOAA:

National Estuarine Research Reserves 2.3 1.2 1.6 0.7 1.1 6.9

Coastal and Estuarine Land Conservation Program – – 0.5 0.2 0.5 1.2

NOAA Subtotal 2.3 1.2 2.1 0.9 1.6 8.1

Total $ 253.2 $ 166.8 $ 165.4 $ 143.2 $ 267.2 $ 995.8

EDA:

EDA’s investments in non-federal physical property, other than Disaster Recovery, require matching funds by state and local 

governments of 20 to 50 percent. Disaster Recovery grants do not require matching funds and can be up to 100 percent 

of the investment costs.

120 FY 2018 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
Public Works: The Public Works program promotes long-term economic development in distressed areas by providing 

investments for vital public infrastructure and development facilities. These critical investments enable communities to 

attract new, or support existing, businesses that will generate new jobs and income for unemployed and underemployed 

residents. Among the types of projects funded are water, sewer, fiber optics, access roads, and facilities such as industrial 

and business parks, business incubator and skill training facilities, and port improvements.

Economic Adjustment Assistance: The Economic 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 last fiscal year of funding for the GCCMIF program was 

FY 2011. The funding for this program is fully expensed. EDA is not anticipating future grants from this funding source. 

GCCMIF program financed projects that fostered economic development by advancing the green economy in distressed 

communities and developed and used products and services that contributed to economic growth and alleviated economic 

distress by respecting and revitalizing the environment. GCCMIF program supported projects that created 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.

Assistance to Coal Communities: This program competitively awards grants to coalitions of regionally-driven economic 

development and workforce development organizations anchored in impacted coal communities. These grants enable 

grantees to take deliberate and measured steps to build economic resilience, industry diversification, and promote new job 

creation opportunities. Competitive projects are tightly linked to existing economic and workforce development strategic 

plans. These activities should result in more competitive and resilient “pipelines” of skilled workers moving into new 

job opportunities. Eligible activities include helping communities: organize themselves to respond on behalf of affected 

workers and businesses; strengthen or develop targeted industry clusters; prepare and train the existing workforce for 

new jobs; and help and execute coordinated economic and workforce development activities based on communities’ 

strategic plans. These activities should result in more competitive and resilient “pipelines” of skilled workers moving into 

new job opportunities.

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): NERR system consists of 29 estuarine reserves protected by federal, state, and 

local partnerships that work to preserve and protect the Nation’s estuaries. 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, 2018, encompassed 

approximately 1.4 million acres of estuarine waters, wetlands, and uplands. The most recent reserve, He’eia, HI, was 

designated on January 19, 2017. 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.

FY 2018 AGENCY FINANCIAL REPORT 121

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
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 209 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. The amount of 

Coastal Zone Management Funds expended by the U.S. federal government is zero.

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 2014 through FY 2018:

(In Millions)

Program FY 2018 FY 2017 FY 2016 FY 2015 FY 2014 Total

National Sea Grant College Program $ 0.9 $ 1.1 $ 0.9 $ 0.7 $ 0.8 $ 4.4

National Estuarine Research Reserve Program 1.7 1.5 1.5 1.5 1.3 7.5

Educational Partnership Program 15.3 14.1 14.3 14.3 14.3 72.3

Ernest F. Hollings Undergraduate Scholarship Program 5.9 5.7 5.8 5.5 6.2 29.1

Other Programs – 0.2 0.2 0.4 0.7 1.5

Total $ 23.8 $ 22.6 $ 22.7 $ 22.4 $ 23.3 $ 114.8

National Sea Grant College Program: Sea Grant is a nationwide network, administered through NOAA, of 34 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 

122 FY 2018 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
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. During FY 2018, the program awarded 57 fellowships: 

15 fellowships funded by the National Sea Grant College Program, and 42 fellowships funded by other NOAA offices and 

other federal agencies. During FY 2018, NOAA’s National Marine Fisheries Service’s (NMFS) Sea Grant Graduate Fellowship 

Program began funding six new fellows. A total of 21 current Fellows have funding through at least 2018. 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.

Educational Partnership Program: The NOAA Educational Partnership Program (EPP) with Minority Serving Institutions (MSI) 

provides financial assistance through competitive processes to minority serving institutions that support research and training 

of students in NOAA-related sciences (EPP Cooperative Science Centers). 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. EPP/MSI also seeks to increase collaborative research efforts between NOAA scientists and researchers at minority 

serving academic institutions through the EPP Cooperative Science Centers. In FY 2018, EPP Cooperative Science Centers 

awarded approximately 75 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 United States. In FY 2018, 

the program added 150 students.

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 significant investments in R&D are by the National Institute of Standards and Technology (NIST) and NOAA.

FY 2018 AGENCY FINANCIAL REPORT 123

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
NIST:

The following table summarizes NIST’s R&D investments for FY 2014 through FY 2018:

(In Millions)

Program

FY 2018 

Basic Applied Development Total FY 2017 FY 2016 FY 2015 FY 2014 Total

NIST Laboratories Program $ 266.9 $ 454.8 $ 11.5 $ 733.2 $ 734.2 $ 756.0 $ 717.2 $ 657.5 $ 3,598.1

Manufacturing USA, Advanced 

Manufacturing Technology 

Consortia, and Technology 

Innovation Program 0.6 3.6 3.4 7.6 8.6 14.4 5.2 7.2 43.0

Public Safety Communications 

Research Program – 36.2 – 36.2 21.7 – – – 57.9

Total $ 267.5 $ 494.6 $ 14.9 $ 777.0 $ 764.5 $ 770.4 $ 722.4 $ 664.7 $ 3,699.0

NIST Laboratories Program: 

For more than 100 years, NIST has maintained the national standards of measurement, a role that the U.S. Constitution 

assigns to the federal government. Today, NIST Laboratories address increasingly complex measurement challenges. 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 Nation’s system of measurements 

is firmly grounded on a sound scientific and technical foundation. NIST also promotes the use of measurements based 

on the international system of units.

● NIST Laboratories work to assure that the Nation’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 the Nation’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 Nation’s research community, and through 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 as the coordinator for all federal agencies using documentary 

standards that are developed by private sector consensus bodies to carry out their policy objectives.

124 FY 2018 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
Manufacturing USA:

Manufacturing USA was renamed from the National Network for Manufacturing Innovation in September 2016. This 

program was first appropriated funds of $25.0 million in FY 2016, pursuant to the Revitalize American Manufacturing and 

Innovation Act of 2014 (RAMI). The FY 2017 appropriations for NIST also provided funding for this program of $25.0 million. 

The FY 2018 appropriations were $15 million. This program and funding is part of government-wide efforts to strengthen 

the U.S. advanced manufacturing sector.

As part of its efforts to revitalize U.S. manufacturing, NIST proposed and Congress authorized (RAMI) Manufacturing USA, 

which would consist of a network of manufacturing innovation institutes where researchers, companies, universities, 

community colleges, and entrepreneurs can come together to develop new manufacturing technologies with broad 

applications, as well as train the workforce needed to work in advanced manufacturing industries. The primary goal is to 

ensure that American innovations and inventions, currently going off-shore for production in competitor nations, would 

be scaled up from the lab-scale experiments to industrial scale by developing new manufacturing processes to be used 

by entire industry sectors.

Each institute in Manufacturing USA has a unique technology focus with the objective of creating self-sustaining regional 

manufacturing hubs that have national impact. The institutes help support an ecosystem of manufacturing activity in 

regions of the United States. The institutes support manufacturing technology commercialization by helping to bridge the 

gap from the laboratory to the market and address core gaps in scaling manufacturing process technologies.

In FY 2018, six Manufacturing USA institutes were in their first year of operation, for a total of 14 manufacturing innovation 

institutes in the network. This included the first NIST-sponsored institute, on the topic of biopharmaceuticals manufacturing: 

the National Institute for Innovation in Manufacturing Biopharmaceuticals (NIIMBL). NIIMBL’s mission is to accelerate 

biopharmaceutical manufacturing capabilities, and educate and train a world-leading biopharmaceutical manufacturing 

workforce, fundamentally advancing the United States competitiveness in this burgeoning industry. In addition, NIST’s 

Office of Advanced Manufacturing provides infrastructure support for the network and all institutes within the network.

The Manufacturing USA network is operated by the interagency Advanced Manufacturing National Program Office of NIST. 

The office is staffed by representatives from federal agencies with manufacturing-related missions as well as fellows from 

manufacturing companies and universities, and provides infrastructure support for the network and all institutes within the 

network. The office operates in partnership with the U.S. Department of Defense, U.S. Department of Energy, National 

Aeronautics and Space Administration, National Science Foundation, U.S. Department of Education, U.S. Department of 

Agriculture, U.S. Department of Health and Human Services, and U.S. Department of Labor.

NIST Public Safety Communications Research Program:

As part of the Middle Class Tax Relief and Job Creation Act of 2012, NIST received through FY 2017 one-time (non-recurring) 

mandatory budgetary resources of $300.0 million from the National Telecommunications and Information Administration 

(NTIA) to help develop cutting-edge wireless technologies for public safety users. In partnership with industry and public 

safety organizations, NIST will continue to conduct research and develop new standards, technologies, and applications to 

advance public safety communications in support of NTIA’s First Responder Network Authority’s efforts to build an interoperable 

nationwide broadband network for first responders.

FY 2018 AGENCY FINANCIAL REPORT 125

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
NOAA:

NOAA’s R&D investments by program from FY 2014 through FY 2018 were as follows:

(In Millions)

Program

FY 2018 

Basic Applied Development Total FY 2017 FY 2016 FY 2015 FY 2014 Total

Environmental and Climate $ – $ 403.1 $ 85.5 $ 488.6 $ 452.5 $ 405.5 $ 298.4 $ 294.1 $ 1,939.1

Fisheries – 45.1 15.0 60.1 57.7 53.4 50.3 43.4 264.9

Marine Operations and 

Maintenance and Aircraft 

Services – 66.9 – 66.9 26.0 29.9 29.2 29.7 181.7

Weather Service – 1.7 17.8 19.5 20.7 18.7 42.7 29.3 130.9

Other – 103.9 35.2 139.1 68.1 70.4 30.0 63.5 371.1

Total $ – $ 620.7 $ 153.5 $ 774.2 $ 625.0 $ 577.9 $ 450.6 $ 460.0 $ 2,887.7

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 (OAR) is NOAA’s primary R&D 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 wide-ranging 

research into complex climate systems, including the exploration and investigation of ocean habitats and resources. NOAA’s 

research organizations conduct applied research to predict severe weather events and hazardous conditions that threaten 

life, property, and economic well being. OAR research laboratories then develop high-resolution regional and global weather 

prediction models and software applications for forecasters that transfer into operations at the National Weather Service to 

significantly improve services to the public. These products are helping to evolve the National Weather Service into providing 

decision support to users in addition to weather forecasts.

Fisheries: NOAA’s NMFS supports sustainable fisheries and protected resources management specifically improving 

aquaculture, improvements to fishery data collection and assessment, protected species science, techniques for reducing 

bycatch and other adverse impacts, adapting to climate change and other long-term ecosystem change, and socio-economic 

research. Other examples of R&D are process-oriented studies to understand mechanisms that control reproductive success, 

population genetics and stock structure, animal behavior, biophysical modeling, and the functional value of habitat. 

126 FY 2018 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
Marine Operations and Maintenance and Aircraft Services: NOAA’s Office of Marine and Aviation Operations (OMAO) manages 

a variety of specialized ships and aircraft that play a critical role in the in-situ collection of oceanographic, atmospheric, 

hydrographic, and fisheries data in support of NOAA’s missions. The NOAA fleet operates throughout the world supporting 

a wide array of NOAA missions including fisheries research, nautical charting, hurricane reconnaissance and research, snow 

surveys, and specialized atmospheric and ocean research. NOAA ships range from large oceanographic research vessels 

capable of exploring the world’s deepest oceans to smaller ships responsible for charting the shallow bays and inlets of the 

United States. NOAA aircraft range from the four engine WP-3D, capable of penetrating hurricanes, to the De Havilland Twin 

Otters, well-suited for water resource management data collection and marine mammal surveys where slower airspeeds 

and low altitudes are essential. 

Weather Service: NOAA’s National Weather Service (NWS) conducts applied research and development to support integrated 

water prediction, with advances to the initial operational capability for the National Water Model, tsunami modeling for 

more accurate predictions, and development of the Next Generation Global Prediction System (NGGPS). NGGPS, a global 

prediction system to address growing service demands, will increase the accuracy of weather forecasts out to 30 days. The 

goal is to expand and accelerate critical weather forecasting research to operation through accelerated development and 

implementation of current global weather prediction models, improved data assimilation techniques, and improved software 

architecture and system engineering. Improvements to hurricane forecasts are being transitioned into operations; NGGPS 

as the backbone for NWS’ environmental predictions will support these and all high-impact weather forecasts. 

Other Programs: As a national lead for coastal stewardship, NOAA’s National Ocean Service (NOS) supports research and 

development on the cartographic, hydrographic and oceanographic sciences that underpin mapping, observing, and modeling 

efforts. This research and development leads to new technologies, models, and products and tools. NOS conducts applied 

research and delivers scientific information for disaster response and management, protection, and restoration of ocean and 

coastal resources. Finally, NOS research contributes to the national effort to make the coast more resilient to natural and 

man-made changes. NOAA’s National Environmental Satellite Data and Information Service, Center for Satellite Applications 

and Research accelerates the transfer of satellite observations of land, atmosphere, ocean, and climate from scientific 

research and development into routine operations, enabling NOAA to offer state-of-the-art data, products, and services to 

decision-makers.

NOAA’s Spectrum Efficient National Surveillance Radar Program includes research and development activities to determine 

the feasibility of improving the efficiency and effectiveness of the spectrum use by federal radar operations. The primary 

focus is making available a minimum of 30 MHz in the 1300-1350 MHz band for reallocation to shared federal and non-federal 

use through updated radar technology. 

FY 2018 AGENCY FINANCIAL REPORT 127

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
THIS PAGE LEFT INTENTIONALLY BLANK

128 FY 2018 AGENCY FINANCIAL REPORT

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION (UNAUDITED)
Other Information

(Unaudited)
1 

OIG’s Top Management and Performance Challenges 

Facing the Department of Commerce in FY 2019

The Office of Inspector General is required by statute1

 to report annually the most serious 

management and performance challenges facing the Department of Commerce. Below is a 

summary of our final report on the Department’s top management and performance challenges 

for fiscal year (FY) 2019. 

1. Successfully Completing 2020 Census Testing and Systems Integration of New

Innovations in Time to Deliver a Cost-Effective, Accurate Decennial Census

Following the 2010 Census, the Census Bureau (the Bureau) recognized that it needed to

address the trend of increasing decennial costs. Early this decade, the Bureau committed

to making fundamental changes to the decennial census design in order to complete the

2020 Census at a lower cost than the 2010 Census2 while maintaining quality. The

Bureau also committed to measuring 2020 Census design options with respect to cost and

quality by developing improved cost models for operations and applying cost-benefit

analyses to all proposed operations. The Bureau’s research and testing strategy focused

on implementing numerous technological and methodological innovations in four key

areas: (1) reengineering address canvassing,3 (2) optimizing self-response, (3) utilizing

administrative records and third-party data,4 and (4) reengineering field operations with

technology. However, throughout the decade, the Bureau has modified its strategy by

both reducing the number and scope of tests, citing funding constraints as the primary

reason. In addition, technology changes in May 2016 required the Bureau to implement

new systems on a condensed time schedule. As a result, with Census Day5 less than 2

years away, the Bureau has not fully integrated and tested all of its new, innovative

decennial census design solutions—and is quickly running out of time and facing the risk

of increasing costs.

The Bureau must also operate within statutory and regulatory legal constraints and meet

the primary requirements of the decennial census as defined in the U.S. Constitution—to

1 31 U.S.C. § 3516(d).

2 Per housing unit and adjusted for inflation.

3 The address canvassing operation serves two purposes: to deliver a complete and accurate address list and spatial 

database for enumeration; and to determine the type and address characteristics for each living quarter.

4 The goal of the administrative records operation is to use information people have already provided to 

governmental and nongovernmental entities to improve the efficiency and effectiveness of the 2020 Census, and in 

particular, to reduce expensive in-person follow-up activities. Administrative record data refers to information from 

federal and state governments. Third-party data refers to information from commercial sources.

5 The 2020 Census will count where the population is living as of Census Day, which is April 1, 2020.

OFFICE OF INSPECTOR GENERAL SUMMARY ON TOP 

MANAGEMENT AND PERFORMANCE CHALLENGES

1 

OIG’s Top Management and Performance Challenges 

Facing the Department of Commerce in FY 2019

The Office of Inspector General is required by statute1

 to report annually the most serious 

management and performance challenges facing the Department of Commerce. Below is a 

summary of our final report on the Department’s top management and performance challenges 

for fiscal year (FY) 2019. 

1. Successfully Completing 2020 Census Testing and Systems Integration of New

Innovations in Time to Deliver a Cost-Effective, Accurate Decennial Census

Following the 2010 Census, the Census Bureau (the Bureau) recognized that it needed to

address the trend of increasing decennial costs. Early this decade, the Bureau committed

to making fundamental changes to the decennial census design in order to complete the

2020 Census at a lower cost than the 2010 Census2 while maintaining quality. The

Bureau also committed to measuring 2020 Census design options with respect to cost and

quality by developing improved cost models for operations and applying cost-benefit

analyses to all proposed operations. The Bureau’s research and testing strategy focused

on implementing numerous technological and methodological innovations in four key

areas: (1) reengineering address canvassing,3 (2) optimizing self-response, (3) utilizing

administrative records and third-party data,4

 and (4) reengineering field operations with

technology. However, throughout the decade, the Bureau has modified its strategy by

both reducing the number and scope of tests, citing funding constraints as the primary

reason. In addition, technology changes in May 2016 required the Bureau to implement

new systems on a condensed time schedule. As a result, with Census Day5 less than 2

years away, the Bureau has not fully integrated and tested all of its new, innovative

decennial census design solutions—and is quickly running out of time and facing the risk

of increasing costs.

The Bureau must also operate within statutory and regulatory legal constraints and meet

the primary requirements of the decennial census as defined in the U.S. Constitution—to

1 31 U.S.C. § 3516(d).

2 Per housing unit and adjusted for inflation.

3 The address canvassing operation serves two purposes: to deliver a complete and accurate address list and spatial 

database for enumeration; and to determine the type and address characteristics for each living quarter.

4 The goal of the administrative records operation is to use information people have already provided to 

governmental and nongovernmental entities to improve the efficiency and effectiveness of the 2020 Census, and in 

particular, to reduce expensive in-person follow-up activities. Administrative record data refers to information from 

federal and state governments. Third-party data refers to information from commercial sources.

5 The 2020 Census will count where the population is living as of Census Day, which is April 1, 2020.

130 FY 2018 AGENCY FINANCIAL REPORT

OIG SUMMARY ON TOP MANAGEMENT AND PERFORMANCE CHALLENGES
2

enumerate the population in order to apportion representatives among the states.6 To 

ensure a quality decennial census in 2020, the Bureau must ensure that its innovative 

systems and methods will allow it to “count everyone once, only once, and in the right 

place.”7 The challenge of conducting a complex and innovative decennial census is 

compounded by the Bureau’s commitment to data quality while honoring privacy and 

protecting confidentiality.

OIG’s FY 2019 top management and performance challenges include these priority areas 

related to the 2020 Census:

• Minimizing the challenges associated with incomplete testing of 2020 Census 

systems and innovations

• Mitigating the risks of unplanned changes

• Preventing further reductions to cost avoidance, reducing cost overruns, and 

eliminating unaccounted-for costs

Progress made/challenges remaining since the FY 2018 TMC: In last year’s top 

management and performance challenges report, we identified the following Bureau 

challenges: to maintain continuity of leadership, develop an accurate 2020 Census lifecycle cost estimate, and ensure timely implementation of reengineered processes and 

systems.

In July 2018, the President nominated a new Director of the Bureau for the remainder of 

a 5-year term that expires on December 31, 2021; if confirmed, the new Director would 

provide leadership through the completion of the 2020 Census. To address the challenge 

of developing a life-cycle cost estimate, the Bureau released a revised estimate in 

December 2017 that increased the expected 2020 Census cost to $15.6 billion. According 

to the Secretary of Commerce’s testimony, the revised cost estimate “meets the 

characteristics of a high-quality estimate and improve [sic] control over how risks and 

uncertainty are accounted for in the cost estimate.”8 Finally, the Bureau conducted its 

2018 End-to-End Census Test, which included significant field data collection 

components. This 2018 Test represents progress that the Bureau has made toward last 

year’s challenge.

 6 Decennial census data are also used, for example, to define boundaries for Congressional districts, state legislative 

districts, school districts, and voting precincts; enforce voting rights and civil rights legislation; and determine the 

distribution of federal funds to local communities. The data are also used for decisions about U.S. commerce and the 

economy at local and national levels.

7 U.S. Census Bureau, September 2017. 2020 Census Operational Plan: A New Design for the 21st Century, version 

3.0. Washington, DC: Census Bureau.

8 House Committee an Oversight and Government Reform, Hearing on the 2020 Census, October 12, 2017. Written 

Statement: Wilbur Ross, Secretary of Commerce [online]. https://oversight.house.gov/wpcontent/uploads/2017/10/Written-SWLR-HOGR-Testimony-FINAL.pdf (accessed August 27, 2018).

FY 2018 AGENCY FINANCIAL REPORT 131

OIG SUMMARY ON TOP MANAGEMENT AND PERFORMANCE CHALLENGES
3

2. Maximizing Efficiencies of Environmental Satellite Programs

Satellite data and imagery are essential to National Oceanic and Atmospheric 

Administration’s (NOAA’s) capability to understand, predict, and track weather and 

other environmental phenomena. NOAA’s primary sources of these observations are 

satellites in geostationary and polar orbits.

NOAA’s constellation of Geostationary Operational Environmental Satellites (GOES) 

maintains a constant watch over the Western hemisphere for tracking and forecasting 

severe storms. NOAA’s Joint Polar Satellite System (JPSS) and other polar satellites 

circle above Earth from pole to pole, observing the entire globe approximately twice a 

day. Their data provide important input for numerical weather prediction systems’ 3–7

day forecasts. Beyond its own satellites and those of international and intergovernmental 

partners, NOAA has a pilot program seeking to leverage capabilities in the emerging 

sector of commercial space services.

While continuing to ensure the continuity of its environmental satellite observations, 

NOAA must maximize efficiencies in its established satellite programs and further 

explore opportunities to augment its capabilities through data obtained from new sources. 

OIG’s FY 2019 top management and performance challenges include these priority areas 

related to NOAA’s satellite programs:

• Reducing life-cycle costs of the Polar Weather Satellite program

• Identifying an optimal launch strategy for remaining satellites in the series

• Managing risks in next-in-series satellites

• Planning an optimal next-generation satellite system architecture

Progress made/challenges remaining since the FY 2018 TMC: OIG’s past top 

management and performance challenges reports have emphasized NOAA’s challenge 

mitigating the risk of satellite data gaps. In FY 2018, NOAA made some progress by (a) 

transitioning GOES-16 and JPSS-1 into operations (the latter, now providing data that 

forecast models assimilate, helps reduce risk of data gaps from the polar orbit); (b) 

addressing issues and risks in the acquisition and development of the next-in-series 

satellites (system testing and key instrument acquisition/development still present risk); 

(c) receiving full funding for revised Polar Follow-On program baselines; and (d) 

delaying its reporting and further assessment of the viability of using commercial data in 

weather forecasts.

3. Deploying a Nationwide Public Safety Broadband Network (NPSBN)

The Middle Class Tax Relief and Job Creation Act of 2012 established the First 

Responder Network Authority (FirstNet) as an independent authority within the National 

Telecommunications and Information Administration (NTIA) to build, deploy, and 

operate a NPSBN dedicated to first responders. On March 30, 2017, FirstNet entered into 

132 FY 2018 AGENCY FINANCIAL REPORT

OIG SUMMARY ON TOP MANAGEMENT AND PERFORMANCE CHALLENGES
4

a 25-year contract with AT&T for the construction and operation of the NPSBN. 

FirstNet’s partnership with AT&T involves (a) an initial obligation of up to $6.5 billion 

in funds to the private company to deploy the network, (b) AT&T’s use of dedicated 

broadband spectrum, and (c) payments from AT&T to FirstNet over the life of the 

contract. FirstNet is to use these proceeds to support its operations and to fund future 

upgrades to the network.

Although FirstNet has made progress in implementing the Middle Class Tax Relief and 

Job Creation Act’s requirements since its 2012 enactment, FirstNet continues to face 

challenges as it deploys and operates the NPSBN.

OIG’s FY 2019 top management and performance challenges include these priority areas 

related to FirstNet:

• Deploying the NPSBN

• Securing public safety participation

• Ensuring the successful performance of the contract awarded to AT&T

• Ensuring effective and efficient use of proceeds AT&T provides annually 

to FirstNet

• Strengthening operational controls 

Progress made/challenges remaining since the FY 2018 TMC: In March 2018, 

FirstNet made progress addressing challenges by launching its core network and 

awarding the task order to execute the plan to build, operate, maintain, and improve the 

Radio Access Network in each state. In addition, AT&T allows first responders to 

immediately take advantage of AT&T’s long-term evolution spectrum bands and 

maintains a list of certified devices. However, questions about initial deployment and 

beyond remain. It is critical that both AT&T and FirstNet meet their contractually agreed 

upon milestones. In addition, they must address future coverage, the ability to operate 

reliably and continually during severe conditions, and the continuous improvements the 

network will require.

4. Ensuring USPTO Provides High-Quality Intellectual Property Rights

The U.S. Patent and Trademark Office (USPTO) faces the challenge of issuing reliable 

patents. Innovators and creators must have confidence that their patents will withstand 

scrutiny and litigation; in light of this challenge, USPTO’s Director has indicated a need 

to increase the reliability of patents. As noted by stakeholders, patentability concerns will 

deteriorate innovators’ confidence in the U.S. patent system, stifle innovation, and 

weaken the value of U.S. intellectual property rights.9

 9 George Mason University Antonin Scalia Law School Center for the Protection of Intellectual Property, April 

28, 2017. An Ever-Weakening Patent System is Threatening the Future of American Innovation [online]. 

FY 2018 AGENCY FINANCIAL REPORT 133

OIG SUMMARY ON TOP MANAGEMENT AND PERFORMANCE CHALLENGES
5

OIG’s FY 2019 top management and performance challenges with respect to USPTO 

include these priority areas:

• Ensuring that the Patent Trial and Appeal Board operates fairly and effectively

• Ensuring that examiners perform thorough patent application reviews 

• Improving the management of IT acquisitions and operations

Progress made/challenges remaining since the FY 2018 TMC: Over the previous 2 

years, OIG has identified the modernization of USPTO’s legacy IT systems as a top 

management and performance challenge. Although USPTO identified interim 

accomplishments such as trademark document migration into the Trademark Next 

Generation (TMNG) application, OIG remains concerned about USPTO’s progress in 

this area. 

USPTO relies upon mission-critical IT systems in every aspect of its operation for 

examination, rights management, and revenue collection associated with patents and 

trademarks. To help meet its strategic goals and mission, USPTO aggressively pursues 

modernization of its IT systems for core applications, such as Patent End to End, TMNG, 

and Fee Processing Next Generation. However, as noted in the FY 2018 top management 

and performance challenges, several major systems are still behind their original 

implementation schedule and over estimated costs.

5. Continuing to Improve the Department’s Cybersecurity Posture

In recent years, strengthening the cybersecurity of federal government networks and 

critical infrastructure has increasingly become a high priority. To meet this priority, the 

Department has actively participated in a government-wide effort to deploy cybersecurity 

capabilities that provide a dynamic approach to fortifying the cybersecurity of 

government networks and systems. Although the Department has made progress in this 

area, it continues to face significant challenges to improving its enterprise cybersecurity 

posture. In addition, the Department is increasingly relying on cloud technology services 

to support its business operations, including the 2020 decennial census. While cloud 

technologies can bring great benefits, they unavoidably introduce new security 

challenges. The Department must provide adequate security to support the 2020 

decennial census as well as other critical mission functions, fully implement the 

enterprise cybersecurity capabilities, and ensure it has a sustainable cyber workforce to 

meet its cybersecurity needs. As security threats become increasingly sophisticated and 

more numerous, the Department faces the challenge of reevaluating and expanding its 

approaches to securing information technology (IT) systems. The Department must work 

to fulfill existing requirements, while also implementing new strategies, to meet the 

additional security demands of cloud-based computing, as well as other technological 

developments.

 

https://cpip.gmu.edu/2017/04/28/an-ever-weakening-patent-system-is-threatening-the-future-ofamerican-innovation/ (accessed August 30, 2018).

134 FY 2018 AGENCY FINANCIAL REPORT

OIG SUMMARY ON TOP MANAGEMENT AND PERFORMANCE CHALLENGES
6

OIG’s FY 2019 top management and performance challenges include these priority areas 

with respect to the Department’s cybersecurity posture:

• Implementing security controls to protect the systems supporting the 2020 Census

• Securing cloud-based systems and assets

• Sustaining Department-wide implementation of the Continuous Diagnostics and 

Mitigation (CDM) program

• Maintaining a robust IT workforce to manage an effective IT security program

Progress made/challenges remaining since the FY 2018 TMC: In the FY 2017 Top 

Management and Performance Challenges, OIG reported that the Department had made 

substantial progress toward implementing the Enterprise Continuous Monitoring 

Operation (ECMO) capability on its system components—but not on high-impact 

systems. As a result, the Department has no continuous monitoring cybersecurity 

capability over its most critical systems. While NOAA and BIS continue to deploy 

ECMO on their high-impact systems, crucial data will not automatically feed into the 

Department’s ECMO operation until mid-2019. The Department must make a concerted 

effort to ensure complete ECMO deployment on its high-impact systems, sustain 

Department-wide implementation of the CDM program, and provide real-time continuous 

monitoring to enhance its cybersecurity posture.

6. Utilizing Resources and Developing Processes to Rebalance Trade Enforcement and 

Promotion Priorities

Among the federal government’s leading trade enforcement and promotion agencies, the 

Department faces the challenge of helping U.S. companies be more competitive abroad 

while simultaneously protecting U.S. national security interests. The Department’s trade 

enforcement and promotion responsibilities primarily reside with two bureaus: (1) ITA, 

which enforces U.S. trade laws and agreements and assists U.S. exporters to sell their 

products overseas, and (2) BIS, which administers and enforces U.S. export control laws 

and regulations to support U.S. national security interests. With the Administration 

prioritizing trade enforcement activities to promote fair and secure trade, the Department 

must continue to rebalance its resources and capabilities to that end.

In the area of international trade, the Administration has prioritized enforcing laws that 

promote fair and secure trade using existing and new laws and regulations, in addition to

using rarely exercised authorities.10 The two Department components affected the most 

by this prioritization are ITA and BIS. The Enforcement and Compliance (E&C) business 

unit of ITA is responsible for conducting antidumping (AD) and countervailing duty 

(CVD) investigations and reviews to remedy unfairly dumped and/or subsidized imports. 

ITA’s Industry and Analysis (I&A) business unit leads, with extensive BIS collaboration, 

 10 U.S. Department of Commerce Office of Inspector General, September 27, 2017. Top Management and 

Performance Challenges Facing the Department of Commerce, OIG-17-033. Washington, DC: DOC OIG, 21.

FY 2018 AGENCY FINANCIAL REPORT 135

OIG SUMMARY ON TOP MANAGEMENT AND PERFORMANCE CHALLENGES
7

the Department’s engagement in interagency efforts to review transactions involving 

potential foreign ownership of U.S. companies. BIS leads, with substantive ITA support, 

the Section 232 investigations to determine whether tariffs on imports are warranted for 

national security reasons. ITA and BIS must use their resources effectively and 

efficiently as they participate in government-wide efforts to ensure fair trade that protects 

national security.

OIG’s FY 2019 top management and performance challenges include these priority areas 

related to trade and enforcement promotion:

• Building staff expertise for the self-initiation of AD and CVD cases

• Institutionalizing processes for Section 232 product exclusion request reviews and 

managing the increased foreign investment review workload

• Managing the downsizing of trade promotion capacity

Progress made/challenges remaining since the FY 2018 TMC: In the last year, ITA has 

made progress on top management and performance challenges relating to AD and CVD 

cases. E&C has tasked its Petition Counseling and Analysis Unit within the Office of 

Policy and Negotiations, staffed with five full-time positions, with self-initiating AD and 

CVD investigations, when warranted, on behalf of affected domestic interested parties. 

However, further challenges remain.

7. Providing Adequate Oversight to Effectively Manage the Significant Increase in 

Disaster Assistance Funding to the Economic Development Administration (EDA)

According to NOAA, the United States experienced a historic year of weather-related 

disasters in 2017. Our nation endured 16 separate billion-dollar disaster events, including 

severe weather, hurricanes, flooding, and wildfires. In response, the President signed into 

law the Bipartisan Budget Act of 2018, which designated $1 billion in disaster recovery 

funds to the Department, $600 million of which was appropriated to the Department’s 

Economic Development Administration (EDA), while the remaining $400 million was 

appropriated to NOAA. There is $587 million available for EDA grants, following 

transfers related to grant administration and oversight.

Providing assistance in a post-disaster recovery environment introduces its own unique 

challenges, such as the reliance on impaired local infrastructure, awarding funds to 

recipients that might not be familiar with federal requirements, and unanticipated impact 

on resources due to the increased workload. This is especially critical to EDA, as the 

additional disaster assistance funding triples its typical annual budget authority from 

about $300 million to nearly $900 million. This significant increase in funding will place 

additional demands on EDA’s existing workforce, oversight processes, business 

practices, and financial management systems to ensure proper oversight and use of the 

funds. Additionally, EDA is responsible for integrating the expertise of the federal 

government to assist local, state, tribal governments, and the private sector in economic 

recovery efforts following a major disaster. EDA has taken proactive steps to start 

136 FY 2018 AGENCY FINANCIAL REPORT

OIG SUMMARY ON TOP MANAGEMENT AND PERFORMANCE CHALLENGES
8

addressing this challenge. To date, EDA has developed four Disaster Supplemental 

Implementation working groups, whose responsibility is to promote policies and 

procedures that address disaster assistance related priority areas. 

However, to ensure proper and timely use of the disaster assistance fund, EDA must 

develop and implement comprehensive strategic planning, develop consistent policies, 

and maintain a highly-skilled workforce as it increases its oversight efforts to effectively 

administer the disaster assistance appropriations.

OIG’s FY 2019 top management and performance challenges include these key areas 

related to EDA disaster relief:

• Following a comprehensive oversight implementation strategy

• Acquiring and maintaining sufficient staff with appropriate proficiency

• Developing a risk management strategy to strengthen internal control

Progress made/challenges remaining since the FY 2018 TMC: This challenge is new 

for FY 2019.

8. Addressing Departmental Management Matters Involving Acquisitions

A continuing challenge for the federal government generally, and the Department 

specifically, is spending taxpayer dollars wisely and protecting them from waste and 

abuse. In FY 2017, the Department awarded various types of contracts—totaling 

approximately $3.2 billion—for goods and services related to satellite acquisitions, 

support for intellectual property operations, management of coastal and ocean resources, 

IT, and construction and facilities management. Consequently, it is imperative that these 

funds result in the best value for the taxpayer. OIG audits have identified a number of 

areas where the Department can better manage and oversee contracts to improve program 

performance, achieve cost savings, and help prevent fraud, waste, and abuse.

OIG’s FY 2019 top management and performance challenges include these key areas: 

• Improving monitoring of blanket purchase agreements (BPAs)

• Developing and maintaining a competent acquisition workforce to maximize cost 

savings

• Establishing oversight of mission-support service delivery

• Increasing the pace of NOAA ship acquisitions

FY 2018 AGENCY FINANCIAL REPORT 137

OIG SUMMARY ON TOP MANAGEMENT AND PERFORMANCE CHALLENGES
9

Progress made/challenges remaining since the FY 2018 TMC: In FY 2017, the 

Department reported progress in the recruitment and retention of a capable workforce that 

can manage complex acquisition programs. For example, the number of acquisition 

professionals increased 14 percent and the attrition rate decreased from 14.3 to 12.6 

percent. Nevertheless, the Department continues to face workforce challenges.

138 FY 2018 AGENCY FINANCIAL REPORT

OIG SUMMARY ON TOP MANAGEMENT AND PERFORMANCE CHALLENGES
SUMMARY OF FINANCIAL STATEMENT AUDIT 

AND MANAGEMENT ASSURANCES

P

resented below is a summary of financial statement audit and management assurances for FY 2018. Table 1 relates 

to the Department’s FY 2018 financial statement audit, which resulted in an unmodified opinion with two material 

weaknesses. 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 1 1 0 0 2

Table 2. Summary of Management Assurances

EFFECTIVENESS OF INTERNAL CONTROL OVER FINANCIAL REPORTING (FMFIA § 2)

Statement of Assurance: Unmodified

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: Unmodified

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 2018 AGENCY FINANCIAL REPORT 139

SUMMARY OF FINANCIAL STATEMENT AUDIT AND MANAGEMENT ASSURANCES
T

he Improper Payments Information Act (IPIA) of 2002, as amended by the Improper Payments Elimination and 

Recovery Act 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. 

The Office of Management and Budget’s (OMB) Circular A-123, Management’s Responsibility for Enterprise Risk 

Management and Internal Control (July 15, 2016), Appendix C, Requirements for Payment Integrity Improvement 

(June 26, 2018), defines an improper payment1 and provides guidance to agencies to comply with IPIA, as amended, and 

for agency improper payments efforts. The Department has not itself identified any programs or activities susceptible 

to significant improper payments.

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 high. Each of the Department’s payment offices has implemented policies and procedures to detect and 

prevent improper payments. For FY 2019 and beyond, the Department will continue its efforts to ensure the integrity 

of its disbursements.

On January 29, 2013, the President signed into law the Disaster Relief Appropriations Act (Act), which provided a total 

of $50.5 billion government-wide 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 that are deemed 

by OMB as susceptible to significant improper payments for the purposes of requirements under IPIA of 2002, as 

amended, and the Department was required, for FY 2013 through FY 2016 disbursements, to calculate and report an 

PAYMENT INTEGRITY

1 Excerpts: An improper payment is any payment that should not have been made or that was made in an incorrect amount 

under statutory, contractual, administrative, or other legally applicable requirements. Incorrect amounts are overpayments or 

underpayments that are made to eligible recipients (including inappropriate denials of payment or service, any payment that 

does not account for credit for applicable discounts, payments that are for an incorrect amount, and duplicate payments). An 

improper payment also includes any payment that was made to an ineligible recipient or for an ineligible good or service, or 

payments for goods or services not received (except for such payments authorized by law). In addition, when an agency’s 

review is unable to discern whether a payment was proper as a result of insufficient or lack of documentation, this payment 

should also be considered an improper payment. A “questioned cost” should not be considered an improper payment until 

the transaction has been completely reviewed and is confirmed to be improper.

The term “payment” in this guidance means any disbursement or transfer of Federal funds (including a commitment for future 

payment, such as cash, securities, loans, loan guarantees, and insurance subsidies) to any non-Federal person, non-Federal 

entity, or Federal employee, that is made by a Federal agency, a Federal contractor, a Federal grantee, or a governmental or 

other organization administering a Federal program or activity. The term “payment” includes disbursements made pursuant 

to prime contracts awarded under the Federal Acquisition Regulation and Federal awards subject to the 2 C.F.R. Part 200 – 

Uniform Administrative Requirements, Costs Principles and Audit Requirements for Federal Awards (Uniform Guidance) that 

are expended by recipients.

140 FY 2018 AGENCY FINANCIAL REPORT

PAYMENT INTEGRITY
annual improper payments estimate. The Department, effective with FY 2017 disbursements, is no longer required 

by OMB to calculate and report an annual improper payments estimate, and is no longer required to report in the 

FY 2018 Agency Financial Report (AFR) on the Disaster Relief Appropriations Act funds.

The Department, effective with its FY 2019 AFR, will begin reporting on disaster funds received by the Economic 

Development Administration (EDA) of $600.0 million and disaster funds received by NOAA of $400.0 million, under 

the Bipartisan Budget Act of 2018 (February 9, 2018). Pursuant to OMB Memorandum M-18-14, Implementation of 

lnternal Controls and Grant Expenditures for the Disaster-Related Appropriations (March 30, 2018), the Department 

submitted in FY 2018 its internal control plans for funds provided to EDA and NOAA that are deemed by OMB as 

susceptible to significant improper payments for the purposes of requirements under IPIA of 2002, as amended. The 

Department is required to submit a statistical sampling and estimation plan(s) to OMB by June 30, 2019 for EDA and 

NOAA FY 2018 disbursements, to calculate and report an annual improper payments estimate(s).

I. Improper Payments Risk Assessments.

The Department annually conducts an assessment of the effectiveness of internal control over financial reporting, in 

compliance with OMB Circular A-123, Appendix C. Furthermore, every three years, the assessment includes a review of 

internal controls 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 

incorporate improper payments risk assessments every three years of the control, procurement, and grants management 

environments. The program/activity improper payments risk assessments performed in FY 2018 address the nine minimum 

improper payments risk factors set forth in the previous October 20, 2014 version of OMB Circular A-123, Appendix C that 

should be addressed, which are: whether the program or activity reviewed is new to the agency; the complexity of the 

program or activity reviewed, particularly with respect to determining correct payment amounts; the volume of payments 

made annually; whether payments or payment eligibility decisions are made outside of the agency, for example, by a state or 

local government, or a regional federal office; recent major changes in program funding, authorities, practices, or procedures; 

the level, experience, and quality of training for personnel responsible for making program eligibility determinations or 

certifying that payments are accurate; the inherent risks of improper payments due to the nature of agency programs or 

operations; significant deficiencies in the audit reports of the agency including, but not limited to, the agency Inspector 

General or the U.S. General Accountability Office audit report findings, or other relevant management findings; and results 

from prior improper payment work.

The following table presents a summary of the Department’s program/activity improper payments risk assessments performed 

in FY 2018; none of these improper payments risk assessments performed (or performed in prior fiscal years) revealed any 

programs or activities considered susceptible to significant improper payments. 

FY 2018 AGENCY FINANCIAL REPORT 141

PAYMENT INTEGRITY
II. Overpayments Identified in FY 2018 and FY 2018 Recaptures of Overpayments.

a. When applicable, for all programs and activities that expend $1 million or more annually, agencies shall 

describe any action the agency has taken or plans to take to recover improper payments and intends to take 

to prevent future improper payments.

The Department has extensive payment integrity monitoring, minimization, recapturing, and corrective actions efforts in 

place, including the identification of improper payments through bureau post-payment reviews, the Office of Inspector 

General (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, 

sample reviews of Department-wide sustained disallowed costs, and Department-wide sample testing of disbursements 

under internal controls testing.

A type of improper payment that the Department’s applicable bureaus experience is the improper drawdown(s) (i.e., payment(s) 

to recipient) of funds by a recipient against a Departmental grant or cooperative agreement award in the Automated Standard 

Application for Payments (ASAP). ASAP is a secure, Web-based, all electronic payment and information application operated 

by the U.S. Department of the Treasury (Treasury) that allows recipients to drawdown funds from accounts preauthorized by 

federal agencies. A recipient can normally drawdown on its authorized funds with little or no oversight by the Department 

prior to drawdown if the drawdown is in accordance with the conditions of the grant/cooperative agreement. Since these 

drawdowns are at the discretion of the recipient, it is difficult for the Department to control an improper drawdown(s) by a 

recipient. The recipient, however, will often report the overpayment to the Department and promptly return the funds to 

the Department via ASAP. When a recipient establishes a history of improper drawdowns against its awards, or for several 

other valid reasons, bureau financial assistance personnel can place the recipient on “Agency Review” within ASAP to help 

prevent future improper payments.

SUMMARY OF PROGRAMS/ACTIVITIES FOR WHICH IMPROPER PAYMENTS RISK ASSESSMENTS WERE PERFORMED IN FY 2018

Program/Activity

Census Bureau

Current Demographic Statistics

Current Economic Statistics

Decennial Census

Periodic Economic Statistics

Economic Development Administration

Disaster Funds received in FY 2018

Economic Adjustment Assistance

Regional Innovation Strategies

Research and Evaluation

Technical Assistance

Trade Adjustment Assistance

Economics and Statistics Administration

Economics and Statistics Administration

International Trade Administration

Executive Direction and Administration

Program/Activity

National Institute of Standards and Technology

Foreign Guest Researcher/Miscellaneous

Grants

Payments to Employees

National Oceanic and Atmospheric Administration

Grants

Payments to Employees

National Telecommunications and Information Administration

Digital Television Transition and Public Safety Fund, 

excluding TV Converter Box Coupon Program and Public 

Safety Interoperable Communications

First Responder Network Authority (FirstNet)

Information Infrastructure Grants

Non-FirstNet Activity included in Public Safety Trust Fund 

and Network Construction Fund

Public Telecommunications Facilities Program

State and Local Grant Implementation Program

142 FY 2018 AGENCY FINANCIAL REPORT

PAYMENT INTEGRITY
A standard procedure is for bureau financial assistance personnel to review recipients’ periodic Standard Form (SF) 425, 

Federal Financial Report, submissions to the Department, and when an overpayment is discovered, the recipient is promptly 

notified and requested to return the overpayment to the Department via ASAP. These bureaus now require that project 

officers sign and date progress reports after review, and place the signed documents in the grant files. In-house training, 

furthermore, is being provided to bureau financial assistance personnel on performing comprehensive reviews of the SF 425 

submissions from recipients. To ensure that proper review and approval procedures are being followed, bureaus have 

established a peer-to-peer review process where financial assistance specialists review their partners’ financial assistance 

files. The results of these reviews are shared and discussed with other bureau financial assistance specialists. Bureaus’ 

supervisory staff are conducting desk audits of financial assistance specialists to ensure that procedures are followed in a 

timely manner. Bureaus also schedule periodic audits or reviews of financial assistance files to ensure that all procedures 

are being followed. Bureau financial assistance offices continue to make considerable investments in vendor-provided 

training certification programs for their financial assistance personnel on the full range of federal financial assistance policy, 

including technical requirements such as the preparation of SF 425s. 

Overpayments can also be recaptured from recipients via other methods if recapture via ASAP is not appropriate. Improper 

payments for grants/cooperative agreements are also detected during post-award closeout procedures and similar action 

is taken to recapture an overpayment from a recipient.

Two additional types of improper payments encountered by the Department are (a) improper payments determined resulting 

from an audit, review, or investigation by the Department’s OIG; and (b) improper payments determined resulting from an 

audit of a federal grant/cooperative agreement award under the Single Audit Act of 1984, as amended. It is often difficult 

or not possible for the Department to identify, prior to payment, the types of improper payments that are identified in these 

audits, reviews, or investigations. One bureau financial assistance office’s efforts to help prevent incorrect overhead rates 

being billed by a grant/cooperative agreement recipient include (a) overhead rates are reviewed through the review of a 

recipient’s approved Negotiated Indirect Cost Rate Agreements and line item budget; and (b) overhead costs will not be 

allowable costs against an award unless permitted under the award, and specifically included as a line item in the award’s 

approved budget. Furthermore, at the time of award closeout, a final comprehensive SF 425 must be submitted by the 

recipient within 90 days after award expiration. If overhead costs were included as a line item in the award’s approved 

budget, the SF 425 must include the cumulative total of overhead costs charged to the award. This SF 425 requires the 

review and approval of the bureau’s financial assistance office. This bureau’s financial assistance office has also taken 

steps to help ensure recipients do not overdraw their awards. Award funds are monitored through the review of interim 

Federal Financial Cash Flow Reports to ensure that (a) recipients are expending funds at an appropriate rate; (b) federal 

disbursements are comparable with the period covered by requests for payment; (c) reports submitted by the recipient 

agree with the bureau’s accounting records for payments made; and (d) recipients are not maintaining excess cash on 

hand. The financial assistance office, monthly, furthermore obtains a cash flow tracking report, which serves as an internal 

control for monitoring recipients’ cash on-hand balances. 

One bureau finance office has indicated an additional identifiable reason for improper payments to vendors is a lack of 

resources that can sometimes lead to short staffing in the accounts payable processing operations, resulting in, due to 

heavy workload for individual technicians, data entry or other types of errors that result in improper payments. In response 

to this condition, the bureau is hiring additional accounts payable staff, and providing periodic training to staff to address 

errors that have been made.

FY 2018 AGENCY FINANCIAL REPORT 143

PAYMENT INTEGRITY
For an identified overpayment that is not promptly recaptured, the Department’s policy is to establish a receivable for 

the overpayment and the Department then pursues the overpayment through the Department’s normal debt collection 

management process. See the Receivables with the Public and Debt Collection Management subsection of the Financial 

Management and Analysis subsection of Management’s Discussion and Analysis in this report for more information on 

the Department’s debt collection management process for receivables from the public.

In September 2018, the Department performed a review of the statuses of sustained disallowed costs of $10 thousand or 

more, issued between August 1, 2016 through April 30, 2018. Sustained disallowed costs could result, for example, from 

Single Audit Act audit reports related to grants/cooperative agreements, OIG audits or reviews, post-payment reviews, 

closeout reviews, grant/cooperative agreement-specific audits or reviews, and contracts/obligations-specific audits or 

reviews. The statuses of the sustained disallowed costs provided by the contractor are utilized by the Department for its 

comprehensive payment integrity and overpayment recapture efforts, including reporting, monitoring, recapturing, and 

corrective actions; the statuses are further followed up on by the Department as appropriate.

b. All programs and activities that expend $1 million or more annually shall be considered for payment recapture 

audits. See OMB Circular A-123, Appendix C, Part III.C, Payment Recapture Audits, for more information 

about payment recapture audits. An agency shall discuss payment recapture audit efforts, if applicable. The 

discussion should describe:

i. the actions and methods used by the agency to recoup overpayments; 

ii. a justification of any overpayments that have been determined not to be collectable; and 

iii. 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). 

c. If the agency has excluded any programs or activities from review under its payment recapture audit program 

because the agency has determined a payment recapture audit program is not cost-effective, the agency 

must provide the justification and a summary of the analysis that is used to determine that conducting a 

payment recapture audit program for the program or activity was not cost effective (i.e., a discussion of 

the analysis conducted to determine that a payment recapture audit program would not be cost effective). 

See OMB Circular A-123, Appendix C, Part III.C.6, What should an agency do if it determines that a payment 

recapture audit program would not be cost-effective, for additional information regarding payment recapture 

audit cost-effectiveness. 

In conformity with IPIA, as amended, the Department had been performing from 2005 through June 2017, primarily with 

contractor assistance, annual payment recapture audits of closed contracts/obligations for many of the Department’s bureaus/

reporting entities on a rotational basis. From 2012 through June 2017, 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; however, for which the closeout process has not yet been completed. Annual payment recapture 

auditing was additionally performed by a contractor, effective 2011, for Department-wide grants and other cooperative 

agreements (i.e., financial assistance). Per OMB Circular A-123, Appendix C, intragovernmental transactions were not 

required to be reviewed.

144 FY 2018 AGENCY FINANCIAL REPORT

PAYMENT INTEGRITY
In March 2018, the Department completed a cost/benefit analysis for contracts/obligations and for grants and other cooperative 

agreements, and determined that it is not able to conduct a cost-effective payment recapture audit program (one in which the 

benefits, including recaptured amounts, exceed the costs) for the above noted categories. Since 2005 through June 2017, 

the cumulative amount subject to review in the payment recapture audits performed was $17.53 billion, and $5.85 billion 

was reviewed by the payment recapture auditors. The cumulative adjusted overpayments subject to recapture that were 

identified was only $113 thousand, which was fully recaptured. This cumulative recaptured amount of $113 thousand fell 

well short of the cumulative contractor costs for the payment recapture audits performed of $582 thousand, before taking 

into consideration the significant staff time incurred across the Department to support the individual payment recapture 

auditor and the payment recapture audit program.

In May 2011, the Department completed an evaluation of possible additional categories of disbursements for which payment 

recapture auditing could be performed, if cost-effective, as discussed below, held a meeting with OMB to discuss the 

Department’s evaluation, and provided the written summary of the evaluation to OMB.

The Department’s evaluation of payroll disbursements in May 2011 determined that it would likely not be cost-effective 

to perform payment recapture auditing for payroll disbursements. Payroll-administration services are primarily provided 

to the Department by the U.S. Department of Agriculture’s National Finance Center (NFC). Based on the Department’s 

review of available risk assessments and audits/reviews, at that time, the Department’s payroll processes were rated at a 

low risk and only had a few minor audit and review findings. Further, no significant payroll improper payments had been 

identified by the bureaus. The latest audit report at that time regarding the adequacy of the internal controls of NFC as 

a servicing organization revealed no significant issues. The Department will continue to reevaluate, in FY 2019, whether 

payment recapture auditing should be performed, if considered cost-effective, for payroll and other payments to employees.

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 U.S. Department of 

Defense; and, therefore, are not subject to payment recapture auditing by the Department.

d. For each program or activity that expends $1 million or more annually and either conducts a payment 

recapture audit or recaptures payments outside of a payment recapture audit:

i. report the amount recovered through recapture audits in that fiscal year including the percent such amounts 

represent of the total overpayments identified through payment recapture audits during that fiscal year. 

ii. report amounts recovered through sources other than payment recapture audits in that fiscal year, including 

the percent such amounts represent of the total overpayments identified for recapture through sources 

other than payment recapture audits in the fiscal year. For example, agencies could report on improper 

payments identified through: statistical samples conducted under IPIA; agency post-payment reviews or 

audits; OIG reviews; Single Audit reports; self-reported overpayments; or reports from the public. Agencies 

may group amounts by program or activity or in total per the source of recapture, as appropriate.

The following table summarizes the Department’s FY 2018 overpayments identified, and overpayments verified as recaptured 

in FY 2018, through all sources. The Overpayments Recaptured column includes both (a) recaptures of overpayments 

during FY 2018 of overpayments reported in FY 2018; and (b) recaptures of overpayments that were previously identified 

in prior fiscal years.

FY 2018 AGENCY FINANCIAL REPORT 145

PAYMENT INTEGRITY
OVERPAYMENTS IDENTIFIED IN FY 2018 AND FY 2018 RECAPTURES OF OVERPAYMENTS 

(In Millions)

Bureau/Reporting Entity

Overpayments Identified in FY 2018 and FY 2018 Recaptures of Overpayments

Overpayments Identified Overpayments Recaptured1

BIS $ 1.095 $ 0.013

Census Bureau 0.610 0.505

DM/S&E 0.263 0.250

DM/WCF 0.312 0.309

EDA 0.002 0.005

ITA 1.254 0.018

NIST 3.060 1.753

NOAA 1.016 0.671

NTIA 0.646 0.138

NTIS 0.108 0.090

USPTO 0.289 0.242

Total $ 8.655 $ 3.994

1 Includes both (a) recaptures of overpayments during FY 2018 of overpayments that were reported in FY 2018; and (b) recaptures of 

overpayments that were previously reported in prior fiscal years.

III. Departmental Use of Treasury’s Do Not Pay Portal for Payment Integrity.

Agencies should provide a brief narrative of the reduction in improper payments that is attributable to the Do Not 

Pay Initiative, as applicable. See OMB Circular A-123, Appendix C, Part V, the Do Not Pay Initiative, for a thorough 

overview of the roles and responsibilities of agencies to use centralized data sources such as the Treasury Working 

System and other government databases to prevent improper payments.

Pursuant to OMB Memorandum M-12-11 dated April 12, 2012, Reducing Improper Payments through the “Do Not Pay 

List,” the Department in 2013 implemented the Department’s OMB-approved plan to perform periodic (primarily weekly) 

prepayment eligibility reviews of Do Not Pay portal databases for the Department’s domestic, non-classified, non-employeerelated, non-intragovernmental disbursements. The Department currently performs prepayment checking of the following 

Do Not Pay portal databases: (a) Social Security Administration’s Death Master File (DMF); and (b) the U.S. General Services 

Administration’s System for Award Management (SAM) Exclusion Records.

The prepayment checking performed by the Department excludes prepayment eligibility reviews of grantees under ASAP, 

as Treasury performs continuous monitoring of the Do Not Pay portal of ASAP grantees. Bureau payment and acquisition 

offices, as appropriate, follow up on any vendors initially matched to the Do Not Pay portal databases checked, and perform 

further research as necessary to follow through and resolve any 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.

146 FY 2018 AGENCY FINANCIAL REPORT

PAYMENT INTEGRITY
Furthermore, the Department’s payment offices receive, from the Do Not Pay portal, monthly 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 the Do Not Pay portal monthly Adjudication Reports summarizing 

the results of their efforts.

Since the inception of the payment offices’ Do Not Pay portal prepayment eligibility reviews and reviews of the Do Not Pay 

portal post-payment 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 identify and minimize improper payments.

IV. PaymentAccuracy.gov Website.

Treasury, in coordination with the U.S. Department of Justice and OMB, established the PaymentAccuracy.gov website, 

located at https://paymentaccuracy.gov, to create a centralized location to publish information about U.S. government 

improper payments made to individuals, organizations, and contractors. This website also provides a centralized place where 

suspected incidents of fraud, waste, and abuse can be reported, and contains information about (1) current and historical 

rates and amounts of improper payments; (2) why improper payments occur; and (3) what agencies are doing to reduce 

and recapture improper payments. The website also contains extensive information, guidance, and links to other useful 

resources for addressing improper payments.

This website contains additional information and data about the Department’s improper payments, including improper 

payments information included in previous Departmental AFRs that is no longer included in the FY 2018 AFR.

FY 2018 AGENCY FINANCIAL REPORT 147

PAYMENT INTEGRITY
FRAUD REDUCTION REPORT

F

raud risk management is an important aspect of the Department’s strategy to achieve its mission and goals. Fraud 

prevention, detection, monitoring, and response are key to managing fraud risk and is continually being integrated in 

the culture and controls throughout the Department. Several key control strategies have been implemented in FY 2018. 

Fraud risk has been identified as one of 10 categories of risk by the Department’s Enterprise Risk Management (ERM) 

Framework. The Department’s ERM Framework is designed to facilitate a risk-based approach to fraud risk assessment at 

different levels within the organization. Management uses the U.S. Government Accountability Office (GAO) Fraud Risk 

Management Framework leading practices as a guide to combat fraud, increase emphasis on prevention, and put into 

place corrective actions to address identified deficiencies. The Department also utilizes several processes and sources to 

identify, manage, and mitigate fraud risks. These processes and sources include, but are not limited to, the Agency Risk 

Profile, GAO High-Risk List, and Mission Critical Programs and Activities List. 

Analyses of risks, including fraud risks, are also an integral process of the Department’s financial internal control program. 

The Department annually performs an assessment of the risks at the entity and process levels. At the entity level, the 

Department and components assess exposures and controls around fraud risk. How the Department anticipates, identifies, 

and responds to fraud is considered during the assessment. Existing Departmental policies and procedures are also examined 

to ensure that they adequately meet their objective. At the process level, inherent and control risks are assessed for each 

of the Department’s key business processes and sub-processes. The process level assessment includes evaluations such 

as the Department’s payroll, contracts, purchase card, and grants management business cycles. The exercise and results of 

these assessments aids in identifying types and levels of risks within the Department and informs the mitigation process.

Business process workshops are also held annually in which interdisciplinary teams, including task owners and the Internal 

Control Senior Assessment Team, come together to identify and examine the control activity and control design around 

key business processes. During these workshops, key control objectives and activities are discussed and control gaps are 

identified and addressed. Internal control test steps are also discussed and/or modified.

Finally, the Department has a data analytics team to perform, collect, and analyze data to detect and monitor for potential 

fraud. The data analytics program involves the development of continuous monitoring processes, data science techniques, 

analytics and visualizations, to be applied to sensitive programs and financial data in order to identify trends, anomalies, and 

other meaningful patterns that may signify potential internal control weakness or indicators of fraud, waste, and abuse. In 

FY 2018, the Department completed reviews of Purchase Card datasets and worked together with bureaus on sensitive 

issues and corrective actions. The Department plans to continue to expand its data analytics program to enhance the 

capabilities and scope of additional analysis.

148 FY 2018 AGENCY FINANCIAL REPORT

FRAUD REDUCTION REPORT
REDUCE THE FOOTPRINT

P

er 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, 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. Under the Freeze 

the Footprint initiative from FY 2013 to FY 2015 DOC achieved an overall 4.7 percent space reduction in three years by 

looking for office consolidation opportunities, revisiting storage requirements, and tighter management of space allocations. 

On March 25, 2015, OMB issued Memorandum 2015-01, Implementation of OMB Memorandum M-12-12 Section 3: 

Reduce the Footprint. The Reduce the Footprint requirement is focused on workspace planning, better managing of space 

requirements, and a disciplined approach to aligning agency missions and collaboration of space to provide a variety of 

reconfigurable space and technology options. 

The Department’s goals are to monitor and limit long-term growth of real property space by systematically and strategically 

eliminating unneeded assets regardless of space type. In the five-year period between FY 2018 and FY 2022, the Department’s 

goal is to reduce its office and warehouse inventory by 4.3 percent, or 529,429 square feet of its leased, owned, and U.S. 

General Services Administration (GSA) occupancies compared to its FY 2017 year-end inventory. The largest property is a 

U.S. Patent and Trademark Office warehouse of nearly 278 thousand square feet that was closed at the end of FY 2018. 

These goals do not include the 2020 Decennial Census space because the Decennial 2020 space has net zero impact on 

the five-year period as a whole. The Census Bureau, working through GSA, began acquisition of the decennial locations 

in FY 2017, and will continue through FY 2019. However, these locations are short-term, and they will be vacated and out 

of Departmental inventory by the end of FY 2022.

The Department has determined its principle strategic approaches. They are: (1) focus on office utilization rate improvement 

to reduce space; (2) consolidate underutilized assets; and (3) dispose of all unneeded assets. Because of budget constraints, 

operating units will need to consider the use of GSA’s Workplace Engagements for consolidations. 

REDUCE THE FOOTPRINT BASELINE COMPARISONS

(In Millions)

FY 2015

Baseline

FY 2017 

Actuals +/- Change 

Square Footage 12.12 12.21 0.091

OPERATING COST OF DIRECT LEASED AND OWNED PROPERTIES

(In Millions)

FY 2015

Baseline

FY 2017 

Actuals +/- Change 

Operations and Maintenance Costs $35.04 $41.48 $6.442

1 The net increase in square feet from FY 2015 to FY 2017 is due to the start of Decennial 2020 Census acquisition of space.

2 The increase in operating costs is about 18 percent over two years. The increase is the renewal of two direct leases with new rental rates 

that are higher than previous rates that were 10 years old.

FY 2018 AGENCY FINANCIAL REPORT 149

REDUCE THE FOOTPRINT
CIVIL MONETARY PENALTIES’ ADJUSTMENTS 

FOR INFLATION

T

he Federal Civil Penalties Inflation Adjustment Act of 1990, as amended by the Debt Collection Improvement Act of 1996 

and the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, requires agencies to adjust their 

civil monetary penalties (CMP) for inflation to maintain their deterrent effect. A CMP is defined as any penalty, fine, or 

other sanction that is (1) for a specific monetary amount as provided by federal law, or has a maximum amount provided for 

by federal law; (2) assessed or enforced by an agency pursuant to federal law; and (3) assessed or enforced pursuant to an 

administrative proceeding or a civil action in the federal courts. The Department has been adjusting its CMPs for inflation since 

1996 in accordance with the Federal Civil Penalties Inflation Adjustment Act of 1990, as amended. Effective 2017, agencies are 

required to make annual adjustments for inflation to CMPs, to take effect not later than January 15.

The Department published its 2018 adjustments for inflation to CMPs (15 CFR Part 6, Civil Monetary Penalty Adjustments 

for Inflation) in the Federal Register on January 6, 2018 (Vol. 83, No. 5, Rules and Regulations, pages 706-709). These 

adjustments for inflation to CMPs, which became effective on January 15, 2018, are also available at the Department’s website 

at http://www.osec.doc.gov/ofm/OFM_Publications.html. The following table provides detailed information on each of the 

Department’s CMPs as of January 15, 2018.

Penalty Description Statutory Authority

CMP 

Name

Year CMP 

Originally

Enacted

Latest Year of CMP 

Non-inflation 

Adjustment 

(via Statute or 

Regulation)

Current

CMP Level

Department of Commerce

Penalty for each submission of 

a false, fictitious, or fraudulent 

claim for payment or benefits.

31 U.S.C. 3802(a)(1), 

Program Fraud Civil 

Remedies Act of 1986

Violation 1986 1986 Maximum 

$11,181

Penalty for each submission of 

a false, fictitious, or fraudulent 

written statement.

31 U.S.C. 3802(a)(2), 

Program Fraud Civil 

Remedies Act of 1986

Violation 1986 1986 Maximum 

$11,181

Penalty for each submission of 

a false, fictitious, or fraudulent 

claim for payment.

31 U.S.C. 3729(a)(1)(G), 

False Claims Act

Violation 1863 1986 Minimum 

$11,181

 Maximum 

$22,363

Bureau of Industry and Security

Penalty for each violation of the 

requirements in this Act.

15 U.S.C. 5408(b)(1), 

Fastener Quality Act

Violation 1990 1990 Maximum 

$46,192

Penalty for refusing to permit 

entry or inspection.

22 U.S.C. 6761(a)(1)(A), 

Chemical Weapons Convention 

Implementation Act

Violation 1998 1998 Maximum 

$37,601

 (continued on next page)

150 FY 2018 AGENCY FINANCIAL REPORT

CIVIL MONETARY PENALTIES’ ADJUSTMENTS FOR INFLATION
Penalty Description Statutory Authority

CMP 

Name

Year CMP 

Originally

Enacted

Latest Year of CMP 

Non-inflation 

Adjustment 

(via Statute or 

Regulation)

Current

CMP Level

Bureau of Industry and Security (continued)

Penalty for failing or refusing to 

establish and maintain records, 

submit any required report 

or notice, or permit access 

or copying of any records as 

required by the Act.

22 U.S.C. 6761(a)(1)(B), 

Chemical Weapons Convention 

Implementation Act

Violation 1998 1998 Maximum 

$7,520

Penalty for committing an 

unlawful act described in 

subsection 1705(a).

50 U.S.C. 1705(b), 

International Emergency 

Economic Powers Act

Violation 1977 2007 Maximum 

$295,141

Penalty for each violation to 

subsection 8124: willful failure 

to permit, or to disrupt, delay or 

impede complementary access 

authorized by this subchapter.

22 U.S.C. 8142(a), 

United States Additional 

Protocol Implementation Act 

(Nuclear Nonproliferation 

Treaty between United States 

and the International Atomic 

Energy Commission)

Violation 2006 2006 Maximum 

$30,557

Penalty for prohibited conduct 

described in section 1760(a)(2) 

or any regulations related to 

this Act. (new penalty in 2018).

Export Control Reform Act 

of 2018, Pub. L. No. 115-232, 

tit. 17, subtitle B, 132 Stat. 

2208 (2018).

Violation 2018 2018 Maximum 

$300,000

Census Bureau

Penalty for each day’s 

delinquency in filing required 

export information reports.

13 U.S.C. 304, Collection 

of Foreign Trade Statistics

Violation 1962 2002 Each day’s 

delinquency 

of a violation: 

 Maximum 

$1,360

Maximum 

per violation: 

$13,605

Penalty for violating provisions 

of this chapter.

13 U.S.C. 305(b), Collection

of Foreign Trade Statistics

Violation 1962 2002 Maximum 

$13,605

Economics and Statistics Administration

Penalty for failure to furnish any 

information required, or comply 

with any rule, regulation, order 

or instruction.

22 U.S.C. 3105(a), 

International Investment 

and Trade in Services Act

Violation 1990 1990 Minimum 

$4,619 

Maximum 

$46,192

International Trade Administration

Penalty for violation of the 

chapter or any regulation 

under this chapter.

19 U.S.C. 81s, 

Foreign Trade Zone

Violation 1934 1934 Maximum 

$2,852

Penalty for violation of protective 

orders under NAFTA and this 

agreement.

19 U.S.C. 1677f(f)(4), 

U.S.-Canada FTA 

Protective Order

Violation 1988 1988 Maximum 

$205,211

 (continued on next page)

(continued from previous page)

FY 2018 AGENCY FINANCIAL REPORT 151

CIVIL MONETARY PENALTIES’ ADJUSTMENTS FOR INFLATION
Penalty Description Statutory Authority

CMP 

Name

Year CMP 

Originally

Enacted

Latest Year of CMP 

Non-inflation 

Adjustment 

(via Statute or 

Regulation)

Current

CMP Level

National Oceanic and Atmospheric Administration

Penalty for noncompliance with 

the requirements of licenses or 

regulations issued under this 

subchapter.

51 U.S.C. 60123(a), Land 

Remote Sensing Policy Act 

of 2010

Violation 2010 2010 Maximum 

$11,278

Penalty for receiving or using 

unenhanced LANDSAT solely 

for non-commercial purposes.

51 U.S.C. 60148(c), Land 

Remote Sensing Policy Act 

of 2010

Violation 2010 2010 Maximum 

$11,278

Penalty for committing acts 

prohibited by section 773(e) 

of this title.

16 U.S.C. 773f(a), Northern 

Pacific Halibut Act of 1982

Violation 1982 2007 Maximum 

$236,114

Penalty for taking or catching 

sponges in the Gulf or Florida 

Straits that are less than 

prescribed size.

16 U.S.C. 783, Sponge Act Violation 1914 1914 Maximum 

$1,686

Penalty for fishing violations 

described in section 957(a).

16 U.S.C. 957(d), (e), and (f), 

Tuna Conventions Act of 1950

Violation 1962 1962 Maximum 

$84,264 

Penalty for record keeping 

violations described in section 

957(b).

16 U.S.C. 957(d), (e), and (f), 

Tuna Conventions Act of 1950

Violation 1962 1962 Maximum 

$181,493

Penalty for subsequent violations 

described in section 957(a).

16 U.S.C. 957(d), (e), and (f), 

Tuna Conventions Act of 1950

Violation 1962 1962 Maximum 

$2,852

Penalty for subsequent record 

keeping violations described in 

section 957(b).

16 U.S.C. 957(d), (e), and (f), 

Tuna Conventions Act of 1950

Violation 1962 1962 Maximum 

$16,853

Penalty for import violations 

described in section 957(c).

16 U.S.C. 957(d), (e), and (f), 

Tuna Conventions Act of 1950

Violation 1962 1962 Maximum 

$362,986

Additional penalties for violations, 

see the Magnusson-Stevens 

Act (MSA) section 1826g, then 

section 1858 of this title.

16 U.S.C. 957(i), Tuna 

Conventions Act of 1950

Violation 1962 1990 Maximum 

$184,7671

Penalties for violations, see 

the MSA section 1826g, then 

section 1858 of this title.

16 U.S.C. 959, Tuna 

Conventions Act of 1950

Violation 1962 1990 Maximum 

$184,7671

Penalties for violations, see 

the MSA section 1826g, then 

section 1858 of this title.

16 U.S.C. 971f(a), Atlantic 

Tunas Convention Act of 1975

Violation 1990 1990 Maximum 

$184,7671

Penalty for violations described 

in section 973(c).

16 U.S.C. 973f(a), South 

Pacific Tuna Act of 1988

Violation 1988 1988 Maximum 

$513,026

Penalty for violating any 

provisions of this chapter.

16 U.S.C. 1174(b), Fur Seal 

Act Amendments of 1983

Violation 1983 1983 Maximum 

$24,421

Penalty for violating any 

provisions of this subchapter.

16 U.S.C. 1375(a)(1), Marine 

Mammal Protection Act 

of 1972

Violation 1972 1972 Maximum 

$28,520

 Footnote is shown at the end of this table. (continued on next page)

(continued from previous page)

152 FY 2018 AGENCY FINANCIAL REPORT

CIVIL MONETARY PENALTIES’ ADJUSTMENTS FOR INFLATION
Penalty Description Statutory Authority

CMP 

Name

Year CMP 

Originally

Enacted

Latest Year of CMP 

Non-inflation 

Adjustment 

(via Statute or 

Regulation)

Current

CMP Level

National Oceanic and Atmospheric Administration (continued)

Penalty for violating any 

provisions of this subchapter.

16 U.S.C. 1385(e), Dolphin 

Protection Consumer 

Information Act

Violation 1990 1990 Maximum 

$184,7671

Penalty for violating any 

provisions of this subchapter.

16 U.S.C. 1437(d)(1), National 

Marine Sanctuaries Act

Violation 1984 1992 Maximum 

$173,951

Penalty for knowingly violating 

any provisions of this chapter.

16 U.S.C. 1540(a)(1), 

Endangered Species Act 

of 1973

Violation 1973 1988 Maximum 

$51,302 

Penalty for knowingly violating 

any provision of any regulation 

issued under this chapter.

16 U.S.C. 1540(a)(1), 

Endangered Species Act 

of 1973

Violation 1973 1988 Maximum 

$24,625

Penalty for otherwise violating 

any provision of any regulation 

issued under this chapter.

16 U.S.C. 1540(a)(1), 

Endangered Species Act 

of 1973

Violation 1973 1988 Maximum 

$1,686

Penalty for violations described 

in section 1857, Prohibited Acts.

16 U.S.C. 1858(a), MagnusonStevens Fishery Conservation 

and Management Act

Violation 1976 1990 Maximum 

$184,7671

Penalties for violations described 

in section 2435, see the MSA 

section 1826g, then section 1858 

of this title.

16 U.S.C. 2437(a), Antarctic 

Marine Living Resources 

Convention Act of 1984

Violation 1984 1990 Maximum 

$184,7671

Penalties for violations described 

in section 2435, see the MSA 

section 1826g, then section 1858 

of this title.

16 U.S.C. 2465(a), Antarctic 

Protection Act of 1990

Violation 1990 1990 Maximum 

$184,7671

Penalty for import, export, 

transport, selling, receiving, 

acquiring, or purchasing any 

fish or wildlife or plant taken, 

possessed, transported, or sold 

in violation of any law, treaty, or 

regulation of the United States.

16 U.S.C. 3373(a)(1), 

Lacey Act Amendments 

of 1981

Violation 1981 1981 Maximum 

$26,409 

Penalty for import, export, 

transport, selling, receiving, 

acquiring, or purchasing any 

fish or wildlife or plant valued 

under $350, taken, possessed, 

transported, or sold in violation 

of any law, treaty, or regulation 

of the United States.

16 U.S.C. 3373(a)(2), 

Lacey Act Amendments 

of 1981

Violation 1981 1981 Maximum 

$660

 Footnote is shown at the end of this table. (continued on next page)

(continued from previous page)

FY 2018 AGENCY FINANCIAL REPORT 153

CIVIL MONETARY PENALTIES’ ADJUSTMENTS FOR INFLATION
Penalty Description Statutory Authority

CMP 

Name

Year CMP 

Originally

Enacted

Latest Year of CMP 

Non-inflation 

Adjustment 

(via Statute or 

Regulation)

Current

CMP Level

National Oceanic and Atmospheric Administration (continued)

Penalty for conducting directed 

fishing of Salmon from 12 miles 

seaward of territorial waters, or 

for violating any provision under 

this chapter.

16 U.S.C. 3606(b)(1), 

Atlantic Salmon Convention 

Act of 1982

Violation 1982 1990 Maximum 

$184,7671

Penalties for violations of any 

provisions under this chapter, 

see the MSA section 1826g, 

then section 1858 of this title.

16 U.S.C. 3637(b), 

Pacific Salmon Treaty Act 

of 1985

Violation 1985 1990 Maximum 

$184,7671

Penalty for violating any provision, 

order or regulation issued under 

this chapter.

16 U.S.C. 4016(b)(1)(B), 

Fish and Seafood Promotion 

Act of 1986

Violation 1986 1986 Minimum 

$1,118

Maximum 

$11,181

Penalty for fishing or taking 

anadromous fish in the 

convention area.

16 U.S.C. 5010, North 

Pacific Anadromous Stocks 

Act of 1992

Violation 1990 1990 Maximum 

$184,7671

Penalty for otherwise violating 

any provision of any regulation 

issued under this chapter.

16 U.S.C. 5103(b)(2), 

Atlantic Coastal Fisheries 

Cooperative Management Act

Violation 1990 1990 Maximum 

$184,7671

Penalties for violations of any 

provisions under this chapter, 

see the MSA section 1858 of 

this title.

16 U.S.C. 5154(c)(1), 

Atlantic Striped Bass 

Conservation Act

Violation 1984 1990 Maximum 

$184,7671

Penalty for violations described 

in section 5505, Unlawful 

Activities.

16 U.S.C. 5507(a), High 

Seas Fishing Compliance 

Act of 1995

Violation 1995 1995 Maximum 

$160,484

Penalties for violations of any 

provisions under this chapter, 

see the MSA section 1826g, 

then section 1858 of this title.

16 U.S.C. 5606(b), 

Northwest Atlantic Fisheries 

Convention Act of 1995

Violation 1990 1990 Maximum 

$184,7671

Penalties for violations of any 

provisions under this chapter, 

see the MSA section 1826g, 

then section 1858 of this title.

16 U.S.C. 6905(c), 

Western and Central 

Pacific Fisheries Convention 

Implementation Act

Violation 1990 1990 Maximum 

$184,7671

Penalties for violations of any 

provisions under this chapter, 

see the MSA section 1826g, 

then section 1858 of this title.

16 U.S.C. 7009(c) and (d), 

Pacific Whiting Act of 2006

Violation 1990 1990 Maximum 

$184,7671

Penalty for importing fish in 

violation of any provisions of 

this section.

22 U.S.C. 1978(e), Fishermen’s 

Protective Act of 1967

Violation 1971 1971 Maximum 

$28,520

 Footnote is shown at the end of this table. (continued on next page)

(continued from previous page)

154 FY 2018 AGENCY FINANCIAL REPORT

CIVIL MONETARY PENALTIES’ ADJUSTMENTS FOR INFLATION
Penalty Description Statutory Authority

CMP 

Name

Year CMP 

Originally

Enacted

Latest Year of CMP 

Non-inflation 

Adjustment 

(via Statute or 

Regulation)

Current

CMP Level

National Oceanic and Atmospheric Administration (continued)

Penalty for importing fish in 

subsequent violation of any 

provisions of this section.

22 U.S.C. 1978(e), Fishermen’s 

Protective Act of 1967

Violation 1971 1971 Subsequent 

Violation: 

Maximum 

$84,264

Penalty for violating any provision 

of this chapter, any regulation 

issued under this chapter.

30 U.S.C. 1462(a), Deep 

Seabed Hard Mineral 

Resources Act

Violation 1980 1980 Maximum 

$72,718

Penalty for violations described in 

section 9151, Prohibited Acts.

42 U.S.C. 9152(c), 

Ocean Thermal Energy 

Conversion Act of 1980

Violation 1980 1980 Maximum 

$72,718

Penalty for selling Billfish or 

Billfish products.

16 U.S.C. 1827a, Billfish 

Conservation Act of 2012

Violation 1990 1990 Maximum 

$184,7671

Penalty for refusing inspection 

or violating any provision of this 

chapter or the regulations issued 

under this chapter.

16 U.S.C. 7407(b), 

Port State Measures 

Agreement Act of 2015

Violation 1990 1990 Maximum 

$184,7671

Penalties for violations of any 

provisions under this chapter, 

see section 1858 of this title.

16 U.S.C. 1826g(f), High 

Seas Driftnet Fishing 

Moratorium Protection Act

Violation 1990 1990 Maximum 

$184,7671

Penalty for violating any of 15 

prohibited acts listed in section 

7706. See section 1858 of this 

title.

16 U.S.C. 7705, Ensuring 

Access to Pacific Fisheries Act

Violation 1990 1990 Maximum 

$184,7671

Penalty for violating any of 15 

prohibited acts listed in section 

7806. See section 1858 of this 

title.

16 U.S.C. 7805, Ensuring 

Access to Pacific Fisheries Act

Violation 1990 1990 Maximum 

$184,7671

1 This National Oceanic and Atmospheric Administration maximum CMP, as prescribed by law, is the maximum CMP per 16 U.S.C. 1858(a), 

Magnuson-Stevens Fishery Conservation and Management Act CMP.

(continued from previous page)

FY 2018 AGENCY FINANCIAL REPORT 155

CIVIL MONETARY PENALTIES’ ADJUSTMENTS FOR INFLATION
GRANTS OVERSIGHT AND NEW EFFICIENCY (GONE) ACT 

REPORTING OF UNCLOSED GRANT AND COOPERATIVE 

AGREEMENT AWARDS FOR WHICH THE PERIOD OF 

PERFORMANCE HAS EXPIRED MORE THAN TWO YEARS

The Office of Management and Budget (OMB) Management Procedures Memorandum 2016-04, GONE Act Reporting of 

Unclosed Grant and Cooperative Agreement Awards For Which the Period of Performance Has Expired More Than Two Years 

(August 15, 2016), requires the following information to be reported in the Other Information section of the Department’s 

FY 2018 Agency Financial Report:

a. A brief high-level discussion on a subset of GONE Act information, including:

i. A summary table of the total number of federal grant and cooperative agreement awards and balances for which 

closeout has not yet occurred but for which the period of performance has elapsed more than two years—with 

zero dollar balances, or with undisbursed dollar balances. 

ii. A brief narrative of the progress made in closing grant and cooperative agreement awards listed in the FY 2017 

GONE Act submission, challenges that remain, and any remaining actions to be taken.

The table below summarizes the total number of the Department’s grant and cooperative agreement awards and balances, 

as of September 30, 2018, for which closeout has not yet occurred but for which the period of performance has lapsed 

more than two years with zero dollar balances, or with undisbursed dollar balances as of September 30, 2018, and the 

related dollar amounts of undisbursed balances.

(Numbers of Agreements in Actual Amounts; Dollars in Thousands)

Period of Performance has Expired as of September 30, 2018

Category

Closeout Lapse of 

more than Two Years 

and up to Three Years

Closeout Lapse of 

more than Three Years 

and up to Five Years 

Closeout Lapse of 

more than Five Years

Number of Grants/Cooperative Agreements 

with Zero Dollar Balances – 1 3

Number of Grants/Cooperative Agreements 

with Undisbursed Balances – 1 –

Total Dollar Amount of Undisbursed Balances $ – $ 40 $ –

In FY 2018, the Department successfully closed 11 of the 16 grants and cooperative agreements that were open as of 

September 30, 2017. Additionally, the total amount of undisbursed dollar balances was reduced from $134 thousand as of 

September 30, 2017 to $40 thousand as of September 30, 2018. The remaining 5 grant and cooperative agreements that 

are not yet closed are delayed due to an audit resolution dispute and the completion of debt collection. 

156 FY 2018 AGENCY FINANCIAL REPORT

GRANTS OVERSIGHT AND NEW EFFICIENCY (GONE) ACT REQUIREMENTS
UNDISBURSED BALANCES IN EXPIRED GRANT ACCOUNTS

Undisbursed balances in expired grant accounts include budget authority that is no longer available for new obligations 

but is still available for disbursement. The period of disbursement lasts for five years after the last unexpired year 

unless the expiration period has been lengthened by legislation. Specifically, one may not incur new obligations 

against expired budget authority, but one may liquidate existing obligations by making disbursements (section 20.4(c), 

Period of availability of budget authority, of the Office of Management and Budget’s (OMB) Circular A-11 Revised dated 

June 29, 2018, Preparation, Submission, and Execution of the Budget).

OMB Memorandum M-16-18, Financial and Performance Reporting on Undisbursed Balances in Expired Grant Accounts 

(July 15, 2016), requires the following information to be reported in the Department’s annual Agency Financial Report and 

annual performance plans/budgets for FY 2018 and subsequent fiscal years regarding undisbursed balances in expired 

grant accounts:

(1) In the preceding three fiscal years, provide the total number of expired grant accounts with undisbursed balances 

for the Department and the total amount that has not been obligated to a specific grant or project remaining in 

the accounts;

(2) Details on future action the Department will take to resolve undisbursed balances in expired grant accounts;

(3) The method that the Department uses to track undisbursed balances in expired grant accounts; and

(4) Process for identification of undisbursed balances in expired grant accounts that may be returned to the 

U.S. Department of the Treasury (Treasury). 

Six bureaus report information under this guidance: Census Bureau, International Trade Administration (ITA), Minority 

Business Development Agency (MBDA), National Institute of Standards and Technology (NIST), National Oceanic and 

Atmospheric Administration (NOAA), and National Telecommunications and Information Administration (NTIA). NIST’s 

Grants Management Division (GMD) manages all grants awarded by NIST as well as a portion of those grants funded 

by NTIA. NOAA’s GMD manages all grants awarded by NOAA as well as those grants awarded by the Census Bureau, 

ITA and MBDA and the remainder of the NTIA awards. 

Both NIST GMD and NOAA GMD have teams that are specifically responsible for reviewing, closing out, and deobligating 

undisbursed balances in expired awards. As part of their routine grants management responsibilities, these offices review 

reports that identify expired awards with undisbursed balances of funds as well as expired awards that may have existing 

audit findings or other unresolved matters which require further coordination prior to deobligating funds and closing out 

an award.

During its reviews of expired awards with undisbursed obligations, NIST GMD reconciles the recipient’s Standard 

Form (SF) 425, Federal Financial Report, against the amount of funding remaining in the payment system and in NIST’s 

financial system. NIST GMD works with all relevant parties to resolve any discrepancies prior to the deobligation of funds 

and begins the deobligation process once it is determined that the recipient is not owed any further federal funding and 

that all relevant issues are resolved. The NIST grants specialist actively checks NIST’s Grant Management Information 

System (GMIS) for awards eligible for closeout, and begins closing awards with the largest de-obligated funded awards first. 

NIST has a Grants Management Officer (GMO) assigned to oversee the closeout process. This individual routinely obtains 

FY 2018 AGENCY FINANCIAL REPORT 157

UNDISBURSED BALANCES IN EXPIRED GRANT ACCOUNTS
reports from GMIS to identify any awards that have expired and that are eligible for the closeout process. Additionally, these 

reports identify if any undisbursed obligations remain in the award account. The GMO also collects regular status updates 

on all the awards in the closeout process, and advises on appropriate next steps to resolve any outstanding issues that 

may be preventing a deobligation or the closeout of an award. The status updates are reconciled against reports run from 

GMIS to help ensure that no awards warranting attention are missed during the process. If there is an unobligated balance, 

NIST’s finance office uses the budget account to determine what unobligated funds, if any, may be returned to Treasury. 

Any funds that are returned to Treasury are typically returned to Treasury upon the budget account entering the cancelled 

phase. NIST has made significant progress in reducing the backlog of closeouts and deobligations in the past three fiscal 

years; any aged closeouts are being tracked and reported to the Department’s GMD to help ensure progress is made. 

NOAA GMD obtains and reviews monthly an Undisbursed Funds Chart which is used to track expired grant awards with 

undisbursed obligations. The monthly Undisbursed Funds Charts are also provided to the Department’s GMD. Upon review 

and acceptance of the recipient’s SF 425, NOAA GMD completes and submits to NOAA’s finance office a deobligation 

request. After deobligation is completed, NOAA’s finance office identifies the applicable budget account and determines 

what, if any, unobligated funds may be returned to Treasury. NOAA will continue to expedite deobligations and closeout of 

expired to the maximum extent within 90 days from NOAA receipt of a recipient’s final SF 425. Recipients have 90 days 

after award expiration to drawdown remaining funds for expenses incurred during the award period.

Each bureau submits a monthly report to the Department’s GMD detailing the current status of expired awards—number 

of expired awards not yet closed and undisbursed balances of funds in these awards. The Department’s GMD consolidates 

these reports and presents the information during the Department’s bi-monthly Grants Council meetings for review and 

analysis. Over the past three fiscal years, numerous lessons learned and business process improvements have been 

identified and implemented across the Department’s grants offices. A direct impact of the Grants Council’s oversight has 

been the Department’s significant progress in reducing the backlog of closeouts and deobligations.

The table on the following page presents, for each budget account that had undisbursed obligations for expired grant awards 

as of September 30, 2018 (last day of FY 2018), September 30, 2017 (last day of FY 2017), or September 30, 2016 (last day 

of FY 2016), the dollar amount of undisbursed obligations for expired grant awards as of September 30, 2018, 2017, and 

2016; the dollar amount of the total unobligated balance for the budget account as of September 30, 2018, 2017, and 2016; 

and, for each bureau reported in this table, the total number of expired grant awards with undisbursed obligations as of 

September 30, 2018, 2017, and 2016.

158 FY 2018 AGENCY FINANCIAL REPORT

UNDISBURSED BALANCES IN EXPIRED GRANT ACCOUNTS
(Numbers in Actual Amounts; Dollars in Thousands)

Bureau

Budget Account As of September 30, 2018 As of September 30, 2017 As of September 30, 2016

Number Title

Number 

of Expired 

Grant 

Awards with 

Undisbursed 

Obligations

Undisbursed 

Obligations 

for Expired 

Grant Awards

Total 

Unobligated 

Balance 

in Budget 

Account

Number 

of Expired 

Grant 

Awards with 

Undisbursed 

Obligations

Undisbursed 

Obligations 

for Expired 

Grant Awards

Total 

Unobligated 

Balance 

in Budget 

Account

Number 

of Expired 

Grant 

Awards with 

Undisbursed 

Obligations

Undisbursed 

Obligations 

for Expired 

Grant Awards

Total 

Unobligated 

Balance 

in Budget 

Account

ITA 1250 Operations and 

Administration, ITA, Commerce 5 $ 34 $ 57,719 2 $ 30 $ 69,579 8 $ 863 $ 58,931 

MBDA 0201 Minority Business 

Development, MBDA 49 13,739 5,353 2 72 5,867 60 8,945 6,795 

NIST 0500 Scientific and Technical 

Research and Services, NIST 1,679 29,609 1,037 10,268 2,359 21,818 

0513 Wireless Innovation Fund, 

NIST – 195,107 – 239,241 1 275,341

0515 Construction of Research 

Facilities, NIST – 266,727 – 47,607 – 24,216

0525 Industrial Technology 

Services, NIST 981 8,506 953 8,368 8,616 43,243 

0549 Scientific and Technical 

Research and Services, Recovery Act, NIST, Commerce – 113 – 113 – –

4650 Working Capital Fund, NIST 210 133,548 308 117,090 7,112 90,168 

Total 312 2,870 633,610 157 2,298 422,687 175 18,088 454,786 

NOAA 1450 Operations, Research, and 

Facilities, NOAA 17,041 466,461 15,043 344,422 11,589 379,957 

1451 Expenses, Pacific Coastal 

Salmon Recovery, NOAA 159 793 254 163 2 434 

1460 Procurement, Acquisition, 

and Construction, NOAA, Commerce 272 502,201 1,136 398,645 83 264,553 

(continued on next page)

FY 2018 AGENCY FINANCIAL REPORT 159

UNDISBURSED BALANCES IN EXPIRED GRANT ACCOUNTS
(Numbers in Actual Amounts; Dollars in Thousands)

Bureau

Budget Account As of September 30, 2018 As of September 30, 2017 As of September 30, 2016

Number Title

Number 

of Expired 

Grant 

Awards with 

Undisbursed 

Obligations

Undisbursed 

Obligations 

for Expired 

Grant Awards

Total 

Unobligated 

Balance 

in Budget 

Account

Number 

of Expired 

Grant 

Awards with 

Undisbursed 

Obligations

Undisbursed 

Obligations 

for Expired 

Grant Awards

Total 

Unobligated 

Balance 

in Budget 

Account

Number 

of Expired 

Grant 

Awards with 

Undisbursed 

Obligations

Undisbursed 

Obligations 

for Expired 

Grant Awards

Total 

Unobligated 

Balance 

in Budget 

Account

NOAA (continued)

2055 Fisheries Disaster 

Assistance, NOAA, Commerce $ 59 $ 219,858 $ – $ 78 $ 159 $ –

4316 Damage Assessment and 

Restoration Revolving Fund, NOAA 35 137,657 1 119,678 2,686 118,529

5139 Promote and Develop 

Fishery Products and Research Pertaining to American Fisheries, NOAA 395 2,089 228 3,706 455 2,414

5284 Limited Access System 

Administration Fund, NOAA 608 17,777 – 16,197 52 13,731

5362 Environmental 

Improvement and Restoration Fund, NOAA 1,285 – – 8,222 1,298 –

5439 Western Pacific 

Sustainable Fisheries Fund, NOAA 240 – – 17 – 418

Total 542 20,094 1,346,836 357 16,662 891,128 292 16,324 780,036

NTIA 0550 Salaries and Expenses, 

NTIA, Commerce 144 35,439 9 30,874 – 39,423

0551 Public Telecommunication 

Facilities, Planning and Construction, NTIA, Commerce 39 855 39 852 39 903

0554 Broadband Technology 

Opportunities Program, Recovery Act, NTIA, Commerce – 169,792 – 169,784 80,291 168,850

4358 Network Construction 

Fund, NTIA, Commerce 1,012 40,329 154 5,539,480 – –

Total 4 1,195 246,415 7 202 5,740,990 11 80,330 209,176

Total 912 $ 37,932 $2,289,933 525 $ 19,264 $ 7,130,251 546 $ 124,550 $1,509,724

(continued from previous page)

160 FY 2018 AGENCY FINANCIAL REPORT

UNDISBURSED BALANCES IN EXPIRED GRANT ACCOUNTS
A AFR Agency Financial Report

APG Agency Priority Goal

APPR Annual Performance Plan and Report

ASAP Automated Standard Application for Payments (Treasury)

ASR Annual Strategic Review

B BAR Budget and Accrual Reconciliation

BEA Bureau of Economic Analysis

BIS Bureau of Industry and Security

BRS Blended Retirement System (NOAA Corps)

C CBS Commerce Business Systems

CEIP Coastal Energy Impact Program (a NOAA direct loan program)

CFO Chief Financial Officer

CFO/ASA Chief Financial Officer and Assistant Secretary for Administration (DM)

CFR Code of Federal Regulations

CMP Civil Monetary Penalty

COTS Commercial off-the-shelf [software]

CPI Consumer Price Index

CSTARS Commerce Standard Acquisition and Reporting System

CSRS Civil Service Retirement System (OPM)

CTP Corporation for Travel Promotion

D DATA Act Digital Accountability and Transparency Act of 2014

DM Departmental Management 

DM&R Deferred Maintenance and Repairs

DMF Death Master File (Social Security Administration)

DOI U.S. Department of the Interior

DOL U.S. Department of Labor

GLOSSARY OF ACRONYMS

Abbreviation Title

FY 2018 AGENCY FINANCIAL REPORT 161

GLOSSARY OF ACRONYMS
E E2 Employee Travel System, version 2 or E2 Solutions 

(travel management system) 

EDA Economic Development Administration 

EPP Educational Partnership Program (NOAA)

ERM Enterprise Risk Management

ES Enterprise Services (DM)

ESA Economics and Statistics Administration

F FACE Financial Assistance Committee for E-Government

FASAB Federal Accounting Standards Advisory Board

FCA Facility Condition Assessment (NIST and NOAA)

FCC Federal Communications Commission

FCCS Federal Claims Collections Standards

FCI Facility Condition Index (DM&R)

FDI Foreign Direct Investment

FECA Federal Employees’ Compensation Act

FEGLI Federal Employees’ Group Life Insurance Program (OPM)

FEHB Federal Employees Health Benefit Program (OPM)

FERS Federal Employees Retirement System (OPM)

FFMIA Federal Financial Management Improvement Act of 1996

FirstNet First Responder Network Authority (an independent 

authority within NTIA)

FKNMS Florida Keys National Marine Sanctuary (NOAA)

FMFIA Federal Managers’ Financial Integrity Act of 1982

FVOG Fishing Vessel Obligation Guarantee Program 

(a NOAA loan guarantee program)

FWC Future Workers’ Compensation

FY Fiscal Year ended September 30

G G-Invoicing Government Invoicing System (Treasury)

GAAP Generally Accepted Accounting Principles

GAO U.S. Government Accountability Office

Abbreviation Title

162 FY 2018 AGENCY FINANCIAL REPORT

GLOSSARY OF ACRONYMS
Abbreviation Title

GCCMIF Global Climate Change Mitigation Incentive Fund (EDA)

GEMS Grants Enterprise Management Solution

GMD Grants Management Division

GMIS Grant Management Information System (NIST)

GMO Grants Management Officer (NIST)

GOES Geostationary Operational Environmental Satellites (NOAA)

GONE Act Grants Oversight and New Efficiency Act of 2016

GPRA Government Performance and Results Act of 1993

GPRAMA Government Performance and Results Modernization Act of 2010 

Grants Manual Grants and Cooperative Agreements Manual (Department of Commerce)

GSA U.S. General Services Administration

H HCOP Human Capital Operating Plan (OMB)

HR Human Resources

I IFQ Individual Fishing Quota Loans (a NOAA direct loan program)

IP Intellectual Property

IPIA Improper Payments Information Act of 2002

ISO Information Services Office (NIST)

IT Information Technology

ITA International Trade Administration

IUS Internal Use Software

J JPSS Joint Polar Satellite System (NOAA)

M MBDA Minority Business Development Agency

MD&A Management’s Discussion and Analysis

MSI Minority Serving Institutions (EPP)

N NCDC National Climatic Data Center (NOAA)

NERR National Estuarine Research Reserves (NOAA)

NESDIS National Environmental Satellite, Data, and Information Service (NOAA)

NFC National Finance Center (U.S. Department of Agriculture)

FY 2018 AGENCY FINANCIAL REPORT 163

GLOSSARY OF ACRONYMS
NGGPS Next Generation Global Prediction System (NOAA)

NHTSA National Highway Traffic Safety Administration 

(U.S. Department of Transportation)

NIIMBL National Institute for Innovation in Manufacturing Biopharmaceuticals

NIST National Institute of Standards and Technology

NMFS National Marine Fisheries Service (NOAA)

NOAA National Oceanic and Atmospheric Administration

NOS National Ocean Service (NOAA)

NPSBN Nationwide Public Safety Broadband Network

NTIA National Telecommunications and Information Administration

NTIS National Technical Information Service

NWS National Weather Service (NOAA)

O OAM Office of Acquisition Management (DM)

OAR Office of Oceanic and Atmospheric Research (NOAA)

OFM Office of Financial Management (DM)

OIG Office of Inspector General (DM)

OMAO Office of Marine and Aviation Operations (NOAA)

OMB Office of Management and Budget

OPM U.S. Office of Personnel Management

OS Office of the Secretary (DM)

P P3 Public–Private Partnership

PAR Position Action Request

PIFSC Pacific Islands Fisheries Science Center (NOAA)

PP&E Property, Plant, and Equipment

R R&D Research and Development

RAMI Revitalize American Manufacturing and Innovation Act of 2014

RPPR Research Performance Progress Report

RT&C Research Terms and Conditions

Abbreviation Title

164 FY 2018 AGENCY FINANCIAL REPORT

GLOSSARY OF ACRONYMS
Abbreviation Title

S S&E Salaries and Expenses (DM)

SAM System for Award Management (GSA)

SBR Combined Statement of Budgetary Resources

SCNP Consolidated Statement of Changes in Net Position

SF 425 Standard Form 425, Federal Financial Report

SFFAS Statement of Federal Financial Accounting Standards (FASAB)

SMS Sustainment Management System

SPRI Strategic Plan Review and Implementation

ST&C Standard Terms and Conditions

T TIBCO The Information Bus Company

TMC Top Management Challenges

TPA Travel Promotion, Enhancement, and Modernization Act of 2014

Treasury U.S. Department of the Treasury

TROR Treasury Report on Receivables

TSP Thrift Savings Plan

U USDA U.S. Department of Agriculture

USPTO U.S. Patent and Trademark Office

W WCF Working Capital Fund (DM)

WIPO World Intellectual Property Organization

X XML Extensible Markup Language

FY 2018 AGENCY FINANCIAL REPORT 165

GLOSSARY OF ACRONYMS
THIS PAGE LEFT INTENTIONALLY BLANK

166 FY 2018 AGENCY FINANCIAL REPORT

GLOSSARY OF ACRONYMS
CERTIFICATE OF EXCELLENCE

IN ACCOUNTABILITY REPORTING

I

n May 2018, the U.S. Department of 

Commerce received the Certificate 

of Excellence in Accountability 

Reporting (CEAR) from the Association 

of Government Accountants (AGA) for 

its Fiscal Year 2017 Agency Financial 

Report. The CEAR Program was 

established by the AGA, in conjunction 

with the Chief Financial Officers Council 

and the U.S. Office of Management and 

Budget, to improve the effectiveness 

of financial and program accountability 

reporting. 

T

his 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, Office of Public 

Affairs, and Office of Facilities and Environmental Quality/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

Certificate of Excellence in

Accountability Reporting®

in recognition of outstanding effort in preparing the 

Agency Financial Report for fiscal year 2017

presented to the

Ann M. Ebberts, MS, PMP

Chief Executive Officer, AGA

Diane L. Dudley, CGFM, CPA

Chair, CEAR Board

U.S. Department of Commerce
U.S. DEPARTMENT OF COMMERCE

1401 Constitution Avenue NW

Washington, DC 20230

(202) 482-2000

www.commerce.gov