U.S. Department of Labor

FY 2009 Performance and Accountability Report

FY 2011 Agency Financial Report     3

Table of Contents

Message from the Secretary of Labor.......................................................................................................5

Management’s Discussion and Analysis...................................................................................................9

Program Performance Overview............................................................................................................................ 13

American Recovery and Reinvestment Act of 2009 ............................................................................................... 23

Financial Performance Overview............................................................................................................................ 24

Management Assurances ....................................................................................................................................... 30

Financial Section ....................................................................................................................................31

Message from the Chief Financial Officer .............................................................................................................. 33

Independent Auditors’ Report................................................................................................................................ 34

Annual Financial Statements.................................................................................................................................. 65

Principal Financial Statements and Notes........................................................................................................ 67

Required Supplementary Stewardship Information ...................................................................................... 129

Required Supplementary Information ........................................................................................................... 137

Other Accompanying Information........................................................................................................167

Top Management Challenges............................................................................................................................... 169

Management’s Response to the 2011 Top Management Challenges.................................................................. 190

Summary of Financial Statement Audit and Management Assurances............................................................... 194

Improper Payments Reporting Details................................................................................................................. 195

Open Government Links....................................................................................................................................... 221

Acronyms.............................................................................................................................................................. 222

This report can be found on the Internet at www.dol.gov/dol/aboutdol/.

If you have questions or comments regarding this report, contact:

Office of the Chief Financial Officer

U.S. Department of Labor

200 Constitution Avenue, NW, Room S‐4030

Washington, DC  20210

202‐693‐6800

The photographs in this publication were furnished by numerous individuals. All photographs are proprietary and

prior permission from the photographer is required for any use or reproduction of the photographs.  All references

to non‐governmental companies or organizations, their services, products or resources in this report are offered for

informational purposes and should not be construed as an endorsement by the Department of Labor of any of the

companies or organizations, or their services, products or resources.  The Department of Labor does not endorse,

takes no responsibility for, and exercises no control over non‐governmental organizations’ Web sites mentioned in

this report, or their views or contents; nor does it vouch for the accuracy of the information contained on other

organizations’ Web sites.

FY 2011 Agency Financial Report     5

Message from the Secretary of Labor  

November 14, 2011

I am pleased to submit the Department of Labor’s Agency Financial Report (AFR)

for Fiscal Year 2011. This report shows how we managed our resources, highlights

our major accomplishments, and outlines our plans to address the challenges

ahead.   This AFR is an alternative to the Performance and Accountability Report

produced in prior years. Information on program performance will be included in

the Department’s Annual Performance Report (APR), submitted as part of DOL’s

Congressional Budget Justification in February 2012. The APR will be posted on

DOL’s Web site at www.dol.gov/sec/media/reports/.

Even in challenging economic times, the Department is constantly evolving to help

meet the needs of the American people, all while working toward my vision of

good jobs for everyone.    DOL remains committed to supporting the workforce’s

needs, whether someone is looking for a job, has a job, or has retired.  Through the

Department’s many programs and services, more than 17,000 DOL employees

nationwide are hard at work getting America back to work.  We are doing this through several major initiatives,

which include the following:

Getting America Back to Work

The Department is committed to promoting employment opportunities and training in vulnerable communities,

supporting the employment needs of our veterans, fostering innovative new ways to deliver services at lower costs,

and preparing the workforce for new employment opportunities in the “green” economy. You see this commitment

at the Electrical Joint Apprenticeship Training Center in San Jose, California, where trainees learn to install and

maintain advanced lighting control systems and obtain certification, or at the 100 hiring fairs held throughout the

country during FY 2011 as part of the Hiring our Heroes initiative.    Furthermore, the Department launched

mynextmove.org, a Web site designed to help job seekers identify career paths.  DOL also continues to promote its

YouthBuild program, ensuring younger workers can gain hands‐on job experience while completing their education.  

Other initiatives include focusing on the expansion of employer‐linked training, on‐the‐job training implementation

grants, and apprenticeship expansion.

Keeping Workers Safe

We are strengthening our enforcement programs to ensure that wages and worker rights are protected and that

safe working conditions exist for the entire workforce.  We are giving our inspectors the tools they need to ensure

that workers are safe when providing for their families. As an example, the Department proposed a rule requiring

that continuous mining machines used in underground coal mines be equipped with proximity detection systems.  

When installed on mining machinery, proximity detection can detect the presence of personnel or other machinery

within a certain distance. These systems can be programmed to send warning signals and stop machine movement

when certain areas are breached, thus protecting worker lives.    Additionally, we have made significant

enhancements to our on‐line enforcement database to improve the public’s access to and understanding of our

enforcement activities.  We also developed a heat safety mobile application that allows workers and supervisors to

monitor the heat index for their work site. Based on the heat index, the application displays the level of risk to

outdoor workers and provides reminders about the protective measures that should be taken to protect them from

heat‐related illness.
Message from the Secretary of Labor

6    United States Department of Labor

Helping Workers Provide for Their Families and Keep What They Earn

We continue to work to ensure that employees receive the wages and benefits they earn, both while employed and

after retirement. We have expanded our regional Wage and Hour Division presence to improve communication

with stakeholders and to help coordinate with community‐based resources to support enforcement initiatives.  

Health and pension benefits need to be protected, and we are working to reduce inequities in the workforce that

result from discrimination.  DOL will defend employee rights under the law, and the Department wants companies

that play by the rules to know that we will take action against those that use illegal tactics to gain an unfair

competitive advantage. One area that demonstrates DOL’s commitment is protecting migrant workers. In

September, along with the ambassadors from the Dominican Republic, Costa Rica, and El Salvador, I signed

declarations that will help protect the labor rights of workers from those countries while they are employed in the

United States. These countries joined representatives from Mexico, Nicaragua, and Guatemala, who previously

signed agreements with the Department.   

Ensuring Program Effectiveness, Improving Efficiency, and Increasing Transparency

We are striving to provide additional outputs with fewer tax dollars to ensure that the public is receiving value for

the services we are delivering.  To do that, we are conducting comprehensive evaluations of our major programs to

build our knowledge of which strategies and approaches work and to ensure that resources are invested in high‐

impact areas.   We are reducing travel costs, incorporating renewable energy to reduce real property costs, and

developing electronic data‐collection systems to reduce the need for paper forms.    I invite you to explore our

Open.Gov page on the DOL Web site. Here you will find the latest data sets, links to ways you can connect with

Department staff, and information about how you can provide input that will make our Web site, and our work,

even better and more engaging.    

Management Assurances

To lead in information technology and transparency, we implemented a new core financial management system in

January 2010. This state‐of‐the‐art financial management system allows the Department to leverage technology to

support financial analysis and real‐time decision‐making. Ultimately, the new system allows us to provide higher

quality service, control and reduce costs, and improve efficiency and effectiveness.   As I reported last year, the

transition to the new system was challenging; however, we ultimately received an unqualified audit opinion on the

FY 2010 financial statements in May 2011.   

Having just completed our first full fiscal year with the new system, I can proudly report that we have again

received an unqualified opinion on our financial statements for the fiscal year ending September 30, 2011. I am also

pleased to provide an unqualified statement of assurance regarding the Department’s internal controls, as required

by the Federal Managers Financial Integrity Act (FMFIA) of 1982 and Office of Management and Budget Circular No.

A‐123, Management’s Responsibility for Internal Control.   We are confident that the financial and summary

performance data included in this AFR are complete and reliable in accordance with federal requirements.

Moving forward, the Department is committed to working on weaknesses in internal controls concerning financial

reporting noted by the Inspector General and the auditors. Further information on this, as well as the results of

management’s assessment of internal controls and compliance of financial management systems, pursuant to

FMFIA and the Federal Financial Management Improvement Act of 1996 (FFMIA), are discussed in the

Management’s Discussion and Analysis section of this report.  

Conclusion

Through our commitment to transparency and openness, the Department wants to show what we are doing to get

America working. Therefore, it is my pleasure to submit the DOL’s Agency Financial Report for Fiscal Year 2011 to

Congress and the American people. It is important to remember that this report only provides a snapshot in time.

At the end of this report, there is a list of links that will allow you to stay up‐to‐date with the Department’s latest
Message from the Secretary of Labor

FY 2011 Agency Financial Report      7

news. I invite you to engage with us in real‐time by following us on Twitter, Facebook, and YouTube for the newest

information. With all the exciting work we are doing, I look forward to the coming year and engaging stakeholders

through our effort to advance the Department of Labor’s mission. Now, let’s get America back to work!

HILDA L. SOLIS

U.S. Secretary of Labor

FY 2011 Agency Financial Report     9

Management’s Discussion and Analysis

(Unaudited)

FY 2011 Agency Financial Report     11

Agency Financial Report

The Department of Labor's annual Agency Financial Report (AFR) provides fiscal and high‐level performance results

that enable the President, Congress, and American people to assess the Department’s accomplishments for each

fiscal year (October 1 through September 30). This report provides an overview of programs, accomplishments,

challenges, and management’s accountability for the resources entrusted to the Department. The report is

prepared in accordance with the requirements of Office of Management and Budget (OMB) Circular A‐136,

Financial Reporting Requirements.

Mission Statement and Organizational Structure1

DOL’s mission remains as relevant today as at the Department’s founding in 1913: to foster, promote and develop

the welfare of the job seekers, wage earners and retirees of the United States; improve working conditions;  advance

opportunities for profitable employment; and assure work related benefits and rights.

To accomplish this mission, DOL is organized into the program agencies and offices depicted in the chart below,

which administer the various statutes and programs for which the Department is responsible. The major program

agencies, each headed by an Assistant Secretary, Commissioner, or Director, are:

Employment and Training Administration (ETA) 2 Office of Labor‐Management Standards (OLMS) 3

Veterans’ Employment and Training Service (VETS) Women’s Bureau (WB)

Office of Federal Contract Compliance Programs (OFCCP) 3 Office of Disability Employment Policy (ODEP)

Occupational Safety and Health Administration (OSHA) Bureau of International Labor Affairs (ILAB)

Wage and Hour Division (WHD) 3 Office of Workers' Compensation Programs (OWCP) 3

Employee Benefits Security Administration (EBSA) Bureau of Labor Statistics (BLS)

Mine Safety and Health Administration (MSHA)

Bureau 

Bureau 

1 The Pension Benefit Guaranty Corporation (PBGC), a Federal corporation under the chairmanship of the Secretary of Labor, is designated by the Office of

Management and Budget (OMB) as a separate reporting entity for financial statement purposes, and is not included as part of the DOL reporting entity in this

AFR.

2 The Consolidated Appropriations Act of 2010 transferred the Job Corps program and its administrative funding from the Office of the Secretary back to ETA,

to better integrate the program with other employment and training programs overseen by ETA. 3

In FY 2010, DOL dissolved the Employment Standards Administration (ESA) and established its four component offices/divisions, the Office of Federal Contract

Compliance Programs, the Office of Labor‐Management Standards, the Office of Workers’ Compensation Programs, and the Wage and Hour Division, as stand‐

alone agencies reporting directly to the Office of the Secretary. This reorganization was reflected in DOL’s FY 2011 budget, in which funding previously

requested for ESA was requested separately for these four component agencies.  However, all applicable appropriations occurred under the previous ESA

structure. Consequently, ESA’s four component agencies are referenced in the AFR’s Program Performance Overview, whereas references to ESA are retained

in the financial section of this report.
Management’s Discussion and Analysis

(Unaudited)

12    United States Department of Labor   

________bbb__ ______ 

United States Department of Labor

For text links and additional information, see our Find It! By Organization site at

www.dol.gov/dol/organization.htm
(Unaudited)

FY 2011 Agency Financial Report     13

Program Performance Overview

The Program Performance Overview offers an opportunity to present performance goals, objectives and results and

provide a discussion of key performance measures.  This section presents an aspect of performance that can be

related to spending as reported in the following Financial Section. Outcome data reported under the Government

Performance and Results Act (GPRA) are included in the APR, which will be published in February 2012 with the FY

2013 Congressional Budget Justification.  A third report, the Summary of Performance and Financial Information for

Fiscal Year 2011, will be available on February 15, 2012.

In FY 2010, the Department updated its five‐year Strategic Plan (www.dol.gov/_sec/stratplan/) through a

comprehensive effort guided by five strategic goals and 14 outcome goals supporting the Secretary’s vision of good

jobs for everyone.   These goals are presented in the following table:  

STRATEGIC GOAL 1: Prepare workers for good jobs and ensure fair compensation.

1.1. Increase workers’ incomes and narrow wage and income inequality.

1.2. Assure skills and knowledge that prepare workers to succeed in a knowledge‐based     

economy, including high growth and emerging industry sectors like “green” jobs.

1.3. Help workers who are in low‐wage jobs or out of the labor market find a path into

middle‐class jobs.

1.4. Help middle‐class families remain in the middle class.

1.5. Secure wages and overtime.

1.6. Foster acceptable work conditions and respect for workers’ rights in the global

economy to provide workers with a fair share of productivity and protect vulnerable

people.

STRATEGIC GOAL 2: Ensure workplaces are safe and healthy.

2.1. Secure safe and healthy workplaces, particularly in high‐risk industries.

STRATEGIC GOAL 3: Assure fair and high quality work‐life environments.

3.1. Break down barriers to fair and diverse work‐places so that every worker’s

contribution is respected.

3.2. Provide workplace flexibility for family and personal care‐giving.

3.3. Ensure worker voice in the workplace.

STRATEGIC GOAL 4: Secure health benefits and, for those not working, provide

income security.

4.1. Facilitate return to work for workers experiencing work‐place injuries or illnesses

who are able to work.

4.2. Ensure income support when work is impossible or unavailable.

4.3. Improve health benefits and retirement security for all workers.

STRATEGIC GOAL 5: Produce timely and accurate data on the economic conditions

of workers and their families.

5.1. Provide sound and impartial information on labor market activity, working

conditions and price changes in the economy for decision making, including support

for the formulation of economic and social policy affecting virtually all Americans.

This goal framework signals the Secretary’s commitment to leading a stronger, more effective Department of Labor.  

An important innovation of the goal structure is the Department’s commitment to measuring activities intended to

positively impact the day‐to‐day lives of working families and use them to track progress in implementation of the
Management’s Discussion and Analysis

(Unaudited)

14     United States Department of Labor   

outcomes and strategic goals listed above.  The table below organizes DOL program agencies into five categories.  

This report provides FY 2011 performance data for activities that support the Secretary’s vision from each agency

listed here.    The Department’s mission is also supported by administrative, policy, legal, public affairs, and

congressional liaison offices.

Employment and Training

Employment and Training Administration (ETA)

Veterans’ Employment and Training Service (VETS)

Worker Protection

Office of Federal Contract Compliance Programs (OFCCP)

Occupational Safety and Health Administration (OSHA)

Wage and Hour Division (WHD)

Employee Benefits Security Administration (EBSA)

Mine Safety and Health Administration (MSHA)

Office of Labor‐Management Standards (OLMS)

Policy

Women’s Bureau (WB)

Office of Disability Employment Policy (ODEP)

Bureau of International Labor Affairs (ILAB)

Benefits

Office of Workers’ Compensation Programs (OWCP)

Federal‐State Unemployment Insurance (UI) System (administered by ETA)

Statistics

Bureau of Labor Statistics (BLS)

The section that follows presents a brief description of the programs administered by each agency and the most

recent results for key output measures.  The Department tracks performance using over 200 such measures; the

measures highlighted here were selected as most representative of agencies’ activities from resource allocation and

strategic perspectives.

EMPLOYMENT & TRAINING

Employment and Training Administration (ETA)

ETA provides high quality employment assistance, labor market information and job training through the

administration of programs authorized by the Workforce Investment Act of 1998 (WIA) for adults, youth, dislocated

workers and other targeted populations.    ETA also administers Job Corps; Trade Adjustment Assistance (TAA);

Employment Services (ES) authorized under the Wagner‐Peyser Act; Foreign Labor Certification activities; the

Community Service Employment for Older Americans program (CSEOA); and Apprenticeship programs.   ETA helps

achieve the Secretary’s Strategic Goal 1, to prepare workers for good jobs and ensure fair compensation and the

associated outcome goals. Numerous measures help ETA track outputs for these programs; below are descriptions

and available data for just a few:

 Number of risk assessments conducted for Grant Programs (WIA, ES, and CSEOA) – Federal staff conduct risk

assessments of grantee work plans and award documents to ensure procedures and performance expectations

are clearly outlined and to assess grantees’ ability to carry out all tasks.  Risk assessments are conducted at the

onset of a grant and documented in ETA’s Grants e‐Management System (GEMS).  ETA conducted 2,272 risk
    Management’s Discussion and Analysis

(Unaudited)

FY 2011 Agency Financial Report     15

assessments in FY 2010 and 3,004 risk assessments in FY 2011 – a 32% increase that corresponds to the

Department’s investments in grants designed to expand credential attainment.

 Average petition processing time in days for TAA – The Trade Adjustment Assistance program was established

to provide benefits and services to workers who become unemployed due to the impact of international trade.  

This measure represents the average number of days staff take to process TAA petitions from initial filing to

final determination during the applicable year.  Processing time nearly tripled between 2009 and 2010 due to

large numbers of petitions filed after the TAA reauthorization that took effect in May of 2009, which expanded

coverage to more workers and firms, including those in the service sectors.  These changes resulted in a surge

of approximately 700 petitions filed in May 2009, declining to a steady state of 500 petitions per month, with

an average of 550 per month through September 2009.    In calendar year 2010, petition volume averaged

approximately 210 per month.

During FY 2010, ETA increased staffing and improved its management information system and investigation

procedures.    These investments reduced the backlog to fewer than 150 pending petitions.  Average petition

processing time continued to decline from 177 days in April 2010 to approximately 65 days in September 2011.  

This downward trend is expected to continue barring any unforeseen spikes in petitions filings if new legislation

is enacted.  Furthermore, ETA has developed a management plan to reduce the impact of potential increases in

petition filings on petition processing times.   

   

 Number of regional office desk audits and Contractor Past Effectiveness Ratings (CPER) updates completed for

Job Corps – Regional Office Desk Audits are conducted monthly using Job Corps reports to assess contract

operations.  CPERs are updated every six months within the contract period and are included in each Option

Year package ‐ a request to extend the contract ‐ sent to the national office for review.  In FY 2010, Job Corps

conducted 2,822 regional office desk audits and CPER updates; and in FY 2011, ETA conducted 4,285 regional

office desk audits and CPER updates.  This increase is a result of federal staff using desk audits to compensate

for fewer onsite assessments due to travel restrictions during the FY 2011 continuing resolutions.

Veterans’ Employment and Training Service (VETS)

VETS helps veterans obtain positive employment outcomes through services provided at One‐Stop Career Centers

and other locations.   VETS helps achieve the Secretary’s Strategic Goal 1, to prepare workers for good jobs and

ensure fair compensation as well as the associated outcome goals 1.1, increase workers’ incomes and narrow wage

and income inequality; 1.3, help workers who are in low‐wage jobs or out of the labor market find a path into

middle class jobs; and 1.4, help middle‐class families remain in the middle class.    Grants are provided to State

Workforce Agencies (SWA) and other service providers to support staff dedicated to serving veterans, including

those who require special assistance due to disabilities or other barriers to employment.  VETS also protects the

employment and reemployment rights of veterans and other service members under the provisions of the

Uniformed Services Employment and Reemployment Rights Act (USERRA) program so that they can serve on active

duty without harm to their employment status; and by assuring that veterans who seek Federal employment obtain

the preferences agencies are required to apply.    An output measure of importance to VETS’ USERRA effort is

“Percent of USERRA Investigations Completed within 90 Days.”  To provide prompt resolution for both claimants

and employers, VETS strives to complete USERRA investigations within 90 days as directed by the Veterans’ Benefits

Improvement Act of 2008.  VETS' response to this 2008 legislation has improved case timeliness, compared to prior

years.

Measure FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Average Petition Processing Time (in days) 31 33 35 48 143 65
Management’s Discussion and Analysis

(Unaudited)

16     United States Department of Labor   

WORKER PROTECTION

Office of Federal Contractor Compliance Programs (OFCCP)

OFCCP ensures that employers doing business with the Federal Government comply with the laws and regulations

requiring a fair and diverse workplace, free of discrimination and harassment.   OFCCP supports the Secretary’s

Strategic Goal 3, assure fair and high quality work‐life environments and the associated outcome goal 3.1, break

down barriers to fair and diverse work places so that every worker's contribution is respected.   The Compliance

Evaluation audits that are conducted by OFCCP play a critical role in measuring Federal contractor compliance with

applicable legal requirements.  Specifically, OFCCP selects Federal contractor establishments for compliance audits

through an administrative process in which it examines compliance with the nondiscrimination and affirmative

action mandates under Executive Order 11246, Section 503 of the Rehabilitation Act of 1973, and the Vietnam Era

Veterans’ Readjustment Assistance Act of 1974.  OFCCP enforcement efforts in FY 2010 included approximately

600 one‐time American Recovery and Reinvestment Act (ARRA) evaluations that contributed to the significant

increase of more than 26% in audit activity as compared to FY 2009.  In FY 2011, OFCCP reduced the total target

goal of compliance evaluations in order to increase the focus on audit quality.  To promote audit quality, OFCCP is

using a new assessment tool to identify major and technical deficiencies found in closed cases.  This approach will

provide OFCCP a more nuanced understanding of where errors are occurring to further inform the planning and

delivery of compliance officer training.    Additionally, OFCCP is conducting three quality activities: (1) random

regional quality audits of pre‐closure and closed cases, (2) national office audits of regions, and (3) regional self‐

audits.

Measure FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Compliance Evaluations 3,975 4,923 4,333 3,917 4,960 4,014

Occupational Safety and Health Administration (OSHA)

OSHA was established by the Occupational Safety and Health Act of 1970 with the mission to assure, so far as

possible, that every working man and woman in the American workplace has safe and healthful working conditions.  

OSHA ensures the safety and health of America's workers by setting and enforcing workplace safety and health

standards; delivering effective enforcement; providing training, outreach, and education; and encouraging

continual improvement in workplace safety and health.  Through these efforts, OSHA aims to reduce the number of

worker illnesses, injuries, and fatalities and contribute to the broader goals aimed at promoting economic recovery

and the competitiveness of our nation's workers.    OSHA supports the Secretary’s Strategic Goals 2, 3 and 4,

specifically as relates to outcome goals 2.1, secure safe and healthy workplaces, particularly in high‐risk industries;

3.1, ensure worker voice in the workplace; and 4.1, facilitate return to work for workers experiencing workplace

injuries or illnesses who are able to work.  The most recent data for key measures of OSHA’s activity – the number

of safety, health, and construction industry inspections – are presented in the table below.

Safety inspections in general industry encompass a variety of high‐hazard industries, such as the chemical and

refinery industries, oil and gas well drilling, manufacturing, maintenance, arborist and logging work, power

distribution and generation, coal manufacturing, telecommunications, green industries such as the windmill

industry, forging, steel manufacturing, food manufacturing, and grain handling.   Workers in these industries are

exposed to a multitude of serious safety hazards.  Since FY 2005, safety inspections have been generally increasing

and fatalities have been decreasing.

Measure FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Percent of USERRA Investigations

Completed within 90 Days 81% 78% 78% 86% 84% 87%
    Management’s Discussion and Analysis

(Unaudited)

FY 2011 Agency Financial Report     17

Health inspections are conducted by industrial hygienists and address hazards such as chemical hazards, biological

hazards (e.g., bloodborne pathogens and tuberculosis), physical hazards (e.g., noise, radiation, and heat and cold

stress), and ergonomic hazards (e.g., patient handling, repetitive motion, excessive force, and awkward postures).  

Although the number of health inspections declined from FY 2005 through FY 2008, there were increases in FY 2009

and FY 2010, and OSHA maintained the upward trend in FY 2011.

OSHA tracks safety and health inspections of construction worksites separately because construction is a large

industry that exposes workers to serious hazards, such as falling from rooftops, unguarded machinery, being struck

by heavy construction equipment, electrocutions, silica dust, and asbestos.   According to recent OSHA data, the

industry’s fatality rate is almost eight times the rate for all workers. Therefore, OSHA carries out more than half of

its annual inspections in the construction industry.    The proportion of construction inspections fell slightly in FY

2011 due to a reprioritization of Agency resources to more effectively target inspections across a variety of

occupational hazards.  In addition, construction activity as a whole was reduced, which resulted in fewer

inspections.

Measure FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011*

Total Number of Safety Inspections Conducted 31,843 33,063 33,074 33,221 34,320 34,293

Total Number of Health Inspections Conducted 6,736 6,316 5,517 5,783 6,649 7,202

Number of Safety and Health Inspections

Conducted in Construction Industry 22,915 23,192 23,062 23,754 24,326 23,520

     *Estimated using data through the 3rd Quarter.  Complete FY 2011 data will not be available before late November 2011.

Wage and Hour Division (WHD)

WHD is responsible for administering and enforcing laws that establish the minimum standards for wages and

working conditions in the United States.  The Fair Labor Standards Act (FLSA) minimum wage provisions and the

prevailing wage laws provide a floor for the payment of fair wages; overtime provisions are intended to fairly

compensate workers for long hours of work and to broaden work opportunities and promote employment.  The

Migrant and Seasonal Agricultural Worker Protection Act and the immigration programs establish working

conditions intended both to protect the wages and the safety and health of vulnerable workers and to ensure that

the labor force is not displaced by lower‐paid foreign or migrant labor.   The prevailing wage programs provide

protection to local middle class workers who may be disadvantaged by competition from outside labor who offer

their services at wages lower than those in the locality.  The Family and Medical Leave Act was enacted to help

workers balance family and work responsibilities, and the child labor provisions of the FLSA ensure the safe

employment of young workers, encourage their educational endeavors, and provide a path to future employment.  

WHD’s enforcement responsibilities directly contribute to the Secretary’s Strategic goals 1, 2 and 3 and related

outcome goals 1.1, increase workers’ incomes and narrow wage and income inequality; 1.5, secure wages and

overtime; 2.1, secure safe and healthy workplaces, particularly in high‐risk industries; 3.2, provide workplace

flexibility for family and personal care giving; and 3.3, ensure worker voice in the workplace.   

The agency uses directed investigations to increase WHD presence in high‐risk, fissured industries and among

vulnerable worker populations.   Fissured industries rely on subcontracting, franchising, temporary employment,

and independent contracting which creates a distance between the beneficiary of labor and the workers who

actually provide that labor.  Vulnerable workers are those who are at risk of exploitation at work because they are

reluctant to complain when they are subject to violations for fear of retaliation.   Directed investigations have a

higher rate of return when measured as the number of workers helped for every enforcement hour expended, and,

when undertaken as part of a planned initiative, have the effect of producing a positive ripple effect on compliance

within the same industry and geographic area.  The first measure below is directed investigations as a percentage of

all compliance actions conducted.  With the increasing productivity of new investigators, the reduction of a FY 2010

backlog, and the shift towards prioritizing complaints that point to systemic violations, WHD has moved resources
Management’s Discussion and Analysis

(Unaudited)

18     United States Department of Labor   

to directed investigations since last fiscal year, a trend that will continue in future years.    The second measure

reflects WHD’s commitment to maintaining an increased presence in those industries where the misclassification of

employees as independent contractors is prevalent – as more and more industries are moving to the fissured

business model.   

Measure FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Percent of Directed Investigations* 35% 35% 36% 35% 27% 29%

Percent of Directed Investigations in

Industries with a High Prevalence of

Employees Misclassified as Independent

Contractors

13% 9% 13% 10% 17% 21%

* WHD has revised this measure to exclude conciliations, which are largely a customer service function performed by WHD technicians,  

not WHD investigators. Prior year data reflects this change.

Employee Benefits Security Administration (EBSA)

EBSA protects workers and their families’ retirement and health benefits security through administration and

enforcement of the Employee Retirement Income Security Act of 1974 (ERISA).    EBSA provides proactive

enforcement, outreach and education programs that protect the most vulnerable populations while ensuring broad

compliance with ERISA and related laws.   EBSA is committed to protecting approximately 150 million Americans

covered by an estimated 718,000 private retirement plans, 2.5 million health plans, and similar numbers of other

welfare benefit plans; as well as plan sponsors and members of the employee benefits community.  As such, EBSA

supports the Secretary’s Strategic Goal 4, to secure health benefits and, for those not working, provide income

security and the specific outcome goal 4.3, improve health benefits and retirement security for all workers.

Historical data for two key performance measures, “Number of Criminal Investigations Processed” and “Number of

Civil Investigations Processed” are shown in the table below.   EBSA’s investigation program is designed to deter

and correct violations of ERISA.    In FY 2011, EBSA’s continued focus on a high priority national criminal

enforcement project contributed to a greater number of criminal investigations processed; the total number of

criminal investigations processed increased by seven percent from the FY 2010 result.    EBSA also processed a

greater number of fiduciary investigations than the previous year, which contributed to a higher number of civil

investigations processed  ‐ a twelve percent increase from the FY 2010 result.  The number of criminal and civil

cases that EBSA investigates each year is also influenced by other unforeseeable factors, such as policy direction

and economic changesin the regulated community.

Measure FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Number of Criminal Investigations Processed 221 188 212 287 281 302

Number of Civil Investigations Processed 3,411 3,236 3,570 3,669 3,112 3,472

Mine Safety and Health Administration (MSHA)

MSHA protects the safety and health of the nation’s miners under the provisions of the Federal Mine Safety and

Health Act of 1977, as amended by the Mine Improvement and New Emergency Response (MINER) Act of 2006.  

The purpose of MSHA is to prevent death, disease, and injury from mining and to promote safe and healthful

workplaces for the nation’s miners through the enactment and enforcement of mandatory safety and health

standards.  MSHA supports the Secretary’s Strategic Goal 2, ensure workplaces are safe and healthy and Strategic

Goal 3, assure fair and high quality work‐life environments, and related outcome goals 2.1, secure safe and healthy

workplaces, particularly in high‐risk industries and 3.3, ensure worker voice in the workplace.  MSHA’s mandated

inspections require four complete inspections annually at active underground mines and two complete inspections

annually at active surface mines, and miner training and compliance assistance.  A key measure for MSHA is “Total
    Management’s Discussion and Analysis

(Unaudited)

FY 2011 Agency Financial Report     19

Number of Regular Mandated Inspections.”   The mining industry is influenced by economic and product need

causing continual fluctuations in the number of mines operating during any given time period.

Total Number of Regular Mandated Inspections FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Coal Safety and Health 5,402 4,822 5,385 5,526 5,121 5,139

Metal and Nonmetal Safety and Health 16,867 15,945 18,235 17,168 16,127 16,269

Office of Labor‐Management Standards (OLMS)

OLMS administers the Labor‐Management Reporting and Disclosure Act of 1959 (LMRDA) and related laws.  These

laws primarily establish safeguards for union democracy and union financial integrity and require public disclosure

reporting by unions, union officers, union employees, employers, labor consultants and surety companies.  OLMS

also administers employee protections under various Federally‐sponsored transportation programs that require

fair, equitable protective arrangements for transit employees when Federal funds are used to acquire, improve, or

operate a transit system.   As such, OLMS supports the Secretary’s Strategic Goal 3, assure fair and high quality

work‐life environments, and the specific outcome goal 3.3, ensure worker voice in the workplace.  For OLMS, key

measures are “Criminal Investigations Conducted” and “Number of Days to Resolve Union Officer Election

Complaints,” recent results for which are provided in the table below.   

OLMS conducts criminal investigations to determine if potential criminal violations of the LMRDA have occurred.  

Most OLMS criminal investigations involve embezzlement or theft of union funds.    Evidence of suspected

embezzlement is obtained through leads, analysis of union financial reports, surety company reports, contacts with

union officials, employees or members, and OLMS’ compliance audit program.    The number of criminal

investigations conducted by OLMS declined in FY 2010 and FY 2011 because OLMS had fewer investigators on staff.  

However, OLMS uses enhanced audit targeting techniques to focus reduced audit resources on labor unions most

likely to be in violation of the law and thereby conduct fewer audits without a significant decline in those leading to

fallout investigations.    The success of audit targeting strategies is measured by “Percent of Targeted Audits that

Result in a Criminal Case (Fallout),” results for which will appear in the FY 2011 Annual Performance Report to be

published with the Department’s FY 2013 Congressional Budget Justification in February 2012.

For the election resolution measure, the apparent drastic improvement in FY 2009 results is considered anomalous

because few high‐complexity cases were closed that year, and such cases account for large variances in average

resolution time.    As expected, the relative number of high‐complexity cases in FY 2010 returned to normal.  

Improvement from FY 2008 to FY 2011 is attributed to efficiency gains.

Measure FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Criminal investigations Conducted 341 406 393 405 355 321

Number of Days to Resolve Union Officer

Election Complaints 77 86 92 70 81 79
Management’s Discussion and Analysis

(Unaudited)

20     United States Department of Labor   

POLICY

Women’s Bureau (WB or Bureau)

The Bureau is the only Federal office dedicated to serving and promoting the interests of women in the workforce.  

As such, it develops promising policies and standards and conducts inquiries to safeguard the interests of working

women; advocates for their equality and economic security for themselves and their families; and promotes quality

work environments.  The Bureau supports the Secretary’s Strategic Goal 1, to prepare workers for good jobs and

ensure fair compensation and Strategic Goal 3, assure fair and high quality work‐life environments and their

associated outcome goals.    For the Bureau, key measures include the number of active collaborations and the

number of technical assistance hours provided.

An active collaborator is an external entity that is receiving technical assistance (e.g. guidance, support, and feedback)

from the Bureau to implement recommended policies, strategies, or practices that improve employment outcomes

for wage‐earning women.  Collaborators include DOL agencies; other Federal, state, or local government agencies;

community‐based organizations; service providers; industry associations; labor organizations; women’s

organizations; and educational institutions.    Technical assistance hours are the number of hours Bureau staff

spends responding to questions and providing guidance, feedback, and support to active collaborators.

In FY 2011, the Bureau participated in 1,003 collaborations.  The Bureau will begin collecting data on the technical

assistance hours provided to these collaborators in FY 2012.

Office of Disability Employment Policy (ODEP)

ODEP was established to bring a permanent focus within the U.S. Department of Labor and across the Federal

government to the development, evaluation, and dissemination of policy strategies that address the significant

barriers to employment faced by individuals with disabilities.  As such, ODEP supports the Secretary’s Strategic Goal

1, prepare workers for good jobs and ensure fair compensation and Strategic Goal 3, assure fair and high quality

work‐life environments and associated outcome goals, specifically goal 3.1, to break down barriers to fair and

diverse work places so that every worker’s contribution is respected.  Although many people with disabilities are

prepared, willing, and able to work, they remain a largely untapped labor pool.   ODEP brings together Federal

agencies, private and public sector employers, labor organizations, and other stakeholders to develop policy

solutions that expand physical and programmatic access to One‐Stop Career Centers and the workforce system in

general.  ODEP improves employer organizational practices, makes workplaces more inclusive, and increases access

to employment support for workers with a disability.   

ODEP works to achieve its outcomes through the adoption and implementation of its policies and strategies,

accomplished through its public and private partners.  ODEP’s key measures are “Policy Outputs” and “Effective

Practices.”  Policy outputs are recommendations for significant policy change or an interpretation of existing policy

related to disability employment.   Examples of policy outputs are legislation, regulations, policy guidance and

Executive Orders or Memoranda.  Effective Practices are ODEP developed strategies, models or theories that lead

directly to an identified outcome and have a documented record of success or validated effectiveness.   

As indicated by the table, Policy Outputs and Effective Practices rose from FY 2006‐2008 as ODEP's policies and

strategies were developed based on its initial investments in demonstration projects and research from ODEP's first

five years (FY 2001‐2005).   The number of Policy Outputs and Effective Practices dropped in FY 2009 as ODEP

worked to cultivate new approaches that promote the employment of people with disabilities. One key approach

was the restructuring of grant and contract deliverables (that focused on the identification and development of

promising practices and strategies).  In FY 2010, ODEP began to see the results of these changes, with an increase in

the number of Effective Practices.  In FY 2011, continued investment in these approaches led to the adoption and

implementation of policy that increased the participation of people with disabilities in the labor market.  
    Management’s Discussion and Analysis

(Unaudited)

FY 2011 Agency Financial Report     21

Bureau of International Labor Affairs (ILAB)

ILAB works to ensure that global markets are governed by fair market rules that protect vulnerable people,

including women and children, and provide workers a fair share of their productivity and voice in their work lives.  

In order to carry out these strategic objectives, responsibilities, and mandates, ILAB collaborates with other U.S.

government agencies to formulate international economic, trade, and labor policies, including the formulation and

implementation of the labor aspects of international trade and investment agreements; coordinates U.S.

government participation in international organizations relative to labor issues; oversees and implements technical

assistance programs; and conducts research, analysis and publishes reports on international labor issues.  Through

these activities, ILAB supports the Secretary’s Strategic Goals 1 and 3, specifically as they relate to outcome goals

1.6, foster acceptable work conditions and respect for workers’ rights in the global economy to provide workers with

a fair share of productivity and protect vulnerable people and 3.3, ensure worker voice in the workplace.

ILAB tracks the number of countries engaged in policy dialogue or negotiation as a measure of its scope of influence

and opportunities to 1) improve labor rights and living standards of workers in the global economy, and 2) reduce

the prevalence of the worst forms of child labor and forced labor.   In prior years, ILAB measured engagement

through policy dialogue, negotiation and collaboration.   This past year, ILAB revised its output measures in its

operating plan and budget submission to include separate measures for policy dialogue and negotiation distinct

from collaborative activities to better capture the elements of its core mission.  The new measure, the number of

countries engaged in policy dialogue or negotiation, focuses on activities that are the result of or the precursor to

all other forms of foreign government collaboration.  In FY 2011, ILAB engaged 29 countries in policy dialogue or

negotiation.

BENEFITS

Office of Workers’ Compensation Programs (OWCP)

OWCP is comprised of four separate compensation programs which provide wage replacement, medical treatment,

and vocational rehabilitation benefits.    The Federal Employees' Compensation Act (FECA) program provides

monetary wage‐loss and medical compensation to civilian employees of the Federal Government injured at work,

and to certain other designated groups, as well as survivor benefits for a covered employee’s employment‐related

death.  The Longshore and Harbor Workers' Compensation Act program provides similar benefits to injured private

sector workers engaged in certain maritime and related employment, and also provides monetary benefits to the

survivors of deceased workers.  The Black Lung Benefits program provides monetary and medical benefits to totally

disabled miners suffering from coal mine pneumoconiosis stemming from mine employment, and monetary

benefits to their dependent survivors.    The Energy Employees Occupational Illness Compensation Program Act

(EEOICPA) provides monetary compensation and/or medical benefits to employees or survivors of employees of the

Department of Energy (DOE) and certain contractors or subcontractors with DOE who have been diagnosed with

cancer or other occupational diseases due to exposure to radiation or toxic substances at covered facilities.  OWCP

supports the Secretary’s Strategic Goal 4, secure health benefits and, for those not working, provide income

security, and Outcome Goals 4.1, facilitate return to work for workers experiencing workplace injuries or illnesses

who are able to work and 4.2, ensure income support when work is impossible or unavailable.   

A key measure for OWCP is Lost Production Day rates (LPD), expressed as days per 100 employees in Federal

Government agencies.  The LPD rate provides a valuable measure of the overall incidence and severity of workplace

injuries for Federal employees and the effectiveness of OWCP’s and Federal employers’ return to work efforts since

Measure FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Policy Outputs 20 34 44 39 35 42

Effective Practices 26 24 27 15 23 44
Management’s Discussion and Analysis

(Unaudited)

22     United States Department of Labor   

it measures actual lost days from work during the first year of injury.  OWCP uses nurse case managers to provide

early assistance in more severe injury cases to coordinate medical care and return to work services for workers

covered by FECA.  OWCP also assists Federal employers with accommodation and reemployment of their injured

workers.    These strategies have contributed to a greater than 30% reduction in the Government‐wide LPD rate

since FY 2006.  During this period,  a joint OWCP/OSHA Safety, Health and Return to Employment initiative also

contributed significantly to this success by establishing government‐wide goals for Federal employers to improve

their compensation case handling and return to work activities. A new four‐year initiative named Protecting Our

Workforce and Ensuring Re‐employment (POWER) will continue those efforts.

Measure FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011*

Government‐Wide LPD Rate in Non‐Postal

Agencies 49.5 46.3 41.3 35.8 34.6 33.4

      *Estimated using data through the 3rd Quarter.  Final FY 2011 data will be available in late November 2011.

Federal‐State Unemployment Insurance (UI) System (administered by ETA)   

The Federal‐state UI program, authorized under the Federal Unemployment Tax act and Title III of the Social

Security Act, provides temporary, partial wage replacement for unemployed workers, providing them with income

support when suitable work is unavailable. To be eligible for benefits, unemployed workers must meet eligibility

requirements established by state laws that conform to federal law, including that they have worked recently, be

involuntarily unemployed, and be able and available for work.    One of the key measures for this program is

“Percent of All Intrastate First Payments Made within 21 Days After the Last Day of the First Compensable Week.”  

The table below provides historical data, along with unemployment statistics, that illustrate the impact of

increasing claims volume on program performance during the recession that began in FY 2008.    The Total

Unemployment Rate, calculated by using Bureau of Labor Statistics data, is the sum of the not seasonally adjusted

unemployment level for October through September divided by the sum of the not seasonally adjusted labor force

level for October through September.  

* Years ending 6/30.

STATISTICS

Bureau of Labor Statistics (BLS)

In support of the Secretary’s Strategic Goal 5, to produce timely and accurate data on the economic conditions of

workers and their families, BLS produces timely, accurate, and relevant statistics reflecting labor market activity,

working conditions, and price changes in the economy.   Statistics produced by BLS support the formulation of

economic and social policy affecting virtually all Americans.  BLS uses the American Customer Satisfaction Index

(ACSI) to measure customer satisfaction with its website, since most users access BLS data through bls.gov, which

averages more than 7 million user sessions each month.   The ACSI survey prompts users while they are on the

website for feedback regarding the extent to which the website meets their needs.   BLS uses these results to

improve the website to better serve its stakeholders and as a measure of mission achievement.

Measure* FY 2009 FY 2010 FY 2011

Customer Satisfaction with BLS Web Site as measured by the ACSI Score 75 75 75

* ACSI Score is calculated on a 100 point scale.

Measure FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

First Payment Timeliness* 87.6% 88.4% 86.8% 83.8% 82.2% 84.0%

Total Unemployment Rate 4.7% 4.5% 5.3% 8.5% 9.7% 9.2%
(Unaudited)

FY 2011 Agency Financial Report     23

American Recovery and Reinvestment Act of 2009

(Recovery Act)

Since our nation’s greatest resource is its workers, the Recovery Act targeted investments to key areas that create

and preserve good jobs. DOL has two key roles in this recovery effort: providing worker training through the

administration of programs for these jobs; and easing the burden of the recession on workers and employers by

providing extended and expanded unemployment benefits and assisting and educating them regarding expanded

access to continued health benefits. Listed below are descriptions of a few of the largest (by funding level) among

DOL’s 24 Recovery Act programs. More details are posted on the Web at www.recovery.gov and

www.dol.gov/recovery.

Unemployment Insurance – Extension of the Emergency Unemployment Compensation, 2008 (EUC08) Program.

The Recovery Act extended the Emergency UI program, commonly known as EUC08, which provides weekly UI

benefits to individuals who have exhausted their regular State‐financed UI benefits, through December 31, 2009,

with phaseout through June 5, 2010. Subsequent legislation further extended these benefits to January 3, 2012,

with phaseout through June 9, 2012.  

Unemployment Insurance – Federal Additional Compensation (FAC) Program.   The Recovery Act also created a

new federally‐funded program, FAC, which temporarily increased UI benefits by $25 a week through December 31,

2009, with phaseout through July 10, 2010.  Subsequent legislation further extended this program to June 2, 2010,

with phaseout through December 11, 2010.

Unemployment Insurance – Modernization ($7 Billion Incentive Fund). The Federal‐State UI Program provides

unemployment benefits to eligible workers who are unemployed because of a lack of suitable work, and meet other

eligibility requirements. States operate UI programs under their own laws, which must conform to Federal law. The

Modernization Program helped States make UI more accessible to workers by temporarily defraying the costs of

certain eligibility liberalizations.  At the conclusion of the program on September 30, 2011, $4.4 billion of the $7.0

billion had been disbursed to 41 states, while $2.6 billion remained unclaimed, reverting to the Federal

Unemployment Account on October 1, 2011.

Workforce Investment Act Dislocated Worker Program. Prior to passage of the Recovery Act, funding for the public

workforce investment system had declined, while program enrollments increased, placing strain on the system’s

capacity to keep pace with recessionary impacts such as job loss and worker dislocations.  The Recovery Act nearly

doubled the annual funding to the WIA Dislocated Worker Program.  As of September 30, 2011, all program funds

were obligated by states.   States have used these Recovery Act dollars to improve their reemployment efforts,

increase training in new or emerging occupations, and design and create new programs or program elements to

respond to local needs.  

Workforce Investment Act Youth. The Recovery Act made an additional $1.2 billion available for WIA Youth

activities, using the same formula as the regular appropriation and extended the youth eligibility age from 21 to 24.

Grantees focused on creating summer employment opportunities for youth, including opportunities in the health

care sector and in green jobs within the construction, energy efficiency, renewable energy, and other related

industries. The Recovery Act WIA Youth activities ended June 30, 2011.  A total of 426,206 youth were served which

includes 374,489 youth who were placed in summer employment.  As of September 30, 2011, approximately 99%

of the Recovery Act WIA Youth Program funds were obligated and expended.  

 
(Unaudited)

24     United States Department of Labor

Financial Performance Overview   

Sound financial management is an integral part of the Department's efforts to deliver services and administer

programs.   With the Department's emphasis on internal controls, accurate financial information delivery to key

decision makers, and transparent and accountable reporting, the Department's stakeholders can be confident that

resources are used efficiently and effectively.

DOL's internal control program and centralized processes for reporting financial data help to ensure the relevance

and reliability of financial performance data.  DOL's comprehensive internal control program has the objective of

providing, on a continuing basis, reasonable assurance that all financial, non‐financial, performance, statistical

records, and related reports are reliable.  DOL's internal control program helps ensure that appropriate internal

controls are in place for financial performance management and that Agencies institute sound, effective internal

control policies and procedures for financial performance measurement and regular evaluation of their processes.  

Financial performance is evaluated during comprehensive ongoing financial management reviews and corrective

actions are implemented as required to resolve audit findings and increase efficiency.  These business processes

help to ensure that reported financial performance information is relevant and reliable.

In FY 2011, DOL used managerial cost accounting (activity‐based costing) for costing programs and performance

indicator results.   Activity‐based costing is a U.S. generally accepted accounting principle promulgated by the

Federal Accounting Standards Advisory Board (FASAB) in the Statement of Federal Financial Accounting Standards

(SFFAS) No. 4, Managerial Cost Accounting Standards and Concepts for the Federal Government, as amended by

SFFAS No. 30, Inter‐Entity Cost Implementation.   The statement outlines the standards for Federal entities to

provide “reliable and timely information on the full cost of federal programs, their activities, and outputs.”  This

information can be used to allocate resources and evaluate program performance.  Activity‐based costing directly

supports the sections of the AFR that address Program Net Cost and the Statement of Net Cost.  Total Net Cost of

DOL activities for FY 2011 was $135.1 billion.  

Analysis of Financial Statements and Stewardship Information

The principal financial statements summarize the Department's financial position, net cost of operations, and

changes in net position, and provide information on budgetary resources and social insurance.  

Financial Position  

The Department's Balance Sheet presents DOL’s financial position through the identification of agency assets,

liabilities, and net position.  The Department's total assets decreased from $42.8 billion in FY 2010 to $38.1 billion in

FY 2011, a decrease of 11.0%.  This decrease was primarily due to decreases in Funds with U.S. Treasury [(12.7%)]

and Investments [(16.1%)]. Liabilities increased from $61.8 billion at the end of FY 2010 to $70.8 billion at the end

of FY 2011, an increase of 14.6%.  This increase was primarily due to increases in liabilities for intra‐governmental

debt [21.0%] and energy employees occupational illness compensation benefits [24.8%].  Intra‐governmental debt

increased due to Unemployment Trust Fund borrowings from the General Fund of the Treasury to meet

unemployment benefit requirements.   The energy employees occupational illness compensation benefits liability

increased due to increased cancer Special Exposure Cohort (SEC) classes, increased number of projected approvals

for Part E cases, higher medical costs and a lower discount rate.
    Management’s Discussion and Analysis

(Unaudited)

FY 2011 Agency Financial Report     25

$0

$5

$10

$15

$20

$25

Funds with U.S.

Treasury

Investments Accounts

Receivable

Advances Property, Plant

and Equipment

ASSETS ($ in Billions)

2011 - $38.1 2010 - $42.8

Net Cost of Operations

The Department's net cost of operations for the year ended September 30, 2011 was $135.1 billion, a decrease of

$44.7 billion [(24.9%)] from 2010.  This decrease was attributable to the major programs discussed below:

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

Income

Maintenance

Employment and

Training

Standards Safety and Health Statistics

NET COST OF MAJOR PROGRAMS ($ in Billions) 

2011 - $135.1 2010 - $179.8

Income Maintenance programs continue to comprise the major portion of Departmental costs. These programs

include unemployment benefits paid to covered individuals who are out of work and seeking employment, as well

as payments to individuals who qualify for disability benefits due to injury or illness suffered on the job. Income

maintenance net costs were $124.9 billion, a decrease of 26.1% from FY 2010.  This decrease was primarily due to

decreases in benefits for regular, extended, emergency and additional unemployment compensation (EUC)

provided under existing legislation, with supplemental provisions extended through FY 2011.

Employment and Training programs comprise DOL’s second largest cost.    These programs are designed to help

individuals deal with the loss of a job, identify new occupational opportunities, find training to acquire different

skills, start a new job, make long‐term career plans and connect employers to workers with the skills they need.

Employment and training costs were $7.6 billion in FY 2011, a decrease of nearly 9.5% from FY 2010.  This decrease

was primarily due to the decrease in ARRA funding.
Management’s Discussion and Analysis

(Unaudited)

26     United States Department of Labor   

Budgetary Resources

The Statement of Budgetary Resources reports the budgetary resources available to DOL to effectively carry out the

activities of the Department during FY 2011 and FY 2010, as well as the status of these resources at the end of each

fiscal year.  The Department had direct obligations of $189.0 billion in FY 2011, a decrease of $67.6 billion [(26.3%)]

from FY 2010. This decrease was primarily due to decreases in direct obligations for income maintenance programs.  

Social Insurance and the Black Lung Disability Benefit Program  

(Dollars included in the text of this section are in thousands)

The Federal Accounting Standards Advisory Board (FASAB) has classified the Black Lung Disability Benefit Program

as a social insurance program that is required to report a Statement of Social Insurance (SOSI) for the Black Lung

Disability Trust Fund (BLDTF).  Effective in FY 2011, the Department implemented FASAB SFFAS 37, Social Insurance:

Additional Requirements for Management’s Discussion and Analysis and Basic Financial Statements.    SFFAS 37,

among other things, amended SFFAS 17, Accounting for Social Insurance, and requires a new summary section in

the Statement of Social Insurance (SOSI) and a new Statement of Changes in Social Insurance Amounts (SCSIA), as

well as additional financial statement note disclosures, such as the valuation date and the uncertain nature of

projected information.  To comply with SFFAS 37, DOL also provides additional information about the program in

the Required Supplementary Information (RSI), including tabular presentations of summarized data and

presentation of projections with sensitivity analysis in constant dollars.

The SOSI reports for the projection period (which begins on September 30 of the reporting year and ends

September 30, 2040), for all current and future participants, the actuarial present value of future benefits and the

present value of administrative costs, less the present value of coal excise tax income.  For FY 2007 through FY 2011

as presented in the SOSI, the present value of the coal excise tax income has been greater than the sum of the

actuarial present value of the future benefits and the present value of administrative costs.  This amount – which is

the excess of present value of estimated future excise tax income over actuarial present value of future benefit

payments and present value of estimated administrative costs during the projection period for current and future

participants – is also called the open and closed group measure.   

An open group beneficiary population includes those persons, as of the valuation date, who are or will be

participants of the program during the projection period.   A closed group beneficiary population includes those

persons, as of the valuation date, who already are participants of the program. The program’s beneficiary

population is a nearly closed universe in which attrition by death exceeds new entrants by a ratio of more than ten

to one and the effects of new entrants are considered immaterial.    The measure is the net present value of all

expenditures to or on behalf of that population and all contributions or other income on behalf of that population.  

Because the difference between the open group measure and the closed group measure due to new participants is

immaterial, the same measure is presented for both the open group and the closed group.   

The SOSI summary section reports the total of open and closed group measure plus fund assets (Funds with U.S.

Treasury and receivables).  The total of open and closed group measure plus fund assets as of September 30, 2011

of $4,784,043 represents a projected net positive cash flow that may be used to liquidate the liabilities of the

BLDTF, which were ($6,163,075) as of September 30, 2011.

The SCSIA reports the net change in the open and closed group measure (see Table of Key Measures below).  The

open and closed group measure decreased ($730,251) [(13.4%)] from $5,450,480 as September 30, 2010 to

$4,720,229 as of September 30, 2011.  Reasons for the net decrease in the measure of ($730,251) include changes

in the assumptions that primarily led to:

 A decrease in the projected coal excise tax revenues of ($1,144,303) due to revisions based on current year

experience and a decrease in future collections;

 A decrease in future benefits costs (for costs not associated with medical inflation or Federal civilian pay raises)

leading to an increase in the measure of $202,800; and  
    Management’s Discussion and Analysis

(Unaudited)

FY 2011 Agency Financial Report     27

 A decrease in the discount rate from 3.75% to 3.375% leading to an increase in the measure of $197,720

(described as a change in assumption about interest rate on the SCSIA).

(Dollars in Thousands) 2011 2010 

 Net cost of operations $ (429,280) $ (454,310)

 Total financing sources 568,631 536,019 

 Net change of cumulative results of operations $ 139,351 $ 81,709 

 Total assets $ 63,814 $ 68,028 

 Less: total liabilities (6,163,075) (6,306,640)

 Net Position (assets net of liabilities) $ (6,099,261) $ (6,238,612)

 Excess of present value of estimated future excise tax income

 over actuarial present value of future benefit payments and

 present value of estimated administrative costs during the

 projection period for current and future participants

 (open and closed group measure), September 30, 2010

 Excess of present value of estimated future excise tax income

 over actuarial present value of future benefit payments and

 present value of estimated administrative costs during the

 projection period for current and future participants

 (open and closed group measure), September 30, 2011

 Net change in open and closed group measure $ (730,251)

Social Insurance

 $ 5,450,480 

 4,720,229 

Black Lung Disability Benefit Program – Table of Key Measures

Costs and Changes in Net Position

Net Position 

As presented in the Table of Key Measures above, the Black Lung Disability Benefit Program’s net cost of operations

for the year ended September 30, 2011 was ($429,280), a decrease of $25,030 [(5.5%)] over 2010 mainly due to an

decrease in administrative costs.  Total financing sources were $568,631, an increase of $32,612 [6.1%] over 2010

mainly due to an increase in coal excise tax revenues.    The net change of cumulative results of operations was

$139,351, an increase of $57,642 [70.5%] over 2010 mainly due to a decrease in administrative costs and an

increase in coal excise tax revenues.

As presented in the Table of Key Measures above, the Black Lung Disability Benefit Program’s total assets decreased

$4,214 from $68,028 in FY 2010 to $63,814 in FY 2011, a decrease of 6.2% that was due to a decrease in Funds with

U.S. Treasury and a decrease in benefit overpayments.    Liabilities decreased from ($6,306,640) at the end of FY

2010 to ($6,163,075) at the end of FY 2011, a decrease of 2.3% that was mainly due to a decrease in intra‐

governmental debt.  Net position increased $139,351 from ($6,238,612) in FY 2010 to ($6,099,261) in FY 2011, an

increase of 2.2% that was mainly due to a decrease in the net cost of operations and an increase in financing

sources.

Refer to Notes 1‐W and 21 and RSI for additional information on the SOSI, including the summary section; SCSIA;

the Black Lung Disability Benefit Program; its reported activity and balances; and projections and sensitivity analysis

in constant dollars through 2040.   
Management’s Discussion and Analysis

(Unaudited)

28     United States Department of Labor   

Limitations on the Principal Financial Statements

As required by the Government Management Reform Act of 1994 (31 USC 3515(b)), the principal financial

statements report the Department's financial position and results of operations.  While the statements have been

prepared from the Department's books and records in accordance with formats prescribed by OMB, the statements

differ from the financial reports used to monitor and control budgetary resources, which are prepared from the

same books and records.  The statements should be read with the realization that they are a component of the U.S.

Government, a sovereign entity, and that liabilities reported in the financial statements cannot be liquidated

without legislation providing resources to do so.  

Reducing Improper Payments

  

Improved financial performance through the reduction of improper payments continues to be a key financial

management focus of the Federal government.  At DOL, developing strategies and the means to reduce improper

payments is a matter of good stewardship.  Accurate payments lower program costs.   

In accordance with the Improper Payments Information Act (IPIA) of 2002, as amended by the Improper Payments

Elimination and Recovery Act (IPERA) of 2010, and as implemented by OMB Circular A‐123, Appendix C,

Requirements for Effective Measurement and Remediation of Improper Payments, the Department reviews its

programs and activities annually to identify programs that may be susceptible to significant improper payments.  

For programs and activities deemed risk susceptible, the Department performs testing, establishes improper

payment reduction targets in accordance with OMB guidance, and develops and implements corrective actions.

   

The Department has two programs that are classified to be at risk of significant improper payments in accordance

with OMB criteria or classification – the Unemployment Insurance (UI) benefit program and the Workforce

Investment Act (WIA) grant program.   The table below shows the target and actual improper payments error rates

for the programs classified as at‐risk:

DoL Program FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Target Actual Target Actual Target Target Target

Unemployment Insurance 9.9% 11.2% 9.8% 12.0% 9.7% 9.6% 9.6%*

Workforce Investment Act 0.07% 0.2% 0.07% 0.3% 0.07% 0.07% 0.07%

*Targets for FY 2014 have not been established.  Targets from FY 2013 have been carried forward.

The target UI improper payments error rate for FY 2011 was 9.8%, whereas the actual error rate was 12.0%.  This

difference is primarily due to increases in overpayments to claimants who continued to claim benefits after they

returned to work, claimants ineligible for benefits because they voluntarily quit their jobs or were discharged for

disqualifying reasons, and claimants who failed to meet active work search requirements.    These three causes

accounted for 65% of overpayments in FY 2010 and 70% of overpayments in FY 2011 and represent nearly all of the

increase in the overpayment rate.    Corrective actions to address these causes are described in the “Improper

Payments Information Act Reporting Details” in the Other Accompanying Information section of this report.  The

higher actual error rate for WIA in FY 2010 and FY 2011 compared to the program’s annual target is primarily due to

including the results of DOL Office of Inspector General audits and other monitoring activities in the measurement

methodology and higher incidence of error.

The Department has implemented various corrective actions to address the causes and reduce improper payments

in both of these programs.   Like many other Federal agencies, the Department faces challenges in meeting its

improper payment reduction and recovery targets, particularly with programs that are sensitive to economic

fluctuations or natural disasters, such as the UI program.  Furthermore, meeting improper payment reduction and

recovery targets of programs such as UI and WIA are contingent upon the cooperation and support of State
    Management’s Discussion and Analysis

(Unaudited)

FY 2011 Agency Financial Report     29

agencies and other outside stakeholders who are intricately involved in the day‐to‐day administration and

management of these programs' activities.

See “Improper Payments Information Act Reporting Details” in the Other Accompanying Information section of this

report for additional information on improper payments.

Financial Management Systems and Strategy

DOL continues to pursue its financial management system strategy to improve reporting, accountability, and

decision making, while furthering implementation of key Government‐wide initiatives, e‐Gov requirements, and

other regulatory mandates.    The Department seeks to maintain financial management systems, processes, and

controls that ensure financial accountability and transparency, provide useful information to management, and

satisfy Federal laws, regulations, and guidance.

In FY 2010, DOL deployed the New Core Financial Management System (NCFMS) as its financial system of record to

improve the Department’s compliance with legislation and regulations that drive Federal accounting, financial

management systems, financial management reporting, and security.  In FY 2011, the first full year using NCFMS,

DOL has begun to realize benefits of the system through the automated processes (such as invoice processing and

approval), increased efficiencies in financial reporting and a normalization of business operations.   

Continued assessment and change management and optimization of NCFMS capabilities will further assure the

accuracy and completeness of data, standardize the business processes, institutionalize financial practices, and

improve ease of preparation and completeness of all types of financial reports.
(Unaudited)

30     United States Department of Labor

Management Assurances

Federal Managers’ Financial Integrity Act of 1982 (FMFIA)

FMFIA requires that agencies establish internal controls and financial systems that provide reasonable assurance

that the integrity of Federal programs and operations is protected. It requires that the head of the agency provide

an annual assurance statement whether the agency has met this requirement.

Appendix A of OMB Circular A‐123 provides specific requirements for conducting management’s assessment of

internal control over financial reporting, and also requires the agency head to provide an assurance statement on

the effectiveness of internal controls over financial reporting.

Federal Financial Management Improvement Act of 1996 (FFMIA)

FFMIA requires that agencies implement and maintain financial management systems that comply substantially

with the Federal financial management system requirements, applicable Federal accounting standards, and the

United States Government Standard General Ledger at the transaction level. The agency head is to make an annual

determination whether the financial systems substantially comply with FFMIA.
    Management’s Discussion and Analysis

(Unaudited)

FY 2011 Agency Financial Report     31

Financial Section

FY 2011 Agency Financial Report     33

Message from the Chief Financial Officer

Transparency and accountability provide the foundation for effective financial

management.    Because we finished our transition to a new core financial management

system, Department of Labor officials have taken a major step toward the administration’s

goal of providing clearer and more accessible information to stakeholders.    We have

modernized government through technology.

The FY 2011 financial statements are the first produced entirely from the new financial

system, and I am proud that the Department has obtained an unqualified audit opinion on

its financial statements for 14 consecutive fiscal years.  This clean audit opinion provides

independent confirmation that the Department’s financial statements are presented fairly

and in conformity with U.S. generally accepted accounting principles. Accurate and timely

financial information improves DOL’s accountability to its stakeholders and the operational, budget, and policy

decision‐making processes that are the foundation for the services the Department delivers to the public.

Following challenges in migrating to the new financial management system in FY 2010, we continued to work to

resolve outstanding material weaknesses and significant deficiencies identified during the FY 2010 audit process. In

addition, we have significantly improved the ability of the financial system to process procurement documents,

grants, and travel payments in conjunction with the Department’s legacy systems.

I am extremely proud of the Department’s financial management personnel, who have worked tirelessly to achieve

a clean opinion for FY 2010 and, under a compressed schedule, attained that same result for FY 2011. They

exemplify the high standards of professionalism demanded by the American people, and they enable the

Department to be a leader in sound financial management across government. As DOL places additional emphasis

on maximizing outcomes in its core missions despite limited resources, it will be critical to focus on the sound

financial management necessary to support Secretary Solis’ vision of good jobs for everyone.

James L. Taylor

Chief Financial Officer

November 14, 2011
34 United States Department of Labor

KPMG LLP

2001 M Street, NW

Washington, DC 20036-3389

Independent Auditors’ Report

Secretary and Acting Inspector General

U.S. Department of Labor: 

We have audited the accompanying consolidated balance sheets of the U.S. Department of Labor (DOL) as 

of September 30, 2011 and 2010; the related consolidated statements of net cost and changes in net position 

and combined statements of budgetary resources for the years then ended; the statements of social 

insurance as of September 30, 2011, 2010, 2009, 2008, and 2007; and the statement of changes in social 

insurance amounts for the year ended September 30, 2011 (hereinafter referred to as “consolidated 

financial statements”). The objective of our audits was to express an opinion on the fair presentation of 

these consolidated financial statements. In connection with our fiscal year (FY) 2011 audit, we also

considered DOL’s internal control over financial reporting and tested DOL’s compliance with certain 

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

material effect on these consolidated financial statements. 

We have also examined DOL’s compliance with section 803(a) of the Federal Financial Management 

Improvement Act of 1996 (FFMIA) as of September 30, 2011. 

SUMMARY

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

statements present fairly, in all material respects, the financial position of DOL as of September 30, 2011 

and 2010; its net costs, changes in net position, and budgetary resources for the years then ended; the 

financial condition of its social insurance program as of September 30, 2011, 2010, 2009, 2008, and 2007; 

and the changes in social insurance amounts for the year ended September 30, 2011, in conformity with 

U.S. generally accepted accounting principles.

As discussed in our opinion on the financial statements, the statements of social insurance present the 

actuarial present value of DOL’s future expenditures to be paid to or on behalf of participants, estimated 

future income to be received from excise taxes, and estimated expenditures for administrative costs during 

a projection period ending in 2040. 

Also, as discussed in our opinion on the financial statements, in FY 2011, DOL adopted new accounting 

and reporting requirements for its social insurance program. 

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

that we consider to be material weaknesses and other deficiencies that we consider to be significant 

deficiencies, as defined in the Internal Control over Financial Reporting section of this report, as follows:

KPMG LLP is a Delaware limited liability partnership, 

the U.S. member firm of KPMG International Cooperative

(“KPMG International”), a Swiss entity.
Independent Auditors’ Report

FY 2011 Agency Financial Report 35

Material Weaknesses

1. Lack of Sufficient Controls over Financial Reporting 

2. Lack of Sufficient Controls over Budgetary Accounting 

3. Lack of Sufficient Security Controls over Key Financial and Support Systems 

Significant Deficiencies

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

5. Weaknesses Noted over Payroll Accounting 

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

agreements, exclusive of those referred to in the FFMIA, disclosed no instances of noncompliance and two 

other matters that are required to be reported under Government Auditing Standards, issued by the 

Comptroller General of the United States, and Office of Management and Budget (OMB) Bulletin No. 07-

04, Audit Requirements for Federal Financial Statements, as amended.

As stated in our opinion on DOL’s compliance with section 803(a) of FFMIA, we concluded that DOL did 

not comply, in all material respects, with the requirements of section 803(a) of FFMIA as of September 30, 

2011. 

The following sections discuss our opinion on DOL’s consolidated financial statements; our consideration 

of DOL’s internal control over financial reporting; our tests of DOL’s compliance with certain provisions 

of applicable laws, regulations, contracts, and grant agreements; our opinion on compliance with FFMIA; 

and management’s and our responsibilities.

OPINION ON THE FINANCIAL STATEMENTS

We have audited the accompanying consolidated balance sheets of the U.S. Department of Labor as of 

September 30, 2011 and 2010; the related consolidated statements of net cost and changes in net position 

and the combined statements of budgetary resources for the years then ended; the statements of social 

insurance as of September 30, 2011, 2010, 2009, 2008, and 2007; and the statement of changes in social 

insurance amounts for the year ended September 30, 2011. 

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 Labor as of September 30, 2011 and 2010; its net 

costs, changes in net position, and budgetary resources for the years then ended; the financial condition of 

its social insurance program as of September 30, 2011, 2010, 2009, 2008, and 2007; and the changes in its 

social insurance amounts for the year ended September 30, 2011, in conformity with U.S. generally 

accepted accounting principles.
Financial Section

36 United States Department of Labor

As discussed in Note 1-W and 1-Y to the consolidated financial statements, the statements of social 

insurance present the actuarial present value of DOL’s future expenditures to be paid to or on behalf of 

participants, estimated future income to be received from excise taxes, and estimated expenditures for 

administrative costs during a projection period ending in 2040. In preparing the statements of social 

insurance, management considers and selects assumptions and data that it believes provide a reasonable 

basis for the assertions in the statements. However, because of the large number of factors that affect the 

statements of social insurance and the fact that future events and circumstances cannot be known with 

certainty, there will be differences between the estimates in the statements of social insurance and the 

actual results, and those differences may be material.

Also as discussed in Note 1-B to the consolidated financial statements, DOL changed its method of 

reporting its social insurance program to adopt the provisions of the Federal Accounting Standards 

Advisory Board’s Statement of Federal Financial Accounting Standards No. 37, Social Insurance: 

Additional Requirements for Management’s Discussion and Analysis and Basic Financial Statements, 

effective October 1, 2010. 

The information in the Management’s Discussion and Analysis, Required Supplementary Stewardship 

Information, and Required Supplementary Information sections is not a required part of the consolidated 

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

principles. We have applied certain limited procedures, which consisted principally of inquiries of 

management regarding the methods of measurement and presentation of this information. However, we did 

not audit this information and, accordingly, we express no opinion on it. 

The information in the Message from the Secretary of Labor, Message from the Chief Financial Officer, 

and Other Accompanying Information section are presented for purposes of additional analysis and are not 

required as part of the consolidated financial statements. This information has not been subjected to 

auditing procedures, and accordingly, we express no opinion on it. 

INTERNAL CONTROL OVER FINANCIAL REPORTING 

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

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

control over financial reporting that might be deficiencies, significant deficiencies or material weaknesses

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

weaknesses have been identified. However, in our FY 2011 audit, we identified certain deficiencies in 

internal control over financial reporting that we consider to be material weaknesses and other deficiencies 

that we consider to be significant deficiencies. 

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 combination of 

deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the 

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

the deficiencies described in Exhibit I to be material weaknesses. 
Independent Auditors’ Report

FY 2011 Agency Financial Report 37

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 Exhibit II to be significant deficiencies.

Exhibit IV presents the status of prior year significant deficiencies and material weaknesses. 

We noted certain additional matters that we reported to management of DOL in a separate letter.

COMPLIANCE AND OTHER MATTERS

The results of our tests of compliance as described in the Responsibilities section of this report, exclusive 

of those referred to in the FFMIA, disclosed no instances of noncompliance that are required to be reported 

herein under Government Auditing Standards or OMB Bulletin No. 07-04, as amended. 

Other Matters. DOL is currently reviewing two incidents regarding potential violations of the Antideficiency Act. As of the date of this report, no final noncompliance determination has been made for these 

incidents. 

We noted certain additional matters that we reported to management of DOL in a separate letter.

OPINION ON COMPLIANCE WITH FFMIA

DOL represented that, in accordance with the provisions and requirements of FFMIA, the Secretary of 

Labor determined that DOL’s financial management systems were in substantial compliance with FFMIA 

as of September 30, 2011. 

We have examined the U.S. Department of Labor’s compliance with section 803(a) of the Federal 

Financial Management Improvement Act of 1996 as of September 30, 2011. Under section 803(a) of 

FFMIA, the U.S. Department of Labor’s financial management systems are required to substantially 

comply with (1) Federal financial management systems requirements, (2) applicable Federal accounting 

standards, and (3) the United States Government Standard General Ledger (USSGL) at the transaction 

level. We used OMB’s Implementation Guidance for the Federal Financial Management Improvement Act, 

dated January 9, 2009, to determine compliance. 

Our examination disclosed the following material noncompliance with FFMIA section 803(a) applicable to 

the U.S. Department of Labor as of September 30, 2011. DOL’s financial management systems do not 

comply substantially with Federal financial management system requirements because of certain 

weaknesses in DOL’s system access controls. In addition, we identified material instances in which DOL 

did not comply with the USSGL at the transaction level. These matters are further described in Exhibit III.

In our opinion, because of the effects of the matters discussed in the preceding paragraph, the U.S. 

Department of Labor did not substantially comply with FFMIA section 803(a) as of September 30, 2011. 

* * * * * * * 
Financial Section

38 United States Department of Labor

RESPONSIBILITIES

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

establishing and maintaining effective internal control; and complying with laws, regulations, contracts, 

and grant agreements applicable to DOL.

Auditors’ Responsibilities. Our responsibility is to express an opinion on the FY 2011 and 2010 

consolidated financial statements of DOL based on our audits. We conducted our audits in accordance with 

auditing standards generally accepted in the United States of America; the standards applicable to financial 

audits contained in Government Auditing Standards, issued by the Comptroller General of the United 

States; and OMB Bulletin No. 07-04, as amended. Those standards and OMB Bulletin No. 07-04 require 

that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial 

statements are free of material misstatement. An audit includes consideration of internal control over 

financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but 

not for the purpose of expressing an opinion on the effectiveness of DOL’s internal control over financial 

reporting. Accordingly, we express no such opinion. 

An audit also includes: 

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

financial statements;

• Assessing the accounting principles used and significant estimates made by management; and

• Evaluating the overall consolidated financial statement presentation.

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

In planning and performing our FY 2011 audit, we considered DOL’s internal control over financial 

reporting by obtaining an understanding of DOL’s internal control, determining whether internal controls 

had been placed in operation, assessing control risk, and performing tests of controls as a basis for 

designing our auditing procedures for the purpose of expressing our opinion on the consolidated financial 

statements, but not for the purpose of expressing an opinion on the effectiveness of DOL’s internal control 

over financial reporting. Accordingly, we do not express an opinion on the effectiveness of DOL’s internal 

control over financial reporting. We did not test all controls relevant to operating objectives as broadly 

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

As part of obtaining reasonable assurance about whether DOL’s FY 2011 consolidated financial statements 

are free of material misstatement, we performed tests of DOL’s compliance with certain provisions of laws, 

regulations, contracts, and grant agreements, noncompliance with which could have a direct and material 

effect on the determination of the consolidated financial statement amounts, and certain provisions of other 

laws and regulations specified in OMB Bulletin No. 07-04, as amended. We limited our tests of compliance 

to the provisions described in the preceding sentence, and we did not test compliance with all laws, 

regulations, contracts, and grant agreements applicable to DOL. However, providing an opinion on 

compliance with laws, regulations, contracts, and grant agreements was not an objective of our audit and, 

accordingly, we do not express such an opinion. 
Independent Auditors’ Report

FY 2011 Agency Financial Report 39

Our responsibility also included expressing an opinion on DOL’s compliance with FFMIA section 803(a) 

requirements as of September 30, 2011, based on our examination. Our examination was conducted in 

accordance with attestation standards established by the American Institute of Certified Public Accountants 

and the standards applicable to attestation engagements contained in Government Auditing Standards

issued by the Comptroller General of the United States, and accordingly, included examining, on a test 

basis, evidence about DOL’s compliance with the requirements of FFMIA section 803(a) and performing 

such other procedures as we considered necessary in the circumstances. We believe that our examination 

provides a reasonable basis for our opinion. Our examination does not provide a legal determination on 

DOL’s compliance with specified requirements.

______________________________ 

DOL’s response to the findings identified in our audit is presented in Exhibits I and II. We did not audit 

DOL’s response and, accordingly, we express no opinion on it. 

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

Inspector General, OMB, the U.S. Government Accountability Office, and the U.S. Congress and is not 

intended to be and should not be used by anyone other than these specified parties.

November 14, 2011 
Financial Section

Material Weaknesses

Exhibit I

40 United States Department of Labor

1. Lack of Sufficient Controls over Financial Reporting

The U.S. Department of Labor (DOL) experienced significant issues related to financial reporting in fiscal year 

(FY) 2010 as a result of the implementation of its new accounting and reporting system, the New Core Financial 

Management System (NCFMS). Although DOL has made substantial improvements in its financial reporting 

processes, we continued to identify certain control deficiencies in FY 2011 related to the reconciliation of data, 

financial processes, and other financial reporting controls. The specific issues identified in each of the 

aforementioned areas are discussed below. 

Reconciliation of Data: DOL performs various reconciliations throughout the year over the data recorded in its 

general ledger. During our FY 2011 audit procedures, we identified several deficiencies in DOL’s reconciliation 

controls related to Fund Balance with Treasury (FBWT), general ledger transactions, and grants data. 

During test work covering the period October 1, 2010, through March 31, 2011, we determined that the Office of 

the Chief Financial Officer (OCFO) did not perform the Government-wide Accounting System (GWA) Account 

Statement FBWT reconciliation and supervisor review processes properly, in a timely manner or at all. 

Specifically, the FBWT reconciliations and supervisor reviews for the selected months of October 2010 and 

March 2011 were not completed until December 28, 2010, and May 12, 2011, respectively, and the 

reconciliations for the selected months of December 2010 and February 2011 were not performed at all. 

Furthermore, the March FBWT reconciliation was designed to reconcile the amount of activity that occurred 

from October 1, 2010 through March 31, 2011, instead of ending balances as required by the U.S. Department of 

the Treasury (Treasury). We also noted that material differences identified in the March 2011 reconciliation were 

not adequately researched and resolved. 

FBWT

In addition, during the six month period ended March 31, 2011, Statement of Differences (FMS 6652)

reconciliations and related supervisory reviews were not performed in a timely manner or at all. In reviewing a 

sample of FMS 6652 reconciliations, we specifically noted the following issues:

• The OCFO did not complete the December 2010 and March 2011 reconciliations and related reviews for 

two agency location codes (ALC) until May 2011; 

• The Office of the Assistant Secretary for Administration and Management (OASAM) did not perform the 

December 2010 and March 2011 reconciliations for two ALCs; and 

• OASAM and the Bureau of Labor Statistics did not reconcile all differences identified on the December 

2010 and March 2011 FMS 6652 reports. 

Furthermore, sufficient evidence was not maintained to support that certain differences identified on the FMS

6652 reports as of December 31, 2010, and March 31, 2011, had been properly researched and resolved. During 

our year-end testing, we determined that the differences identified on the FMS 6652 reports were materially 

resolved as of September 30, 2011. 

Competing priorities related to the researching and correcting of differences identified on the FMS 6652 reports 

reduced the staff available to perform and maintain effective internal controls over the GWA FBWT 

reconciliation process and caused the OCFO and OASAM to choose to resolve the discrepancies instead of 

formally documenting the monthly FMS 6652 reconciliations in a timely manner. In addition, because of the 

year-end adjustments and actions needed to correct the FBWT balance as of September 30, 2010, the OCFO 

chose to reconcile the activity recorded in the FBWT accounts instead of the ending balances. Furthermore, the 

OCFO policies and procedures did not specifically define how the individual differences on the FMS 6652, the 

related causes, and the related corrective actions should be documented. 
Independent Auditors’ Report

Material Weaknesses

Exhibit I

 

FY 2011 Agency Financial Report 41

Differences that are not properly researched and resolved timely compromise the reliability of FBWT balances 

and other United States Standard General Ledger (USSGL) account balances contra to the FBWT account. This, 

in turn, compromises the overall integrity and status of DOL’s financial reports.

The OCFO provided data extracts of detailed general ledger transactions from NCFMS for the six months ended

March 31, 2011, and the quarter ended June 30, 2011, that did not initially reconcile to the NCFMS consolidated 

trial balance. Specifically, we identified a $329 million difference between the March 31, 2011, data extract and 

the NCFMS consolidated trial balance for one general ledger account. We also identified differences between the 

third quarter data extract and the NCFMS consolidated trial balance for numerous general ledger accounts. 

Several of these general ledger accounts had differences that ranged from $30 billion to $47 billion each. The 

OCFO was ultimately able to provide us revised data extracts for both periods that reconciled to the consolidated 

trial balance.

General Ledger Transactions

The errors occurred because the OCFO did not adequately review the data extracts prior to submitting them to us 

for audit. In addition, the OCFO did not have formal procedures in place to ensure that the population of detailed 

general ledger transactions extracted from its general ledger reconciled to the consolidated trial balance. Without 

sufficient procedures in place to generate an accurate population of detailed general ledger transactions, the 

OCFO may not be able to support the completeness, accuracy, and existence of its general ledger balances. 

DOL did not perform quarterly reconciliations of the E-Grants system to NCFMS in a timely manner. The 

reconciliation for the first quarter of FY 2011 was not performed because the responsible agency, the 

Employment and Training Administration (ETA), was unaware of its duty to perform the quarterly 

reconciliation. This was caused by a lack of communication and a lack of written policies and procedures over 

the reconciliation of E-Grants to NCFMS. ETA did perform a reconciliation of E-Grants to NCFMS for the 

second quarter; however, material differences were identified that were not resolved until the fourth quarter. 

Grants Data

In addition, we tested the Health and Human Services (HHS)-Payment Management System (PMS) Synch 

Report, which identifies differences between the authorized amount (obligation amount) and the advance amount 

(disbursement amount) reported in HHS-PMS and NCFMS, as of December 31, 2010. During our test work, we 

noted that ETA did not provide support evidencing that differences for four items were investigated and properly 

resolved. The differences were attributed to significant mapping issues between HHS-PMS and NCFMS for 

Office of Job Corps grants and were not investigated and resolved because related procedures had not been 

developed. 

Without adequate reconciliation controls and resolution of differences, material errors could occur and not be 

detected or corrected, resulting in a misstatement of grant-related expenses, advances, payables, and undelivered 

orders. 

We used the following criteria during our FY 2011 reconciliations testing: 

Treasury Financial Manual, Part 2, Chapter 5100, Reconciling Fund Balance With Treasury (FBWT) states, 

“Treasury notifies agencies by letter and/or a monthly Statement of Differences (SOD) report when there are 

differences in reported amounts. Agencies must investigate all Treasury-reported differences. They must initiate 

and/or report any necessary adjustments to their FBWT account and/or Treasury account symbol. Agencies must 

reconcile these differences monthly.”

Treasury’s FBWT Reconciliation Procedures, A Supplement to the Treasury Financial Manual, 1 TFM 2-5100 

November 1999 (Reconciliation Procedures), states, “Federal agencies must reconcile the SGL 1010 account and 
Financial Section

Material Weaknesses

Exhibit I

42 United States Department of Labor

any related subaccounts with the FMS 6652, 66531

, 66541 and 66551 on a monthly basis (at minimum).” It 

further states, “Federal agencies must research and resolve differences reported on the monthly FMS 6652.” 

The Reconciliation Procedures also state that “...each financial system’s policies and procedures should provide: 

(1) regular and routine reconciliation of G/L accounts; (2) thorough investigation of differences; (3) 

determination of specific causes of differences; and (4) initiation of corrective action.” The Reconciliation 

Procedures goes on to state, “When resolving differences, agencies should maintain detailed reconciliation 

worksheets (see Appendix 1) that, if needed, can be reviewed by the agency’s auditors or Treasury.”

Office of Management and Budget (OMB) Circular No. A-123, Management’s Responsibility for Internal 

Control, states, “Reliability of financial reporting means that management can reasonably make the following 

assertions: All reported transactions actually occurred during the reporting period...” and, “Transactions should 

be promptly recorded, properly classified, and accounted for in order to prepare timely accounts and reliable 

financial and other reports.” 

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

Standards) states, “Control activities occur at all levels and functions of the entity. They include a wide range of 

diverse activities such as approvals, authorizations, verifications, reconciliations, performance reviews, 

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

execution of these activities as well as appropriate documentation. Control activities may be applied in a 

computerized information system environment or through manual processes.” 

The Standards also state, “Internal control should generally be designed to assure that ongoing monitoring occurs 

in the course of normal operations. It is performed continually and is ingrained in the agency’s operations. It 

includes regular management and supervisory activities, comparisons, reconciliations, and other actions people 

take in performing their duties.”

Financial Processes: During our review of the FY 2011 third quarter financial statements, we noted the 

following errors: 

• Certain beginning balances reported in the Statement of Changes in Net Position (SCNP) and the Statement 

of Budgetary Resources (SBR) did not agree with the related ending balances reported in the FY 2010 

audited financial statements issued in May 2011; differences ranged from $343 million to $1.9 billion. 

• The balances reported for Permanently Not Available – All Other on the SBR and Unexpended 

Appropriations – Adjustments on the SCNP were overstated by $808 million. 

• Certain balances reported in multiple places in the statements did not agree.

The errors above were primarily caused by certain adjustments (i.e., topside adjustments) made by the OCFO to 

the FY 2010 audited financial statements issued in May 2011 that were initially recorded outside of the general 

ledger and were not timely recorded in NCFMS during FY 2011. Management was aware that the October 1 

beginning balances and certain ending balances reported in the general ledger were incorrect as of June 30, 2011, 

and planned to record correcting journal entries in the fourth quarter. However, they did not develop an 

alternative process to ensure that the third quarter financial statements were fairly stated, in all material respects.

The OCFO ultimately recorded the FY 2010 topside adjustments in September 2011; however, one of the 

adjustments was recorded incorrectly. The topside adjustments were recorded by management using memo 

accounts, which were required to be mapped to the appropriate consolidated financial statement line items to 

reflect the correct balances. Although management properly recorded the topside adjustments to the memo 

accounts, their review did not detect that one of the memo accounts was not properly mapped to the correct line 

 

1 The FMS 6653, 6654, and 6655 were superseded by the GWA Account Statement.
Independent Auditors’ Report

Material Weaknesses

Exhibit I

 

FY 2011 Agency Financial Report 43

item on the SBR. This error, which was subsequently corrected by the OCFO, caused the FY 2011 balances of 

Appropriations Received and Permanently not Available – All Other to be initially overstated by $808 million. 

The OCFO also had difficulty providing timely support that certain Unemployment Trust Fund (UTF) activities 

were accounted for and reported in accordance with U.S. generally accepted accounting principles (GAAP). 

Specifically, the OCFO was initially unable to (a) provide a sufficient rationale for why certain UTF receipts 

were reported as temporarily unavailable pursuant to public law or (b) support the presentation of UTF advances 

and payables on DOL’s consolidated balance sheet, and they did not perform adequate research to resolve these 

issues in a timely manner. Although these matters were identified and presented to the OCFO in June 2011, the 

OCFO did not provide sufficient resolution for them until October 2011 because they did not have a formal 

process in place to ensure significant financial reporting issues were researched, properly resolved, and 

documented in a timely manner.

Furthermore, we determined that the OCFO did not finalize the draft U.S. Department of Labor Manual Series

(DLMS) policies and procedures that require a comprehensive and detailed review of all financial information in 

the draft financial statements, nor did they document comprehensive policies and procedures related to the 

financial reporting process under NCFMS as of September 30, 2011. Because the OCFO was focused on 

reissuing its FY 2010 consolidated financial statements during the first half of FY 2011, the OCFO lacked the 

resources to draft comprehensive policies and procedures related to the NCFMS financial reporting process and 

to finalize the draft DLMS procedures.

The issues noted above increased the risk that DOL’s consolidated financial statements could be misstated or not 

presented in conformity with GAAP. 

We used the following criteria during our FY 2011 testing over DOL’s financial processes: 

The Standards state:

• “Internal control should provide reasonable assurance that the objectives of the agency are being achieved 

relative to reliability of financial reporting, including reports on budget execution, financial statements, and 

other reports for internal and external use and compliance with applicable laws and regulations.” 

• “Transactions should be promptly recorded to maintain their relevance and value to management in

controlling operations and making decisions.” 

• “Internal control and all transactions and other significant events need to be clearly documented, and the 

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

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

All documentation and records should be properly managed and maintained.” 

OMB Circular No. A-136, Financial Reporting Requirements, states, “Reporting entities should ensure that

information in the financial statements is presented in accordance with GAAP for Federal entities and the 

requirements of this Circular. Preparers of financial statements seeking additional guidance on matters involving 

the recognition, measurement, and disclosure requirements should refer to the specific FASAB standards 

governing those requirements.” It further states, “Where the FASAB standards and interpretations or the 

instructions in this Circular do not provide guidance, agencies will follow the hierarchy of accounting principles 

described in Section II.4.2 Q&A and SFFAS No. 34, The Hierarchy of Generally Accepted Accounting 

Principles, Including the Application of Standards Issued by the Financial Accounting Standards Board.” 

Other Financial Reporting Controls: We also noted that DOL needed improvement in its other financial 

reporting controls. Specifically, we identified deficiencies in controls related to the UTF disbursements accrual; 

grants; and non-benefit, non-payroll expenses, as described below. 

 
Financial Section

Material Weaknesses

Exhibit I

44 United States Department of Labor

During our FY 2011 testing of the UTF disbursements accrual methodology, we identified deficiencies in ETA’s 

retrospective analysis of the estimate. ETA’s analysis identified variances between the estimate and actual 

expenses as of December 31, 2010, and March 31, 2011, in the amounts of $1.4 billion and $500 million, 

respectively. However, ETA did not document management’s conclusion as to whether or not these variances 

necessitated a revision to the disbursement accrual methodology. In addition, although ETA personnel assessed 

the impact of the variances on gross costs, they did not assess the impact on accrued benefits and advances, 

which are based in part on the disbursements accrual. Furthermore, ETA did not fully investigate and identify the 

cause of the variances. 

UTF Disbursements Accrual

In addition, a computational error of approximately $318 million in the first quarter disbursements accrual 

calculation was not detected in management’s review of it. However, we did not identify any similar errors 

during our fourth quarter testing over the disbursements accrual. 

ETA did not have formal policies and procedures in place for the preparation and review of the retrospective 

analysis of the UTF disbursement accrual. The computational error occurred and was not detected because of an 

oversight during supervisory review of the disbursements accrual. Additionally, no formal policies and 

procedures were in place to outline the necessary steps supervisors should perform to ensure adequate reviews of 

the accrual. 

The lack of sufficient internal controls over the UTF disbursements accrual increased the risk that gross costs, 

accrued benefits, and advances could be misstated and not detected and corrected in a timely manner. 

The Standards state, “Managers also need to compare actual performance to planned or expected results 

throughout the organization and analyze significant differences.” It also states, “Internal control and all 

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

available for examination.”

OMB Circular No. A-123 states, “Reliability of financial reporting means that management can reasonably make 

the following assertions: All reported transactions actually occurred during the reporting period...” and, 

“Transactions should be promptly recorded, properly classified, and accounted for in order to prepare timely 

accounts and reliable financial and other reports.”

As part of our audit procedures over grant controls, we selected 55 grantees to determine if Federal Project 

Officer (FPO) desk reviews were being performed accurately and timely during the six months ended 

March 31, 2011. Our testing disclosed that a FPO desk review was not performed for 1 of the 55 grantees 

selected. In addition, 8 of the 54 FPO desk reviews tested were not completed timely within the required 75 

calendar days of the quarter end. This occurred because sufficient supervisory review procedures related to the 

timely completion of quarterly FPO desk reviews were not developed and implemented. Policies and procedures 

related to FPO desk reviews were outdated, and although they included a deadline for performance of the FPO 

desk reviews, they did not include any guidance regarding monitoring their completion. 

Grants

We also tested the March 31, 2011, Delinquent Reporting Analysis and noted that the analysis was reviewed by 

the Division of Financial and Systems Services (DFSS) Accounting Supervisor on May 6, 2011. However, ETA 

did not send notification of the delinquent cost reports to the responsible individuals for follow-up until after we 

requested support for the notification on June 20, 2011. The notification was delayed because of ETA oversight. 

Additionally, ETA’s Delinquent Filers Monitoring Procedures did not include specific deadlines regarding when 

the notification of delinquent filers must be distributed and when the follow-up was to be completed. 
Independent Auditors’ Report

Material Weaknesses

Exhibit I

 

FY 2011 Agency Financial Report 45

Without adequate grantee monitoring controls, grantees may misreport (intentionally or unintentionally) grant 

expenses without the misstatement being detected by ETA or fail to report grant expenditure details. As a result, 

grant-related expenses, advances, payables, and undelivered orders could be misstated.

DOL General Guidance on GEMS Usage for FY05 memorandum, DOL’s policy regarding desk reviews, states

that, “Desk reviews should be completed 30 days after receipt of the quarterly reports from grantees, but no later 

than 75 calendar days after the end of the calendar quarter.”

Chapter 75 of Title 31, United States Code (commonly referred to as the "Single Audit Act'') states, “Each 

Federal agency shall, in accordance with guidance issued by the Director under section 7505, with regard to 

Federal awards provided by the agency – (1) monitor non-Federal entity use of Federal awards...” 

The Standards state, “Internal control should generally be designed to assure that ongoing monitoring occurs in 

the course of normal operations. It is performed continually and is ingrained in the agency’s operations. It 

includes regular management and supervisory activities, comparisons, reconciliations, and other actions people 

take in performing their duties.”

We selected 550 non-benefit, non-payroll expenses recorded in the general ledger from October 1, 2010, through 

September 30, 2011, for testing. However, DOL was unable to provide supporting documentation or the 

documentation was not adequate for 33 of the items selected; 20 of which were related to adjustments recorded 

by DOL’s shared service provider. Of the 517 items tested, we identified 54 errors. As a result, 

non-benefit, non-payroll expenses were overstated by $26 million, which we statistically extrapolated to an 

overstatement of $405 million as of September 30, 2011. We included these errors in the Summary of Audit 

Misstatements, which was attached to the FY 2011 management representation letter. 

Non-Benefit, Non-Payroll Expenses

Additionally, we identified six exceptions related to grant expenses that were improperly classified as intragovernmental expenses instead of non-federal expenses. As a result of these exceptions, we analyzed grant 

expenses recorded in the general ledger from October 1, 2010, through September 30, 2011 and identified grant 

expenses in the amount of $117 million that were incorrectly classified as intra-governmental expenses. We 

included these errors in the Summary of Audit Misstatements, which was attached to the FY 2011 management 

representation letter. 

The Standards state, “Internal control and all transactions and other significant events need to be clearly 

documented, and the documentation should be readily available for examination. The documentation should 

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

form. All documentation and records should be properly managed and maintained.” 

In addition, the Standards state, “Controls over the design and use of records help provide reasonable assurance 

that expense transactions are recorded. Such controls include receiving reports, inspection documents, purchase 

orders, and other information such as vendor invoices, or other documents used to record delivered orders and 

related liabilities to provide assurance that all and only valid transactions are recorded.”

Statement of Federal Financial Accounting Concepts No. 2, Entity and Display, states, “Costs and revenues 

arising from transactions with other Federal entities should be displayed separately from transactions with nonFederal entities.” 

USSGL Compliance: We identified the following transactions that were not compliant with the USSGL:

• A portion of the liability for estimated future benefits related to the Energy Employees Occupational Illness 

Compensation Program in the amount of $12.1 billion was incorrectly recorded in the general ledger as a 

Contingent Liability instead of an Actuarial Liability. This prior year error was inadvertently not corrected in 
Financial Section

Material Weaknesses

Exhibit I

46 United States Department of Labor

the current year. The liability was presented correctly in the consolidated financial statements as of 

September 30, 2011. 

• An expenditure transfers payable in the amount of $2 billion was incorrectly recorded in the general ledger as 

Other Liabilities with Related Budgetary Obligations. This issue occurred because the entry was not 

adequately reviewed by a DOL supervisor prior to it being recorded. However, the liability was reported 

correctly in the consolidated financial statements as of September 30, 2011. 

• Grants payable in the amount of $792 million was incorrectly recorded in the general ledger as Accounts 

Payable instead of Other Liabilities. The OCFO made this decision for financial statement mapping purposes. 

The liability was presented correctly in the consolidated financial statements as of September 30, 2011. 

• UTF borrowings transactions in the amount of $3 billion were not recorded in accordance with the OMB and 

Treasury guidance provided to DOL. This error occurred because the OCFO misapplied the guidance for 

returning funds to Treasury. This misclassification had no effect on the consolidated financial statements as 

of September 30, 2011. 

• The increase of $1.6 billion in benefit overpayment receivables was incorrectly recorded in the general ledger 

as Benefit Expense instead of Other Expenses Not Requiring Budgetary Resources. This issue occurred 

because management had made a decision in prior years to record the change in benefit overpayments to the 

Benefits Expense general ledger account. This misclassification had no effect on the consolidated financial 

statements as of September 30, 2011. 

• Transactions related to the Federal Employees Compensation Account (FECA) Existing Claims accrual in the 

amount of $360 million were incorrectly recorded as Benefit Expense instead of Future Funded Expenses. 

This issue occurred because management had previously made a decision in prior years to use the Benefit 

Expense account in lieu of the Future Funded Expenses account. The liability was presented correctly in the 

consolidated financial statements as of September 30, 2011. 

The USSGL contains the chart of accounts that provides the basic accounting structure for Federal agencies’ 

general ledger systems. It incorporates both proprietary and budgetary accounts. It also provides the accounting 

transactions for events occurring throughout the Federal Government. These transactions illustrate the proper 

proprietary and budgetary entries for each accounting event. 

To address the issues noted above, the Chief Financial Officer should: 

a) Develop and implement procedures to properly complete and document the monthly GWA FBWT 

reconciliations, including 1) reinstatement of the previous reconciliation process that reconciled the ending 

balances reported on the GWA Account Statements to the ending FBWT balances recorded in the general 

ledger and 2) documented research and resolution of identified differences; 

b) Dedicate adequate resources to complete the monthly FBWT reconciliations and supervisor reviews timely; 

c) Perform, document, and review timely the monthly FMS 6652 reconciliations to demonstrate that the 

differences identified on the FMS 6652 reports have been resolved;

d) Update policies and procedures to properly complete and document the monthly FMS 6652 reconciliations, 

including documented research and resolution of all identified differences; 

e) Formalize procedures for generating data extracts of detailed general ledger transactions from NCFMS, and 

enhance the procedures for reviewing data extracts prior to submission for audit to ensure they reconcile to 

the consolidated trial balance; 

f) Develop and implement a formal process for promptly researching and resolving significant financial 

reporting issues that are identified. In addition, resolution of each issue should be formally documented and 

retained to support the consolidated financial statements’ compliance with GAAP;

g) Finalize draft DLMS policies and procedures requiring detailed review of all financial information in the 

financial statements, and ensure that OCFO personnel adhere to these policies. Financial statement review 

should include procedures for comparing financial data reported on the different statements to ensure 

accuracy and consistency; agreeing the financial data to the general ledger to ensure existence, completeness, 

and accuracy of financial data reported; and analyzing significant variances between current period and prior 

period financial information; 
Independent Auditors’ Report

Material Weaknesses

Exhibit I

 

FY 2011 Agency Financial Report 47

h) Formally document comprehensive policies and procedures related to the financial reporting process under 

NCFMS;

i) Develop and implement policies and procedures to address the minimum documentation requirements 

needed to support adjustments recorded by DOL’s shared service provider, provide training to the agencies 

to address the minimum documentation requirements needed to sufficiently support recorded transactions, 

and develop and implement monitoring controls to ensure that individuals are performing sufficient reviews 

of expenses and related documentation before they are posted in NCFMS to ensure they are adequately 

supported; 

j) Investigate the specific cause of the grant expense misclassification issue, and develop and implement 

appropriate corrective action; and

k) Record journal entries to correct the misclassified amounts identified above to their proper USSGL accounts 

in the general ledger, develop and implement procedures to properly record these transactions in the future, 

review significant transactions for USSGL compliance, and make any necessary corrections. 

In addition, the Assistant Secretary for Administration and Management should perform, document, and review 

timely the monthly FMS 6652 reconciliations to demonstrate that the differences identified on the FMS 6652 

reports have been resolved.

We also recommend the National Director for the Office of Job Corps continue working to resolve the mapping 

issues between HHS-PMS and NCFMS to allow the systems to communicate properly, and develop and 

implement procedures to investigate, resolve, and document differences identified through the quarterly 

HHS-PMS Synch Report. 

Furthermore, we recommend that the Assistant Secretary for Employment and Training: 

a) Develop and implement written policies and procedures regarding the quarterly reconciliation of E-Grants to 

NCFMS and resolution of identified differences, including an expected timeframe to ensure errors are 

detected and corrected to avoid a misstatement. Documentation should be maintained to support these 

activities; 

b) Develop and implement comprehensive procedures for the preparation and review of the UTF disbursements 

accrual that address the minimum documentation needed to support management’s conclusions and require 

individuals performing supervisory reviews to verify the accuracy of the accrual data and calculations and 

the adequacy of documentation maintained to substantiate management’s conclusion; 

c) Update written policies and procedures to include guidance on monitoring the timely completion of FPO 

desk reviews, which should include requirements for supervisors to periodically review a sample of active 

grantees to confirm that the FPO desk reviews are being completed timely. This review should be 

documented; and 

d) Update the Delinquent Filers Monitoring Procedures to include 1) a control procedure designed to ensure 

that the quarterly notification of delinquent filers is distributed timely, 2) a deadline by which the notification 

of delinquent filers must be sent to the responsible individuals for follow-up, and 3) deadlines for required 

follow-up. 

Management’s Response: Although management generally concurs with the recommendations, we do not 

concur that the level of this deficiency continues to be at the material weakness level as of September 30, 2011. 

Management agreed with the auditors that in FY 2010 there was a material weakness in this area, however, with 

the significant improvements made during FY 2011, as noted by the auditors, this weakness no longer rises to the 

level of a material weakness.

During FY 2011 we have implemented corrective actions that have resulted in significant improvements and will 

initiate further corrective actions to address the auditors’ recommendations. We have taken steps to ensure that 

procedures for reconciliations are properly updated and documented, including resolution of differences and 

required documentation. We will continue to strengthen our policies and procedures in all areas and will provide 

training to our staff as needed.
Financial Section

Material Weaknesses

Exhibit I

48 United States Department of Labor

Regarding the reconciliations of Fund Balance with Treasury (FBWT), Statement of Differences (FMS 6652) 

reconciliations, general ledger transactions, and grants data, we agree with the auditors that not enough resources 

were dedicated to perform these reconciliations during the six month period ended March 31, 2011. Significant 

resources were devoted to these reconciliations in the second half of FY 2011 and significant progress was made 

and material differences were resolved. As noted by the auditors, “During our year-end testing, we determined

that the differences identified on the FMS 6652 reports were materially resolved as of September 30, 2011.” and 

that identified material differences in the grants reconciliation were resolved in the fourth quarter. We agree with 

the auditors that the data extracts of detailed general ledger transactions from NCFMS provided did not initially 

reconcile to the NCFMS consolidated trial balance. This was due to the way the extracts were generated and 

placed into the format required by the auditors and not due to the accuracy of the data in the general ledger. This 

issue was corrected and revised data extracts for both periods that reconciled to the consolidated trial balance

were provided, as noted by the auditors. Subsequently, similar extracts we properly provided to the auditors on a 

timely basis for the periods ending August 31, 2011, September 30, 2011 and October 24, 2011. 

Regarding the interim financial statements, the auditors noted that “During our review of the FY 2011 third 

quarter financial statements, we noted the following errors: Certain beginning balances reported in the Statement 

of Changes in Net Position (SCNP) and the Statement of Budgetary Resources (SBR) did not agree with the 

related ending balances reported in the FY 2010 audited financial statements issued in May 2011; differences 

ranged from $343 million to $1.9 billion. The balances reported for Permanently Not Available – All Other on 

the SBR and Unexpended Appropriations – Adjustments on the SCNP were overstated by $808 million.” These 

differences relate to the adjustments made by DOL in preparing the FY 2010 financial statements issued in May 

2011. DOL had made a specific management decision to record these adjustments during the fourth quarter of FY 

2011 and this was communicated to the auditors. As such, the ending balances from the May 2011 submission of 

the FY 2010 financial statements would not tie to the beginning balances in the unaudited FY 2011 third quarter

unaudited financial statements. DOL recorded the adjustments in a controlled manner during FY 2011 fourth 

quarter for proper presentation on the annual FY 2011 financial statements. In addition, the SCNP is not a 

required interim financial statement per Office of Management and Budget (OMB) Circular No. A-136, 

Financial Reporting Requirements, and OMB does not require the SCNP to be submitted for quarterly reporting.

As such the SCNP was not submitted to OMB or to anyone else outside of DOL. 

Regarding the topside adjustments, the auditors noted that “Although management properly recorded the topside 

adjustments to the memo accounts, their review did not detect that one of the memo accounts was not properly 

mapped to the correct line item on the SBR. This error, which was subsequently corrected by the OCFO, caused 

the FY 2011 balances of Appropriations Received and Permanently not Available – All Other to be initially 

overstated by $808 million.” The error to which the auditor refers to existed in a test environment and did not 

exist on the FY 2011 financial statements. Absent discussion with the auditors, we believe that this matter would 

have become apparent in the yearend evaluation of the composition of the SBR, which DOL had planned to do 

and communicated to the auditors. 

Regarding the reconciliation of grants data and reconciliation of HHS-PMS to NCFMS for Office of Job Corps 

related activity, ETA will develop and implement written procedures regarding quarterly reconciliation of Egrants to NCFMS and resolution of identified differences. Beginning with the 1st quarter FY2012, ETA will 

investigate, resolve, and document obligation and disbursement differences using the quarterly HHS-PMS Sync 

report. The resolution of the OJC grant mapping issues between HHS/PMS and NCFMS continue. To date, 

OCFO and GCE have reduced the number/amount of incorrectly mapped items. Regarding the UTF disbursement 

accrual, ETA will develop a checklist for the initial review process. In terms of a quarterly retrospective review 

process, ETA will document the process and related results, including establishing a threshold to determine 

whether there are significant variances which warrant investigation and a supervisory review. ETA updated its 

Delinquent Filers Monitoring procedures to include timelines for notifying responsible individuals of the 

delinquent cost report. ETA will ensure that notification will include deadlines for required follow up. 
Independent Auditors’ Report

Material Weaknesses

Exhibit I

 

FY 2011 Agency Financial Report 49

Auditors’ Response: Our consideration of internal control over financial reporting covers the entire fiscal year; 

as such, management’s assessment of the severity of the identified deficiencies at year-end may differ from our 

assessment. We will conduct follow-up procedures in FY 2012 to determine whether corrective actions have been 

developed and implemented. 

2. Lack of Sufficient Controls over Budgetary Accounting

DOL encountered significant issues in accounting for its budgetary resources and their related status during FY 

2010. Although DOL made substantial improvements in its budgetary accounting during FY 2011, we continued 

to identify certain control deficiencies related to budgetary reconciliations, obligations and fund controls, and the 

status of budgetary resources. The specific issues identified in each of the aforementioned areas are discussed 

below. 

Lack of Budgetary Reconciliations: During our FY 2011 testing, we noted that reconciliations of the

Apportionment and Reapportionment Schedules (SF-132) to the Report on Budget Execution and Budgetary 

Resources (SF-133) were not prepared and reviewed by management for the first and second quarters of FY 

2011. Additionally, the budgetary to proprietary account relationship analysis and the reconciliation of net 

outlays per the GWA Account Statement Expenditure Activity Report to the SBR were not performed at all for 

the first quarter and were not completed until July 8 and June 8, 2011, respectively, for the second quarter. 

Because of the aforementioned exceptions, we determined these controls were not operating effectively and, 

therefore, did not perform additional control testing over these reconciliations in the third and fourth quarters. 

In addition, we performed testing over the reconciliation of the SBR to the SF-133s as of March 31, 2011. Based 

on our testing, we noted that the OCFO did not resolve differences ranging from $107.9 million to $3.7 billion 

between related line items reported on the SBR and the SF-133s as of June 30, 2011. These differences were 

materially reconciled in the fourth quarter. 

Because of competing priorities related to the researching and correcting of balances reported on DOL’s FY 2010 

financial statements, the number of OCFO staff available to perform certain quarterly budgetary reconciliations

was reduced during the first half of FY 2011. 

Policies and procedures over budgetary reconciliations were not sufficient to address the minimum 

documentation requirements needed to substantiate that identified differences were properly researched and 

resolved and to outline the necessary steps to ensure supervisors were performing adequate reviews. When 

quarterly budgetary reconciliations are not properly performed, the risk increases that material misstatements will 

not be detected and corrected in a timely manner. 

The Standards state, “Internal control should generally be designed to assure that ongoing monitoring occurs in 

the course of normal operations. It is performed continually and is ingrained in the agency’s operations. It 

includes regular management and supervisory activities, comparisons, reconciliations, and other actions people 

take in performing their duties.” It further states, “Internal control and all transactions and other significant 

events need to be clearly documented, and the documentation should be readily available for examination. The 

documentation should appear in management directives, administrative policies, or operating manuals and may 

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

OMB Circular No. A-136, section IV.3, states, “Agencies are required to submit an analysis of any material 

differences between the current quarter’s unaudited SBR and the current quarter’s department-wide SF 133, 

Report on Budget Execution and Budgetary Resources. Agencies should reconcile the two reports; however, 

agencies are only required to provide OMB with an explanation for any material differences between the SBR 

and SF 133 for comparable line items related to unobligated balance brought forward, gross budget authority, 

obligations incurred, actual offsetting collections, net outlays and distributed offsetting receipts.” 
Financial Section

Material Weaknesses

Exhibit I

50 United States Department of Labor

OMB Circular No. A-136, section II.4.6.1, states, "Information on the SBR should be reconcilable to the budget 

execution information reported on the SF 133 Report on Budget Execution and Budgetary Resources and with 

information reported in the Budget of the United States Government to ensure the integrity of the numbers 

presented." 

Obligations and Fund Control: The OCFO did not adequately monitor undelivered orders (UDOs) for the 

quarter ended December 31, 2010. Specifically, the OCFO did not obtain the results of the agencies’ quarterly 

review of UDOs to determine whether any UDO balances needed to be deobligated in the general ledger. The 

OCFO did not have sufficient resources to implement policies and procedures to obtain the results of the 

agencies’ review or to ensure expired and invalid UDOs were deobligated either by the agency or by the OCFO

because of resource constraints and competing priorities related to the correction of NCFMS implementation 

issues. However, as of our March 31, 2011 control testing, we noted that the OCFO had implemented policies 

and procedures related to monitoring UDOs. 

We selected a statistical sample of three UDO balances reported in NCFMS as of September 30, 2011 that had no 

activity during the fourth quarter for testing. Through our testing, we identified one invalid UDO that resulted in 

an overstatement of $60,994, which we statistically extrapolated to an overstatement of $379 million as of 

September 30, 2011. We included this error in the Summary of Audit Misstatements, which was attached to the 

FY 2011 management representation letter. This error occurred because of a determination that the UDO should 

not be deobligated that was not supported by appropriate documentation.

As of June 30, 2011, we compared the amount of obligations incurred reported on the SF-133s to the total 

amount available to obligate on the SF-132s. Based on our review, we determined that the reported amount of 

obligations incurred exceeded total funds available by $58.3 million, raising a question about compliance with 

the Anti-deficiency Act. Upon investigation, we determined that this was an accounting error, not an instance of 

noncompliance, caused by a batch entry that was intended to reduce obligations but caused obligations to 

increase instead. The automated fund controls in NCFMS did not prevent the entry from being posted even 

though it caused obligations to exceed the amount of funding available. The OCFO subsequently corrected the 

batch entry error and appropriately reduced obligations as of September 30, 2011. 

During our control testing over the grant closeout process as of March 31, 2011, we noted that 4 of 55 grants 

tested were not closed out timely because of errors in the E-Grants system related to the acceptance of final ETA 

9130s, a coding issue in E-Grants, and the improper recording of a grantee’s refund check. Because of the 

aforementioned exceptions, we concluded this control was not operating effectively, and therefore, did not 

perform additional control testing. Without adequate controls to timely close out expired grants and deobligate 

any remaining funds, undelivered orders may be overstated. 

U.S. Code Title 31 Section 1501, Documentary Evidence Requirement for Government Obligations, states, “An 

amount shall be recorded as an obligation of the United States Government only when supported by documentary 

evidence of a binding agreement between an agency and another person (including an agency) that is (a) in 

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

availability for obligation of the appropriation or fund.” Section 1554, Audit, control and reporting, states, "The 

head of each agency shall establish internal controls to assure that an adequate review of obligated balances is 

performed to support the certification required by section 1108(c) of this title." 

OMB Circular No A-11, section 150.2, further states, “The purpose of your agency’s fund control system is to: 

Restrict both obligations and expenditures (also known as outlays or disbursements) from each appropriation or 

fund account to the lower of the amount apportioned by OMB or the amount available for obligation or 

expenditure in the appropriation or fund account.” 

The Standards state, “Control activities occur at all levels and functions of the entity. They include a wide range 

of diverse activities such as approvals, authorizations, verifications, reconciliations, performance reviews, 
Independent Auditors’ Report

Material Weaknesses

Exhibit I

 

FY 2011 Agency Financial Report 51

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

execution of these activities as well as appropriate documentation.” 

The Standards also state, “Internal control and all transactions and other significant events need to be clearly 

documented, and the documentation should be readily available for examination. The documentation should 

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

form. All documentation and records should be properly managed and maintained.” 

Status of Budgetary Resources: During our testing over appropriations received as of June 30, 2011, we noted 

that one of DOL’s funds included $320 million in appropriations that were incorrectly recorded in NCFMS as 

Unapportioned Authority instead of Unobligated Funds Exempt from Apportionment. This error occurred 

because the NCFMS Budget Module was not configured to allow appropriations exempt from apportionment to 

be posted to the correct general ledger account. Although the OCFO developed a process to correct these 

transactions through a manual journal entry, this fund was inadvertently overlooked, and a correcting entry was 

not initially recorded. As a result, Unapportioned Authority was overstated and Unobligated Funds Exempt from 

Apportionment was understated by $320 million as of June 30, 2011. In addition, this error resulted in 

noncompliance with the USSGL at the transactional level. This error was corrected as of September 30, 2011. 

USSGL Compliance: In addition to certain issues noted above, we identified the following budgetary 

transactions that were not recorded in compliance with the USSGL.

• Receipts temporarily precluded from obligation in the amount of $10 billion were incorrectly reported in the 

general ledger as Receipts Unavailable for Obligation upon Collection instead of Receipts and 

Appropriations Temporarily Precluded from Obligation as of September 30, 2011. This occurred because the 

OCFO did not correctly interpret the guidance in the Federal Trust Fund Accounting Guide related to 

receipts precluded from obligation. 

• Budgetary and proprietary entries were not recorded simultaneously for economic events related to the 

enactment of an appropriation or budget authority. On average, the entries we identified were recorded 16 

days apart, but we identified a few transactions that were recorded 30 days or more apart. The budget and 

proprietary entries were not recorded simultaneously because they were recorded by two separate agencies 

that did not coordinate accordingly. 

We used the following criteria during our FY 2011 testing over the status of budgetary resources and USSGL 

compliance: 

The USSGL contains the chart of accounts that provides the basic accounting structure for Federal agencies’ 

general ledger systems. It incorporates both proprietary and budgetary accounts. It also provides the accounting 

transactions for events occurring throughout the Federal Government. These transactions illustrate the proper 

proprietary and budgetary entries for each accounting event. 

The Standards state, “Transactions should be promptly recorded to maintain their relevance and value to 

management in controlling operations and making decisions. This applies to the entire process or life cycle of a 

transaction or event from the initiation and authorization through its final classification in summary records.”

To address the issues noted above, the Chief Financial Officer should: 

a) Provide adequate resources to complete all necessary budgetary reconciliations timely; 

b) Update policies and procedures over budgetary reconciliations 1) to address the minimum documentation 

requirements needed to substantiate that identified differences are properly researched and resolved, and 2) to 

outline the necessary steps to complete adequate supervisory reviews; 

c) Provide training on the updated policies and procedures over budgetary reconciliations, including timing and 

frequency of reconciliation preparation; 
Financial Section

Material Weaknesses

Exhibit I

52 United States Department of Labor

d) Update the NCFMS configuration so that all recorded transactions are subject to the system’s automated 

funds control;

e) Provide training to the agencies to address the minimum documentation requirements needed to sufficiently 

support the validity of UDOs;

f) Update the NCFMS Budget Module configuration to allow appropriations that are exempt from 

apportionment to be posted to the correct general ledger account. Until the NCFMS Budget Module is 

properly configured, procedures should be developed and implemented to periodically review funds with 

appropriations exempt from apportionment to ensure amounts improperly reported as Unapportioned 

Authority are properly reclassified to Unobligated Funds Exempt from Apportionment; and 

g) Require that one agency be responsible for recording both the budgetary and proprietary journal entries for 

economic events, or if separate agencies continue to record the entries, develop and implement procedures 

that requires those agencies to coordinate appropriately to ensure almost simultaneous recording. 

We recommend that the Assistant Secretary for Employment and Training: 

a) Evaluate E-Grants to determine the cause of the continuing system errors related to the acceptance of ETA 

9130s, and implement the appropriate corrective action; 

b) Identify and correct the E-Grants coding issue that prevented timely and proper grant closeout; and 

c) Develop and implement alternative procedures to properly post refunds to appropriate grants in NCFMS. 

Management’s Response: Although management generally concurs with the recommendations, we do not 

concur that the level of this deficiency continues to be at the material weakness level as of September 30, 2011. 

Management agreed with the auditors that in FY 2010 there was a material weakness in this area, however, with 

the significant improvements made during FY 2011, as noted by the auditors, this weakness no longer rises to the 

level of a material weakness.

During FY 2011 we have implemented corrective actions that have resulted in significant improvements and will 

initiate further corrective actions to address the auditors’ recommendations. As noted below, we have taken steps 

to ensure that procedures for budgetary reconciliations and the performance of the reconciliations are given 

priority. We will continue to strengthen our policies and procedures in all areas and will provide training to our 

staff as needed.

Regarding the reconciliations of the Apportionment and Reapportionment Schedules (SF-132) to the Report on 

Budget Execution and Budgetary Resources (SF-133), it should be noted that U.S. Government agencies were 

operating under a Continuing Resolution during the first two quarters of FY 2011. As such, the majority of 

Treasury Appropriation Fund Symbols applicable to DOL had not yet been issued OMB-approved SF-132s for 

FY 2011, making budgetary resources reconciliations less pertinent and resources were used elsewhere. The 

reconciliations were properly performed as of June 30, 2011 and September 30, 2011. 

The SBR to SF-133 reconciliation of data as of June 30, 2011 and September 30, 2011 were properly performed 

and all significant variances accounted for except for certain variances related to the Unemployment Insurance 

Trust Fund. We have worked with the appropriate Federal agency to resolve this issue and a revised SF 133 will 

be submitted by that agency. The issue noted by the auditors that appropriations that were incorrectly recorded in 

NCFMS as Unapportioned Authority instead of Unobligated Funds Exempt from Apportionment was resolved 

and the amounts are properly reflected in the financial statements.

With respect to the E-grants system errors, ETA’s Closeout unit continues to work with the E-grants technical 

support staff by forwarding system errors encountered during the acceptance of 9130s. The E-grants personnel 

have evaluated the cause of the errors and made the necessary system changes to successfully reduce the number 

of overall errors of attempted 9130 acceptances to less than 5%. Errors continue to be identified and corrected on 

a case-by-case basis. The coding issue cited in the finding was an isolated incident and has been corrected and 

the grant subsequently closed. Lastly, to properly post refunds a template was developed to use when posting 
Independent Auditors’ Report

Material Weaknesses

Exhibit I

 

FY 2011 Agency Financial Report 53

receipts that need to be attributed to a particular document number. This will ensure that disbursement balances 

are correctly stated in NCFMS and allow the grant closeout to be completed timely.

Auditors’ Response: Our consideration of internal control over financial reporting covers the entire fiscal year; 

as such, management’s assessment of the severity of the identified deficiencies at year-end may differ from our 

assessment. We will conduct follow-up procedures in FY 2012 to determine whether corrective actions have been 

developed and implemented.

3. Lack of Sufficient Security Controls over Key Financial and Support Systems

In FY 2011, DOL agencies completed corrective action to address certain previously-identified control 

deficiencies. However, based on our FY 2011 testing of significant DOL financial and support systems, located 

in four DOL agencies, we determined that security control deficiencies continued to be systemic across DOL 

agencies. In our testing, we identified new security control deficiencies in addition to the ones that were reported 

in prior years. 

We have classified the deficiencies identified into the following four categories: account management, system 

access settings, system audit log reviews, and vulnerability management. 

The first two categories summarize the identified deficiencies related to controls that are designed to help prevent 

unauthorized access to information technology (IT) systems. The specific deficiencies identified in these two 

categories were as follows: 

Account Management 

• User accounts were not timely removed for separated users. Certain separated users had active system 

accounts, and in some cases, separated users accessed systems after their separation dates;

• Shared accounts and multiple user accounts for the same user existed; 

• Certain user accounts were granted more privileges than what was requested on their access request forms;

• Incidents were not timely reported; 

• Developer and production roles were not separated;

• Application-level conflicting roles were not separated;

• Periodic user account reviews or re-certifications were not appropriately performed; 

• Review of employees with access to data centers were not performed;

• Agencies did not maintain lists of users who could authorize new system access requests; and 

• Account management controls were not performed, evidenced by incomplete or missing access requests, nondisclosure agreements, modification forms, and termination forms. 

System Access Settings 

• Unnecessary services were not disabled;

• Servers were not configured to the most appropriate settings; 

• Inactive accounts were not disabled in a timely manner; and 

• Password settings, lockout timeouts, and remote session timeouts did not comply with the Office of the Chief 

Information Officer Computer Security Handbook. 

The account management control deficiencies increase the risk that current employees, separated employees, 

and/or contractors may obtain unauthorized or inappropriate access to financial systems and/or data. Such access 

could lead to unauthorized activities and/or inappropriate disclosures of sensitive data. Additionally, system 

access setting deficiencies may be exploited, in either a singular fashion or in combination, by a malicious user, 

which may affect the confidentiality, integrity, and/or availability of DOL systems and data. 
Financial Section

Material Weaknesses

Exhibit I

54 United States Department of Labor

System Audit Logs Review 

The system audit logs review category represents controls designed to detect unauthorized access to IT systems. 

Although DOL has certain detective controls in place to mitigate the aforementioned risks, we also identified 

certain deficiencies in these controls, as follows: 

• Certain system administrator activities were not properly logged; and 

• Audit logs monitoring user and administrator activity, changes to security profiles, remote access logs, access 

to sensitive directories, and failed login attempts were not reviewed, or documentation of audit log reviews 

was not maintained. 

The lack of system audit log reviews may allow for unauthorized or inappropriate activities to go undetected by 

management. 

Vulnerability Management 

Controls related to vulnerability management are designed to prevent weaknesses in IT systems from being 

exploited. Such controls include proactively monitoring system vulnerabilities, timely patching of related 

security issues, and configuring IT systems in compliance with baseline security requirements. During our FY 

2011 vulnerability assessments, we identified the following deficiencies: 

• Numerous critical and high risk application and operating system patches were not implemented; 

• Numerous servers and workstations were not compliant with minimum security baselines; and 

• Passwords did not meet the minimum security baseline requirements. 

Vulnerabilities that are not remedied in a timely manner may result in information leaks or system threats. These 

vulnerabilities may also disrupt normal system processes, allow inappropriate access, prevent updates from being 

implemented, and jeopardize the integrity of financial information. Additionally, vulnerabilities that are not 

remedied or mitigated can present an opportunity to circumvent account management, system access settings, 

and audit logging controls. 

Collectively, the aforementioned IT control deficiencies pose a significant risk to the integrity of DOL’s data, 

which could ultimately impact its ability to accurately and timely perform its financial reporting duties. The 

specific nature of these deficiencies, their causes, and the systems impacted by them has been communicated 

separately to management. These deficiencies, which were noted across all four agencies selected for testing, 

were a result of systemic issues in the implementation and monitoring of Departmental procedures and controls. 

DOL agencies have not invested the necessary level of effort and resources to ensure that IT policies and 

procedures are operating effectively.

To address the issues noted above, the Chief Information Officer should: 

a) Coordinate efforts among the DOL agencies to develop procedures and controls to address access and 

vulnerability management control deficiencies in financial and support systems; 

b) Monitor the agencies’ progress to ensure that procedures and controls are appropriately implemented and 

maintained; and 

c) Ensure that sufficient resources are available to develop, implement, and monitor the procedures and controls 

that address access and vulnerability management control deficiencies. 

Management’s Response: The Office of the Assistant Secretary for Administration and Management (OASAM) 

does not concur with the FY 2011 KPMG Financial Statement Audit aggregated Enterprise-wide "material 

weakness" regarding lack of adequate controls over access to key financial and support systems. In management's 

view, the auditors did not provide the requisite linkage between the findings and risks or events that could 

realistically be expected to rise to the level of seriousness contemplated by the term "material weakness;" nor did 
Independent Auditors’ Report

Material Weaknesses

Exhibit I

 

FY 2011 Agency Financial Report 55

the report adequately represent the operating environments of the systems audited in a holistic manner. The 

financial systems are physically and logically separated with appropriate supporting boundary controls. The 

segregated environments that host DOL financial applications provide supplemental controls aligned to the 

security best practice concept of defense in depth. Additionally, DOL policies, procedures and standards 

collectively provide compound safeguards and redundant security measures to ensure the integrity of DOL 

financial systems. 

In general, it is management's view that the auditors’ characterizations of risk levels are inflated. For example, an 

account which is disabled, but not deleted, does not represent a high risk as portrayed in the audit Notification of 

Findings. A disabled account does not permit unauthorized access to a system or inappropriate access to sensitive 

data. Additionally, security incidents that are reported and handled appropriately, but not reported within 1 hour 

of occurrence do not permit unauthorized access to a system. While these are weaknesses that should be 

addressed, and management will see that they are mitigated, they do not support the determination of a material 

weakness in that they do not contribute to the material misstatements of the Department's financial statement. 

Management remains committed to safeguarding DOL financial systems and will ensure corrective actions are 

developed and implemented to address the identified issues. In FY 2012, management will communicate with 

DOL Agency Heads calling attention to their agency outstanding findings and recommendations, and ask that 

they give priority attention and sufficient resources to their agency's mitigation strategy as well as provide 

guidance on developing and prioritizing corrective actions. Management will continue to deploy policies, 

procedures and automated tools aimed at strengthening and providing continuous monitoring of the overall 

security posture of DOL's computer security program, including monitoring agency corrective action activities.

Auditors’ Response: The details of our FY 2011 IT findings were provided to DOL management through the 

established Notification of Findings process. Although we did not identify any individual finding as a material 

weakness, we evaluated the combination of certain findings, in accordance with auditing standards generally 

accepted in the United States of America, to conclude that a material weakness does exist, taking into 

consideration that certain findings, when assessed in aggregate, identified deficiencies in both detective and 

preventive access controls related to one or more financial systems. Although management stated that they do not 

concur with our categorization of identified deficiencies as a material weakness, they plan on taking steps to 

address the deficiencies. We will conduct follow-up procedures in FY 2012 to determine whether corrective 

actions have been developed and implemented. 
Financial Section

Significant Deficiencies

Exhibit II

56 United States Department of Labor

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

The U.S. Department of Labor (DOL) records manual journal entries throughout the year to account for certain 

accounting transactions and to make corrections to general ledger account balances, as necessary. During our

fiscal year (FY) 2011 audit, we tested a sample of 170 journal entries recorded in the New Core Financial 

Management System (NCFMS) from October 1, 2010, through March 31, 2011. The supporting documentation 

provided for 51 of the journal entries selected was not adequate for us to determine whether the journal entries 

were recorded in the proper period, represented a valid economic event, or were recorded in accordance with the 

United States Standard General Ledger (USSGL). 

Adequate supporting documentation was provided for the remaining 119 journal entries selected, and based on 

our testing, we identified the following exceptions:

• 8 instances where the amount recorded for the entry did not agree with the support provided or the support 

did not substantiate the underlying economic transaction; 

• 4 instances where the support provided indicated that the entry was not recorded in the proper period; 

• 8 instances where management initially recorded the entry incorrectly and did not identify the error 

immediately; and

• 26 instances where the entry was not recorded in accordance with the USSGL and applicable Federal 

accounting standards. 

The exceptions above were caused by insufficient review by DOL supervisors of journal entries to ensure they 

were properly prepared and supported before posting to the general ledger. Furthermore, the Office of the Chief

Financial Officer (OCFO) had not revised its policies and procedures to address the minimum documentation 

requirements needed to adequately support journal entries during the first two quarters of FY 2011. In addition, 

the OCFO did not have monitoring controls in place to ensure that supervisors or individuals other than the 

preparer were performing adequate reviews of journal entries and related documentation to ensure they were

properly supported. 

The OCFO updated its policies and procedures related to journal entries in June 2011. As a result, we noted 

improvements in the preparation and review of journal entries during our third and fourth quarter testing. 

Specifically, we received adequate supporting documentation for 147 of the 169 journal entries selected from 

NCFMS for the period April 1, 2011, through August 31, 2011. Adequate supporting documentation was not 

provided for the remaining 22 items. For the 147 journal entries tested, we identified two instances where the 

amount recorded for the entry did not agree with the support provided or the support did not substantiate the 

underlying economic transaction, and two instances where the support provided indicated that the entry was not 

recorded in proper period. In addition, we identified 23 instances where the journal entry was not recorded in 

accordance with the USSGL.

Without proper review and approval of transactions, the risk increases that a material error would not be 

prevented or detected and corrected in a timely manner. In addition, without adequate supporting documentation, 

management is unable to determine the appropriateness of transactions posted to the general ledger. 

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

Standards) state, “Internal control and all transactions and other significant events need to be clearly documented, 

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

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

documentation and records should be properly managed and maintained.” 
Independent Auditors’ Report

Significant Deficiencies

Exhibit II

FY 2011 Agency Financial Report 57

Furthermore, the Standards state that, “Internal control should generally be designed to assure that ongoing 

monitoring occurs in the course of normal operations. It is performed continually and is ingrained in the agency’s 

operations. It includes regular management and supervisory activities, comparisons, reconciliations, and other 

actions people take in performing their duties.”

To address the issues identified above, we recommend the Chief Financial Officer: 

a) Provide training on the updated policies and procedures implemented in June 2011 to address the minimum 

documentation requirements needed to adequately support journal entries, and 

b) Develop monitoring controls to ensure that supervisors or individuals other than the preparer are performing 

sufficient reviews of journal entries and related documentation before the entries are posted to ensure they 

are adequately supported and are in compliance with the USSGL and Federal accounting standards. 

Management’s Response: Management generally concurs with the recommendations noted above and will 

initiate further appropriate corrective actions to address these recommendations. As noted by the auditors, the 

revised policies and procedures for preparation and review of journal entries implemented in June 2011 improved 

the quality of the entries. Management will reinforce the policies and procedures and further improve the 

Department’s performance in this area. Although we believe that most of the journal entries were properly 

supported or the support was available in other DOL files/systems, we will continue to work to improve the 

supporting documentation for journal vouchers and the review thereof. 

Auditors’ Response: We will conduct follow-up procedures in FY 2012 to determine whether corrective actions 

have been developed and implemented. 

5. Weaknesses Noted over Payroll Accounting

During FY 2011, DOL used the U.S. Department of Agriculture’s (USDA) OCFO/National Finance Center 

(NFC) to process its payroll. For each pay period, DOL submitted to the NFC payroll information that included 

all DOL employees for the period, along with their hours worked, leave used and other payroll related 

information for the period. The NFC processed the payroll for DOL each period and made available for 

download a payroll register for each DOL Human Resources (HR) office. In prior years, we identified 

weaknesses in DOL’s controls over payroll accounting related to the Payroll/Time and Attendance 

Reconciliation Reports and the reconciliation between the general ledger and the payroll reports provided by the 

NFC. We identified similar weaknesses in the payroll accounting controls during our current year audit 

procedures. 

Specifically, we selected 23 Payroll/Time and Attendance Reconciliation Reports from various agencies for the 

period of October 1, 2010, through April 30, 2011, for testing. For the 23 reports tested, we identified the 

following exceptions: 

• 9 instances where the HR offices did not provide the requested reports, 

• 1 instance where the HR offices provided the report but did not provide sufficient documentation to 

support that the discrepancies identified on it were adequately researched and corrective actions were 

initiated,

• 2 instances where the HR offices provided reports which did not have evidence that a supervisor and/or 

HR certifier reviewed the reports, and

• 10 instances where the HR offices did not review the reports in a timely manner.

Because of the aforementioned exceptions, we concluded this control was not operating effectively, and 

therefore, did not perform additional control testing. 
Financial Section

Significant Deficiencies

Exhibit II

58 United States Department of Labor

As a result, we noted insufficient evidence existed to determine that the preparation and review of payroll-related 

items, including time and attendance and gross pay, were completed properly and timely and identified issues 

were resolved. The OCFO policy and procedures issued in July 2009, requiring the responsible HR official to 

review the Payroll/Time and Attendance Reconciliation Reports and investigate issues identified, were not 

adequately enforced by the HR officials’ supervisors. 

We also determined that the OCFO monitoring control for the Payroll/Time and Attendance Reconciliation 

Reports was not routinely performed, and therefore, could not be tested. The OCFO’s failure to adequately 

monitor compliance with the July 2009 policy and procedures was partially attributed to the decentralized HR 

organization within DOL. As a result of the organizational structure, the OCFO had difficulty obtaining the 

needed documentation to monitor that the Payroll/Time and Attendance Reconciliation Reports were being 

properly completed, in a timely fashion, and adequately reviewed. 

Furthermore, the Payroll/Time and Attendance Reconciliation Reports continued to lack sufficient details, such 

as employer withholdings, to arrive at an employee’s net pay and total benefits expense. These reports were not 

properly designed to contain the information needed to ensure that errors in all relevant payroll-related items 

were identified and resolved timely because the OCFO did not sufficiently consider all items that should have 

been addressed in the reconciliation. 

In addition, the monthly reconciliations of the payroll register provided by the NFC and the NFC-prepared SF224, Statement of Transactions, to the general ledger were not prepared and/or performed during the time period 

of October 2010 through January 2011. Competing priorities reduced the staff time available to perform and 

maintain effective internal controls over payroll and benefit expense. In February 2011, management began 

completing the FY 2011 reconciliations, dating back to October 2010. Also, we requested that the OCFO provide 

us the April, May and June 2011 reconciliations of the payroll registers from the NFC to the payroll expense 

recorded in the general ledger by July 20, 2011; however, they were not provided until September 15, 2011, and 

we were not provided evidence that they were completed prior to that time. 

The lack of compensating reconciliation controls around the NFC compensation outputs increases the risk that 

payroll-related line items may be misstated due to errors in payroll processing by the NFC. In addition, DOL’s 

failure to reconcile the NFC payroll registers to the general ledger further increases the risk that a payroll-related 

misstatement would not be detected by management. 

Federal agencies that use external service providers, such as the NFC, should have controls in place to ensure the 

accuracy of processing outputs. As stated by the USDA Office of Inspector General (OIG) in its FY 2011 Report 

No. 11401-2-11, “The relative effectiveness and significance of specific controls at NFC and their effect on the 

assessments of control risk at customer agencies are dependent on their interaction with the controls and other 

factors present at individual customer agencies.” 

Office of Management and Budget Circular No. 123, Management’s Responsibility for Internal Control, states, 

“Application control should be designed to ensure that transactions are properly authorized and processed 

accurately and that the data is valid and complete. Controls should be established at an application’s interfaces to 

verify inputs and outputs, such as edit checks.” 

Additionally, per the Standards, “Internal control should generally be designed to assure that ongoing monitoring 

occurs in the course of normal operations. It is performed continually and is ingrained in the agency’s operations.

It includes regular management and supervisory activities, comparisons, reconciliations, and other actions people 

take in performing their duties.” 

To address the issues identified above, the Chief Financial Officer should: 

a) Design the Payroll/Time and Attendance Reconciliation Reports to reflect the necessary payroll-related 

information to conduct an adequate reconciliation; 
Independent Auditors’ Report

Significant Deficiencies

Exhibit II

FY 2011 Agency Financial Report 59

b) Complete periodic monitoring procedures to ensure that the July 2009 policy and procedures are 

implemented and complied with throughout DOL; and 

c) Revise procedures related to the monthly payroll reconciliations to require the preparer and the reviewer to 

document the preparation and review dates, respectively, and to sign the reconciliations once they have 

completed their work. 

We also recommend that the Director of the Human Resource Center ensure that the OCFO’s July 2009 policy 

and procedures are properly and consistently implemented, by enforcing the requirements that all payroll-related

reconciliations are documented, reviewed, and approved by an appropriate supervisor, and maintained. 

Management’s Response: Management concurs with the recommendations noted above and has initiated 

appropriate corrective actions to address these recommendations. Effective reconciliation controls, including 

timely preparation of proper reconciliations and resolution of differences, will enhance quarterly consolidated 

financial statements and minimize differences between DOL’s general ledger and the NFC-processed payroll 

data. OCFO will improve the design of the Payroll/Time and Attendance Reconciliation Reports and will work 

with the Director, Human Resource Center, to improve monitoring controls and compliance with procedures to 

help ensure timely and consistent implementation of reconciliations and reviews agency-wide.

Auditors’ Response: We will conduct follow-up procedures in FY 2012 to determine whether corrective actions 

have been developed and implemented. 
Financial Section

Compliance and Other Matters

Exhibit III

60 United States Department of Labor

1. Federal Financial Management Improvement Act of 1996 (FFMIA) 

Under section 803(a) of FFMIA, the U.S. Department of Labor’s (DOL) financial management systems are 

required to substantially comply with (1) Federal financial management systems requirements, (2) applicable 

Federal accounting standards, and (3) the United States Government Standard General Ledger (USSGL) at the 

transaction level. DOL represented that in accordance with the provisions and requirements of FFMIA, the 

Secretary of Labor determined that DOL’s financial management systems were substantial compliance with 

FFMIA as of September 30, 2011. 

As a result of our FY 2011 testing, we concluded that DOL did not substantially comply with the requirements of 

section 803(a) of FFMIA. Specifically, we noted the following: 

• Federal financial management systems requirements - Numerous information technology (IT) general and 

application control weaknesses related to computer security were identified as part of our IT testing in FY 

2011. These weaknesses impact the IT environments and systems in several large DOL agencies. In 

addition, DOL was unable to demonstrate that sufficient corrective actions had been taken to resolve its FY 

2010 Federal Information Security Management Act significant deficiency. See Material Weakness No. 3 in 

Exhibit I for further information. 

• USSGL at the transaction level - Several material transactions, such as certain borrowing activity ($3 billion), 

receipts temporarily precluded from obligation ($10 billion), grants payable ($792 million), actuarial 

liabilities ($12 billion), benefit overpayment receivables ($1.6 billion), and other accruals ($360 million) 

were not recorded in accordance with the USSGL. See Material Weakness Nos. 1 and 2 in Exhibit I for 

further information. 

We recommend that DOL follow the recommendations provided in Material Weakness Nos. 1, 2, and 3 in 

Exhibit I, and improve its process to ensure compliance with FFMIA section 803(a) requirements in FY 2012. 
Independent Auditors’ Report

Status of Prior Year Findings and Recommendations

Exhibit IV

FY 2011 Agency Financial Report 61

The following table provides the FY 2011 status of all recommendations included in the Independent Auditors' 

Report on the U.S. Department of Labor's FY 2010 Revised Consolidated Financial Statements, Report No. 22-

11-015-13-001 (May 23, 2011). 

Fiscal Year (FY) 

2010 Finding 

FY Finding 

Originated FY 2010 Recommendations FY 2011 Status

Internal Control

1. Lack of Sufficient 

Controls over 

Financial Reporting – 

Material Weakness 

2009 (as a 

Significant 

Deficiency)

Recommendation (a): The Chief Financial Officer (CFO) 

should ensure that routine reconciliation controls are 

implemented and performed. 

Open (See 

Exhibit I, 

comment 

no. 1)

Recommendation (b): The CFO should ensure that all 

necessary financial reports are developed and available to 

the agencies.

Closed

Recommendation (c): The CFO should ensure that any 

remaining interface errors are promptly resolved.

Closed

Recommendation (d): The CFO should fully document 

and implement all business processes and controls required 

for the accurate and timely operation of the New Core 

Financial Management System (NCFMS). 

Open (See 

Exhibit I, 

comment 

no. 1) 

Recommendation (e): The CFO should promptly resolve 

the classification issues related to intragovernmental 

balances.

Closed

Recommendation (f): The CFO should develop and 

implement policies and procedures to monitor the work of 

Office of the CFO (OCFO) contractors, including the 

designation of appropriately skilled and knowledgeable 

individuals from the OCFO to monitor each accounting 

process that is primarily performed by an OCFO contractor, 

to ensure the work is being properly performed.

Partially 

Open and 

Revised to 

Control 

Deficiency

Recommendation (g): The CFO should ensure that 

someone other than the preparer is properly reviewing the 

grant accrual calculation and the Unemployment Trust 

Fund (UTF) accounts receivable journal entry prior to 

recording them in the general ledger.

Closed

Recommendation (h): The CFO should review significant 

transactions for U.S. Standard General Ledger compliance 

and make any necessary corrections.

Open (See 

Exhibit I, 

comment 

no. 1)

Recommendation (i): The CFO should review its Federal 

Managers’ Financial Integrity Act (FMFIA) assessment 

process and implement enhancements to better identify 

material weaknesses in internal control and more timely 

complete its draft FMFIA assurance statement.

Open and 

Revised to 

Control 

Deficiency

Recommendation (j): The CFO should ensure that the 

draft U. S. Department of Labor (DOL) Manual Series

(DLMS) policies and procedures requiring detailed review 

of all financial information in the draft financial statements 

are comprehensive and finalized and that OCFO personnel 

Open (See 

Exhibit I, 

comment 

no. 1) 
Financial Section

Status of Prior Year Findings and Recommendations

Exhibit IV

62 United States Department of Labor

Fiscal Year (FY) 

2010 Finding 

FY Finding 

Originated FY 2010 Recommendations FY 2011 Status

adhere to these policies. Financial statement review should 

include procedures for comparing financial data reported 

on the different statements to ensure accuracy and 

consistency; agreeing the financial data to the general 

ledger to ensure existence, completeness, and accuracy of 

financial data reported; and analyzing significant variances 

between current period and prior period financial 

information.

2. Lack of Sufficient 

Controls over 

Budgetary Accounting 

– Material Weakness 

2009 (as a 

Significant 

Deficiency)

Recommendation (a): The CFO should ensure that 

policies and procedures over the Apportionment and 

Reapportionment Schedules (SF-132) and Report on 

Budget Execution and Budgetary Resources (SF-133) 

reconciliations are enhanced to address the minimum 

documentation requirements needed to substantiate that 

identified differences were properly researched and 

resolved.

Open (See 

Exhibit I, 

comment 

no. 2) 

Recommendation (b): The CFO should ensure that 

individuals performing supervisory reviews are required to 

check the reconciliations for appropriate supporting 

documentation. 

Open (See 

Exhibit I, 

comment 

no. 2) 

Recommendation (c): The CFO should ensure that 

adequate resources are in place to complete all necessary 

reconciliations timely and to maintain adequate internal 

controls over financial reporting, both while NCFMS 

implementation issues are being resolved and for all 

periods thereafter.

Open (See 

Exhibit I, 

comment 

no. 2) 

Recommendation (d): The CFO should ensure that 

procedures are implemented to periodically obtain and 

review the results of the agencies’ review of their 

unliquidated obligations and ensure expired and invalid 

undelivered orders are deobligated timely in the general 

ledger either by the agency or OCFO.

Closed

Recommendation (e): The CFO should ensure that 

appropriate corrective actions are performed to ensure that 

the identifying information and balances for obligations are 

correct, and that the posting logic in NCFMS is properly 

configured.

Closed

Recommendation (f): The CFO should ensure that 

preparers of budgetary entries are properly trained and 

possess the technical accounting proficiencies needed to 

properly record the entries.

Closed

Recommendation (g): The CFO should ensure that one 

agency is responsible for recording both the budgetary and 

proprietary journal entries for economic events, or if 

separate agencies continue to record the entries, that those 

agencies are appropriately coordinating.

Open (See 

Exhibit I, 

comment 

no. 2) 

Recommendation (h): The CFO should ensure that Closed
Independent Auditors’ Report

Status of Prior Year Findings and Recommendations

Exhibit IV

FY 2011 Agency Financial Report 63

Fiscal Year (FY) 

2010 Finding 

FY Finding 

Originated FY 2010 Recommendations FY 2011 Status

procedures are developed and implemented for multi-year 

and no-year funds to ensure that post-closing entries for 

unobligated balances are properly recorded at year end, and 

reapportionments are promptly recorded to the general

ledger in the subsequent year.

3. Improvements 

Needed in the 

Preparation and 

Review of Journal 

Entries – Material 

Weakness

2006 (as a 

Reportable 

Condition2

Recommendation (a): The CFO should evaluate the 

system errors that are preventing certain journal entries 

from being routed to the approver, and develop and 

implement appropriate corrective action.

)

Closed

Recommendation (b): The CFO should enhance policies 

and procedures and provide related training to address the 

minimum documentation requirements needed to 

sufficiently support journal entries.

Partially 

Open (See 

Exhibit II, 

comment 

no. 4)

Recommendation (c): The CFO should develop 

monitoring controls to ensure that supervisors or 

individuals other than the preparer are performing adequate 

reviews of journal entries and related documentation before 

the entries are posted to ensure they are properly supported. 

Open (See 

Exhibit II, 

comment 

no. 4) 

4. Lack of Adequate 

Controls over Access 

to Key Financial and 

Support Systems – 

Material Weakness 

2001 (as a 

Reportable 

Condition2

)

Recommendation (a): The Chief Information Officer

(CIO) should coordinate efforts among the DOL agencies 

to develop procedures and controls to address access 

control weaknesses in current financial management 

systems.

Open (See 

Exhibit I, 

comment 

no. 3) 

Recommendation (b): The CIO should monitor the 

agencies’ progress to ensure that procedures and controls 

are appropriately implemented and maintained. 

Open (See 

Exhibit I, 

comment 

no. 3) 

Recommendation (c): The CIO should ensure that 

sufficient resources are available to develop, implement, 

and monitor the procedures and controls that address access 

control weaknesses.

Open (See 

Exhibit I, 

comment 

no. 3) 

5. Weakness Noted 

over Payroll 

Accounting – 

Significant Deficiency

2006 (as a 

Reportable 

Condition2

)

Recommendation (a): The CFO should ensure that the 

Payroll/Time and Attendance Reconciliation Reports are 

properly designed to reflect the necessary payroll-related 

information to conduct an adequate reconciliation.

Open (See 

Exhibit II, 

comment 

no. 5)

Recommendation (b): The CFO should ensure that proper 

monitoring is routinely completed by the OCFO to ensure 

that the July 2009 policy and procedures are implemented 

and complied with throughout DOL.

Open (See 

Exhibit II, 

comment 

no. 5)

Recommendation (c): The Director of the Human Open (See 

 

2 The term “reportable condition” was used through FY 2006 in accordance with Statement on Auditing Standards (SAS) No. 60. 

However, the term “reportable condition” was discontinued in FY 2007 as a result of the implementation of SAS No. 112 and 

replaced with the term “significant deficiency,” which had a revised definition. 
Financial Section

Status of Prior Year Findings and Recommendations

Exhibit IV

64 United States Department of Labor

Fiscal Year (FY) 

2010 Finding 

FY Finding 

Originated FY 2010 Recommendations FY 2011 Status

Resource Center should ensure that the OCFO July 2009 

policy and procedures are properly and consistently 

implemented, by enforcing the requirements that all 

payroll-related reconciliations are documented, reviewed, 

and approved by an appropriate supervisor, and maintained.

Exhibit II, 

comment 

no. 5) 

6. Untimely and 

Inaccurate Processing 

of Property, Plant, and 

Equipment (PP&E) 

Transactions – 

Significant Deficiency

2010 (as a 

Significant 

Deficiency)

Recommendation (a): The CFO should dedicate the 

appropriate resources to implement the documented 

process for identifying and recording PP&E additions and 

deletions in NCFMS to ensure that these transactions are 

accurately and timely recorded.

Partially 

Open and 

Revised to 

Control 

Deficiency

Recommendation (b): The CFO should configure 

NCFMS to accurately calculate both accumulated 

depreciation balances and current year depreciation 

expense amounts.

Open and 

Revised to 

Control 

Deficiency

Compliance

1. Federal Managers’ 

Financial Integrity Act 

of 1982 (FMFIA) 

2010 (as 

Noncompliance 

We recommend that DOL follow the recommendation 

provided in Material Weakness No. 1 and improve its 

process to ensure compliance with the requirements of 

FMFIA in FY 2011

Open and 

Revised to 

Control 

Deficiency

2. Federal Financial 

Management 

Improvement Act of 

1996 

2010 (as 

Noncompliance

We recommend that DOL follow the recommendations 

provided in Material Weakness Nos. 1, 2, 3 and 4 and 

improve its processes to ensure compliance with FFMIA 

section 803(a) requirements in FY 2011.

Open (See 

Exhibit III)
65 

Annual Financial Statements

67 

Principal Financial Statements and Notes
Financial Section

PRINCIPAL FINANCIAL STATEMENTS

68     United States Department of Labor

Principal Financial Statements Included in This Report

The principal financial statements included in this report have been prepared in accordance with the requirements

of the Chief Financial Officers Act of 1990 (P.L. 101‐576), the Government Management Reform Act of 1994 and  

Office of Management and Budget’s (OMB) Circular No. A‐136, Financial Reporting Requirements.    The

responsibility for the integrity of the financial information included in these statements rests with management of

the U.S. Department of Labor (DOL).  The audit of DOL’s principal financial statements was performed by KPMG LLP.  

The auditors’ report accompanies the principal statements.

The Department’s principal financial statements for fiscal years (FYs) 2011 and 2010 consist of the following:  

 The Consolidated Balance Sheet, which presents as of September 30, 2011 and 2010 those resources owned or

managed by DOL that are available to provide future economic benefits (assets); amounts owed by DOL that will

require payments from those resources or future resources (liabilities); and residual amounts retained by DOL,

comprising the difference (net position).

 The Consolidated Statement of Net Cost, which presents the net cost of DOL operations for the years ended

September 30, 2011 and 2010.  DOL’s net cost of operations includes the gross costs incurred by DOL less any

exchange revenue earned from DOL activities.  Due to the complexity of DOL’s operations, the classification of

gross cost and exchange revenues by major program and suborganization is presented in Note 15 to the

consolidated financial statements.

 The Consolidated Statement of Changes in Net Position, which presents the change in DOL’s net position

resulting from the net cost of DOL operations, budgetary financing sources other than exchange revenues, and

other financing sources for the years ended September 30, 2011 and 2010.

 The Combined Statement of Budgetary Resources, which presents the budgetary resources available to DOL

during FY 2011 and 2010, the status of these resources at September 30, 2011 and 2010, the change in

obligated balance during FY 2011 and 2010, and net outlays of budgetary resources for the years ended

September 30, 2011 and 2010.

 The Statement of Social Insurance, which presents the net present value of projected cash inflows and cash

outflows of the Black Lung Disability Trust Fund as of September 30, 2011, 2010, 2009, 2008, and 2007; the net

present value of these cash flows is also known as the open and closed group measure. The summary section

presents the total of open and closed group measure plus fund assets (Funds with U.S. Treasury and

receivables).

 The Statement of Changes in Social Insurance Amounts, which presents the net change in the open and closed

group measure of the Black Lung Disability Trust Fund for the year ended September 30, 2011 and provides

information about the change.
Annual Financial Statements

CONSOLIDATED BALANCE SHEET  

As of September 30, 2011 and 2010

(Dollars in Thousands)

FY 2011 Agency Financial Report     69 

2011 2010

ASSETS

Intra-governmental

Funds with U.S. Treasury (Notes 1-C and 2) 10,954,458 $ 12,618,146 $ 

Investments (Notes 1-D and 3) 16,213,789 19,281,093

Accounts receivable (Notes 1-E and 4) 5,882,371 5,944,955 

Total intra-governmental 33,113,202 37,781,610

Accounts receivable, net of allowance (Notes 1-E and 4) 2,170,862 2,011,881

Property, plant and equipment, net

 of accumulated depreciation (Notes 1-F and 5) 1,219,912 1,174,713

Other

Advances (Notes 1-G and 6) 1,872,192 1,590,397 

Total assets $ 42,840,396 38,094,373 $ 

LIABILITIES AND NET POSITION

Liabilities (Note 1-I)

Intra-governmental

Accounts payable $ 11,965 43,327 $ 

Debt (Notes 1-J and 8) 48,935,904 40,400,725

Other liabilities (Note 9) 202,438 222,511 

Total intra-governmental 49,181,669 40,635,201

Accounts payable 1,149,278 1,466,974

Accrued benefits (Notes 1-K and 10) 3,320,444 5,284,543

Future workers' compensation benefits (Notes 1-L and 11) 1,732,024 2,075,547

Other

Energy employees occupational illness

 compensation benefits (Note 1-M) 15,145,777 12,114,480

Accrued leave (Note 1-N) 116,659 116,505

Other liabilities (Note 9) 176,333 155,209 

Total liabilities 61,848,459 70,822,184 

Contingencies (Note 13)

Net position (Note 1-R)

Unexpended appropriations - other funds 9,210,647 10,539,272

Cumulative results of operations

Earmarked funds (Note 21) (33,466,525) (23,762,133)

Other funds (5,785,202) (8,471,933) 

Total net position (19,008,063) (32,727,811) 

Total liabilities and net position $ 42,840,396 38,094,373 $ 

The accompanying notes are an integral part of these statements.
Financial Section

CONSOLIDATED STATEMENT OF NET COST  

For the Years Ended September 30, 2011 and 2010

(Dollars in Thousands)

70     United States Department of Labor

2011 2010

NET COST OF OPERATIONS (Notes 1-S and 15)

CROSSCUTTING PROGRAMS

Income maintenance

Gross cost $ 173,153,232 129,233,668 $ 

Less earned revenue (4,335,839) (4,302,214) 

Net program cost 168,851,018 124,897,829 

Employment and training

Gross cost 7,658,729 8,420,173

Less earned revenue (11,262) (13,914) 

Net program cost 8,408,911 7,644,815 

Labor, employment and pension standards

Gross cost 836,184 779,994

Less earned revenue (9,944) (8,872) 

Net program cost 771,122 826,240 

Worker safety and health

Gross cost 996,362 1,020,139

Less earned revenue (4,028) (6,025) 

Net program cost 1,014,114 992,334 

OTHER PROGRAMS

Statistics

Gross cost 683,562 694,918

Less earned revenue (13,634) (11,320) 

Net program cost 681,284 672,242 

COSTS NOT ASSIGNED TO PROGRAMS

Gross cost 60,472 96,580

Less earned revenue not attributed to programs (9,453) (22,774) 

Net cost not assigned to programs 87,127 37,698 

Net cost of operations $ 179,813,576 135,071,158 $ 

The accompanying notes are an integral part of these statements.
Annual Financial Statements

CONSOLIDATED STATEMENT OF CHANGES IN NET POSITION   

For the Years Ended September 30, 2011 and 2010

(Dollars in Thousands)

FY 2011 Agency Financial Report     71 

Consolidated Consolidated Consolidated Consolidated

Earmarked All Other Consolidated Earmarked All Other Consolidated

Funds Funds Total Funds Funds Total

Cumulative results

 of operations, beginning $ (5,785,202) (23,762,133) $ $ (29,547,335) $ 4,562,666 $ 3,703,340 (859,326) $ 

Budgetary financing sources

 (Note 1-T)

Appropriations used - 63,729,728 63,729,728 99,719,400 - 99,719,400 

Non-exchange revenue (Note 16)

Employer taxes 52,679,104 - 52,679,104 41,060,101 - 41,060,101

Interest 1,886,494 1,402 1,887,896 778,939 10 778,949

Assessments - - - - 8 8

Reimbursement of 

 unemployment benefits 4,035,503 (21,582) 4,013,921 4,721,275 3,997 4,725,272

Total non-exchange revenue 58,601,101 (20,180) 58,580,921 46,560,315 4,015 46,564,330

Transfers without 

 reimbursement (Note 17) 45,540,978 (45,333,891) 207,087 70,525,944 203,794 (70,322,150) 

Other financing sources

 (Note 1-U)

Imputed financing from 

 costs absorbed by others 4,787 153,249 158,036 214 172,840 173,054

Transfers without 

 reimbursement (Note 17) - 2,075 2,075 - 3,507 3,507

Other (762) 2,950 2,188 (52,950) (48,234) (101,184) 

Total financing sources 104,149,816 18,530,219 122,680,035 117,033,523 146,562,901 29,529,378 

Net cost of operations (21,216,950) (113,854,208) (135,071,158) (145,358,322) (179,813,576) (34,455,254) 

Net change (9,704,392) (2,686,731) (12,391,123) (28,324,799) (33,250,675) (4,925,876) 

Cumulative results

 of operations, ending (8,471,933) (33,466,525) (41,938,458) (23,762,133) (29,547,335) (5,785,202) 

Unexpended appropriations,

 beginning - 10,539,272 10,539,272 10,825,237 - 10,825,237 

Budgetary financing sources

 (Note 1-T)

Appropriations received

 (Note 18-F) - 67,405,860 67,405,860 101,266,852 - 101,266,852 

Appropriations transferred - 20,157 20,157 - (214,474) (214,474)

Appropriations not available - (5,024,914) (5,024,914) (1,618,943) - (1,618,943) 

Appropriations used - (63,729,728) (63,729,728) (99,719,400) - (99,719,400) 

Subtotal - (1,328,625) (1,328,625) (285,965) - (285,965) 

Unexpended appropriations,

 ending - 9,210,647 9,210,647 10,539,272 - 10,539,272 

Net position $ 738,714 (33,466,525) $ (32,727,811) $ (23,762,133) $ 4,754,070 $ (19,008,063) $ 

2011 2010

The accompanying notes are an integral part of these statements.
Financial Section

COMBINED STATEMENT OF BUDGETARY RESOURCES

For the Years Ended September 30, 2011 and 2010

(Dollars in Thousands)

72     United States Department of Labor       

2011 2010

BUDGETARY RESOURCES

Unobligated balance, brought forward, October 1 4,191,543 $ 4,124,635 $ 

Recoveries of prior year unpaid obligations 436,261 162,552

Budget authority

Appropriations received (Note 18-F) 179,309,030 227,533,225

Borrowing authority 26,747,749 29,110,000

Spending authority from offsetting collections

Earned

Collected 3,123,935 2,973,698

Change in receivables from Federal sources (82,064) (20,973)

Change in unfilled customer orders

Advance received (22,402) 33,299

Without advance from Federal sources 822 (822)

Expenditure transfers from trust funds 5,070,175 5,108,201 

Total budget authority 214,185,271 264,698,602

Nonexpenditure transfers, net 26,157 (6,382)

Temporarily not available pursuant to Public Law (16,004) (38,626)

Permanently not available

Redemption of debt (13,699,216) (3,242,445)

All other (1,730,312) (9,812,648) 

Total budgetary resources $ 195,311,364 $ 263,968,024

STATUS OF BUDGETARY RESOURCES

Obligations incurred (Note 18-A)

Direct $ 188,956,056 $ 256,587,422

Reimbursable 3,189,059 2,979,047 

Total obligations incurred 191,935,103 259,776,481

Unobligated balances available

Apportioned 1,189,123 3,067,897

Exempt from apportionment 386,996 62,478 

Total unobligated balances available 1,251,601 3,454,893

Unobligated balances not available 736,650 2,124,660 

Total status of budgetary resources $ 195,311,364 $ 263,968,024

CHANGE IN OBLIGATED BALANCE

Obligated balance, net 

Unpaid obligations, brought forward, October 1 18,448,078 $ 18,216,935 $ 

Less uncollected customer payments from Federal sources, 

 brought forward, October 1 (2,331,775) (1,911,539) 

Total unpaid obligated balance, net 16,536,539 15,885,160

Obligations incurred, net 191,935,103 259,776,481

Less gross outlays (194,159,697) (259,382,936)

Other - 150

Less recoveries of prior year unpaid obligations, actual (436,261) (162,552)

Change in uncollected customer payments from Federal sources 420,236 (56,958) 

Obligated balance, net, end of period

Unpaid obligations 15,787,223 18,448,078

Less uncollected customer payments from Federal sources (1,968,497) (1,911,539) 

Total unpaid obligated balance, net, end of period $ 16,536,539 13,818,726 $ 

NET OUTLAYS

Gross outlays $ 194,159,697 $ 259,382,936

Less offsetting collections (8,071,535) (8,475,613)

Less distributed offsetting receipts (76,620,902) (53,119,556) 

Net outlays $ 132,968,606 $ 174,286,421

The accompanying notes are an integral part of these statements.
Annual Financial Statements

   

STATEMENT OF SOCIAL INSURANCE

As of September 30, 2011, 2010, 2009, 2008, and 2007

(Dollars in Thousands)

FY 2011 Agency Financial Report     73 

2011 2010 2009 2008 2007

BLACK LUNG DISABILITY 

 BENEFIT PROGRAM (Note 1-W)

Actuarial present value of future benefit

 payments during the projection

 period to disabled coal miners

 and dependent survivors 1,951,755 $ $ 2,125,231 $ 2,170,943 $ 2,450,064 2,139,810 $ 

Present value of estimated future

 administrative costs during 

 the projection period 935,444 881,311 984,996 831,439 827,437 

Actuarial present value of future benefit

 payments and present value of estimated 

 administrative costs during the projection

 period for current and future participants 2,887,199 3,006,542 3,155,939 3,281,503 2,967,247 

Less the present value of estimated future

 excise tax income during the projection period 7,607,428 8,457,022 8,876,813 7,897,423 8,009,265 

Excess of present value of estimated future

 excise tax income over actuarial present value of 

 future benefit payments and present value of 

 estimated administrative costs during

 the projection period for current and future

 participants (open and closed group measure) 4,720,229 $ $ 5,450,480 $ 5,720,874 $ 5,042,018 $ 4,615,920

 

Trust fund net position deficit at start 

 of projection period (Note 21) (6,099,261) $ $ (6,238,612) $ (6,320,321) $ (10,439,186) $ (10,027,701)

Summary Section

Open and closed group measure 4,720,229 $ $ 5,450,480 $ 5,720,874 $ 4,615,920 5,042,018 $ 

Add: Funds with U.S. Treasury and

 receivables from benefit overpayments (Note 21) 63,814 68,028 67,598 50, 63,840 415

Total of open and closed group measure

 plus fund assets (Note 1-W) $ 4,784,043 $ 5,518,508 $ 5,788,472 $ 5,105,858 $ 4,666,335

For the Projection Period Ending September 30, 2040 (Note 1-W)

The accompanying notes are an integral part of these statements.
Financial Section

   

STATEMENT OF CHANGES IN SOCIAL INSURANCE AMOUNTS

For the Year Ended September 30, 2011

(Dollars in Thousands)

74     United States Department of Labor       

BLACK LUNG DISABILITY BENEFIT PROGRAM (Note 1-W)

Open and Closed Group Measure

2011

Excess of present value of estimated future excise tax income

 over actuarial present value of future benefit payments and

 present value of estimated administrative costs during the

 projection period for current and future participants

 (open and closed group measure), September 30, 2010, beginning of year

Reasons for changes in the excess of present value during

 the year:

Changes in the assumptions about beneficiaries, including

 costs, number, type, age and life expectancy

Changes in assumptions about coal excise tax revenues (1,144,303)

Changes in assumptions about Federal civilian pay raises for income benefits 33,839 

Changes in assumptions about medical cost inflation for medical benefits (1,152)

Changes in assumptions about administrative costs (19,155)

Change in assumption about interest rate 197,720 

Net change in open and closed group measure (730,251)

Open and closed group measure, September 30, 2011, end of year $ 4,720,229 

 202,800 

 $ 5,450,480 

The accompanying notes are an integral part of these statements.
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     75 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Reporting Entity

The U.S. Department of Labor (DOL or the Department), a cabinet level agency of the Executive Branch of the United

States Government, was established in 1913, to promote the welfare of the wage earners of the United States.  

Today the Department’s mission remains the same: to foster, promote and develop the welfare of the job seekers,

wage earners and retirees of the United States; improve working conditions; advance opportunities for profitable

employment; and assure work‐related benefits and rights.  

DOL accomplishes this mission through the execution of its congressionally approved budget, operating in five major

Federal program areas, under five major budget functions: (i) education, training, employment, and social services;

(ii) health (occupational health and safety); (iii) income security;  and (iv) national defense.  DOL is organized into

major program agencies, which administer the various statutes and programs for which the Department is

responsible.  DOL’s major program agencies and the major programs in which they operate, are shown below.

1.Major program agencies

 Employment and Training Administration (ETA)

- Office of Job Corps

 Employment Standards Administration (ESA)

 Occupational Safety and Health Administration (OSHA)

 Bureau of Labor Statistics (BLS)

 Mine Safety and Health Administration (MSHA)

 Employee Benefits Security Administration (EBSA)  

 Veterans’ Employment and Training Service (VETS)

 Departmental Management

- Office of the Secretary        ‐    Office of the Deputy Secretary

- Office of the Assistant Secretary for    ‐    Office of Inspector General      

Administration and Management    ‐    Office of the Solicitor

- Office of the Assistant Secretary for Policy  ‐    Office of Public Affairs

- Women’s Bureau  ‐    Office of the Chief Financial Officer

- Bureau of International Labor Affairs  ‐    Office of Disability Employment Policy

In FY 2010, DOL dissolved ESA and established its four component offices/divisions: the Office of Federal

Contract Compliance Programs, the Office of Labor‐Management Standards, the Office of Workers’

Compensation Programs, and the Wage and Hour Division, as stand‐alone agencies reporting directly to the

Office of the Secretary. This reorganization was reflected in DOL’s FY 2011 budget, in which funding

previously requested for ESA was requested separately for these four component agencies, but was not

acted upon by Congress.  Funding for these four component agencies was requested again in the FY 2012

budget. In FY 2010 and 2011, funding for these component agencies occurred under the ESA appropriation;

consequently, references to ESA are retained throughout this report.

The Consolidated Appropriations Act of 2010 transferred funding for the Office of Job Corps and the Job

Corps program from Departmental Management to a separate appropriation account under ETA, to better

coordinate management of the Job Corps program with other employment and training programs managed

by ETA.  However, the Office of Job Corps continues to be reported as a separate major program agency in

Note 15.
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

76     United States Department of Labor       

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

A. Reporting Entity ‐ Continued

1.Major program agencies (continued)

The Pension Benefit Guaranty Corporation (PBGC), wholly owned by the Federal government under the

chairmanship of the Secretary of Labor, has been designated by OMB as a separate reporting entity for

financial statement purposes and has been excluded from these financial statements.

2.Major programs

 Income maintenance  

 Employment and training  

 Labor, employment, and pension standards  

 Worker safety and health 

 Statistics  

Note 15 presents earned revenues and expenses by major program agency and by major program.

The table below shows the relationship between the Department’s strategic goals and its major programs.

   

                                    Major Programs

     Strategic Goals                                

Income

Maintenance

Employment

and Training

Labor,

Employment,

and Pension

Standards

Worker

Safety

and

Health Statistics

1:  Prepare workers for good jobs and

ensure fair compensation.   ●  ●     

2:  Ensure workplaces are safe and healthy.        ●   

3:  Assure fair and high quality

     work‐life environments.     ●     

4:  Secure health benefits and, for those not

working, provide income security. ●    ●     

5:  Produce timely and accurate data on the

economic conditions of workers and

their families.

        ● 

3.Fund accounting structure

DOL’s financial activities are accounted for by Federal account symbol, using individual funds and fund

accounts within distinct fund types to report to the U.S. Department of the Treasury’s (Treasury) Financial

Management Service and to OMB.  For financial statement purposes, DOL funds are further classified as

earmarked funds, fiduciary funds and all other funds.  DOL’s earmarked funds, fiduciary funds and all other

funds are discussed below:

                                        
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     77 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

A. Reporting Entity ‐ Continued

3.Fund accounting structure ‐ continued   

Earmarked funds

Earmarked funds are financed by specifically identified revenues, which can be supplemented by other

financing sources, both of which remain available over time.    These revenues and financing sources are

required by statute to be used for designated purposes and must be accounted for separately from the

Government’s general revenues.  DOL’s earmarked funds are shown below:

The Unemployment Trust Fund was established under the authority of Section 904 of the Social Security Act

of 1935, as amended, to receive, hold, invest, and disburse monies collected under the Federal

Unemployment Tax Act, as well as state unemployment taxes collected by the states and transferred to the

Fund, and unemployment taxes collected by the Railroad Retirement Board and transferred to the Fund.

The Black Lung Disability Trust Fund was established under Part C of the Black Lung Benefits Act, to provide

compensation and medical benefits to coal miners who suffer disability due to pneumoconiosis (Black Lung

disease), and compensation benefits to their dependent survivors for claims filed subsequent to June 30,

1973.  Claims filed from the origination of the program until June 30, 1973 are paid by the Special Benefits

for Disabled Coal Miners fund. (See Note 1.A.3 – All other funds.)  

The Gifts and Bequests Fund uses miscellaneous funds received by gift or bequest to support various

activities of the Secretary of Labor.  

The Panama Canal Commission Compensation Fund was established to provide for the accumulation of

funds provided by the Commission to pay the workers compensation obligations of the Panama Canal

Commission under the Federal Employees’ Compensation Act.  

H‐1B Funds provide demonstration grants to regional and local entities to provide technical skills training to

unemployed and incumbent workers.    The funds are supported by fees paid by employers applying for

foreign workers under the H‐1B temporary alien labor certification program authorized by the American

Competitiveness and Workforce Improvement Act of 1998.

Fiduciary funds

Fiduciary funds are used to account for DOL’s fiduciary activities, which involve the collection or receipt and

subsequent disposition of cash or other assets in which non‐Federal entities have an ownership interest

that the Department must uphold.  Fiduciary assets are not assets of DOL or the Federal Government, and

accordingly, are not recognized on the Department’s balance sheet.  The fiduciary assets held by DOL and

the fiduciary activities related to these assets are disclosed in Note 22 to these financial statements.   DOL’s

fiduciary funds are discussed below.

The Wage and Hour and Public Contracts Restitution Fund, a deposit fund established by the Fair Labor

Standards Amendments of 1949, receives deposits from employers assessed by the Department for unpaid  
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

78     United States Department of Labor       

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

A. Reporting Entity ‐ Continued

3.Fund accounting structure ‐ continued

   

Fiduciary funds ‐ continued

minimum wages or unpaid overtime compensation owed to employees as a result of labor law violations,

and pays these wages directly to the affected employees.   

The Longshore and Harbor Workers’ Compensation Act Trust Fund, established under the authority of the

Longshore and Harbor Workers’ Compensation Act, provides medical benefits, compensation for lost wages,

and rehabilitation services for job‐related injuries and diseases or death to private sector workers in certain

maritime and related employment.    The Act authorizes the Department to assess insurance carriers on

behalf of these beneficiaries.

The District of Columbia Workmen’s Compensation Act Trust Fund, established under the authority of the

District of Columbia Workmen’s Compensation Act, provides compensation  and medical payments to the

District of Columbia employees for work‐related injuries or death which occurred prior to July 26, 1982.  The

Act authorizes the Department to assess insurance carriers on behalf of these beneficiaries.

All other funds  

Salaries and Expenses include appropriated funds which are used to carry out the missions and functions of

the Department, except where specifically provided for from other Departmental funds.

Training and Employment Services provides for a flexible, decentralized system of Federal and local

programs of training and other services for the economically disadvantaged designed to lead to permanent

gains in employment, through grants to states and Federal programs, authorized by the Workforce

Investment Act and the Job Training Partnership Act.   

The Office of Job Corps supports the administration and management of the Job Corps program, which

helps at‐risk youth who need and can benefit from intensive education and training services to become

more employable, responsible, and productive citizens.    The Consolidated Appropriations Act of 2008

appropriated Job Corps funding directly to the Office of Job Corps in a separate appropriation account

under a new Federal account symbol as a sub‐organization of Departmental Management, Office of the

Secretary.    In FY 2009, under mandate by OMB, all outstanding Job Corps balances under prior year

appropriations were transferred from ETA to the new appropriation account for the Office of Job Corps

under Departmental Management.  The Consolidated Appropriations Act of 2010 transferred funding for

the Job Corps program from Departmental Management back to ETA.  Funding for the Job Corps program in

FY 2011 and FY 2010 is recorded in a separate appropriation account for the Office of Job Corps under ETA.  

Welfare to Work Jobs provides funding for the activities of the Welfare‐to‐Work Grants program established

by the Balanced Budget Act of 1997.    The program provides formula grants to States and Federally

administered competitive grants to other eligible entities to assist welfare recipients in securing lasting

unsubsidized employment.

State Unemployment Insurance and Employment Service Operations includes grants to states for

administering the Unemployment Compensation and Employment Service programs.  Unemployment  
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     79 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

A. Reporting Entity ‐ Continued

3.Fund accounting structure ‐ continued

All other funds ‐ continued

Compensation Program provides administrative grants to state agencies which pay unemployment benefits

to eligible individuals and collect state unemployment taxes from employers.    The Employment Service

Program is a nationwide system providing no‐fee employment services to individuals seeking employment

and to employers seeking workers.    Employment Service activities are financed by allotments to states

distributed under a demographically based funding formula established under the Wagner‐Peyser Act, as

amended.

Payments to the Unemployment Trust Fund was initiated as a result of amendments to the Emergency

Unemployment Compensation (EUC) law, which provided general fund financing to the Unemployment

Trust Fund to pay emergency unemployment benefits and the related administrative costs.  This account is

also used to make general fund reimbursements for benefits and administrative costs incurred under the

new Emergency Unemployment Compensation program, first enacted in Public Law 110‐252, and

subsequently expanded and extended.  Funds are transferred from the account to a receipt account in the

Unemployment Trust Fund, for transfer to the Trust Fund’s Employment Security Administration Account

for administrative costs or the Extended Unemployment Compensation Account for benefit costs.

Advances to the Unemployment Trust Fund and Other Funds provides advances to other accounts within

the Unemployment Trust Fund to pay unemployment compensation whenever the balances in these

accounts prove insufficient or whenever reimbursements to certain accounts, as allowed by law, are to be

made.  This account also makes advances to the Federal Unemployment and Benefits Allowances account to

pay the cost of benefits and services under the Trade Adjustment Assistance for Workers program; and

provides loans to the Black Lung Disability Trust Fund to make disability payments whenever the fund

balance proves insufficient.

Federal Unemployment Benefits and Allowances provides for payment of benefits, training, job search, and

relocation allowances as authorized by the Trade Act of 1974.

Community Service Employment for Older Americans provides part‐time work experience in community

service activities to unemployed, low income persons aged 55 and over.

The Federal Employees’ Compensation Act (FECA) Special Benefit Fund provides wage replacement benefits

and payment for medical services to covered Federal civilian employees injured on the job, Federal

employees and certain other workers who have incurred a work‐related illness or injury, and survivors of

employees whose death is attributable to a job‐related injury. The Fund also provides for vocational

rehabilitation of injured employees to facilitate their return to work.  Under extensions of FECA, benefits

are also paid to certain groups such as people related to War Hazards, non‐Federal law enforcement

officers, Job Corps enrollees, and certain Federally‐supported volunteers.   Section 10(h) of the amended

Longshore and Harbor Workers’ Compensation Act authorized payments from the Special Benefit fund for

50% of the annual increase in benefits for compensation and related benefits for certain pre‐1972

Longshore cases.
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

80     United States Department of Labor       

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

A. Reporting Entity ‐ Continued

3.Fund accounting structure ‐ continued

All other funds ‐ continued

The Energy Employees Occupational Illness Compensation Fund was established to adjudicate, administer,

and pay claims for benefits under the Energy Employees Occupational Illness Compensation Program Act of

2000.  The Act authorizes lump sum payments and the reimbursement of medical expenses to employees of

the Department of Energy (DOE) or of private companies under contract with DOE, who suffer from

specified diseases as a result of their work in the nuclear weapons industry.    The Act also authorizes

compensation to the survivors of these employees under certain circumstances.  The Act was amended by

the Ronald Reagan National Defense Authorization Act of 2005 to provide coverage to additional claimants.   

Special Benefits for Disabled Coal Miners was established under the Federal Mine Safety and Health Act to

pay benefits to coal miners disabled from pneumoconiosis and to their widows and certain other

dependents.  Part B of the Act assigned processing of claims filed from the origination of the program until

June 30, 1973 to the Social Security Administration.  Part B claims processing and payment operations were

transferred to DOL effective October 1, 2003.

Federal Additional Unemployment Compensation was established under the American Recovery and

Reinvestment Act of 2009 (Recovery Act) to provide a $25 weekly supplement to the unemployment

compensation of eligible claimants.   

DOL played a key role in the implementation of the Recovery Act, enacted in February 2009. Departmental

efforts included the provision of worker job training; the payment of extended and expanded

unemployment benefits to help ease the burden of the recession on workers and employers; and the

education and assistance of workers and employers regarding expanded access to continued health

benefits.  These efforts were funded under additional Federal account symbols established within existing

DOL programs, including Training and Employment Services, Office of Job Corps, State Unemployment

Insurance and Employment Service Operations, and Payments to the Unemployment Trust Fund.

The Working Capital Fund maintains and operates a program of centralized services in the national office

and the field.    The Fund is paid in advance by the agencies, bureaus, and offices for which centralized

services are provided at rates which return the full cost of operations.

Miscellaneous receipt accounts hold non‐entity receipts and accounts receivable from DOL activities which

by law cannot be deposited into funds under DOL control.    The Treasury automatically transfers all cash

balances in these receipt accounts to the general fund of the Treasury at the end of each fiscal year.   

Clearing accounts hold monies that belong to DOL, but for which a specific receipt account has not been

determined.

Deposit funds account for monies held temporarily by DOL until ownership is determined or monies held by

DOL as an agent for others.  
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     81 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

A. Reporting Entity ‐ Continued

4.Inter‐departmental relationships

DOL and Treasury are jointly responsible for the operations of the Unemployment Trust Fund and the Black

Lung Disability Trust Fund.  DOL is responsible for the administrative oversight and policy direction of the

programs financed by these trust funds.  Treasury acts as custodian over monies deposited into the funds

and also invests amounts in excess of disbursing requirements in Treasury securities on behalf of DOL.  DOL

consolidates the financial results of the Unemployment Trust Fund and the Black Lung Disability Trust Fund

into these financial statements.

B. Basis of Accounting and Presentation

These consolidated financial statements present the financial position, net cost of operations, changes in net

position and budgetary resources of the U.S. Department of Labor, and estimated and actuarial projections, and

changes therein, for the Department’s Black Lung social insurance program, in accordance with U.S. generally

accepted accounting principles and the form and content requirements of OMB Circular No. A 136, Financial

Reporting Requirements. Except as described in the following paragraphs, they have been prepared from the

books and records of DOL, and include the accounts of all funds under the control of the DOL reporting entity.  All

inter‐fund balances and transactions have been eliminated, except in the Statement of Budgetary Resources, which

is presented on a combined basis, as required by OMB Circular No. A‐136.  

DOL is a party to allocation transfers with other Federal agencies as both a transferring (parent) entity and 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. Treasury as a subset of the parent fund account to track and report allocation transfers.  All allocation

transfers of balances are credited to this account, and subsequent obligations and outlays incurred by the child

entity on behalf of the parent entity are charged to this allocation account.  OMB Circular No. A‐136 requires the

parent to report all budgetary and proprietary activity in its financial statements.   DOL (parent entity) allocates

appropriations to the U.S. Department of Agriculture and the U.S. Department of Interior (child entities) to provide

funds for youth training programs. Accordingly, all activity for these allocation accounts is included in the DOL

financial statements. DOL (child entity) receives allocated appropriations from the U.S. Environmental Protection

Agency, the U.S. Department of State and the U.S. Agency for International Development (parent entities).  

Accordingly, all activity for these allocation accounts is excluded from the DOL financial statements and reported by

the parent agencies.

The Department implemented SFFAS 37, “Social Insurance: Additional Requirements for Management’s Discussion

and Analysis and Basic Financial Statements,” in FY 2011. SFFAS 37 amended, among other things, certain

requirements of SFFAS 17, “Accounting for Social Insurance.”  In accordance with SFFAS 37, the Statement of Social

Insurance has been amended to include a new summary section which presents the total of open and closed group

measure plus fund assets for the projection period ending September 30, 2040 as of September 30, 2007, 2008,

2009, 2010, and 2011. Furthermore, SFFAS 37 required a new Statement of Changes in Social Insurance Amounts

for the open group measure and new notes describing the reasons for the changes in the open group measure from

September 30, 2010 to September 30, 2011 (see Note 1‐W). Finally, SFFAS 37 required new disclosures in

Management’s Discussion and Analysis and Required Supplementary Information.
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

82     United States Department of Labor       

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

B. Basis of Accounting and Presentation ‐ Continued

U.S. generally accepted accounting principles encompass both accrual and budgetary transactions. Under accrual

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

Budgetary accounting facilitates compliance with legal constraints on, and controls over, the use of federal funds.

These consolidated financial statements are different from the financial reports, also prepared by DOL pursuant to

OMB directives, used to monitor DOL’s use of budgetary resources.

Throughout these financial statements, assets, liabilities, earned revenue, and costs have been classified according

to the type of entity with whom the transactions were made. Intra‐governmental assets and liabilities are those

from or to other federal entities. Intra‐governmental earned revenue represents collections or accruals of revenue

from other federal entities, and intra‐governmental costs are payments or accruals to other federal entities.

C. Funds with U.S. Treasury  

DOL’s cash receipts and disbursements are processed by the U.S. Treasury.    Funds with U.S. Treasury represent

obligated and unobligated balances available to finance allowable expenditures and restricted balances, including

amounts related to expired authority and amounts not available for use by DOL.  (See Note 2)

D. Investments       

The Federal Government does not set aside assets to pay future benefits or other expenditures associated with

DOL’s earmarked funds.  The cash receipts collected from the public for earmarked funds are deposited in the U.S.

Treasury, which uses the cash for general Government purposes.  Interest earning Treasury securities are issued to

DOL’s earmarked funds as evidence of the receipts.  These Treasury securities are assets to DOL and liabilities to the

U.S. Treasury.  Because DOL and the U.S. Treasury are both parts of the Government, these assets and liabilities

offset each other from the standpoint of the 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 DOL with

authority to draw upon the U.S. Treasury to make future benefit payments or other expenditures.    When DOL

requires redemption of these securities to make expenditures, the 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, just as the Government finances all other expenditures.

Balances held in the Unemployment Trust Fund are invested in non‐marketable, special issue Treasury securities

(certificates of indebtedness and bonds) available for purchase exclusively by Federal government agencies and

trust funds.    Special issues are purchased and redeemed at face value (cost), which is equivalent to their net

carrying value on the Consolidated Balance Sheet.  Interest rates and maturity dates vary.  The UTF special issue

Treasury bonds may be redeemed, in whole or in part, prior to their maturity date and continue to accrue interest

until fully redeemed.

Balances held in the Panama Canal Commission Compensation Fund are invested in marketable Treasury securities.  

These investments are stated at amortized costs that equal their net carrying value on the Consolidated Balance

Sheet.   Discounts and premiums are amortized using the effective interest method.   Interest rates and maturity

dates vary.    Management expects to hold these marketable securities until maturity; therefore, no provision is

made in the financial statements for unrealized gains or losses.   

Balances held in the Energy Employees Occupational Illness Compensation Fund are invested in non‐marketable

Treasury one‐day certificates.  (See Note 3)
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     83 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

E. Accounts Receivable, Net of Allowance

Accounts receivable consists of intra‐governmental amounts due to DOL, as well as amounts due from the public.

1.Intra‐governmental accounts receivable

The Federal Employees Compensation (FEC) account within the Unemployment Trust Fund provides

unemployment insurance to eligible Federal workers (UCFE) and ex‐service members (UCX).  DOL recognizes

as accounts receivable amounts due from other Federal agencies for unreimbursed UCFE and UCX benefits.  

DOL’s Federal Employees’ Compensation Act (FECA) Special Benefit Fund provides workers’ compensation

benefits to eligible Federal workers on behalf of other Federal agencies.    DOL recognizes as accounts

receivable amounts due from other Federal agencies to the Special Benefit Fund for unreimbursed FECA

benefits.  

DOL also has receivables from other Federal agencies for work performed on their behalf under various

reimbursable agreements.

2.Accounts receivable due from the public

DOL recognizes as accounts receivable state unemployment taxes due from covered employers and

reimbursements of benefits paid on behalf of reimbursable employers.    Also recognized as accounts

receivable are benefit overpayments made by DOL to individuals not entitled to receive the benefit.

DOL recognizes as accounts receivable amounts due from the public for fines and penalties levied against

employers by OSHA, MSHA, ESA, and EBSA and for amounts due from grantees and contractors for grant

and contract costs disallowed by ETA.  

3.Allowance for doubtful accounts

Accounts receivable due from the public are stated net of an allowance for uncollectible accounts.    The

allowance is estimated based on an aging of account balances, past collection experience, and an analysis of

outstanding accounts at year‐end.  Intra‐governmental accounts receivable are considered fully collectible.  

(See Note 4)

F. Property, Plant and Equipment, Net of Accumulated Depreciation

The majority of DOL’s property, plant and equipment (PP&E) is general purpose PP&E held by Job Corps centers

owned and operated by DOL through a network of contractors.   Internal use software is considered general purpose

PP&E.  
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

84     United States Department of Labor       

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

F. Property, Plant and Equipment, Net of Accumulated Depreciation ‐ Continued

DOL’s capitalization thresholds are displayed in the following table.

PP&E purchases and additions are stated at cost.    Normal repairs and maintenance are charged to expense as

incurred.   PP&E are depreciated over their estimated useful lives using the straight‐line method of depreciation.  

Job Corps center construction costs are capitalized as construction‐in‐progress until completed.  Upon completion

they are reclassified as structures or facilities and depreciated over their estimated useful lives.   Leasehold

improvements made at Job Corps centers and DOL facilities leased from the General Services Administration are

recorded at cost and amortized over the remaining life of the lease or the useful life of the improvements,

whichever is shorter, using the straight‐line method of amortization.  DOL operating leases have one‐year terms with

multiple option years.   The leases are cancelable by the government upon appropriate notice as specified in the

lease agreements.  Historically, these leases have not been canceled and DOL has no intention to cancel these leases

in the near term.

Internal use software development costs are capitalized as software development in progress until the development

stage has been completed and successfully tested.  Upon completion and testing, software development‐in‐progress

costs are reclassified as internal use software and amortized over their estimated useful lives.

The table below shows the major classes of DOL’s depreciable PP&E, and the depreciation periods used for each

major classification.  (See Note 5)     

   Years  

Structures, facilities and improvements 20 ‐ 50

Furniture and equipment    2 ‐ 36

Internal use software    2 ‐ 15

G. Advances

DOL advances consist primarily of payments made to state employment security agencies (SESAs) and to grantees

and contractors to provide for future DOL program expenditures.  These advance payments are recorded by DOL as

an asset, which is reduced when actual expenditures or the accrual of estimated unreported expenditures are

recorded by DOL.  (See Note 6)

H.  Non‐entity Assets

Assets held by DOL which are not available to DOL for obligation are considered non‐entity assets.  DOL holds non‐

entity assets for the Railroad Retirement Board and for transfer to the U.S. Treasury.  (See Note 7)

Property classification    Prior to FY 1996 FY 1996 through  

FY 2001

FY 2002 and

thereafter

Useful life

Equipment – WCF > $5,000 > $5,000 >= $50,000 >= 2 years

Equipment – Non WCF > $5,000 > $25,000 >= $50,000 >= 2 years

Real Property Purchases or Improvements > $5,000 > $25,000 > $500,000 >= 2 years

Leasehold Improvements > $5,000 > $25,000 > $500,000 >= 2 years

Internal Use Software – WCF > $5,000   > $5,000   > $300,000 >= 2 years

Internal Use Software – Non WCF > $5,000 > $300,000 > $300,000 >= 2 years
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     85 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

I. Liabilities

Liabilities represent probable amounts to be paid by DOL as a result of past transactions and are recognized when

incurred, regardless of whether there are budgetary resources available to pay them.  However, the liquidation of

these liabilities will consume budgetary resources and cannot be made until available resources have been

obligated. For financial reporting purposes, DOL’s liabilities are classified as covered or not covered by budgetary

resources.   

Liabilities are classified as covered by budgetary resources if budgetary resources are available to pay them.  

Liabilities are also considered covered by budgetary resources if they are to be funded by permanent indefinite

appropriations, which have been enacted and signed into law and are available for use as of the balance sheet date,

provided that the resources may be apportioned by OMB without further action by the Congress and without a

contingency having to be met first.    Liabilities are classified as not covered by budgetary resources if budgetary

resources are not available.    These classifications differ from budgetary reporting, which categorizes liabilities as

obligated, consuming budgetary resources, or unobligated, not consuming budgetary resources. Unobligated

liabilities include those covered liabilities for which available budgetary resources have not been obligated, as well

as liabilities not covered for which budgetary resources are not available to pay them.  (See Note 12)

J. Debt

DOL’s debt consisted of the following:

1.Black Lung Disability Trust Fund borrowings from U.S. Treasury

The Energy Improvement and Extension Act of 2008 (P.L. 110‐343, section 113), enacted October 3, 2008,

authorized restructuring of the Black Lung Disability Trust Fund (BLDTF) debt by the repayment at market value

the fund’s outstanding repayable Advances from U.S. Treasury, using the proceeds from borrowings from

Treasury’s Bureau of Public Debt and a one‐time appropriation.    Pursuant to this authority, in FY 2009, the

BLDTF borrowed from Treasury $6.496 billion which was structured into 32 discounted instruments with

sequential annual September 30th maturities over the 32‐year period 2009 through 2040, bearing interest rates

ranging from 1.412% to 4.556%.  Interest on each instrument accrues until its September 30th maturity date or

the instrument’s prepayment, whichever occurs first.    These debt payments are to be made from the excise

taxes assessed on coal mined.    In the event that the BLDTF cannot repay a discounted instrument when it

matures, or make benefit payments or other authorized expenditures, the Act authorizes the issuance of one‐

year discounted instruments to finance these activities.    The BLDTF issued additional debt on September 30,

2010 (due September 30, 2011) bearing an interest rate of 0.267%, and on September 30, 2011 (due September

30, 2012) bearing an interest rate of 0.106%. (See Note 8)
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

86     United States Department of Labor       

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

J. Debt ‐ Continued

2.Unemployment Trust Fund Advances from U.S. Treasury

Unemployment Trust Fund advances from U.S. Treasury outstanding as of September 30, 2011 and 2010

represent borrowings from the General Fund of the U.S. Treasury pursuant to the authority of section 1203

of the Social Security Act (42 USC 1323) and appropriated through P.L. 111‐8 (123 Stat. 754), P.L. 111‐46

(123 Stat. 1970), and P.L. 111‐117 (123 Stat. 3230) to pay unemployment benefits, when amounts in the

Unemployment Trust Fund are insufficient to fund these benefits. These repayable advances bear interest

rates of 3.25%, 3.0% and 2.875% and were computed as the average interest rate, as of the end of the

calendar month preceding the issuance date of the advance, for all interest bearing obligations of the

United States then forming the public debt, to the nearest lower one‐eighth of 1%. Interest on the

repayable advances is due on September 30th of each year.  Advances will be repaid by transfers from the

Unemployment Trust Fund to the General Fund of the Treasury when the Secretary of the Treasury, in

consultation with the Secretary of Labor, has determined that the balances in the Unemployment Trust

Fund allow repayment. (See Note 8)

K. Accrued Benefits

The financial statements include a liability for unemployment, workers’ compensation, and disability benefits due

and payable from various DOL funds, as discussed below.  (See Note 10)

1.Unemployment benefits payable

The Unemployment Trust Fund provides benefits to unemployed workers who meet State and Federal

eligibility requirements.  Regular and extended unemployment benefits are paid from State accounts within

the Unemployment Trust Fund, financed primarily by a State unemployment tax on employer payrolls.  Fifty

percent of the cost of extended unemployment benefits is paid from the Extended Unemployment

Compensation Account (EUCA) within the Unemployment Trust Fund, financed by a Federal unemployment

tax on employer payrolls.    The Recovery Act provided for a 100% Federal funding of extended benefits

through December 2009. This 100% Federal funding provision has been extended several times until

January 4, 2012.

Emergency unemployment compensation benefits, first authorized by the Supplemental Appropriations Act

of 2008, and financed by Federal unemployment taxes paid from EUCA, were extended by the Recovery Act

through December 2009, and funded entirely from Treasury General Fund revenues, which the Recovery Act

appropriated.    Emergency unemployment compensation benefits have been extended several times until

January 3, 2012.

The Recovery Act also provided for Federal Additional Unemployment Compensation (FAUC), a $25 weekly

supplement entirely funded from Treasury General Fund revenues, payable through December 2009 to

individuals who are entitled under state law to otherwise receive any type of unemployment compensation.  

FAUC benefits were extended three times after the expiration of the Recovery Act in May 2010, with phase

out through December 2010.  

   
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     87 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

K. Accrued Benefits ‐ Continued

1.Unemployment benefits payable – continued

 

Unemployment benefits to unemployed Federal workers are paid from the Federal Employees

Compensation Account within the Unemployment Trust Fund, which is then reimbursed by the responsible

Federal agency.  

A liability is recognized for unpaid unemployment benefits applicable to the current period and for benefits

paid by states that have not been reimbursed by the fund.    DOL also recognizes a liability for Federal

employees’ unpaid unemployment benefits for existing claims filed during the current period, payable in the

subsequent period, to the extent reimbursed by other Federal entities.   

2.Federal employees disability and 10(h) benefits payable

The Federal Employees’ Compensation Act Special Benefit Fund provides income and medical cost

protection to covered Federal civilian employees injured on the job, employees who have incurred a work‐

related occupational disease and beneficiaries of employees whose death is attributable to a job‐related

injury or occupational disease. The fund is reimbursed by other Federal agencies for the FECA benefit

payments made on behalf of their workers.    The fund assumes the liability for unreimbursed (non‐

chargeable) FECA benefits.    The fund also provides 50% of the annual cost‐of‐living adjustments for pre‐

1972 compensation cases under the authority of Section 10(h) of the Longshore and Harbor Workers’

Compensation Act and the District of Columbia Workmen’s Compensation Act.  A liability for FECA benefits

payable by the Special Benefit Fund to the employees of DOL and other Federal agencies and for 10(h)

benefits is accrued to the extent of unpaid benefits applicable to the current period.

3.Black lung disability benefits payable

The Black Lung Disability Trust Fund and Special Benefits for Disabled Coal Miners provide compensation

and medical benefits for eligible coal miners who are disabled due to pneumoconiosis (black lung disease).  

DOL recognizes a liability for disability benefits to the extent of unpaid benefits applicable to the current

period.

4.Energy employees occupational illness compensation benefits payable

The Energy Employees Occupational Illness Compensation Fund provides benefits to eligible current or

former employees of the U.S. Department of Energy (DOE) and its contractors suffering from designated

illnesses incurred as a result of their work with DOE.  Benefits are also paid to certain survivors of those

employees and contractors, as well as to certain beneficiaries of the Radiation Exposure Compensation Act

(RECA). DOL recognizes a liability for disability benefits to the extent of unpaid benefits applicable to the

current period.
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

88     United States Department of Labor       

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

L. Future Workers’ Compensation Benefits

The financial statements include an actuarial liability for future workers’ compensation benefits payable by DOL to

its employees, to employees of the Panama Canal Commission and to enrollees of the Job Corps, as well as benefits

not chargeable to other Federal agencies, which must be paid by DOL’s Federal Employees’ Compensation Act

Special Benefit Fund.  The liability includes the expected payments for death, disability, medical, and miscellaneous

costs for approved compensation cases, as well as a component for incurred but not reported claims.  The liability is

determined using historical benefit payment patterns related to injury years to predict the ultimate payments.  

The actuarial methodology provides for the effects of inflation and adjusts historical payments to current year

constant dollars by applying wage inflation factors (cost of living adjustments or COLAs) and medical inflation factors

(consumer price index‐medical or CPIMs) to the calculation of projected benefits.  The COLAs and CPIMs used in the

projections for FY 2011 and FY 2010 were as follows:

            COLA               CPIM                            

  FY     2011 2010 2011 2010

   

2011    N/A    2.23%      N/A 3.45% 

2012 2.10% 1.13% 3.07% 3.43% 

2013 2.53% 1.70% 3.62% 3.64%

2014 1.83% 1.90% 3.66% 3.66%

2015 1.93% 1.93% 3.73% 3.73%

2016+ 2.00% 1.93% 3.73% 3.73%

Projected annual payments were discounted to present value based on OMB’s interest rate assumptions for ten year

Treasury notes.    For FY 2011, interest rate assumptions were 3.535% in year one and 4.025% in year two and

thereafter.  For FY 2010, interest rate assumptions were 3.653% in year one and 4.300% in year two and thereafter.

(See Note 11.)    The use of these rates approximates the use of average historical rates on marketable Treasury

securities with maturities consistent with the projected benefit payments

M. Energy Employees Occupational Illness Compensation Benefits  

The Energy Employees Occupational Illness Compensation Fund, established under the authority of the Energy

Employees Occupational Illness Compensation Program Act of 2000 (EEOICPA), provides benefits to eligible current

or former employees of DOE and its contractors, or to certain survivors of those employees and contractors, as well

as benefits to certain beneficiaries of RECA.  DOL is responsible for adjudicating and administering claims filed under

the EEOICPA.  Effective July 31, 2001, compensation of $150,000 and payment of medical expenses from the date a

claim is filed are available to covered individuals suffering from designated illnesses incurred as a result of their work

with DOE.  Prior to October 2004, compensation of $50,000 and payment of medical expenses from the date a claim

is filed are available to individuals eligible for compensation under RECA.  As a result of the October 2004 changes,

new RECA cases are paid the full $150,000 under EEOICPA.

The Ronald Reagan National Defense Authorization Act of 2005 amended EEOICPA to include Subtitle E –

Contractor Employee Compensation.  This amendment replaces Part D of the EEOICPA, which provided assistance

from DOE in obtaining state workers’ compensation benefits.    The amended program grants workers’

compensation benefits to covered employees and their families for illness and death arising from exposure to toxic  
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     89 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

M. Energy Employees Occupational Illness Compensation Benefits ‐ Continued

substances at a DOE facility.  The amendment also makes it possible for uranium workers as defined under Section

5 of RECA to receive compensation under Part E for illnesses due to toxic substance exposure at a uranium mine or

mill covered under that Act.  These claims were formerly paid by the Department of Justice (DOJ).

DOL has recognized a $15.1 billion and $12.1 billion actuarial liability for estimated future benefits payable by DOL

at September 30, 2011 and 2010, respectively, to eligible individuals under the EEOICPA.  At September 30, 2011

the undiscounted liability is $22.6 billion discounted to a present value liability of $15.1 billion based on an interest

rate of 4.025% projected over a 55‐year period.  The present value liability increased significantly at September 30,

2011 due to increased cancer Special Exposure Cohort (SEC) classes, increased number of projected approvals for

Part E cases, higher medical costs and a lower discount rate.  At September 30, 2010 the undiscounted liability was

$19.8 billion discounted to a present value liability of $12.1 billion based on an interest rate of 4.30% projected

over a 51‐year period. The estimated liability includes the expected lump sum and estimated medical payments for

approved compensation cases and cases filed pending approval, as well as claims incurred but not yet filed.  The

actuarial projection methodology provided an estimate of the ultimate number of reported cases as a result of

estimating future claims from the historical patterns of reported claims and subsequent claim approval rates.  

Medical payments were derived by estimating an average benefit award per living employee claimant.

N. Accrued Leave

A liability for annual and compensatory leave is accrued as leave is earned and paid when leave is taken.    The

balance of leave earned but not taken will be paid from future funding sources.  Sick leave and other types of non‐

vested leave are expensed as taken.

O. Employee Health and Life Insurance Benefits

DOL employees are eligible to participate in the contributory Federal Employees Health Benefit Program (FEHBP)

and the Federal Employees Group Life Insurance Program (FEGLIP).   DOL matches the employee contributions to

each program to pay for current benefits.  During FY 2011, DOL’s contributions to the FEHBP and FEGLIP were $99.2

million and $1.4 million, respectively. During FY 2010, DOL’s contributions to the FEHBP and FEGLIP were $91.3

million and $2.3 million, respectively.  These contributions are recognized as current operating expenses.

P. Other Retirement Benefits

DOL employees eligible to participate in the FEHBP and the FEGLIP may continue to participate in these programs

after their retirement.  DOL recognizes a current operating expense for the future cost of these other retirement

benefits (ORB) at the time the employee’s services are rendered.  This ORB expense must be financed by U.S. Office

of Personnel Management (OPM).    Using cost factors supplied by OPM, DOL recorded ORB imputed costs and

imputed financing sources of $96.8 million in FY 2011 and $107.8 million in FY 2010.
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

90     United States Department of Labor       

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

Q. Employee Pension Benefits

DOL employees participate in either the Civil Service Retirement System (CSRS) or the Federal Employees’

Retirement System (FERS).    For employees participating in CSRS, 7.0% of their gross earnings is withheld and

transferred to the Civil Service Retirement and Disability Fund.  DOL contributes an additional 7.0% of the employee

gross earnings to the Civil Service Retirement and Disability Fund.    For employees participating in FERS, DOL

withholds 0.8% of gross earnings and makes an 11.2% employer contribution.  This total is transferred to the Federal

Employees’ Retirement Fund.    The CSRS and FERS retirement funds are administered by the OPM.    DOL

contributions to the CSRS and FERS are recognized as current operating expenses.    FERS participants are also

covered under the Federal Insurance Contribution Act (FICA) and are subject to withholdings.  DOL makes matching

FICA contributions, recognized as operating expenses.  DOL’s matching contributions were $88.6 million in FY 2011

and $86.7 million in FY 2010.

The Thrift Savings Plan (TSP) is a defined contribution retirement savings and investment plan for employees

covered by either CSRS or FERS.  CSRS participants may contribute up to $16,500 of their gross pay to the TSP during

calendar years 2011 and 2010, but there is no departmental matching contribution.    FERS participants may

contribute up to $16,500 of their gross pay to the TSP during calendar years 2011 and 2010.    CSRS and FERS

participants aged 50 years or older may also contribute an additional $5,500 each calendar year in “catch‐up”

contributions during calendar years 2011 and 2010, but there is no departmental matching on “catch‐up”

contributions. For employees covered under FERS, DOL contributes 1% of the employees’ gross pay to the TSP.  DOL

also matches employees’ contributions dollar‐for‐dollar on the first 3% of pay contributed each pay period and 50

cents on the dollar for the next 2% of pay contributed.   DOL contributions to the TSP are recognized as current

operating expenses.   Employee and employer contributions to the TSP are transferred to the Federal Retirement

Thrift Investment Board. (See Note 14)   

DOL recognizes the full cost of providing future CSRS and FERS pension benefits to covered employees at the time

the employees’ services are rendered.    The pension expense recognized in the financial statements equals the

service cost for covered DOL employees, less amounts contributed by these employees.  Service cost represents the

actuarial present value of benefits attributed to services rendered by covered employees during the accounting

period.   

The measurement of service cost requires the use of actuarial cost methods to determine the percentage of the

employees’ basic compensation sufficient to fund their projected pension benefit.  These percentages (cost factors)

are provided by OPM, and applied by DOL to the basic annual compensation of covered employees to arrive at the

amount of total pension expense to be recognized in DOL’s financial statements.   

The excess of total pension expense over the amount contributed by the Department and by DOL’s employees

represents the amount of pension expense which must be financed directly by OPM.  DOL recognized an imputed

cost and an imputed financing source equal to the excess amount.    DOL does not recognize in its financial

statements FERS or CSRS assets, accumulated plan benefits or unfunded liabilities, if any, applicable to its

employees.  (See Note 14)
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     91 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

R. Net Position

DOL’s net position consists of the following:

1.Unexpended appropriations

Unexpended appropriations include the unobligated balances and undelivered orders of DOL’s appropriated

funds.  Unobligated balances associated with appropriations that expire at the end of the fiscal year remain

available for obligation adjustments, but not new obligations, until those appropriations are closed, five

years after the appropriations expire.  Unexpired multi‐year and no‐year appropriations remain available to

DOL for obligation in future periods.  

2.Cumulative results of operations

Cumulative results of operations include the accumulated historical difference between expenses

consuming budgetary resources and financing sources providing budgetary resources in DOL’s trust,

revolving and special funds; liabilities not consuming budgetary resources net of assets not providing

budgetary resources; and DOL’s net investment in capitalized assets.   

S. Net Cost of Operations  

1.Operating costs   

Full operating costs are comprised of all direct costs consumed by the program and those indirect costs

which can be reasonably assigned or allocated to the program.  Full costs are reduced by exchange (earned)

revenues to arrive at net program cost.    The full and net operating costs of DOL’s major programs are

presented in the Consolidated Statement of Net Cost, and are also reported by sub‐organization in Note 15

to the financial statements.   

2.Earned revenue

Earned revenues arise from exchange transactions which occur through the provision of goods and services

for a price, and are deducted from the full cost of DOL’s major programs to arrive at net program cost.  

Earned revenues are recognized by DOL to the extent reimbursements are payable from other Federal

agencies and from the public, as a result of costs incurred or services performed on their behalf.   Major

sources of DOL’s earned revenue include reimbursements to the Federal Employees’ Compensation Act

Special Benefit Fund from Federal agencies for the costs of disability compensation and medical care

provided to or accrued on behalf of their employees and reimbursements to the Unemployment Trust Fund

from Federal agencies for the cost of unemployment benefits provided to or accrued on behalf of their

former employees.
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

92     United States Department of Labor       

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

T. Budgetary Financing Sources

Budgetary financing sources other than earned revenues provide funding for the Department’s net cost of

operations and are reported on the Consolidated Statement of Changes in Net Position.  These financing sources

include appropriations received, less appropriations transferred and not available, non‐exchange revenue, and

transfers without reimbursement, as discussed below:

1.Appropriations received, appropriations transferred and appropriations not available

DOL receives financing sources through congressional appropriations to support its operations.  A financing

source is recognized for these appropriated funds received, less appropriations transferred or not available

through rescission or cancellation.  

2.Non‐exchange revenue

Non‐exchange revenues arise primarily from the Federal government’s power to demand payments from

the public.  Non‐exchange revenues are recognized by DOL on the Consolidated Statement of Changes in

Net Position for the transfer of employer and excise taxes from the entities collecting these taxes and for

interest from investments, as discussed below.  (See Note 16)

 Employer taxes  

Employer tax revenues are recognized on a modified cash basis, to the extent of cash transferred by the

collecting entity to DOL, plus the change in inter‐entity balances between the collecting entity and DOL.  

Inter‐entity balances represent revenue received by the collecting entity, net amounts due to the collecting

entity and adjustments made to previous transactions by the collecting entity which have not been

transferred to DOL.   

Federal and state unemployment taxes represent non‐exchange revenues collected from employers based

on wages paid to employees in covered employment.    Federal unemployment taxes are collected by the

Internal Revenue Service and transferred to designated accounts within the Unemployment Trust Fund.  

State unemployment taxes are collected by each State and deposited in separate State accounts within the

Unemployment Trust Fund.    Federal unemployment taxes are used to pay the Federal share of extended

unemployment benefits and to provide for Federal and State administrative expenses related to the

operation of the unemployment insurance program.  State unemployment taxes are restricted in their use

to the payment of unemployment benefits.

 Interest

The Unemployment Trust Fund, the Panama Canal Commission Compensation Fund, and the Energy

Employees Occupational Illness Compensation Fund receive interest on fund investments.    The

Unemployment Trust Fund receives interest from states that had accounts with loans payable to the Federal

unemployment account at the end of the prior fiscal year.  Interest is also earned on Federal funds in the

possession of non‐Federal entities.  Interest is recognized as non‐exchange revenue when earned.  
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     93 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

T. Budgetary Financing Sources ‐ Continued

2.Non‐exchange revenue ‐ continued

 Assessments

Assessments consist of penalties levied against employers by ESA for regulatory violations.  Assessments

are recognized as non‐exchange revenues when earned.

 

 Reimbursement of unemployment benefits

The Unemployment Trust Fund receives reimbursements from state and local government entities and non‐

profit organizations for the cost of unemployment benefits provided to or accrued on behalf of their

employees.  These reimbursements are recognized as non‐exchange revenue when earned.   

3.Transfers without reimbursement

Transfers recognized as budgetary financing sources by DOL include transfers from the Department of

Homeland Security H‐1B Nonimmigrant Petitioner Account to H‐1B Funds in ETA and ESA.  Also included are

transfers from various DOL general fund unexpended appropriation accounts to the Working Capital Fund’s

cumulative results of operations.    There are also transfers between DOL entities, primarily for the

administration of the unemployment insurance program and additional appropriations for extended

unemployment benefits. (See Note 17)

U.  Other Financing Sources

Other financing sources include items that do not represent budgetary resources.  

1.Imputed financing

A financing source is imputed by DOL to provide for pension and other retirement benefit expenses

recognized by DOL but financed by OPM.  (See Notes 1‐P and Q)

2.Transfers without reimbursement

Transfers recognized as other financing sources by DOL include the transfers of property from the General

Services Administration.  (See Note 17)
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

94     United States Department of Labor       

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

V.  Custodial Activity

DOL collects and transfers to the general fund of the U.S. Treasury custodial non‐exchange revenues for penalties

levied against employers by OSHA, MSHA, ESA, and EBSA for regulatory violations; for ETA disallowed grant costs

assessed against canceled appropriations; and for FECA administrative costs assessed against government

corporations in excess of amounts reserved to finance capital improvements in the Federal Employees’

Compensation Act Special Benefit Fund.    These collections are not available to the agencies for obligation or

expenditure.  Penalties and other assessments are recognized as custodial revenues when collected or subject to

collection.   (See Notes 1‐B and 20)

W.  Significant Assumptions Used in the Statement of Social Insurance (SOSI) and Statement of Changes

in Social Insurance Amounts and Other Social Insurance Disclosures

The Black Lung Disability Benefit Program provides for compensation, medical and survivor benefits for eligible coal

miners who are disabled due to pneumoconiosis (black lung disease) arising out of their coal mine employment.  

The Black Lung Disability Trust Fund (BLDTF) provides benefit payments to eligible coal miners disabled by

pneumoconiosis when no responsible mine operator can be assigned the liability.   

Black lung disability benefit payments are funded by excise taxes from coal mine operators based on the sale of

coal, as are the fund’s administrative costs.   These taxes are collected by the Internal Revenue Service and

transferred to the BLDTF, which was established under the authority of the Black Lung Benefits Revenue Act, and

administered by the U.S. Department of the Treasury.  Prior to October 3, 2008, the Black Lung Benefits Revenue

Act provided for repayable advances to the BLDTF from the general fund of the Treasury in the event that BLDTF

resources were not adequate to meet program obligations.

P.L. 110‐343, Division B‐‐Energy Improvement and Extension Act of 2008, enacted on October 3, 2008, in section

113, (1) allowed for the temporary increase in coal excise tax rates to continue an additional five years beyond the

current statutory limit and (2) restructured the BLDTF debt by refinancing the outstanding high interest rate

repayable advances with the proceeds from issuing low interest rate discounted debt instruments similar in form to

zero‐coupon bonds, plus a one‐time appropriation.   This Act also allowed that any debt issued by the BLDTF

subsequent to the refinancing may be used to make benefit payments, other authorized expenditures, or to repay

debt and interest from the initial refinancing.  Debt issued by the BLDTF subsequent to the initial refinancing will

have a maturity date of one year and bear interest at the Treasury 1‐year rate.  All debt issued by the BLDTF was

effected as borrowing from the Bureau of Public Debt.  (See Notes 1‐J and 8)

P.L. 111‐148, Patient Protection and Affordable Care Act of 2010, enacted on March 23, 2010, in section 1556,

amended the Black Lung Benefits Act and became effective immediately.  Among other things, section 1556 affects

claims for (1) total disability benefits filed by miners with long histories of employment in the coal industry and (2)

survivors benefits filed by widows and other surviving dependents of totally disabled coal miners upon their death.  

The amendments apply to claims which were filed after 2004 and pending on this Act's effective date and

thereafter.  These amendments may make it easier for some coal miners and their surviving dependents to meet

the eligibility requirements for total disability and survivors benefits.
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     95 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

W. Significant Assumptions Used in the Statement of Social Insurance (SOSI) and Statement of Changes

in Social Insurance Amounts and Other Social Insurance Disclosures ‐ Continued

The Division of Coal Mine Workers' Compensation (DCMWC) within the Office of Workers' Compensation Programs

administers the Black Lung Program and the payment of benefits under the Black Lung Benefits Act.  The Federal

Coal Mine Health and Safety Act sets Black Lung benefits at 37.5% of the base salary of a Federal employee at level

GS‐2, Step 1.  P.L. 111‐322, the Continuing Appropriations and Surface Transportation Extensions Act of 2011, was

enacted on December 22, 2010.  This Act, among other things, provided that no Federal employee statutory pay

adjustment would take effect during the period January 1, 2011 through December 31, 2012.  As a result, because

the Federal employee base salary will remain unchanged through 2012, the rates for Black Lung benefits will

likewise remain unchanged through 2012.

The significant assumptions used in the projections for the Statement of Social Insurance (SOSI) are the number of

beneficiaries, life expectancy, coal excise tax revenue estimates, the tax rate structure, Federal civilian pay raises

and medical cost inflation.  These assumptions also affect the amounts reported on the SOSI summary section and

the Statement of Changes in Social Insurance Amounts.       

Treasury’s Office of Tax Analysis provides estimates of future receipts of the black lung excise tax.  Its estimates are

based on projections of future coal production and sale prices prepared by the Energy Information Agency of the

U.S. Department of Energy.   Treasury’s Office of Tax Analysis provides the first eleven years of tax receipt

estimates.  The remaining years are estimated using a growth rate based on both historical tax receipts and the

Treasury’s estimated tax receipts.  The higher coal excise tax rate structure is $1.10 per ton of underground‐mined

coal and $0.55 per ton of surface‐mined coal sold, with a cap of 4.4% of sales price.   Based on Treasury’s

interpretation of section 113 of P.L. 110‐343, the higher excise tax rates will continue until the earlier of December

31, 2018 or the first December 31 after 2008 in which there exist no (1) balance of repayable debt described in

section 9501 of the Internal Revenue Code and (2) unpaid interest on the debt.   Starting in 2019, the tax rates

revert to $0.50 per ton of underground‐mined coal and $0.25 per ton surface‐mined coal sold, with a limit of 2.0%

of sales price.   Although section 9501 of the Internal Revenue Code uses the terminology "advance," the Treasury

has interpreted this to mean any debt owed by the BLDTF to the Bureau of the Public Debt.

The beneficiary population data is updated from information supplied by the program.  The beneficiary population

is a nearly closed universe in which attrition by death exceeds new entrants by a ratio of more than ten to one.  

Projections for new participants are included in the overall projections and are considered immaterial.  Therefore,

the difference between the open group measure and the closed group measure due to new participants is

immaterial and the same measure is presented for both the open group and the closed group.    Social Security

Administration life tables are used to project the life expectancies of the beneficiary population.  OMB supplies

assumptions for future monthly benefit rate increases based on increases in the Federal pay scale and future

medical cost inflation based on increases in the consumer price index‐medical, which are used to calculate future

benefit costs.  During the current projection period, the future benefit rate (annualized for the fiscal year) increases

0% in 2012, 1.125% in 2013, 2.629% in 2014, and 3% in each year thereafter and medical cost increases 3.2% in

2012, and ranges from 3.6% to 3.8% thereafter. Estimates for administrative costs for the first 11 years of the

projection are supplied by DOL’s Budget Office, based on current year enacted amounts, while later years are based

on the number of projected beneficiaries.   
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

96     United States Department of Labor       

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

W. Significant Assumptions Used in the Statement of Social Insurance (SOSI) and Statement of Changes

in Social Insurance Amounts and Other Social Insurance Disclosures ‐ Continued

The projection period ends September 30, 2040, because the primary purpose of the BLDTF, which was established

in 1978, is to compensate the victims of coal mine dust exposures which occurred prior to 1970.  By the end of FY

2040, not only the disabled miners and their widows in that class, but also virtually all of their eligible dependent

disabled adult children will be deceased.  All of the current year projections are discounted using an interest rate of

3.375% published by Treasury as of the start of the projection period.  This rate is for Treasury loans to government

agencies for loans up to 30 years.  Thirty years is the maximum period for which Treasury publishes rates for loans

to government agencies and approximates the projection period.  The valuation date for the FY 2011 information

presented in the SOSI, including the summary section, and the Statement of Changes in Social Insurance Amounts is

September 30, 2011.

The accumulated deficit of all past disbursements over past cash receipts, including interest on investments, is

($6.1) billion, the amount of the trust fund net position deficit at the start of the projection period, September 30,

2011.  The excess of the present value of estimated future excise tax income over the actuarial present value of

future benefits payments and present value of estimated administrative costs during the projection period for

current and future participants (open and closed group measure) is calculated by adding the outflows of:

(1) actuarial present value of future benefit payments during the projection period to disabled coal miners and

dependent survivors and

(2) present value of estimated future administrative costs during the projection period;

and then subtracting the inflows of:

(3) the present value of estimated future excise tax income during the projection period.

SFFAS 37 requires the SOSI summary section to present the total of open and closed group measure plus fund

assets.  This consists of the (1) open and closed group measure, which is the excess of the present value of the

estimated future excise tax revenue over actuarial present value of future benefit payments and present value of

estimated administrative costs during the projection period for current and future participants, plus the (2) Funds

with U.S. Treasury and receivables from benefit overpayments and represents a net positive cash flow that may be

used to liquidate the liabilities of the BLDTF.

  

SFFAS 37 requires the Statement of Changes in Social Insurance Amounts to present the changes in the open and

closed group measure from $5.4 billion as of September 30, 2010 to $4.7 billion as of September 30, 2011 and to

disclose the reasons for the change of ($730.3) million.  From FY 2010 to FY 2011, the decrease in the assumptions

about coal excise tax revenues of ($1.1) billion represents the largest decrease in the open and closed group

measure.    From FY 2010 to FY 2011, the coal excise tax revenue projections were revised downward to reflect

current year experience and a decrease in future collections.    From FY 2010 to FY 2011, the increase in the

assumptions about beneficiaries, including costs (not associated with medical inflation or Federal civilian pay

raises), number, type, age, and life expectancy, of $203 million represents the largest increase in the open and

closed group measure.  From FY 2010 to FY 2011, the assumptions about the beneficiaries were revised downward

to reflect current year experience and a decrease in future costs.

From FY 2010 to FY 2011, the increases and decreases with respect to changes in assumptions for Federal civilian

pay raises for income benefits of $33.8 million, medical cost inflation for medical benefits of ($1.2) million, and
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     97 

NOTE 1 ‐ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ‐ Continued

W. Significant Assumptions Used in the Statement of Social Insurance (SOSI) and Statement of Changes

in Social Insurance Amounts and Other Social Insurance Disclosures ‐ Continued

administrative costs of ($19.2) million were based on revisions to reflect current year experience and future costs.  

From FY 2010 to FY 2011, the increase of $197.7 million for the change in assumption about interest rate

represents the change in the discount rate from 3.75% to 3.375%.

X.  Tax Exempt Status

As an agency of the Federal government, the Department is exempt from all taxes imposed by any governing body

whether it is a Federal, state, commonwealth, local, or foreign government.  

Y.  Application of Critical Accounting Estimates

The financial statements are based on the selection of accounting policies and the application of significant

accounting estimates, some of which require management to make significant assumptions.  

Estimates and assumptions affect the reported amounts of assets and liabilities and the reported amounts of

revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Estimates and assumptions also affect the amounts reported on the Statement of Social Insurance and the

Statement of Changes in Social Insurance Amounts.  Further, the estimates are based on current conditions that

may change in the future. Actual results could differ materially from the estimated amounts. The financial

statements include information to assist in understanding the effect of changes in assumptions to the related

information.

Z. Reclassifications

The FY 2010 statements were reclassified to conform to the FY 2011 Departmental financial statement presentation

requirements. The reclassifications had no effect on total assets, liabilities, net position, and change in net position

or budgetary resources as previously reported.
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

98     United States Department of Labor       

NOTE 2 ‐ FUNDS WITH U.S. TREASURY

Funds with U.S. Treasury at September 30, 2011 consisted of the following:

Unobligated Unobligated Obligated

Balance Balance Balance Not Total Non-entity

(Dollars in thousands) Available Unavailable Yet Disbursed Entity Assets Assets Total

Revolving funds $ 5,647 $ 6,655 $ 85,078 $ 97,380 $ 97,380 - $ 

Trust funds 91 - 44,385 44,476 (555) 43,921

General funds 1,245,780 2,118,005 7,445,531 10,809,316 10,809,316 - 

Other - - - - 3,841 3,841 

$ 2,124,660 1,251,518 $ $ 7,574,994 $ 10,951,172 $ 3,286 10,954,458 $ 

Entity Assets

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

Unobligated Unobligated Obligated

Balance Balance Balance Not Total Non-entity

(Dollars in thousands) Available Unavailable Yet Disbursed Entity Assets Assets Total

Revolving funds $ 14,633 $ 23,630 $ 58,361 $ 96,624 $ 96,624 - $ 

Trust funds 91 - 141,599 141,690 (629) 141,061

General funds 3,029,238 705,680 8,641,922 12,376,840 12,376,840 - 

Other - - - - 3,621 3,621 

$ 729,310 3,043,962 $ $ 8,841,882 $ 12,615,154 $ 2,992 12,618,146 $ 

Entity Assets

The negative fund balances reported as of September 30, 2011 and 2010 relate to the Unemployment Trust Fund

(UTF) and are the result of the timing of processing the investments and redemptions of UTF.  The investments and

redemptions relating to the last business day of the month are not processed until the first day of the next month.  

This could result in a negative cash position for the preceding business day if the disbursements are greater than

the receipts to the fund.

Annual and multi‐year budget authority expires at the end of its period of availability.  During the first through the

fifth expired years, the unobligated balance is unavailable and may be used to adjust obligations and disbursements

that were recorded before the budgetary authority expired or to meet a legitimate or bona fide need arising in the

fiscal year for which the appropriation was made.  The unobligated balance for no‐year budget authority may be

used to incur obligations indefinitely for the purpose specified by the appropriation act. No‐year budget authority

unobligated balances, except those specifically exempt, are still subject to the annual apportionment and allotment

process.

Unobligated Balance Available at September 30, 2011 includes $483 million of funds apportioned for use in the

subsequent year.  
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     99 

NOTE 3 ‐ INVESTMENTS

Investments at September 30, 2011 consisted of the following:

Face Premium Interest Net Market

(Dollars in thousands) Value (Discount) Receivable Value Value

Unemployment Trust Fund

Non-marketable

Special issue U.S. Treasury Bonds

3.000% maturing June 30, 2012 $ 16,030,410 - $ 120,228 $ 16,150,638 16,030,410 $ 

 16,030,410 - 120,228 16,150,638 16,030,410

Panama Canal Commission

 Compensation Fund

Marketable

U.S. Treasury Bills

Maturing November 17, 2011 580 - - 580 580

U.S. Treasury Notes

1.750% Maturing November 15, 2011 58,126 103 381 58,610 58,126

3.625% Maturing May 15, 2013 3,968 (61) 54 3,961 3,968 

 62,674 42 435 63,151 62,674 

$ 16,093,084 42 $ $ 120,663 $ 16,213,789 16,093,084 $ 

Entity investments $ 42 16,037,946 $ $ 120,249 $ 16,037,946 16,158,237 $ 

Non-entity investments 55,138 - 414 55,552 55,138 

$ 16,093,084 42 $ 120,663 $ 16,213,789 $ 16,093,084 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

100     United States Department of Labor       

NOTE 3 ‐ INVESTMENTS ‐ Continued

Investments at September 30, 2010 consisted of the following:

Face Premium Interest Net Market

(Dollars in thousands) Value (Discount) Receivable Value Value

Unemployment Trust Fund

Non-marketable

Special issue U.S. Treasury Bonds

3.125% maturing June 30, 2011 $ 5,981,782 $ - $ 20,672 $ 6,002,454 $ 5,981,782

4.500% maturing June 30, 2011 12,720,998 - 143,111 12,864,109 12,720,998 

 18,702,780 - 163,783 18,866,563 18,702,780

Panama Canal Commission

 Compensation Fund

Marketable

U.S. Treasury Notes

3.625% maturing May 15, 2013 3,968 (96) 54 3,926 3,968

4.500% Maturing November 15, 2010 62,967 (794) 1,063 63,236 62,967

 66,935 (890) 1,117 67,162 66,935 

Energy Employees Occupational Illness 

 Compensation Fund

Non-marketable

One Day Certificate

0.120% maturing October 1, 2010 347,368 - - 347,368 347,368 

$ 19,117,083 (890) $ $ 164,900 $ 19,281,093 19,117,083 $ 

Entity investments $ (890) 19,087,134 $ $ 164,638 $ 19,087,134 19,250,882 $ 

Non-entity investments 29,949 - 262 30,211 29,949 

$ 19,117,083 (890) $ 164,900 $ 19,281,093 $ 19,117,083 $ 
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     101 

NOTE 4 ‐ ACCOUNTS RECEIVABLE, NET OF ALLOWANCE

           

Accounts receivable at September 30, 2011 consisted of the following:

Gross Net

(Dollars in thousands) Receivables Allowance Receivables

Entity intra-governmental assets

Due for UCFE and UCX benefits 666,272 $ $ 666,272 - $ 

Due for workers' compensation benefits 5,262,735 5,262,735 - 

Other 15,948 - 15,948 

 5,944,955 5,944,955 - 

Entity assets

State unemployment taxes 1,164,204 (829,016) 335,188

Due from reimbursable employers 1,209,305 (109,110) 1,100,195

Benefit overpayments 4,175,940 (3,545,419) 630,521

Other 3,142 - 3,142 

 (4,483,545) 6,552,591 2,069,046 

Non-entity assets

Fines and penalties 149,637 101,816 (47,821) 

 (4,531,366) 6,702,228 2,170,862 

$ (4,531,366) 12,647,183 $ 8,115,817 $ 

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

Gross Net

(Dollars in thousands) Receivables Allowance Receivables

Entity intra-governmental assets

Due for UCFE and UCX benefits 745,405 $ $ 745,405 - $ 

Due for workers' compensation benefits 5,135,704 5,135,704 - 

Other 1,262 1,262 - 

 5,882,371 5,882,371 - 

Entity assets

State unemployment taxes 953,709 (691,600) 262,109

Due from reimbursable employers 1,235,093 1,142,229 (92,864) 

Benefit overpayments 2,980,496 (2,500,582) 479,914

Other 8,275 - 8,275 

 (3,285,046) 5,177,573 1,892,527 

Non-entity assets

Fines and penalties 169,680 119,354 (50,326) 

 (3,335,372) 5,347,253 2,011,881 

$ (3,335,372) 11,229,624 $ 7,894,252 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

102     United States Department of Labor       

NOTE 5 ‐ PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION

Property, plant and equipment at September 30, 2011 consisted of the following:

Accumulated

Depreciation/ Net Book

(Dollars in thousands) Cost Amortization Value

Structures, facilities and improvements

Structures and facilities 1,219,588 $ $ 704,470 (515,118) $ 

Improvements to leased facilities 423,263 157,887 (265,376) 

 1,642,851 862,357 (780,494) 

Furniture and equipment

Equipment held by contractors 155,493 (149,832) 5,661

Furniture and equipment 46,146 10,911 (35,235) 

 201,639 16,572 (185,067) 

Internal use software 217,602 (78,250) 139,352

Construction-in-progress 107,530 - 107,530

Land 94,101 94,101 - 

$ 2,263,723 $ 1,219,912 (1,043,811) $ 

2011

Property, plant and equipment at September 30, 2010 consisted of the following:

Accumulated

Depreciation/ Net Book

(Dollars in thousands) Cost Amortization Value

Structures, facilities and improvements

Structures and facilities 1,134,773 $ $ 652,107 (482,666) $ 

Improvements to leased facilities 423,915 166,887 (257,028) 

 1,558,688 818,994 (739,694) 

Furniture and equipment

Equipment held by contractors 153,333 (148,963) 4,370

Furniture and equipment 39,410 12,310 (27,100) 

 192,743 16,680 (176,063) 

Internal use software 216,452 (101,714) 114,738

Construction-in-progress 130,200 - 130,200

Land 94,101 94,101 - 

$ 2,192,184 $ 1,174,713 (1,017,471) $ 

2010
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     103 

NOTE 6 – ADVANCES

Advances at September 30, 2011 and 2010 consisted of the following:

(Dollars in thousands) 2011 2010

Advances to states for UI benefit payments $ 1,545,979 $ 1,746,918

Other 125,274 44,418 

$ 1,590,397 1,872,192 $ 

NOTE 7 ‐ NON‐ENTITY ASSETS

Non‐entity assets consisted of the following at September 30, 2011 and 2010:

(Dollars in thousands) 2011 2010

Intra-governmental

Funds with U.S. Treasury $ 2,992 3,286 $ 

Investments 30,211 55,552 

 33,203 58,838 

Accounts receivable, net of allowance 101,816 119,354

$ 152,557 160,654 $ 

NOTE 8 ‐ DEBT

DOL’s debt during FY 2011 consisted of the following:

Balance at Balance at

September 30, Net September 30,

(Dollars in thousands) 2010 Borrowing 2011

Intra-governmental

Debt to Treasury

Black Lung Disability Trust Fund

 Borrowing from U.S. Treasury 6,289,746 $ $ (126,671) $ 6,163,075

Unemployment Trust Fund

 Advances from U.S. Treasury 34,110,979 8,661,850 42,772,829

$ 40,400,725 $ 8,535,179 $ 48,935,904

DOL’s debt during FY 2010 consisted of the following:

Balance at Balance at

September 30, Net September 30,

(Dollars in thousands) 2009 Borrowing 2010

Intra-governmental

Debt to Treasury

Black Lung Disability Trust Fund

 Borrowing from U.S. Treasury 6,370,580 $ $ (80,834) $ 6,289,746

Unemployment Trust Fund

 Advances from U.S. Treasury 7,981,387 26,129,592 34,110,979

$ 14,351,967 $ 26,048,758 $ 40,400,725
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

104     United States Department of Labor       

NOTE 8 ‐ DEBT ‐ Continued

For the Black Lung Disability Trust Fund, net borrowing includes capitalized interest of $226.6 million, repaid debt of

($439.3 million), paid interest of ($21.7 million) on the repaid debt, and additional borrowing of $107.7 million, for

a net total of ($126.7 million); and capitalized interest of $223.9 million, repaid debt of ($353.4 million), paid

interest of ($11.3 million) on the repaid debt, and additional borrowing of $60.0 million, for a net total of ($80.8

million) in FY 2011 and FY 2010, respectively.   

For the Unemployment Trust Fund, net borrowing includes new advances of $21.9 billion and repayments of debt

($13.3 billion) for a net total of $8.6 billion and new advances of $29.05 billion, repayments of debt ($2.9 billion)

and ($31.4 million) for accrued interest for a net total of $26.1 billion in FYs 2011 and 2010, respectively.    At

September 30, 2011, all accrued interest was paid; interest paid in FY 2011 was $1.4 billion.

NOTE 9 ‐ OTHER LIABILITIES

Other liabilities at September 30, 2011 and 2010 consisted of the following current liabilities:

(Dollars in thousands) 2011 2010

Intra-governmental

Accrued payroll benefits $ 53,930 56,219 $ 

Non-entity receivables due to U.S. Treasury 101,816 119,354

Amounts held for the Railroad Retirement Board and other liabilities 49,227 44,403 

Total intra-governmental 222,511 202,438 

Accrued payroll and benefits 106,717 95,086

Deposit and clearing accounts 4,067 3,930

Readjustment allowances and other liabilities 56,193 65,549 

 155,209 176,333 

$ 377,720 378,771 $ 

NOTE 10 ‐ ACCRUED BENEFITS

Accrued benefits at September 30, 2011 and 2010 consisted of the following:

(Dollars in thousands) 2011 2010

State regular and extended unemployment benefits payable $ 1,454,256 $ 2,634,528

Federal extended unemployment benefits payable 464,429 436,522

Federal emergency unemployment benefits payable 817,232 1,524,946

Federal employees' unemployment benefits payable 426,141 455,940

Federal additional unemployment benefits payable 18,787 130,446

Total unemployment benefits payable 3,180,845 5,182,382

Black lung disability benefits payable 16,255 33,606 

Federal employees' disability and 10(h) benefits payable 101,175 40,639

Energy employees occupational illness compensation benefits payable 22,169 27,916

$ 3,320,444 $ 5,284,543
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     105 

NOTE 11 ‐ FUTURE WORKERS' COMPENSATION BENEFITS

DOL’s liability for future workers’ compensation benefits at September 30, 2011 and 2010 consisted of the

following:

(Dollars in thousands) 2011 2010

Projected gross liability of the Federal government

 for future FECA benefits $ 29,819,932 31,342,564 $ 

Less liabilities attributed to other agencies:

U.S. Postal Service (10,597,448) (12,218,674) 

Department of Navy (2,463,087) (2,394,057) 

Department of Army (1,813,932) (1,828,972) 

Department of Veterans Affairs (1,890,635) (1,862,265)

Department of Air Force (1,349,859) (1,321,451)

Department of Transportation (977,634) (976,753)

Department of Homeland Security (2,055,225) (1,937,837)

Tennessee Valley Authority (475,090) (499,357)

Department of the Treasury (558,388) (544,345)

Department of Agriculture (903,734) (881,453)

Department of Justice (1,314,107) (1,359,361) 

Department of Interior (723,131) (747,211) 

Department of Defense, Other (794,008) (820,707)

Department of Health and Human Services (269,073) (259,500)

Social Security Administration (334,083) (319,295)

General Services Administration (132,195) (135,331)

Department of Commerce (235,982) (210,235)

Department of Energy (93,317) (94,065) 

Department of State (71,997) (73,829) 

Department of Housing and Urban Development (75,875) (72,289)

Department of Education (17,603) (16,231) 

National Aeronautics and Space Administration (51,078) (55,402)

Environmental Protection Agency (44,832) (44,938)

Small Business Administration (30,630) (29,960)

Office of Personnel Management (21,712) (22,043)

National Science Foundation (1,272) (1,356)

Nuclear Regulatory Commission (7,245) (7,575)

Agency for International Development (22,175) (26,035)

Other (621,636) (647,415) 

 (29,610,540) (27,744,385) 

$ 2,075,547 1,732,024 $ 

Projected liability of the Department of Labor for future FECA benefits

FECA benefits not chargeable to other Federal agencies payable by

 DOL's Federal Employees' Compensation Act Special Benefit Fund $ 1,457,173 $ 1,794,522

FECA benefits due to eligible workers of DOL and Job Corps enrollees 226,156 226,491

FECA benefits due to eligible workers of the Panama Canal Commission 54,534 48,695 

$ 2,075,547 1,732,024 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

106     United States Department of Labor       

NOTE 12 ‐ LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

Liabilities not covered by budgetary resources at September 30, 2011 and 2010 consisted of the following:

(Dollars in thousands) 2011 2010

Intra-governmental

Debt $ 48,935,905 $ 40,400,725

Accrued benefits 220,682 359,002

Future workers' compensation benefits 1,269,098 1,524,846

Accrued annual leave 112,639 116,505

Readjustment allowances and other Job Corps liabilities 53,453 122,973 

 2,053,806 1,725,392 

$ 50,661,297 $ 42,454,531

NOTE 13 – CONTINGENCIES

The Department is involved in various lawsuits incidental to its operations.   Judgments resulting from litigation

against the Department are generally paid by the Department of Justice.    In the opinion of management, the

ultimate resolution of pending litigation will not have a material effect on the Department’s financial position.  

NOTE 14 ‐ PENSION EXPENSE  

Pension expense in FY 2011 consisted of the following:

Total

Employer Costs Imputed Pension

(Dollars in thousands) Contributions by OPM Expense

Civil Service Retirement System $ 17,695 $ 58,938 41,243 $ 

Federal Employees' Retirement System 135,039 19,985 155,024

Thrift Savings Plan 50,149 50,149 - 

$ 202,883 $ 264,111 61,228 $ 

Pension expense in FY 2010 consisted of the following:

Total

Employer Costs Imputed Pension

(Dollars in thousands) Contributions by OPM Expense

Civil Service Retirement System $ 20,299 $ 66,576 46,277 $ 

Federal Employees' Retirement System 123,176 18,996 142,172

Thrift Savings Plan 46,947 46,947 - 

$ 190,422 $ 65,273 $ 255,695

 
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     107 

NOTE 15 ‐ PROGRAM COST

Schedule A presents detailed cost and revenue information by major program and major program agency

(responsibility segment) in support of the summary information presented in the Consolidated Statement of Net

Cost for FY 2011. Schedules B and C present a further breakdown of this cost and revenue information for DOL’s

two largest program agencies, the Employment and Training Administration and the Employment Standards

Administration. (See Note 1‐A.1)
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

108     United States Department of Labor       

NOTE 15 ‐ PROGRAM COST ‐ Continued

             

A. Consolidating Statement of Net Cost by Major Program Agency

Net cost by major program agency for the year ended September 30, 2011 consisted of the following (intra‐agency

transactions for a total of approximately $235.1 million were eliminated within each agency column rather than shown

under an eliminations column):

Employment Employment Office Occupational

and Training Standards of Safety and Health

(Dollars in thousands) Administration Administration Job Corps Administration

CROSSCUTTING PROGRAMS

 Income maintenance

Intra-governmental 1,615,853 $ $ 367,534 $ 11 - $ 

With the public 119,690,548 7,527,531 - 1,075 

 Gross cost 121,306,401 7,895,065 - 1,086 

Intra-governmental earned revenue (1,332,733) (3,000,544) - - 

Public earned revenue (1,074) (1,015) - - 

 Less earned revenue (1,333,807) (3,001,559) - - 

Net program cost 119,972,594 4,893,506 - 1,086

 Employment and training

Intra-governmental 114,403 1,211 51,405 - 

With the public 5,616,821 140 1,666,657 - 

 Gross cost 5,731,224 1,351 1,718,062 - 

Intra-governmental earned revenue (11,921) - (860) - 

Public earned revenue (501) - (506) - 

 Less earned revenue (12,422) - (1,366) - 

Net program cost 5,718,802 1,351 1,716,696 - 

 Labor, employment and pension

 standards

Intra-governmental - 165,341 - - 

With the public - 370,283 - - 

 Gross cost - 535,624 - - 

Intra-governmental earned revenue - (854) - - 

Public earned revenue - (3,035) - - 

 Less earned revenue - (3,889) - - 

Net program cost - 531,735 - - 

 Worker safety and health

Intra-governmental - - - 144,847

With the public - - - 452,208 

 Gross cost - - - 597,055 

Intra-governmental earned revenue - - - (1,411)

Public earned revenue - - - (720) 

 Less earned revenue - - - (2,131) 

Net program cost - - - 594,924

OTHER PROGRAMS

 Statistics

Intra-governmental - - - - 

With the public - - - - 

 Gross cost - - - - 

Intra-governmental earned revenue - - - - 

Public earned revenue - - - - 

 Less earned revenue - - - - 

Net program cost - - - - 

COSTS NOT ASSIGNED TO PROGRAMS

 Gross cost - - - - 

 Less earned revenue not attributed to programs - - - - 

Net cost not assigned to programs - - - - 

Net cost of operations $ 125,691,396 $ 5,426,592 $ 596,010 1,716,696 $ 
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     109 

Bureau of Mine Safety Employee Benefits Veterans' Other

Labor and Health Security Employment Departmental

Statistics Administration Administration and Training Programs Total

$ - - $ 9,200 $ - $ 67 $ 1,992,665 $ 

 - - 18,426 - 3,423 127,241,003

 - - 27,626 - 3,490 129,233,668

 - - (388) - - (4,333,665)

 - - (85) - - (2,174)

 - - (473) - - (4,335,839)

 - - 27,153 - 3,490 124,897,829

 - - - 14,712 203 181,934

 - - - 192,752 425 7,476,795

 - - - 207,464 628 7,658,729

 - - - (33) (45) (12,859)

 - - - (38) (10) (1,055)

 - - - (71) (55) (13,914)

 - - - 207,393 573 7,644,815

 - 53,146 - 1,599 37,516 257,602

 - - 132,546 18,730 57,023 578,582

 - - 185,692 20,329 94,539 836,184

 - (5,817) - (4) (200) (6,875)

 - - (32) (2) - (3,069)

 - - (5,849) (6) (200) (9,944)

 - - 179,843 20,323 94,339 826,240

 131,306 - - - - 276,153

 - 267,885 - - 116 720,209

 - 399,191 - - 116 996,362

 (344) - - - - (1,755)

 - (1,553) - - - (2,273)

 - (1,897) - - - (4,028)

 - 397,294 - - 116 992,334

 225,032 - - - - 225,032

 458,240 - - - 290 458,530

 683,272 - - - 290 683,562

 (10,580) - - - - (10,580)

 (740) - - - - (740)

 (11,320) - - - - (11,320)

 671,952 - - - 290 672,242

 - - - - 60,472 60,472

 - - - - (22,774) (22,774)

 - - - - 37,698 37,698

$ 671,952 397,294 $ 206,996 $ $ 227,716 $ 136,506 $ 135,071,158
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

110     United States Department of Labor       

NOTE 15 ‐ PROGRAM COST ‐ Continued

  

B. Consolidating Statement of Net Cost ‐ Employment and Training Administration

Net cost of the Employment and Training Administration for the year ended September 30, 2011 consisted of the

following (intra‐agency transactions were eliminated within each program column rather than shown under an

eliminations column):

Training and

Employment Employment

(Dollars in thousands) Security Programs Total

CROSSCUTTING PROGRAMS

 Income maintenance

Benefits 112,595,374 $ $ - $ 112,595,374

Grants 5,327,043 - 5,327,043

Interest 1,431,079 - 1,431,079

Administrative and other 1,952,905 - 1,952,905

 Gross cost 121,306,401 - 121,306,401

Less earned revenue (1,333,807) - (1,333,807)

Net program cost 119,972,594 - 119,972,594

 Employment and training

Benefits - - - 

Grants - 5,698,976 5,698,976

Administrative and other - 32,248 32,248

 Gross cost - 5,731,224 5,731,224

Less earned revenue - (12,422) (12,422)

Net program cost - 5,718,802 5,718,802

Net cost of operations $ 119,972,594 $ 5,718,802 $ 125,691,396

  

            
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     111 

NOTE 15 ‐ PROGRAM COST ‐ Continued

C. Consolidating Statement of Net Cost ‐ Employment Standards Administration

Net cost of the Employment Standards Administration for the year ended September 30, 2011 consisted of the

following (intra‐agency transactions were eliminated within each office column rather than shown under an

eliminations column):

Office of Office of Office of

Workers' Federal Wage Labor

Compensation Contract and Hour Management

(Dollars in thousands) Programs Compliance Division Standards Total

CROSSCUTTING PROGRAMS

 Income maintenance

Benefits 7,192,332 $ $ - $ - $ - $ 7,192,332

Interest 226,708 - - - 226,708

Administrative and other 476,025 - - - 476,025

 Gross cost 7,895,065 - - - 7,895,065

Less earned revenue (3,001,559) - - - (3,001,559)

Net program cost 4,893,506 - - - 4,893,506

 Labor, employment and

 pension standards

Benefits - - - - - 

Administrative and other 138,987 - 333,797 62,840 535,624

 Gross cost 138,987 - 333,797 62,840 535,624

Less earned revenue (294) - (3,446) (149) (3,889)

Net program cost 138,693 - 330,351 62,691 531,735

 Employment and training

Benefits - - - - - 

Administrative and other - - 1,351 - 1,351

 Gross cost - - 1,351 - 1,351

Less earned revenue - - - - - 

Net program cost - - 1,351 - 1,351

Net cost of operations $ 138,693 4,893,506 $ 331,702 $ 62,691 $ 5,426,592 $ 

Schedules D, E and F present detailed cost and revenue information by suborganization (responsibility segment) for

programs in the Department, the Employment and Training Administration, and the Employment Standards

Administration in support of the summary information presented in the Consolidated Statement of Net Cost for FY

2010.   
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

112     United States Department of Labor       

NOTE 15 ‐ PROGRAM COST ‐ Continued

D. Consolidating Statement of Net Cost by Major Program Agency  

Net cost by major program agency for the year ended September 30, 2010 consisted of the following (intra‐agency

transactions for a total of approximately $203.7 million were eliminated within each agency column rather than

shown under an eliminations column):

Employment Employment Office Occupational

and Training Standards of Safety and Health

(Dollars in thousands) Administration Administration Job Corps Administration

CROSSCUTTING PROGRAMS

 Income maintenance

Intra-governmental 1,030,572 $ $ 289,538 $ 108 - $ 

With the public 161,898,525 9,893,696 - 3,984 

 Gross cost 162,929,097 10,183,234 - 4,092 

Intra-governmental earned revenue (1,515,084) (2,778,843) - - 

Public earned revenue (932) (6,729) - - 

 Less earned revenue (1,516,016) (2,785,572) - - 

Net program cost 161,413,081 7,397,662 - 4,092

 Employment and training

Intra-governmental 24,832 270 39,026 - 

With the public 6,506,059 610 1,623,673 - 

 Gross cost 6,530,891 880 1,662,699 - 

Intra-governmental earned revenue (11,043) - (82) - 

Public earned revenue - - - - 

 Less earned revenue (11,043) - (82) - 

Net program cost 6,519,848 880 1,662,617 - 

 Labor, employment and pension

 standards

Intra-governmental - 110,188 - - 

With the public - 366,591 - - 

 Gross cost - 476,779 - - 

Intra-governmental earned revenue - (1,404) - - 

Public earned revenue - - - - 

 Less earned revenue - (1,404) - - 

Net program cost - 475,375 - - 

 Worker safety and health

Intra-governmental - - - 82,496

With the public - - - 533,284 

 Gross cost - - - 615,780 

Intra-governmental earned revenue - - - (2,744)

Public earned revenue - - - (1,354) 

 Less earned revenue - - - (4,098) 

Net program cost - - - 611,682

OTHER PROGRAMS

 Statistics

Intra-governmental - - - - 

With the public - - - - 

 Gross cost - - - - 

Intra-governmental earned revenue - - - - 

Public earned revenue - - - - 

 Less earned revenue - - - - 

Net program cost - - - - 

COSTS NOT ASSIGNED TO PROGRAMS

 Gross cost - - - - 

 Less earned revenue not attributed to programs - - - - 

Net cost not assigned to programs - - - - 

Net cost of operations $ 167,932,929 $ 7,873,917 $ 1,662,617 $ 615,774
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     113 

Bureau of Mine Safety Employee Benefits Veterans' Other

Labor and Health Security Employment Departmental

Statistics Administration Administration and Training Programs Total

$ - $ 5,388 - $ $ - $ 489 $ 1,326,095

 - - 20,538 - 10,394 171,827,137

 - - 25,926 - 10,883 173,153,232

 - (626) - - - (4,294,553)

 - - - - - (7,661)

 - - (626) - - (4,302,214)

 - - 25,300 - 10,883 168,851,018

 - - - 8,066 136 72,330

 - - - 216,566 935 8,347,843

 - - - 224,632 1,071 8,420,173

 - - - (64) (73) (11,262)

 - - - - - - 

 - - - (64) (73) (11,262)

 - - - 224,568 998 8,408,911

 - 30,021 - 795 4,373 145,377

 - - 149,630 30,841 87,555 634,617

 - - 179,651 31,636 91,928 779,994

 - (7,461) - (7) - (8,872)

 - - - - - - 

 - - (7,461) (7) - (8,872)

 - - 172,190 31,629 91,928 771,122

 72,816 - - 17 155,329

 - 329,539 - - 1,987 864,810

 - 402,355 - - 2,004 1,020,139

 (562) - - - - (3,306)

 - (1,365) - - - (2,719)

 - (1,927) - - - (6,025)

 - 400,428 - - 2,004 1,014,114

 190,112 - - - 42 190,154

 499,797 - - - 4,967 504,764

 689,909 - - - 5,009 694,918

 (10,725) - - - - (10,725)

 (2,909) - - - - (2,909)

 (13,634) - - - - (13,634)

 676,275 - - - 5,009 681,284

 - - - - 96,580 96,580

 - - - - (9,453) (9,453)

 - - - - 87,127 87,127

$ 676,275 $ 400,428 $ 197,490 $ 256,197 $ 197,949 $ 179,813,576
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

114     United States Department of Labor       

NOTE 15 ‐ PROGRAM COST ‐ Continued

  

E. Consolidating Statement of Net Cost ‐ Employment and Training Administration

Net cost of the Employment and Training Administration for the year ended September 30, 2010 consisted of the

following (intra‐agency transactions were eliminated within each agency column rather than shown under an

eliminations column):  

        

Training and

Employment Employment

(Dollars in thousands) Security Programs Total

CROSSCUTTING PROGRAMS

 Income maintenance

Benefits 155,373,085 $ $ - $ 155,373,085

Grants 4,545,418 - 4,545,418

Interest 1,001,890 - 1,001,890

Administrative and other 2,008,704 - 2,008,704

 Gross cost 162,929,097 - 162,929,097

Less earned revenue (1,516,016) - (1,516,016)

Net program cost 161,413,081 - 161,413,081

 Employment and training

Benefits - - - 

Grants 6,498,223 - 6,498,223

Administrative and other 32,668 - 32,668

 Gross cost 6,530,891 - 6,530,891

Less earned revenue (11,043) - (11,043)

Net program cost 6,519,848 - 6,519,848

Net cost of operations $ 161,413,081 $ 6,519,848 $ 167,932,929
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     115 

NOTE 15 ‐ PROGRAM COST ‐ Continued

F. Consolidating Statement of Net Cost ‐ Employment Standards Administration

Net cost of the Employment Standards Administration for the year ended September 30, 2010 consisted of the

following (intra‐agency transactions were eliminated within each agency column rather than shown under an

eliminations column):

Office of Office of Office of

Workers' Federal Wage Labor

Compensation Contract and Hour Management

(Dollars in thousands) Programs Compliance Division Standards Total

CROSSCUTTING PROGRAMS

 Income maintenance

Benefits 9,533,632 $ $ - $ - $ 9,533,632 - $ 

Interest 223,923 - - - 223,923

Administrative and other 425,679 - - 425,679 - 

 Gross cost 10,183,234 - - 10,183,234 - 

Less earned revenue (2,785,572) - - (2,785,572) - 

Net program cost 7,397,662 - - 7,397,662 - 

 Labor, employment and

 pension standards

Benefits - - - - - 

Administrative and other 124,828 - 295,139 56,812 476,779

 Gross cost 124,828 - 295,139 56,812 476,779

Less earned revenue (380) - (832) (192) (1,404)

Net program cost 124,448 - 294,307 56,620 475,375

 Employment and training

Benefits - - - - - 

Administrative and other - - 880 880 - 

 Gross cost - - 880 - 880

Less earned revenue - - - - - 

Net program cost - - 880 880 - 

Net cost of operations $ 124,448 7,397,662 $ 295,187 $ 56,620 $ 7,873,917 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

116     United States Department of Labor       

NOTE 16 ‐ NON‐EXCHANGE REVENUE

Non‐exchange revenues reported on the Consolidated Statement of Changes in Net Position in FY 2011 and FY 2010

consisted of the following:

(Dollars in thousands) 2011 2010

Employer taxes

Unemployment Trust Fund

Federal unemployment taxes 6,791,564 $ 6,451,722 $ 

State unemployment taxes 45,264,659 34,013,576

 52,056,223 40,465,298

Black Lung Disability Trust Fund excise taxes 622,881 594,803

 52,679,104 41,060,101

Interest

Unemployment Trust Fund 1,884,900 776,082

Panama Canal Commission Compensation Fund 367 553

Energy Employees Occupational Illness Compensation Fund - 10

Black Lung Disability Trust Fund 2,304 1,227 

Other 1,402 -

 778,949 1,887,896 

Assessments 8 - 

Reimbursement of unemployment benefits from state and

 local governments and non-profit organizations

 to the Unemployment Trust Fund 4,013,921 4,725,272 

$ 46,564,330 58,580,921 $ 

NOTE 17 ‐ TRANSFERS WITHOUT REIMBURSEMENT

Transfers from (to) other Federal agencies in FY 2011 and FY 2010 consisted of the following:

(Dollars in thousands) 2011 2010

Budgetary financing sources

From H-1B Nonimmigrant Petitioner Account, Department of Homeland Security $ 204,987 $ 201,794

From DOL general fund unexpended appropriation

 accounts to the DOL Working Capital Fund 6,000 2,000

From DOL Working Capital Fund to the General Fund of the U.S. Treasury (3,900) -

 207,087 203,794

Other financing sources

From General Services Administration 2,075 3,507 

 2,075 3,507

$ 207,301 209,162 $ 

The balance of $207.0 and $203.8 million in budgetary financing sources for FY 2011 and 2010, respectively, reflects

the elimination of intra‐DOL transfers of $45.5 and $70.5 billion.
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     117 

NOTE 18 ‐ STATUS OF BUDGETARY RESOURCES

    

A. Apportionment Categories of Obligations Incurred

Obligations incurred reported on the Combined Statement of Budgetary Resources in FY 2011 and FY 2010 consisted

of the following:

(Dollars in thousands) 2011 2010

Direct Obligations

Category A $ 4,325,174 4,812,366 $ 

Category B 62,910,921 100,212,112

Exempt from apportionment 121,232,769 152,050,136

Total direct obligations 256,587,422 188,956,056 

Reimbursable Obligations

Category A 264,788 254,927

Category B 2,714,259 2,934,132

Total reimbursable obligations 3,189,059 2,979,047 

$ 191,935,103 $ 259,776,481

B. Permanent Indefinite Appropriations

DOL’s permanent indefinite appropriations include all trust funds, the Federal Additional Unemployment

Compensation Fund, the Panama Canal Commission Compensation Fund, the Energy Employees Occupational

Illness Compensation Fund, ETA and ESA H‐1B funds, ETA’s Advances and Payments to the Unemployment Trust

Funds, and portions of State Unemployment Insurance and Employment Service Operations and Federal

Unemployment Benefits and Allowances.  These funds are described in Note 1‐A.3.  At September 30, 2011, the

Department returned unobligated, indefinite authority to Treasury in the amount of $9.3 billion.

C. Legal Arrangements Affecting Use of Unobligated Balances

Unemployment Trust Fund receipts are reported as budget authority in the Combined Statement of Budgetary

Resources.  The portion of UTF receipts collected in the current year in excess of amounts needed to pay benefits

and other valid obligations are precluded by law from being available for obligation.    Therefore, these excess

receipts are not classified as budgetary resources in the Combined Statement of Budgetary Resources.  Current year

excess receipts are reported as temporarily not available pursuant to Public Law.    Conversely, when obligations

exceed receipts in the current year, amounts are drawn from unavailable collections to meet these obligations.  

Cumulative excess receipts are not included in unobligated balances in the status of budgetary resources included in

that Statement.  All excess receipts are reported as assets of the UTF and are included in the Consolidated Balance

Sheet.  They will become available for obligation as needed in the future.   

The cumulative amounts of excess UTF receipts are denoted as unavailable collections in the Budget of the United

States Government.  The cumulative amount of these excess receipts at September 30, 2011 and 2010 reclassified

from unobligated balances to UTF unavailable collections is presented on the following page.
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

118     United States Department of Labor       

NOTE 18 ‐ STATUS OF BUDGETARY RESOURCES ‐ Continued

C. Legal Arrangements Affecting Use of Unobligated Balances ‐ Continued

(Dollars in millions) 2011 2010

Unemployment Trust Fund unavailable collections, beginning $ 14,221 10,963 $ 

Budget authority from current year appropriations and borrowing authority 118,505 148,378

Less obligations (151,636) (119,732) 

Excess (deficiency) of budget authority over obligations (1,227) (3,258)

Unemployment Trust Fund unavailable collections, ending $ 9,736 $ 10,963

D. Explanation of Differences between the Combined Statement of Budgetary Resources and the Budget

of the United States Government

The Budget of the United States Government with actual amounts for the year ended September 30, 2011, has not

been published as of the issue date of these financial statements.  This document will be available in February 2012.

A reconciliation of budgetary resources, obligations incurred and net outlays, as presented in the Combined

Statement of Budgetary Resources, to amounts included in the Budget of the United States Government for the

year ended September 30, 2010, is shown below.

Distributed

Budgetary Obligations Offsetting Net

(Dollars in millions) Resources Incurred Receipts Outlays

Combined Statement of Budgetary Resources $ 263,968 $ 259,776 $ 174,286 76,621 $ 

Pension Benefit Guaranty Corporation reported separately 19,756 5,617 - (1,333)

Distributed offsetting receipts - - - 76,621

Amounts included in the Combined Statement of Budgetary 

 Resources (SBR) subsequent to submission of the budget 3,918 3,127 - -

Expired accounts (456) (26) - -

Fiduciary Funds (included in the budget but not in the SBR) 213 139 - 139

Other (193) (12) (8) - 

Budget of the United States Government $ 287,206 $ 268,621 $ 249,705 76,621 $ 

E. Undelivered Orders

Undelivered orders at September 30, 2011 and 2010 were as follows.

(Dollars in thousands) 2011 2010

Undelivered orders $ 12,015,527 11,164,367 $ 
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     119 

NOTE 18 ‐ STATUS OF BUDGETARY RESOURCES ‐ Continued

F. Appropriations Received

The Combined Statement of Budgetary Resources discloses appropriations received of $179,309 and $227,533

million for FY 2011 and 2010, respectively.  Appropriations received on the Consolidated Statement of Changes in

Net Position are $67,406 and $101,267 million for FY 2011 and 2010, respectively.  The differences of $111,903 and

$126,266 million primarily represent certain fiduciary and earmarked receipts recognized as exchange revenue or

non‐exchange revenue reported on the Consolidated Statement of Net Cost or the Consolidated Statement of

Changes in Net Position, respectively, in the current or prior years. Detail of these differences is presented below. 

(Dollars in millions) 2011 2010

Receipts recognized as revenue and transfers in current or prior years

Unemployment Trust Fund $ 125,474 111,069 $ 

Black Lung Disability Trust Fund 629 596

Other earmarked funds 203 196 

 126,266 111,901 

Other 2 -

$ 126,266 111,903 $ 

G.  Borrowing Authority

As of September 30, 2011, P.L. 111‐117 (123 Stat. 3230 dated December 16, 2009) granted borrowing authority for

repayable advances and other debt in the amount of “such sums as may be necessary” to the following trust funds:  

(1) Unemployment Trust Fund for advances as authorized by sections 905(d) and 1203 of the Social Security Act and

(2) Black Lung Disability Trust Fund (BLDTF) for advances as authorized by section 9501(c)(1) of the Internal

Revenue Code.  Although section 9501 of the Internal Revenue Code and section 2 of P.L. 111‐46 both use the

terminology "advance," the Treasury has interpreted this to mean any debt owed by the BLDTF to the Bureau of the

Public Debt.
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

120     United States Department of Labor       

NOTE 19 ‐ RECONCILIATION OF BUDGETARY RESOURCES OBLIGATED TO NET COST OF OPERATIONS  

(Dollars in thousands) 2011 2010

Resources used to finance activities

Budgetary resources obligated

Obligations incurred $ 191,935,103 $ 259,776,481

Recoveries of prior year obligations (436,261) (162,552)

Less spending authority from offsetting collections (8,128,492) (8,055,377)

Obligations, net of offsetting collections and recoveries 183,370,350 251,558,552

Other resources

Imputed financing from costs absorbed by others 158,036 173,055

Transfers, net 2,075 3,507

Exchange revenue not in budget (1,556,689) (1,613,215)

Total resources used to finance activities 181,973,772 250,121,899

Resources used to finance items not part of the net cost of operations

Change in budgetary resources obligated for goods, services and

 benefits ordered but not yet received or provided 816,928 188,220

Resources that finance the acquisition of assets (124,884) (113,686)

Transfers that do not effect the net cost of operations (50,510,629) (75,452,547)

Total resources used to finance items not part of the net cost of operations (49,818,585) (75,378,013)

Total resources used to finance the net cost of operations 132,155,187 174,743,886

Components of the net cost of operations that will not require or generate

 resources in the current period

 Components requiring or generating resources in other periods

Increase (decrease) in annual leave liability 154 9,194

Increase in benefits liabilities 2,654,189 4,993,544

Other 226,537 103,613

Total 2,880,880 5,106,351

Components not requiring or generating resources

Depreciation and amortization 67,188 82,310

Revaluation of assets and liabilities 1,630,224 1,342,385

Benefit overpayments (1,662,321) (1,461,356)

Total 35,091 (36,661)

Total components of the net cost of operations that will not

 require or generate resources in the current period 2,915,971 5,069,690

Net cost of operations $ 135,071,158 $ 179,813,576
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     121 

NOTE 20 ‐ SOURCES AND DISPOSITIONS OF CUSTODIAL REVENUE

Custodial revenues in FY 2011 consisted of the following:

Net Cash Increase

Collections (Decrease) in

and Transfers to Amounts to

Cash Less U.S. Treasury be Collected Total

(Dollars in thousands) Collections Refunds General Fund and Transferred Revenues

Civil monetary penalties

OSHA 151,167 $ $ - $ 151,167 $ 114,457 (36,710) $ 

MSHA 100,128 (17) 100,111 6,610 106,721

EBSA 20,727 (19) 20,708 1,801 22,509

ESA 11,588 (10) 11,578 840 12,418

 (46) 283,610 283,564 (27,459) 256,105

ETA disallowed grant costs 2,989 (42) 2,947 171 3,118

Other 4,660 - 4,660 24 4,684

$ 291,259 $ (88) $ 291,171 $ (27,264) $ 263,907

Custodial revenues in FY 2010 consisted of the following:

Net Cash Increase

Collections (Decrease) in

and Transfers to Amounts to

Cash Less U.S. Treasury be Collected Total

(Dollars in thousands) Collections Refunds General Fund and Transferred Revenues

Civil monetary penalties

OSHA $ 120,259 $ (59) $ 120,200 $ 148,328 28,128 $ 

MSHA 82,986 (4) 82,982 64,607 (18,375) 

EBSA 24,761 2 24,763 24,758 (5) 

ESA 13,270 (123) 13,147 (5,212) 7,935

 241,276 (184) 241,092 4,536 245,628

ETA disallowed grant costs 8,133 (86) 8,047 6,949 (1,098) 

Other 580 (757) (177) (76) (253)

$ (1,027) 249,989 $ $ 248,962 $ 252,324 3,362 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

122     United States Department of Labor       

NOTE 21 ‐ EARMARKED FUNDS

DOL is responsible for the operation of certain earmarked funds.    Other earmarked funds include Gifts and

Bequests, Panama Canal Commission Compensation Fund, and H‐1B Funds.  The financial position of the earmarked

funds as of September 30, 2011 is shown below.

Black Lung

(Dollars in thousands) Unemployment Disability Other Total

Assets

Intra-governmental

Funds with U.S. Treasury $ - $ 50,019 $ 521,813 471,794 $ 

Investments 16,150,638 - 63,151 16,213,789

Accounts receivable, net

Due from other Federal agencies

 for UCX and UCFE benefits 666,272 - - 666,272 

Other - - 1,619 1,619 

Total intra-governmental 16,816,910 50,019 536,564 17,403,493

Accounts receivable, net

State unemployment tax 335,188 - - 335,188

Due from reimbursable employers 1,100,195 - - 1,100,195

Benefit overpayments 552,225 13,795 - 566,020

Other - - 7 7

Advances 1,366,403 - 1,366,404 1 

Other - - 822 822 

Total assets $ 20,170,921 $ 63,814 $ 20,772,129 537,394 $ 

Liabilities

Intra-governmental

Accounts payable to DOL agencies 2,020,603 $ $ - $ 2,020,742 139 $ 

Debt 42,772,829 6,163,075 - 48,935,904

Amounts held for the Railroad

 Retirement Board 54,995 - - 54,995

Other - - 7,169 7,169 

Total intra-governmental 44,848,427 6,163,075 7,308 51,018,810

Accounts payable 5,508 - 2,811 8,319

Future workers' compensation benefits - - 48,695 48,695

Accrued benefits 3,162,058 - - 3,162,058

Other Liabilities - 772 - 772 

Total liabilities 48,015,993 6,163,075 59,586 54,238,654 

Net position

Cumulative results of operations (27,845,072) (6,099,261) (33,466,525) 477,808 

Total liabilities and net position $ 20,170,921 $ 63,814 $ 20,772,129 537,394 $ 
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     123 

NOTE 21 ‐ EARMARKED FUNDS ‐ Continued

The net results of operations of the earmarked funds for the year ended September 30, 2011 are shown below.

Black Lung

(Dollars in thousands) Unemployment Disability Other Total

Cost, net of earned revenues

Benefits (111,241,172) $ $ (201,219) $ (111,453,041) (10,650) $ 

Grants - - (23,304) (23,304)

Interest (1,431,065) (226,646) (1) (1,657,712)

Administrative and other (2,002,696) (1,493) (47,660) (2,051,849) 

 (429,358) (114,674,933) (81,615) (115,185,906) 

Earned revenue 1,331,620 78 1,331,698 - 

Net cost of operations (113,343,313) (429,280) (113,854,208) (81,615) 

Net financing sources

Taxes 52,056,223 622,881 - 52,679,104

Interest 1,884,900 1,227 367 1,886,494

Reimbursement of unemployment benefits 4,035,503 - - 4,035,503

Imputed financing - - 4,787 4,787

Transfers-in

Department of Homeland Security - - 201,564 201,564

DOL entities 50,444,186 - - 50,444,186

Transfers-out - - - 

DOL entities (5,046,345) (58,427) - (5,104,772) 

Other financing sources - 2,950 2,950 - 

 103,374,467 568,631 104,149,816 206,718 

Net results of operations (9,968,846) 139,351 125,103 (9,704,392)

Net position, beginning of period (17,876,226) (6,238,612) (23,762,133) 352,705 

Net position, end of period $ (27,845,072) $ (6,099,261) $ (33,466,525) 477,808 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

124     United States Department of Labor       

NOTE 21 ‐ EARMARKED FUNDS ‐ Continued

The financial position of the earmarked funds as of September 30, 2010 is shown below.

Black Lung

(Dollars in thousands) Unemployment Disability Other Total

Assets

Intra-governmental

Funds with U.S. Treasury 88,491 $ $ 52,471 $ 490,577 349,615 $ 

Investments 18,866,563 - 67,162 18,933,725

Accounts receivable, net

Due from other Federal agencies

 for UCX and UCFE benefits 745,405 - - 745,405 

Other - - 1,113 1,113 

Total intra-governmental 19,700,459 52,471 417,890 20,170,820

Accounts receivable, net

State unemployment tax 262,109 - 3 262,112

Due from reimbursable employers 1,142,229 - - 1,142,229

Benefit overpayments 450,248 15,557 - 465,805

Other - - - - 

Advances 1,628,384 - 2,871 1,631,255

Other - - 705 705 

Total assets $ 23,183,429 $ 68,028 $ 23,672,926 421,469 $ 

Liabilities

Intra-governmental

Accounts payable to DOL agencies 1,866,105 $ $ - $ 1,866,244 139 $ 

Debt 34,110,979 6,289,746 - 40,400,725

Amounts held for the Railroad

 Retirement Board 29,582 - - 29,582

Other (690) - 2,412 3,102 

Total intra-governmental 36,005,976 6,289,746 3,241 42,298,963

Accounts payable 1,861 - 10,374 12,235

Future workers' compensation benefits 54,534 54,534

Accrued benefits 16,894 5,051,818 615 5,069,327 

Total liabilities 41,059,655 6,306,640 68,764 47,435,059 

Net position

Cumulative results of operations (17,876,226) (6,238,612) (23,762,133) 352,705 

Total liabilities and net position $ 23,183,429 $ 68,028 $ 23,672,926 421,469 $ 
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     125 

NOTE 21 ‐ EARMARKED FUNDS ‐ Continued

The net results of operations of the earmarked funds for the year ended September 30, 2010 is shown below.

Black Lung

(Dollars in thousands) Unemployment Disability Other Total

Cost, net of earned revenues

Benefits (143,689,319) $ $ (220,977) $ (143,910,585) (289) $ 

Grants - - (132,912) (132,912)

Interest (1,001,853) (223,923) (5) (1,225,781)

Administrative and other (1,568,235) (9,410) (10,714) (1,588,359) 

 (146,259,407) (454,310) (143,920) (146,857,637)

Earned revenue 1,499,315 - 1,499,315 - 

Net cost of operations (144,760,092) (454,310) (145,358,322) (143,920) 

Net financing sources

Taxes 40,465,298 594,803 - 41,060,101

Interest 776,082 2,304 553 778,939

Reimbursement of unemployment benefits 4,721,275 - - 4,721,275

Imputed financing - - 214 214

Transfers-in

Department of Homeland Security - - 195,728 195,728

DOL entities 75,392,284 - 6,000 75,398,284

Transfers-out

DOL entities (5,009,930) (58,138) - (5,068,068)

Other financing sources - (2,950) (52,950) (50,000) 

 116,345,009 536,019 117,033,523 152,495 

Net results of operations (28,415,083) 81,709 8,575 (28,324,799)

Net position, beginning of period 10,538,857 (6,320,321) 4,562,666 344,130 

Net position, end of period $ (17,876,226) $ (6,238,612) $ (23,762,133) 352,705 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

126     United States Department of Labor       

NOTE 22 ‐ FIDUCIARY ACTIVITY

The Department has one deposit fund and two trust funds that fall under the definition of fiduciary activity

promulgated by SFFAS 31, "Accounting for Fiduciary Activities”.   The schedule of fiduciary activity for these funds

for the year ended September 30, 2011 is shown below.

Longshore District of

Wage and Hour and Harbor Columbia

and Public Workers' Workmen's

Contracts Compensation Compensation Total

Restitution Act Trust Act Trust Fiduciary

(Dollars in thousands) Fund Fund Fund Funds

Fiduciary activity

Assessments 9,376 $ 126,877 $ 5,371 $ 141,624 $ 

Investment earnings - 25 2 27 

Administrative and other expenses - (1,744) - (1,744) 

Transfer of funds to Treasury - (2,118) - (2,118) 

Disbursements to beneficiaries (99) (126,737) (9,095) (135,931) 

Increase (decrease) in fiduciary net assets 9,277 (3,697) (3,722) 1,858 

Fiduciary net assets, beginning of year 25,210 92,330 5,691 123,231 

Fiduciary net assets, end of year $ 21,513 101,607 $ 1,969 $ 125,089 $ 

The schedule of fiduciary net assets for these funds as of September 30, 2011 is shown below.

Longshore District of

Wage and Hour and Harbor Columbia

and Public Workers' Workmen's

Contracts Compensation Compensation Total

Restitution Act Trust Act Trust Fiduciary

(Dollars in thousands) Fund Fund Fund Funds

Fiduciary assets

Cash 110,473 $ 5 $ - $ 110,478 $ 

Investments - 58,170 4,042 62,212 

Other assets 129 1,763 1,892 

Less: liabilities (8,866) (38,425) (2,202) (49,493) 

Total fiduciary net assets $ 21,513 101,607 $ 1,969 $ 125,089 $ 

Unqualified opinions were expressed on separate financial statements issued for the Longshore and Harbor

Workers’ Compensation Act Trust Fund and the District of Columbia Workmen’s Compensation Act Trust Fund for FY

2010.  These separate financial statements were presented in accordance with U.S. GAAP.  Copies of these financial

statements are available on DOL’s website at www.oig.dol.gov.
Annual Financial Statements

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

FY 2011 Agency Financial Report     127 

NOTE 22 ‐ FIDUCIARY ACTIVITY ‐ Continued

The schedule of fiduciary activity for the fiduciary funds for the year ended September 30, 2010 is shown below.

Longshore District of

Wage and Hour and Harbor Columbia

and Public Workers' Workmen's

Contracts Compensation Compensation Total

Restitution Act Trust Act Trust Fiduciary

(Dollars in thousands) Fund Fund Fund Funds

Fiduciary activity

Assessments $ 35,318 $ 129,761 $ 11,094 $ 176,173

Investment earnings - 41 5 46

Administrative and other expenses - (322) (6) (328)

Transfer of funds to Treasury (8,162) (2,124) - (10,286)

Disbursements to beneficiaries (128,550) (21,273) (9,382) (159,205) 

Increase (decrease) in fiduciary net assets 5,883 (1,194) 1,711 6,400 

Fiduciary net assets, beginning of year 26,404 86,447 3,980 116,831 

Fiduciary net assets, end of year $ 25,210 92,330 $ 5,691 $ 123,231 $ 

The schedule of fiduciary net assets for these funds as of September 30, 2010 is shown below.

Longshore District of

Wage and Hour and Harbor Columbia

and Public Workers' Workmen's

Contracts Compensation Compensation Total

Restitution Act Trust Act Trust Fiduciary

(Dollars in thousands) Fund Fund Fund Funds

Fiduciary assets

Cash 91,304 $ 5,446 $ 2,870$ $ 99,620

Investments - 60,579 5,143 65,722

Other assets 1,026 2,946 148 4,120

Less: liabilities (43,761) - (2,470) (46,231) 

Total fiduciary net assets $ 25,210 92,330 $ 5,691 $ 123,231 $ 
Financial Section

   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended September 30, 2011 and 2010

128     United States Department of Labor       

NOTE 23 ‐ MATERIAL CONCENTRATION OF RISK

The Division of Federal Employees' Compensation within the Office of Workers’ Compensation Programs (OWCP)

administers the Federal Employees' Compensation Act (FECA) program and the payment of workers' compensation

benefits to federal and postal workers for employment‐related injuries and occupational diseases. Federal agencies

and the U.S. Postal Service (USPS) reimburse the FECA Special Benefits Fund for payments made on behalf of their

workers. In Note 11, Future Workers’ Compensation Benefits, the USPS liability as of September 30, 2011, of $12.2

billion represents the largest portion of the total projected gross liability of the Federal government for future FECA

benefits attributed to other agencies of $29.6 billion as of September 30, 2011. In October 2011, the USPS timely

reimbursed the FECA Special Benefits Fund for costs incurred on their behalf during the 12 months ended June 30,

2011.   

In the USPS FY 2011 quarterly report for the nine months ended June 30, 2011, USPS disclosed in the notes to their

unaudited interim financial statements that their liquidity was projected at critically low levels for all of FY 2012 and

that they had suspended certain of their employer defined benefit pension contributions to the Office of Personnel

Management in June 2011; USPS reported net losses of $5.7 billion for the nine months ended June 30, 2011 and

reported on their balance sheet as of June 30, 2011, that their largest noncurrent liability was $11.2 billion for the

long‐term portion of workers’ compensation costs (out of $19.6 total noncurrent liabilities). USPS reported annual

losses of $8.5 billion, $3.8 billion, and $2.8 billion for the fiscal years ended September 30, 2010, 2009, and 2008,

respectively.

The size of the USPS FECA liability and its share of the total FECA liability as of September 30, 2011 (as reported in

Note 11), together with the USPS’ poor financial condition, represent a material concentration of risk for DOL.

NOTE 24 ‐ SUBSEQUENT EVENTS

The financial statements, notes, and required supplementary information do not reflect the effects of the

subsequent event described below.

Unemployment Insurance

Subsequent to September 30, 2011, the Extended Unemployment Compensation Account (EUCA) of the

Unemployment Trust Fund (UTF) borrowed, as Advances from U.S. Treasury, $1.3 billion at interest rates of 2.75%

and 2.875%. During the same period, the Federal Unemployment Account (FUA) of the UTF borrowed, as Advances

from U.S. Treasury, $600 million at an interest rate of 2.875%.
   

Required Supplementary Stewardship Information

Annual Financial Statements

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION

(Unaudited)

FY 2011 Agency Financial Report     131    

STEWARDSHIP INVESTMENTS IN HUMAN CAPITAL

Stewardship investments are made by DOL on behalf of the nation, providing long‐term benefits that cannot be

measured in traditional financial reports.  These investments are made for the general public, and are intended to

maintain or increase national economic productive capacity.  DOL’s stewardship investments are in human capital,

reported as employment and training expenses in DOL’s net cost of operations.  Within DOL, the Employment and

Training Administration (ETA), the Office of Job Corps (OJC), and the Veterans’ Employment and Training Service

(VETS) administer training programsthat invest in human capital.

Employment and Training Administration and the Office of Job Corps

In FY 2011, ETA incurred total net costs of $125.7 billion.  The majority of these costs consisted of unemployment

benefits, which increased in FY 2011 by over $60 billion from pre‐recession levels.  Also included in ETA’s total net

costs were investments in human capital of $5.7 billion, which provided services to over 9.75 million participants

in FY 2011.    These investments were made through job training programs authorized by the Workforce

Investment Act of 1998 (WIA), Title V of the Older Americans Act, as amended, the Trade Act of 1974, as amended,

the Health Care and Education Reconciliation Act of 2010, the National Apprenticeship Act of 1937, the American

Recovery and Reinvestment Act of 2009 (ARRA) and other legislation.

The Office of Job Corps also invests in human capital through WIA training programs.    OJC’s investment in

human capital in FY 2011 was $1.7 billion, providing services to 56.2 thousand participants in primarily residential

settings at 125 Job Corps centers. The ETA and OJC job training programs authorized by WIA are discussed below.

Adult, Dislocated Worker, Youth and Job Corps Programs

Authorized by the Workforce Investment Act (WIA) of 1998

 Adult employment and training programs – ETA awards grants to states to design and operate training and

employment assistance programs for disadvantaged adults, including public assistance recipients. ETA’s FY

2011 investment in human capital through WIA adult programs was $960 million.

 Dislocated worker employment and training programs – ETA awards grants to states to provide

reemployment services and retraining assistance to individuals dislocated from their employment.   ETA’s FY

2011 investment in human capital through WIA dislocated worker programs was $2,039 million.

 Youth programs – ETA awards grants to states to support a wide range of program activities and services

to prepare low‐income youth for academic and employment success, including summer jobs, by linking

academic and occupational learning with youth development activities.   ETA’s FY 2011 investment in human

capital through WIA youth programs was $1,124 million.

 Job Corps program – ETA’s Office of Job Corps awards contracts to support a system of primarily

residential centers offering basic academic education, career technical training, work experience and

other support, to economically disadvantaged youth.    Large and small corporations and non‐profit

organizations manage and operate 97 Job Corps centers under these contractual arrangements.    The

remaining 28 centers are operated through interagency agreements between DOL and the U.S.

Department of Agriculture.   In addition, 24 operators are contracted to provide outreach and admissions

and career transition services. OJC’s FY 2011 investment in human capital through the Job Corps program was

$1,717 million.
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132     United States Department of Labor    

 Reintegration of Ex‐Offenders programs – ETA supports programs to help individuals exiting prison make

a successful transition to community life and long‐term employment through the provision of mentoring and

job training programs to promote the successful return of adult and juvenile ex‐offenders into mainstream

society. ETA’s FY 2011 investment in human capital through ex‐offender programs was $67 million.

 National programs – ETA’s National programs provide evaluation resources and program   support for

WIA activities; including nationally administered programs providing employment and training services to

segments of the population that have special disadvantages in the labor market, including grants to federally

recognized Indian tribes and other Native American governments or non‐profit organizations, and to Migrant

and Seasonal Farmworker service organizations ETA’s FY 2011 human capital investment in WIA National

Programs was $150 million.

Community Service Employment for Older Americans (CSEOA) Program

ETA also invests in human capital through the Community Service Employment for Older Americans program,

authorized under Title V of the Older Americans Act, as amended in 2006.    Known as the Senior Community

Service Employment Program (SCSEP), the SCSEP is a federally sponsored community service employment and

training program that provides part‐time training through on‐the‐job work experience in community service

activities for unemployed,  low‐income  individuals  ages  55  and  older,  so  that  they  can  prepare  to  enter  or  

re‐enter   the workforce. ETA’s FY 2011 investment in human capital through the CSEOA’s SCSEP program was

$707 million.

Trade Adjustment Assistance (TAA) Programs  

 Trade Adjustment Assistance for Workers Program – The TAA for Workers program was authorized by

the Trade Act of 1974, as amended and reauthorized with expanded eligibility to service sector workers by

the Trade and Globalization Adjustment Assistance Act of 2009.    This expanded eligibility was extended

through February 12, 2011 by the Omnibus Trade Act of 2010 through December 31, 2013, by the Trade

Adjustment Assistance Extension Act of 2011.   The TAA for Workers program provides cash benefits; job

search and relocation allowances; employment services; and training to eligible workers displaced by

international trade. Only TAA training costs are considered investmentsin human capital.

 Trade    Adjustment Assistance Community College    and    Career    Training    (TAACCCT) Grant Fund  ‐  

Implemented in cooperation with the Department of Education, the TAACCCT program provides grants to

eligible institutions of higher learning to improve education and employment outcomes for students.  

Authorized by the Trade Act of 1974 and Health Care and Education Reconciliation Act of 2010, the program

enables educational institutions to prepare students to succeed in growing occupations by acquiring the skills

necessary for high‐wage, in‐demand jobs.

ETA’s FY 2011 human capital investment in the trade adjustment assistance programs was $506 million.

National Apprenticeship Program

The National Apprenticeship Act of 1937 established the foundation for development of the nation’s skilled

workforce through apprenticeship programs, which combine on‐the‐job learning with related technical instruction

to teach workers the theoretical aspects of skilled occupations. Funding provides oversight for a national system of

skilled  and  technical  occupational  training,  which  promotes  apprentices,  registers  apprenticeship  programs,

certifies apprenticeship standards, and safeguards the welfare of apprentices.    ETA’s FY 2011 investment in

apprenticeship programs was $32 million.
Annual Financial Statements

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FY 2011 Agency Financial Report     133 

Program Costs and Outputs

The cost of ETA and OJC investmentsin human capital and the participants served are shown in the chart below,

for the five year period FY 2007 through FY 2011.

ETA and OJC Investments in Human Capital

Program Costs (in Millions) and Participants Served (in Thousands)  

For The Five Year Period FY 2007 through FY 2011

2011 2010 2009 2008 2007

Program Costs

Part.

Served Costs

Part.

Served Costs

Part.

Served Costs

Part.

Served Costs

Part.

Served

WIA

Adult (1) $960 7,025.2 $899 6,695.3 $878 4,921.8 $844 2,828.7 $ 896 1,723.2

Dislocated

Worker (2) 2,039 1,570.6 2,539 1,250.4 1,440 842.1 1,307 401.3 1,409 413.1

Youth (3) 1,124 245.0 1,431 316.3 1,125 438.9 966 250.7 866 248.9

Job Corps 1,717 56.2 1,663 59.8 1,640 60.9 1,589 63.4 1,485 64.8

Ex‐

Offenders (4) 67 39.0 70 36.1 58 9.8 61 14.2 76 15.7

National

Programs (5) 150 38.9 134 61.3 206 35.0 206 44.7 220 44.0

CSEOA

SCSEP 707 105.9 740 103.6 543 89.0 479 89.6 444 86.4

TAA (6)

TAA for Workers

training 506 193.1 540 232.7 286 105.0 248 82.1 223 79.2

Apprenticeship 32 432.2 28 485.4 25 301.6 25 385.7 24 309.5

Other (7) 135 104.9 139 95.8 120 Na 108 Na 91 Na

TOTAL $7,437 9,811.0 $8,183 9,336.7 $6,321 6,804.1 $5,833 4,160.4 $5,734 2,984.8

(1)   Adult program increases in participants served, beginning in 2008, may be attributed to the increased demand for                           

services as a result of the economic downturn. Yearly increases can also be attributed to state reports that include self‐service

only participants and/or co‐enrolled Wagner‐Peyser participants.

(2)   Dislocated Worker programs include Community Based Job Training Grants, National Emergency Grants and High Growth

and Emerging Industry Training. ARRA activities account for the increases, beginning in 2009, in costs and participants.  

(3)   Youth program participants served, beginning in 2009, include youth reported under ARRA.

(4)   Ex‐Offender programs include the Prisoner Re‐entry and Youthful Offender programs.

(5)   National Programs include the Native American and Migrant and Seasonal Farmworker programs.

(6)   TAACCCT grants were not funded until the final week of FY 2011; as a result, direct obligations but no accrued costs or

participants were reported for the TAACCCT program during the fiscal year.

(7)   Other includes training programs for highly skilled occupations funded through H1‐B fees, green jobs initiatives and

costs for lapsed programs.
Financial Section

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134     United States Department of Labor    

Program Outcomes

Outcomes for training programs comprising ETA’s investment in human capital are presented in the Department’s

Annual Performance Report for FY 2011, available on the DOL website at www.dol.gov/_sec/media/reports/ in

February 2012.
Annual Financial Statements

REQUIRED SUPPLEMENTARY STEWARDSHIP INFORMATION

(Unaudited)

FY 2011 Agency Financial Report     135 

Veterans’ Employment and Training Service

The mission of the Veterans’ Employment and Training Service (VETS) is to provide veterans and transitioning

service members with the resources and services to succeed in the 21st century workforce, maximizing employment

opportunities, protecting employment rights, and meeting labor market demands with qualified veterans.   

Program Activities

 

Jobs for Veterans State Grants

The Jobs for Veterans Act (JVA) of 2002, which allocates resources to the States through the Jobs for Veterans State

Grants (JVSG) program (38 U.S.C. 4102A(b)(5)), supports the majority of VETS activities through three major VETS

programs:  

   Disabled Veterans’ Outreach Program (DVOP) Specialists – The DVOP Specialists (as required by 38 U.S.C.

4103A), provide intensive services to meet the employment needs of veterans, including counseling,

assessment, lifelong learning skills and referral to training, particularly to veterans with disabilities or those who

recently separated from the military.

   Local Veterans’ Employment Representatives (LVER) Staff – The LVER staff (as required by 38 U.S.C. 4104)

conducts employer outreach on behalf of veterans, allowing States to develop marketing strategies and

outreach activities that promote the hiring of veterans.  The staff also provides individualized job development

services for veterans, especially veterans determined to be job‐ready after receipt of intensive services from a

DVOP specialist. 

   Transition Assistance Program (TAP) – The TAP (established by 10 U.S.C. 1144) operates as a partnership

between the Departments of Labor, Defense, Homeland Security and Veterans Affairs.  The program provides

separating service members and their spouses or individuals retiring from military service with career counseling

and training.  TAP workshops are provided throughout the United States and overseas.   

   

Federal Management  

VETS Federal management activities provide programs and policies to meet the employment and training needs of

veterans.  The majority of resources are devoted to Uniformed Services Employment and Reemployment Rights Act

(USERRA) and Veterans’ Preference Rights (5 U.S.C. 2108, 3309) compliance and outreach. Activities, as discussed

below:

 Uniformed Services Employment and Reemployment Rights Act and Veterans’ Preference Rights – The

Uniformed Services Employment and Reemployment Rights Act (USERRA) of 1994, codified at 38 U.S.C. Chapter

43, protects civilian job rights and benefits for veterans, members of the National Guard and Reserves.  

Veterans Preference for Federal Employment is codified in 5 U.S.C. 2108 and 3309.    VETS promotes a

productive relationship between employer and employee by educating both on the employment rights of the

individual veterans.

Homeless Veterans and Veterans’ Workforce Investment Programs

 Homeless Veterans Reintegration Program (HVRP) – The HVRP, codified at 38 U.S.C. 2021, provides

employment assistance to homeless veterans through competitive grants to States or other entities in both
Financial Section

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136     United States Department of Labor    

urban and rural areas to operate employment programs to reach out to homeless veterans and help them

become employed.

 Veterans’ Workforce Investment Program (VWIP) ‐ The VWIP, (29 U.S.C. 2913), provides competitive grants for

training and retraining of veterans to create highly skilled employment opportunities for targeted veterans.

Program Costs and Outputs

The full cost of VETS programs is presented in the Consolidated Statement of Net Cost.    The costs of VETS

investments in human capital, and the participants served by this investment, are presented below, by major

program.

VETS Investments in Human Capital

Program Costs and Participants Served (in Thousands)

For the Fiscal Years Ended FY 2007 through FY 2011

2011 2010 2009   2008 2007

Program Costs

Part.

Served Costs

Part.

Served Costs

Part.

Served Costs

Part.

Served Costs

Part.

Served

DVOP

   

$89,251 329.4 $99,818 351.1 $91,064 345.1 $86,844 363.8 $86,667 363.4

LVER 82,246 302.2 91,984 357.9 83,917 362.3 80,028 366.4 80,000 400.6

TAP 7,089 143.1 7,928 129.0 7,233 124.7 6,898 150.0 7,704 151.3

USERRA 9,874 79.9 11,043 101.6 10,075 107.9 9,100 93.0 9,170 70.8

HVRP 28,385 17.0 31,746 14.4 28,962 13.7 27,620 14.0 27,504 12.8

VWIP 7,863 3.9 8,794 3.3 8,023 3.6 7,651 3.3 7,667 3.6

   TOTAL $224,708 875.5 $251,313 957.3 $229,274 957.3 $218,141 990.5 $218,712 1,002.5

Program Outcomes

Outcomes for the programs comprising VETS’ investment in human capital are presented in the Department’s

Annual Performance Report for FY 2011 available on the DOL website, www.dol.gov/_sec/media/reports/,  

in February 2012.
Required Supplementary Information

Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 Agency Financial Report     139

DEFERRED MAINTENANCE

The U.S. Department of Labor (DOL) maintains one hundred twenty‐five (125) Job Corps centers located throughout

the United States.  Periodic maintenance is performed to keep these centers in acceptable condition, as determined

by Job Corps management.  Maintenance requirements are stratified by management into critical and non‐critical

projects.    Critical maintenance involves life, safety, health, and environmental issues, as well as building code

compliance deficiencies.  Critical maintenance projects are funded and performed in the year they are identified.

Non‐critical maintenance projects are performed each year to the extent that funding constraints allow.  Non‐critical

maintenance projects that cannot be funded when scheduled are deferred to a future period.   

Condition Assessment Surveys

Condition assessment surveys are conducted every three years at each Job Corps center to determine the current

condition of buildings and structures (constructed assets) and the estimated maintenance cost to correct

deficiencies.  Surveys conducted during years one and two of this three year cycle are updated annually to reflect

maintenance performed, and rolled up with current assessments to provide a condition assessment for the entire

Job Corps portfolio of constructed assets.    Condition assessment surveys are based on methods and standards

consistently applied, including:

      ‐  condition descriptions of facilities  ‐ recommended maintenance schedules

      ‐  estimated costs of maintenance actions  ‐  standardized condition codes

Asset Condition

Condition assessment surveys are used to estimate the current plant replacement value and deferred maintenance

repair backlog for every constructed asset at each Job Corps center.  Plant replacement value and repair backlog are

used to calculate a Facilities Condition Index (FCI) for each building and structure. The chart below ranks each asset

within one of five categories of asset condition, based on the assets FCI score, for the previous five year period.  

Job Corps Center Constructed Assets  

Ranking of Individual Asset Condition By FCI Score(1)

at September 30, 2007 – 2011

 

2011 2010 2009 2008 2007

Asset

Condition FCI Score

No. of

Assets

Asset

%

No. of

Assets

Asset

%

No. of

Assets

Asset

%

No. of

Assets

Asset

%

No. of

Assets

Asset

%

Excellent 90‐ 100% 3,338 86.2 3,273 86.4 3,037 84.6 2,878 81.9 2,966 80.9

Good 80‐ 89% 301 7.8 282 7.4 290 8.1 311 8.9 338 9.2

Fair 70‐ 79% 100 2.6 90 2.4 95 2.6 115 3.3 126 3.4

Poor 60‐ 69% 52 1.3 57 1.5 71 2.0 89 2.5 98 2.7

Very Poor < 60% 83 2.1 88 2.3 96 2.7 118 3.4 136 3.8

3,874 100.0 3,790 100.0 3,589 100.0 3,511 100.0 3,664 100.0

(1)   FCI = 1 – (Repair Backlog / Plant Replacement Value).  An FCI closer to 100 % indicates better asset condition.   
Financial Section

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140     United States Department of Labor

Portfolio Condition and Deferred Maintenance Cost Estimates

The FCI assessments by building and structure are consolidated to calculate an FCI score for the entire portfolio of

constructed assets, which is used to evaluate the overall asset condition of the Job Corps portfolio.  Job Corps has

set the goal of achieving and maintaining an FCI of 90% or greater (the standard used by the National Association of

College and University Business Offices) for its portfolio of constructed assets. In 2011, the portfolio’s aggregate FCI

score for 3,874 constructed assets was 93.7%, and deferred maintenance costs to return the portfolio to an

acceptable condition were estimated at $96.1 million, as shown in the table below. The final graph juxtaposes

deferred maintenance cost estimates with the FCI trend line for the five year period ending in 2011.

Job Corps Center Constructed Assets

Portfolio Condition and Deferred Maintenance Cost Estimates

at September 30, 2007 ‐ 2011

 

Constructed Assets ‐ FY

Number of

Constructed

Assets

Portfolio Condition

Based on

Aggregate FCI Score

Deferred Maintenance

Costs to Return Assets

To Acceptable Condition

Buildings and structures ‐ 2011 3,874 Excellent  ‐  93.7%    $96,136,092

Buildings and structures ‐ 2010 3,790 Excellent  ‐  93.4%    $89,827,363

Buildings and structures ‐ 2009 3,589 Excellent  ‐  91.7% $83,861,828

Buildings and structures ‐ 2008 3,511 Excellent  ‐  92.2%    $71,901,425

Buildings and structures ‐ 2007 3,664 Excellent  ‐  90.8%       $87,372,700

 

Deferred Maintenance Cost Estimates and FCI Trend Line

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

2007 2008 2009 2010 2011

Fiscal Year

Deferred Maintenance

89.0%

90.0%

91.0%

92.0%

93.0%

94.0%

Facilities Condition Index

DM FCI FCI Trendline
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 Agency Financial Report     141

SOCIAL INSURANCE PROGRAMS

The Federal Accounting Standards Advisory Board (FASAB) has classified certain government income transfer

programs as social insurance programs.  Recognizing that these programs have complex characteristics that do not

fit traditional accounting models, the FASAB has developed accounting standards for social insurance programs

which require the presentation of supplementary information to facilitate the assessment of the program’s long‐

term sustainability.    Effective in FY 2011, the Department implemented FASAB Statement of Federal Financial

Accounting Standards 37, Social Insurance: Additional Requirements for Management’s Discussion and Analysis and

Basic Financial Statements, and has modified, among other things, the disclosures and presentations of the

Required Supplementary Information (RSI) reporting for its social insurance programs to conform to the

requirements of the accounting standard.

The U.S. Department of Labor operates two programs classified under Federal accounting standards as social

insurance programs, the Unemployment Insurance Program and the Black Lung Disability Benefits Program.  

Presented below is the supplementary information for the two programs.

Unemployment Insurance Program

The Unemployment Insurance (UI) Program was created in 1935 to provide income assistance to unemployed

workers who lose their jobs generally through no fault of their own and are unemployed due to a lack of suitable

work.    The program protects workers during temporary periods of unemployment through the provision of

unemployment compensation benefits.  These benefits replace part of the unemployed worker’s lost wages and, in

so doing, stabilize the economy during recessionary periods by increasing the unemployed worker’s purchasing

power.    The UI program operates counter cyclically, with benefits exceeding tax collections during recessionary

periods and UI tax revenues exceeding benefit payments during periods of recovery.

Program Administration and Funding

The UI program is administered through a unique system of Federal‐state partnerships, established in Federal law

but executed through conforming state laws by state officials.    The Federal government provides broad policy

guidance and program direction through the oversight of the U.S. Department of Labor, while program details are

established through individual state UI statutes, administered through state UI agencies.

Federal and State Unemployment Taxes

The UI program is financed through the collection of Federal and state unemployment taxes levied on subject

employers and deposited in the Unemployment Trust Fund (UTF).    The UTF was established to account for the

receipt, investment and disbursement of unemployment taxes.  Federal unemployment taxes are used to pay for

the administrative costs of the UI program, including grants to each state to cover the costs of state UI operations

and the Federal share of extended UI benefits.    Federal unemployment taxes are also used to fund an account

within the UTF, to make advances to insolvent states to pay UI benefits.  State UI taxes are used exclusively for the

payment of regular UI benefits, as well as the state’s share of extended benefits.  
Financial Section

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142     United States Department of Labor

Federal Unemployment Taxes

Under the provisions of the Federal Unemployment Tax Act (FUTA), a Federal tax is levied on covered

employers, at a current rate of 6.0% of the first $7,000 in annual wages paid to each employee.    This

Federal tax rate is reduced by a credit of up to 5.4%, granted to employers paying state UI taxes under

conforming state UI statutes.  Accordingly, in conforming states, employers paid an effective Federal tax of

0.8% (0.6% starting July 1, 2011).    Federal unemployment taxes are collected by the Internal Revenue

Service.  

State Unemployment Taxes

In addition to the Federal tax, individual states finance their UI programs through state tax contributions

from subject employers based on the wages of covered employees.  (Three states also collect contributions

from employees.)  Within Federal confines, state tax rates are assigned in accordance with an employer’s

experience with unemployment.    Actual tax rates vary greatly among the states and among individual

employers within a state.  At a minimum, these rates must be applied to the Federal tax base of $7,000;

however, states may adopt a higher wage base than the minimum established by FUTA.  State UI agencies

are responsible for the collection of state unemployment taxes.

                                                                                                                                                                                                                                        

Unemployment Trust Fund

Federal and state UI taxes are deposited into designated accounts within the Unemployment Trust Fund.  The UTF

was established under the authority of Title IX, Section 904 of the Social Security Act of 1935, as amended, to

receive, hold, invest, loan and disburse Federal and state UI taxes.  The U.S. Department of the Treasury acts as

custodian over monies deposited into the UTF, investing amounts in excess of disbursing requirements in Treasury

securities.  The UTF is comprised of the following accounts:

Federal Accounts

The Employment Security Administration Account (ESAA) was established pursuant to Section 901 of the

Act.   All tax receipts collected under the Federal Unemployment Tax Act (FUTA) are appropriated to the

ESAA and used to pay the costs of Federal and state administration of the unemployment insurance

program and veterans’ employment services, as well as 97% of the costs of the state employment services.  

Excess balances in ESAA, as defined under the Act, are transferred to other Federal accounts within the

Fund, as described below.

The Federal Unemployment Account (FUA) was established pursuant to Section 904 of the Act.    FUA is

funded by any excesses from the ESAA as determined in accordance with Section 902 of the Act.  Title XII,

Section 1201 of the Act authorizes the FUA to loan Federal monies to state accounts that are unable to

make benefit payments because the state UI account balance has been exhausted.  Title XII loans must be

repaid with interest.  The American Recovery and Reinvestment Act of 2009 waived interest on advances to

state accounts for the period February 17, 2009, through December 31, 2010.  The FUA may borrow from

the ESAA or EUCA, without interest, or may also receive repayable advances, with interest, from the

general fund of the U.S. Treasury, when the FUA has a balance insufficient to make advances to the states.   
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 Agency Financial Report     143

The Extended Unemployment Compensation Account (EUCA) was established pursuant to Section 905 of

the Act.    EUCA provides for the payment of extended unemployment benefits authorized under the

Federal‐State Extended Unemployment Compensation Act of 1970, as amended.    Under the extended

benefits program, extended unemployment benefits are paid to individuals who have exhausted their

regular unemployment benefits.  These extended benefits are financed one‐half by State unemployment

taxes and one‐half by FUTA taxes from the EUCA.  The EUCA is funded by a percentage of the FUTA tax

transferred from the ESAA in accordance with Section 905(b)(1) and (2) of the Act.  The EUCA may borrow

from the ESAA or the FUA, without interest, or may also receive repayable advances from the general fund

of the Treasury when the EUCA has a balance insufficient to pay the Federal share of extended benefits.  

During periods of sustained high unemployment, the EUCA may also receive payments and non‐repayable

advances from the general fund of the Treasury to finance emergency unemployment compensation

benefits.  Emergency unemployment benefits require Congressional authorization.

The Federal Employees Compensation Account (FEC) was established pursuant to Section 909 of the Act.  

The FEC account provides funds to States for unemployment compensation benefits paid to eligible former

Federal civilian personnel and ex‐service members.  Generally, benefits paid are reimbursed to the Federal

Employees Compensation Account by the various Federal agencies.  Any additional resources necessary to

assure that the account can make the required payments to States, due to the timing of the benefit

payments and subsequent reimbursements, will be provided by non‐repayable advances from the general

fund of the Treasury.

   

State Accounts

Separate state accounts were established for each state and territory depositing monies into the Fund, in

accordance with Section 904 of the Act.    State unemployment taxes are deposited into these individual

accounts and may be used only to pay state unemployment benefits.    States may receive repayable

advances from the FUA when their balances in the Fund are insufficient to pay benefits.   

Railroad Retirement Accounts

The Railroad UI Account and Railroad UI Administrative Account were established under Section 904 of the

Act to provide for a separate unemployment insurance program for railroad employees.    This separate

unemployment insurance program is administered by the Railroad Retirement Board, an agency

independent of DOL.   DOL is not responsible for the administrative oversight or solvency of the railroad

unemployment insurance system.  Receipts from taxes on railroad payrolls are deposited in the Railroad UI

Account and the Railroad UI Administrative Account to meet benefit payment and related administrative

expenses.  
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

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144     United States Department of Labor

UI Program Benefits

   

The UI program provides regular and extended benefit payments to eligible unemployed workers.    Regular UI

program benefits are established under state law, payable for a period not to exceed a maximum duration.    In

1970, Federal law began to require states to extend this maximum period of benefit duration by 50% during periods

of high unemployment.  These extended benefit payments are paid equally from Federal and state accounts.  

   

Regular UI Benefits

The UI program is a cooperative Federal and state program with the federal government providing

oversight.  Eligibility requirements, as well as benefit amounts and benefit duration are determined under

state law.  Under state laws, worker eligibility for benefits depends on experience in covered employment

during a past base period, which attempts to measure the workers’ recent attachment to the labor force.  

Three factors are common to state eligibility requirements: (1) a minimum duration of recent employment

and earnings during a base period prior to unemployment, (2) unemployment not the fault of the

unemployed, and (3) availability of the unemployed for work.  

Benefit payment amounts under all state laws vary with the worker’s base period wage history.  Generally,

states compute the amount of weekly UI benefits as a percentage of an individual’s average weekly base

period earnings, within certain minimum and maximum limits.  Most states set the duration of UI benefits

by the amount of earnings an individual has received during the base period.  Currently, almost all states

have established the maximum duration for regular UI benefits at 26 weeks. Regular UI benefits are paid by

the state UI agencies from monies drawn down from the state account within the Unemployment Trust

Fund.

Extended UI Benefits

The Federal/State Extended Unemployment Compensation Act of 1970 provides for the extension of the

duration of UI benefits during periods of high unemployment.    When the insured unemployment level

within a state, or in some cases total unemployment, reaches certain specified levels, the state must extend

benefit duration by 50%, up to a combined maximum of 39 weeks; certain states voluntarily extended the

benefit duration up to a combined maximum of 46 weeks.    Fifty percent of the cost of extended

unemployment benefits is paid from the Extended Unemployment Compensation Account within the UTF,

and 50% by the state, from the state’s UTF account.  The American Recovery and Reinvestment Act of 2009

began temporary 100% Federal funding of extended benefits.    P.L. 111‐205, the Unemployment

Compensation Extension Act of 2010, authorized 100% Federal funding of extended benefits to December 4,

2010 and P.L. 111‐312, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of

2010, authorized continuing 100% Federal funding of extended unemployment benefits to January 4, 2012.
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 Agency Financial Report     145

Emergency UI Benefits

During prolonged periods of high unemployment, Congress may authorize the payment of emergency

unemployment benefits to supplement extended UI benefit payments.   Emergency benefits began in July

2008, authorized under the Supplemental Appropriations Act, 2008.    This emergency program was

temporarily extended and additionally funded by the Recovery Act and has been modified several times,

most recently by P.L. 111‐312, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation

Act of 2010, which changed the expiration date of the emergency unemployment insurance program to

January 3, 2012.   

Federal UI Benefits

Unemployment benefits to unemployed Federal workers are paid from the Federal Employees

Compensation Account within the Unemployment Trust Fund.  These benefit costs are reimbursed by the

responsible Federal agency and are not considered to be social insurance benefits.  Federal unemployment

compensation benefits are not included in this discussion of social insurance programs.  

Program Finances and Sustainability

At September 30, 2011, total liabilities within the UTF exceeded total assets by $27.8 billion.    Although at the

present time there is a deficit, any future surplus of tax revenues and earnings on these revenues over benefit

payment expenses is available to finance benefit payments in future periods when tax revenues may be insufficient.  

Treasury invests any accumulated surplus in Federal securities.  The net value of these securities, including interest

receivable, at September 30, 2011 was $16.2 billion.    This interest is distributed to eligible state and Federal

accounts within the UTF.   Interest income from these investments during FY 2011 was $0.7 billion.  Federal and

state UI tax and reimbursable revenues of $56.1 billion and regular, extended and emergency benefit payment

expense of $111.2 billion were recognized for the year ended September 30, 2011.

As discussed in Note 1.K.1 to the consolidated financial statements, DOL recognized a liability for regular, extended

and emergency unemployment benefits to the extent of unpaid benefits applicable to the current period and for

benefits paid by states that have not been reimbursed by the UTF.   Accrued unemployment benefits payable at

September 30, 2011 were $3.2 billion.   

During FY 2011, both the FUA and EUCA borrowed from the general fund of the U.S. Treasury in the form of

repayable advances.  FUA had an outstanding repayable advances balance of $29.3 billion, of which $18.0 billion

bear interest at 3.25%, $4.5 billion bear interest at 3.0%, and $6.8 billion bear interest at 2.875%, as of September

30, 2011.  EUCA had an outstanding repayable advances balance of $13.5 billion, of which $3.1 billion bear interest

at 3.25%, $5.3 billion bear interest at 3.0%, and $5.1 billion bear interest at 2.875%, as of September 30, 2011.
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

146     United States Department of Labor

Subsequent Events

This required supplementary information does not reflect the effects of the subsequent events described below.

  

Subsequent to September 30, 2011, the Extended Unemployment Compensation Account (EUCA) of the

Unemployment Trust Fund (UTF) borrowed, as Advances from U.S. Treasury, $1.3 billion at interest rates of 2.75%

and 2.875%. During the same period, the Federal Unemployment Account (FUA) of the UTF borrowed, as Advances

from U.S. Treasury, $600 million at an interest rate of 2.875%.

Effect of Projected Cash Inflows and Outflows on the Accumulated Net Assets of the UTF, in Constant Dollars  

The ability of the UI program to meet a participant’s future benefit payment needs depends on the availability of

accumulated taxes and earnings within the UTF.    The Department measures the effect of projected benefit

payments on the accumulated net assets of the UTF, under an open group scenario, which includes current and

future participants in the UI program.  Future estimated cash inflows and outflows of the UTF are tracked by the

Department for budgetary purposes.  These projections allow the Department to monitor the sensitivity of the UI

program to differing economic conditions, and to predict the program’s sustainability under varying economic

assumptions.

The significant assumptions used in the projections include total unemployment rates, civilian labor force levels,

percent of unemployed receiving benefits, total wages, distribution of benefit payments by state, state tax rate

structures, state taxable wage bases, interest rates on UTF investments, and the Consumer Price Index‐Urban for

goods and services (CPI‐U).  The use of CPI‐U factors allows the projections to be presented in constant dollars with

FY 2011 as the base year.  The valuation date for the projections is September 30, 2011.  Cash projections depend

on the assumptions used and actual experience may differ from the projections.

Presented on the following pages is the effect of projected economic conditions on the net assets of the UTF, in

constant dollars, excluding the Federal Employees Compensation Account.    
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 Agency Financial Report     147

Expected Economic Conditions  

Charts I and II graphically depict the effect of expected economic conditions on the UTF, in constant dollars, over

the next ten years.   

Projected Cash Inflows and Outflows, in Constant Dollars, Under Expected Economic Conditions

Chart I depicts projected cash inflows and outflows of the UTF, in constant dollars, over the next ten years

under expected economic conditions.  Both cash inflows and cash inflows excluding interest earnings are

displayed.  Current estimates by the Department are based on an expected unemployment rate of 8.45%

during FY 2012, decreasing steadily to below 6% in FY 2016 and thereafter.    Total cash outflows exceed

total cash inflows in FY 2012, whereas total cash inflows exceed total cash outflows beginning in FY 2013

and through the end of the projected period.  The net outflow is $3.4 billion in FY 2012.  The net inflow

increases from $2.2 billion in FY 2013 to $13.3 billion in FY 2016, and ranges between $10.6 billion to $3.7

billion thereafter.  The net outflow occurs due to state unemployment benefits.  The net inflow is sustained

by the excess of Federal tax collections over Federal expenditures.

These projections, excluding interest earnings, indicate net cash outflow in FY 2012, then net cash inflows

at varied levels in FYs 2013 through 2020.   

Chart I

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

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Excludes the Federal Employee Compensation Account

Unemployment Trust Fund

Cash Inflow and Outflow in Constant Dollars

Total Cash Inflows Cash Inflow Excluding Interest Total Cash Outflow
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

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148     United States Department of Labor

Effect of Expected Cash Flows on UTF Assets in Constant Dollars

Chart II demonstrates the effect of these expected cash inflows and outflows on the net assets of the UTF,

in constant dollars, over the ten year period ended September 30, 2021.    Yearly projected total cash

inflows, including interest earnings, and cash outflows, including interest payments, are depicted as well as

the net effect of this cash flow on UTF assets.  

Total cash outflows exceed cash inflows for FY 2012 and total cash inflows exceed total cash outflows

beginning in FY 2013 and all other years in the projected period.  The excess of total cash inflows over total

cash outflows peaks in FY 2016.  Starting at a nearly $27.0 billion fund balance deficit at the beginning of FY

2012, net UTF assets decrease by about $3.4 billion during FY 2012 to a nearly $30.4 billion fund balance

deficit by the end of FY 2012 and then increase by about $66.3 billion over the next nine years to a nearly

36.0 billion fund net assets balance by the end of FY 2021.  The fund is in a deficit situation from FY 2012

through FY 2015 and ends FY 2016 with a nearly $3.0 billion fund net assets balance.

Chart II

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

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Unemployment Trust Fund 

Effect of Net Cash Flow on Net Assets in Constant Dollars

Total Cash Inflows Total Cash Outflows Net Assets
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 Agency Financial Report     149

Sensitivity Analyses in Constant Dollars

Charts III and IV demonstrate the effect on accumulated UTF assets of projected total cash inflows and cash

outflows of the UTF, in constant dollars, over the ten year period ending September 30, 2021, in two sensitivity

analyses.    Each sensitivity analysis uses an open group, which includes current and future participants in the UI

program.  Chart III assumes decreasing rates of unemployment beginning in FY 2012 and Chart IV assumes higher

unemployment in FY 2012 and then decreasing rates of unemployment beginning in FY 2013.

  

Effect on UTF Assets, in Constant Dollars, in Sensitivity Analysis I

The Department projects the effect of decreasing unemployment rates beginning in FY 2012 on the cash inflows

and outflows of the UTF, in constant dollars.  In this sensitivity analysis, which utilizes a decreasing unemployment

rate of 7.82% beginning in FY 2012, net cash inflows are reestablished in FY 2012 and peak in FY 2016 with a drop in

the unemployment rate below 6.0% for FYs 2016 through 2021.    Starting at a nearly $27.0 billion fund balance

deficit at the beginning of FY 2012, net UTF assets increase by $65.5 billion over the next ten years to a $38.5 billion

fund net assets balance by the end of FY 2021.  The fund is in a deficit situation from FY 2012 to FY 2015.

Chart III

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Unemployment Trust Fund 

Effect of Net Cash Flow on Net Assets in Constant Dollars

Total Cash Inflows Total Cash Outflows Net Assets
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

150     United States Department of Labor

Effect on UTF Assets, in Constant Dollars, in Sensitivity Analysis II

The Department also estimates the effects of an increasing unemployment rate of 10.11% in FY 2012 and

decreasing unemployment rates beginning in FY 2013 on the cash inflows and outflows of the UTF, in

constant dollars.    Net cash outflows including projected interest earnings and expenses from Federal

sources are projected in FY 2012 through FY 2014, with the fund in a deficit situation from FY 2012 to FY

2021.  The net assets of the UTF decreases $39.9 billion from a nearly $27.0 billion fund balance deficit at

the beginning of FY 2012 to a $66.9 billion fund balance deficit in FY 2014.    Net cash inflows are

reestablished in FY 2015 and peak in FY 2018 with a drop in the unemployment rate to 6.42% and then

lower rates for FYs 2019 through 2021.  By the end of FY 2021, this positive cash flow has decreased the UTF

fund balance deficit to under $1.0 billion.  At the end of the projection period of sensitivity analysis II, net

assets are $36.7 billion less than under expected economic conditions.

Chart IV

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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

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Unemployment Trust Fund 

Effect of Net Cash Flow on Net Assets in Constant Dollars

Total Cash Inflows Total Cash Outflows Net Assets

The three examples of expected economic conditions and two sensitivity analyses, in constant dollars,

demonstrate the counter cyclical nature of the UI program, which experiences net cash outflows during

periods of recession to be replenished through net cash inflows during periods of recovery.  In the three

examples, state accounts without sufficient reserve balances to absorb negative cash flows are forced to

obtain advances from the FUA to meet benefit payment requirements.  Advances to states also deplete the

FUA, which borrows from the ESAA and the EUCA until they are depleted.  The FUA then requires advances

from the general fund of the U.S. Treasury to provide for state borrowings.   (See following discussion of

state solvency measures.)
FY 2011

FY 2011 Agency Financial Report    151

(Dollars in thousands) 2012 2013 2014 2015 2016 2017 2018 2019 

Balance, start of year $ (26,952,765) $ (30,350,496) $ (28,191,626) $ (21,052,537) $ (10,375,285) $ 2,901,553 $ 13,467,110 $ 20,783,557 

Cash inflow

State unemployment taxes 46,855,760 48,302,743 48,897,379 47,885,376 46,804,866 43,983,669 42,120,430 41,996,850 

Federal unemployment taxes 6,805,120 8,643,234 9,844,920 10,906,896 11,835,984 10,368,143 9,065,408 9,864,792 

General revenue appropriation 18,831,680            ‐                              ‐                              ‐                              ‐                              ‐                              ‐                              ‐                              Interest on loans 1,200,500 1,169,537 1,037,300 937,860 791,844 625,335 514,448 422,096 CMIA receipts 294 288 283 277 272 266 261 255 

Deposits by the Railroad Retirement Board 263,815 165,195 62,426 44,166 59,251 99,609 129,046 115,480 

Total cash inflow excluding interest 73,957,169 58,280,997 59,842,308 59,774,575 59,492,217 55,077,022 51,829,593 52,399,473 

Interest on Federal securities 391,551 387,944 405,195 529,777 748,918 990,127 1,205,324 1,510,178 

Total cash inflow 74,348,720 58,668,941 60,247,503 60,304,352 60,241,135 56,067,149 53,034,917 53,909,651 

Cash outflow

State unemployment benefits 71,598,800 50,894,560 47,674,308 44,311,344 41,791,062 40,534,126 40,886,450 42,075,993 

State administrative costs 4,465,860 4,041,005 4,004,921 4,012,932 4,025,358 4,033,189 4,048,671 4,060,972 

Federal administrative costs 187,290 182,093 182,825 181,371 180,951 180,223 181,329 180,556 

Interest on tax refunds 1,321 1,661 1,854 2,167 2,612 2,604 2,499 2,843 

CMIA interest payment                              ‐ ‐                              ‐                              ‐                              ‐                              ‐                              ‐                              ‐                              

Interest on advances 1,381,800 1,287,740 1,141,030 1,016,400 860,700 647,510 495,330 451,030 Railroad Retirement Board withdrawals 111,380 103,012 103,476 102,886 103,614 103,940 104,191 104,174 

Total cash outflow 77,746,451 56,510,071 53,108,414 49,627,100 46,964,297 45,501,592 45,718,470 46,875,568 Excess of total cash inflow excluding

interest over total cash outflow (3,789,282) 1,770,926 6,733,894 10,147,475 12,527,920 9,575,430 6,111,123 5,523,905 

Excess of total cash inflow over

total cash outflow (3,397,731) 2,158,870 7,139,089 10,677,252 13,276,838 10,565,557 7,316,447 7,034,083 

Balance, end of year $ (30,350,496) $ (28,191,626) $ (21,052,537) $ (10,375,285) $ 2,901,553 $ 13,467,110 $ 20,783,557 $ 27,817,640 

Total unemployment rate 8.45% 7.90% 7.10% 6.42% 5.80% 5.37% 5.20% 5.20% 

U.S. DEPARTMENT OF LABOR

SUPPLEMENTARY SOCIAL INSURANCE INFORMATION IN CONSTANT DOLLARS

CASH INFLOW AND OUTFLOW OF THE

UNEMPLOYMENT TRUST FUND EXCLUDING THE FEDERAL EMPLOYEES COMPENSATION ACCOUNT

FOR THE TEN YEAR PERIOD ENDING SEPTEMBER 30, 2021

(1) EXPECTED ECONOMIC CONDITIONS
(Dollars in thousands) 2012 2013 2014 2015 2016 2017 2018 2019 

Balance, start of year $ (26,952,765) $ (25,459,647) $ (19,603,770) $ (13,168,842) $ (4,406,037) $ 7,796,131 $ 17,189,120 $ 25,848,899 Cash inflow

State unemployment taxes 46,983,160 47,929,875 47,928,918 47,316,192 45,676,896 43,473,644 41,971,831 41,670,917 

Federal unemployment taxes 6,838,440 8,616,326 9,562,020 10,551,156 11,704,614 9,048,287 10,325,458 9,703,102 

General revenue appropriation 18,664,100            ‐                              ‐                              ‐                              ‐                              ‐                              ‐                              ‐    

                        

Interest on loans 1,059,380 1,012,894 854,358 783,552 680,406 557,036 431,024 329,337 

CMIA receipts 294 288 283 277 272 266 261 255 

Deposits by the Railroad Retirement Board 263,815 165,195 62,426 44,166 59,251 99,609 129,046 115,480 

Total cash inflow excluding interest 73,809,189 57,724,578 58,408,005 58,695,343 58,121,439 53,178,842 52,857,620 51,819,091 

Interest on Federal securities 429,692 470,529 436,474 552,564 774,239 1,023,857 1,321,802 1,685,895 

Total cash inflow 74,238,881 58,195,107 58,844,479 59,247,907 58,895,678 54,202,699 54,179,422 53,504,986 

Cash outflow

State unemployment benefits 66,708,600 46,918,903 47,205,637 45,335,136 41,667,846 39,952,254 40,737,851 42,290,445 

State administrative costs 4,384,765 3,961,146 3,982,242 4,022,773 4,022,776 4,021,081 4,041,545 4,060,078 

Federal administrative costs 187,290 182,093 182,825 181,371 180,951 180,223 181,329 180,556 

Interest on tax refunds 1,328 1,656 1,801 2,096 2,583 2,272 2,847 2,796 

CMIA interest payment                              ‐ ‐                              ‐                              ‐                              ‐                              ‐                              ‐                              ‐                              

Interest on advances 1,352,400 1,172,420 933,570 840,840 715,740 549,940 451,880 442,520 

Railroad Retirement Board withdrawals 111,380 103,012 103,476 102,886 103,614 103,940 104,191 104,174 

Total cash outflow 72,745,763 52,339,230 52,409,551 50,485,102 46,693,510 44,809,710 45,519,643 47,080,569 Excess of total cash inflow excluding

interest over total cash outflow 1,063,426 5,385,348 5,998,454 8,210,241 11,427,929 8,369,132 7,337,977 4,738,522 

Excess of total cash inflow over

total cash outflow 1,493,118 5,855,877 6,434,928 8,762,805 12,202,168 9,392,989 8,659,779 6,424,417 

Balance, end of year $ (25,459,647) $ (19,603,770) $ (13,168,842) $ (4,406,037) $ 7,796,131 $ 17,189,120 $ 25,848,899 $ 32,273,316 

Total unemployment rate 7.82% 7.26% 7.05% 6.42% 5.63% 5.24% 5.20% 5.20% 

U.S. DEPARTMENT OF LABOR

SUPPLEMENTARY SOCIAL INSURANCE INFORMATION IN CONSTANT DOLLARS

CASH INFLOW AND OUTFLOW OF THE

UNEMPLOYMENT TRUST FUND EXCLUDING THE FEDERAL EMPLOYEES COMPENSATION ACCOUNT

FOR THE TEN YEAR PERIOD ENDING SEPTEMBER 30, 2021

(2) SENSITIVITY ANALYSIS I UNEMPLOYMENT RATE

152     United States Department of Labor  
FY 2011

FY 2011 Agency Financial Report    153

(Dollars in thousands) 2012 2013 2014 2015 2016 2017 2018 2019 Balance, start of year $ (26,952,765) $ (54,593,030) $ (66,626,023) $ (66,925,462) $ (61,517,060) $ (52,945,358) $ (41,624,957) $ (28,759,366Cash inflow

State unemployment taxes 46,967,480 49,625,079 50,766,405 50,272,068 49,532,832 48,512,691 47,328,347 44,447,730 

Federal unemployment taxes 6,717,900 8,465,449 9,817,573 11,851,224 13,690,566 14,818,222 14,921,599 13,869,598 

General revenue appropriation 19,729,360            ‐                      ‐      3,772                         ‐                              ‐                              ‐                              ‐                              Interest on loans 1,461,180 1,828,783 1,951,067 1,993,068 2,039,406 1,945,191 1,698,895 1,421,170 

CMIA receipts 294 288 283 277 272 266 261 255 

Deposits by the Railroad Retirement Board 263,815 165,195 62,426 44,166 59,251 99,609 129,046 115,480 

Total cash inflow excluding interest 75,140,029 60,084,794 62,601,526 64,160,803 65,322,327 65,375,979 64,078,148 59,854,233 

Interest on Federal securities 228,139 174,657 240,775 348,151 485,041 680,668 915,230 1,114,711 

Total cash inflow 75,368,168 60,259,451 62,842,301 64,508,954 65,807,368 66,056,647 64,993,378 60,968,944 

Cash outflow

State unemployment benefits 96,233,060 65,690,116 56,447,037 52,303,944 50,299,308 47,876,712 45,507,792 42,960,182 

State administrative costs 4,868,199 4,335,936 4,190,503 4,181,516 4,202,572 4,194,490 4,166,551 4,118,542 

Federal administrative costs 187,290 182,093 182,825 181,371 180,951 180,223 181,329 180,556 

Interest on tax refunds 1,304 1,627 1,849 2,355 3,021 3,721 4,114 4,015 

CMIA interest payment                              ‐ ‐                              ‐                              ‐                              ‐                              ‐                              ‐                              ‐                              

Interest on advances 1,607,200 1,979,660 2,216,050 2,328,480 2,446,200 2,377,160 2,163,810 1,838,160 

Railroad Retirement Board withdrawals 111,380 103,012 103,476 102,886 103,614 103,940 104,191 104,174 

Total cash outflow 103,008,433 72,292,444 63,141,740 59,100,552 57,235,666 54,736,246 52,127,787 49,205,629 Excess of total cash inflow excluding

interest over total cash outflow (27,868,404) (12,207,650) (540,214) 5,060,251 8,086,661 10,639,733 11,950,361 10,648,604 

Excess of total cash inflow over

total cash outflow (27,640,265) (12,032,993) (299,439) 5,408,402 8,571,702 11,320,401 12,865,591 11,763,315 

Balance, end of year $ (54,593,030) $ (66,626,023) $ (66,925,462) $ (61,517,060) $ (52,945,358) $ (41,624,957) $ (28,759,366) $ (16,996,051

Total unemployment rate 10.11% 9.74% 9.06% 8.45% 7.90% 7.10% 6.42% 5.80% 

U.S. DEPARTMENT OF LABOR

SUPPLEMENTARY SOCIAL INSURANCE INFORMATION IN CONSTANT DOLLARS

CASH INFLOW AND OUTFLOW OF THE

UNEMPLOYMENT TRUST FUND EXCLUDING THE FEDERAL EMPLOYEES COMPENSATION ACCOUNT

FOR THE TEN YEAR PERIOD ENDING SEPTEMBER 30, 2021

(3) SENSITIVITY ANALYSIS II UNEMPLOYMENT RATE
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

154     United States Department of Labor

States Minimally Solvent

Each state’s accumulated UTF net assets or reserve balance should provide a defined level of benefit payments over

a defined period.  To be minimally solvent, a state’s reserve balance should provide for one year’s projected benefit

payment needs based on the highest levels of benefit payments experienced by the state over the last twenty years.  

A ratio of 1.00 or greater indicates a state is minimally solvent.  States below this level are vulnerable to exhausting

their funds in a recession.    States exhausting their reserve balance must borrow funds from the Federal

Unemployment Account (FUA) to make benefit payments.  During FY 2009, the balances in the FUA were depleted

and the FUA borrowed from the Treasury general fund and continued to do so in FY 2010 and FY 2011, although in

FY 2011 the FUA repaid some borrowings.   

Chart V presents the state by state results of this analysis at September 30, 2011 in descending order by ratio.  As

the table below illustrates, 46 state funds were below the minimal solvency ratio of 1.00 at September 30, 2011.

Chart V

State Ratio State Ratio State Ratio

Nebraska 1.45 Maine 0.94 Texas 0.00

Louisiana 1.40 Alaska 0.92 Colorado 0.00

Mississippi 1.27 Oklahoma 0.88 Georgia 0.00

Wyoming 1.19 Puerto Rico 0.88 Arizona 0.00

Washington 1.15 Oregon 0.83 Connecticut 0.00

District of Columbia 1.04 Utah 0.83 Arkansas 0.00

North Dakota 1.00 Iowa 0.73 New Jersey 0.00

Montana 0.71 Rhode Island 0.00

South Dakota 0.67 Illinois 0.00

New Mexico 0.50 New York 0.00

Maryland 0.43 Florida 0.00

Tennessee 0.39 Missouri 0.00

West Virginia 0.36 Pennsylvania 0.00

New Hampshire 0.34 Wisconsin 0.00

Massachusetts 0.11 Ohio 0.00

Hawaii 0.04 Nevada 0.00

Kansas 0.00 California 0.00

Alabama 0.00 Virgin Islands 0.00

Virginia 0.00 Kentucky 0.00

Vermont 0.00 Michigan 0.00

Idaho 0.00 South Carolina 0.00

Minnesota 0.00 North Carolina 0.00

Delaware 0.00 Indiana 0.00

Minimally Solvent Not Minimally Solvent Not Minimally Solvent
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 FY 2011 Agency Financial Report     155t     

Black Lung Disability Benefit Program

The Black Lung Disability Benefit Program provides for compensation, medical and survivor benefits for eligible coal

miners who are totally disabled due to pneumoconiosis (black lung disease) arising out of their coal mine

employment. The U.S. Department of Labor operates the Black Lung Disability Benefit Program.    The Black Lung

Disability Trust Fund (BLDTF) provides benefit payments to eligible coal miners totally disabled by pneumoconiosis

when no responsible mine operator can be assigned the liability.   

Program Administration and Funding

Black lung disability benefit payments are funded by excise taxes from coal mine operators based on the sale of coal,

as are the program’s administrative costs.  These taxes are collected by the Internal Revenue Service and transferred

to the BLDTF, which was established under the authority of the Black Lung Benefits Revenue Act, and administered

by the U.S. Department of the Treasury.  Prior to October 3, 2008, the Black Lung Benefits Revenue Act provided for

repayable advances to the BLDTF from the general fund of the Treasury, in the event that BLDTF resources were not

adequate to meet program obligations.  

P.L. 110‐343, Division B‐‐Energy Improvement and Extension Act of 2008, enacted on October 3, 2008, in section

113, (1) allowed for the temporary increase in coal excise tax rates to continue an additional five years beyond the

current statutory limit and (2) restructured the BLDTF debt by refinancing the outstanding repayable advances

(which had higher interest rates) with the proceeds from issuing discounted debt instruments similar in form to

zero‐coupon bonds (which had lower interest rates), plus a one‐time appropriation.  This Act also allowed that any

debt issued by the BLDTF subsequent to the refinancing may be used to make benefit payments, other authorized

expenditures, or to repay debt and interest from the initial refinancing.  All debt issued by the BLDTF was effected

as borrowing from the Treasury's Bureau of Public Debt.  (See Notes 1J and 8)

P.L. 111‐148, Patient Protection and Affordable Care Act of 2010, enacted on March 23, 2010, in section 1556,

amended the Black Lung Benefits Act and became effective immediately.  Among other things, section 1556 affects

claims for (1) total disability benefits filed by miners with long histories of employment in the coal industry and (2)

survivors benefits filed by widows and other surviving dependents of totally disabled coal miners upon their death.  

The amendments apply to claims which were filed after 2004 and pending on this Act's effective date and

thereafter.  These amendments may make it easier for some coal miners and their surviving dependents to meet

the eligibility requirements for total disability and survivors benefits.  

The Division of Coal Mine Workers' Compensation (DCMWC) within the Office of Workers' Compensation Programs

administers the Black Lung Program and the payment of benefits under the Black Lung Benefits Act.  The Federal

Coal Mine Health and Safety Act sets Black Lung benefits at 37.5% of the base salary of a Federal employee at level

GS‐2, Step 1.  P.L. 111‐322, the Continuing Appropriations and Surface Transportation Extensions Act of 2011, was

enacted on December 22, 2010.  This Act, among other things, provided that no Federal employee statutory pay

adjustment would take effect during the period January 1, 2011 through December 31, 2012.  As a result, because

the Federal employee base salary will remain unchanged through 2012, the rates for Black Lung benefits will

likewise remain unchanged through 2012.
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

156     United States Department of Labor

Program Finances and Sustainability

At September 30, 2011, total liabilities of the BLDTF exceeded assets by $6.1 billion.  This net position represents the

accumulated shortfall of excise taxes necessary to meet benefit payments, administrative costs, and interest

expense incurred prior to and subsequent to the debt refinancing pursuant to P.L. 110‐343.  Prior to enactment of

P.L. 110‐343, this shortfall was funded by repayable advances to the BLDTF, which are repayable with interest.  

Pursuant to P.L. 110‐343, any shortfall will be financed with debt instruments similar in form to zero‐coupon bonds,

with a maturity date of one year and bear interest at the Treasury 1‐year rate.  Outstanding debt at September 30,

2011 was $6.2 billion, bearing interest rates ranging from 0.106% to 4.556%.  Excise tax revenues of $622.9 million,

benefit payment expense of $201.2 million and interest expense of $226.6 million were recognized for the year

ended September 30, 2011.   The interest expense is accrued and capitalized to the principal of the debt until the

debt reaches its face value at the time of maturity.  On September 30, 2011, the BLDTF issued debt in the amount of

$107.7 million, bearing interest at 0.106% and maturing on September 30, 2012.   At September 30, 2011, there

were 30 debt instruments with staggered maturities of September 30 for years 2012 through 2040, with a total

carrying value of $6.2 billion and a total face value at maturity of $10.4 billion.  Of these 30 debt instruments, 29 are

from the October 2008 refinancing and one debt instrument was issued on September 30, 2011.  

Other information about the BLDTF and social insurance reporting is also presented in Note 1‐W of the financial

statements.

Projected Cash Inflows and Outflows, in Constant Dollars

The beneficiary population is a nearly closed universe in which attrition by death exceeds new entrants by a ratio of

more than ten to one.  Projections for new participants are included in the overall projections and are considered

immaterial.  Therefore, the projections presented are for the open and closed group.

The significant assumptions used in the projections, in constant dollars, are coal excise tax revenue estimates,

number of beneficiaries, life expectancy, medical cost inflation, Federal civilian pay raises, the interest rate on new

debt issued by the BLDTF, and the Consumer Price Index‐Urban for goods and services (CPI‐U).  The use of CPI‐U

factors allows the projections to be presented in constant dollars with FY 2011 as the base year.  The valuation date

for the projections is September 30, 2011.    Cash projections depend on the assumptions used and actual

experience may differ from the projections.  These projections are sensitive to changes in the tax rate and changes

in interest rates on debt issued by the BLDTF.

These projections, in constant dollars, made over the twenty‐nine year period ending September 30, 2040, indicate

that cash inflows from excise taxes will exceed cash outflows for benefit payments and administrative expenses for

each period projected.  Cumulative net cash inflows are projected to reach $8.8 billion by FY 2040.  However, when

payments from the BLDTF’s maturing debt are applied against this surplus cash inflow, the BLDTF’s cash flow turns

negative in FY 2012 and each of the subsequent periods included in the projections.    Net cash outflows after

payments on maturing debt are projected to reach $13.3 billion by the end of FY 2040, resulting in a projected

deficit of $6.2 billion at September 30, 2040.  (See Chart I)   

The net present value of future projected benefit payments and other cash inflow and outflow activities together

with the fund’s deficit positions as of September 30, 2011, 2010, 2009, 2008, and 2007 are presented in the

Statement of Social Insurance.  Yearly cash inflows and outflows are presented in Table I.  Amount totals in tables

may differ slightly due to rounding.   
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 FY 2011 Agency Financial Report     157t     

Chart I

0

100

200

300

400

500

600

700

800

900

1,000

2012 2016 2020 2024 2028 2032 2036 2040

$ - Millions

BLACK LUNG DISABILITY TRUST FUND

CASH INFLOW AND OUTFLOW IN CONSTANT DOLLARS

Total Cash Outflow Total Cash Inflow Cash Outflow Before Repayment of Debt and Interest

Projected Cash Inflows and Outflows with Sensitivity Analysis, in Constant Dollars

For the projected cash inflows and outflows with sensitivity analysis, in constant dollars, the significant assumptions

for Federal civilian pay raises were modified, but the other significant assumptions were left unchanged.    The

Federal Coal Mine Health and Safety Act sets Black Lung benefits at 37.5% of the base salary of a Federal employee

at level GS‐2.  The significant assumptions for Federal civilian pay raises were modified to reflect that no Federal

employee statutory pay adjustment would take effect through December 31, 2015 (instead of 2012).  As a result,

because the Federal employee base salary would remain unchanged through 2015, the rates for Black Lung benefits

would likewise remain unchanged through 2015.  Even after statutory pay adjustments return in 2016, they would

be applied to lower amounts of benefits and this would decrease the benefit amounts through FY 2040.    Cash

projections depend on the assumptions used and actual experience may differ from the projections.    These

projections are sensitive to changes in the tax rate and changes in interest rates on debt issued by the BLDTF.

These projections with sensitivity analysis, in constant dollars, made over the twenty‐nine year period ending

September 30, 2040, indicate that cash inflows from excise taxes would exceed cash outflows for benefit payments

and administrative expenses for each period projected.  Cumulative net cash inflows would be projected to reach

$8.8 billion by the year 2040.  However, when payments from the BLDTF’s maturing debt are applied against this

surplus cash inflow, the BLDTF’s cash flow would turn negative in 2012 and each of the subsequent periods included

in the projections.  Net cash outflows after payments on maturing debt would be projected to reach $13.1 billion by

the end of the year 2040, and would result in a projected deficit of $6.0 billion at September 30, 2040.  (See Chart II)

Yearly cash inflows and outflows are presented in Table II.    Amount totals in tables may differ slightly due to

rounding.   
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

158     United States Department of Labor

Chart II

0

100

200

300

400

500

600

700

800

900

1,000

2012 2016 2020 2024 2028 2032 2036 2040

$ - Millions

BLACK LUNG DISABILITY TRUST FUND

CASH INFLOW AND OUTFLOW IN CONSTANT DOLLARS

SENSITIVITY ANALYSIS

Total Cash Outflow Total Cash Inflow Cash Outflow Before Repayment of Debt and Interest

Open and Closed Group Measure with Sensitivity Analysis

For the open and closed group measure with sensitivity analysis, the significant assumptions for Federal civilian pay

raises were modified, but the other significant assumptions were left unchanged.  The Federal Coal Mine Health and

Safety Act sets Black Lung benefits at 37.5% of the base salary of a Federal employee at level GS‐2.  The significant

assumptions for Federal civilian pay raises were modified to reflect that no Federal employee statutory pay

adjustment would take effect through December 31, 2015 (instead of 2012).    As a result, because the Federal

employee base salary would remain unchanged through 2015, the rates for Black Lung benefits would likewise

remain unchanged through 2015.  Even after statutory pay adjustments return in 2016, they would be applied to

lower amounts of benefits and this would decrease the benefit amounts through FY 2040.   

As a result of changing the significant assumptions for Federal civilian pay raises as described above, for FY 2011 the

actuarial present value of future benefit payments during the projection period to disabled coal miners and

dependent survivors would decrease ($88,958) from $1,951,755 as reported on the Statement of Social Insurance

(SOSI) to $1,862,797; the actuarial present value of future benefit payments and present value of estimated

administrative costs during the projection period would decrease ($88,958) from $2,887,199 as reported on the

SOSI to $2,798,241; the excess of present value of estimated future excise tax income over actuarial present value

of estimated administrative costs during the projection period for current and future participants (open and closed

group measure) would increase $88,958 from $4,720,229 as reported on the SOSI to $4,809,187.  The trust fund net

position deficit at the start of the projection period would remain unchanged.

Cash projections depend on the assumptions used and actual experience may differ from the projections.  These

projections are sensitive to changes in the tax rate and changes in interest rates on debt issued by the BLDTF.
Table I 

(Dollars in thousands) 2012 2013 2014 2015 2016 2017 - 

Balance, start of year $ (6,099,261) (5,817,936) $ (5,556,818) $ (5,321,403) $ (5,103,436) $ (4,90

$ 

Cash inflow

Excise taxes 575,260 561,224 545,997 538,692 535,446 6,05

 

Total cash inflow 561,224 575,260 545,997 538,692 535,446 6,05

 

Cash outflow

Disabled coal miners benefits 199,738 182,767 167,727 153,159 139,774 1,35

 

Administrative costs 57,630 58,368 59,191 57,999 56,869 78

 

Cash outflows before repayment of

 debt and interest 241,135 257,368 226,918 211,158 196,643 2,14

 

Cash inflow over cash outflow  before repayment of debt and interest 317,892 320,089 319,079 327,534 338,803 3,90

 

Maturity of obligations refinanced October 2008 422,856 434,794 445,897 455,171 468,862 5,55

 

Interest on annual borrowings 5,120 113 12,499 20,087 27,146 2,20

 

Total cash outflow 681,049 680,337 685,314 686,416 692,651 9,90

 

Total cash outflow over total cash inflow (105,077) (119,825) (139,317) (147,724) (157,205) (3,85

 

Reduction of debt refinanced October 2008 386,401 380,943 374,732 365,691 358,969 2,52

 

Balance, end of year $ (5,556,818) (5,817,936) $ (5,321,403) $ (5,103,436) $ (4,901,672) $ (6,22

$ 

CASH INFLOW AND OUTFLOW OF THE BLACK LUNG DISABILITY TRUST FUND IN CONSTANT DOLLARS

FOR THE TWENTY-NINE YEAR PERIOD ENDING SEPTEMBER 30, 2040

U.S. DEPARTMENT OF LABOR

SUPPLEMENTARY SOCIAL INSURANCE INFORMATION

FY 2011 Agency Financial Report     159t    
Table II 

(Dollars in thousands) 2012 2013 2014 2015 2016 2017 Balance, start of year $ (5,817,936) (6,099,261) $ (5,555,081) $ (5,314,399) $ (5,087,724) $ (4,

$ 

Cash inflow

Excise taxes 575,260 561,224 545,997 538,692 535,446 6,

 

Total cash inflow 561,224 575,260 545,997 538,692 535,446 6,

 

Cash outflow

Disabled coal miners benefits 199,738 181,030 162,521 144,740 131,278 1,

 

Administrative costs 57,630 58,368 59,191 57,999 56,869 

Cash outflows before repayment of

 debt and interest 239,399 257,368 221,713 202,739 188,147 2,

 

Cash inflow over cash outflow  before repayment of debt and interest 317,892 321,825 324,284 335,953 347,299 3,

 

Maturity of obligations refinanced October 2008 422,856 434,794 445,897 455,171 468,862 5,

 

Interest on annual borrowings 5,120 113 12,438 19,798 26,467 2,

 

Total cash outflow 679,312 680,337 680,047 677,708 683,476 9,

 

Total cash outflow over total cash inflow (118,088) (105,077) (134,050) (139,016) (148,030) (3,

 

Reduction of debt refinanced October 2008 386,401 380,943 374,732 365,691 358,969 2,

 

Balance, end of year $ (5,555,081) (5,817,936) $ (5,314,399) $ (5,087,724) $ (4,876,785) $ (6,

$ 

 U.S. DEPARTMENT OF LABOR

SUPPLEMENTARY SOCIAL INSURANCE INFORMATION SENSITIVITY ANALYSIS

CASH INFLOW AND OUTFLOW OF THE BLACK LUNG DISABILITY TRUST FUND IN CONSTANT DOLLARS

FOR THE TWENTY-NINE YEAR PERIOD ENDING SEPTEMBER 30, 2040

160     United States Department of Labort     
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 Agency Financial Report    161

STATEMENT OF BUDGETARY RESOURCES

The principal Combined Statement of Budgetary Resources combines the availability, status and outlay of DOL’s

budgetary resources during FY 2011 and 2010.    Presented on the following pages is the disaggregation of this

combined information for each of the Department’s major budget agencies.
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

162     United States Department of Labor

COMBINING STATEMENT OF BUDGETARY RESOURCES

For the Year Ended September 30, 2011

Employment Employment Office

and Training Standards of 

(Dollars in thousands) Administration Administration Job Corps

BUDGETARY RESOURCES

Unobligated balance, brought forward, October 1 2,238,705 $ $ 763,332 1,007,921 $ 

Recoveries of prior year unpaid obligations 266,222 21,569 36,043

Budget authority

Appropriations received 172,123,139 3,342,877 1,701,585

Borrowing authority 26,640,000 107,749 -

Spending authority from offsetting collections

Earned

Collected 20,090 2,824,292 532

Change in receivables from Federal sources (33,276) (43,888) -

Change in unfilled customer orders

Advance received - - -

Without advance from Federal sources 822 - -

Expenditure transfers from trust funds 4,752,275 36,126 -

Total budget authority 203,503,050 6,267,156 1,702,117

Nonexpenditure transfers, net (14,213) 4,902 14,068

Temporarily not available pursuant to Public Law - (16,004) -

Permanently not available - - -

Redemption of debt (13,238,151) (461,065) -

All other (8,986,637) (86,345) (721,350) 

Total budgetary resources $ 183,768,976 $ 6,103,129 2,429,215 $ 

STATUS OF BUDGETARY RESOURCES

Obligations incurred

Direct $ 181,815,840 $ 1,787,302 2,779,472 $ 

Reimbursable 30,993 2,675,673 -

Total obligations incurred 181,846,833 5,455,145 1,787,302

Unobligated balances available

Apportioned 694,547 241,803 191,087

Exempt from apportionment - 62,478 -

Total unobligated balances available 694,547 304,281 191,087

Unobligated balances not available 1,227,596 450,826 343,703 

Total status of budgetary resources $ 183,768,976 $ 6,103,129 2,429,215 $ 

CHANGE IN OBLIGATED BALANCE

Obligated balance, net 

Unpaid obligations, brought forward, October 1 16,964,600 $ $ 454,841 276,858 $ 

Less uncollected customer payments from Federal sources, 

 brought forward, October 1 (1,899,939) 23,577 -

Total unpaid obligated balance, net 15,064,661 300,435 454,841

Obligations incurred, net 181,846,833 5,455,145 1,787,302

Less gross outlays (184,360,764) (5,412,262) (1,685,997)

Other - - -

Less recoveries of prior year unpaid obligations, actual (266,223) (21,569) (36,042)

Change in uncollected customer payments from Federal sources (122,053) 43,888 -

Obligated balance, net, end of period

Unpaid obligations 14,184,446 298,172 520,104

Less uncollected customer payments from Federal sources (2,021,992) 67,465 -

Total unpaid obligated balance, net, end of period $ 12,162,454 $ 520,104 365,637 $ 

NET OUTLAYS

Gross outlays $ 184,360,764 $ 1,685,997 5,412,262 $ 

Less offsetting collections (4,617,861) (2,860,418) (532)

Less distributed offsetting receipts (53,090,479) (2,469) -

Net outlays $ 126,652,424 $ 2,549,375 1,685,465 $ 
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 Agency Financial Report    163

Occupational Bureau of Mine Safety Employee Benefits Veterans' Other

Safety and Health Labor and Health Security Employment Departmental

Administration Statistics Administration Administration and Training Programs Total

$ 7,825 21,311 $ 7,107 $ $ 4,488 $ 6,227 $ 4,191,543 134,627 $ 

 84,609 2,908 3,337 3,759 2,909 14,905 436,261

 533,183 558,620 363,843 154,861 45,971 484,951 179,309,030

 - - - - - - 26,747,749

 8,178 1,610 1,562 5,813 21 261,837 3,123,935

 195 (7,204) - - - 2,109 (82,064)

 - 127 - 1 - (22,530) (22,402)

 - - - - - - 822

 78,107 - - - 209,736 31,957 5,108,201 

 619,790 553,026 365,405 160,675 255,728 758,324 214,185,271

 (769) 1,076 (1,352) 17,768 (325) 5,002 26,157

 - - - - - - (16,004)

 - - - - - -

 - - - - - (13,699,216) - 

 (3,130) (1,402) (961) (1,196) (2,053) (9,812,648) (9,574) 

$ 708,325 576,919 $ 373,536 $ 185,494 $ $ 262,486 $ 195,311,364 903,284 $ 

$ 663,037 557,478 $ 367,108 $ 162,890 $ $ 255,466 $ 188,956,056 567,463 $ 

 8,035 1,320 1,594 5,817 - 2,979,047 255,615 

 671,072 558,798 368,702 168,707 255,466 823,078 191,935,103

 480 13 1,998 11,749 2,070 45,376 1,189,123

 - - - - - 62,478 - 

 480 13 1,998 11,749 2,070 45,376 1,251,601

 18,108 36,773 2,836 5,038 4,950 34,830 2,124,660 

$ 708,325 576,919 $ 373,536 $ 185,494 $ $ 262,486 $ 195,311,364 903,284 $ 

$ 114,323 111,859 $ 37,810 $ $ 46,436 $ 90,040 $ 18,448,078 351,311 $ 

 (516) (9,703) - - (17,190) (1,911,539) (7,768) 

 113,807 102,156 37,810 46,436 72,850 343,543 16,536,539

 671,072 558,798 368,702 168,707 255,466 823,078 191,935,103

 (615,106) (565,513) (356,328) (168,436) (253,403) (741,888) (194,159,697)

 - - - - - - -

 (84,609) (2,909) (3,337) (3,760) (2,909) (14,903) (436,261)

 (195) 7,204 - - 16,307 (56,958) (2,109) 

 85,680 102,235 46,847 42,947 89,194 417,598 15,787,223

 (711) (2,499) - - (883) (1,968,497) (9,877) 

$ 84,969 99,736 $ 46,847 $ $ 42,947 $ 88,311 $ 13,818,726 407,721 $ 

$ 615,106 565,513 $ 356,328 $ 168,436 $ $ 253,403 $ 194,159,697 741,888 $ 

 (86,412) (1,610) (1,562) (5,814) (226,063) (271,263) (8,071,535)

 - - - - - (53,119,556) (26,608) 

$ 528,694 563,903 $ 354,766 $ 162,622 $ $ 27,340 $ 132,968,606 444,017 $ 
Financial Section

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

164     United States Department of Labor

COMBINING STATEMENT OF BUDGETARY RESOURCES

For the Year Ended September 30, 2010

Employment Employment Office

and Training Standards of 

(Dollars in thousands) Administration Administration Job Corps

BUDGETARY RESOURCES

Unobligated balance, brought forward, October 1 2,310,218 $ $ 766,909 925,448 $ 

Recoveries of prior year unpaid obligations 107,214 1,840 20,844

Budget authority

Appropriations received 220,750,431 2,934,510 1,708,205

Borrowing authority 29,050,000 60,000 - 

Spending authority from offsetting collections

Earned

Collected 41,572 2,687,605 7,901

Change in receivables from Federal sources 458 (23,759) - 

Change in unfilled customer orders

Advance received - - - 

Without advance from Federal sources (822) - - 

Expenditure transfers from trust funds 4,715,245 34,844 - 

Total budget authority 254,556,884 5,693,200 1,716,106

Nonexpenditure transfers, net (3,340) 4,263 8,850

Temporarily not available pursuant to Public Law - (38,626) - 

Permanently not available

Redemption of debt (2,889,021) (353,424) - 

All other (1,644,184) (10,341) (54,531) 

Total budgetary resources $ 252,437,771 $ 6,178,170 2,502,368 $ 

STATUS OF BUDGETARY RESOURCES

Obligations incurred

Direct $ 250,171,209 $ 1,738,399 2,278,467 $ 

Reimbursable 27,857 637 2,891,782 

Total obligations incurred 250,199,066 5,170,249 1,739,036

Unobligated balances available

Apportioned 1,653,268 599,242 738,910

Exempt from apportionment 1 386,905 - 

Total unobligated balances available 1,653,269 986,147 738,910

Unobligated balances not available 585,436 21,774 24,422 

Total status of budgetary resources $ 252,437,771 $ 6,178,170 2,502,368 $ 

CHANGE IN OBLIGATED BALANCE

Obligated balance, net 

Unpaid obligations, brought forward, October 1 16,643,118 $ $ 582,354 269,839 $ 

Less uncollected customer payments from Federal sources, 

 brought forward, October 1 (2,317,856) (182) - 

Total unpaid obligated balance, net 14,325,262 269,657 582,354

Obligations incurred, net 250,199,066 5,170,249 1,739,036

Less gross outlays (249,770,370) (5,161,391) (1,845,855)

Other - - 150

Less recoveries of prior year unpaid obligations, actual (107,213) (1,840) (20,844)

Change in uncollected customer payments from Federal sources 417,918 23,759 - 

Obligated balance, net, end of period

Unpaid obligations 16,964,600 276,858 454,841

Less uncollected customer payments from Federal sources (1,899,939) 23,577 - 

Total unpaid obligated balance, net, end of period $ 15,064,661 $ 454,841 300,435 $ 

NET OUTLAYS

Gross outlays $ 249,770,370 $ 1,845,855 5,161,391 $ 

Less offsetting collections (5,174,371) (2,722,449) (7,901)

Less distributed offsetting receipts (56,305,080) (20,233,057) (1,089)

Net outlays $ 188,290,919 $ (17,794,115) $ 1,836,865
Annual Financial Statements

REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

FY 2011 Agency Financial Report    165

Occupational Bureau of Mine Safety Employee Benefits Veterans' Other

Safety and Health Labor and Health Security Employment Departmental

Administration Statistics Administration Administration and Training Programs Total

$ 8,617 15,813 $ 2,311 $ $ 5,892 $ 5,230 $ 4,124,635 84,197 $ 

 4,460 16,166 817 464 1,321 9,426 162,552

 533,183 558,620 357,293 154,861 45,971 490,151 227,533,225

 - - - - - - 29,110,000

 9,060 1,928 1,625 7,682 34 216,291 2,973,698

 516 1,590 - - 883 (661) (20,973)

 - - - - - 33,299 33,299

 - - - - - - (822)

 78,264 - - - 210,156 31,666 5,070,175 

 621,023 562,138 358,918 162,543 257,044 770,746 264,698,602

 (3,486) 4,425 7,246 6,574 (65) (30,849) (6,382)

 - - - - - - (38,626)

 - - - - - - (3,242,445)

 (3,287) (6,402) (196) (514) (3,334) (1,730,312) (7,523) 

$ 627,327 592,140 $ 369,096 $ 174,959 $ $ 260,196 $ 263,968,024 825,997 $ 

$ 610,071 568,077 $ 360,841 $ 163,027 $ $ 253,969 $ 256,587,422 443,362 $ 

 9,431 2,752 1,148 7,444 - 3,189,059 248,008 

 619,502 570,829 361,989 170,471 253,969 691,370 259,776,481

 1,265 1,969 5,645 2,964 2,207 62,427 3,067,897

 - - - - - 386,996 90 

 1,265 1,969 5,645 2,964 2,207 62,517 3,454,893

 19,342 6,560 1,462 1,524 4,020 72,110 736,650 

$ 627,327 592,140 $ 369,096 $ 174,959 $ $ 260,196 $ 263,968,024 825,997 $ 

$ 102,301 91,479 $ 32,599 $ 46,273 $ $ 73,960 $ 18,216,935 375,012 $ 

 (8,113) - - - - (2,331,775) (5,624) 

 102,301 83,366 32,599 46,273 73,960 369,388 15,885,160

 619,502 570,829 361,989 170,471 253,969 691,370 259,776,481

 (603,020) (534,283) (355,961) (169,844) (236,568) (705,644) (259,382,936)

 - - - - - - 150

 (4,460) (16,166) (817) (464) (1,321) (9,427) (162,552)

 (516) (1,590) - - (17,190) 420,236 (2,145) 

 114,323 111,859 37,810 46,436 90,040 351,311 18,448,078

 (516) (9,703) - - (17,190) (1,911,539) (7,768) 

$ 113,807 102,156 $ 37,810 $ 46,436 $ $ 72,850 $ 16,536,539 343,543 $ 

$ 603,020 534,283 $ 355,961 $ 169,844 $ $ 236,568 $ 259,382,936 705,644 $ 

 (87,324) (1,928) (1,625) (7,682) (193,883) (278,450) (8,475,613)

 - (227) - (77,899) (3,550) (76,620,902) - 

$ 515,696 532,355 $ 354,109 $ 84,263 $ $ 39,135 $ 174,286,421 427,194 $ 
  
REQUIRED SUPPLEMENTARY INFORMATION

(Unaudited)

  

Other Accompanying Information

(Unaudited)

FY 2011 Agency Financial Report    169

Top Management Challenges

The Top Management Challenges identified by the Office of the Inspector General (OIG) for the Department of

Labor (DOL) are discussed below.   

2011 Top Management Challenges Facing the Department of Labor

For 2011, the OIG considers the following as the most serious management and performance challenges facing the

Department:   

•     Protecting the Safety and Health of Workers

•     Improving Performance Accountability of Workforce Investment Act Grants

•     Ensuring the Effectiveness of the Job Corps Program

•     Safeguarding Unemployment Insurance

•     Improving the Management of Workers’ Compensation Programs

•     Maintaining the Integrity of Foreign Labor Certification Programs

•     Ensuring the Security of Employee Benefit Plan Assets

•     Securing Information Technology Systems and Protecting Related Information Assets

•     Ensuring the Successful Development and Implementation of Major Information Management Systems

•     Ensuring the Effectiveness of Veterans’ Employment and Training Programs

•     Improving Procurement Integrity

For each challenge, the OIG presents the challenge, the OIG’s assessment of the Department’s progress in

addressing the challenge, and what remains to be done. These top management challenges are intended to identify

and help resolve serious weaknesses in areas that involve substantial resources and provide critical services to the

public.

CHALLENGE:  Protecting the Safety and Health of Workers

OVERVIEW:  

The two DOL agencies primarily responsible for protecting workers are the Occupational Safety and Health

Administration (OSHA) and the Mine Safety and Health Administration (MSHA). The Department is responsible for

ensuring safe and healthful working conditions for 130 million workers at more than seven million establishments,

and more than 350,000 miners who work at more than 14,500 mines nationwide. DOL’s effective enforcement of

worker safety laws is critical towards this end. However, both OSHA and MSHA must constantly balance the

mandate of their missions with competing interests of business, labor, and other special interests.

CHALLENGE FOR THE DEPARTMENT:

Occupational Safety and Health Administration – With more than seven million entities under its oversight and

4,547 fatal workplace injuries reported by the Bureau of Labor Statistics (BLS) in 2010, OSHA continues to be

challenged on how to best target its resources, and measure the impact of its policies and programs and those of

the 27 states authorized by OSHA to operate their own safety and health programs. OSHA carries out its

enforcement responsibilities through a combination of self‐initiated and complaint investigations, but can reach

only a fraction of the entities it regulates. Consequently, OSHA must strive to target the most egregious and

persistent violators while protecting the most vulnerable worker populations.

Determining the Effectiveness of Federally and State Operated Worker Safety and Health Programs–While OSHA is

required to ensure that state‐operated programs are at least as effective as the safety and health programs
Other Accompanying Information

(Unaudited)

170     United States Department of Labor

operated directly by Federal OSHA, a recent OIG audit found that OSHA lacks outcomes‐based performance metrics

to measure and demonstrate the causal effect of its own Federal programs on the safety and health of workers.  

Without such metrics, OSHA cannot determine the effectiveness of either Federally‐operated or state‐run worker

safety and health programs.  

Evaluating the Impact of Penalty Reductions – OSHA reduces penalties imposed on employers cited for safety and

health violations as an incentive for employers to voluntarily correct safety and health violations. During the two‐

year period ending in June of 2009, OSHA inspections resulted in 142,187 citations, of which 98 percent received

reductions with penalties of $523.5 million being reduced by $351.2 million (67percent). However, OSHA has not

yet completed any evaluations as to whether penalty reductions actually result in enhanced compliance with safety

and health rules.    

Mine Safety and Health Administration – With more than 7,000 injuries and 71 fatalities reported in 2010, MSHA

continues to be challenged to effectively manage its enforcement efforts and programs to ensure that every miner

returns home safely at the end of each day.

Completing Mandatory Regular Safety and Health Inspections –Historically, MSHA has struggled to complete all of

its mandated Regular Safety and Health mine inspections, as required by the Mine Act.    In 2007, an OIG audit

reported that MSHA was not completing all required inspections at the nation’s coal mines. In a report issued in

2011, the OIG found that MSHA should be more transparent in reporting inspections. Although MSHA reported it

completed all statutorily required Regular Safety and Health inspections of Metal/NonMetal mines in FY 2010, it

had recorded only “attempted inspections” at more than 5 percent of the mines because those mines were

temporarily idle on the day(s) on which MSHA visited the mines.

Applying Available Enforcement Authorities– Although the Mine Act provides MSHA with an array of enforcement

tools, only recently has MSHA begun exercising some of its strongest authorities. A 2010 OIG audit questioned

MSHA’s ability to accurately identify repeat and egregious violators through its Pattern of Violations (POV) analysis

and reported that, in 32 years it had never exercised its POV authority to place a mine on this enhanced

enforcement despite concerns that recent mine fatalities might be linked to mines with patterns of violations.

Timely identification of, and strong action against, the most serious violators is critical to protecting our nation’s

miners.

Addressing Contested Citations – As a result of stepped‐up enforcement and the revised penalty provisions

implemented in 2007, there has been an increase in citations and monetary fines issued by MSHA.  However, mine

operators have contested a growing percentage of citations before the Federal Mine Safety and Health Review

Commission (FMSHRC), limiting MSHA’s enforcement impact and straining its resources.

Maintaining an experienced and properly trained enforcement staff– MSHA must continue to recruit, train, and

adequately supervise its enforcement workforce to meet its statutory obligations. This challenge will be

exacerbated by retirements, with 41 percent of MSHA’s enforcement personnel eligible to retire by 2014.  

Moreover, a 2010 OIG audit raised concerns about the supervision of inspector trainees and the continuing

education of journeyman inspectors.  

Timely Setting and Updating of Regulations and Standards– As scientific knowledge and mining practices change,

MSHA must assure that its standards and regulations keep pace.    MSHA’s regulatory agenda, as of July 2011,

contained seven separate proposed rulemakings.  For example, MSHA has proposed lowering coal miners’ exposure

to coal dust, which is a change aimed at addressing recent increases in Black Lung disease among coal miners.

MSHA will be challenged to issue final regulations in a timely manner while effectively and efficiently incorporating

input from various stakeholders during the rulemaking process.
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FY 2011 Agency Financial Report    171

Fostering the Development and Implementation of New Technologies– Mining accidents in recent years have placed

renewed attention on improving mine safety through the development and use of new technologies such as

wireless underground communication and miner tracking systems, a new generation of self‐contained breathing

apparatuses, and real‐time monitoring devices such as a coal dust explosibility meter. While not directly responsible

for developing such technology, MSHA’s challenge is to encourage development of these new tools within the

industry.

DEPARTMENT’S PROGRESS:

OSHA continues to review and enhance its Severe Violator Enforcement Program (SVEP), which is designed to

concentrate resources on inspecting employers who repeatedly violate the OSH Act. OSHA revised its penalty policy

which increased penalty amounts and decreased prior reductions in an effort to deter employer non‐compliance

with OSHA’s standards.  

Moreover, the Department introduced a new approach to measuring the performance of worker protection

agencies. Central to this new approach is establishing regular processes for evaluating the success of enforcement

strategies in helping to achieve desired outcomes. In this regard, the Department initiated a multi‐year study of

OSHA’s Site‐Specific Targeting program to assess the impact of the program interventions on future employer

compliance.  

MSHA continues to identify and hire mine inspector candidates within authorized personnel levels. MSHA has

increased the use of videoconferencing and on‐line courses to more quickly and conveniently deliver training.  It

has also made changes to more accurately and timely track training of new inspectors. MSHA has re‐emphasized its

policy requiring periodic retraining of all inspectors, including establishing a policy that prohibits personnel from

conducting inspections if required retraining has not been completed and verified.    During FY 2010 MSHA

implemented new supervisory training programs for Metal/NonMetal and coal supervisors.  MSHA reported that

Metal/NonMetal supervisors have completed the training, and coal supervisors were expected to have completed it

by the end of October 2011.

In November 2010, MSHA designed and implemented new criteria for identifying mines with a pattern of violations

and established new criteria for potential POV mines to avoid receiving a POV notice.  Since November 2010, MSHA

has issued potential POV notices to 18 mines, including two mines that failed to maintain their improvements after

initially meeting MSHA’s criteria.    As a result, for the first time in its history, MSHA placed mines under the

enhanced enforcement of the POV authority.  It also developed an on‐line database that allows mine operators,

miners, or the general public to monitor any mine’s status in relation to the POV criteria. In January 2011, MSHA

published proposed regulations aimed at further strengthening the existing POV process.

Using a supplemental appropriation received in July 2010, MSHA continues to work with the FMSHRC and DOL’s

Office of the Solicitor (SOL) to reduce a specific backlog of 10,425 cases that existed at July 31, 2010.  Through July

28, 2011, this initial backlog had been reduced to 3,501 cases.  However, MSHA reported that the overall FMSHRC

caseload remained at 12,177 cases in September 2011 (down from a high of 15,082 cases in January 2011) as a

result of additional appeals filed by mine operators after July 2010.  

During FY 2011, MSHA published Proposed Rules related to lowering miners' exposure to respirable coal dust,

strengthening requirements for examinations of underground coal mines. In June 2011, MSHA published a Final

Rule increasing the rock dust requirements in underground coal mines.

MSHA has recently approved the first wireless communication system for use in underground mines and continues

to support the National Institute for Occupational Safety and Health’s efforts to develop a hand‐held rock dust

monitor by conducting tests of developmental models.  MSHA stated it has proposed or finalized requirements for

proximity detection systems for continuous mining machines in underground coal mines, refuge alternatives in

underground mines, and improved flame‐resistant conveyor belts.   MSHA also stated it has conducted outreach
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with stakeholders, miners’ representatives and the mining community to promote adoption of new technology,

such as the next generation self‐contained self‐rescue device.

WHAT REMAINS TO BE DONE:   

OSHA should to continue its efforts to ensure SVEP is operating as intended. As part of the Department’s new

approach to measuring the success of enforcement strategies, OSHA needs to continue its efforts to evaluate the

impact of penalty reductions on comprehensive improvements to workplace safety and health, and evaluate

whether State Plan programs are as effective as Federal OSHA in protecting workers.  

MSHA must take steps to: complete all required inspections; finalize proposed POV regulations implementing

procedures to facilitate early resolution of enforcement issues; collaborate with the FMSHRC to reduce the time it

takes to resolve contested cases before the FMSHRC; timely complete its rulemaking agenda; and encourage

technological advances.

CHALLENGE: Improving Performance Accountability of Workforce Investment Act Grants  

OVERVIEW:

In FY 2011, the Department’s Employment and Training Administration (ETA) reported program costs totaling  

$4.1 billion for the Workforce Investment Act (WIA) Adult, Dislocated Worker, and Youth programs. WIA adult

employment and training services are provided through financial assistance grants to states and territories to

design and operate programs for disadvantaged persons, including public assistance recipients. ETA also awards

grants to states to provide reemployment services and retraining assistance to individuals dislocated from their

employment. Youth programs are funded through grant awards that support program activities and services to

prepare low‐income youth for academic and employment success, including summer jobs.  

CHALLENGE FOR THE DEPARTMENT:

Successfully meeting the employment and training needs of citizens requires selecting the best service providers,

making expectations clear to grantees, ensuring that success can be measured, providing active oversight, and

disseminating and replicating proven strategies and programs. DOL is challenged to ensure the grants it awards

accomplish program objectives and that the performance data reported by the grantees are accurate and reliable.

Ensuring Grant Objectives Are Accomplished – The Department is challenged to ensure the grants it awards

accomplish program objectives. Most critically, the Department needs to know whether training provided by

grantees leads to training‐related employment. A recent OIG audit of the WIA Adult and Dislocated Worker

programs found that training related employment data reported by grantees was incomplete and unreliable. For a

sample of 362 Adult and Dislocated Worker program exiters, OIG found that 37 percent either did not obtain

employment or their employment was unrelated to the training they received. Additionally, for another 10 percent,

the states could not provide sufficient evidence to determine whether the reported placement was training‐related.

OIG projected that the amount of funds paid for training these types of exiters totaled approximately $124 million.  

As reported by GAO in March 2011, the Department’s research related to job training and employment generally

addresses key employment and training issues. However, GAO found that some studies were limited in their

usefulness and suggested that future research should include a focus on employment and training approaches that

work and for whom. GAO also noted that WIA required the Department to conduct at least one multi‐site control

group evaluation of the services and programs under WIA by the end of FY 2005.  ETA delayed executing such a

study, soliciting proposals in November 2007 and awarding the $23 million contract in June 2008.  Several design

revisions have been made to the study, and ETA expects to receive the final report in 2015 – 10 years later than the

WIA‐mandated timeframe.
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FY 2011 Agency Financial Report    173

Federal project officers are assigned to monitor grants, but carry a heavy workload. Monitoring is also limited by

the amount of travel funds available. Further, WIA formula funds are awarded to states, who then distribute the

funds to local workforce investment areas within their states. As a result, ETA must rely on state monitoring efforts

and reporting to assess grant performance. Reliable and timely performance data are needed to allow ETA to

identify performance problems in time to correct them.  

For example, a recent OIG audit of $500 million in American Recovery and Reinvestment Act (Recovery Act) grants

intended to prepare workers for green jobs found that the program’s slow pace in placing workers into green jobs

raises concerns that the original placement goals may not be reached before the grant periods expire. Of the

$490.1 million of grants awarded, $162.8 million or 33 percent had been spent with about 73 percent of the grant

period having elapsed as of June 30, 2011. More than two years after the Recovery Act was signed and 18 months

after the grants were awarded, grantees have reported placing 8,035 participants (10 percent) into employment

out of the planned goal of 79,511 participants. Of the 96,658 participants who were to be trained, 26,142 or 27

percent had completed training. Grantees have also expressed concerns that the expected green jobs have not

materialized and that job placements have been fewer than expected for this point in the grant program. While ETA

stated it expects performance to significantly increase following an initial lag during the standard start‐up phase of

the grants, the OIG remains concerned that the low placement rate makes it unlikely the program will meet its goal

of placing nearly 80,000 workers in green jobs by 2013.

Meeting Increased Demand for Services – The performance of the Department’s employment and training

programs is impacted by the nation’s economic conditions. The downturn of the economy has placed additional

pressures on the workforce system as more workers are in need of its services. Meeting this increase in demand,

while continuing to provide intensive services, such as career counseling and case management, are critical to

helping workers find new jobs quickly.

Coordinating with Other Service Providers –The Government Accountability Office (GAO) recently issued a report

addressing fragmentation, overlap, and potential duplication in Federal employment and training programs. ETA is

challenged to address the collocation issues that GAO presented, specifically the collocating of the U.S. Department

of Health and Human Services’ (HHS) Temporary Assistance for Needy Families (TANF) and DOL’s Employment

Service and WIA programs. These challenges include how to serve additional clients given the limited capacity of

One‐Stop Centers and potential lease restrictions, how to navigate philosophical differences among programs and

address the multiple needs of TANF clients in the one‐stop center setting, how to ensure that services are

geographically accessible, whether the potential benefits of collocating TANF in One‐Stop Centers outweigh the

potential costs of no longer collocating these services with other services for low‐income families, and whether, and

to what extent, TANF will contribute to one‐stop center operating costs.  

DEPARTMENT’S PROGRESS:  

In September 2010, ETA executed a contract for the services of 14 staff for 12 months to assist with grant

management activities for Recovery Act grants.  These staff performed duties such as monitoring, audit resolution,

and reporting under Section 1512 of the Recovery Act.

ETA and the Department have taken steps to improve the way research is conducted, and ETA has reported that it

has taken several actions to address GAO’s recommendations.    The Department recently established the Chief

Evaluation Office to oversee department‐wide research and evaluation efforts, and ETA stated it is formally

incorporating the routine involvement of the Chief Evaluation Officer into its research process.  ETA also reported it

has begun involving outside experts in developing its research plan and it has made improvements to its Web‐based

database for disseminating research and evaluation findings, including development of strategies to support

broader and more innovative marketing efforts for disseminating research and evaluation reports.  

ETA has made design changes to the WIA Gold Standard Evaluation of the Adult and Dislocated Worker programs.

ETA expects to receive the first evaluation report (on implementation) during the winter of 2012‐2013 and the final
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report in 2015. Through this evaluation, ETA intends to measure the net impact of specific interventions, such as

the incremental effects of the intensive and training services provided to adults and dislocated workers.  The multi‐

year WIA Gold Standard is funded on an annual basis and is contingent on the availability of appropriated funding.

ETA completed and began field testing a draft data validation supplement to the Core Monitoring Guide used by its

Federal project officers. The supplement includes a detailed appendix, or “Resource and Tool Guide,” for use by

Federal project officers. The appendix provides a step‐by‐step reference guide that provides the basis of training

specific to data validation overall. ETA also indicated that data validation has been included in staff performance

standards as one of the field activities required of Federal project officers.

To meet the increased demand for services and improve coordination with other service providers, ETA indicated

that states in one region were able to utilize Recovery Act TANF funds to expand services by providing subsidized

employment activities. In two states, TANF has continued to contribute post‐Recovery Act funds to support summer

youth employment and/or work experience programs. In collaboration with HHS, ETA issued a joint letter to

encourage partnerships between workforce and human services agencies and utilized waivers to expand summer

employment opportunities.  

ETA and the Department have identified the reauthorization of WIA as a legislative priority and have specified

several goals that the Department believes should be a focus of the reauthorization process.  Among these goals is

improving accountability by updating the performance measures used by WIA programs.

WHAT REMAINS TO BE DONE:  

ETA should closely monitor its WIA grants and address any disconnects between the training being provided and

employment demands.  Further, ETA needs to pursue legislative authority in the WIA reauthorization to develop

performance measures for training outcomes, require SWAs to report training costs and funding sources at the

participant level so stakeholders have adequate information to make return‐on‐investment decisions for WIA

services, develop and provide guidance to SWAs and LWAs regarding the best methodology for collecting and

reporting data for training‐related employment, and exercise oversight over SWAs to ensure they develop and/or

identify best practices to increase the percentage of exiters who find employment related to the training they

receive.

ETA needs to continue its efforts to identify and prioritize workloads and funding levels to ensure Recovery Act

funded green jobs grants are adequately monitored, grant funds are spent properly, and grants achieve their

intended purpose. Over the next year, the OIG will focus its Recovery Act audit efforts on assessing how grantees

and contractors performed and what was accomplished with Recovery Act funding.

ETA should complete the field testing of the data validation supplement, make any needed adjustments, and make

the final supplement available to all ETA grantees. Once the final supplement is issued, ETA needs to determine

user training needs and how best to meet those needs.  

ETA should continue plans to:  work with HHS to develop a joint strategy for addressing client needs in the One‐

Stop center setting; finalize strategies for out‐stationing One‐Stop staff in non‐traditional facilities, such as libraries,

community centers, faith‐based organizations, veterans’ centers and community colleges; and ensure that virtual

services are increasingly utilized for accessing services.

CHALLENGE:  Ensuring the Effectiveness of the Job Corps Program

OVERVIEW:

ETA operates the Job Corps program, which provides residential education, training, and support services to

approximately 60,000 students at 125 Job Corps centers. Job Corps centers are operated for DOL by private
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FY 2011 Agency Financial Report    175

contractors, and by other Federal Agencies through interagency agreements. The program was appropriated about

$1.7 billion in FY 2011.

CHALLENGE FOR THE DEPARTMENT:

Ensuring Eligibility– The Job Corps program is intended to serve at risk, low‐income youth ages 16‐24. A recent OIG

audit found that Job Corps’ policy allowing potential students to self‐certify their family income levels was not

effective. We estimated that 472 (10 percent) of the 4,718 active students enrolled in the program during March

2011 were ineligible; and that $13.8 million would be spent over time to train them. If Job Corp and outreach and

recruitment contractors’ controls are not strengthened and the ineligibility rate remains constant, then funds spent

on ineligible students over a one‐year period could total $164.6 million.

Ensuring Health and Safety– Ensuring the quality of life at centers, including healthy living conditions and a sense

of safety, is a continuing challenge for Job Corps. Past OIG audits have identified unsafe or unhealthy conditions and

the lack of required safety inspections at some centers.  OIG audits also found that some centers did not hold

required behavior review board meetings to evaluate student misconduct and initiate disciplinary action and

underreported significant incidents occurring at the centers.  

Improving Performance Accountability – Ensuring that the program achieves its intended results remains a

challenge for Job Corps. Job Corps measures effectiveness through a complex performance management system of

58 metrics designed to meet WIA mandates, Government Performance and Results Act requirements, and DOL

priorities. Since 2006, Job Corps has spent almost $1.5 million on consultants to improve its performance metrics

and outcomes.  However, a recent OIG audit found that Job Corps officials and other decision makers did not have

reliable performance information to determine, for example, how effectively Job Corps placed students in jobs that

matched the vocational training provided. Specifically, the OIG found that more than 3,000 reported placements

either did not relate or poorly related to the vocational training provided. For example, some participants trained in

office administration were placed in fast‐food restaurants; others trained as nurses assistants were placed as sales

persons, stock clerks or laborers in retail stores.  

Improving the Integrity of Reported Performance Data–The integrity of performance data reported by center

operators remains a challenge for Job Corps. Most centers are operated by contractors through performance‐based

contracts with incentive fees and bonuses that are tied directly to contractor performance. Under such contracts

and without proper controls and strict oversight, there is a risk that contractors will overstate performance results.  

Past OIG audits have found that weak controls at centers have resulted in the overstatement of performance

results.  

Ensuring Financial Accountability–Job Corps has responsibility to ensure its center operators spend Federal funds

wisely and appropriately.  Job Corps center operators annually award contracts for millions of dollars of goods and

services.   Recent OIG audits have found that center operators were not always awarding contracts and claiming

related costs in accordance with the Federal Acquisition Regulation. As a result, Job Corps cannot ensure it is

getting the best value for the Federal dollars being spent.

DEPARTMENT’S PROGRESS:

Job Corps has eliminated self‐certification of family income and now requires all potential students to provide

income documentation, such as tax returns, paycheck stubs, or letters from employers.  Also, Job Corps’ automated

system no longer allows outreach and admissions service providers to enroll applicants who do not meet the      

low‐income definition. Job Corps conducted training for its Outreach and Admissions staff, center directors, and

student records personnel to provide up‐to‐date guidance on admissions procedures, including new requirements

for determining income eligibility.

Job Corps stated it has published: several Information Notices and Program Instructions on safety issues; sent

quarterly memoranda to the Regional Directors regarding major hazards identified during centers’ quarterly
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inspections; and provided technical assistance in response to inquiries about center abatement action plans. Job

Corps also reported that centers continued to provide training and support to students on issues such as conflict

resolution, abuse, and student leadership. Job Corps is in the process of clarifying its behavior management

policies.

In FY 2011, Job Corps released a revised Job Training Match crosswalk that aligned the program’s career training

pathways with O*Net‐Standard Occupational Classification codes maintained by ETA’s Office of Workforce

Investment.  Job Corps stated it has also implemented a quality check that will require placement counselors to

verify their selection of potentially inappropriate codes as a Job Training Match.

Job Corps has also instituted a data integrity assessment system.    According to Job Corps, these assessments

provide a mechanism for Regional Office staff to identify and report on specific instances of improperly reported

data as well as management practices that could potentially affect data integrity. To date, Job Corps stated that it

has contracted for 128 data integrity assessments for student leave, career technical training, and GED/high school

diploma attainment.

WHAT REMAINS TO BE DONE:

Job Corps needs to provide proactive, consistent, and rigorous oversight of contractors at all centers.  Job Corps

should closely monitor outreach and admissions service providers’ compliance with its new policy requiring

documentation of income eligibility by all incoming students. In the area of performance accountability, Job Corps

needs to improve the transparency and reliability of its performance metrics, especially the job training match, so

internal and external stakeholders can make informed decisions regarding the program’s performance and costs.

Job Corps has indicated it plans to improve its monitoring of service providers and it will be publishing additional

performance data on the program’s website. In addition, Job Corps needs to take actions to ensure centers provide

a safe and conducive learning environment while supporting student success and program retention. Finally, ETA’s

Office of Contract Management, which manages all procurement and contract activities for Job Corps, must ensure

that center operators and other service providers comply with procurement and contracting regulations and

requirements.

CHALLENGE:  Safeguarding Unemployment Insurance  

OVERVIEW:

ETA partners with the states to administer unemployment insurance (UI) programs. State UI provides benefits to

workers who are unemployed and meet the eligibility requirements established by their respective states. UI

benefits are largely financed through employer taxes imposed by the states and deposited in the Unemployment

Trust Fund (UTF) from which the states pay the benefits. The states administer these programs under an agreement

with DOL in accordance with their state laws and regulations. ETA funds State Workforce Agencies (SWAs) who

administer the UI program through grant agreements. These grant agreements are intended to ensure that SWAs

efficiently administer the UI program and comply with Federal laws and regulations.

CHALLENGE FOR THE DEPARTMENT:

Over the past three years, payments to UI recipients have grown to unprecedented levels, paying nearly $318

billion to unemployed workers. This rapid, large growth, especially in the Federally‐funded portion, has increased

the risk of improper payments. According to GAO, the rate of improper payments in the UI program was the third

largest of any benefits program in FY 2010. DOL estimates that nearly $32 billion of improper payments occurred

over the past three years. DOL estimates that $17.2 billion may be collectable, which includes more than $10.3

billion in state‐funded benefits and $6.9 billion in Federally‐funded programs.
Top Management Challenges

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FY 2011 Agency Financial Report    177

Reducing Improper Payments – ETA is challenged to reduce the rate of improper payments in the UI program.  

Executive Order 13520 and the Improper Payments Elimination and Recovery Act of 2010 have placed even greater

emphasis on taking steps to reduce these improper payments. However, the weak economy has continued to make

controlling UI overpayments difficult, as the number of claims filed continues at elevated levels.  According to ETA

officials, states responded to the heavy workload by shifting resources from detecting improper payments to

processing claims.  For 2010, DOL reported improper payments totaling $17.5 billion, an increase from the  

$12.3 billion reported for 2009. The improper payment rate also increased from 10.3 percent in 2009 to 11.2

percent in 2010.  Indeed, because reducing improper payments is so critical, the target rate of 9.9 percent in 2010

was reduced to 9.8 percent in 2011.

In addition, OIG investigations continue to uncover fraud committed by individual UI recipients who do not report

or underreport earnings, as well as fictitious employer schemes. ETA estimates that about $3.7 billion of

overpayments resulted from willful misrepresentation by claimants – a fraud overpayment rate of 2.37 percent of

total UI benefits paid in FY 2010.  

A recent OIG audit found that ETA lacks effective controls over the detection of improper payments for both the UI

state and Federal programs, leaving both programs, but especially the Federally funded programs, vulnerable.

Therefore, ETA’s reporting on how well improper payments were detected significantly overstated performance

results. This occurred because ETA lacked controls over the three key elements of the improper payment process:

estimating improper payments; validating actual improper payment amounts; and monitoring how well states did

in detecting improper payments. In monitoring only state‐funded programs, ETA reported that the UI program met

its program requirements (50 percent) by detecting more than 52 percent of recoverable improper payments.

However, for the Federally‐funded programs, the actual rate of detection was only about 19 percent, or about  

$1.3 billion detected versus about $6.9 billion estimated recoverable improper payments, leaving $5.6 billion

undetected.  

OIG investigations also continue to uncover fraud committed by individual UI recipients who do not report or

underreport earnings, as well as fictitious employer schemes. In addition, recent investigations have confirmed

criminal schemes involving employers who knowingly employ undocumented or improperly documented foreign

workers for whom they intentionally fail to make the required unemployment insurance contributions.

DEPARTMENT’S PROGRESS:

In March 2010, the Department implemented the State Information Data Exchange System (SIDES), which enables

communication and transmission of UI separation information requests from UI agencies to multi‐state employers

and third‐party administrators (TPAs).  To date, five states (Utah, Colorado, Georgia, Ohio, and New Jersey) have

implemented SIDES. Fifteen other states have joined the consortium and are preparing to implement SIDES.  The

Department’s supplemental funding opportunity for FY 2011 included incentives for the original states to

implement SIDES faster, while providing funds for new states to implement SIDES.  As a result, ETA believes that 21

states will be fully implemented by March 31, 2012, and 21 new states will be implemented by September 30, 2012,

increasing the numbers of states using SIDES from 5 to 42.

In April 2011, the Department targeted 10 states with the highest improper payments due to a claimant’s failure to

register with the state’s Employment Service or job bank in accordance with the state’s UI law.    Through the

implementation of technology and/or other solutions, these states have seen a 23 percent reduction in improper

payments due to claimants’ failure to register with the Employment Service.

DOL pursued the passage of the Claims Resolution Act of 2010 which was signed into law in December 2010.  The

Act includes provisions to expand the Treasury Offset Program (TOP) to recover more UI overpayments.    The

Department has worked with the U.S. Department of the Treasury’s Financial Management Service to facilitate

state implementation of TOP for the recovery of UI debts.   As of June 29, 2011, over $25 million had been
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recovered by NY, WI, and MI through the use of TOP.  Through the Department’s FY 2011 supplemental funding

opportunity, an additional 25 states will receive funding to implement TOP.

The Department supported the convening of state cross‐functional task forces that will focus on addressing the root

causes of overpayments that have the highest impacts in the states, and developed a new web site that displays

state‐by‐state performance and progress in addressing UI improper payments. The Department is also working to

develop new performance measures for states which initially will target reducing improper payments when

claimants continue to claim benefits after returning to work by 30 percent the first year, and a total of 50 percent

after two years.  The Department is pursuing the development of a claimant and employer messaging campaign to

be implemented by the states to improve claimants’ and employers’ understanding of their responsibilities when

collecting UI payments or responding to requests for information.  

DOL also mandated that by December 31, 2011, all states must use the National Directory of New Hires (NDNH) for

benefit payment control. California, which accounts for the largest amount of UI improper payments, is the only

state still not using NDNH.

WHAT REMAINS TO BE DONE:

ETA can further improve its oversight of the states’ detection and prevention of UI overpayments by fully

implementing SIDES, and increasing the frequency of SWA on‐site reviews. ETA must ensure California has

implemented NDNH by December 31, 2011. ETA continues to pursue legislation to allow States to use up to 5

percent of recovered UI overpayments to detect and deter benefit overpayments. The legislation would also

require employers to report former workers they rehire to the NDNH after a separation of at least 60 days; and

continuing to promote States’ use of a variety of other databases (e.g., Social Security, Department of Corrections)

to prevent and detect improper UI benefit payments. ETA also needs to provide additional, detailed information on

its efforts to reduce improper payments in its next Report on UI Improper Payments.  

CHALLENGE:  Improving the Management of Workers’ Compensation Programs

OVERVIEW:

The Department’s Office of Workers’ Compensation Programs manages the Government’s workers’ compensation

programs, including the Federal Employees’ Compensation Act (FECA) Program and the Energy Employees

Occupational Illness Compensation Act Program (Energy workers’ program).  

The FECA Program provides wage‐loss compensation and pays medical expenses for covered Federal civilian and

certain other employees who incur work‐related occupational injuries or illnesses as well as survivors benefits for a

covered employee’s employment‐related death. DOL reports that the cost of Federal workplace injuries, when

measured by FECA compensation costs for wage‐loss, is nearly $3 billion and two million lost production days

annually.

The Energy workers’ program was created to provide monetary compensation and medical benefits to civilian

employees who incurred an occupational illness, such as cancer, as a result of their exposure to radiation or other

toxic substances while employed in the nuclear weapons and testing programs of the U.S. Department of Energy

and its predecessor agencies.    In certain circumstances, these employees’ survivors may be eligible for

compensation.  Since the program began in 2001, DOL reports it has paid more than $7 billion in compensation and

medical benefits to more than 85,000 claimants nationwide.

CHALLENGE FOR THE DEPARTMENT:   

Preventing FECA Fraud and Improper Payments – The FECA program must be responsive and timely to eligible

claimants while ensuring it makes proper payments. The challenges facing the FECA program include moving
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FY 2011 Agency Financial Report    179

claimants off the periodic rolls when they can return to work or when their eligibility ceases, preventing ineligible

recipients from receiving benefits, and preventing fraud by service providers and by individuals who receive FECA

benefits while working. OIG’s recent audit of FECA improper payments found that OWCP did not always take timely

action to terminate benefits when notified of FECA claimants’ deaths. Additionally, OWCP had not designed

effective procedures to ensure that benefit payments were reduced for FECA claimants who were collecting SSA

retirement benefits. OIG investigations continue to identify fraud committed by claimants and medical providers. In

FY 2011, FECA claimant investigations alone resulted in $10,690,040 in OIG investigative monetary

accomplishments. While it is difficult to identify and address improper payments and fraud in the FECA program,

OWCP must measure its efforts and progress in improving payment accuracy and reducing fraud.

Timely Processing of Claims Filed by Energy Workers –Processing of energy workers’ claims continues to take too

long, particularly given the advanced age and serious illnesses of those typically filing for benefits.    The Energy

workers compensation program, though administered by OWCP, requires the pre‐adjudication input, assistance,

and determinations of three other major Federal agencies and a Federal advisory board. Complex requirements in

the authorizing legislation and the difficulty of locating employment and other records, as well as the inability of

sick, often aging, claimants to fully understand their rights and responsibilities, contribute to the lengthy decision

process. Furthermore, the National Institute for Occupational Safety and Health (NIOSH), which is an agency within

the U.S. Department of Health and Human Services, must prepare a complicated and time consuming dose

reconstruction of the amount of radiation to which an employee was exposed.  As indicated on OWCP’s website, for

cases decided in 2010, it took about 200 days for a final decision to be reached for cases not sent to NIOSH and

more than 21⁄2 years for cases sent to NIOSH. While processing times have come down since 2006, they remain at or

above 2004 processing times. OWCP is hampered in its efforts to reduce processing times, as it has no authority

over the completion time of the NIOSH process.  

DEPARTMENT’S PROGRESS:

The Department reported that OWCP will run the death match with the Social Security Administration weekly and

will improve procedures to ensure timely termination of benefits upon the death of a claimant.  Additional training

on improper payments will be provided to claims examiners by the end of calendar year 2011.

The Department reported that the average number of days for OWCP to process an initial energy workers claim

decreased from 164 days in FY 2008 to 97 days in FY 2010 for Part B benefits (covering workers diagnosed with

illnesses caused by exposure to radiation, beryllium, or silica), and from 283 days in FY 2008 to 125 days in FY 2010

for Part E benefits (covering employees of DOE contractors or subcontractors, or their survivors, who develop an

illness due to exposure to toxic substances). While these reported processing time reductions do not include the

time claims spent at NIOSH, OWCP is establishing a baseline in FY 2011 to set performance targets for the average

days between the date a claim is filed and a final decision is issued. The new performance metrics will distinguish

between cases that involve NIOSH review and those that do not.

WHAT REMAINS TO BE DONE:

As we have previously reported, OWCP does not have the legal authority to match FECA compensation recipients

against Social Security wage records. OWCP must obtain written permission each time from each individual

claimant in order to check SSA records to determine if a claimant has returned to work.  Having direct authority to

perform the match would enable OWCP to reduce improper payments by identifying individuals who are collecting

FECA benefits while working and collecting wages or Federal retirement benefits.  In addition to obtaining access to

SSA wage records, OWCP needs to continue to seek legislative reforms to the FECA program to enhance incentives

for recovered employees to return to work, address retirement equity issues, discourage unsubstantiated or

otherwise unnecessary claims, and make other benefit and administrative improvements. Through the enactment

of these proposals, OWCP estimates savings to the government over 10 years to be $550 million. OWCP also needs

to improve its methodology for determining the amount of FECA improper payments, and establish a strategy and

performance measures for preventing and detecting such payments.
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While OWCP has reduced processing times in the Energy workers’ program for initial case processing and for

completing final decisions once a claim reaches final adjudication, overall claims processing times remain long.  

OWCP needs to continue to work with the other Federal agencies involved in the adjudication process to issue final

decisions in a matter of months, rather than years.

CHALLENGE:  Maintaining the Integrity of Foreign Labor Certification Programs

OVERVIEW:

The Department’s Foreign Labor Certification (FLC) programs are administered by the ETA.    These programs are

intended to provide U.S. employers access to foreign labor to meet worker shortages as long as U.S. workers are

not adversely affected.  The H‐1B visa specialty workers’ program requires employers that intend to employ foreign

specialty occupation workers on a temporary basis to file labor condition applications with ETA stating that

appropriate wage rates will be paid and that workplace guidelines will be followed. The H‐2B program establishes a

means for U.S. nonagricultural employers to bring foreign workers into the United States to meet temporary

worker shortages. The Permanent FLC program allows an employer to hire a foreign worker to work permanently in

the United States. Employers are required to pay foreign workers a required wage, which in most cases, is the

prevailing wage in that occupation so wages of similarly employed U.S. workers will not be adversely affected.

Employers are also required to comply with all laws governing such employment.  

CHALLENGE FOR THE DEPARTMENT:

ETA is challenged to ensure the integrity of the FLC programs it administers. OIG investigations continue to uncover

schemes carried out by immigration attorneys, labor brokers, and transnational organized crime groups. OIG

investigations have repeatedly revealed that fraudulent applications filed with DOL on behalf of fictitious

companies, as well as schemes wherein fraudulent applications were filed using the names of legitimate companies

without the companies’ knowledge. Additionally, OIG investigations have uncovered complex schemes involving

fraudulent DOL FLC documents filed in conjunction with or in support of similarly falsified identification documents

required by other Federal and state organizations.

ETA faces challenges in maintaining the integrity of its H‐1B and H‐2B FLC programs.  The H‐1B challenges include

statutory limits on its authority, making system improvements in its H‐1B Labor Condition Application processing

system to better identify incomplete and/or obviously inaccurate applications, and uncertainty regarding the

process for including individuals or entities debarred under the Department’s FLC programs on the government‐

wide excluded parties lists. The present H‐2B worker protections are based on a model where employers merely

assert, but do not demonstrate, that they have performed an adequate test of the U.S. labor market before hiring

foreign workers in lieu of U.S. workers.   An OIG report issued in October 2011 found that DOL regulations had

hampered ETA’s ability to provide adequate protections for U.S. workers in the H‐2B applications filed by four

Oregon forestry employers. Although 187 U.S. workers were contacted by the employers regarding possible

employment, none were hired.  Instead, 323 foreign workers were brought into the country for these jobs.  The OIG

also found that certain State Workforce Agencies (SWAs) did not fulfill their responsibilities for the H‐2B

applications we reviewed.  Furthermore, the OIG found that ETA could improve its initial application reviews, post‐

adjudication processes, and monitoring activities to better protect the interests of U.S. workers under the

regulations by which the program currently operates.

The OIG also found that the SWAs it reviewed were not transmitting posted job orders to other states or referring

U.S. workers to employers, as they are required to do. Also, a September 2010 GAO report highlighted examples of

H‐2B employers and recruiters submitting fraudulent documentation to DOL.    Specifically, GAO identified

employers and recruiters who misclassified employee duties on labor certification applications to pay lower than

prevailing wages, or preferentially hired H‐2B employees over American workers in violation of Federal law.
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DEPARTMENT’S PROGRESS:

ETA’s Fraud Detection and Prevention Unit continues to work closely with the OIG to identify and reduce fraud in

the FLC process by reviewing applications for inconsistencies, errors, and omissions. ETA has revised the rule for

determining prevailing wage rates and proposed new rules governing the H‐2B process. The major features of the

new proposed rules include: creating a national electronic job registry for all H‐2B job orders; increasing the

amount of time for which U.S. workers must be recruited; requiring employers to engage in post‐filing recruitment

of U.S. workers; creating an H‐2B registration process in which employers must demonstrate temporary need

before applying for a labor certification; reinstating the critical role of the SWAs in assisting employers by using

their expertise on local labor market conditions and recruitment patterns, and strengthening debarment authorities

by providing Wage and Hour Division (WHD) with independent debarment authorities, and providing revocation

authority to ETA.  

To address the H‐1B challenges, ETA has entered into a contract with a third‐party vendor for employer verification

services. Through this service, ETA indicates that it will have access to a more comprehensive employer

identification database and verification system. This service will be applied to all FLC. In addition, ETA is working

with the Department’s Chief Acquisition Officer on ways to include foreign labor certification suspensions and

debarments on the government‐wide excluded parties list.

Finally, ETA is piloting a new risk management model in its Permanent Labor Certification Program (PERM).  

According to ETA, this new risk management model allows ETA to assign risk ratings to individuals applying to its

PERM program and spend the appropriate amount of time reviewing the higher risk applications and reducing

overall reviewing timeframes.  ETA officials also stated that the new model will eventually be applied to the rest of

the FLC programs.

WHAT REMAINS TO BE DONE:

The Department needs to evaluate the results of its certification processes, as well as reexamine existing processes,

to assess their effectiveness.    Furthermore, the Department needs to enhance its monitoring of the H‐2B

application process to ensure that SWAs and employers are fully complying with program requirements and

intentions and make adjustments to enhance integrity of its employer verification services by fully implementing its

electronic employer verification controls to the H‐1B program and the remaining FLC programs. The Department

should ensure that suspensions and debarments are considered and decisions documented for anyone convicted of

FLC violations. It also needs to ensure the FLC debarments are reported to appropriate DOL personnel for inclusion

in the government‐wide exclusion system.  

CHALLENGE:  Ensuring the Security of Employee Benefit Plan Assets  

OVERVIEW:

The mission of the Department’s Employee Benefits Security Administration (EBSA) is to protect the security of

retirement, health, and other private‐sector employer‐sponsored benefits for America’s workers, retirees, and their

families. Benefits under EBSA’s jurisdiction consist of approximately $6.5 trillion in assets covering approximately

150 million participants and beneficiaries. EBSA is charged with overseeing the administration and enforcement of

the fiduciary, reporting, and disclosure provisions of Title I of the Employee Retirement Income Security Act (ERISA).

EBSA oversees benefit security for an estimated 718,000 private retirement plans, 2.6 million health plans, and

similar numbers of other welfare benefit plans, such as those providing life or disability insurance.

CHALLENGE FOR THE DEPARTMENT:

Multiple Challenges Stem from Implementing the Patient Protection and Affordable Care Act (PPACA)–The broad

changes mandated by the PPACA require EBSA to issue new health plan regulations. A recent OIG audit found EBSA
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to be challenged to address the more than 1,900 public comments it has received on its rule making, and to

incorporate these new regulations effectively into its enforcement program. These new and extensive health care

requirements will pose major challenges for the Department through at least 2014, when all provisions of the

PPACA are to be implemented.

Uncertainty About the Impact of EBSA Enforcement Programs–OIG audits have found that EBSA could not

determine whether its civil enforcement projects, such as the Multiple Employer Welfare Arrangements project and

the Rapid ERISA Action Team (REACT) project, were increasing compliance with ERISA, or whether the projects were

decreasing the risk of workers losing benefits.  While EBSA uses a variety of quantitative indicators to evaluate its

individual civil enforcement projects, such as monetary results, staff days expended per case, and the number of

civil cases converted to criminal cases (i.e., outputs), none of these indicators measure external events or

conditions (i.e., outcomes).    As a result, EBSA cannot ensure that it is effectively directing resources among its

regional offices or to the enforcement areas where resources will do the most good.

Limited Authority to Oversee Plan Audits–Despite the importance of audits of employee benefit plans, EBSA does

not have the authority to suspend, debar, or levy civil penalties against employee benefit plan auditors who

perform substandard audits. In addition, ERISA allows plan administrators to exclude investments held by certain

regulated institutions, such as banks and insurance companies, from the scope of a plan audit, resulting in the

auditor’s disclaimer of opinion on the financial statements, which seriously impairs the usefulness of the audit in

protecting employee benefit plan assets.

DEPARTMENT’S PROGRESS:

EBSA has taken significant actions toward the implementation of the PPACA requirements through issuing

regulations and sub‐regulatory guidance, conducting research studies and surveys, and providing compliance

assistance and outreach. To date, EBSA has issued interim‐final regulations on: Coverage of Preventive Services,

Preexisting Conditions Exclusions, Rescissions, Annual and Lifetime Limits, Patient Protections, Extension of

Coverage for Adult Children, Grandfathered Health Plans, and Internal Claims and Appeals and External Review.  For

research studies and surveys, EBSA has reported on: Self‐Insured Group Health Plans, Large Group Market, and

Selected Benefits covered by employer and multiemployer plans.    An additional study regarding the use of

incentives in group health plan wellness programs is currently in progress. Additionally, EBSA has conducted

numerous compliance assistance seminars, workshops and webcasts on the PPACA requirements.  EBSA stated that

starting in FY 2012, it added PPACA enforcement as a component part of its new national enforcement initiative,

the Health Benefits Security Project. Through this project, EBSA plans to investigate a large number of health plans.  

EBSA has stated it plans to address public rulemaking comments when the interim final regulations are finalized.

As an initial step in developing performance metrics to measure the effectiveness of its enforcement program, EBSA

implemented a broad Sample Investigation Program (SIP) in FY 2011, which reviewed randomly selected employee

benefit plans for compliance with ERISA.  Interim compliance data will be reported in FY 2012, and the first baseline

compliance measure will be available in FY 2013.

The Department has previously sought legislative changes, such as expanding the authority of EBSA to address

substandard benefit plan audits, and ensuring that auditors with poor records are not allowed to continue

performing plan audits. These changes have not been enacted by Congress.    In addition, the Department has

unsuccessfully sought recommended legislative changes to either eliminate or modify the limited‐scope audit

exception to strengthen the protections afforded plan participants and beneficiaries.

WHAT REMAINS TO BE DONE:

In addition to issuing additional regulations under the PPACA, further action is needed to resolve potential

challenges that may affect implementation and compliance with the statutory requirements. To ensure that

affected parties can fully implement and comply with the PPACA requirements, EBSA should work with the

Departments of Health and Human Services (HHS) and Treasury (who share joint jurisdiction over the Health Care
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Reform Act market reform regulations), and the Office of Management and Budget (OMB) to establish specific

timetables to respond to public comments and issue final regulations. EBSA needs to proceed with a rulemaking to

implement Section 6604 of the PPACA. Section 6604 is designed to prevent fraudulent multiple employer welfare

arrangements from escaping liability for their actions under state law by claiming that state law enforcement is

preempted by Federal law. EBSA needs to incorporate PPACA requirements into its enforcement program to assist

plans in complying with PPACA. EBSA also needs to provide HHS with the results of a survey of benefits typically

covered by employers that is sufficiently broad to enable HHS to determine benefits provided under a typical

employer plan.  

EBSA should complete its evaluation of the results of SIP to determine what changes are needed to improve

program effectiveness.  EBSA should also continue working to obtain legislative change to address deficient benefit

plan audits and to ensure that auditors with poor records do not perform any additional plan audits.

CHALLENGE:  Securing Information Technology Systems and Protecting Related

Information Assets

OVERVIEW:  

DOL systems contain vital, sensitive information that is central to the Department’s mission and to the effective

administration of its programs. DOL systems are used to determine and house the nation’s leading economic

indicators, such as the unemployment rate and the Consumer Price Index. They also maintain critical data related to

enforcement actions, worker safety, health, pension, and welfare benefits, job training services, and other worker

benefits.   

Providing assurances that IT systems will function reliably and safeguard information assets, especially in the face of

new security threats, IT developments, and telework requirements, will challenge Federal agencies for many years.  

The Administration’s goal of expanding the use of technology to create and maintain an open and transparent

government has added to the challenge of keeping information secure.   

CHALLENGE FOR THE DEPARTMENT:   

Ongoing IT Security Concerns–Safeguarding information assets is a continuing challenge for Federal agencies,

including DOL.  The Administration’s goal of expanding the use of technology to create and maintain an open and

transparent government, while safeguarding systems and protecting sensitive information, has added to the

challenge.   OIG IT audits over the past several years have identified access controls and oversight of third‐party

(contractor) systems, as areas most challenging to the Department. Strong access controls are necessary to secure

important, confidential, or sensitive information and equipment; however, during its FY 2010 audit testing OIG was

able to gain unauthorized system administrative access to one of the Department’s major information management

systems. OIG also tested five contractor systems and discovered security problems in all five. In a report issued in

March 2011, OIG found that approximately 50 percent of the IT assets recorded in the Department’s property

management system could not be physically located, and approximately 14 percent of IT assets observed during

testing were not recorded in the system. Furthermore, Department security officials could not determine whether

sensitive data such as personally identifiable information (PII) existed on 377 sensitive IT assets that had been

reported lost, missing, or stolen. The Department could not determine whether these items—which included

laptops, desktops, printers, and a server—represented a potential information security breach.

New Challenges Posed by Emerging Technologies– The security of sensitive information that can be accessed

remotely (e.g., via telework), stored on mobile computers/device, or any form of data being accessed and used

outside of DOL office settings is a continuing challenge to the Department and the Federal government overall.

With employees’ increased use of telework and reliance on new ways of communicating such as blogging,

Facebook, and Twitter, the Department is challenged to evolve and adapt its information security controls to keep

pace with the risks posed by these new technologies. Consolidating data centers and moving mission critical
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systems to the cloud increases the risk of exposing PII and unauthorized information exchanges, including sensitive

pre‐decisional budget and policy information.   

DEPARTMENT’S PROGRESS:   

The Department is developing an Identity Access Management system that will require users to access DOL IT

systems by using Personal Identity Verification cards with a phased implementation approach that was set to begin

in October 2011. The Department has restructured/recreated the Enterprise Implementation Committee (EIC) to

replace its management review board.    The EIC is composed of senior‐level business executives from the

Department’s agencies and offices. The EIC’s mission is to ensure that all initiatives affecting information

technology (IT) infrastructure, common services and customer service programs that have cross‐agency impacts are

implemented to provide effective support for the Department’s business mission and operations. Additionally, the

Department established the IT Acquisition Review Board to oversee and manage IT acquisitions. The Department is

also planning to consolidate its data centers and systems. Transition to the cloud computing environment has

begun with systems such as Disability.gov and the New Core Financial Management System (NCFMS or New Core).

The Department is in the process of implementing by the end of FY 2012 a continuous monitoring solution. The

Department is also in the process of implementing the Trusted Internet Connection program to protect external

communications to and from the Internet. The Department is continuing to participate on several Federal Councils,

Committees and Forums to assist in the development and implementation of policies, procedures, and standards

that will address these challenges.  

WHAT REMAINS TO BE DONE:  

In light of these challenges, the OIG continues to recommend the creation of an independent Chief Information

Officer (CIO) to provide exclusive oversight of all issues affecting the IT capabilities of the Department. DOL

currently manage its IT systems with a CIO who must balance IT with other competing responsibilities; the CIO

presently also serves as the Chief Acquisition Officer, Chief Human Capital Officer, Privacy Officer, and Assistant

Secretary of Administration and Management.  

The Department must also improve upon its security controls testing and evaluation process by performing agency‐

specific customized testing to focus on program agencies’ high‐risk vulnerabilities and control weaknesses. The

Department should ensure that it has a consolidated, viable inventory management system that is properly

updated.  As the telework program expands, the Department needs to implement additional security controls that

will protect data being accessed and used outside of DOL office settings.

CHALLENGE:  Ensuring the Successful Development and Implementation of Major

Information Management Systems

OVERVIEW:

The Congress and the Office of Management and Budget (OMB) have raised concerns that Federal information

technology (IT) investments, especially high‐risk, major system developments, have experienced schedule delays

and cost overruns costing billions of dollars. The Administration has called upon Federal agencies to strengthen

oversight of major IT investments through greater IT investment portfolio and project management. The Clinger‐

Cohen Act requires agency heads to designate Chief Information Officers to lead reforms to help control system

development risks, better manage technology spending, and achieve real, measurable improvements in agency

performance through better management of IT resources.   

DOL reported IT development, modernization and enhancement efforts totaling about $35 million in FY 2011.  

These efforts include the Foreign Labor Certification Automated Systems, MSHA Standardized Information System,

and BLS Industrial Prices Systems. For FY 2012, DOL has planned IT development, modernization and enhancement
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efforts totaling almost $53 million, such as the Human Resources Shared Service Center investment, IT

Infrastructure Modernization, and MSHA Mine Safety Information System.

CHALLENGE FOR THE DEPARTMENT:   

DOL executives and project managers will face challenges in managing system developments and other related

technology initiatives to accomplish them on time and within budget, and to ensure these initiatives function as

designed. The areas most likely to cause delays or budget overruns include: project vision/goals poorly defined; lack

of accountability/ownership; unrealistic deadlines; poor communication of expectations; resource

deprivation/competition; scope changes; uncertain dependencies; not understanding/defining project risk; and lack

of stakeholder/user engagement throughout the project life cycle. These challenges are made more difficult by the

inherent nature of major IT system developments, which typically occur over multiple years and are subject to

changes in policy, priorities and funding.

Problems in any one of the above areas can negatively impact a project. For example, the Department reported it

spent $35 million between 2003 and 2008 in a failed effort to replace its legacy financial system. The Department

then awarded a $15 million contract for the development and implementation of New Core, which was scheduled

to be fully operational by October 14, 2009. However, the Department had to postpone the deployment of the new

system until January 14, 2010, to provide additional time to train users and continue data migration activities. Upon

implementation, New Core experienced numerous problems, including: an underestimated user base; users’ lack of

understanding of the substantial changes to business processes; and data quality problems. Notably, the

Department experienced significant turnover amongst its senior financial managers during most of the system’s

implementation and post‐launch phases.    To avoid similar problems in its future IT initiatives, the Department

should: fully understand and develop system requirements before beginning the procurement process; ensure that

interfaces with other key Departmental systems are built and tested prior to implementation; ensure that users are

properly trained; and establish strict project management oversight responsibility.  

DEPARTMENT’S PROGRESS:   

The Department is in the process of assessing the New Core initiative for lessons learned to incorporate into future

projects. DOL will note what worked well at key decision points, as well as what factors contributed to problems at

other key decision points.  

The Department has created the Enterprise Implementation Committee (EIC) composed of senior‐level business

executives from the DOL’s agencies and offices. The EIC’s mission is to ensure that all initiatives affecting IT

infrastructure, including common services and customer service programs that have cross‐agency impacts, are

implemented to provide effective support for the Department’s business mission and operations.  The Department

has implemented a new IT governance structure that it believes will strengthen the role and participation of core IT

governance committees and ensure that the right people are engaged in the right conversations on an ongoing

basis.    Additionally, the Department established the IT Acquisition Review Board to oversee and manage IT

acquisitions, and will be using new methods designed for more immediate feedback related to monitoring IT

initiatives’ progress and to bring about corrective actions, where necessary.  

WHAT REMAINS TO BE DONE:

DOL IT initiatives in 2011 and beyond will need direct executive involvement and highly‐skilled‐project managers to

be successful, on‐time and within budget.  As detailed in the top management challenge related to IT security, the

Department needs to establish an independent CIO to provide exclusive oversight of all issues affecting DOL’s IT

capabilities.

Achieving anticipated success will require analyzing setbacks and failures in order to improve. Project managers

should be highly trained, and executives should focus on past project's challenges to learn from them in order to

develop a stronger IT investment and project management capability.
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CHALLENGE:  Ensuring the Effectiveness of Veterans’ Employment and Training Programs

OVERVIEW:

The Department’s Veterans’ Employment and Training Service (VETS) programs are intended to provide veterans

and transitioning service members the resources and services to succeed in the workforce by maximizing their

employment opportunities, protecting their employment rights, and meeting labor market demands with qualified

veterans.  

CHALLENGE FOR THE DEPARTMENT:

Providing meaningful employment and training services to military members transitioning to civilian employment is

a continuing challenge for the Department, particularly in light of rising unemployment rates among veterans.

According to the Bureau of Labor Statistics, veterans’ unemployment rate has risen from 11.5 percent in June 2010

to 13.3 percent in June 2011.  In 2010, young male veterans, ages 18 to 24, who served during the Gulf War II era,

including those who served at any time since September 2001, had an unemployment rate of 21.9 percent.

According to the Department of Veterans Affairs (VA), with the scheduled troop draw‐downs in Iraq and

Afghanistan, more than one million active service members will be re‐entering the civilian work force in the next

five years.

The VETS’ Transition Assistance Program (TAP) provides a two‐and‐a‐half‐day session in which participants learn job

search techniques, career decision‐making processes, current occupational and labor market conditions, resume‐

writing, and interviewing techniques.    A recent OIG audit of TAP found VETS did not ensure that participants

received the employment assistance needed to obtain meaningful employment. VETS also did not use measurable

performance goals and outcomes to evaluate program effectiveness and lacked adequate contracting oversight for

TAP workshop services. These deficiencies undermined VETS’ ability to ensure it was providing a high‐quality

program that helps veterans successfully transition from military to civilian employment.   

VETS issues grants to SWAs to assist veterans to gain and retain employment, with a special emphasis on providing

intensive services to meet the employment needs of disabled veterans. Our audit of these services in Texas found

staff needed to do a better job of accurately assessing veterans’ needs and documenting intensive service activities,

particularly for homeless veterans and veterans with disabilities.

Reducing homelessness among veterans is another challenge for VETS. The Homeless Veterans' Reintegration

Program (HVRP) was the first nationwide Federal program focused on placing homeless veterans into jobs. The

program provided employment and training services to an estimated 23,500 homeless veterans in FY 2010.

However, a recent OIG audit found that performance results fell short of the planned goal of placing 9,093 veterans

into employment by 2,461 veterans, or 27 percent.  

DEPARTMENT PROGRESS:

VETS is undertaking a redesign of the TAP workshop.  This redesign involves providing a more customized workshop

by assessing each individual’s readiness for employment before they attend the workshop.  Other elements of the

redesign include updating the content of the workshop for the first time in 19 years, using contractors as workshop

facilitators, developing an online TAP workshop that will be available in Spanish, providing follow‐up services, and

implementing performance metrics to evaluate program effectiveness. In conjunction with the Department’s Office

of Procurement Services, VETS reported it has implemented more stringent management controls for contract

administration.

VETS issued guidance that HVRP grantees awarded grants in Program Years 2009 and 2010 are to meet 90 percent

of planned cumulative quarterly goals for Federal expenditures, enrollments, and placements into employment and

training by the end of the second quarter.    Grantees that do not achieve at least 75 percent of their planned

cumulative quarterly goals must submit a corrective action plan. VETS also issued guidance to regional staff
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FY 2011 Agency Financial Report    187

directing that if an eligible grantee for a second or third year award has missed its performance and/or financial

goals, a corrective action plan must be initiated before recommending a second or third year funding.

VETS is coordinating with the National Veterans Training Institute to improve intensive service training for Disabled

Veterans Outreach specialists. VETS also provided additional funding to the State of Texas to establish an online

case management system to document intensive services to veterans.   

WHAT REMAINS TO BE DONE:

VETS needs to establish standard forms and policy for monitoring TAP Employment Workshops, establish outcome

goals, establish a new TAP Memorandum of Understanding with partner agencies, and follow up to ensure staff are

complying with the newly implemented management controls for contract administration.

For HVRP, VETS needs to ensure that grantees are making adequate progress towards achieving their goals, and

VETS staff is closely monitoring grantees’ reported accomplishments and taking appropriate corrective action when

needed.

VETS also needs to ensure that funds given to Texas for the implementation of an on‐line management system

were used properly and system outcomes meet design expectations. Further, VETS needs to provide rigorous

oversight over contractors, grantees and state agencies for all programs.

CHALLENGE: Improving Procurement Integrity

OVERVIEW:

The Department contracts for many goods and services to assist in carrying out its mission. In FY 2010, DOL

awarded 3,804 contracts totaling $468 billion and issued 4,422 modifications to existing contracts totaling

$1.6 billion.

CHALLENGE FOR THE DEPARTMENT:  

Ensuring integrity in procurement activities is a continuing challenge for the Department. Until procurement and

programmatic responsibilities are properly separated and effective controls are put in place, the Department will

continue to be at risk for wasteful and abusive procurement practices. Our most recent audits and investigations of

the Departments’ procurement activities have identified the need for better control and monitoring of

procurement activities delegated to program agencies.

The current control environment surrounding the Department’s procurement activities has introduced both

financial and operational risk to the Department. The lack of standard operating procedures and procurement‐

related training leaves the consistency and quality of DOL’s procurement functions heavily dependent on the

various program agencies with delegated procurement authority.

Recent OIG audits of the Departments’ procurement activities have identified numerous deficiencies in

procurement: MSHA could not support sole‐source awards, did not promote full and open competition, or

maximize small business opportunities; the Los Angeles Job Corps Center did not comply with the Federal

Acquisition Regulation for subcontracts it awarded; the Office of the Assistant Secretary for Administration and

Management (OASAM) awarded a Job Corps’ contract using Recovery Act funds that was not based on merit and

two modifications for projects not eligible for Recovery Act funding; VETS management did not ensure contract

services were properly authorized by the contracting officer or that supporting documentation was maintained for

contract payments; and VETS did not conduct appropriate cost comparisons when awarding funds under its TAP to

ensure the best value to the Government.
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A recent OIG investigation into allegations of improper procurement activities within VETS found a pattern of

conduct which reflected a consistent disregard of Federal procurement rules and regulations, Federal ethics

principles and proper stewardship of appropriated dollars. Specifically, the investigation revealed the circumvention

of rules and regulations related to open competition and advisory and assistance contracts, as well as the

acceptance of free services.

The issues described above, along with those in the Securing Information Technology Systems and Protecting

Related Information Assets challenge, highlight the need for the Department to appoint a CAO whose primary duty

is acquisition management. The Department continues to be out of compliance with the Service Acquisition Reform

Act of 2003 requirement that executive agencies appoint a CAO whose primary duty is acquisition management.

The Assistant Secretary for Administration and Management presently serves as the Department’s CAO, while

retaining other significant non‐acquisition responsibilities.  

DEPARTMENT’S PROGRESS:   

OASAM reported that it has issued 34 certifications to contracting officers and 127 certifications to contracting

officers’ technical representatives that have completed Federal acquisition certification training. MSHA

implemented OIG recommendations to ensure procurement officials comply with DOL policy and procedures,

require supervisory review of contracts, provide refresher training to personnel, and develop and implement

controls to assure the SOL completes pre‐award reviews of selected contracts. OASAM has de‐obligated Recovery

Act funds inappropriately awarded for Job Corps. VETS has implemented improved contracting controls over the

request for changes to the delivery schedule of TAP workshops to prevent contracting officer's technical

representatives from making unauthorized changes to task orders.

OASAM is currently updating its internal policies and procedures to clarify provisions related to acquisition

planning, conflict of interest, and the administration of the Department’s Procurement Review Board.   OASAM

completed a Procurement Management Review of VETS and is scheduled to complete a review of ETA during the

first quarter of FY 2012. The Department is pursuing Federal Acquisition Certification in Contracting (FAC‐C) and

Federal Acquisition Certification for Contracting Officer’s Technical Representative (FAC‐COTR) for the acquisition

workforce.   

In response to the Office of Inspector General’s investigative report on VETS improper procurement activities,

OASAM is instituting contractual provisions and certification requirements designed to prevent re‐occurrence of

such activities.  In addition, OASAM and the Office of the Solicitor will conduct procurement integrity and ethics

training for Department’s Senior Executive and Acquisition Workforce Staffs.  A key aspect of the training will be

ensuring that program and contracting office procurement staff know how and when to elevate procurement

violation concerns. Lastly, OASAM will be conducting procurement accountability reviews of program agencies to

assess the adequacy of their staff to prepare acquisition materials for submission to their servicing contracting

offices and to preclude potential ethical violations.

WHAT REMAINS TO BE DONE:

The Department needs to develop standard and consistent internal controls and compliance frameworks for

component agencies with procurement authority to follow to ensure the consistency and quality of DOL’s

procurement functions. In addition, while the Department is taking positive actions to improve procurement

integrity, it has yet to appoint a CAO whose primary duty is acquisition management.  

Changes from Last Year

Changes to the Top Management Challenges from FY 2010 include the addition of a challenge on ensuring the

effectiveness of Veterans’ Employment and Training Programs. A previous challenge related to the implementation

of the Departments NCFMS was expanded into a challenge on ensuring the successful development and

implementation of major information management systems. In addition, a challenge regarding improving
Top Management Challenges

(Unaudited)

FY 2011 Agency Financial Report    189

procurement integrity has been reintroduced, given our concerns over the consistency and quality of the

Departments procurement functions.  

Achieving the goals and protecting the investment provided by the American Recovery and Reinvestment Act was

previously discussed in our FY 2010 Top Management Challenges. Our concerns focused on large amounts of funds

that remained unspent and contract/grant awards that may not have been in the government’s best interest.  

Through September 30, 2011, the Department reported that it had obligated $63.1 billion, or 99.5 percent, of the

$63.4 billion in discretionary and mandatory funds made available through the Recovery Act, and all Recovery Act

contract and grant competitions had been concluded. As a result, we have removed the Recovery Act as a separate

issue in FY 2011 Top Management Challenges. However, we will continue to report on the Department’s use of

Recovery Act funds as part of its overall grant management responsibilities. We will also conduct appropriate follow

up work to ensure unemployment benefit payments funded by the Recovery Act were proper, and adequate efforts

were made to identify and recover overpayments.
(Unaudited)

190     United States Department of Labor

Management’s Response to the 2011 Top Management Challenges

Overview

The Department of Labor continues to streamline and modernize its programs and increase transparency.  These

efforts have been possible because of a dedicated team of professionals working every day in support of the

Department’s mission to promote the welfare of job seekers, wage earners, and retirees of the United States.

Management appreciates OIG’s recognition of progress in addressing challenges related to the American Recovery

and Reinvestment Act of 2009, leading to its removal from the list as a separate challenge.  The Department has

made significant improvements in worker safety and health and strengthened the management of benefit and

compensation programs in difficult economic times. Information technology systems are more secure and core

programs operate more effectively for the benefit of the American people.    Overall, management of the

Department’s programs and resources is stronger today than at this time last year.

Nonetheless, the Department recognizes that the 11 challenges posed by OIG represent issues of major potential

impact on the effectiveness and efficiency of DOL's programs and operations.    Management understands that

ongoing improvements in many of the areas identified by OIG are necessary for continued success of the

Department’s programs and services.    To that end, management has reviewed OIG’s presentation of the issue,

current status, progress, and next steps for each identified challenge.    In most cases, OIG has recognized the

Department’s progress in the last year in each of the identified areas.    The Department will continue to work

collaboratively with OIG to address and resolve these challenges.    While some improvements are outside the

Department’s immediate control, management will continue to pursue legislative options and work with

stakeholders where appropriate to pursue resolution of issues underlying many of these challenges. Nonetheless,

management has elected to respond to several challenges presented by OIG, which are discussed below.

Moving forward in FY 2012, the Department will aggressively work to ensure full consideration is given to OIG’s

challenges in order to realize the Secretary’s vision of good jobs for everyone.

Protecting the Safety and Health of Workers

The Mine Safety and Health Administration (MSHA) appreciates the work of OIG and its acknowledgement of

progress that MSHA has made in the areas of inspector hiring, delivery of training and training requirements,

pattern of violations, and other rulemaking efforts in Fiscal Year 2011.    As the OIG noted in the section of the

Department’s progress, MSHA has worked consistently over the past year to improve all aspects of its regulatory

program, including enforcement, enhanced enforcement, training, the backlog, and rulemaking.   

However, MSHA questions the inclusion and characterization of some of OIG’s challenges.  Specifically, with respect

to the challenge concerning completion of mandatory regular safety and health inspections, OIG raises the issue of

transparency for reporting completed Metal/Nonmetal inspections.  MSHA agreed that the Agency would report

completed inspections in a more transparent manner and specifically note the mines where the Agency attempted

inspections but the mines were not operating.  The OIG challenge implies that MSHA is not completing all of its

mandated inspections; on the contrary, MSHA completed all mandated inspections at mines that were operating on

the date of the inspection.  

MSHA questions the inclusion of Timely Setting and Updating of Regulations and Standards as a challenge.  This

item is not unique to MSHA, but instead a challenge for any regulatory agency in the U.S. Government.  Over the

past several years, MSHA has timely issued all of its regulations, including many that were statutorily mandated in

the Mine Improvement and New Emergency Response Act.  The proposed rule cited in the challenge provided by

the OIG is lowering coal miners’ exposure to coal dust, a centerpiece of MSHA’s End Black Lung campaign, and a
Management’s Response to the 2011 Top Management Challenges

(Unaudited)

FY 2011 Agency Financial Report    191

rule for which the agency held 7 public hearings across the country to solicit broad input from miners, operators,

miners’ representatives, manufacturers, public interest groups, and other stakeholders.    Further, MSHA has

generally successfully met the timetables for all other regulatory actions.  

Fostering the Development and Implementation of New Technologies is another challenge with which MSHA

disagrees.  MSHA also questions the inclusion of this item, particularly since over the last several years MSHA has

fostered the implementation of new technologies in the mining workplace.  For example, MSHA has proposed or

finalized requirements for: proximity detection systems for continuous mining machines in underground coal

mines; continuous personal dust monitors to provide real‐time information on miners’ exposure to coal mine dust;

refuge alternatives in underground coal mines; multi‐gas detectors in underground coal mines; improved flame‐

resistant conveyor belts; communications and tracking systems (which OIG notes); and lifelines.   MSHA recently

submitted a proposed rule for proximity detection systems for other mobile equipment in underground coal mines

to the Office of Management and Budget for review. MSHA remains in close contact with its partner research

agency, NIOSH, to identify and collaborate on technology that can provide increased safety and health protection

for miners.    MSHA conducts intensive outreach with stakeholders, miners’ representatives, and the mining

community to promote adoption of new technology to reduce risk and save lives.  One example in this area is the

next generation self‐contained self‐rescue device.  With all of these activities, MSHA is unclear as to why the OIG

included this as a challenge.  

Improving Performance Accountability of Workforce Investment Act Grants

OIG identified the Department’s Recovery Act efforts regarding Green Jobs as a challenge.    The total funding

availability for this program represents a rather small portion, less than 1%, of the Department’s total funding

availability under the Recovery Act.  Moreover, this grant area is identified in the Department’s plan to accelerate

remaining Recovery Act expenditures as required by OMB Director Jacob Lew’s September 15, 2011 memorandum

M‐11‐34.

ETA conducted seven grant competitions awarding $741 million for Green Jobs and Healthcare initiatives.  Unlike

the formula grants – the vast majority of ETA’s Recovery Act grant activity which were issued within 30 days of the

enactment of the Recovery Act ‐‐ these competitive grants were all awarded between March 2009 and June 2010.  

As part of its plan to accelerate spending in these areas, ETA is reviewing the progress of these grants on a monthly

basis and has a robust technical assistance program in place to assist grantees in expediting these programs.  In

addition, the following actions are planned to assist in the acceleration of grant expenditures:

 All active ARRA grantees will receive a letter informing them of our expectation for the rapid completion of

Recovery Act fund expenditures.  This letter encourages the grantees to expedite their training programs if

their expenditures are lagging;   

 On a monthly basis beginning in November 2011, ETA will identify grantees with lagging expenditures.  

Additional technical assistance (TA) will be provided to the identified grantees that do not have adequate

plans to address this issue.    Based on an analysis of grantees with lagging expenditure rates, ETA has

identified a number of technical assistance activities to aid grantees in accelerating expenditures.  These

include: aggressively targeting and recruiting participants, managing and monitoring sub‐grantees,

coordinating and managing multiple training providers, and expanding quality service delivery for

participants at all stages of the program.  Technical assistance will be provided on specific topics based on

the specific challenges being faced by an individual grantee; and

 ETA regional staff will continue to perform quarterly desk reviews including analysis of financial reports.  As

appropriate, additional written communication to grantees with lagging expenditures will occur.  
Other Accompanying Information

(Unaudited)

192     United States Department of Labor

Ensuring the Security of Employee Benefit Plan Assets  

The Patient Protection and Affordable Care Act (PPACA) assigned significant new regulatory, enforcement, and

outreach responsibilities to the Department and more specifically, EBSA.  The Department is required to develop

and implement over 25 regulations in conjunction with the Departments of Health and Human Services (HHS) and

Treasury; implement Multiple Employer Welfare Arrangements (MEWA) reporting and oversight requirements; and

design and conduct several health benefit studies, as well as develop and implement education, outreach, and

assistance programs and new enforcement strategies.   EBSA will engage in discussions with HHS, Treasury, and

OMB regarding timetables to respond to public comments and issue final regulations.  These discussions typically

take place through the semi‐annual regulatory agenda decision‐making process.

OIG states that EBSA needs to proceed with rulemaking to implement section 6604 of the PPACA.  Section 6604

gives the Secretary authority to issue regulatory standards or orders to establish that a multiple employer welfare

arrangement is subject to state insurance laws, even if the laws otherwise would be preempted by ERISA or the Risk

Retention Act of 1986.  EBSA will reevaluate its initial determination, made in consultation with the Solicitor’s Office

that it would hold off issuing regulations under PPACA section 6604 in light of other priorities.   EBSA will set a

reasonable timeline for such regulations, taking into account all PPACA priorities.

As OIG notes, starting in FY 2012, EBSA added PPACA enforcement as a component part of its new national

enforcement initiative, the Health Benefits Security Project.  Through this national enforcement project EBSA will

investigate a large number of health plans.   These investigations will provide meaningful feedback on PPACA

compliance after plans and insurers have had the opportunity to process the implementing regulations and related

guidance and benefit from EBSA’s extensive outreach.  Prior to the introduction of this new enforcement project,

EBSA’s focus on promulgating regulations, issuing sub‐regulatory guidance and providing compliance assistance was

consistent with the Administration and the Departments of Health and Human Services and Treasury’s emphasis on

assisting (rather than imposing penalties on) plans, issuers and others that were working diligently and in good faith

to understand and comply with the new law.   

OIG also indicates that EBSA needs to provide HHS with the results of a survey of benefits typically covered by

employers that is sufficiently broad to enable HHS to determine benefits provided under a typical employer plan.  

On April 15, 2011, Secretary Solis transmitted to HHS Secretary Sebelius the report entitled, “Selected Medical

Benefits: A Report from the Department of Labor to the Department of Health and Human Services.”   The

methodology and scope of the survey was developed in consultation with and agreed upon by HHS, BLS and

EBSA.  The report was based on data from the National Compensation Survey (NCS), conducted by BLS.  Using a

large, nationally representative sample of employers, the NCS collects detailed information on whether particular

benefits are included in employer health plans.  The report presents data on the coverage of health benefits by

employer‐provided health plans in the private sector, and is organized in two parts.  The first part summarizes

published statistics on health benefit coverage from the 2008 and 2009 NCS.   The second part presents new

results from an analysis of additional benefits, not included in the previously published reports.   

The results of this report are sufficiently broad to enable HHS to determine benefits provided under a typical

employer plan.   The information provided is sufficiently broad because it includes detailed data on different

benefits frequency of incidences and does not restrict reporting on survey results to a specified threshold of

incidence above which (and only above which) the benefit should be considered "typical" by HHS.  By measuring

the incidence of a broad range of different benefits, the Department's survey will allow the Secretary of HHS to

determine which benefits are offered by a typical employer plan.  Moreover, it provides the Secretary of HHS

with useable and relevant data to consider in making her determination.  It is the opinion of EBSA and the Office

of the Solicitor that this report, together with its associated supporting material, fully satisfies the requirements

of PPACA Section 1302(b)(2)(A).  
Management’s Response to the 2011 Top Management Challenges

(Unaudited)

FY 2011 Agency Financial Report    193

As OIG notes, EBSA implemented a broad Sample Investigation Program (SIP) in FY 2011, an initial step in

developing performance metrics to measure the effectiveness of its enforcement program.   The SIP reviews

randomly selected employee benefit plans for compliance with ERISA, and will continue in FY 2012.   Interim

compliance data will be reported in FY 2012, and the first baseline compliance measure will be available in FY 2013.  

Finally, EBSA continues to work on obtaining legislative change to address deficient benefit plan audits and to

ensure that auditors with poor records do not perform any additional plan audits.

Securing Information Technology Systems and Protecting Related Information Assets

Management appreciates the OIG’s recognition of the Department’s progress developing an Identity Access

Management system using Personal Identity Verification cards; establishing the Enterprise Implementation

Committee (EIC) composed of senior‐level business executives from the Department’s agencies and offices to

replace the Technical Review Board; establishing the IT Acquisition Review Board to oversee and manage IT

acquisitions; developing plans to consolidate its data centers and systems; transitioning to the cloud computing

environment; and implementing the Trusted Internet Connection program to protect external communications to

and from the Internet.   

In addition to managing information technology with an eye on the future, the Department gave ample attention to

securing the current IT environment.    The Department successfully implemented corrective actions to address

approximately 98% of the weaknesses identified by the OIG in Fiscal Year 2011, many of which contributed to the

identified management challenge.    

Ensuring the Successful Development and Implementation of Major Information Management Systems

The Department recognizes and understands the challenge of implementing major information management

systems and appreciates the OIG’s acknowledgement of its progress to date.  That progress includes ongoing efforts

to strengthen and expand the base of knowledgeable and experienced Project Mangers (PMs).  Through the Office

of the Chief Information Officer, the Department offers training classes (i.e., Risk Management, Earned Value

Management) for Federal PMs.  
(Unaudited)

FY 2011 Agency Financial Report    194

Summary of Financial Statement Audit and Management Assurances

The following tables provide a summary of the Department’s FY 2011 financial statement audit and its management

assurances.

Summary of Financial Statement Audit  

Audit Opinion Unqualified

Restatement No

Material Weaknesses Beginning

Balance

New Resolved Consolidated Ending

Balance

Lack of Sufficient Controls over Financial Reporting 1       1

Lack of Sufficient Controls over Budgetary Accounting 1       1

Improvements Needed in the Preparation of Journal Vouchers 1    1    0

Lack of Adequate Controls over Access to Key Financial and Support Systems 1       1

Total Material Weaknesses 4    1    3

Summary of Management Assurances

Effectiveness of Internal Control over Financial Reporting (FMFIA § 2)

Statement of Assurance Unqualified

Material Weaknesses Beginning

Balance

New Resolved Consolidated Reassessed Ending

Balance

Weaknesses over Financial Reporting 1    1     0

Weaknesses over Preparation and Review of Journal Vouchers 1    1     0

Weaknesses over Budgetary Accounts Reconciliation 1    1     0

Total Material Weaknesses 3    3     0

Effectiveness of Internal Control over Operations (FMFIA § 2)

Statement of Assurance Unqualified

Material Weaknesses Beginning

Balance

New Resolved Consolidated Reassessed Ending

Balance

Total Material Weaknesses 0 0 0 0 0 0

Conformance with financial management system requirements (FMFIA § 4)

Statement of Assurance Systems conform to financial management system requirements

Non‐Conformances Beginning

Balance

New Resolved Consolidated Reassessed Ending

Balance

Federal Financial Management System Requirements, Internal

Controls, Preparation of Financial Statements

1    1     0

Total non‐conformances 1    1     0

Compliance with Federal Financial Management Improvement Act (FFMIA)

Agency Auditor

Overall Substantial Compliance Yes No

1. System Requirements Yes No

2. Accounting Standards Yes Yes

3. USSGL at Transaction Level Yes No
(Unaudited)

195     United States Department of Labor

Improper Payments Reporting Details

The Improper Payments Information Act of 2002 (IPIA), as amended by the Improper Payments Elimination and

Recovery Act of 2010 (IPERA), and as implemented by Office of Management and Budget (OMB) Circular A‐123,

Appendix C, Requirements for Effective Measurement and Remediation of Improper Payments, requires Federal

agencies to review their programs and activities annually to identify those that may be susceptible to significant

improper payments.  For programs and activities deemed risk susceptible, agencies are required to perform testing

to estimate the rates and amounts of improper payments, develop and implement corrective action plans to reduce

and recover improper payments, and report on results.   

The Department of Labor’s (DOL) review for Fiscal Year (FY) 2011 identified one program, the Unemployment

Insurance (UI) benefit program, to be at risk of significant improper payments in accordance with OMB criteria

(programs with annual improper payments exceeding both $10 million and 2.5% of annual program payments, or

$100 million).  One additional program, the Workforce Investment Act (WIA) grant program, is classified as at‐risk in

OMB’s Circular A‐123, Appendix C, due to its annual level of expenditures, although the Department’s risk

assessment does not support such a high‐risk designation.

In FY 2011, the Department performed detailed testing for the UI and WIA programs to estimate the level of

improper payments and their major causes.  The Department has taken corrective actions to address the causes

and reduce improper payments in these programs and has established improper payment reduction targets in

accordance with OMB guidance.  

The FY 2011 error rate target for UI’s improper payments was 9.8% as compared to the actual error rate of 12.0%

(11.35% overpayment rate plus 0.65% underpayment rate) for the period July 2010 to June 2011, the most recent

period for which data was available.    This difference is primarily the result of increases in overpayments to

claimants who continued to claim benefits after they returned to work, claimants who failed to meet active work

search requirements, and claimants ineligible for benefits because they voluntarily quit their jobs or were

discharged for disqualifying reasons. These three causes accounted for 70% of overpayments in the 2011 reporting

period and represent nearly all of the increase in the overpayment rate from 2010.  Corrective actions to address

these causes are described in Section III.    The higher actual error rate for WIA in FY 2011 compared to the

program’s annual target is primarily due to including the results of DOL Office of Inspector General audits and other

monitoring activities in the measurement methodology and higher incidence of error.  

Table 1 shows the FY 2010 – FY 2014 targets and projected rates for Department’s “At‐Risk” programs.

   

Table 1: Target and Actual Improper Payments Rates for the Department’s At‐Risk Programs

DOL Program FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Target Actual Target Actual Target Target Target

Unemployment Insurance 9.9% 11.2% 9.8% 12.0% 9.7% 9.6% 9.6%*

Workforce Investment Act 0.07% 0.2% 0.07% 0.3% 0.07% 0.07% 0.07%

    *Targets for FY 2014 have not been established.  Targets from FY 2013 have been carried forward.

I. Risk Assessment

In FY 2011, the Department conducted a risk assessment of its major programs and activities.  Tasks included:   

 Reviewing the prior three year’s results of IPIA risk assessments and detailed tests.  In addition to testing

the two programs (UI and WIA) designated as at‐risk, DOL performed risk assessments and/or detailed

testing on all its other significant programs during FY 2011.  These programs included Federal Employees’

Compensation Act, Black Lung Disability Trust Fund, Energy Employees Occupational Illness Compensation

Program, Longshore and Harbor Workers’ Compensation Act, District of Columbia Compensation Act, and
Other Accompanying Information

(Unaudited)

196     United States Department of Labor

State Unemployment Insurance and Employment Service Operations.  The results of the risk assessments

and detailed testing showed that these programs were low risk.

 Reviewing DOL Office of Inspector General (OIG) and Government Accountability Office (GAO) audit reports

issued for DOL programs to determine whether the reports indicate control weaknesses or other issues that

could potentially impact the amount of improper payments for DOL programs.

 Reviewing results of the Department’s OMB Circular A‐123 internal control assessment to determine

whether control weaknesses were identified that could potentially impact the amount of improper

payments for DOL programs.  

 Reviewing DOL programs’ funding levels for FY 2009 through FY 2011 for significant changes in program

funding that may impact the amount of improper payments.

The outlays for the UI program (State UI, Unemployment Compensation for Federal Employees [UCFE],

Unemployment Compensation for Ex‐Service Members [UCX], Extended Benefits [EB], Emergency Unemployment

Compensation 2008 [EUC08] and Federal Additional Compensation [FAC]) decreased in FY 2011 to an estimated

$114 billion, compared with $156 billion in FY 2010, reflecting improved labor market conditions, a significant drop

in insured unemployed, and the phase‐out of the FAC program.  FY 2011 UI outlays include $52.0 billion in EUC08,

$11.7 billion in EB, and $1.4 billion in FAC.   

For WIA, the American Recovery and Reinvestment Act (ARRA) provided additional resources primarily for formula

grants to states and for other discretionary grants; the ARRA outlays in FY 2010 and FY 2011 include approximately

$2.2 billion and $.8 billion, respectively.   

The UI’s estimated annual improper payments for 2011 are $13.70 billion, consisting of $12.96 billion in

overpayments and $742 million in underpayments.  The estimates are based on the results of the Benefit Accuracy

Measurement (BAM) survey.  The BAM survey methodology is described in Section II – Statistical Sampling.

Funds for both UI and WIA are disbursed and monitored through established systems and processes as utilized in

the past.  In addition, the Department has taken and will continue to take various actions to minimize and manage

the risk associated with the ARRA funding, including the following:

 Issuing specific guidance on the use of the funds distributed through the ARRA programs.

 Conducting outreach to states and other eligible grant applicants to communicate policies and guidelines

and utilizing the regional office Federal Project Officers to conduct and document quarterly desk reviews of

financial obligations, expenditures, and program performance.  Grantees identified as “high‐risk grantees”

through these reviews are given priority attention for on‐site monitoring.   

 Training grantees on Federal grant requirements, performance expectations, fiscal and program

requirements, and allowable use of funds.  

 Closely monitoring the draw‐down of UI’s ARRA funds from the specific accounts and ensuring systems are

in place for reporting information required for monitoring and evaluating the operations of these programs.

 Conducting program reviews to ensure that the various activities included in the ARRA are properly

implemented, including the use of these funds according to various operating instructions and guidance

provided to the states.

II. Statistical Sampling

The following sampling was performed for the two programs designated as at‐risk:  
Improper Payments Reporting Details

(Unaudited)

FY 2011 Agency Financial Report    197

Unemployment Insurance

Sampling Process:    Improper payment rates are estimated from the Benefit Accuracy Measurement (BAM)

program.   BAM includes the three largest permanently authorized unemployment compensation (UC) programs:

State UI1

, UCFE, and UCX.    The Department reports an improper payment rate, which is the combined Annual

Report Overpayment Rate and the Underpayment Rate, required by the Improper Payments Information Act (IPIA).  

Executive Order 13520 required “high‐priority” federal programs to develop supplemental measures.   The

Department, in consultation with the Office of Management and Budget, developed two supplemental measures ‐‐ 

the Operational Rate, which includes fraud and non‐fraud recoverable overpayments that state agencies are

expected to identify and establish for recovery, and the Employment Service (ES) Registration Rate, which measures

the percentage of UI claimants who were required to register with the state ES, but who were not actively

registered during the paid week selected for the BAM audit.   The Department reports these two supplemental

measures quarterly for publication on the Department of the Treasury Payment Accuracy Web site

(www.paymentaccuracy.gov/).   The Operational Rate is also reported annually as part of the IPIA reporting

requirements.

BAM investigators in each state conduct comprehensive audits for randomly selected weekly samples of paid and

denied claims.  Effective January 2008, all paid claims sampled for BAM investigation must be matched with the

National Directory of New Hires (NDNH) database to improve the ability to detect overpayments due to individuals

who claim benefits after returning to work, the largest single cause of UI overpayments.  The universe (population)

includes paid and denied claims under the State UI, UCFE, and UCX programs.    However, because the claims

processes and eligibility requirements are very similar for the additional benefits paid to unemployed individuals

under the EB, EUC08, and FAC programs, the estimated improper payment rates are assumed to generally reflect

the accuracy of these benefit payments.    Overpayment and Underpayment Rates for FY 2011 shown in the

Improper Payment Reduction Outlook Table are for the period July 1, 2010 to June 30, 2011.  Data are shown for

this period rather than the fiscal year because a higher percentage of BAM investigations have been completed and

will, therefore, produce more accurate estimates.    For the period July 1, 2010 to June 30, 2011, state agencies

completed audits for 24,456 paid claims cases, a completion rate of 99.9%.  Additional information about the BAM

methodology can be found at:  www.oui.doleta.gov/unemploy/bam/2010/bam‐cy2010.pdf.

Workforce Investment Act  

Sampling Process:    For FY 2011, the Department used a separate methodology (but similar to its previous

measurements) to estimate the improper payment rate for the WIA grant program.  Unlike the benefit programs,

data is not readily available to allow the Department to directly sample grant payments to develop a statistically

valid estimate of improper payments.    The grant programs’ funding stream makes it very difficult to assess the

improper payment rate on payments to final recipients.  The Department provides grants to states, cities, counties,

private non‐profits, and other organizations to operate programs, and relies significantly on Single Audit Act

Reports (as required by the Single Audit Act of 19962

) to monitor funding to all grant recipients.  Based on a review

of the definition of questioned costs in OMB Circular A‐133 and OMB's IPIA implementation guidance, the

Department determined that questioned costs can be used as a proxy for improper payments.    Therefore, the

Single Audit Act Reports, along with other data in FY 2011, were utilized to determine the improper payment rate

for the WIA grant program.  

 

1 Included in the UI program are the 50 states and Puerto Rico, US Virgin Islands and the District of Columbia (referred to as

states/areas).  The US Virgin Islands does not participate in BAM.   2 The Single Audit Act of 1996 provides for consolidated financial and single audits of state, local, non‐profit entities, and Indian

tribes administering programs with Federal funds. Non‐Federal entities that expend $500,000 or more of Federal awards in a

year are subject to a consolidated financial single audit; any non‐Federal entities that do not meet this threshold are not

required to have a single audit. All non‐Federal entities are required to submit all single audit reports to a Federal Audit

Clearinghouse (Clearinghouse) that is administered by the Census Bureau.
Other Accompanying Information

(Unaudited)

198     United States Department of Labor

  

The Department reviewed FY 2009 (most recent available) Single Audit Act Reports with DOL‐related findings from

the Federal Audit Clearinghouse (which is the national repository of Single Audit Act Reports) and identified all WIA

program questioned costs included in such reports.  As additional evidence that no other audit reports included

questioned costs for the DOL grant programs, the Department selected and reviewed random samples of audit

reports classified in the Clearinghouse database as not having any questioned costs.  In addition to using the Single

Audit Act Reports, the Department performed additional analyses to assess the level of improper payments,

including a review of the results of the monitoring work performed by the ETA regional staff responsible for

managing the WIA program and the GAO and DOL OIG audit reports issued for the WIA program.  To determine an

approximate rate of improper payments for the grant programs, the Department divided the average annual

amount of questioned costs from these sources by the direct program outlays.  The resulting improper payment

rate (assumed to be representative of the FY 2011 rate) was applied to the WIA program outlays for FY 2011 to

determine the estimated improper payment amount for FY 2011.   

III. Corrective Actions

Unemployment Insurance

OMB has established the following categories to classify the root causes of improper payments:  (1) Documentation

and Administrative Errors, (2) Verification Errors, and (3) Authentication and Medical Necessity Errors.

These categories do not align precisely with the way in which the UI program classifies root causes.    The BAM

survey collects data on state workforce agency actions associated with the processing of overpayments.  Table 2

displays the crosswalk between the OMB classification for Documentation and Administrative Errors and

Verification Errors and the BAM data.   No UI overpayments fit the definition of the Authentication and Medical

Necessity Errors category.

Table 2: OMB‐Specified Causes of Errors and BAM Data Crosswalk

Overpayment Causes (OMB Classification) Percent of Overpayments

Documentation and Administrative Errors: 17.79%

   Procedures Not Followed by Agency 8.80%

   Agency Took Incorrect Action 7.87%

   Other Agency Errors 0.93%

   Agency Provided Incorrect Information 0.19%

Verification Errors: 82.21%

   Issue Not Detectable By Agency Procedures 68.59%

   Agency Had Documentation/Did Not Resolve Properly 9.99%

   Agency In Process of Resolving 2.67%

   New Hire Cross‐Match 0.72%

   Wage Record Cross‐Match 0.24%
Improper Payments Reporting Details

(Unaudited)

FY 2011 Agency Financial Report    199

Table 3 reflects the root causes of UI overpayments.  The Department classifies the root causes of UI overpayments

according to the following categories:

Table 3: Root Causes of UI Overpayments

Annual Report Rate Overpayments 2011 IPIA

Rate

Benefit Year Earnings 30.31%

Work Search 21.14%

Separation 20.04%

Employer Service Registration 9.10%

Base Period Wages 6.11%

Able and Available 4.83%

Other Eligibility Issues* 3.73%

All Other Issues** 4.74%

     Total    100.00%

*Other Eligibility Issues include refusal of work, self‐employment, failure to report for agency review or report requested

information, citizenship status, and claiming benefits using a false identity.

**Other issues include adjustments to dependents’ allowance, adjustments to benefits due to claimant receipt of income from

severance pay, vacation pay, Social Security, or employer pension, back pay awards, payment during a period of disqualification,

or agency redetermination of eligibility.

In response to the level of improper payments in the UI program, ETA has developed a Strategic Plan to address

several root causes of improper payments.

Benefit Year Earnings (BYE) Strategies  

The leading cause of overpayments is claimants who have returned to work and continue to claim UI benefits.  Early

detection of these overpayments  ‐‐ which represented 30% of all overpayments in the period July 2010 to June

2011 ‐‐ allows agencies to stop payments sooner and to recover these overpayments more readily.   

#1:  Implement New State Performance Measure Focused on Overpayment Prevention.  

 UI Program Letter No. 34‐11 was issued on September 28, 2011, to announce and implement a new

measure focused on reducing BYE errors.

 The first performance period will be calendar year (CY) 2012.  A goal of a 30% reduction in the BYE rate

from the CY 2008 – 2010 baseline has been set for the first year of implementation, and a 50% reduction is

proposed for the second year of implementation.

 State performance will be addressed through the State Quality Service Plan process.  

#2: Mandate State Use Of National Directory Of New Hires (NDNH) for Benefit Payment Control and Develop

Recommended Operating Procedures.  

 UI Program Letter No. 19‐11, issued in June 2011, established the mandatory use of NDNH for state Benefit

Payment Control no later than December 2011 and included recommended operating procedures for cross‐

matching activity for National and State Directories of New Hires.
Other Accompanying Information

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200     United States Department of Labor

#3: Claimant Messaging Campaign to Deter Continued Claims Filing After Return to Work.

 Implementation of a state‐wide claimant messaging campaign designed to improve claimants’ awareness of

their responsibility to report any work and earnings if they are claiming benefits.  The Department worked

closely with its state partners and the Information Technology Support Center (ITSC) to develop messaging

products that the states can integrate within their existing systems.  These messaging products have been

finalized and are being packaged for dissemination within the states.    Pilot states include California,

Connecticut, Florida, Louisiana, Oregon, and Texas.  

#4: Work Collaboratively with the Partnership Fund for Integrity Innovation to Explore More Timely Data Sources

Indicating Claimant's Return to Work.  

 OMB’s Partnership Fund for Program Integrity Innovation provided funding to the Department to pilot the

use of financial institutions’ payroll deposit and payroll information as a detection tool with states.   The

Department is working in collaboration with the National Association of State Workforce Agencies, the

ITSC, and selected states for the pilot implementation.  

Separation Issue Strategy  

Claimants who were ineligible for UI benefits because they either voluntarily quit their jobs or were discharged for

cause represented 20% of all overpayments in the July 2010 to June 2011 period.

#5: Significantly Increase State Take‐Up of the State Information Data Exchange System (SIDES) Implementation to

Improve Timeliness and Quality of Separation Information.  

 SIDES is a web‐based system that allows electronic transmission of UI information requests from UI

agencies to multi‐state employers and/or Third Party Administrators (TPAs), as well as transmission of

replies containing the requested information back to the UI agencies.  The current implementation of SIDES

allows for the exchange of separation and earnings verification information.

 Currently five states – Colorado, Georgia, New Jersey, Ohio, and Utah – participate in SIDES, along with a

TPA – Automated Data Processing, Inc.  An additional seven states are targeted to fully implement SIDES by

December 31, 2011. TALX, the largest TPA, began participation in SIDES in Utah.  

 The Department is aggressively promoting the use of SIDES by its outreach efforts to recruit new states,

employers, and TPAs.    Several training sessions and webinars were facilitated to provide technical

assistance and support for implementation.  These webinars were attended by 300 state staff nationwide.  

In FY 2011, supplemental funding was provided to accelerate the implementation in 16 states that had

previously agreed to implement, and support the implementation of, SIDES in 21 new states by September

30, 2012.  

Employment Service (ES) Registration Issue Strategy  

Claimants who were required to register with the state Employment Service (ES) but who were not actively

registered accounted for 9% of total overpayments between July 2010 and June 2011.

#6: Aggressive and Targeted Technical Assistance and Monitoring of States with the Largest Overpayments Due to

Employment Service Registration Issues.

 Provide technical assistance to states with high ES registration errors and implementing technology or

other solutions designed to address improper payments due to a claimant’s failure to register with the
Improper Payments Reporting Details

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FY 2011 Agency Financial Report    201

state’s Employment Service or job bank in accordance with the state’s UI law.  In April 2011, seven states

with high ES registration errors were targeted for intensive technical assistance and monitoring.

 Several of these states reported significant decreases in their ES registration error rates during FY 2011.  

Nationally, the ES Registration rate has decreased from 1.43% for the 2010 IPIA reporting period to 1.0% for

the 2011 IPIA reporting period.  

 ETA will continue to monitor state progress in addressing their ES registration issues.

State Focus/Technical Assistance/Resource Targeting

#7: Integrity Legislation to Provide Additional Resources for States to Perform Integrity Functions and Improve Tools

for States to Address Improper Payments.

 The Trade Adjustment Assistance Extension included three key provisions which were enacted in October

2011.  Other proposed provisions that are pending action include: (1) Permit states to use up to 5% of UC

overpayments recovered to augment administrative funding to deter, detect, and recover benefit

overpayments; and (2) Permit states to use up to 5% of contributions collected due to employer fraud or

tax evasion, including misclassification of employees, to augment administrative funding for activities

related to these purposes.

#8: Require Dedicated Percentage of State UI Administrative Grants for Integrity Activities.

 A Departmental team has been established and has begun the exploration of potential regulatory options

with respect to requiring states to dedicate a percentage of UI Administrative Grant funding for State

Integrity Activities.  

#9: Federal/State Workgroup to Identify State Improper Payment Prevention Strategies.

 The workgroup is providing state feedback and input on all strategies in the Strategic Plan.

 Contractor support has been secured, and work is proceeding with support from the Integrity Workgroup

to solicit and document state integrity best practices.

 Best practices will be featured on the UI Communities of Practice (CoP) website:  

uiworks.workforce3one.org as well as disseminated through webinars and conferences scheduled during

the next fiscal year.  The workgroup will continue to convene during the next fiscal year to support new

integrity strategies.

#10: Support Targeted States to Convene Cross‐Agency Task Forces on UI Improper Payments.

 The Virtual Institute convened over a two‐week period in June 2011 with initial webinars on improper

payment root causes and SIDES.  State task forces were formed to support strategic planning for reducing

each state’s improper payment rate based on their root causes. All 11 states considered to be “High

Impact” states (California, Florida, Illinois, Michigan, North Carolina, New Jersey, New York, Ohio,

Pennsylvania, Texas, and Wisconsin) now have strategic plans for reducing improper payments.  

 The Department issued UI Program Letter No. 28‐11 on September 1, 2011, to announce Department

support for states to convene cross‐functional UI integrity task forces and to develop state‐specific strategic

plans to reduce improper payments.    The Department conducted a webinar on September 16, 2011 to

launch the UI Integrity Institute, the successor to the Virtual Institute.  The webinar was targeted to the

states that did not participate in the initial Virtual Institute.    These states will also be expected to form

cross‐functional teams and develop strategic plans to reduce improper payments.  ETA will continue to  
Other Accompanying Information

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202     United States Department of Labor

monitor state progress and will provide on‐going technical assistance to help states implement their

improper payment reduction strategies.

#11: Provide Technical Assistance to Support Targeted High Priority States to Develop Strategic Plans to Reduce UI

Improper Payments.

 Beginning in 2011 and annually thereafter, ETA will identify the states with persistently high improper UI

payment rates as “High Priority” and provide targeted and customized technical assistance to improve their

performance.  The Department issued UI Program Letter No. 33‐11 on September 21, 2011 to launch the

“Improper Payment High Priority States” initiative to reduce the unacceptably high levels of improper UI

payments in those states.  For FY 2011, six states were identified to participate in this initiative – Arizona,

Colorado, Indiana, Louisiana, Virginia, and Washington.  The Department will work with these states and

provide enhanced monitoring and technical assistance to facilitate the development of state strategic plans

to reduce improper payments.

#12: Enhanced State Quality Service Planning (SQSP) Process to Incorporate New Elements Related to Prevention of

Improper Payments.

 UI Program Letter No. 21‐11 was issued in June 2011, which provided planning guidance for the FY 2012

SQSP and included the Integrity Action Plan template and instructions for states' use to identify strategies

and actions to address improper payment rates.  All states have submitted their FY 2012 SQSPs with the

Integrity Action Plan to address their strategies for the prevention, detection, and recovery of UI

overpayments.  

 ETA will continue monitoring of the progress of states’ strategic plans during the next fiscal year.  

#13: Assist Targeted States in Taking Advantage of Supplemental Budget Requests (SBRs) to Enable Reductions in

the States’ Improper Payment Rates.

 UI Program Letter No. 26  ‐11 was issued on July 18, 2011, to solicit state agency proposals for UI

supplemental funding for program integrity and performance and system improvements.  This initiative is

discussed in detail in section VII ‐ Information Systems and Infrastructure.

#14: Assist States in Participating in the Treasury Offset Program (TOP)

 The “SSI Extension for Elderly and Disabled Refugees Act” (P.L. 110‐328) included provisions to permit

states to recover certain Unemployment Compensation debts due to fraud from Federal income tax

refunds under TOP.  The Claims Resolution Act of 2010 (P.L. 111‐29) includes provisions that expand the use

of TOP to recover non‐fraud overpayments if the UC debt is due to failure to report earnings.  ETA issued UI

Program Letter No. 11‐11 in March 2011, to notify states of these changes.    

 On January 28, 2011, the U.S. Department of the Treasury published the interim rule concerning the use of

TOP to collect covered UC debt in the Federal Register at 76 Fed. Reg. 5070.    The Department issued

Change 2 to UIPL No. 02‐09 in May 2011, which informs states of amendments to the procedures to

implement TOP to recover UC debt as well as provide the most current and accurate information on those

procedures.  Michigan, New York, and Wisconsin have begun accessing TOP.  Additional states are expected

to begin participation in TOP during FY 2012.
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FY 2011 Agency Financial Report    203

Workforce Investment Act

The WIA estimated improper payment rate for FY 2011 of 0.3% applies to two of OMB’s three categories of error,

“Documentation and Administration Errors” at 0.28% and “Verification Errors” at 0.02% as shown in Table 4.  No

errors fit the definition of “Authentication and Medical Necessity Errors”.

Table 4: FY 2011 Improper Payments Rates for the Workforce Investment Act Program

By OMB‐Specified Category of Error

OMB‐Specified Category of Error DOL Program

Workforce Investment Act

Documentation and Administrative 0.28%

Verification 0.02%

Authentication and Medical Necessity 0%

Total Improper Payment Rate 0.3%

The improper payment rate estimate work indicated that the major types of errors found in the WIA program are

primarily administrative in nature, including cash management, sub‐recipient monitoring, unallowable costs and

insufficient documentation for participant payments.  The grant management and monitoring processes focus on

these items to reduce and prevent improper payments.  ETA currently uses a multi‐step approach to ensure proper

administration and effective program performance of WIA grants.  First, ETA starts its review/oversight process by

conducting a structured initial risk assessment of all new grants and grantees at the time of the award.  Second, ETA

Federal Project Officers (FPOs) conduct quarterly desk reviews of the financial and program performance of each

grant.    The results of these activities are recorded in the Grants e‐Management System (GEMS), an electronic

tracking and grant management system.    This serves as an early warning system to detect potential financial

management and/or programmatic performance issues and allows ETA to target technical assistance more

effectively.  Finally, ETA staff (FPOs, financial management and others) conduct periodic onsite reviews of grantees.  

ETA attempts to conduct an onsite review of each grantee at least once every three years, but actual review

schedules are based on the results of the risk assessments and desk reviews.  Onsite reviews are conducted using

ETA's Core Monitoring Guide as well as program specific and technical guide supplements designed to provide a

more detailed review of program requirements and financial activities.  Results of the onsite monitoring activities

are also cataloged in the GEMS system.    For grantees with large numbers of sub‐recipients (e.g., WIA formula

grantees), the onsite review conducted using the formula program supplement to the Core Guide includes an

assessment of the grantee's sub‐recipient monitoring activities.   In addition, ETA conducts onsite review of local

areas as part of its review of the state grantee.    The results of the onsite monitoring are also catalogued in the

GEMS system.    ETA now has the capability to review trends or issues that arise in a more comprehensive and

consistent manner.  Whenever deficiencies or problems are identified as a result of a desk review, onsite review, or

an independent audit, ETA immediately begins working with the grantee to obtain appropriate corrective actions.  

Corrective actions undertaken by the grantee are tracked by ETA and follow‐up technical assistance and reviews are

scheduled as needed.

The ETA Division of Policy Review and Resolution processes each grant at closeout, reviewing final grantee reports, the

grant closeout package, FPO recommendations, and other documents available to them to determine whether the

objectives of the grant were accomplished and that all funds were expended as authorized.  Expenditures which are

questioned are resolved through the normal determination process and disallowed costs are forwarded for collection.  

The Audit Resolution staff receives grantee A‐133 audit reports (Single Audit Act reports) which report questioned costs

and/or administrative weaknesses in need of correction.  These items are followed up using the same determination

process noted above, disallowed costs are forwarded for collection, and resolutions reported back to the OIG.    In

addition, these units participate in special grantee reviews and provide fiscal policy training for grantee and Federalstaff.  
Other Accompanying Information

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204     United States Department of Labor

IV. Improper Payment Reduction Outlook

Table 5 showsthe Improper Payment Reduction outlook, for the “At‐Risk” programs, for FY 2010 – FY 2014

Table 5: Improper Payment ReductionOutlook FY 2010– FY 2014

($ in millions)

Program FY 2010 FY 2011 FY 2012 FY 2013 FY 2014

Outlays IP % IP $ Outlays IP% IP$

Est

Outlays IP % IP $

Est

Outlays IP % IP $

Est

Outlays IP % IP $

Unemployment

Insurance $156,000     $114,140     $74,110     $53,900     $51,450    

Annual Report

Rate

Overpayments

10.6% $16,536    11.35% $12,955 8.95% $6,633 8.85% $4,770    8.85% $4,553

Underpayments 0.6% $936    0.65% $742    0.71% $526 0.71% $383    0.71% $365

Operational Rate 5.7% $8,892    6.22% $7,100 5.1% $3,780 5.1% $2,749    5.1% $2,624

Employment

Service

Registration

1.4% $2,231    1.03% $1,176 1.15% $852 1.15% $620    1.15% $592

Workforce

Investment Act $5,875 0.2% $11.8 $4,123 0.3%* $12.4 $3,723 0.07% $2.6 $3,700 0.07% $2.6 $3,550 0.07% $2.4

*The WIA IP rate is comprised of overpayments of 0.29% and underpayments of 0.01%.

Notes:   Actual UI outlays in FY 2010 include approximately $32.7 billion of American Recovery and Reinvestment Act of 2009 (ARRA)

benefit payments under the EB, FAC and EUC08 programs.    Program extensions beyond December 2009 were not considered to be

funded by ARRA.  Recovery Act UI modernization incentive and administrative cost payments to states are not included.  For WIA, the FY

2010 and 2011 outlays include $2.2 and $0.8 billion, respectively, of Recovery Act grants.

The rates were determined as described in Section II – Statistical Sampling and applied to the outlays for the fiscal year.  UI rates are

estimates based on a statistical survey of State UI, UCFE, and UCX payments.  Because the claims processes and eligibility requirements

are very similar for the EB, EUC08, and FAC programs, the estimated improper payment rates are assumed to generally reflect the

accuracy of these benefit payments.    These rates, which include full and partial overpayments, overestimate the improper payments

relating to FAC outlays (about 6.6 % of total outlays in FY 2010 and 1.2% of total outlays in FY 2011), as the FAC payments are payable in

full to claimants entitled to at least $1 in unemployment compensation.  FY 2010 rates exclude Georgia BAM data, which could not be

included in the national estimates due to BAM coding and methodology issues, which were subsequently resolved.   Georgia data are

included in the FY 2011 estimates.

Only an estimated 2.37% and 2.94% of UI benefits were overpaid due to fraud in FY 2010 and FY 2011, respectively. Overpayments due

to fraud are included as part of both the Annual Report and Operational overpayment rates.   

Recovery of Improper Payments

State Benefit Payment Control (BPC) operations identify UI overpayments for recovery through such methods as

cross‐matching claimant SSNs with State and National Directories of New Hires, wage record files submitted each

quarter by employers, matches with other databases, such as Workers Compensation and State Corrections, and

other sources such as appeals, reversals and tips and leads.  States collect overpaid claims through offsets of UI

benefits, state income tax offsets, and direct cash reimbursement from the claimant.  As discussed in Section III,

states now have statutory authority to participate in the U.S. Department of the Treasury’s TOP program, to seek

the recovery of fraud and certain non‐fraud overpayments from the claimant’s federal income tax returns.    The

identification of overpayments for recovery for the WIA program is primarily done through ETA’s onsite monitoring

activities, the Single Audit Act reports, and OIG program audits.  From FY 2004 through FY 2011, approximately $6.1

billion has been recovered for the UI program (including the State UI, UCFE, UCX, EB, and EUC programs) and $7

million for the WIA programs.
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FY 2011 Agency Financial Report    205

V. Recapture of Improper Payments Reporting   

The Improper Payments Elimination and Recovery Act (IPERA), Section 2(h), requires agencies to conduct payment

recapture audits for each program and activity that expends $1 million or more annually if conducting such audits

would be cost‐effective.  A payment recapture audit program is an agency’s overall plan for risk analysis and the

performance of payment recapture audits and recovery activities.    A cost‐effective payment recapture audit

program is one in which the benefits (i.e., recaptured amounts) exceed the costs (e.g., staff time and resources, or

payments for the payment recapture audit contractor) associated with implementing and overseeing the program.  

A payment recapture audit is a review and analysis of an agency’s or program’s accounting and financial records,

supporting documentation, and other pertinent information supporting its payments – it is a detective and

corrective control activity specifically designed to identify and recapture overpayments.

During FY 2011, all major DOL programs and activities were reviewed to establish the cost‐effectiveness of payment

recapture audits.  The UI program, which accounts for the majority of funds administered by DOL and over $114

billion for FY 2011, was deemed cost effective.  The UI strategic action plan calls for investment to enhance the

existing payment recapture audit program.    All other assessed programs and activities, which represented

approximately $14 billion in funding, were determined to be not cost effective.   

Methodology for Determining Cost‐Effectiveness of Payment Recapture Audits

Steps taken to determine the cost‐effectiveness of performing a payment recapture audit for all non‐UI programs

and activities included determining:  (1) the basis for establishing dollar thresholds of programs and activities of $1

million or more in annual expenditures, (2) the criteria for evaluating the cost‐effectiveness of a payment recapture

program, and (3) the procedures to be used to collect the data to support the cost‐effectiveness analysis.  OMB’s

two overall assessment areas were used as the principal criteria for determining the cost‐effectiveness of a

payment recapture program, as reflected in the revised Appendix C, Part I.B, Section 5:  

a)The likelihood that identified overpayments will be recaptured. For example:

 Whether laws or regulations allow recovery;

 Whether the recipient of the overpayment is likely to have resources to repay overpayments from non‐

Federal funds;

 Whether the evidence of overpayment is clear and convincing (e.g., the same exact invoice was paid

twice) as opposed to whether the recipient of an apparent overpayment has grounds to contest; and

 Whether the overpayment is truly an improper payment which can be recovered rather than a failure

to properly document compliance.

b)The likelihood that the expected recoveries will be greater than the costs incurred to identify the overpayments.  

For example:

 Can efficient techniques such as sophisticated software and matches be used to identify significant

overpayments at a low cost per overpayment or will labor intensive manual reviews of paper

documentation be required?

 Are tools available to efficiently perform the payment recapture audit and minimize payment recapture

audit costs? Payment recapture audits are generally most efficient and effective where there is a

central electronic database (e.g., a database that contains information on transactions and eligibility

information) where sophisticated software can be used to perform matches and analysis to identify

recoverable overpayments (e.g., duplicate payments).

From this guidance, questionnaires for analyzing all programs and activities were developed and completed by the

responsible agencies.
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Results of Analysis

Of the 51 programs and activities analyzed, representing over $170 billion in annual Federal expenditures, 39 were

determined to have expenditures over the $1 million cost‐effectiveness threshold. These included:

 6 Benefit Programs,

 32 Grant Programs, and  

 1 DOL‐wide activity  ‐  Non‐Payroll Administrative and Other Costs (primarily contract payment activities

managed by 17 DOL agencies/offices)

These 39 programs and activities were subjected to a detailed analysis to determine the cost‐effectiveness of

performing payment recapture audits.  The results of the analysis are summarized in Table 6.

Table 6: Programs Determined Not Cost Effective for Payment Recapture Audits

DOL Program Likelihood That

Identified

Overpayments Will

be Recaptured

Likelihood That the

Expected Recoveries

Will Be Greater

Than Costs Incurred

Determined

To Be Cost

Effective

Benefit Programs:

Federal Employees’ Compensation Act   Medium Low No

Black Lung Disability Trust Fund Low Low No

Energy Employees Occupational Illness

Compensation

Low Low No

Longshore and Harbor Workers’ Compensation Low Low No

District of Columbia Compensation Act Low Low No

Grant Programs:

Workforce Investment Act (12 programs) Medium Low No

State Unemployment Insurance and

Employment Service Operations (5 grant

programs)

High Low No

Other DOL Grant Programs (15 programs) Medium Low No

Non‐Payroll Administrative and Other Costs:

Contract Payments High Low No

In assessing the likelihood that recaptured overpayments will be greater than costs incurred, most programs

evaluated were ranked “Low” because the process for discovering an overpayment was found to be very manually

intensive and there was no basis for automating the discovery process.  From this assessment, even if the likelihood

of overpayment recapture was “High”, the DOL did not conclude that it would be cost‐effective to conduct payment

recapture audits using traditional contracting practices.

As further evidence of the cost‐effectiveness of performing payment recapture audits, the services of a contingency

contractor have recently been secured to perform payment recapture audits in selected areas on a pilot basis.  The

contractor’s fees will be based on overpayments identified and recaptured and will be paid out of recaptured funds.  

A pilot payment recapture audit is scheduled for the Contract Payments activity for FY 2012.

Unemployment Insurance

The single largest program at DOL is the UI program, which represents approximately $114 billion in expenditures in

FY 2011.  Of this, the amount of estimated overpayments is $12.96 billion, with an estimated overpayment rate of

11.4%.  Because the improper payments for UI are above $750 million and are estimated to be over 10%, the UI

program is classified as a high‐priority program; the only program with this designation within DOL.
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FY 2011 Agency Financial Report    207

DOL’s first priority has been to target resources to its at‐risk programs.    Since the UI program is the only DOL

program deemed both high priority and at‐risk and it receives the vast majority of DOL’s funding, enhancing Federal

and state efforts to reduce improper payments in the UI program is a top priority at DOL.   Additionally, the UI

program is continuing to emphasize the recovery of overpayments by performing payment recapture activities and

providing states with tools to aid their recovery efforts.   

Each state’s UI program has a Benefit Payment Control (BPC) unit that is responsible for promoting and maintaining

program integrity through prevention, detection, investigations, establishment, and recovery of improper

payments.  The BPC units also prepare cases for prosecution.  This work is performed at the state level by state staff

to meet the following requirements:

 Section 303(a)(l) of the Social Security Act (SSA) requires that a state's UI law includes a provision for:  “Such

methods of administration...as are found by the Secretary to be reasonably calculated to ensure full

payment of unemployment compensation when due.”

 Section 303(a)(5) of the SSA also requires that a state law includes provision for: “Expenditure of all money

withdrawn from an unemployment fund of such state, in the payment of unemployment compensation....”

The Secretary of Labor has interpreted these Federal law provisions to create the Secretary's Standard for Fraud

and Overpayment, which requires that states’ laws include provisions for such methods of administration as are,

within reason, calculated:

 To deter claimants from obtaining benefits through willful misrepresentation;

 To detect benefits paid through error by the agency, or through willful misrepresentation or error by the

claimant or others; and

 To recover benefits overpaid under certain circumstances.

Overpayment Prevention and Detection

Every state conducts post award audits for the prevention and detection of UI improper payments on benefit

payments to determine whether error or willful misrepresentation has occurred in the payment of UI benefits. All

states audit all benefits payments by means of a cross‐match against new hire directories (National and State), and

state wage files. However, under certain circumstances, states may exclude payments from these matches if the

wages are being reported, or if the payment was made to a claimant with a return‐to‐work date.   

These activities are conducted through the use of automated tools and procedures that; confirm the identity and

legal status of the claimants, search for unreported earnings, and detect other forms of fraud or errors contributing

to improper payments in the UI program.  

States agencies also maintain the integrity of unemployment insurance and reduce the amount of improper

payments by ensuring that employers contribute their fair share of tax and facilitate the return to work of UI

claimants.

Some of the most useful tools and practices include:

Benefit Year Earnings Issues (claimants continuing to claim UI benefits after returning to work)

National Directory of New Hires – This database is managed by the Department of Health and Human Services,

Office of Child Support Enforcement.  The NDNH has claims information as well as wage and new hire information

from employers all over the country including the Federal government and military.  States use this database to

cross‐match between the wage record data to detect unreported earnings and new hire data to identify individuals

who continue to claim benefits after returning to work.   
Other Accompanying Information

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208     United States Department of Labor

 State Directory of New Hires – This tool provides information similar to the NDNH, but only contains data

reports from employers within the state.   

 State Quarterly Wage Cross‐Match – Paid claims are matched against the quarterly UI tax reporting to

states by employers. (The lag in reporting requirements for UI tax can prevent identification of

overpayments in a timely manner.)  

Separation Issues (claimants ineligible to receive benefits due to voluntary quit or discharge for cause)

 State Information Data Exchange System – This automated data exchange promotes the receipt of timely

information from employers regarding the claimants’ separation from employment and verification of

earnings upon returning to work.    Timely and adequate information from employers provides the state

agency with the necessary information to make a determination on the claimants’ eligibility and thus

prevent improper payments.  

Verification of Claimant Identity and Other Fraud Prevention Activities

 State Department of Motor Vehicles – Helps verify the identity of the claimant.  

 Social Security Administration (SSA) – Helps confirm identity and benefits from SSA.  

 Systematic Alien Verification for Entitlement – Maintained by Department of Homeland Security; it

confirms the legal status of non‐citizens.  The wages used to establish a claim must be earned legally, and

after filing a UI claim, non‐citizens must be legally authorized to seek and accept employment.  

 State and Local Prison Records – Some states match claimant data against these records to prevent fraud in

the program.  

 Internal State Databases record multiple claimants using the same contact information (phone numbers,

addresses, bank accounts, or IP addresses).  These tools can prevent fraud schemes.

Tax Fraud Detection  

 State Unemployment Tax Act (SUTA) Dumping Detection System (SDDS) – Use of SDDS software helps

detect employers who manipulate their tax rates by, for example, shifting employees from accounts with

higher tax rates to accounts with lower tax rates.

 Worker Misclassification Programs – Includes audits and investigations to prevent worker misclassification

by employers.  Worker misclassification occurs when an employee is erroneously classified by an employer

as a non‐employee, which reduces UI tax revenue, as well as the worker’s ability to receive UI benefits,

worker’s compensation, Social Security benefits, health insurance coverage, retirement coverage, and

protection under the Fair Labor Standards Act.   

Reemployment and Continuing Eligibility

 Worker Profiling and Reemployment Services – A system designed to identify claimants who are likely to

exhaust benefits and refer them to services designed to assist them in returning to work quickly.

 Reemployment and Eligibility Assessments – In‐person claimant interviews conducted at the One‐Stop

Career Centers to review continuing UI eligibility and assess reemployment needs, including providing labor

market information, assisting with the development of a work‐search plan, and referral to reemployment

services and/or training when appropriate.

Overpayment Recapture

The states must hold the claimants liable to repay benefits that were received improperly and take an active role to

recover improper payments (payment recapture audits).    States may waive repayments for non‐fraud

overpayments when it would be against equity and good conscience pursuant to their state’s law.  
Improper Payments Reporting Details

(Unaudited)

FY 2011 Agency Financial Report    209

Some of the recovery activities and tools include:  

 Offsets from benefits

 Offsets from state and Federal income tax refunds

 Offsets from lottery winnings, homestead exemptions, and other benefits, including the Alaska Mineral

Refund.  

 Interstate recovery agreements

 Repayment plans

 Civil Actions, including wage garnishments and property liens

 Skip tracing, collection agencies, and credit bureaus  

 Probate and Bankruptcy  

 Referral to Office of Inspector General and other Law Enforcement Agencies

 State and Federal Prosecution  

 Establishment of interest and penalties on overpayments, which adds an incentive to repay quickly

A five‐year summary of overpayments established and recovered as a result of the activities described above is

displayed in Table 7, which includes overpayments established minus recoveries.    Separate rates are shown for

State UI, Unemployment Compensation for Federal Employees (UCFE), Unemployment Compensation for Ex‐

Service Members (UCX), and Extended Benefits (EB) claims only and for State UI, UCFE, UCX, and EB plus Emergency

Unemployment Compensation (EUC) claims.  Recovered overpayments for State UI claims are returned to the UI

account from which the benefits were originally paid.  EUC and EB overpayments that are recovered by the states

are returned to the EUCA account within the UI Trust Fund.

Table 7: UI Overpayments Established and Recovered By Fiscal Year (Excluding Waivers)

Fiscal

Year

Overpayments

Established

UI/UCFE/UCX/EB

Overpayments

Recovered

UI/UCFE/UCX/EB

Recovered

%

Overpayments

Established

UI/UCFE/UCX/EB

+ EUC

Overpayments

Recovered

UI/UCFE/UCX/EB

+ EUC

Recovered

%

2006 $979,836,264 $511,524,977 52.21%

2007 $952,889,616 $531,718,388 55.80%

2008 $1,002,131,148 $571,160,044 56.99% $1,010,170,720 $572,970,666 56.72%

2009 $1,456,383,810 $850,978,618 58.43% $1,732,370,866 $913,418,622 52.73%

2010 $1,906,893,984 $966,820,770 50.70% $2,804,109,432 $1,174,113,250 41.87%

The states are required to report quarterly on overpayment detection and recovery activities on the Employment

and Training Administration (ETA) 227 report.    The amounts established and recovered are based on reports

submitted during the indicated fiscal year.  However, the actual payment of benefits may have occurred in a prior

fiscal year.   

The information reported on the ETA 227 report is based on actual counts of UI overpayments identified and

recovered by the state agencies.  This is in contrast to the estimates of UI overpayment rates and amounts that are

reported for the Improper Payments Information Act, which are based on the results of Benefit Accuracy

Measurement (BAM).  BAM is a statistical survey of paid and denied UI claims.  The results of the BAM audits are

projected to the population of benefit payments for all unemployment compensation programs: State UI, UCFE,

UCX, EB, and EUC.    These BAM estimates will be significantly higher than actual overpayments identified for

recovery because 1) the BAM audits detect eligibility issues that usual BPC detection methods will not identify,

because it is very workload intensive and/or not cost effective to detect (for example, verification of all claimant

work search activity or that all claimants were able and available for work); or 2) the overpayment is not
Other Accompanying Information

(Unaudited)

210     United States Department of Labor

recoverable because the responsibility for the improper payment is the agency’s and/or the employer’s, rather than

the claimant’s, or due to state finality rules.  

“Overpayment Establishments” have been adjusted to subtract waivers, which are overpayments that the state

agency has determined are not recoverable.  The Unemployment Insurance Report Handbook (ET Handbook 401,

4th edition, Section IV, Chapter 3, p. 10) defines a waiver as:

“A non‐fraud overpayment for which the state agency, in accordance with state law, officially relinquishes

the obligation of the claimant to repay.”  

Usually, this is authorized when the overpayment was not the fault of the claimant and requiring repayment would

be against equity and good conscience or would otherwise defeat the purpose of the UI law.

DOL believes that this definition is consistent with the criteria established by OMB for evaluating the cost‐

effectiveness of a payment recapture program in the revised Appendix C, Part I.B, Section 5.

The inclusion of EUC overpayments reduces the recovery rate.  Table 8 compares the overpayment establishment

and recovery rates for UI/UCFE/UCX/EB claims versus EUC claims.

Table 8: Comparison of UI/UCFE/UCX/EB and EUC Overpayments Established and Recovered

($ in billions)

Fiscal

Year

UI/UCFE/UCX/EB

Outlays

Overpayments

Established*

UI/UCFE/UCX/EB

Established

As a Percent

of Outlays

Overpayments

Recovered

Recovered As a

Percent of

Established

2008 $38.88 $1.002 2.58% $0.571 56.99%

2009 $86.90 $1.456 1.68% $0.851 58.45%

2010 $84.07 $1.907 2.27% $0.967 50.71%

Fiscal

Year

EUC Outlays Overpayments

Established*

Established

As a Percent

of Outlays

Overpayments

Recovered

Recovered As a

Percent of

Established

2008 $3.55 $0.008 0.23% $0.002 22.50%

2009 $32.66 $0.276 0.85% $0.062 22.46%

2010 $72.09 $0.897 1.24% $0.207 23.08%

* Excluding waivers.

The recovery rate for EUC overpayments is significantly less than the recovery rate for state UI and EB

overpayments due to several factors:

 Many of these claimants have exhausted benefits, and therefore, states are unable to offset overpayments

against their unemployment compensation payments.

 The legislation establishing the EUC program limits offsets to 50% of the amount payable to the claimant

for the compensated week.

 Claimants who have been unemployed for long durations have few resources available for the repayment

of overpayments.

 The severe decline in the housing market removed the option that states have used to recover

overpayments by attaching liens to an individual’s property and recovering the overpayments when the

property is sold.

 Many states reassigned BPC staff to process claims when workloads increased sharply during the recession,

thereby leaving fewer staff to identify and recover overpayments.
Improper Payments Reporting Details

(Unaudited)

FY 2011 Agency Financial Report    211

The ETA 227 report captures data on the causes of overpayments, the method of detection, recovery and

reconciliation, criminal and civil actions, and the aging of benefit accounts.  After eight quarters, the overpayments

are removed from the total outstanding balance on this report. This does not affect the state’s accounting

practices. When overpayments are recovered that have been removed from the reported outstanding balance, the

amount will be added back to report the recovery in the quarterly report, regardless of when the overpayment

originally occurred.  States are now able to attempt recovery of these older unemployment compensation debts

through the U.S. Department of Treasury’s Tax Offset Program by offsetting the claimant’s Federal income tax

returns. When improper payments are recovered, they are returned to the states’ UI trust fund account from which

they were paid.

A cost‐benefit analysis conducted in 2001 indicated that increasing BPC activity has a high payoff  ‐‐  about $5

recovered for every $1 invested in BPC without adjustments, and at least $4 for every $1 invested after allowing for

diminishing returns in states with higher established rates. The study found that the most cost‐effective approach

would add resources in states with low penetration of the established overpayment rates into the BAM estimate of

overpayments. DOL plans to conduct a cost‐benefit study in the near future based on more recent data, including

the lower establishment and recovery rates of EUC claims.  A copy of the 2001 cost‐benefit study is available at

www.ows.doleta.gov/unemploy/integrity/cb_ada.asp .

Grant Programs

As noted above, OMB continues to classify the WIA program as at‐risk due to its high‐level of annual outlays.  DOL

has established processes that help to prevent, detect and/or recapture overpayments for WIA and for all DOL‐

funded grants.  

Overpayment Prevention and Detection

DOL agencies perform grant monitoring activities on direct grants on a periodic basis3.  Similarly, for most formula

grants, the States monitor their sub‐recipients (pass‐through grantees), which in turn monitor their sub‐recipient

grantees. DOL regional monitoring teams also make on‐site visits to select direct grantees and sub‐recipients each

year.   This cascading monitoring structure results in all grantees and sub‐grantees being monitored on a regular

basis.  

DOL agencies also manage grant closeouts, reviewing final grantee reports, the grant closeout package, related

recommendations, and other documents, to determine whether the objectives of the grants were accomplished

and that all funds were expended as authorized.  Questioned costs are resolved through the normal determination

process, as described in the next phase.

In addition to these monitoring activities, DOL grant programs and their grantees and sub‐grantees are subjected to

numerous GAO audits, DOL OIG audits, and annual audits by CPA firms who perform Single Audit Act audits of

Federal grantees.  These audits address a wide range of issues, including program effectiveness, management and

operational issues, financial statements, internal controls, and identification of unallowable costs (questioned

costs/improper payments).    Grants are also covered in the annual DOL internal control assessment, per OMB

Circular A‐123, Appendix A, which evaluates controls that could impact improper payments.  All these monitoring

activities and related audits and assessments serve as a basis for identifying and correcting issues that could

potentially lead to improper payments.  

All non‐Federal entities that are subject to a Single Audit Act audit are required to submit summary level results

from their audits and a copy of the audit report (A‐133 report) to the Federal Audit Clearinghouse (FAC), which is

 

3 Depending on the grant agreement, grant expenditures may be monitored either on a monthly or quarterly basis, in addition

to annual reviews.
Other Accompanying Information

(Unaudited)

212     United States Department of Labor

administered by the Census Bureau and operates on the behalf of the OMB. The Clearinghouse is a central

repository of information on all Single Audits conducted each fiscal year.  For findings noted in A‐133 reports, OMB

guidelines require a corrective action plan to be included in the report, and, in subsequent reports, the status of

prior year findings is to be reported.  

Table 9 shows the amount of DOL funds expended during FY 2009 by grant group and in total.  

Table 9: DOL Grant Program Expenditures for FY 2009

Grant Program

Groups

Grantees

Reporting

Expenditures in

This Group

Direct Expenditures

(Direct Grantees)

Pass‐Through

Expenditures   

(Sub‐Recipients)

Total Expenditures

WIA 3,153 $3,635,721,220 $4,276,191,065 $7,911,912,285

SUIESO + UI* 526 $100,355,031,204 $146,225,819 $100,501,257,023

Other 1,062 $1,372,414,981 $392,899,516 $1,765,314,497

Total DOL $105,363,167,405 $4,815,316,400 $110,178,483,805

*The amount audited under the Single Audit Act for the State Unemployment Insurance and Employment Service Operations (SUIESO)

program covered both SUIESO expenditures and expenditures for the Unemployment Insurance (UI) program (benefit payments).  Total

outlays for SUIESO are only $4.4 billion of the total $100.5 billion for FY 2009.

Within DOL, there is an established periodic review cycle to leverage the work done by auditors performing work

under the Single Audit Act.   By using the Clearinghouse’s data, reviewers are able to quickly identify any A‐133

report that contains data for a DOL program, as well as identifying whether these funds were received directly from

the DOL or were passed‐through from a DOL direct grantee.  Reviewers obtain copies of all reports that show grant

expenditures for direct grantees.   Reviewers then identify whether any of these reports contain any questioned

costs for any DOL grant funds.

Overpayment Recapture

For grantees with A‐133 Reports identifying funding received directly from DOL and that also identify material

weaknesses or significant deficiencies, DOL OIG forwards the reports and finding details to the appropriate DOL

agency for issue resolution.    The responsible agency(s) then determines how to most appropriately resolve the

questioned costs noted in the report.  All findings for direct grantees are considered important to resolve, especially

those deficiencies that are related to sub‐recipient monitoring, and all findings are tracked through to resolution.

 The report itself may describe corrective actions that have already been taken, and the A‐133 auditor has

accepted the actions taken as appropriate to resolve the finding. In this case, the agency simply verifies that

the actions described in the report were taken.

 With some questioned costs, a review must be conducted to determine the exact amount of questioned

costs that are actually improper overpayments and therefore subject to recapture. These reviews may

involve on‐site visits to, or email exchanges and discussions with, the grantee to establish the facts related

to the questioned costs.  At the conclusion of this review, the grantee will be informed of the agency’s final

determination decision, and be required to take whatever corrective actions that may be required to

resolve the questioned costs. The agency then verifies that the required actions were performed.

 With most questioned costs, the amount of improper overpayments is clearly identified in the report, and

the grantee is already engaged in the process of either reimbursing DOL for the overpayment or adjusting

their drawdown for a subsequent period to reflect the fact that they have already received the funds to

reimburse their subsequent grant expenditures. When refunds are collected, they are returned to the

original year and appropriation from which the obligation was established.  For cancelled appropriations,

the refunds are returned to the Treasury.
Improper Payments Reporting Details

(Unaudited)

FY 2011 Agency Financial Report    213

Table 10 reflects grant expenditures with questioned costs discovered through A‐133 audits, and the results from

the Issue Resolution Process for questioned costs, for FY 2009 (most recent year data is available).

Table 10: Analysis of Direct Grantee Potential Overpayments

Grant

Program

Groups

Direct

Grantees

With

Questioned

Costs for  

FY 2009

Direct

Grantee

Questioned

Costs From

Potential

Over‐

Payments for

FY 2009*

Direct

Grantee

Questioned

Costs

Resolved as

Not an Over‐

Payment

Direct

Grantee Over‐

Payments

Repaid or

Draws

Adjusted

Direct

Grantee

Over‐

Payments

with

Repayment

in Process

Direct

Grantee

Unresolved

Questioned

Costs Still

Under Review

Over‐

Payments

Resolved,

Recovered

or in

Recovery

Process     

%

WIA 17 $2,091,332 $391,735 $43,839 $152,028 $1,503,730** 28%

SUIESO

(only)

9 $1,393,110 $664,137 $644,458 $84,514 $ ‐  100%

Other 6 $51,075 $10,631 $1,045 $39,399 $ ‐  100%

Total

DOL

‐  $3,535,516 $1,066,503 $689,342 $275,941 $1,502,730 57%

*Underpayments and administrative questioned costs, which are used in calculating the rate of improper payments, were removed from Initial

Questioned Costs to arrive at the totals in this column.  Additionally, column 4 demonstrates that 30% of these “potential overpayments” are not

overpayments at all.

**More than $1.3 million of the WIA Unresolved Questioned Costs relate to a single finding which is still in the resolution process.  It is anticipated

that this questioned cost will resolve as “not an overpayment”, which would bring the “not an overpayment” total to $2.4 million, or approximately

70% of the potential overpayments.

For sub‐grantees with A‐133 Reports identifying funding received from direct grantees (e.g. States), monitoring of

issue resolutions is the responsibility of the direct grantees that passed the funds through, although the appropriate

DOL agency may also track resolution through their own grant monitoring and close‐out processes.  For example,

within ETA, once determinations are final, they are referred to ETA’s accounting office to establish the debt.  The

ETA accounting office will perform standard collection activities to collect the debt, and if unable to do so, will refer

the debt to Treasury for further collection efforts.

Reducing Improper Payments in Unemployment Insurance  

As described in Section III, Corrective Actions, several factors contribute to improper UI payments.    Efforts to

reduce costs of taking claims and improve customer service prompted the states to design remote claims

processing. The transition from in‐person claims to remote claims processing (phone and internet) has

depersonalized the process, making it easier for claimants to make false statements, and has had the additional

side effect of precluding valuable prevention activities (such as agency messaging to reinforce eligibility

requirements with claimants and questioning claimants with respect to their active work search efforts and benefit

year employment issues) and contributed to the rise of improper payments.  Additionally, the states are required to

meet benefit payment timeliness performance standards, which may result in some eligibility decisions that are

based on incomplete or untimely information.

DOL is actively working with the states to reduce improper payments.  All state administrators have been called to

action to ensure that UI integrity is a top priority and to develop state specific strategies to bring down the

overpayment rate.  Specific attention and assistance has been given to those states with the largest impact on the

improper payment rate.    This work is continuing with all the states, particularly those with unacceptably high

overpayment rates.

Additionally, DOL has provided states with supplemental funding to implement strategies and technology‐based

infrastructure investments that will help the states in preventing, detecting and recovering UI overpayments. These

grants demonstrate DOL’s commitment to the development of integrity‐related systems focused on the proper
Other Accompanying Information

(Unaudited)

214     United States Department of Labor

payment of UI benefits. These systems can result in significant savings of staff costs for integrity‐related activities,

increased dollar amounts of overpayments recovered, and prevention of future overpayments.   

Between FY 2005 and FY 2010, DOL has provided approximately $46.5 million to states in supplemental funding for

integrity related projects.    In FY 2011, over $191 million in supplemental funding was provided to states for

activities to support the prevention, detection, and recovery of improper UI benefit payments, improve

performance, and address outdated Information Technology (IT) system infrastructures, all of which are necessary

to improve UI integrity.

The goal of the FY 2011 funding opportunity was to accelerate state actions to reduce the UI improper payment

rate.    The funding opportunity was structured to require, as a condition of receiving any funds, that states

implement a range of priority integrity activities focused on key root causes that are designed to prevent improper

payments and to quickly reduce the UI improper payment rate.  This core supplemental funding also provides for

state flexibility in designing state specific strategies with a focus on return on investment (ROI) and clear state

targets for reducing the states’ improper payment rates.    States committing to implement the priority integrity

activities were also awarded additional incentive funds in the amount of $1 million per state to enable

implementation of other UI high‐priority activities, including additional integrity projects designed to improve

overall state program performance.

Reducing Improper Payments in Grants Programs

As noted in Table 10, over 98% of the potential overpayments from grant funds are in the grant programs

administered by ETA.  The FY 2011 improper payment rate estimate work indicated that the major types of errors

found in grant programs are primarily administrative in nature, including cash management, sub‐recipient

monitoring, unallowable costs, and insufficient documentation for participant payments.  The grant management

and monitoring processes, as described in Section III, Corrective Actions, focus on these items to reduce and

prevent improper payments.

Table 11 shows the payment recapture audit reporting for all Department programs.

Table 11:  Payment Recapture Audit Reporting ($ in millions)

Status Contracts Grants Benefits (UI) Loans Other

Amount Subject to Review for Current Year (CY) 2011 Reporting N/A*

(1)

N/A $114,140 N/A N/A

Actual 2011 Amount Reviewed and Reported N/A N/A N/A N/A N/A

Amount Identified for Recovery in 2011 N/A N/A $3,093 N/A N/A

Amount Recovered in 2011 N/A N/A $1,284 N/A N/A

% of Amount Recovered Out of Amount Identified in 2011 N/A N/A $41.51% N/A N/A

Amount Outstanding in 2011 N/A N/A $1,744

(2)

N/A N/A

% of Amount Outstanding Out of Amount Identified in 2011 N/A N/A 56.39%

(2)

N/A N/A

Amount Determined Not to be Collectable in 2011 N/A N/A $691 N/A N/A

% of Amount Determined Not to be Collectable Out of Amount Identified

in 2011

N/A N/A 22.34% N/A N/A

Amounts Identified for Recovery in Prior Years (PYs) $5.9 N/A $2,714 N/A N/A

Amounts Recovered in PYs $5.6 N/A $1,107 N/A N/A

Cumulative Amounts Identified for Recovery (CY + PYs) $5.9 N/A $5,807 N/A N/A

Cumulative Amounts Recovered (CY + PYs) $5.6 N/A $2,391 N/A N/A

Cumulative Amounts Outstanding (CY + PYs) $.3 N/A $3,864

(3)

N/A N/A

Cumulative Amounts Determined Not to be Collectable (CY & PYs) N/A N/A $1,284

(3)

N/A N/A
Improper Payments Reporting Details

(Unaudited)

FY 2011 Agency Financial Report    215

Notes:  Amounts include State UI, UCFE, UCX, EB, and EUC programs.  Data are for the period July 1, 2010, through June 30,

2011, the most recent period for which data are available. (Continued)

*Not applicable

(1) A payment recapture audit was not performed for contracts during FY 2011 but will be performed during FY 2012. Payment

recapture audits for contracts are scheduled to be performed every other year.

(2) Overpayments established 360 days old or less.

(3) Includes overpayments established more than 360 days old.

Table 12 shows the UI program’s established annual targets which drive performance.  The targets are based on the

rate of recovery.

Table 12: Payment Recapture Audit Targets

($ in millions)

Type of Payment Current Year 2011

Amount Identified

Current

Year 2011

Amount

Recovered

Current Year

Recovery Rate

(Amount

Recovered /

Amount

Identified)

2012

Recovery

Rate

Target

2013

Recovery

Rate Target

2014 Recovery

Rate Target

UI Benefits $2,954             

(1)

$1,284 43.46% 64% 72%               

(2)

Note: Amounts include State UI, UCFE, UCX, EB, and EUC programs.  

(1) Excludes amounts waived for recovery.  Data are for the period July 1, 2010 through June 30, 2011, the most recent

period for which data are available.

(2) Recovery targets for 2014 have not yet been developed.

Table 13 is an aging schedule of the amount of overpayments identified through the UI program’s payment

recapture audit program that are outstanding (i.e., overpayments that have been identified but not recovered).   

Table 13: Aging of Outstanding Overpayments

($ in millions)

Type of Payment Current Year Amount

Outstanding (0‐6

months)

Current Year Amount

Outstanding (6 months to

1 year)

Current Year Amount

Outstanding (over 1 year)

UI Benefits $675.0                

(1)  

$519.4                   

(2)

$1,452.8

(3)

Notes: Amounts include State UI, UCFE, UCX, and EB programs.  Aging data are not available for EUC  

overpayments.  Aging status is as of June 30, 2011.

(1)Amounts outstanding less than or equal to 180 days.

(2)Amounts outstanding more than 180 days and less than or equal to 360 days.

(3)Amounts outstanding more than 360 days.
Other Accompanying Information

(Unaudited)

216     United States Department of Labor

Table 14 describes the purpose for which recaptured funds were used.

Table 14: Disposition of Recaptured Funds

($ in millions)

Type of Payment Agency

Expenses to

Administer

the

Program

Payment

Recapture

Auditor

Fees

Financial

Management

Improvement

Activities

Original

Purpose

Office of

Inspector

General

Returned to

Treasury

UI Benefits    $1,284

Note:  Amounts include State UI, UCFE, UCX, EB, and EUC programs.  Data are for the period July 1, 2010 through June 30,

2011, the most recent period for which data are available.

All recovered overpayments are returned to the state’s UI Trust Fund or to the appropriate Federal account for the

payment of future benefits.

In FY 2010 the Department performed a recovery audit of the contract payments made in FY 2008, FY 2009 and the

first quarter of FY 2010, which covered a data base of $4.087 billion in payments.   The work was performed by

contractors and DOL staff.    Procedures included analysis of the payment database and review of supporting

documentation for various selected payments. The audit did not identify any significant improper payments,

consistent with the results of the previous recovery audit completed in FY 2008.  In FY 2010 based on other post

payment review processes, improper payments of approximately $5.9 million were identified for recovery, of which

$5.6 million was actually recovered.  Underlying causes of the improper payments were:

 Insufficient system controls over automated payments to certain vendors.  During the implementation of

the new financial management system payments to certain vendors (such as FedEx and Citibank) were

made without adequate prior invoice review, and the accounts payable system was not capable of

detecting large and unusual payments in advance.

 Duplicate payments of certain invoices.

 Overcharges of late‐payment interest on certain invoices.

DOL has addressed the weaknesses identified and the new system will enhance the Department’s ability to refine

system and internal controls and conduct frequent management reviews to identify and reduce the incidence of

improper payments moving forward.   

Table 15 displays overpayments recaptured outside of recapture audits.   

Table 15: Overpayments Recaptured Outside of Payment Recapture Audits

Agency Source Amount

Identified

(2011)

Amount

Recovered

(2011)

Amount

Identified

(2009‐2010)

Amount

Recovered

(2009‐2010)

Cumulative

Amount

Identified

(2004‐2011)

Cumulative

Amount

Recovered

(2004‐2011)

WIA Post‐Payment Reviews $7,191,271 $465,120 $12,854,296 $907,894 $20,045,567 $1,373,014

No UI benefit overpayments were recovered outside of payment recapture audits.
Improper Payments Reporting Details

(Unaudited)

FY 2011 Agency Financial Report    217

VI. Accountability

Unemployment Insurance

The ETA is responsible for Federal oversight of state unemployment insurance (UI) programs, including oversight of

state activities to reduce and recover improper UI benefit payments.  ETA has taken/continues to take the following

steps to hold Federal managers accountable for reduction and recovery of improper UI payments by states.  State

workforce agencies administer the UI program and set operational priorities within the resources available.  The

Department has limited authority to link the performance of state workforce agency staff to improper payment

reduction goals and targets.  However, ETA has established a robust set of performance measures used to evaluate

the states’ overall operational performance.  States not meeting the criteria set for these measures are expected to

submit corrective action plans as part of their annual State Quality Service Plan submission.   

In response to the level of improper payments in the UI program, ETA developed a Strategic Plan to address the

several root causes of improper payments which are described in detail in section III – Corrective Actions.  In FY

2011, ETA continues to focus on the following integrity related activities and ensure the annual performance

standards for managers include the completion of significant milestones for the projects listed below.

 ETA requires states to measure and report the percent, dollar amount, and reasons for improper payments.  

This data is derived from investigations of a statistically valid sample of payments using Federally prescribed

procedures. ETA reviews this data for validity, analyzes the data for each state, and makes the data

available publicly on the ETA Web site –  

www.oui.doleta.gov/unemploy/bam/2010/bam‐cy2010.pdf    Data review, analysis and publication are

included in the performance plan of the Administrator of ETA’s Office of Unemployment Insurance (OUI)

and in the elements and standards of numerous staff in that office.  

 ETA has implemented a core performance measure for detection of overpayments by state UI programs.  

State performance data is available at the OUI Web site –

oui.doleta.gov/unemploy/3yr_overpay.asp States that fail to meet the performance criterion submit

corrective action plans.  Analysis of state performance and monitoring of states’ corrective actions continue

to be evaluation factors in OUI managers’ performance plans.   

 ETA is developing additional performance measures that will require states to: 1) reduce by 30% after the

first year of implementation and by 50% after the second year for those overpayments attributable to

individuals who continue to claim UI benefits after they return to work; 2) meet the 10% improper payment

rate criterion included in IPERA; and 3) meet a minimum UI overpayment recovery rate target.

 ETA has promoted and continues to promote cost effective methods for states to prevent, detect, and

recover improper UI benefit payments.  Development, delivery, and/or successful implementation of these

initiatives by states have been and continue to be factors on which the OUI administrator and managers are

evaluated.  These initiatives are described in detail in section III – Corrective Actions.

 National Integrity Conference:    In order to provide a forum for disseminating successful practices for

preventing, detecting and recovering UI overpayments, ETA sponsors a biennial National Unemployment

Insurance Integrity Professional Development Conference.    The next conference is scheduled for Spring,

2012.   

As part of its monitoring and oversight responsibilities of the State's UI operations, the Department takes an active

role in facilitating and promoting strategies to reduce improper payments and meet the payment accuracy and

recovery targets required by IPERA.  However, it should be noted that these strategies require the cooperation and

implementation by individual states, including in some cases changes to state laws and regulations.    The

Department has no explicit authority over how states establish priorities in administering their UI programs and,

therefore, can only make recommendations and provide technical assistance in the use of these strategies.
Other Accompanying Information

(Unaudited)

218     United States Department of Labor

Workforce Investment Act

ETA has revised and expanded its training for all grant managers.  GEMS tracks the grant managers’ grant review

actions and provides the grant managers with financial and other information useful in managing the grants.  The

ETA Division of Policy Review and Resolution has requirements in its closeout grant officer performance standards

relating to the requirement to follow up on Single Audit Act, OIG or GAO audit findings and questioned costs relating to

WIA grants, and the Director of the Office of Grant and Contract Management has overall responsibility for ensuring that

these procedures are followed.

VII. Agency Information Systems and Other Infrastructure

Unemployment Insurance

States have internal controls, processes, programs, and staff in place throughout all operations of the UI program

dedicated to protection from internal threats and vulnerabilities.  These threats and vulnerabilities include physical

damage and harm to staff and property, misuse of administrative funds and assets by agency staff, and misuse of UI

funds by agency staff.  It is incumbent upon the state agencies to have a series of protections in place addressing a

myriad of considerations such as the granting of systems access, developing and upholding security policies and

procedures, the proper configuration of hardware and software, basic physical safeguards, backup tests and

disaster recovery provisions, regular audits, ongoing employee training, etc.

While state Internal Security (IS) programs are intended to identify and eliminate system vulnerabilities, the risk

remains of losses from the issuance of improper UI benefit payments and misuse of administrative funds due to

fraud, waste, and abuse.  States are expected to review these controls and update them regularly to eliminate new

threats and vulnerabilities as technology and business practices in the administration of the UI program evolve.

Although integrity is the responsibility of all agency staff, the states have dedicated staff conducting Benefit

Payment Control activities to prevent, detect, and recover improper payments.    These staffs work closely with

agency management to assure that sufficient controls are in place to prevent improper payments, conduct complex

fraud investigations, and operate the activities required to recover improper payments if they have been made.

State UI benefit and tax systems vary in terms of their performance capacities, capabilities, and their adaptability to

new UI programs and integrity strategies.  In response, between FY 2005 and FY 2010, the Department provided

approximately $46.5 million to states in supplemental funding for integrity‐related projects.  In FY 2011, UI Program

Letter (UIPL) No. 26‐11, issued in July 2011, provided funding opportunities for state consortia to submit proposals

for UI technology funds to:

 Develop (or modify and develop) either of the core UI Benefits or Tax and Benefit system designs, which

were developed by two previously established state consortia (or join one of these consortia);

 Design additional core UI Benefits or Tax and Benefits systems using open source components that is also

exportable to other states; and

 Implement technology‐based tools designed to prevent, detect or collect/recover improper UI payments.

This builds on the funding provided by the Department in FY 2009 to two consortia through two separate grants to

conduct feasibility studies for jointly developing a core UI benefit and/or tax system.

UIPL No. 26‐11 also provides Incentive Integrity Activity funds.  States that have implemented or have committed to

implement several core integrity activities requested funding for the following activities, most of which have an

information technology component:

 Activities to address Worker Misclassification;

 Implementation of other integrity‐related projects, including technology‐based prevention, detection, and

collection activities;
Improper Payments Reporting Details

(Unaudited)

FY 2011 Agency Financial Report    219

 Implementing the SIDES earnings/wage verification and monetary and potential employer charges data

exchanges;

 Subscription fees for SIDES;

 Contract staff support for Benefit Payment Control (BPC) activities (activities that do not require use of

state merit staff);

 Implementation of the Federal Treasury Offset Program (TOP); and

 Automation efforts that result in overall performance and system improvements.

In response to proposals submitted in response to UIPL No 26‐11, the Department provided over $191 million in

supplemental funding, which included $128 million awarded to three state consortia, and $63.5 million awarded to

40 state workforce agencies. These resources will fund activities to support the prevention, detection, and recovery

of improper UI benefit payments, improve performance, and address outdated IT system infrastructures, all of

which are necessary to improve UI integrity.

As a result of ETA monitoring, states modified computer matching procedures to improve the productivity of NDNH

as a resource to detect improper payments.    ETA is also working closely with the state agencies to develop the

information systems and infrastructure to support SIDES and to access TOP for UI overpayment recovery.   Both

SIDES and TOP are discussed in Section III, Corrective Actions.

Workforce Investment Act

ETA currently has multiple technology projects underway in an effort to improve grants management.   The WIA

program utilizes these tools to execute the risk management process to assess and monitor grantees.  They include

the web‐based Enterprise Business Support System (EBSS), with GEMS.  EBSS is a web‐based solution used to track

and manage grants.  A component of the EBSS is the automated grant cost reporting system that captures grant

costs and obligations, which improves fiscal integrity.  The combination of the two is part of the cradle‐to‐grave E‐

grants solution for the entire Department.  The GEMS system, mentioned also in Section III of this appendix, is an

online grants management tool meant to provide web accessible, role based context access to grant‐related

information from multiple sources.  The utilization of the GEMS system by the Federal Project Officers and program

management and financial staff allows ETA a more coordinated and comprehensive repository of grant‐specific

information.  A GEMS 4.0 technology project has recently been undertaken to provide for a report writing module

and Web links to the Core Monitoring Guide and supplements.  Management reports are also available to check on

the status of FPO actions for individual staff members’ portfolios of grants.

VIII. Barriers

Unemployment Insurance

The UI program has several statutory barriers to reducing improper payments.  States administer the UI program

and set operational priorities.    The Department has limited authority to ensure they pursue improper payment

reduction activities.  

The Department of Treasury requires states to use merit‐based state government staff to access TOP data.  

However, several states use contract staff to perform program activities that require accessing TOP data.    Some

states have reported difficulties in implementing the TOP program due to Treasury’s mandate to use merit staff.  

Treasury is working with the Department to provide customized technical assistance to resolve this issue.

ETA has developed Unemployment Compensation (UC) integrity legislation, which, if enacted by the Congress, will

help states reduce improper benefit payments.  This will ensure that benefits are available for eligible UI claimants,

thus contributing to DOL strategic goal to “Ensure income support when work is impossible or unavailable.”   
Other Accompanying Information

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220     United States Department of Labor

In October 2011, three key integrity provisions were enacted as part of the Trade Adjustment Assistance Extension

Act:    

 Requires states to assess a penalty of not less than 15% of the amount overpaid on any claim for benefits

that is determined to be due to the claimant’s fraud.   

 Prohibits states from relieving an employer of benefit charges if the employer’s (or its agent’s) fault has

caused an inappropriate payment and if the employer (or agent) has established a pattern of failing to

respond timely or adequately to requests for information.

 Requires employers to report employees re‐hired within 60 days of their last employment to the NDNH.  

This change will significantly expand the number of employee records available for matching and can be

expected to increase the number of detections, and potential prevention, of overpayments due to claimant

who continue to claim benefits after they return to work.

 Other proposed provisions that are pending action are:

o Permits states to use up to 5% of UC overpayments recovered to augment administrative funding

to deter, detect, and recover benefit overpayments.

o Permits states to use up to 5% of contributions collected due to employer fraud or tax evasion,

including misclassifications of employees, to augment administrative funding for activities related

to these purposes.

ETA will also pursue the following regulatory changes to facilitate the redirection of resources and activities

towards improving UI program integrity.

 Require a percentage of state UI administrative grants be dedicated for integrity activities.

 Revise the regulation governing the BAM program (20 CFR 602.43) to remove the prohibition on the use of

sanctions or incentives to achieve specific improper payment rates.  

Workforce Investment Act  

No statutory or regulatory barriers exist that limit WIA's ability to address and reduce improper payments.  The WIA

program has the legal authority to establish receivables and implement actions to collect those receivables.
FY 2011 Agency Financial Report     221   

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Department of Labor Agency Pages

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DOL Enforcement Data ‐  http://ogesdw.dol.gov/
222     United States Department of Labor

Acronyms

ACSI American Customer Satisfaction Index

BLS   Bureau of Labor Statistics

CFO   Chief Financial Officer

DOL   U.S. Department of Labor

DVOP   Disabled Veterans’ Outreach Program

EBSA Employee Benefits Security

Administration

ERISA   Employee Retirement Income Security

Act

ESA   Employment Standards Administration

ETA   Employment and Training Administration

   

FASAB   Federal Accounting Standards Advisory

Board

FECA   Federal Employees’ Compensation Act

FFMIA   Federal Financial Management

Improvement Act

FMFIA   Federal Managers’ Financial Integrity Act

FLSA   Fair Labor Standards Act

FTE Full Time Equivalent

FUTA Federal Unemployment Tax Act

FY   Fiscal Year

GAO   U.S. Government Accountability Office

GPRA   Government Performance and Results

Act

GSA   General Services Administration

HVRP   Homeless Veterans’ Reintegration

Program

ILAB   Bureau of International Labor Affairs

IPIA Improper Payments Information Act

IRS   Internal Revenue Service

IT   Information Technology

LMRDA   Labor‐Management Reporting and

Disclosure Act

LPD   Lost Production Days

LVER   Local Veterans’ Employment

Representative

MSHA   Mine Safety and Health Administration

NCFMS   New Core Financial Management System

OASAM   Office of the Assistant Secretary for

Administration and Management

OASP Office of the Assistant Secretary for

Policy

OCFO   Office of the Chief Financial Officer

OCIA   Office of Congressional and

Intergovernmental Affairs

ODEP Office of Disability Employment Policy

OFCCP   Office of Federal Contract Compliance

Programs

OFLC Office of Foreign Labor Certification

OIG   Office of Inspector General

OLMS   Office of Labor‐Management Standards

OMB Office of Management and Budget

OPA   Office of Public Affairs

OSHA   Occupational Safety and Health

Administration

OWCP   Office of Workers’ Compensation

Programs

PBGC   Pension Benefit Guaranty Corporation

PPI   Producer Price Index

PY   Program Year

RAPIDS Registered Apprenticeship Partners

Information Data System

RECA Radiation Exposure Compensation Act

SOL   Office of the Solicitor

SSA   Social Security Administration

SWA State Workforce Agencies

TAA   Trade Adjustment Assistance

TAP   Transition Assistance Program

UI   Unemployment Insurance

USPS   U.S. Postal Service

UTF   Unemployment Trust Fund

VA   U.S. Department of Veterans Affairs

VETS   Veterans’ Employment and Training

Service

WB   Women’s Bureau

WHD Wage and Hour Division

WIA   Workforce Investment Act
(Unaudited)

FY 2009 Performance and Accountability Report     223