FMCS – 2019 Financial Statement Audit 

Contract: GS23F0111L/ FMCS-2018-TO-0001

Federal Mediation and Conciliation Service (FMCS) 

Fiscal Year 2019 Financial Statement Audit

Final Independent Auditors’ Report

Submitted for review and acceptance to:

Terry Lee

Contracting Officer's Representative (COR)

Federal Mediation and Conciliation Service

250 E St SW

Washington, DC 20427

Submitted by:

Jason L. Allmond CPA, CGFM, CISA, CISM

Member

Allmond & Company, LLC

8181 Professional Place, Suite 250

Landover, MD 20785

301-918-8200

jallmond@allmondcpa.com

Final Independent Auditors’ Report 

Prepared under contract to the Federal Mediation and Conciliation Service (FMCS) to provide financial auditing 

services
 

FEDERAL MEDIATION AND CONCILIATION SERVICE

 AUDIT REPORT

 SEPTEMBER 30, 2019

 ALLMOND & COMPANY, LLC

 Certified Public Accountants

 7501 Forbes Blvd, Suite 200

 Lanham, Maryland 20706

 (301) 918-8200
FEDERAL MEDIATION AND CONCILIATION SERVICE

November 15, 2019 

Table of Contents 

INDEPENDENT AUDITORS’ REPORT............................................................................................... 1 

FINANCIAL STATEMENTS...................................................................................................................9

NOTES TO THE FINANCIAL STATEMENTS................................................................................... 13
1 

Independent Auditors’ Report

The Director

Federal Mediation and Conciliation Service:

Report on the Financial Statements

We have audited the accompanying financial statements of the Federal Mediation and Conciliation 

Service, which comprise the balance sheets as of September 30, 2019 and 2018; the related statements of 

net cost, changes in net position, and budgetary resources for the fiscal years ended; and the related notes 

to the financial statements (hereinafter referred to as the financial statements). 

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in 

accordance with accounting principles generally accepted in the United States of America; this

responsibility includes the design, implementation, and maintenance of internal control relevant to the 

preparation and fair presentation of financial statements that are free from material misstatement, whether 

due to fraud or error.

Auditor’s Responsibility 

Our responsibility is to express an opinion on the fiscal years 2019 and 2018 financial statements of 

FMCS 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 the Office of 

Management and Budget (OMB) Bulletin No. 19-03, Audit Requirements for Federal Financial 

Statements. Those standards and OMB Bulletin No. 19-03 require that we plan and perform the audit to 

obtain reasonable assurance about whether the financial statements are free of material misstatement. 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in 

the financial statements. The procedures selected depend on the auditors' judgment, including the 

assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. 

In making those risk assessments, the auditor considers internal control relevant to the entity's preparation 

and fair presentation of the financial statements in order to design audit procedures that are appropriate in 

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

internal control. Accordingly, we express no such opinion. 

An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness 

of significant accounting estimates made by management, as well as evaluating the overall presentation of 

the financial statements.

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

our audit opinion.
Independent Auditors’ Report 

2 

Opinion

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

financial position of the Federal Mediation and Conciliation Service as of September 30, 2019 and 2018, 

and its net cost of operations, changes in net position, and budgetary resources for the years then ended in 

accordance with accounting principles generally accepted in the United States of America. 

Other Matters 

Required Supplementary Information

The information in the Management and Discussion Analysis section, and Other Accompanying 

Information section of this report is not a required part of the basic financial statements, but is 

supplementary information required by accounting principles generally accepted in the United States of 

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

management regarding the methods of preparing the information and comparing the information for 

consistency with management’s responses to our inquiries, the basic financial statements, and other 

knowledge we obtained during our audit of FMCS’s financial statements. However, we did not audit this 

information and, accordingly, we express no opinion on it.

Other Reporting Required by Government Auditing Standards

Internal Control over Financial Reporting 

In planning and performing our audit of FMCS’s financial statements as of and for the year ended 

September 30, 2019, in accordance with generally accepted government auditing standards, we 

considered FMCS’s internal control over financial reporting as a basis for designing audit procedures that 

are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, 

but not for the purpose of expressing an opinion on the effectiveness of FMCS’s internal control over 

financial reporting. Accordingly, we do not express an opinion on FMCS’s internal controls over 

financial reporting. We limited internal control testing to those necessary to achieve the objectives 

described in OMB Bulletin No. 19-03. We did not test all internal control relevant to operating objectives 

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

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

the paragraph above and was not designed to identify all deficiencies in internal control over financial 

reporting that might be material weaknesses or significant deficiencies and therefore, material weaknesses 

or significant deficiencies may exist that were not identified. However, as described in the accompanying 

Exhibit I, we identified certain deficiencies in internal control that we consider to be a material weakness. 

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

management or employees, in the normal course of performing their assigned functions, to prevent, or 

detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination 

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

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

consider the deficiencies described in the accompanying Exhibit I Findings and Recommendations to be 

material weaknesses (2019-01 and 2019-05).
Independent Auditors’ Report

3

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 the attention by those charged with 

governance.

Furthermore, we noted additional matters that we will report to FMCS management in a separate letter.

Compliance and Other Matters Specific to the Financial Statements

As part of obtaining reasonable assurance about whether FMCS’s fiscal year 2019 financial statements 

are free of material misstatements, we performed tests of FMCS’s compliance with certain provisions of 

applicable laws, regulations, contracts, and grant agreements, which noncompliance could have a direct 

and material effect on the determination of material amounts and disclosures in FMCS’s financial 

statements, and certain provisions of other laws specified in OMB Bulletin No. 19-03. However, 

providing an opinion on compliance with those provisions was not an objective of our audit, and 

accordingly, we do not express such an opinion. 

The results of our tests of compliance as described in the preceding paragraph disclosed no instances of 

noncompliance or other matters that are required to be reported herein under Government Auditing 

Standards or OMB Bulletin No. 19-03.

FMCS’s Response to Findings

FMCS’s responses to the findings identified during our audit are presented in Exhibit I. FMCS’s 

responses were not subjected to the auditing procedures applied in the engagement to audit the financial 

statements and, accordingly, we express no opinion on the responses.

Purpose of the Other Reporting Required by Government Auditing Standards

The purpose of the communication provided in the Other Reporting Required by Government Auditing 

Standards section is solely to describe the scope of our testing of internal control and compliance with 

selected provisions of applicable laws, regulations, contracts, and grant agreements, and the results of that 

testing, and not to provide an opinion on the effectiveness of the FMCS’s internal control or on 

compliance. This communication is an integral part of an audit performed in accordance with U.S. 

generally accepted government auditing standards in considering internal controls and compliance with 

laws, regulations, contracts, and grant agreements which could have a material effect FMCS’s financial 

statements. Accordingly, this communication is not suitable for any other purpose. 

Allmond & Company, LLC Lanham, MD 

November 15, 2019
Independent Auditors’ Report 

Exhibit I Material Weaknesses 

Findings and Recommendations

4

Lack of Sufficient Internal Controls over Financial Reporting for Upward and Downward 

Adjustments of Prior Year Obligations (2019-01)

CONDITION:

FMCS’s internal controls over financial reporting lack sufficient internal controls to ensure the reliability 

of its Upward and Downward Adjustments of Prior Year Obligations. Specifically, we noted that the 

recorded Upward Adjustments and Downward Adjustments of Prior year Obligations was not properly 

supported by sufficient and appropriate documentation. Specifically, we noted the following:

• An unsupported transaction of $899,098 was recorded to USSGL account 487100 and account 

488100 due to a change from governmental to non-governmental attribute on obligations in the 

general ledger.

• One instance where a downward adjustment of prior year obligation was recorded and reduced 

the entire obligation amount as opposed to the difference between the original obligation and the 

actual award payment of $242,163.

CRITERIA:

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

Government, (issued September 2014), Principle 10 – Design of Appropriate Types of Control Activities, 

10.03, Accurate and Timely Recording of Transactions, states on page 54,

“Transactions are 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 its initiation and authorization through 

its final classification in summary records. In addition, management designs control 

activities so that all transactions are completely and accurately recorded.” 

The Office of Management and Budget (OMB), OMB Circular A-11, “Preparation, Submission and 

Execution of the Budget, (issued June 28, 2019), Section 130 SF-133, Report on Budget Execution and 

Budgetary Resources, Part 12 “How Do I Report Adjustments to Expired TAFS” states on page 11,

“Downward Adjustments: Place downward adjustments of unpaid obligations previously incurred 

on line 1021, "Unobligated Balance: Recoveries of prior year unpaid obligations." The amount 

should be included as a positive number because it increases the expired resources available only 

for future adjustments.”

CAUSE:

The system is not properly configured to reclassify governmental and non-governmental attributes 

without recording transactions to account 487100 and 488100. 
Independent Auditors’ Report 

Exhibit I Material Weaknesses 

Findings and Recommendations

5

FMCS does not have a policy or procedure in place to review the validity of upward and downward 

adjusts recorded to the financial system. 

EFFECT:

The lack of financial reporting internal controls can lead to potential misstatements to the financial 

statements or line items not being properly classified in accordance with generally accepted accounting 

principles.

RECOMMENDATION:

We recommend that FMCS management enhances current review process, to ensure all transactions are 

recorded completely, accurately and in compliance with the USSGL.

We further recommend that FMCS implement a policy and procedure to identify on a quarterly basis 

upward adjustments and downward adjustments that should not be recorded to the general ledger so that 

adjustments can be recorded to properly state ending balances. 

MANAGEMENT RESPONSE:

As the Director of Finance, I am responding on behalf of senior management. Management concurs with

the findings and recommendations suggested by Allmond and Company. 

We will ensure the following:

1. FMCS management has enhanced current review process, to ensure all transactions are recorded 

completely, accurately and in compliance with the USSGL.

2. FMCS will implement a policy and procedure to identify on a quarterly basis upward adjustments 

and downward adjustments that should not be recorded to the general ledger so that adjustments 

can be recorded to properly state ending balances.
Independent Auditors’ Report 

Exhibit I Material Weaknesses 

Findings and Recommendations 

6 

Internal Controls over Journal Vouchers are not properly Designed and Implemented (2019-05)

CONDITION:

FMCS’s internal controls over journal vouchers are not properly designed and implemented. Specifically, 

during our review of journal vouchers transactions, we noted that FMCS incorrectly recorded unobligated 

no-year funds in USSGL account 451000 as opposed to USSGL account 445000 creating an abnormal 

balance in account 451000 in the amount of $638,441. 

CRITERIA:

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

Government, (issued September 2014), Principle 10 – Design Control Activities, 10.03, Accurate and 

Timely Recording of Transactions, states, 

“Transactions are 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 its initiation and authorization through its final classification in 

summary records. In addition, management designs control activities so that all transactions are 

completely and accurately recorded.”

CAUSE:

GLOWS is not configured to record unobligated balances in no year funds to Unapportioned authority at 

the end of the fiscal year. 

FMCS was unaware of the required entry in order to remove the unobligated balance in no year funds to 

the correct USSGL account. 

EFFECT: 

The lack of properly designed and implemented internal controls over journal vouchers can lead to 

potential misstatements to the financial statements or line items not being properly classified in 

accordance with generally accepted accounting principles.

RECOMMENDATION:

We recommend that FMCS management:

1. Design and implement policies and procedures to verify that the correct entries are recorded

in GLOWS.

2. Provide additional training on the USSGL guidance for properly recording transactions.
Independent Auditors’ Report 

Exhibit I Material Weaknesses 

Findings and Recommendations

7

MANAGEMENT RESPONSE:

As the Director of Finance, I am responding on behalf of senior management. Management concurs with 

the findings and recommendations suggested by Allmond and Company. 

We will ensure the following:

1. FMCS has implemented internal controls for reconciliations and reviews for abnormal balances 

on a monthly basis, to ensure proper recording of transactions. These reviews help to identify any 

abnormal balances, which allowed FMCS to confirm and make the proper correcting entry in the 

current year and fiscal year. FMCS has also transitioned to a shared service provider for fiscal 

year 2020 and going forward, with capabilities beyond that of the previously mentioned GLOWS 

system.

2. FMCS will continue to provide additional training on the USSGL guidance for properly recording 

transactions.
Independent Auditors’ Report 

Exhibit II 

Status of Prior Year Findings

8 

The following table provides the fiscal year (FY) 2019 status of all recommendations included in the 

Independent Auditors' Report on the FY 2019 Financial Statement Audit’s FY 2018 Financial Statements 

(November 15, 2018). 

FY 2018

Finding

FY 2018 Recommendations FY 2019 

Status

Internal 

Controls over 

Preparing 

Financial 

Statements and 

Footnote 

Disclosures are 

not

Adequately 

Designed and 

Implemented 

(2018-04)

Recommendation:

1. Ensure the updated OMB Circular A-136 is utilized when preparing

the financial statements and footnote disclosures.

2. Design and implement policies and procedures to ensure the

account balances, line items, and all corresponding balances agree

to the agency trial balance.

3. Design and implement policies and procedures to have someone

other than the preparer review the financial statements and note

disclosures for completeness, accuracy, and compliance with

financial reporting requirements. The review process should also

utilize checklist that describes key items and expectations regarding

the presentation of the financial statements and footnote

disclosures.

Closed

Internal 

Controls over 

Journal 

Vouchers are 

Not Properly 

Designed and 

Implemented 

(2018-05)

Recommendation:

1. Design and implement policies and procedures to record the use of

appropriations in GLOWS when expenses are incurred.

2. Design and implement policies and procedure to separate and

document the duties of the preparer and the reviewer of journal

vouchers recorded in GLOWS.

3. Design and implement policies and procedures to verify that the

correct entries are recorded in GLOWS.

4. Provide additional training on the USSGL guidance for properly

recording transactions.

Closed

Closed

Open

Open
Federal Mediation and Conciliation Service

Fiscal Year 2019

Financial Statements
2019 2018

Assets:

Intragovernmental

Fund Balance With Treasury (Note 2) $ 12,177,071 $ 14,121,789

Accounts Receivable (Note 3) 18,574 27,781

Total Intragovernmental Assets 12,195,645 14,149,570

Property, Equipment, and Software, Net (Note 4) 309,212 493,831

Total Assets $ 12,504,857 $ 14,643,401

Liabilities:

Intragovernmental

Employer Contributions and Payroll Taxes Payable 316,187 273,884

Unfunded FECA (Note 5) 336,135 330,950

Total Intragovernmental Liabilities $ 652,322 $ 604,834

Accounts Payable $ 173,225 $ 985,436

Accrued Payroll and Benefits 1,161,296 1,025,641

Actuarial FECA (Note 5) 1,752,946 1,747,212

Unfunded Annual Leave (Note 5) 2,513,606 2,281,112

Total Liabilities $ 6,253,395 $ 6,644,235

Net Position:

Unexpended Appropriations - Other Funds $ 7,635,205 $ 8,893,986

Cumulative Results of Operations - Other Funds (1,383,743) (894,820)

 Total Net Position 6,251,462 7,999,166

 Total Liabilities and Net Position $ 12,504,857 $ 14,643,401

The accompanying notes are an integral part of these statements.

FEDERAL MEDIATION AND CONCILIATION SERVICE

BALANCE SHEET

AS OF SEPTEMBER 30, 2019 AND 2018

(In Dollars)

9
2019 2018

Total Gross Program Costs $ 52,114,505 $ 50,029,586

Less: Total Earned Revenues 2,341,178 2,128,569

Net Cost of Operations $ 49,773,327 $ 47,901,017

The accompanying notes are an integral part of these statements.

FEDERAL MEDIATION AND CONCILIATION SERVICE

STATEMENT OF NET COST

FOR THE YEARS ENDED SEPTEMBER 30, 2019 AND 2018

(In Dollars)

10
FY 2019 FY 2018

Unexpended Appropriations

Beginning balances 8,893,986 8,156,658

Beginning balances - adjustment - 516,789

Beginning balances, as adjusted 8,893,986 8,673,447

Budgetary Financing Sources:

Appropriations received 46,650,000 46,650,000

Other adjustments (709,985) (421,005)

Appropriation used (47,198,796) (46,008,456)

 Total Budgetary Financing Sources (1,258,781) 220,539

 Total Unexpended Appropriation 7,635,205 8,893,986

Cumulative Results of Operations:

Beginning balances $ (894,820) $ (436,034)

Beginning balances - adjustment $ (545) $ (516,789)

Beginning balances, as adjusted $ (895,365) $ (952,823)

Budgetary Financing Sources:

Appropriations used 47,198,796 46,008,456

Other Financing Sources

Imputed financing (Note 9) 2,086,153 1,950,564

Total Financing Sources 49,284,949 47,959,020

Net Cost of Operations (49,773,327) (47,901,017)

Net Change (488,378) 58,003

Cumulative Results of Operation (1,383,742) (894,820)

Net Position $ 6,251,462 $ 7,999,166

The accompanying notes are an integral part of these statements.

FEDERAL MEDIATION AND CONCILIATION SERVICE

STATEMENT OF CHANGES IN NET POSITION

FOR THE YEARS ENDED SEPTEMBER 30, 2019 AND 2018

(In Dollars)

11
2019 2018

Budgetary Resources:

 Unobligated balance from prior year budget authority, net 6,220,935 6,851,310

 Appropriations (discretionary and mandatory) 46,650,000 46,650,000

 Spending authority (discretionary and mandatory) 2,342,206 2,128,569

 Total Budgetary Resources $ 55,213,141 $ 55,629,879

Status of Budgetary Resources:

 New obligations and upward adjustments (Note 6) $ 48,193,226 $ 49,512,002

 Unobligated balance, end of year:

 Apportioned, unexpired accounts 2,330,346 2,037,768

 Unapportioned, unexpired accounts 1,572,655 1,138,052

 Expired unobligated balance, end of year 3,116,914 2,942,057

 Unobligated balance, end of year (total) 7,019,915 6,117,877

 Total Status Budgetary Resources $ 55,213,141 $ 55,629,879

Outlays, Net:

 Outlays, net (total) (discretionary and mandatory) 47,883,770 45,832,075

 Agency outlays, net (discretionary and mandatory) $ 47,883,770 $ 45,832,075

FEDERAL MEDIATION AND CONCILIATION SERVICE

STATEMENT OF BUDGETARY RESOURCES

FOR THE YEARS ENDED SEPTEMBER 30, 2019 AND 2018

(In Dollars)

12
13

FEDERAL MEDIATION AND CONCILIATION SERVICE

Notes to the Financial Statements

As of September 30, 2019 and September 30, 2018 

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.) Reporting Entity

FMCS is an independent Federal agency whose primary mission is to prevent or 

minimize labor-management disputes affecting interstate commerce by providing 

mediation, conciliation, and voluntary arbitration. These activities are performed in both 

the private and public sectors, except for the railroad and airline industries, which are 

covered by the Railway Labor Act and the National Mediation Board, respectively. 

At September 30, 2019, FMCS consisted of a national office, 10 regional offices, 

and 12 field offices.

A summary of significant accounting policies utilized in the preparation of the 

financial statements is as follows:

b.) Basis of Presentation

These financial statements have been prepared from the books and records of FMCS to 

report the financial position and results of operations of the Federal Mediation and 

Conciliation Service (FMCS) as required by the Accountability Tax Dollars Act of 2002, 

Public Law 107-289 in accordance with accounting principles generally accepted in the 

United States (GAAP), and the form and content for entity’s financial statements 

specified by the Office of Management and Budget (OMB) in OMB Circular No. A-136, 

Financial Reporting Requirements, as revised. GAAP for federal entities are standards 

prescribed by the Federal Accounting Standards Advisory Board (FASAB), which has 

been designated the official accounting standards-setting body for the federal government 

by the American Institute of Certified Public Accountants (AICPA).

OMB Circular No. A-136 requires agencies to prepare basic financial statements, which 

include a Balance Sheet, Statement of Net Cost, Statement of Changes in Net Position 

and a Statement of Budgetary Resources. The Balance Sheets present, as of September

30, 2019 and 2018, amounts of future economic benefits owned or managed by the 

FMCS (assets), amounts owed by the FMCS (liabilities) and amounts which comprise the 

difference (net position). The Statements of Net Cost report the full cost of the Agency’s 

program, both direct and indirect costs of the output, and the costs of the identifiable 

supporting services provided by other segments within the FMCS. The statement of 

Budgetary Resources reports the FMCS’s budgetary activity.

Transactions are recorded on the accrual and budgetary basis of accounting. According 

to the accrual basis of accounting, revenues are recognized when earned, and expenses 

are recorded when resources are consumed, without regard to the payment of cash. 

Budgetary accounting principles, on the other hand, are designed to recognize the 

obligation of funds according to legal requirements, which in many cases is prior to the

occurrence of accrual based transactions. The recognition of budgetary accounting 

transactions is essential for compliance with legal constraints and controls over the use of 

federal funds.
14

Net Position, shown on the Balance Sheet, is composed of unexpended appropriations 

and cumulative results of operations. Unexpended appropriations included the portion of 

the entity’s appropriations represented by undelivered orders and unobligated balances. 

Cumulative results of operations are the net results of operations since inception plus the

cumulative amount of prior-period adjustments. This includes the cumulative amount of 

donations and transfers of assets in and out without reimbursement.

c.) Dedicated Collections

FMCS has no funds from dedicated collections as described by the Statement of Federal 

Financial Accounting Standards (SFFAS) 43.

 

d.) Use of Estimates

The preparation of financial statements in conformity with GAAP requires management 

to make estimates and assumptions that affect the reported amounts of assets and 

liabilities, and disclosure of contingent assets and liabilities, at the date of the financial 

statements and the reported amounts of revenue and expenses during the reporting period. 

Actual results could differ from those estimates.

e.) Funds Balances with U.S. Department of the Treasury and Cash

FMCS maintains its available funds with the Department of the Treasury (Treasury). The 

funds balance with Treasury is available to pay current liabilities and finance authorized 

purchases. Cash receipts and disbursements are processed by Treasury and reconciled 

with those of Treasury on a regular basis.

f.) Accounts Receivable

Accounts receivable consist of the amounts owed to FMCS as the result of the provision 

of goods and services. Intra-governmental accounts receivable generally arises from the 

provision of reimbursable services to other federal agencies and no allowance for 

uncollectible accounts is established as those accounts are considered to be fully 

collectible.

g.) General Property and Equipment

General property and equipment (P&E) consists of software and equipment used for 

operations. The basis for recording purchased P&E is acquisition cost, which includes all 

costs incurred to bring the P&E to its intended use. All P&E with initial acquisition cost 

of $5,000 or more and estimated useful lives of two years or more are capitalized except 

for internal use software discussed below. 

The P&E is depreciated using the straight-line method over the estimated useful lives of 

assets. Maintenance and repair costs are expensed as incurred. 
15

h.) Liabilities

Liabilities represent the amount of monies or other resources that are likely to be paid by 

FMCS as a result of a transaction or event that has already occurred. Since FMCS is a 

component of the U.S. Government, a sovereign entity, its liabilities cannot be liquidated 

without legislation providing resources to do so. Liabilities for which an appropriation 

has not been enacted are classified as unfunded liabilities and there is no certainty that 

corresponding future appropriations will be enacted. Liabilities arising from other than 

contracts can be abrogated by the Government, acting in its sovereign capacity. Since 

liabilities are only those items that are present obligations of the government. The 

FMCS’s liabilities are classified as covered by budgetary resources or not covered by 

budgetary resources.

i.) Accounts Payable

Accounts payable primarily consist of amounts due for goods and services received, 

progress on contract performance, interest due on accounts payable and other 

miscellaneous payables.

j.) Accrued Payroll and Benefits

Accrued payroll and benefits consist of salaries, wages, leave and benefits earned but not 

taken or disbursed as of year-end. Annual and compensatory leave is expended with an 

offsetting liability as it is earned and the liability is reduced as leave is taken. Each year, 

the balance in the accrued annual leave liability account is adjusted to reflect current pay 

rates. To the extent current or prior year appropriations are not available to fund annual 

and compensatory leave earned but not taken; funding will be obtained from future 

financing resources. Sick leave and other types of non-vested leave are expended as 

taken.

k.) Interest on Late Payments

Pursuant to the Prompt Payment Act, 31 USC 3901-3907, Federal agencies must pay 

interest on payments for goods and services made to business concerns after the due date. 

The due date is generally 30 days after receipts of a proper invoice or acceptance of the 

goods or services and 15 days for Small Businesses.

l.) Federal Employee Benefits

With a few exceptions, employees hired before January 1, 1984, are covered by the Civil 

Service Retirement System (CSRS) and employees first hired after December 31, 1983, 

are covered by the Federal Employees Retirement System (FERS). Employees hired on 

or after January 1, 2013, are covered by the FERS-RAE (Revised Annuity 

Employee). Those hired on or after January 1, 2014 are covered under FERS-FRAE 

(Further Revised Annuity Employee).

For employees covered under CSRS, the FMCS withholds 7.0% of each employee's 

salary and contributes a matching amount to the fund. CSRS covered employees do not 

have FICA withholdings and, thus do not accrue Social Security benefits. However, 

1.45% for Medicare is withheld and matched. 
16

Employees covered under CSRS Offset have 0.8% of their basic pay withheld from their 

salaries biweekly. FMCS contributes 7% of their basic salaries to CSRS and 7.65%

(6.2% OASDI + 1.45% Medicare) of their gross pay to Social Security biweekly. If an 

employee reaches the annual Social Security wages maximum and withholding stop for 

OASDI tax, the CSRS withholding increases to 7% (0.8% + 6.2%).

For employees covered under FERS, in addition to FICA withholdings, FMCS withholds 

approximately 0.8% from employees' basic earnings for a retirement annuity. FMCS 

makes contributions to the plan at an established rate by OPM which was 13.7% for 2019

and 2018. Under FERS, employees also receive retirement benefits from Social Security 

and benefits from a defined contribution plan called Thrift Savings Plan. Under the thrift 

plan, an employee may contribute up to the annual IRS limit to a tax deferred investment 

fund. FMCS contributes 1% of salary for FERS employees, whether or not they 

contribute their own money to the Thrift Savings Plan. For FERS employees who do 

contribute their own money to the Thrift Savings Plan, FMCS matches the amount dollarfor-dollar on the first 3% and 0.50 cents on the dollar for each of the next 2%. The 

combined automatic and matching portion of FMCS’ contribution cannot exceed 5% of 

salary. Those employees who elected to remain under CSRS after December 31, 1983 

and those covered by CSRS offset, continue to receive benefits in place, and may also 

contribute (tax deferred) up to the annual IRS limit to the thrift plan, but with no 

matching amount contributed by FMCS. CSRS, CSRS Offset and FERS employees are 

eligible to contribute an additional tax deferred amount to TSP for a “TSP Catch-Up” if 

they are over age 50 and have contributed the maximum in “regular” TSP deductions 

during the tax year. There is no match on the catch-up contributions.

For employees covered under FERS-RAE, in addition to FICA withholdings, FMCS 

withholds 3.1% from employees’ basic earnings for a retirement annuity. For employees 

covered under FERS-FRAE, in addition to FICA withholdings, FMCS withholds 4.4% 

from employee’s basic earnings for a retirement annuity. FMCS contributions to the plan 

at an established rate by OPM were 11.9% for 2019 and 2018.

The U.S. Office of Personnel and Management administers these benefit plans and, thus, 

report CSRS or FERS assets, accumulated plan benefits or unfunded liabilities applicable 

to federal employees. Therefore, the FMCS financial statements do not recognize any 

liability on its balance sheets for pension, other retirement benefits and other postemployment benefits.

m.) Actuarial Liabilities

The Federal Employees' Compensation Act (FECA) provides wage loss benefits, medical 

benefits, and vocational rehabilitation to cover Federal civilian employees injured on the 

job, employees who have incurred a work-related occupational disease, and survivor 

benefits to eligible dependents of injured workers whose death is attributable to a jobrelated injury or occupational disease. Claims incurred for benefits for FMCS employees 

under FECA are administered by the Department of Labor (DOL) and are ultimately paid 

by FMCS. The future workers' compensation liability has two components, (1) unpaid 

billings, and (2) an amount of estimated unbilled claims. The unbilled claims are 

estimated by applying actuarial procedures. The DOL calculated the liability of the 

Federal Government for future compensation benefits, which includes the expected 

liability for death, disability, medical, and miscellaneous costs for approved 

compensation costs. The liability was determined using the paid-losses extrapolation 
17

method patterns related to a specific incurred period to predict the ultimate payments 

related to that period. The projected annual benefit payments were discounted to present 

value. The resulting Federal Government liability was then distributed by agency.

In accordance with Office of Management and Budget (OMB) guidance, each reporting 

entity preparing financial statements under the Chief Financial Officers Act and the 

Government Management Reform Act should include its respective portion of the 

actuarial liability for workers' compensation benefits as a liability in its financial 

statement, if such amounts are material. The FECA actuarial data is for financial 

statement presentation only and should not be used as a standard for incorporating 

actuarial liabilities in fees, prices, and reimbursements. This liability constitutes an 

extended future estimate of cost, which will not be obligated against budgetary resources 

until the fiscal year in which the cost is actually billed to FMCS.

n.) Comparative Data

Comparative data for the prior year have been presented in order to provide an 

understanding of changes in the financial position and operations of FMCS.

o.) Revenues and other Financing Sources

FMCS receives the majority of the funding needed to support its operations through 

appropriations. The Agency receives annual appropriations that may be used, within 

statutory limits, for operating expenditures. Additional amounts are obtained from fees 

reimbursed for alternative dispute resolution and arbitration services provided to the 

federal, public and private sectors.

Appropriations are recognized as other financing sources when used and fees for services 

are recognized as revenues at the time they are earned and the related program or 

administrative expenses are incurred. Appropriations accrued for property and 

equipment are recognized as expenses when the asset is consumed in operations.

p.) Contingencies and commitments

FMCS leases various facilities accounted for as operating leases. Assets held under these 

leases consist primarily of offices and parking facilities. All of the space occupied by 

FMCS is leased by the General Services Administration (GSA). The space is assigned to 

FMCS by GSA based on FMCS' square footage requirements. The rent charged by GSA 

is based on approximate commercial rates for commercial space and actual rates for 

private buildings. FMCS may terminate the leases with GSA; however, it is anticipated 

that FMCS will continue to occupy and lease space from GSA in future years.

q.) Classified Activities

Accounting standards require all reporting entities to disclose that accounting standards

allow certain presentations and disclosures to be modified, if needed, to prevent the

disclosure of classified information.
18

NOTE 2: FUND BALANCE WITH THE U.S. TREASURY 

The Fund Balance with the U.S. Treasury as reported in the financial statements 

represents the unexpended cash balance on the FMCS books for all FMCS Treasury 

Symbols. The balances were comprised of the following at September 30:

Status of Fund Balance with Treasury

 2019 2018

Unobligated Balance

 Available $2,330,346 $2,039,759

 Unavailable 4,689,569 4,080,109

Obligated Balance not yet Disbursed 5,157,156 8,001,921

Total $12,177,071 $14,121,789

NOTE 3 ACCOUNTS RECEIVABLE

Accounts receivable consist primarily of amounts due from federal government 

departments and other agencies. Since these receivable are from other government 

agencies, management believes these receivables are fully collectable.

The receivable balance consisted of the following at September 30:

 2019 2018

Account Receivable (Gov) $18,574 $27,781

Account Receivable (Non-gov) 0 0

Total Account Receivable $18,574 $27,781

NOTE 4: GENERAL PROPERTY AND EQUIPMENT

Property and equipment owned by FMCS are all classified as equipment and consisted of 

the following at September 30:

2019 2018

Equipment, Furniture, Hardware $2,994,650 $3,022,702

ADP Software 22,377 22,377

 Total $3,017,027 $3,045,079

Less: Accumulated depreciation

On Equipment, Furniture $(2,685,438) $(2,528,871)

Less: Amortization on ADP software (22,377) (22,377)

Net Book Value $309,212 $493,831 

 
19

NOTE 5: LIABILITIES NOT COVERED BY BUDGETARY RESOURCES

Liabilities not covered by budgetary resources include liabilities for which congressional 

action is needed before budgetary resources can be provided.

Unfunded Employee Liabilities consists of workers’ compensation claims payable to the 

Department of Labor, which will be funded in a future period, and an unfunded estimated 

liability for future workers’ compensation claims based on data provided from the DOL. 

The actuarial calculation is based on benefit payments made over 12 quarters, and 

calculates the annual average of payments. For medical expenses and compensation, this 

average is then multiplied by the liability-to-benefit paid ratio for the whole FECA 

program.

Unfunded Leave represents a liability for earned leave and is reduced when leave is 

taken. At year end, the balance in the accrued leave account is adjusted to reflect the 

liability at current pay rates and leave balances. Accrued leave is paid from future 

funding sources and, accordingly, is reflected as a liability not covered by budgetary 

resources. 

All other liabilities are considered to be covered by budgetary resources.

FMCS future funding requirements were comprised of the following at September 30:

2019 2018

Intragovernmental:

Unfunded FECA Liability $336,135 $330,950

Total Intragovernmental 336,135 330,950

Unfunded Annual Leave 2,513,606 2,281,112

Actuarial FECA 1,752,946 1,747,212

Total Liabilities Not Covered by Budgetary Resources 4,602,687 4,359,274

Total Liabilities Covered by Budgetary Resources 1,650,708 2,284,961

Total Liabilities $6,253,395 $6,644,235

NOTE 6: APPORTIONMENT CATEGORIES OF NEW OBLIGATIONS AND UPWARD 

ADJUSTMENTS: DIRECT VS. REIMBURSABLE OBLIGATIONS

Direct vs. Reimbursable new obligations and upward adjustments had the following 

apportionment categories:

2019 2018

Direct Obligations (Category A) $47,061,000 $47,999,150

Reimbursable Obligations (Category A) 1,132,226 1,512,852

Total $48,193,226 $49,512,002 
20

NOTE 7: UNDELIVERED ORDERS AT THE END OF THE PERIOD

The amount of budgetary resources obligated for undelivered orders at September 30, 

2019 and September 30, 2018 are:

2019 2018

Intragovernmental, Undelivered Orders Unpaid $176,940 $1,147,876

Public, Undelivered Orders Unpaid 3,312,951 4,561,734

Total Undelivered Orders $3,489,891 $5,709,610 

NOTE 8: OPERATING LEASES

FMCS leases office space for headquarters operations in Washington, D.C. and for 

district and field operations. The lease agreements expire at various dates, the latest 

being 2034. Assets held under these leases consist primarily of offices. All office space 

occupied by FMCS is leased by the General Services Administration (GSA). 

Future estimated minimum lease payments for the fiscal years ended September 30 are

supported by each GSA lease agreement and are as follows:

Schedule of Future Minimum Lease Payments

FY 2020 4,274,348

FY 2021 4,316,636

FY 2022 4,312,613

FY 2023 4,070,745

FY 2024 4,067,203

FY 2025-2034 lump sum 24,495,995

Total Future Minimum Lease Payments $45,537,541

Rent expense totaled $4,955,156 and $5,101,516 for fiscal years September 30, 2019 and 

2018 respectively. 

NOTE 9: INTER-ENTITY COSTS

Goods and services are received from other federal entities at no cost or at a cost less than

the full cost to the providing federal entity. Consistent with accounting standards, certain

costs of the providing entity that are not fully reimbursed by FMCS are recognized as 

imputed cost in the Statement of Net Cost, and are offset by imputed revenue in the 

Statement of Changes in Net Position. Such imputed costs and revenues relate to

employee benefits. However, unreimbursed costs of goods and services other than those 

identified above are not included in our financial statements. The imputed financing 

amount represents the difference between the employer’s total pension expense and the 

employer’s contribution.
21

Imputed financing sources in 2019 and 2018 consist of the following:

 2019 2018

Office of Personnel Management $ 2,086,153 $ 1,950,564

Total Imputed Financing Sources $ 2,086,153 $ 1,950,564

 

NOTE 10: EXPLANATION OF THE DIFFERENCES BETWEEN THE STATEMENT OF 

BUDGETARY RESOURCES VS. BUDGET OF THE UNITED STATES

GOVERNMENT

The Budget of the United States Government, with actual amounts for the year 

ended September 30, 2019, has not been published as of the issue date of these 

financial statements. A reconciliation of budgetary resources, obligations 

incurred and new outlays (in millions), as presented in the Statement of Budgetary 

Resources, to amounts included in the Budget of the United States Government 

for the year ended September 30, 2018, is shown below.

The Federal Mediation and Conciliation Services Budget Appendix can be found 

on the OMB website (http://www.whitehouse.gov/omb/budget).

Budgetary Resources

New obligations and 

Upward adjustments 

Net 

Outlays

Statement of 

Budgetary 

Resources

55 50 46

Expired Funds -3 0 0

Rounding 0 0 -1

Budget of the U.S. 

Government 52 50 45

The difference between the Statement of Budgetary Resources and the Budget of the U.S. 

Government is due to Expired Unobligated Balances being reported in the FY 2018

Budget of the United States Government but not in the Statement of Budgetary 

Resources.
22

NOTE 11: RECONCILIATION OF NET COST TO NET OUTLAYS

In the new FY 2019 period, agencies are required to report a Budget Accrual 

Reconciliation (BAR) in accordance with Statement of Federal Financial Accounting 

Standards (SFFAS) 53. The BAR starts with the net cost of operations and adjusts 

activity by components of net cost that are not part of net outlays, components of net 

outlays that are not part of net cost, and other temporary timing differences or special

adjustments. For the period ending September 30, 2019, the BAR is as follows:

IntragovernmentalWith the 

Public Total FY 2019

Net Operating Cost (SNC) $13,476,985 $36,296,342 $ 49,773,327

Components of Net Operating Cost Not Part of the Budgetary Outlays

 Property, plant, and equipment depreciation - (261,198) (261,198)

 Property, plant, and equipment disposal & reevaluation - (24,723) (24,723)

 Increase/(decrease) in assets: -

 Accounts receivable (9,207) - (9,207)

 (Increase)/decrease in liabilities not affecting Budget Outlays: -

 Accounts payable - 811,792 811,792

 Salaries and benefits (42,303) (135,655) (177,958)

 Other liabilities (Unfunded leave, unfunded FECA, actuarial FECA) (5,185) (238,228) (243,413)

 Other financing sources -

 Federal employee retirement benefit costs paid by OPM and imputed to agency (2,086,153) - (2,086,153)

 

Total Components of Net Operating Cost Not Part of the Budget Outlays $ (2,142,848) $ 151,988 $ (1,990,860)

Components of the Budget Outlays That Are Not Part of Net Operating Cost

 Acquisition of capital assets - 101,303 101,303

Net Outlays (Calculated Total) $11,334,137 $36,549,633 $ 47,883,770

Related Amounts on the Statement of Budgetary Resources

 Outlays, net (SBR 4210) 47,883,770

Agency Outlays, Net (SBR 4210) $ 47,883,770