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Secretary of Labor Thomas E. Perez
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DOL Annual Report, Fiscal Year 2005
Performance and Accountability Report

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 the Office of Management and Budget's (OMB) Circular A-136, Financial Reporting Requirements.EThe 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 for FY 2005 and 2004 was performed by R. Navarro & Associates, Inc., Certified Public Accountants. The auditors' report accompanies the principal statements.

The Department's principal financial statements for fiscal years (FY) 2005 and 2004 consisted of the following

  • The Consolidated Balance Sheets, which present as of September 30, 2005 and 2004 those resources owned or managed by DOL which 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 Statements of Net Cost, which present the net cost of DOL operations for the years ended September 30, 2005 and 2004. 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 14 to the consolidated financial statements.
  • The Consolidated Statements of Changes in Net Position, which present 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, 2005 and 2004.
  • The Combined Statements of Budgetary Resources, which present the budgetary resources available to DOL during FY 2005 and 2004, the status of these resources at September 30, 2005 and 2004, and the outlay of budgetary resources for the years ended September 30, 2005 and 2004.
  • The Consolidated Statements of Financing, which reconcile the net cost of operations with the obligation of budgetary resources for the years ended September 30, 2005 and 2004.
  • The Consolidated Statements of Custodial Activity, which present the sources and disposition of non-exchange revenues collected or accrued by DOL on behalf of other recipient entities for the years ended September 30, 2005 and 2004.

 

 


CONSOLIDATED BALANCE SHEETS
As of September 30, 2005 and 2004

(Dollars in Thousands)

 

 

 

 

 

 

 

 

 

 

 

2005

 

2004

                           

ASSETS

 

 

 

 

 

 

 

 

 

 

Intra-governmental

 

 

 

 

 

 

 

 

 

 

 

Funds with U.S. Treasury
(Notes 1-C and 2)

 

 

$9,219,660

 

$9,700,757

 

 

Investments (Notes 1-D
and 3)

 

 

 

 

54,952,644

 

45,446,510

 

 

Interest receivable from investments

 

 

 

637,443

 

580,180

 

 

Accounts receivable (Notes 1-E and 4)

 

 

3,991,270

 

3,916,674

 

 

Advances (Notes 1-F and 5)

 

 

10,812

 

 

Total intra-governmental

 

 

 

 

 

59,644,121

 

59,644,121

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net of allowance (Notes 1-E and 4)

 

 

1,043,018

 

1,127,034

 

Advances (Notes 1-F and 5)

 

 

 

 

584,139

 

777,032

 

Property, plant and equipment, net of depreciation (Notes 1-G and 6)

 

 

 

1,023,422

 

876,269

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 

 

 

 

 

$71,462,408

 

$62,424,456

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND NET POSITION

 

 

 

 

 

 

Liabilities (Note 1-I)

 

 

 

 

 

 

 

 

 

 

Intra-governmental

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

 

 

 

 

$16,429

 

$22,207

 

 

Advances from U.S. Treasury (Notes 1-J and 8)

 

 

9,186,557

 

8,740,557

 

 

Other liabilities (Note 11)

 

 

 

 

206,101

 

194,427

 

Total intra-governmental

 

 

 

 

 

9,409,087

 

8,957,191

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

 

 

 

 

1,111,031

 

1,008,450

 

Accrued leave (Note 1-K)

 

 

 

 

 

94,852

 

99,676

 

Accrued benefits (Notes 1-L and 9)

 

 

 

1,147,658

 

1,344,009

 

Future workers' compensation benefits (Notes 1-M and 10)

 

 

564,305

 

528,068

 

Energy employees occupational illness compensation benefits (Note 1-N)

 

 

 

7,436,243

 

2,793,823

 

Other liabilities (Note 11)

 

 

 

 

 

263,233

 

239,333

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

 

 

 

 

20,026,409

 

14,970,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net position (Note 1-R)

 

 

 

 

 

 

 

 

 

 

Unexpended appropriations

 

 

 

 

8,115,461

 

8,299,897

 

Cumulative results of operations

 

 

 

 

43,320,538

 

39,154,009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net position

 

 

 

 

 

 

51,435,999

 

47,453,906

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and net position

 

 

 

 

$71,462,408

 

$62,424,456

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


CONSOLIDATED STATEMENTS OF NET COST
For the Years Ended September 30, 2005 and 2004

(Dollars in Thousands) 

 

 

 

 

 

 

 

 

 

 

 

2005

 

2004

NET COST OF OPERATIONS (Notes 1-S and 14)

 

 

 

 

 

                           

CROSSCUTTING PROGRAMS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income maintenance

 

 

 

 

 

 

 

 

 

 

Gross cost

 

 

 

 

 

 

$45,380,694

 

$51,437,650

 

Less earned revenue

 

 

 

 

 

 

(3,144,410)

 

(3,274,386)

 

 

Net program cost

 

 

 

 

 

 

42,236,284

 

48,163,264

Employment and training

 

 

 

 

 

 

 

 

 

Gross cost

 

 

 

 

 

 

$6,027,121

 

$6,434,017

 

Less earned revenue

 

 

 

 

 

 

(17,737)

 

(17,140)

 

 

Net program cost

 

 

 

 

 

 

6,009,384

 

6,416,877

Labor, employment and pension standards

 

 

 

 

 

 

Gross cost

 

 

 

 

 

 

$724,211

 

$700,428

 

Less earned revenue

 

 

 

 

 

 

(9,860)

 

(11,475)

 

 

Net program cost

 

 

 

 

 

 

714,351

 

688,953

Worker safety and health

 

 

 

 

 

 

 

 

 

Gross cost

 

 

 

 

 

 

$798,110

 

$801,890

 

Less earned revenue

 

 

 

 

 

 

(3,690)

 

(5,207)

 

 

Net program cost

 

 

 

 

 

 

794,420

 

796,683

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER PROGRAMS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statistics

 

 

 

 

 

 

 

 

 

 

Gross cost

 

 

 

 

 

 

$531,675

 

$538,105

 

Less earned revenue

 

 

 

 

 

 

(6,664)

 

(5,504)

 

 

Net program cost

 

 

 

 

 

 

525,011

 

532,601

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs not assigned to programs

 

 

 

 

95,244

 

98,721

 

Less earned revenue not attributed to programs

 

 

(10,800)

 

(20,643)

 

 

Net cost not assigned to programs

 

 

 

84,444

 

78,078

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cost of operations

 

 

 

 

 

 

$50,363,894

 

$56,676,456

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 
                               

CONSOLIDATED STATEMENTS OF CHANGES IN NET POSITION
For the Years Ended September 30, 2005 and 2004
(Dollars in Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2005

 

2004

 

 

 

 

 

 

 

 

 

Cumulative

Cumulative

 

 

 

 

 

 

 

 

 

Results of

Unexpended

Results of

Unexpended

 

 

 

 

 

 

 

 

 

Operations

Appropriations

Operations

Appropriations

 

 

 

 

 

 

 

 

 

Beginning balances

 

 

 

$39,154,009

$8,299,897

$42,260,590

$8,587,666

 

 

 

 

 

 

 

 

 

Budgetary financing

 

 

 

sources (Note 1-T)

 

 

 

 

Appropriations received

 

 

11,100,600

11,510,488

 

Appropriations transferred

 

(622,286)

(646,727)

 

Appropriations not available

 

(326,001)

(153,632)

 

Appropriations used

 

 

 

10,336,749

(10,336,749)

10,997,898

(10,997,898)

 

Nonexchange revenue (Note 15)

 

 

 

Employer taxes

 

 

 

40,571,621

37,376,035

 

 

Interest

 

 

 

 

2,593,415

2,525,135

 

 

Assessments

 

 

 

145,315

145,564

 

 

Reimbursement of

 

 

 

 

 

unemployment benefits

 

1,857,193

2,411,887

 

Total nonexchange revenue

 

45,167,544

42,458,621

 

Transfers without reimbursement (Note 16)

 

 

3,000

3,000

 

 

 

 

 

 

 

 

 

Other financing sources
(Note 1-U)

 

Donations

     
41,760
     
-
   

 

Imputed financing from costs absorbed by others

 

 

 

108,742

110,344

 

Transfers without reimbursement (Note 16)

 

 

(1,127,372)

12

 

 

 

 

 

 

 

 

 

Total financing
Sources

 

 

 

54,530,423

(184,436)

53,569,875

(287,769)

 

 

 

 

 

 

 

 

 

Net cost of operations

 

 

 

(50,363,894)

(56,676,456)

 

 

 

 

 

 

 

 

 

Ending balances

 

 

 

$43,320,538

$8,115,461

$39,154,009

$8,299,897

 

COMBINED STATEMENTS OF BUDGETARY RESOURCES
For the Years Ended September 30, 2005, and 2004

(Dollars in Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

2005

 

2004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BUDGETARY RESOURCES

 

 

 

 

 

 

 

 

 

Budget authority

 

 

 

 

 

 

 

 

 

 

 

Appropriations received

 

 

 

 

 

$57,248,865

 

$58,039,574

   

Borrowing authority

           

446,000

 

497,000

 

 

Net transfers

 

 

 

 

 

 

(387,115)

 

(516,879)

 

Unobligated balance

 

 

 

 

 

 

 

 

 

 

 

Beginning of period

 

 

 

 

 

 

3,577,791

 

3,173,996

 

 

Net transfers

 

 

 

 

 

 

(215)

 

(37,592)

 

Spending authority from offsetting collections

 

 

 

 

 

 

 

Earned

 

 

 

 

 

 

 

 

 

 

 

 

Collected

 

 

 

 

 

 

2,545,382

 

2,645,532

 

 

 

Receivable from Federal sources

 

 

 

57,700

 

(24,109)

 

 

Change in unfilled customer orders

 

 

 

 

 

 

 

 

 

Advance received

 

 

 

 

 

10,756

 

(5,534)

 

 

Transfers from trust funds

 

 

 

 

3,873,716

 

3,884,725

 

Total spending authority from offsetting collections

 

 

6,487,554

 

6,500,614

 

Recoveries of prior year obligations

 

 

 

408,672

 

463,631

 

Temporarily not available pursuant to public law

 

 

(9,296,717)

 

(22,661)

 

Permanently not available

 

 

 

 

 

(496,197)

 

(207,353)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total budgetary resources

 

 

 

 

 

$57,988,638

 

$67,890,330

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STATUS OF BUDGETARY RESOURCES

 

 

 

 

 

 

Obligations incurred (Note 17)

 

 

 

 

 

 

 

 

 

Direct

 

 

 

 

 

 

$51,333,636

 

$61,566,245

 

 

Reimbursable

 

 

 

 

 

 

2,782,927

 

2,746,299

 

Total obligations incurred

 

 

 

 

 

54,116,563

 

64,312,544

 

Unobligated balances available

 

 

 

 

 

 

 

 

 

Apportioned

 

 

 

 

 

 

2,093,925

 

2,344,404

 

 

Exempt from apportionment

 

 

 

 

 

(5)

 

 

Other available

 

 

 

 

 

 

175,310

 

212,708

 

Unobligated balances not available

 

 

 

1,602,840

 

1,020,679

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total status of budgetary resources

 

 

 

 

$57,988,638

 

$67,890,330

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RELATIONSHIP OF OBLIGATIONS TO OUTLAYS

 

 

 

 

 

 

Obligated balance, net, beginning

 

 

 

 

$8,511,826

 

$9,364,834

 

Obligated balance transferred, net

 

 

 

 

 

 

Obligated balance, net, ending

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

 

 

(1,473,474)

 

(1,344,626)

 

 

Undelivered orders

 

 

 

 

 

 

5,879,080

 

6,227,548

 

 

Accounts payable

 

 

 

 

 

 

3,603,546

 

3,628,904

 

Outlays

 

 

 

 

 

 

 

 

 

 

 

Disbursements

 

 

 

 

 

 

54,081,511

 

64,693,879

 

 

Collections

 

 

 

 

 

 

(6,358,706)

 

(6,492,578)

 

Total outlays

 

 

 

 

 

 

47,722,805

 

58,201,301

 

Offsetting receipts

 

 

 

 

 

 

(829,392)

 

(1,549,472)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net outlays

 

 

 

 

 

 

$46,893,413

 

$56,651,829

 

 

 

 

 

 

 

 

 

 

 

 

 

 


CONSOLIDATED STATEMENTS OF FINANCING
As of September 30, 2005 and 2004
(Dollars in Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

2005

 

2005

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RESOURCES USED TO FINANCE ACTIVITIES

 

 

 

 

Budgetary resources obligated

 

 

 

 

 

 

 

 

Obligations incurred

 

 

 

 

 

 

$54,116,563

 

$64,312,544

 

Recoveries of prior year obligations

 

 

 

(408,672)

 

(463,631)

 

Less spending authority from offsetting collections

 

 

(6,487,554)

 

(6,500,614)

 

Obligations, net of offsetting collections and recoveries

 

 

47,220,337

 

57,348,299

Other resources

 

 

 

 

 

 

 

 

 

 

Imputed financing from costs absorbed by others

 

 

108,742

 

110,344

 

Transfers, net

 

 

 

 

 

 

(1,124,372)

 

3,012

 

Exchange revenue not in budget

 

 

(6,874)

 

(71,873)

 

Trust fund exchange revenue

 

 

 

 

(783,657)

 

(823,315)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total resources used to finance activities

 

 

45,414,176

 

56,566,467

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

536,240

 

583,394

 

Resources that finance the acquisition of assets

 

(167,252)

 

(102,862)

 

Allocation transfers to other agencies

 

(198,524)

 

(77,215)

 

Other resources that do not affect net cost of operations

 

1,128,086

 

(800,760)

           

Total resources used to finance items not part of the net cost of operations

 

1,298,550

 

(397,443)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total resources used to finance the net cost of operations

 

46,712,726

 

56,169,024

 

 

 

 

 

 

COMPONENTS OF THE NET COST OF OPERATIONS THAT WILL NOT REQUIRE OR GENERATE RESOURCES IN THE CURRENT PERIOD

 

 

 

 

 

Components requiring or generating resources in future periods

 

 

 

 

 

 

Increase in annual leave liability

 

 

 

(4,823)

 

1,763

 

 

Increase (decrease) in employee benefits and retirement liabilities

 

3,556,208

 

495,628

 

 

Other

 

 

 

 

 

 

26,183

 

(28,273)

 

Total

 

 

 

 

 

 

 

3,577,568

 

469,118

 

Components not requiring or generating resources

 

 

 

 

 

 

 

Depreciation and amortization

 

 

 

 

54,645

 

50,106

 

 

Revaluation of assets and liabilities

 

 

 

403,376

 

678,954

 

 

Benefit overpayments

 

 

 

 

 

(384,421)

 

(690,746)

 

Total

 

 

 

 

 

 

 

73,600

 

38,314

 

 

 

 

 

 

Total components of the net cost of operations that will not require or generate resources in the current period

 

3,651,168

 

507,432

Net cost of operations

 

 

 

 

 

 

$50,363,894

 

$56,676,456

 

 

 

 

 

 

 

 

 

 

 

 

 

 


CONSOLIDATED STATEMENTS OF CUSTODIAL ACTIVITY
For the Years Ended September 30, 2005 and 2004
(Dollars in Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

2005

 

2004

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SOURCES OF CUSTODIAL REVENUE

 

 

(Notes 1-V and 18)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash collection of fines, penalties, assessments and related interest

 

$130,885

 

$131,639

 

Less refunds

 

 

 

 

 

 

(214)

 

(2,206)

 

Net cash collections

 

 

 

 

 

 

130,671

 

129,433

 

Increase (decrease) in amounts to be collected

 

10,951

 

(1,964)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total sources of custodial revenue

 

 

 

 

141,622

 

127,469

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DISPOSITION OF CUSTODIAL REVENUE

 

 

(Note 1-V)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net transfers to U.S. Treasury general fund

 

130,671

 

129,433

 

Increase (decrease) in amounts to be transferred

 

 

10,951

 

(1,964)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total disposition of custodial revenue

 

 

 

141,622

 

127,469

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net custodial activity

 

 

 

 

 

 

 

 


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended September 30, 2005 and 2004

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Reporting Entity

The U.S. Department of Labor (DOL), 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 and promote the welfare of the job seekers, wage earners and retirees of the United States by improving their working conditions, advancing their opportunities for profitable employment, protecting their retirement and health care benefits, helping employers find workers, strengthening free collective bargaining, and tracking changes in employment, prices, and other economic measurements.

DOL is organized into major program agencies, which administer the various statutes and programs for which the Department is responsible. Through the execution of its congressionally approved budget, DOL conducts operations in five major Federal program areas, under three major budget functions: education, training, employment and social services, health (occupational health and safety), and income security. 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)
  • 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)
    (Formerly Pension and Welfare Benefits Administration)
  • Veterans' Employment and Training (VETS)
  • Other Departmental Programs
    • Office of the Assistant Secretary for Administration and Management
    • Office of the Solicitor
    • Office of the Chief Financial Officer
    • Office of the Inspector General
    • Bureau of International Labor Affairs
    • Women's Bureau
    • Office of Disability Employment Policy

2. Major programs

  • Income maintenance
  • Employment and training
  • Labor, employment, and pension standards
  • Worker safety and health
  • Statistics

The Pension Benefit Guaranty Corporation (PBGC), a wholly owned Federal government corporation under the chairmanship of the Secretary of Labor, has been designated by the Office of Management and Budget (OMB) as a separate reporting entity for financial statement purposes and has been excluded from the DOL reporting entity.

3. Fund accounting structure

DOL's financial activities are accounted for by Federal account symbol, utilizing individual funds and fund accounts within distinct fund types, as discussed below.

  • Trust funds

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 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 District of Columbia Workmens' Compensation Act Trust Fund, established under the authority District of Columbia Workmens' Compensation Act provides compensation and medical payments to District of Columbia employees for work related injuries or death which occurred prior to July 26, 1982.

The Black Lung Disability Trust Fund, established under the Black Lung Benefit Act, provides compensation and medical benefits to coal miners who suffer disability due to pneumoconiosis, and compensation benefits to their dependent survivors.

Gifts and Bequests uses miscellaneous funds received by gift or bequest to support various activities of the Secretary of Labor.

  • General 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 such as Job Corps, authorized by the Workforce Investment Act and the Job Training Partnership Act.

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 Compensation provides administrative grants to state agencies which pay unemployment benefits to eligible workers and collect state unemployment taxes from employers. The Employment Service 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 associated administrative 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 provides repayable advances 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 Special Benefit Fund provides wage replacement benefits and payment for medical services 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. The Fund also provides for rehabilitation of injured employees to facilitate their return to work.

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 the Department of Labor effective October 1, 2003.

  • Revolving funds

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.

  • Special funds

The Panama Canal Commission Compensation Fund was established to pay workers compensation obligations of the Panama Canal Commission under the Federal Employees' Compensation Act from funding provided by the Commission.

H-1b Funded provides demonstration grants to regional and local entities to provide technical skills training to unemployed and incumbent workers. The fund is 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.

  • Deposit funds

Deposit funds account for monies held temporarily by DOL until ownership is determined, or monies held by DOL as an agent for others.

  • Miscellaneous receipt and clearing accounts

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 U.S. Department of 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 which belong to DOL, but for which a specific receipt account has not been determined.

4. Inter-departmental relationships

DOL and the Department of the Treasury (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, budgetary resources, financing, and custodial activities of the U.S. Department of Labor, in accordance with accounting principles generally accepted in the United States of America and the form and content requirements of OMB Circular A-136. 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 interfund balances and transactions have been eliminated, except in the Statement of Budgetary Resources. OMB Circular A-136 requires that the Statement of Budgetary Resources be presented on a combined basis.

OMB Circular A-136 requires budget authority and other resources allocated to another agency to be reported by the transferor of the appropriation in its financial statements unless the allocation transfer is material to the recipient's financial statements. The activity relating to the allocation should be reported in all of the recipient's financial statements, except the Statement of Budgetary Resources, when the allocation transfer is material to the recipient's financial statements. The transferor should continue to report the appropriation and the related budgetary activity in its Statement of Budgetary Resources.

DOL has allocated appropriations to the Department of Agriculture and the Department of Interior in fiscal years 2005 and 2004. These Departments consider this activity material to their respective financial statements, and therefore, DOL reports this activity only in the Combined Statement of Budgetary resources. Appropriations have been allocated to DOL from the Environmental Protection Agency, the General Service Administration, and the Agency for International Development, which DOL considers to be immaterial. These amounts are not included in the DOL financial statements.

Accounting principles generally accepted in the United States of America 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.

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

DOL trust fund balances not required to meet current expenditures are invested by Treasury in interest bearing securities of the U.S. government. Balances held in the Unemployment Trust Fund are invested in non-marketable, special issue Treasury securities, 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.

Balances held in the Longshore and Harbor Workers' Trust Fund and the District of Columbia Trust Fund, as well as balances held in the Panama Canal Commission Compensation Fund, the Energy Employees Occupational Illness Compensation Fund and the Backwage Restitution Fund are invested in marketable Treasury securities. These investments are stated at amortized cost, which is equivalent to 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. (See Note 3)

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 Special Benefit Fund provides workers' compensation (FECA) 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. 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; for amounts due for backwages assessed against employers by ESA; and for amounts due from grantees and contractors for grant and contract costs disallowed by ETA.

3. Allowance for doubtful accounts

Accounts receivable 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. (See Note 4)

F. 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 unreported expenditures are recorded by DOL. (See Note 5)

G. Property, Plant and Equipment, Net of 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. DOL maintains the Capital Asset Tracking and Reporting System (CATARS) to account for Job Corp's PP&E, as well as other general purpose PP&E used by the Department. Internal use software is considered general purpose PP&E.

Real property purchases or improvements and leasehold improvements with a cost greater than $500,000 and a useful life of 2 or more years, internal use software with a cost greater than $300,000 and a useful life of 2 or more years, and equipment with a cost of $50,000 or more and a useful life of 2 or more years are capitalized. PP&E acquisitions not meeting these criteria are charged to expense at the time of purchase. In 2001, PP&E (excluding internal use software) with a cost greater than $25,000 ($5,000 for the Working Capital Fund) and a useful life of 2 or more years and internal use software with a cost greater than $300,000 and a useful life of 2 or more years were capitalized. Prior to 2001, internally developed software in the Working Capital Fund with a cost greater than $5,000 was capitalized, when the cost was intended to be recovered through charges to other DOL users. Prior to 1996, PP&E with a cost greater than $5,000 and a useful life of 2 or more years were capitalized. PP&E acquisitions not meeting these criteria were charged to expense at the time of purchase.

Property, plant and equipment purchases and additions are stated at cost. Normal repairs and maintenance are charged to expense as incurred. Plant and equipment 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 life. Leasehold improvements made at Job Corps centers and DOL facilities leased from the General Services Administration are recorded at cost and amortized over their useful lives, using the straight-line method of amortization. (DOL has no operating leases which extend for a period of more than one year.)

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 life.

The table below shows the major classes of DOL's depreciable plant and equipment, and the depreciation periods used for each major classification. (See Note 6)

 

Years

Structures, facilities and improvements

20 - 50

Furniture and equipment

2 - 36

ADP software

2 - 15

 

DOL grantees have acquired real and tangible property with Federal grant funds in which DOL has a reversionary interest when the property is disposed of or no longer used for its authorized purpose. DOL is entitled to a pro rata share of the proceeds from sale of the property or a pro rata share of the property's fair market value, if the property is retained by the grantee but no longer used for DOL purposes.

The value of DOL's reversionary interest in real and tangible property acquired with Federal grant funds can not be determined until the grantee's intention to sell or convert the property is known.

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)

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 for consumption, regardless of whether the available resources have been obligated. Liabilities are classified as not covered by budgetary resources if budgetary resources are not available for consumption. 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. (See Notes 11 and 12)

J. Advances from U.S. Treasury

The Benefits Revenue Act provides for repayable advances to DOL's Black Lung Disability Trust Fund, in the event fund resources are not adequate to meet fund obligations. Spending authority is derived from the Black Lung Disability Trust Fund's indefinite authority to borrow. Repayable advances are provided through transfers from the Advances to the Unemployment Trust Fund and Other Funds appropriation, to the extent of borrowings under the authority. Advances are repayable with interest at a rate determined by the Secretary of the Treasury to be equal to the current average market yield on outstanding marketable obligations of the United States with remaining periods to maturity comparable to the anticipated period during which the advance will be outstanding. Advances made prior to 1982 carried rates of interest equal to the average rate borne by all marketable interest-bearing obligations of the United States then forming a part of the public debt. Outstanding advances bear interest rates ranging from 5.250% to 13.875% at September 30, 2005 and 2004. Amounts in the trust fund shall be available, as provided by appropriation acts, for the payment of interest on, and the repayment of these repayable advances. Interest and principal are paid to the general fund of the Treasury when the Secretary of the Treasury determines that funds are available in the trust fund for such purposes. (See Note 8)

K. 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.

L. Accrued Benefits

The financial statements include a liability for unemployment, workers' compensation and disability benefits payable from various DOL funds, as discussed below. (See Note 9)

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. Temporary extended unemployment benefits, which began in 2002, are paid from the EUCA and are financed by Federal unemployment tax and general fund appropriations. New claims for this program ended in January 2004. Unemployment benefits to unemployed Federal workers are paid from the Federal Employment Compensation Account within the Unemployment Trust Fund. These benefit costs are 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' unemployment benefits to the extent of unpaid benefits for existing claims filed during the current period, payable in the subsequent period.

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 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 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. DOL recognizes a liability for disability benefits to the extent of unpaid benefits applicable to the current period.

5. Longshore and harbor workers' and District of Columbia disability benefits payable

The Longshore and Harbor Workers' Compensation Trust Fund and the District of Columbia Workmens' Compensation Trust Fund provide compensation and medical benefits for work related injuries to workers in certain maritime employment and to employees of the District of Columbia, respectively. DOL recognizes a liability for disability benefits payable by these funds to the extent of unpaid benefits applicable to the current period.

M. Future Workers' Compensation Benefits

The financial statements include a 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 a specific incurred period to predict the ultimate payments related to that period.

The 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 compensation COLAs and CPIMs used in the projections for 2005 and 2004 were as follows:

 

2005

2004

2005

2004

FY

COLA

COLA

CPIM

CPIM

2005

2.20%

2.03%

4.33%

4.14%

2006

3.33%

2.73%

4.09%

3.96%

2007

2.93%

2.40%

4.01%

3.98%

2008

2.40%

2.40%

4.01%

3.99%

2009

2.40%

2.40%

4.01%

4.02%

2010+

2.40%

2.40%

4.01%

4.02%

Projected annual payments were discounted to present value based on OMB's interest rate assumptions for ten year Treasury notes. For 2005, interest rate assumptions were 4.5% in year one and 5.0% in year two and thereafter. For 2004, interest rate assumptions were 4.9% in year one and 5.2% in year two and thereafter. (See Note 10)

N. 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 the Department of Energy (DOE) and its contractors, or to certain survivors of those employees and contractors, as well as benefits to certain beneficiaries of the Radiation Exposure Compensation Act. 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. Compensation of $50,000 and payment of medical expenses from the date a claim is filed are available to individuals eligible for compensation under of the Radiation Exposure Compensation Act.

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 new program grants worker's compensation benefits to covered employees and their families for illness and death arising from exposure to toxic substances at a DOE facility. The amendment also makes it possible for uranium workers as defined under Section 5 of the Radiation Exposure Compensation Act (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 administered and paid by the Department of Justice (DOJ).

DOL has recognized a $7.4 billion and $2.8 billion liability for estimated future benefits payable by DOL at September 30, 2005 and 2004, respectively, to eligible individuals under the EEOICPA. For fiscal year 2005, the undiscounted liability is $10.7 billion discounted to a present value liability of $7.4 billion based on an interest rate of 5.02% projected over a forty-eight year period. For fiscal year 2004, the undiscounted liability is $4.4 billion discounted to a present value liability of $2.8 billion based on an interest rate 5.24% projected over a forty-eight year period. The amendments to the EEOICPA to include Subtitle E as described above accounted for approximately $4.5 billion of the increase in the liability. 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.

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 2005, DOL's contributions to the FEHBP and FEGLIP were $73.9 and $1.9 million, respectively. During 2004, DOL's contributions to the FEHBP and FEGLIP were $70.4 and $1.9 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 OPM, and is offset by DOL through recognition of an imputed financing source. Using cost factors supplied by OPM, DOL recorded ORB expense and imputed financing sources of $64.8 million in 2005 and $60.8 million in 2004.

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 CSRS Retirement and Disability Fund. For employees participating in FERS, DOL withholds 0.8% of gross earnings, and matches the withholding with a 10.7% 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 FICA withholdings. DOL makes matching contributions to FICA, recognized as operating expenses. DOL's matching FICA contributions were $61.0 million in 2005 and $58.7 million in 2004.

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 10% of their gross pay to the TSP, but there is no departmental matching contribution. FERS participants may contribute up to 15% of their gross pay to the TSP. For employees covered under FERS, DOL contributes 1% of the employees' gross pay to the TSP. DOL also matches 100% of the next 4% contributed. DOL contributions to the TSP are recognized as current operating expenses. The maximum amount that either FERS or CSRS employees may contribute to the TSP in a calendar year is $14,000. Employee and employer contributions to the TSP are transferred to the Federal Retirement Thrift Investment Board.

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 as non-exchange revenue 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 13)

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 that appropriation is closed, five years after the appropriations expire. Multi-year appropriations remain available to DOL for obligation in future periods.

2. Cumulative results of operations

Cumulative results of operations includes 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 the program's net operating cost. The full and net operating costs of DOL's major programs are presented in the Consolidated Statements of Net Cost, and are also reported by suborganization in Note 14 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 due 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 due to the Unemployment Trust Fund from Federal agencies for the cost of unemployment benefits provided to or accrued on behalf of their employees.

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 from the Federal government's power to demand payments from and receive donations 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 15)

  • 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 the receiving entity.

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, Longshore and Harbor Workers' Trust Fund, District of Columbia 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.

  • Assessments

The Longshore and Harbor Workers' Trust Fund and District of Columbia Trust Fund receive non-exchange revenues from assessments levied on insurance companies and self-insured employers. Assessments are recognized as non-exchange revenues when due.

  • 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 their employees. These reimbursements are recognized as other non-exchange revenue when due.

3. Transfers without reimbursement

Other transfers recognized as financing sources by DOL include the transfer from various DOL general fund unexpended appropriation accounts to the Working Capital Fund's cumulative results of operations. (See Note 16)

U. Other Financing Sources

Other financing sources include nonexchange revenue and other 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

Other transfers recognized as financing sources by DOL include the transfers of property from the General Services Administration to the Employment and Training Administration (ETA) to be used in training programs.

Transfers without reimbursement also include the transfers of liabilities from the Department of Energy and the Department of Justice to the Energy Employees Occupational Illness Compensation Fund. The liabilities were for programs established by the EEIOCPA and RECA. These programs were transferred to DOL by amendments to the EEIOCPA enacted in FY 2005, which expanded coverage for illness or death arising from exposure to toxic substances at the DOE facilities. (See Note 16)

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. The source and disposition of these revenues are reported on the Consolidated Statements of Custodial Activity. (See Note 18)

W. Use of Estimates

The preparation of financial statements requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

X. Reclassifications

Certain reclassifications have been made to 2004 financial statements to conform to the 2005 presentation.

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