ANNUAL REPORT FY 2001

FINANCIAL STATEMENT AUDIT FINDINGS
UNDER THE CHIEF FINANCIAL OFFICERS ACT (CFOA)

The following table provides a statistical summary of open audit findings as required under the Chief Financial Officers Act.

The Chief Financial Officers Act
prescribed the compilation and audit of annual financial statements. In addition to expressing an opinion in the audit on the fair presentation of the principal financial statements, the Department’s OIG has other reporting responsibilities under Standards issued by the American Institute of Certified Public Accountants and OMB Bulletin 01-02, Audit Requirements for Federal Financial Statements, including the identification of:

Reportable Conditions: Significant deficiencies in the design or operation of internal controls that could adversely affect the Department’s ability to record, process, summarize, and report financial data.

Material Weaknesses: Reportable conditions that could result in misstatements in amounts that would significantly affect the financial statements. The FY 2001 DOL audit revealed no material weaknesses.

Compliance Issues: Instances of noncompliance with laws and regulations.

THE FEDERAL FINANCIAL MANAGEMENT IMPROVEMENT ACT (FFMIA)

The Federal Financial Management Improvement Act of 1996 (FFMIA) requires agencies to implement and maintain financial management systems that are in substantial compliance with OMB Circular A-127, JFMIP requirements, Federal accounting standards, and the United States Government Standard General Ledger (SGL) at the transaction level. All DOL financial management systems substantially comply with FFMIA. Elaine L. Chao Secretary of labor

FEDERAL MANAGERS’ FINANCIAL INTEGRITY ACT (FMFIA)

The Federal Managers' Financial Integrity Act of 1982 requires the Secretary to report to the President and the Congress on the adequacy of management controls in safeguarding resources. Based on the unqualified opinion, the results of the audits, together with assurances given by the agency officials and other pertinent information, DOL accounting systems and internal controls comply with the provisions of the Federal Managers' Financial Integrity Act. Elaine L. Chao Secretary of labor

MANAGEMENT REPORTING UNDER THE INSPECTOR GENERAL ACT AMENDMENTS

The Inspector General Act Amendments of 1988 require explanations for all audit reports with recommendations open for more than one year. DOL management and audit communities agree that some of these audit resolutions will require several years to complete the corrective action. As of September 30, 2001, 70 audit reports have been open for over one year. The total value of open audits of $64.2 million covers 564 separate recommendations.

The table below demonstrates that most of the reportable audits and recommendations that are over one year old are not under the direct control of and cannot be closed by the Department. Auditees have certain rights to appeal audit decisions made by the Office of the Inspector General (OIG), including appeals to an Administrative Law Judge or a Federal Circuit Court of Appeals. Audits are not considered closed simply because the claim is being appealed and sent forward for further action. DOL agencies and the OIG jointly manage and update an audit tracking system where the current status of each open audit is maintained. Final closure of the audit is determined only by final decisions of the reviewing officials. Many of these decisions take years before being rendered and the audit closed.

The most significant of the non-monetary open audit findings are discussed in this report. A listing of all open audits is available upon request from the Department’s Office of the Chief Financial Officer.

DOL FINANCIAL SYSTEMS AND OPERATIONS

Modernization of the Department’s Core Accounting System

The OCFO is continuing to work with DOL agencies in modernizing the Department’s core accounting system, DOLAR$. OCFO representatives and contract staff consulted extensively with agency financial managers to gain agreement on the highest priority enhancements that were needed. During FY 2001, OCFO completed the development and implementation of a financial data warehouse, which enables faster and easier access to accounting information. The overall modernization effort will follow a phased implementation timeline over the next three to five years.

Debt Management

The OCFO monitors the debt management program of the Department. The debt management operations of OSHA, MSHA, ESA, and ETA make up nearly all of the receivable activity of the Department. The larger program agencies manage their own receivables, working directly with their clients and vendors. For many of DOL’s program agencies, this is a natural extension of their day to day work with the organizations they regulate.

The Debt Collection Improvement Act of 1996 (DCIA) established the Department of the Treasury’s Financial Management Service (FMS) as the central agency for collection of Federal debts over 180 days delinquent. FMS presently has an agreement with all DOL agencies to cross-service all debt meeting this threshold.

DOL debt management accounts for a relatively small part of our financial management activity, as the Department does not operate loan or other commercial programs. The majority of debts managed by the Department relate to the assessment of fines and penalties in our enforcement programs. When DCIA was enacted, DOL elected to cross-service all delinquent debts with the Department of Treasury. The percent of eligible delinquent debts referred to Treasury for collection was 92% for both of the last two fiscal years. We anticipate improvement in FY 2002, resulting from several ESA system upgrades.

The table provides information on total debts for the Department as reported to the Department of the Treasury in the Report on Receivables for FY 2000 and 2001.

Electronic Fund Transfer (EFT)

DOL made over 96 percent of its salary, awards, travel, and miscellaneous payments electronically in FY 2001. Electronic vendor payments increased by five percent over the FY 2000 rate.

The Department continues to lag behind government averages due to the low EFT participation and the heavy volume in ESA’s medical and benefits programs. These FECA programs account for over 80 percent of DOL’s total payment volume. The FECA medical payments system is undergoing redesign to permit EFT payments and is scheduled for completion in FY 2002. Overall, the Department’s FY 2001 EFT performance of 38 percent represents a 3 percent decrease from the FY 2000 rate. This change is directly attributable to the increase in ESA’s annual volume of non-EFT medical payments.

User Charges - Policy Review Process

In accordance with the CFO Act and OMB Circular A-25, department wide guidance has been developed to establish policy, procedures, and responsibility for implementing and managing user charges in DOL. The guidance includes the biennial review requirements of the CFO Act. Areview of user fees, conducted by DOL agencies in FY 2000, resulted in adjustments to some user fee pricing rates.

Electronic Data Processing (EDP) Systems

To gain assurance that financial data produced by EDP systems are reliable, the OIG reviewed DOL’s core accounting (DOLAR$) and centralized payroll (IPS) systems, as well as DOL agency financial systems. The Office of the Chief Information Officer, the OCFO, and the major agencies are addressing each of these findings from this review in a department wide effort to update system security plans and close audit findings. For more information, see the Assistant Inspector General Report, beginning on page 153.

Prompt Payment Act

The Prompt Payment Act requires Executive agencies to pay commercial obligations within discreet time periods and to pay interest penalties when those time constraints are not met.

During FY 2001, 95.4 percent of 170,454 total DOL payments subject to the Act were paid on time. Of $899,934,510 in gross payments, $184,962 (approximately .021 percent) was paid in interest fees and penalties.

Government Wide Involvement

The Department takes pride in contributing to effective financial management government wide. DOL staff participate in intergovernmental workgroups to resolve issues common among Federal agencies, and in FY 2001 were actively involved in the Federal Accounting Standards Advisory Board, the United States Standard General Ledger Board, the Federal Credit Policy Working Group, the CFO Grants Management Committee, the JFMIP Core Financial Systems Requirements Update, AGA administrative and training activities, the Human Resource Project Management Initiative, and the CFO Council Fellows Association. We anticipate continued involvement in these and other government wide projects in the future.