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November 4, 2008 DOL Home > About DOL > Annual Report 2003 > Financial Performance Report |
DOL Annual Report, Fiscal Year 2003
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Financial Management Scorecard (as of 9/30/03) |
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Current Status |
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Progress in Implementing the PMA |
To Implement a New Core Accounting System:
To Integrate Financial/Performance Management:
To Reduce UI Erroneous Payments:
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Comment |
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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 2003 DOL audit revealed no material weaknesses.
Compliance Issues: Instances of noncompliance with laws and regulations.
Audit Area |
FY 1999 |
FY 2000 |
FY 2001 |
FY 2002 |
FY 2003 |
Total Open |
Crosscutting Issues |
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Accounting for Grants |
3 |
- |
- |
- |
- |
3 |
Property and Equipment |
1 |
- |
4 |
- |
5 |
10 |
Managing Cost Accounting |
- |
- |
- |
1 |
- |
1 |
Program Specific Issues |
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Unemployment Trust Fund |
- |
- |
1 |
- |
- |
1 |
FECA Program |
- |
- |
- |
- |
1 |
1 |
Total Open Recommendations |
4 |
0 |
5 |
1 |
6 |
16 |
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, 2003, 66 audit reports have been open for over one year. The total value of open audits of $81.1 million covers 360 separate recommendations.
The table below demonstrates that most of the reportable audits and recommendations that are over one year old are not under the direct control of and cannot be closed by the Department. Auditees have certain rights to appeal audit decisions made by the Office of the Inspector General (OIG), including appeals to an Administrative Law Judge or a Federal Circuit Court of Appeals. Audits are not considered closed simply because the claim is being appealed and sent forward for further action. DOL agencies and the OIG jointly manage and update an audit tracking system where the current status of each open audit is maintained. Final closure of the audit is determined only by final decisions of the reviewing officials. Many of these decisions take years before being rendered and the audit closed.
The most significant of the non-monetary open audit findings are discussed in this report. A listing of all open audits is available upon request from the Department's Office of the Chief Financial Officer.
2002 Audit Summary as of 9/30/2003 ($ in thousands) |
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Affected accounts in 66 audits with 360 recommendations over one year old Less: |
$81,053 |
Value of 26 open recommendations under administrative law or Federal Court Appeal |
$18,250 |
Funds put to better use |
$12,794 |
Amounts referred or in process of referral to the Department of Treasury |
$2,873 |
Balance of 66 open audits |
$47,136 |
Modernization of the Department's Core Accounting System
The Office of the Chief Financial Officer, in conjunction with Department of Labor agencies, is currently in the process of replacing the Department's core accounting system, DOLAR$. While DOLAR$ has enabled the Department of Labor to achieve unqualified audit opinions and provide accurate financial information over the past twelve years, recent advances in technology and E-Government initiatives have limited it's effectiveness in achieving the President's Management Agenda. In support of the President's effort to improve Federal financial management, the Office of the Chief Financial Officer has begun a multi-year endeavor to acquire and implement a new core accounting system. Using innovative technology, this project will work toward the goal of achieving a 21st Century Workforce by seeking to streamline business processes, provide real-time reporting on program performance, and create an open, flexible financial management architecture that will allow for integration with other emerging financial and E-Government initiatives. This effort is currently in the acquisition and evaluation phase and awaits Congressional approval in the 2004 appropriations.
To gain assurance that financial data produced by EDP systems are reliable, the OIG reviewed DOL's core accounting (DOLAR$) system, as well as a selection of 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 Audit Report.
Financial Management Line of Business Initiative (FMLOB)
This past April, the Administration established an E-Government Strategy to improve the way the Federal government makes and monitors investments in information technology. This effort centers on identifying, analyzing, and taking advantage of opportunities to integrate and consolidate activities along business lines that cross agency boundaries.
The FMLOB initiative is an interagency effort designed to standardize data structures and business practices for core accounting systems across nine partner agencies in the early stages of financial systems implementation. Core financial processes include cost management, financial reporting, general ledger management, payment management, and accounts receivable management. Assessment of business practice commonalities will expose opportunities to mitigate system redundancy, reduce acquisition costs, and promote seamless data exchange between Federal agencies. A common "to be" architecture is to be established by the end of FY 04, and implemented in FY 05.
E-payroll
This eGov initiative involves consolidation of Federal payroll operations to three providers. Cost savings will result from standardizing policies affecting the payroll process and the elimination of duplicative IT investments across the government. DOL will migrate to the National Finance Center (NFC) run by the Department of Agriculture. The Department is working with other Federal agency partners to develop a functional and technical requirements analysis for the migration.
Erroneous Payment Reduction
Erroneous payment reduction has become a major financial management issue for the Federal government in FY 2003. At Labor reduction of erroneous payments in the Unemployment Insurance (UI) program is a component of the DOL President's Management Agenda for financial management. The Department has initiated several projects and new processes to address the issue of reducing erroneous payments in UI and other programs. In FY 2003 the CFO was designated as the Erroneous Payment Reduction Coordinator for the Department, giving that office the authority and responsibility to coordinate the Department's efforts and reporting in this area of financial management.
FY 2003 efforts in the erroneous payments reduction area included a financial integrity conference held in April for the State UI administrators, meetings with the Social Security Administration regarding data sharing to combat fraud and identity theft, and increased emphasis on error detection and analysis. The Office of the Chief Financial Officer plans to perform an annual review of all Agency programs and activities susceptible to erroneous payments. Risk assessments, internal control reviews, and detailed data analysis techniques will assist in the detection of payment errors. The OCFO will work with Program Agencies to develop a plan of action to reduce improper payments, perform ongoing monitoring techniques and conduct recovery audit activities. A summary of the results of improper payment reduction efforts and levels is presented below.
Unemployment Insurance (UI)
The Employment and Training Administration (ETA) uses the Benefits Accuracy Measurement (BAM) program, a diagnostic tool designed to determine the accuracy of paid and denied claims, to estimate the amount of erroneous payments for three major Unemployment Insurance programs: State (UI), Unemployment Compensation for Federal Employee (UCFE), and Unemployment Compensation for Ex-service members (UCX). State Workforce Agency BAM offices select weekly random samples of UI payments and denied claims. BAM investigators audit these paid and denied claims to determine if the claimant was properly paid or denied eligibility. Each case is thoroughly reviewed for compliance with States' UI laws, regulations, policies, and operating procedures. ETA has been working with outside Agencies such as the Social Security Administration to identify data-sharing tools to help reduce payments to ineligible recipients.
Actual, Projected, and Targeted Improper Payments |
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Item |
FY 2002 |
FY 2003 Projected |
FY 2004 Target |
FY 2005 Target |
FY 2006 Target |
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Number of Payments (in thousands)1 |
161,743 |
167,164 |
159,236 |
145,281 |
140,011 |
Overpaid: % in universe2 |
15.40% |
16.60% |
15.80% |
15.80% |
15.80% |
Overpaid: Number in universe2 |
24,908 |
27,749 |
25,159 |
22,954 |
22,122 |
Overpaid: % established3 |
0.78% |
0.79% |
1.00% |
1.10% |
1.20% |
Overpaid: Number established3 |
1,262 |
1,321 |
1,592 |
1,598 |
1,680 |
Underpaid: % in universe4 |
6.40% |
6.30% |
6.60% |
6.90% |
7.20% |
Underpaid: Number in universe4 |
10,352 |
10,531 |
10,510 |
10,024 |
10,081 |
Monetary Denials: Number in Universe5 |
153 |
1,142 |
NA |
NA |
NA |
Monetary Denials: % in error5 |
9.4% |
12.0% |
NA |
NA |
NA |
Separation Denials: Number in Universe5 |
130 |
2,059 |
NA |
NA |
NA |
Separation Denials: % in error5 |
5.7% |
7.9% |
NA |
NA |
NA |
Continuing Eligibility Denials: |
244 |
2,089 |
NA |
NA |
NA |
Number in Universe5 |
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Continuing Eligibility Denials: |
9.2% |
11.5% |
NA |
NA |
NA |
Dollars Paid |
$40,148 |
$42,374 |
$41,429 |
$38,958 |
$39,020 |
(in Millions, except percents)1 |
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Overpaid: % in universe, |
8.53% |
9.35% |
8.80% |
8.60% |
8.40% |
Overpaid: Dollars in universe1 |
$3,424 |
$3,962 |
$3,646 |
$3,350 |
$3,278 |
Overpaid: % established3 |
2.32% |
2.66% |
3.03% |
3.11% |
3.19% |
Overpaid: Dollars established3 |
$930 |
$1,129 |
$1,257 |
$1,212 |
$1,244 |
Dollars established as % of |
59.0% |
56.1% |
59% |
59.5% |
60% |
Underpaid: % in universe4 |
0.66% |
0.62% |
0.66% |
0.70% |
0.75% |
Underpaid: Dollars in universe4 |
$266 |
$262.7 |
$273 |
$273 |
$293 |
Estimated overpayment rate is preliminary, based on Benefit Accuracy Measurement (BAM) data. |
Status of Action Plans for Conducting Risk Assessments or Developing Estimate of Erroneous Payments
In August 2001, all states began the Denied Claims Accuracy (DCA) program. DCA uses the BAM methodology to assess the accuracy of decisions denying UI eligibility. Separate samples measure the accuracy of denials at the monetary, separation, and weekly eligibility determination levels, enabling the Department to judge the extent of underpayments by including those due to total denials (from DCA) to its estimate of payments that are smaller than proper (from BAM).
In FY 2002, after consultation with the UI system, the Department began using an operational overpayment definition to estimate the overpayments that states could potentially identify and establish for recovery through usual overpayment detection tools such as wage-benefit and new hires crossmatches. This definition excludes from the standard BAM overpayment definition all non-recoverable overpayments and also recoverable overpayments that state operations are unlikely to detect: those due to work search violations, monetary determination errors, failure to register with the Job Service, and certain miscellaneous errors.
Status of Action Plans for Preventing/Reducing Erroneous Payments
Workforce Investment Act (WIA)
For the Workforce Investment Act program, ETA provides actual payments paid in error using audits conducted under the Single Audit Act and or initiated by the Office of Inspector General. Actual erroneous payments made under the ETA's national programs for FY2003 is summarized below:
Program |
Amount |
# of Cases |
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JTPA |
$2,332,119 |
11 |
WIA |
$23,360 |
1 |
Job Corps |
$698,752 |
3 |
Migrants and Seasonal Farmworkers |
$0 |
0 |
Native Americans |
$0 |
0 |
Older Americans |
$0 |
0 |
School-To-Work |
$11,844 |
1 |
Erroneous payment information represents the number and amount of debts ETA established during the fiscal year resulting from final determinations issued by the ETA for audit and incident reports of questioned costs claimed under grants authorized under JTPA and as reported to the U.S. Department of Treasury on SF-220-9, Report on Receivables Due from the Public.
The ETA does not estimate erroneous payment information for its grant programs, and instead, defers to (1) audits issued under the Single Audit Act or conducted by the DOL, OIG and (2) incident and monitoring reports where ETA staff take action in response to issue that arise in a particular grant or contract during the course of a given fiscal year.
Status of Action Plans for Conducting Risk Assessments or Developing Estimate of Erroneous Payments
ETA relies primarily on external audits of its grant programs to identify erroneous payments, and believes it has an adequate system of internal control to prevent or detect many of the types of erroneous payments, including inadvertent errors, payments for services not rendered, and payments resulting from outright fraud.
The Secretary of DOL and ETA management need to evaluate whether its reliance on audits issued under the Single Audit Act or conducted by the DOL, OIG meets the intent of 29 USC 2935, Section 185, Reports; Recordkeeping; Investigations Of Use Of Funds, that requires the Secretary of DOL to evaluate compliance with the provisions of the WIA by conducting investigations, in several states and in each fiscal year, of the use of funds received by recipients under the WIA.
Status of Action Plans for Preventing/Reducing Erroneous Payments
As mentioned above, ETA is required to evaluate compliance with the provisions of the WIA by conducting investigations, in several states and in each fiscal year, of the use of funds received by recipients under the WIA. In doing so, ETA management will need to evaluate whether its reliance on external post-audit activities meets the intent of the requirement, and if not, develop a course of action to implement the requirement.
Federal Employees' Compensation Act (FECA)
The Employment Standards Administration (ESA) estimates erroneous payments in its FECA program for both Compensation Benefits and Medical benefits using routine annual and periodic case reviews. ESA continues to implement new initiatives, such as Quality Case Management and Corrective Coding of medical bills, to assist in identifying, preventing and collecting erroneous payments.
Program-wide Estimates |
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Program: Compensation Benefit Payments (in $000) |
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FY 2002 |
FY 2003 |
FY 2005 |
FY 2006 |
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Total Payments |
1,640,145 |
100% |
1,676,501 |
100% |
100% |
100% |
Underpayments |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
Overpayments |
9,289 |
0.57% |
8,617 |
0.51% |
0.56% |
0.55% |
Total Erroneous Payments |
9,289 |
0.57% |
8,617 |
0.51% |
0.56% |
0.55% |
Notes:
Program: Medical Benefit Payments (in $000) |
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FY 2002 |
FY 2003 |
FY 2005 |
FY 2006 |
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Dollars |
Rate |
Dollars |
Rate |
Rate |
Rate |
Total Payments |
667,797 |
100% |
661,485 |
100% |
100% |
100% |
Underpayments |
N/A |
N/A |
N/A |
N/A |
N/A |
N/A |
Overpayments |
875 est. |
N/A |
438 |
0.07% |
0.3% |
0.30% |
Total Erroneous Payments |
875 est. |
N/A |
438 |
0.07% |
0.3% |
0.30% |
Notes:
Status of Action Plans for Risk Assessments or Develop Estimate of Erroneous Payments
FECA district office Fiscal Operations Specialists began to conduct a quarterly 100% sample audit of potential duplicate medical payments (over $500 in value). For FY 2003, the FOS review identified approximately 391 duplicate payments totaling $438,000. This finding calculates to an error rate of 0.07% of the total dollars paid in the over-$249 category.
Erroneous medical payments are also identified through a monthly audit by FECA Medical Coding Specialists. The objectives of this review are to identify data keying and other processing errors, as well as identifying incorrect payment amounts or payments for unwarranted services.
To supplement the FOS and Medical Coding Specialist audits, FECA is also evaluating other erroneous payment detection methods.
Milestone dates:
New system baseline for reducing erroneous payments. |
FY 2004 |
Refined medical bill sampling methodologies |
FY 2004 |
Modified accountability review procedures |
FY 2004 |
Status of Action Plan for Preventing/Reducing Erroneous Payments
While some inappropriate payments do go undetected, we continue to refine existing controls wherever necessary and plan new systems designs so as to minimize vulnerability. For example, the recently initiated "OASIS" project, which entails electronic imaging and handling of FECA case files, greatly enhances program controls over incoming mail. Likewise, the FECA initiative to receive some new claims and medical bills electronically has been carefully designed to maintain and enhance existing controls.
Central Bill Processing System: |
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FY 2003 |
Gather and analyze medical bill data |
Aug. 2004 |
Establish FY 2003 baseline for existing data |
Mar. 2004 |
Establish parameters for data collection from the central bill system |
FY 2004 |
Collect and report data from new system against baseline. |
District Office Changes: |
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FY 2003 |
Review by FOS's of potential duplicate medical payments over $249 |
FY 2004 |
Modification of procedures to better estimate erroneous payment rates for medical bills, better identify compensation benefit underpayments, and report compensation overpayments. |
Debt Management
The Debt Collection Improvement Act of 1996 (DCIA) established the Department of the Treasury as the central agency for collection of Federal debts over 180 days delinquent, and DOL cross services all delinquent debts in accordance with this statute. Once these debts are referred, the Department of the Treasury has several collection tools at its disposal, including issuing demand letters, conducting telephone follow-up, referring debts for administrative offset, performing administrative wage garnishment, and referring debts to private collection agencies.
Since DOL does not operate loan or other commercial programs, debt management accounts for a relatively small part of our financial management activity. The majority of debts managed by DOL relate to the assessment of fines and penalties in our enforcement programs. During FY 2003, the Department referred 92 percent of all eligible delinquent debt to Treasury for collection.
Department Wide Delinquent Debt Data (in thousands) |
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Delinquent Debt (1-180 days) |
$21,261 |
$19,898 |
$20,361 |
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Delinquent Debt (181+ days) |
$72,410 |
$67,847 |
$97,026 |
Total Collections |
$127,296 |
$127,581 |
$132,732 |
New Receivables |
$153,221 |
$155,845 |
$165,843 |
Eligible to be Referred |
$77,302 |
$72,108 |
$88,023 |
Debts Referred to Treasury During FY 2001 |
$70,917 |
$67,572 |
$80,955 |
Electronic Fund Transfer (EFT)
DOL made over 65 percent of its salary, awards, travel and miscellaneous payments electronically in FY 2003. This represents a 26 percent increase over the FY 2002 total.
The Department continues to lag behind government averages due to the low EFT participation and the heavy volume in ESA's medical and benefits programs. These ESA programs account for over 71 percent of DOL's total payment volume.
DOL EFT Payments |
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FY99 |
FY00 |
FY01 |
FY02 |
FY03 |
---|---|---|---|---|---|
Administrative Vendors |
58% |
64% |
69% |
74% |
96% |
Travel & Miscellaneous |
98% |
99% |
99% |
99% |
99% |
Salary & Awards |
97% |
97% |
96% |
98% |
99% |
ESA Programs |
32% |
27% |
26% |
28% |
53% |
Total |
46% |
41% |
38% |
39% |
65% |
Source: DOL DOLAR$ and Payroll System EFT reports.
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. In FY 2003, of approximately $1.2 billion in gross payments, $521,879 (approximately .043 percent) was paid in interest fees and penalties.
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