FY 2005 Consolidated Financial Statements

A MESSAGE FROM THE CHIEF FINANCIAL OFFICER

I am pleased to present the U.S. Equal Employment Opportunity Commission's financial statements for FY 2005. Our financial statements are an integral component of our Performance and Accountability Report. The Accountability of Tax Dollars Act of 2002 extends to the Commission a requirement to prepare and submit audited financial statements. The President's Management Agenda, Improved Financial Performance component, requires us to obtain and sustain clean audit opinions on our financial statements. The Office of Management and Budget issued Circular A-136, Financial Reporting Requirements, on August 23, 2005, which further consolidated reporting requirements for the PAR submission.

Our FY 2005 financial statements received an unqualified opinion. This is the second consecutive year that the EEOC has received an unqualified opinion and represents another milestone in our efforts to improve the financial management of the agency. This year we were successful in migrating to a third party software package that produces our financial statements with a high level of integration with our financial system. On the other hand, last year our service provider, the Department of the Interior's National Business Center, notified us that the current version of our financial software is considered obsolete. Our service provider requires that we migrate to some replacement software during FY 2008. Consequently, the agency has made budget plans to replace the financial system in FY 2007 with financial software that has been certified by the Office of Management and Budget. We are in the process of analyzing proposals from designated federal Centers of Excellence (COEs). In addition, we hope to begin implementation of e-Travel software in FY 2008. An unstable GSA vendor environment may impact the implementation date for e-Travel.

In support of the Budget and Performance Integration component of the President's Management Agenda, we implemented an integrated cost accounting methodology in the time and attendance component of the payroll system. We conducted a mid-year post implementation review of the process. Several recommendations were approved to fine-tune the process including the addition of two program element codes to collect labor cost information. The two program elements are training and file disclosures. Over the next few years, the agency will determine what level of program cost detail is necessary to support the objectives of activity-based costing. In fiscal year 2005, we submitted our FY 2004 Performance and Accountability Report to the Certificate of Excellence in Accountability Reporting (CEAR) program. We received valuable peer review feedback on areas of the report that needed improvement.

For FY 2005, the agency received a $327 million budget. We completed the fiscal year within budget with improved financial management and some additional focus on cost controls and cost accounting. Compensation and benefit costs continue to consume about 70% of the budget. Some progress has been made to bring rising office space rent costs under control as we re-lease less office space consistent with the number of employees onboard. However, rent costs remain about 9% of our total budget. With 10% of the budget dedicated to the State and local program, only 11% of the budget is available for technology, programs, travel, and other general expenses. As reported in the past, I have identified several critical issues for the agency to focus on to improve its long-term financial health. An update on each item is provided below.

• Execute a disciplined analysis of future workforce and infrastructure requirements. Unfortunately, the Agency has been unable to slow the growth of the current and future cost of compensation and benefits, which makes up 70% of the EEOC's budget each year. These costs include salary, health and life insurance, agency contributions for retirement plans, social security, Medicare, worker's compensation, reasonable accommodations, and transit subsidies. A plan to reposition the field structure for improved efficiency and customer service was approved by the Commission on July 8, 2005. This repositioning is expected to save the agency $4.9 million in payroll costs over 8 years. In addition, as office space is right-sized to the staff onboard, we are expected to save $3.4 million in rent costs over the same period. A Headquarters repositioning will be completed during FY 2006. Finally, the agency contracted for an independent top-down study of the information technology infrastructure and staffing, with a report received in October 2005.
• Recognize and manage competing budget priorities. A limited hiring freeze has continued since August 2001. In addition, we have kept spending controls in place for discretionary travel, awards, and training. Nonpayroll costs also increased for homeland security, rent, facility services, and Government-wide programs such as a uniform Federal Government employees' identification card project.
• Formulate a long-term performance budget strategy. We provided one-year forward- looking projections for workload using available forecasting tools in our
  FY 2005 and FY 2006 performance budget submissions. For future years' performance budget submissions, the agency is considering multiyear forward-looking workload projections in an attempt to better describe our resource requirements.

In FY 2006, guided by an examination and update of our Strategic Plan, the EEOC will continue its focus on accountability and results through improved performance metrics, budget planning and financial management.

Jeffrey A. Smith, CPA, CGFM
Chief Financial Officer
U.S. Equal Employment Opportunity Commission

November 15, 2005

This page was last modified on December 2, 2005

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