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 2009. Our financial statements are an integral component of our Performance and Accountability Report. The Accountability of Tax Dollars Act of 2002 extends to the agency a requirement to prepare and submit audited financial statements. The President's Management Agenda, Improved Financial Performance component among other standards, requires us to obtain and sustain clean audit opinions on our financial statements. The Office of Management and Budget (OMB) issued an updated Circular A-136, Financial Reporting Requirements, on June 10, 2009, which further refined reporting requirements for the PAR submission.

Our FY 2009 financial statements received an unqualified opinion through the hard work of the dedicated financial and administrative staff in the agency. This is the sixth consecutive year that the EEOC has received an unqualified opinion and represents our continuing successful efforts to improve the financial management of the agency. The Department of the Interior's National Business Center won a competition to replace the existing financial software with CGI's Momentum^® software package. The conversion and implementation were completed for operations beginning in FY 2008. However, hosting and application support costs at the National Business Center have risen faster than current appropriation levels can sustain. As we look ahead, we will re-compete the requirements for the Agency's financial line of business software and accounting operations support in FY 2011 for implementation effective October 1, 2012, FY 2013.

For FY 2009, the agency received a $343.9 million budget. We completed the fiscal year within budget with improved financial management. Compensation and benefit costs continue to consume a substantial portion of the budget. Some additional progress has been made to bring rising office space rent costs under control by leasing less office space consistent with the number of employees onboard. Additional rent costs are expected based on the number of approved vacancies. Rent costs are about 8% of our total budget. With 8% of the budget dedicated to the State and local program, only 14% of the budget is available for technology, programs, travel, and other general expenses.

The agency has made some progress on attacking program workload backlogs by embarking on a hiring program to rebuild staffing levels that were at a historically low level. Beginning at mid-year of FY 2009, we began the process to hire investigators, trial attorneys, and other staff to support our systemic enforcement and litigation programs. We anticipate additional hiring in 2010, including the hiring of additional investigators, trial attorneys and support staff. We dedicated $2.5 million to address gaps in training for our investigators, attorneys, program analysts, and other employees.

Working with the General Services Administration, the agency relocated the Headquarters office and the Washington Field Office to 131 M Street, NE in Washington, D.C. in the first quarter of FY 2009. A ten-year occupancy agreement took effect in January 2009. The rent at this new location ensures the agency will not pay more than the annual lease cost at our previous location. The area where the new office is located is called NoMa (North of Massachusetts Avenue). Our agency, along with the Department of Justice, is pleased to be part of an area for economic re-development within the District of Columbia.

Working with our Office of Information Technology, the agency competed and awarded two important orders in the fourth quarter. The first order is for Managed Services for End-User Computing through the GSA Alliant Government-wide Acquisition Contract (GWAC). The potential contract value is $21.4 million dollars for 84 months, if the option period and all optional contract line items are funded. The scope of the contract provides for the replacement and servicing of all desktop computers throughout the agency and related hardware, software and services. The second order was for network engineering services to evaluate future requirements for data and video bandwidth and related services.

As reported in the past, I have identified several critical issues for the agency to focus on to continue 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 for several years, the government as well as the agency have been unable to slow the growth of the current and future cost of compensation and benefits for current employees. Costs are on a path to increase to over 70% of the EEOC's budget. These costs include salary, health and life insurance, agency contributions for retirement plans, social security, medicare, worker's compensation, unemployment insurance, and transit subsidies. The continuing inability of the agency to implement any form of position management means that it will be very difficult to substantially change the cost of the compensation and benefits in future years.

The agency contracted for an independent top-down study of the information technology infrastructure and staffing. The report called for substantial changes in the organization, use of contracts, operations, and the skill mix of staff in order to more effectively spend the $23 million annual budget for the information technology function. The agency is pursuing competitive IT services to consolidate contracts for additional managed hosting and managed operations and maintenance. This is an effort to better focus current government IT employees on strategic, budget, and acquisition planning, contract oversight, system security and end user needs.

Recognize and manage competing budget priorities. We have kept spending controls in place for discretionary line items. Non-payroll costs continue to increase for homeland security, rent, facility services, and government-wide programs such as financial management services with a shared service provider. The agency continues discussions to determine the underlying causes for cost increases in its hosting and software services. There remains a clear need for improved strategic sourcing for software licensing, upgrades, and warranties on commercial off-the-shelf software by leveraging the consolidated requirements and resources under the management control of our shared services provider.

Formulate a long-term performance budget strategy. The agency continues to look into improved communication approaches for annual budget justifications. There is a need for more transparency of workload metrics and the methodologies for supporting the metrics. The backlog of casework and workload by activity makes this an important task as we move forward. Also, substantial work is required to re-engineer and update a Strategic Plan.

In FY 2010, we will continue our focus on accountability, financial transparency, and results through improved budget planning, performance metrics and financial management.

 

Imagen

 

 

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

 

 

November 15, 2009

---

Inspector General's Audit Report

November 13, 2009

MEMORANDUM

The Office of Inspector General (OIG) contracted with the independent certified public accounting firm of Cotton and Company LLP to audit the financial statements of the U.S. Equal Employment Opportunity Commission (EEOC) for fiscal years 2009 and 2008.  The contract required that the audit be done in accordance with U.S. generally accepted government auditing standards; Office of Management and Budget's Bulletin 07-04, Audit Requirements for Federal Financial Statements, and the Government Accountability Office/President's Council on Integrity and Efficiency's Financial Audit Manual.

Cotton and Company LLP issued an unqualified opinion on EEOC's FY 2009 and 2008 financial statements.  In its Report on Internal Control, Cotton and Company LLP noted two areas involving internal control and its operation that were considered to be significant deficiencies. These included time and attendance controls and controls over revenue and receivables.  In its Report on Compliance, Cotton and Co. LLP noted no instances of non compliance with certain laws and regulations applicable to the agency.

In connection with the contract, OIG reviewed Cotton and Company LLP's report and related documentation and inquired of its representatives.  Our review, as differentiated from an audit in accordance with U.S. generally accepted government auditing standards, was not intended to enable us to express, and we do not express, opinions on EEOC's financial statements or conclusions about the effectiveness of internal controls or on whether EEOC's financial management systems substantially complied with FFMIA; or conclusions on compliance with laws and regulations.  Cotton and Company LLP is responsible for the attached auditor's report dated November 13, 2009 and the conclusions expressed in the report.  However, OIG's review disclosed no instances where Cotton and Company LLP did not comply, in all material respects, with generally accepted government auditing standards.

EEOC management was given the opportunity to review the draft report and to provide comments.  Management comments are included with the report as an attachment.

---

Independent Auditor's Report

 

Imagen

Inspector General
Equal Employment Opportunity Commission

INDEPENDENT AUDITOR'S REPORT

We have audited the Balance Sheets of the U.S. Equal Employment Opportunity Commission (EEOC) as of September 30, 2009, and 2008, and the related Statements of Net Cost, Changes in Net Position, and Budgetary Resources for the years then ended. These financial statements are the responsibility of EEOC management. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America; standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Bulletin 07-04, Audit Requirements for Federal Financial Statements. These standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting amounts and disclosures in the financial statements. An audit also includes assessing accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of EEOC as of September 30, 2009, and 2008, and its net costs, changes in net position, and budgetary resources for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Management's Discussion and Analysis (MD&A) and other accompanying information are not required as part of EEOC's basic financial statements. For MD&A, which is required by OMB Circular A-136, Financial Reporting Requirements, and the Federal Accounting Standards Advisory Board's Statement of Federal Financial Accounting Standards No. 15, Management's Discussion and Analysis, we made certain inquiries of management and compared the information for consistency with EEOC's audited financial statements and against other knowledge we obtained during our audits. For other accompanying information, we compared the information with the financial statements. On the basis of this limited work, we found no material inconsistencies with the financial statements, U.S. generally accepted accounting principles, or OMB guidance. We did not audit the MD&A or other accompanying information, and therefore express no opinion on them.

In accordance with Government Auditing Standards, we have also issued separate reports dated November 13, 2009, on our consideration of EEOC's internal control over financial reporting, and on our tests of its compliance with certain provisions of laws and regulations. The purpose of those reports is to describe the scope of our testing of internal control over financial reporting and compliance, and the results of that testing; not to provide an opinion on internal control over financial reporting or on compliance. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing results of our audits.

COTTON & COMPANY LLP

Imagen

 

Colette Y. Wilson, CPA
Partner

 

November 13, 2009
Alexandria, Virginia

---

 

INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL WITH COMMENTS

 

Inspector General
Equal Employment Opportunity Commission

INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL

We have audited the Balance Sheets of the U.S. Equal Employment Opportunity Commission (EEOC) as of September 30, 2009, and 2008, and the related Statements of Net Cost, Changes in Net Position, and Budgetary Resources for the years then ended. We have issued our report thereon dated November 13, 2009. We conducted our audits in accordance with auditing standards generally accepted in the United States of America; standards applicable to financial audits, contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Bulletin 07-04, Audit Requirements for Federal Financial Statements.

In planning and performing our audits, we considered EEOC's internal control over financial reporting as a basis for designing audit procedures for the purpose of expressing an opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of EEOC's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of EEOC's internal control over financial reporting. 

A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affects the entity's ability to initiate, authorize, record, process, or report financial data reliably, in accordance with generally accepted accounting principles, such that there is more than a remote likelihood that a misstatement of the entity's financial statements that is more than inconsequential will not be prevented or detected by the entity's internal control.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the entity's internal control.

Our consideration of internal control over financial reporting was for the limited purpose described above and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. We did, however, note two matters involving internal control and its operation, which we considered to be significant deficiencies.

1. Time-and-Attendance Controls

2. Inaccurate Timekeeping

   During fiscal year (FY) 2009, EEOC continued to experience difficulties in correctly recording time and attendance information. In addition, timekeepers and certifiers did not perform thorough reviews of information entered into EEOC's timekeeping system to ensure that it accurately reflected work performed by employees.

   We noted the following during our testing:

   • 55 timesheets were not signed by the employee
   • 32 timesheets were not signed by the supervisor
   • 33 instances in which the activity coding and/or hours per the timesheet did not tie to the information in Federal Personnel Payroll System (FPPS)
   • 69 instances in which the program coding per the timesheet did not tie to information in the FPPS
   • 13 SF-71 Request for Leave forms were not properly approved
   • 14 instances in which the information per the SF-71 did not tie to the information in FPPS.

   Per EEOC policy, each employee is required to complete a Cost Accounting Bi-weekly Timesheet each pay period. The employee is required to record and allocate time worked using activity codes that represent EEOC program areas. In addition, certifiers are expected to review and approve the assignment of hours to activity codes.

   Failure to properly record hours worked and activity codes on the Bi-weekly Timesheet or entering incorrect data into EEOC's accounting system could lead to improper calculations of accrued annual leave liability as presented on the Balance Sheets, as well as incorrect program cost allocation on the Statements of Net Cost.

   Recommendation: We recommend that the EEOC Office of Human Resources (OHR) review and refine controls in place over time-and-attendance reporting to ensure that all employees report accurate and complete information to timekeepers. Additionally, we recommend that OHR implement a policy requiring timesheets with incorrect or incomplete information to be returned to employees for correction before certifying time-and-attendance information in EEOC's online timekeeping system.

   Management Response: Management concurred with the finding and recommendation.  See appendix B for management's detailed response.

3. Controls Over Revenue and Receivables

4. Untimely Revenue Recognition

   Revenue transactions for the Revolving Fund (RF) were recorded in the wrong period. Our testing of RF training-event transactions identified revenues of $12,694 recorded in FY 2008 for training events that occurred in FY 2009. This error was noted during the FY 2008 audit, but an adjustment was not processed in FY 2009 to properly record the revenue.

   Statement of Federal Financial Accounting Standards (SFFAS) No. 7, Accounting for Revenue and Other Financing Sources, Paragraph 36, states:

   When services are provided to the public or another Government entity (except for specific services produced to order under a contract), revenue should be recognized when the services are performed.

   SFFAS No. 7 also states in Paragraph 37:

   When advance fees or payments are received... revenue should not be recognized until costs are incurred from providing the goods and services (regardless of whether the fee or payment is refundable). An increase in cash and an increase in liabilities, such as "unearned revenue," should be recorded when the cash is received.

   The Revolving Fund Division (RFD) recognizes exchange revenue at the time a customer registers for a training course. In FY 2008, an accrual was processed at yearend to recognize that income that had not yet been earned was deferred for reporting purposes. This accrual did not, however, capture all unearned revenue at yearend. In FY 2009, an adjustment was not processed to properly recognize the revenue in FY 2009.

   Recommendation: We recommend that the Chief Financial Officer (CFO), along with the Director of the RFD, review accrual procedures in place and refine these procedures to ensure that all revenue not earned at yearend is properly classified as deferred in the financial statements.

   Management Response: Management concurred with the finding and recommendation.  See appendix B for management's detailed response.

   Incorrect Amounts and Ineffective Reconciliations over Revenue

   Reconciliations are ineffective between Momentum and Certain Registration, the feeder system used to record event registrations and product orders for the RF. Momentum activity reconciled for FY 2009 did not tie to the yearend revenue balance reported on the financial statements. Additionally, differences in reconciliations were not resolved in a timely manner.

   Results of testing also noted unsupported revenue amounts recorded in the general ledger. During substantive testing of revenue balances, RF personnel could not provide documentation to support revenue amounts recorded in the general ledger. This resulted in a known $2,392 overstatement of revenue and a projected overstatement of $272,440.

   The Government Accountability Office's (GAO) Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1, p. 15,states that control activities should be in place "... to ensure that all transactions are completely and accurately recorded."

   The failure to ensure that financial system data are complete and accurate could lead to inaccurate and incomplete information being reported in the financial statements.

   Recommendation: We recommend that the CFO work with the Director of RFD to ensure that documentation is maintained to support all transactions recorded in the general ledger. Additionally, we recommend that the CFO coordinate with the Director of RFD to ensure that timely, complete, and accurate reconciliations are performed between the general ledger and the subsidiary ledger, and that differences identified are researched and resolved.

   Management Response: Office of Field Program (OFP) Management provided the following response:

   "We believe this matter was resolved and need more information on the alleged discrepancies in order to determine if this finding is correct as we provided you with timely reconciled reports for FY 2009 from the Certain Registration System via Willie Eggleston on October 20, 2009.  Additionally, we provided you with copies of the consolidated reconciliations from our current registration system managed by Kinsail Inc. on October 16, 2009."

   Auditor Response: We received the documentation referenced in OFP's response and noted that the information included in the reconciliations provided did not tie to the yearend trial balance.  We followed up with OFP personnel on 11/03/2009 regarding the discrepancies noted.  Additionally, the 11/03/2009 email was forwarded to OFP management on 11/13/2009 upon receipt of OFP's comments.  No response was received thus we still consider this matter unresolved.

   The status of recommendations included in the FY 2008 Report on Internal Control is detailed in appendix A.

   We noted other matters involving internal control and its operation that we will report to EEOC management in a separate letter.

   This report is intended solely for the information and use of EEOC management, others within EEOC, OMB, and Congress. It is not intended to be and should not be used by anyone other than these specified parties.

   Imagen

   
    

   Colette Y. Wilson, CPA
   Partner

   November 13, 2009
   Alexandria, Virginia

APPENDIX A

STATUS OF MANAGEMENT'S ACTIONS ON
PRIOR-YEAR RECOMMENDATIONS
FISCAL YEAR 2009 FINANCIAL STATEMENT AUDIT
U.S. EQUAL EMPLOYMENT OPPORTUNITY COMMISSION

November 13, 2009

MEMORANDUM

This is in response to the draft audit reports from Cotton & Company dated November 12, 2009.  By way of this memorandum, our response is as follows:

Original Entry in the Draft letter:

Time and Attendance Reporting -- Recommendation

We recommend that the EEOC Office of Human Resources (OHR) review and refine controls in place over time-and-attendance reporting to ensure that all employees report accurate and complete information to timekeepers.  Additionally, we recommend that OHR implement a policy requiring timesheets with incorrect or incomplete information to be returned to employees for correction before certification of time-and-attendance information in EEOC's online timekeeping system.

Response to Recommendation:

As we reported in our response to the FY 08 audit report, in early October 2008, the update for the FY 09 Time Attendance Guidance was produced and placed on EEOC's internal website for reference.  It dictates that "Timekeepers will review time and attendance documentation to determine that they are complete and accurate.  If any documentation is missing or if the Bi-Weekly Worksheet is coded inaccurately, the Timekeeper must return the form to the employee for correction."  Also at that time, OHR sent an email through the FPPS GroupWise Mailbox to all timekeepers and certifiers; a reminder that this has been an issue in past audit results and advised them to review those documents that may be requested of them.  One piece of good news is that the Agency has purchased a web based time and attendance system which will alleviate most of these problems.  It will be completely paperless and will provide a number of edits which will ensure the accuracy of the data.  It is set for implementation in January 2011.  In the meantime, OHR would like to request a list of the specific offices involved in the audit and any other information that can be provided.  We would like to communicate the information directly to Office and District Directors to ensure a better outcome of next year's audit.

If you have any questions, please feel free to contact Arlethia Monroe of my staff at (202) 663-4340.

---

November 13, 2009

Following is management's response to the Untimely Revenue Recognition noted for the Revolving Fund:

We agree with your findings. However, please note that although the $12,694 of revenue was not properly identified as deferred it was reported as earned. Therefore, we could not reclassify the amount as unearned or deferred and ultimately correct the error.

Following is management's response to Incorrect Amounts and Ineffective Reconciliations over Revenue:

We believe this matter was resolved and need more information on the alleged discrepancies in order to determine if this finding is correct as we provided you with timely reconciled reports for FY 2009 from the Certain Registration System via Willie Eggleston on October 20, 2009. Additionally, we provided you with copies of the consolidated reconciliations from our current registration system managed by Kinsail Inc. on October 16, 2009.

In response to the unsupported revenue amounts recorded in the general ledger:

We agree with this finding and implemented controls on December 2, 2008 with our new contractor to insure that proper documentation is being kept to support all revenue amounts in the general ledger. We have had at least two internal control reviews to test this system of controls the week of May 19, 2009 and the week of June 25, 2009 and found that our new registration contractor is properly maintaining support documentation.

---

November 13, 2009

MEMORANDUM

We have no comments on the draft reports for the financial audit and compliance with laws and regulations.

For the draft internal control report, we have no comments on the "Inaccurate Timekeeping" findings and "Recommendation."

For the draft internal control report, we have no comments on the "Untimely Revenue Recognition" and "Incorrect Amounts and Ineffective Reconciliations over Revenue" findings. Similar recommendations carried forward without resolution from the fiscal year 2008 internal control report. The Office of the Chief Financial Officer (OCFO) accounting staff went to considerable lengths during fiscal year 2009 to assist the Office of Field Programs (OFP) staff with hands-on reconciliations and technical meetings on these accounting issues.  We thought our technical assistance would help clear the findings. We suggest OFP, possibly with a third party, conduct a detail review of the revolving fund accounting processes and procedures. This review and subsequent action plan may help eliminate these findings for the fiscal year 2010 financial audit.

We thank Cotton & Company LLP management and staff for their professional audit services for fiscal year 2009 and the prior six years. 

 

Imagen

 

Inspector General
Equal Employment Opportunity Commission

INDEPENDENT AUDITOR'S REPORT ON
COMPLIANCE WITH LAWS AND REGULATIONS

We have audited the Balance Sheets of the U.S. Equal Employment Opportunity Commission (EEOC) as of September 30, 2009, and 2008, and the related Statements of Net Cost, Changes in Net Position, and Budgetary Resources, for the years then ended. We have issued our report thereon dated November 13, 2009. We conducted our audits in accordance with auditing standards generally accepted in the United States of America; standards applicable to financial audits, contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Office of Management and Budget (OMB) Bulletin 07-04, Audit Requirements for Federal Financial Statements.

EEOC management is responsible for complying with laws and regulations applicable to the agency. As part of obtaining reasonable assurance about whether EEOC's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws and regulations, noncompliance with which could have a direct and material effect on the determination of financial statement amounts, and certain other laws and regulations specified in OMB Bulletin 07-04.

Results of our tests of compliance disclosed no instances of noncompliance with certain provisions of laws and regulations described in the preceding paragraph that we are required to report under Government Auditing Standards or OMB Bulletin 07-04.

Providing an opinion on compliance with those provisions was not an objective of our audits, and accordingly, we do not express such an opinion. 

This report is intended solely for the information and use of EEOC management, others within EEOC, OMB, and Congress. It is not intended to be and should not be used by anyone other than these specified parties

COTTON & COMPANY LLP

Imagen

 

Colette Y. Wilson, CPA
Partner

 

November 13, 2009
Alexandria, Virginia

 

---

Limitations of the Financial Statements

EEOC has prepared its financial statements to report its financial position and results of operations, pursuant to the requirements of the Accountability of Tax Dollars Act of 2002, the Government Management Reform Act of 1994, and OMB Circular A-136, Financial Reporting Requirements.

While the EEOC statements have been prepared from its books and records in accordance with the formats prescribed by the Office of Management and Budget, the statements are in addition to the financial reports used to monitor and control budgetary resources, which are prepared from the same books and records.

These statements should be read with the understanding that they are for a component of the United States Government, a sovereign entity. Liabilities, not covered by budgetary resources, cannot be liquidated without the enactment of an appropriation by Congress and payment of all liabilities, other than for contracts, can be abrogated by the federal government.

The accompanying notes are an integral part of these statements

The accompanying notes are an integral part of these statements

(1) Summary of Significant Accounting Policies

(a) Reporting Entity

The Equal Employment Opportunity Commission (EEOC) was created by Title VII of the Civil Rights Act of 1964 (78 Stat. 253:42 U.S.C. 2000e et seq.) as amended by the Equal Employment Opportunity Act of 1972 (Public Law 92261), and became operational on August 2, 1965. Title VII requires that the Commission be composed of five members, not more than three of whom shall be of the same political party. The members are appointed by the President of the United States of America, by and with the consent of the Senate, for a term of 5 years. The President designates one member to serve as Chairman and one member to serve as Vice Chairman. The General Counsel is also appointed by the President, by and with the advice and consent of the Senate for a term of 4 years.

In addition, based on the EEOC Education Technical Assistance and Training Revolving Fund Act of 1992 (P.L. 102-411), the EEOC is authorized to charge and receive fees to offset the costs of education, technical assistance and training.

The Commission is concerned with discrimination by public and private employers of 15 or more employees (excluding elected or appointed officials of state and local governments), public and private employment agencies, labor organizations with 15 or more members or agencies which refer persons for employment or which represent employees of employers covered by the Act, and joint labor-management apprenticeship programs of covered employers and labor organizations. The Commission carries out its mission through investigation, conciliation, litigation, coordination, regulation in the federal sector, and through education, policy research, and provision of technical assistance.

(b) Basis of Presentation

These financial statements have been prepared to report the consolidated financial position of the EEOC, consistent with the Chief Financial Officers' Act of 1990 and the Government Management Reform Act of 1994. This means that any intra-agency transactions have been eliminated. These financial statements have been prepared from the books andrecords of the EEOC in accordance with generally accepted accounting principles (GAAP) using guidance issued by the Federal Accounting Standards Advisory Board (FASAB), the Office of Management and Budget (OMB) and the EEOC's accounting policies, which are summarized in this note. These consolidated financial statements present proprietary information while other financial reports also prepared by the EEOC pursuant to OMB directives are used to monitor and control the EEOC's use of federal budgetary resources.

(c) Basis of Accounting

The Commission's integrated Financial Management System uses CGI's Momentum, which is a highly flexible financial accounting, funds control, management accounting, and financial reporting system designed specifically for federal agencies. Momentum complies with the Financial Systems Integration Office's core requirements for federal financial systems.

Financial transactions are recorded in the financial system, using both an accrual and a budgetary basis of accounting. Under the accrualmethod, revenues are recognized when earned and expenses are recognized when a liability is incurred, without regard to the receipt or payment of cash. Budgetary accounting facilitates compliance with legal requirements and mandated controls over the use of federal funds. It generally differs from the accrual basis of accounting in that obligations are recognized when new orders are placed, contracts awarded, and services received that will require payments during the same or future periods. Any EEOC intra-entity transactions have been eliminated in the consolidated financial statements.

(d) Revenues, User Fees and Financing Sources

The EEOC receives the majority of the funding needed to support its programs through congressional appropriations. Financing sources are received in direct and indirect annual and no-year appropriations that may be used, within statutory limits for operating and capital expenditures. Appropriations used are recognized as an accrual-based financing source when expenses are incurred or assets are purchased.

The EEOC also has a permanent, indefinite appropriation. These additional funds are obtained through fees charged to offset costs for education, training and technical assistance provided through the revolving fund. The fund is used to pay the cost (including administrative and personnel expenses) of providing education, technical assistance, and training by the Commission. Revenue is recognized as earned when the services have been rendered.

An imputed financing source is recognized to offset costs incurred by the EEOC and funded by another federal source, in the period in which the cost was incurred. The types of costs offset by imputed financing are: (1) employees' pension benefits; (2) health insurance, life insurance and other post-retirement benefits for employees; and (3) losses in litigation proceedings. Funding from other federal agencies is recorded as an imputed financing source.

(e) Assets and Liabilities

Assets and liabilities presented on the EEOC's balance sheets include both entity and non-entity balances. Entity assets are assets that the EEOC has authority to use in its operations. Non-entity assets are held and managed by the EEOC, but are not available for use in operations. The EEOC's non-entity assets represent receivables that, when collected, will be transferred to the United States Treasury.

Intra-governmental assets and liabilities arise from transactions between the Commission and other federal entities. All other assets and liabilities result from activity with non-federal entities.

Liabilities covered by budgetary or other resources are those liabilities of the EEOC for which Congress has appropriated funds, or funding is otherwise available to pay amounts due. Liabilities not covered by budgetary or other resources represent amounts owed in excess of available congressionally appropriated funds or other amounts. The liquidation of liabilities not covered by budgetary or other resources is dependent on future congressional appropriations or other funding.

(f) Fund Balance with the U.S. Treasury

Fund Balances with Treasury are cash balances remaining as of the fiscal year-end from which the EEOC is authorized to make expenditures and pay liabilities resulting from operational activity, except as restricted by law. The balance consists primarily of appropriations. The EEOC records and tracks appropriated funds in its general funds. Also included in Fund Balance with Treasury are fees collected for services which are recorded and accounted for in the EEOC's revolving fund.

(g) Accounts Receivable

Accounts receivable consists of amounts owed to the EEOC by other federal agencies and from the public.

Intra-governmental accounts receivable represents amounts due from other federal agencies. The receivables are stated net of an allowance for estimated uncollectible amounts. The method used for estimating the allowance is based on analysis of aging of receivables and historical data.

Accounts receivable from non-federal agencies are stated net of an allowance for estimated uncollectible amounts. The allowance is determined by considering the debtor's current ability to pay, their payment record, and willingness to pay and an analysis of aged receivable activity. The allowance for accounts receivable is computed as follows: Accounts receivable between 365 days and 720 days old are computed at 50% and those older than 720 days are calculated at 100%.

(h) Property, Plant and Equipment

Property, plant and equipment consist of equipment, leasehold improvements and capitalized software. There are no restrictions on the use or convertibility of property, plant and equipment.

For property, plant and equipment, the EEOC capitalizes equipment (including capital leases), and software purchases with a useful life of more than 2 years and an acquisition cost of $25,000 or more. Leasehold improvements are capitalized with a useful life of 2 years or more and an acquisition cost of at least $100,000.

Expenditures for normal repairs and maintenance are charged to expense as incurred unless the expenditure is equal to or greater than $25,000 and the improvement increases the asset's useful life by more than 2 years.

During fiscal year 2008, the capitalization threshold for equipment and software and repairs and maintenance meeting the criteria has been changed from $15,000 to $25,000. For fiscal year 2007 and prior years, the threshold is $15,000.

Depreciation or amortization of equipment is computed using the straight-line method over the assets' useful lives ranging from 5 to15 years. Copiers are depreciated using a
5-year life. Lektriev power files are depreciated over 15 years and computer hardware is depreciated over 10 to 12 years. Capitalized software is amortized over a useful life of 2 years. Amortization of capitalized software begins on the date it is put in service, if purchased, or when the module or component has been successfully tested if developed internally. Leasehold improvements are amortized over the remaining life of the lease.

The EEOC leases the majority of its office space from the General Services Administration. The lease costs approximate commercial lease rates for similar properties.

(i) Advances and Prepaid Expenses

Amounts advanced to EEOC employees for travel are recorded as an advance until the travel is completed and the employee accounts for travel expenses.

Expenses paid in advance of receiving services are recorded as a prepaid expense until the services are received.

(j) Accrued Annual, Sick and Other Leave and Compensatory Time

Annual leave, compensatory time and other leave time, along with related payroll costs, are accrued when earned, reduced when taken, and adjusted for changes in compensation rates. Sick leave is not accrued when earned, but rather expensed when taken.

(k) Retirement Benefits

EEOC employees participate in the Civil Service Retirement System (CSRS) or the Federal Employees' Retirement System (FERS). On January 1, 1987, FERS went into effect pursuant to Public Law 99-335. Most employees hired after December 31, 1983, are automatically covered by FERS and Social Security. Employees hired prior to January 1, 1984 could elect to either join FERS and Social Security or remain in CSRS.

For employees under FERS, the EEOC contributes an amount equal to 1% of the employee's basic pay to the tax deferred thrift savings plan and matches employee contributions up to an additional 4% of pay. FERS and CSRS employees can contribute $16,500 and $15,500 of their gross earnings to the plan, for the calendar years 2009 and 2008, respectively. However, CSRS employees receive no matching agency contribution. There is also an additional $5,500 and $5,000 that can be contributed as a "catch-up" contribution for those 50 years of age or older, for the calendar years 2009 and 2008, respectively.

The EEOC recognizes the full cost of providing future pension and Other Retirement Benefits (ORB) for current employees as required by SFFAS No. 5, Accounting for Liabilities of the Federal Government. Full costs include pension and ORB contributions paid out of EEOC appropriations and costs financed by the U.S. Office of Personnel Management (OPM). The amount financed by OPM is recognized as an imputed financing source. Reporting amounts such as plan assets, accumulated plan benefits, or unfunded liabilities, if any, is the responsibility of OPM.

Liabilities for future pension payments and other future payments for retired employees who participate in the Federal Employees Health Benefits Program (FEHBP) and the Federal Employees Group Life Insurance Program (FEGLI) are reported by OPM rather than EEOC.

(l) Workers' Compensation

A liability is recorded for estimated future payments to be made for workers' compensation pursuant to the Federal Employees' Compensation Act (FECA). The FECA program is administered by the U.S. Department of Labor (DOL), which initially pays valid claims and subsequently seeks reimbursement from federal agencies employing the claimants. Reimbursements to the DOL on payments made occur approximately 2 years subsequent to the actual disbursement. Budgetary resources for this intra-governmental liability are made available to the EEOC as part of its annual appropriation from Congress in the year that reimbursement to the DOL takes place. A liability is recorded for actual un-reimbursed costs paid by DOL to recipients under FECA.

Additionally, an estimate of the expected future liability for death, disability, medical and miscellaneous costs for approved compensation cases, is recorded. The EEOC employs an actuary to compute this estimate using a method that utilizes historical benefit payment

patterns related to a specific period to predict the ultimate payments related to the current period. The estimated liability is not covered by budgetary resources and will require future funding. This estimate is recorded as a future liability.

(m) Contingent Liabilities

Contingencies are recorded when losses are probable, and the cost is measurable. When an estimate of contingent losses includes a range of possible costs, the most likely cost is reported, but where no cost is more likely than any other, the lowest possible cost in the range is reported.

(n) Amounts Collected for Restitution

The courts directed an individual to pay amounts to the EEOC as restitution to several claimants named in a court case. These monies will be paid to claimants as directed by
the courts.

(o) Cost Allocations to Programs

Costs associated with the EEOC's various programs consist of direct costs consumed by the program, including personnel costs, and a reasonable allocation of indirect costs. The indirect cost allocations are based on actual hours devoted to each program from information provided by EEOC employees.

(p) Unexpended Appropriations

Unexpended appropriations represent the amount of EEOC's unexpended appropriated spending authority as of the fiscal year-end that is unliquidated or is unobligated and has not lapsed, been rescinded or withdrawn.

(q) Income Taxes

As an agency of the federal government, EEOC is exempt from all income taxes imposed by any governing body, whether it is a federal, state, commonwealth, local, or foreign government.

(r) Use of Estimates

Management has made certain estimates and assumptions in reporting assets and liabilities and in the footnote disclosures. Actual results could differ from these estimates. Significant estimates underlying the accompanying financial statements include the allowance for doubtful accounts receivable, contingent liabilities and future workers' compensation costs.

(2) Fund Balance with Treasury

Treasury performs cash management activities for all federal agencies. The net activity represents Fund Balance with Treasury. The Fund Balance with Treasury represents the right of the EEOC to draw down funds from Treasury for expenses and liabilities. Fund Balance with Treasury by fund type as of September 30, 2009 and 2008 consists of the following:

The status of the fund balance is classified as unobligated available, unobligated unavailable, or obligated. Unobligated funds, depending on budget authority, are generally available for new obligations in the current year of operations. The unavailable amounts are those appropriated in prior fiscal years, which are not available to fund new obligations. The obligated, but not yet disbursed, balance represents amounts designated for payment of goods and services ordered but not yet received, or goods and services received, but for which payment has not yet been made.

The Fund Balance with Treasury includes items for which budgetary resources are not recorded, such as deposit funds and miscellaneous receipts. These funds are shown in the table below as a Non-budgetary Fund Balance with Treasury.

The undelivered orders at the end of the period consist of $26,399,459 and $33,115,913 for FY 2009 and FY 2008, respectively.

For fiscal years ended September 30, 2009 and 2008, funds in closed accounts of $2,148,575 and $2,285,066 were returned to Treasury.

Status of Fund Balance with Treasury as of September 30, 2009 and 2008 consists of the following:

(3) Accounts Receivable, Net

Intra-governmental accounts receivable due from federal agencies arise from the sale of services to other federal agencies. This sale of services generally reduces the duplication of effort within the federal government resulting in a lower cost of federal programs and services. While all receivables from federal agencies are considered collectible, an allowance for doubtful accounts is sometimes used to recognize the occasional billing dispute. In FY 2009 and FY 2008, this was not deemed necessary.

Accounts receivable due to EEOC from the public arise from enforcement or prevention and training services provided to public and private entities or state and local agencies. An analysis of accounts receivable is performed to determine collectability and an appropriate allowance for uncollectible receivables is recorded. The allowance for accounts receivable is computed as follows: Accounts receivable between 365 days and 720 days old are computed at 50% and those older than 720 days years are calculated at 100%. Accounts receivable as of September 30, 2009 and 2008 are as follows:

 

Amounts due from various federal agencies are for accounts receivable as of September 30, 2009 and 2008. These are related to registered participants' training fees due to the revolving fund and appropriated interagency agreements as shown in the table below:

(4) Property, Plant and Equipment, Net

Property, plant and equipment consist of that property which is used in operations and consumed over time. The following tables summarize cost and accumulated depreciation of property, plant and equipment.

Depreciation expense for the periods ended September 30, 2009 and September 30, 2008 is:

(5) Non-Entity Assets

The EEOC has $158 of net receivables to collect on behalf of the U.S. Treasury as of September 30, 2009 and $5,486 of net receivables to collect on behalf of the U.S. Treasury as of September 30, 2008. Cash collections of $236,055 were returned to Treasury as of September 30, 2009 and $138,018 were returned to Treasury as of September 30, 2008 as instructed by Treasury.

(6) Liabilities Owed to Other Federal Agencies

As of September 30, 2009 and 2008, the following amounts were owed to other federal agencies:

(7) Liabilities Not Covered by Budgetary Resources

Liabilities not covered by budgetary resources represent amounts owed in excess of available congressionally appropriated funds or other amounts.

Liabilities not covered by budgetary resources as of September 30, 2009 and 2008 are shown in the following table:

The EEOC employs an actuary to determine the future workers' compensation liability.

(8) Liabilities Analysis

Current and non-current liabilities as of September 30, 2009 are shown in the following table:

Current and non-current liabilities as of September 30, 2008 are shown in the following table:

(9) Contingent Liabilities

EEOC is a party to various administrative proceedings, legal actions and claims that may eventually result in the payment of substantial monetary claims to third parties, or in the reallocation of material budgetary resources. Any financially unfavorable administrative or court decision could be funded from either the various claims to judgment funds maintained by Treasury or paid by EEOC. In FY 2009 and FY 2008 $0 and $0, respectively was recorded for contingent liabilities, which are the amounts considered probable and measurable by EEOC's management and legal counsel. In addition, for FY 2009, there are two claims for which it is reasonably possible that damages will be paid. These pending claims are for overtime to which employees claim they were entitled and for the removal of an employee which was found not to be supported by evidence. The estimated amount of these claims is between three hundred and fifty thousand ($350,000) and five million ($5,000,000). The chance of these claims succeeding is less than probable, but more than remote. The agency has and will continue to vigorously contest these claims. In the opinion of EEOC's management, the ultimate resolution of pending claims and litigation will not have a material effect on the EEOC's financial statements.

(10) Leases

Capital Leases

The EEOC has several capital leases for copiers in the amount of $286,857 for FY 2009. These leases can be canceled without penalty. The future lease payments and net capital lease liability as of September 30, 2009 is as follows:

None of the future lease payments are covered by budgetary resources.

Operating leases

The EEOC has several cancelable operating leases with the General Services Administration (GSA), for office space that do not have a stated expiration. The GSA charges rent that is intended to approximate commercial rental rates. Rental expenses for operating leases during FYs 2009 and 2008 are $28,249,730 and $26,563,033, respectively. The EEOC has estimated its future minimum liability on GSA operating leases by adding inflationary adjustments to the FY 2009 lease rental expense. Future estimated minimum lease payments, for 5 fiscal years under GSA as of September 30, 2009 are:

(11) Earned Revenue

The EEOC charges fees to offset costs for education, training and technical assistance. These services are provided to other federal agencies, the public, and to some State and Local agencies, as requested. In the chart below, the fees from services does not include intra-agency transactions. The Commission also has a small amount of reimbursable revenue from contracts with other federal agencies to provide on-site personnel. Revenue earned by the Commission as of September 30, 2009 and 2008 was as follows:

(12) Correction of Errors

During FY 2008, it was discovered during the reconciliation between the Fixed Asset System and the general ledger that a copier that had been leased in 2004 was not recorded in the general ledger. The correction below is to record the remaining portion of the capital lease liability as of September 30, 2008.

(13) Appropriations Received

Warrants received by the Commission as of September 30, 2009 and 2008 are:

There was no rescission for the warrant received by the EEOC for FY 2009 and FY 2008.

(14) Apportionment Categories of Obligations Incurred: Direct vs. Reimbursable Obligations

Direct and Reimbursable obligations as of September 30, 2009 and 2008 are:

Obligations		FY 2009		FY 2008
Direct A	$	317,633,031	$	301,205,348
Direct B		25,699,325		28,640,051
Subtotal Direct Obligations		343,332,356		329,845,399
Reimbursable—Direct A		4,590,689		4,975,151
Total Obligations	$	347,923,045	$	334,820,550

(15) Earmarked Funds (Permanent Indefinite Appropriations)

The Commission has permanent, indefinite appropriations from fees earned from services provided to the public and to other federal agencies. These fees are charged to offset costs for education, training and technical assistance provided through the revolving fund. This fund is an earmarked fund and is accounted for separately from the other funds of the Commission. The fund is used to pay the cost (including administrative and personnel expenses) of providing education, technical assistance, and training by the Commission. Revenue is recognized as earned when the services have been rendered by the EEOC.

 

The Revenue includes $242,774 and $1,047,931 of intra-agency revenue for fiscal years ended September 30, 2009 and 2008, respectively that is eliminated in the Principal Statements.

(16) Imputed Financing

OPM pays pension and other future retirement benefits on behalf of federal agencies for federal employees. OPM provides rates for recording the estimated cost of pension and other future retirement benefits paid by OPM on behalf of federal agencies. The costs of these benefits are reflected as imputed financing in the consolidated financial statements. The U.S. Treasury's Judgment Fund paid certain judgments on behalf of the EEOC. Expenses of the EEOC paid or to be paid by other federal agencies at September 30, 2009 and 2008 consisted of:

 

(17) Intragovernmental Costs and Exchange Revenue:

 

(18) Explanation of Differences between the Statement of Budgetary Resources and the Budget of the United States Government

The EEOC's budget is allocated to Justice, Opportunity, and Inclusive Workplaces.

Information from the President's Budget and the Combined Statement of Budgetary Resources for the period ended September 30, 2008 is shown in the following tables. A reconciliation is not presented for the period ended September 30, 2009, since the President's Budget for this period has not been issued by Congress.

The differences between the President's 2008 budget and the Combined Statement of Budgetary Resources for 2008 are shown below:

(a) The EEOC's revolving fund provides training and charges fees to offset the cost. The collections are reported on the Combined Statement of Budgetary Resources as a part of total budgetary resources, but are not reported in the President's Budget.

(b) The obligations incurred by the revolving fund and no-year fund are not a part of the President's Budget, but are included in total obligations incurred in the Combined Statement of Budgetary Resources.

(c) Revolving funds and no-year funds have carry-overs of unobligated balances and recoveries of obligations that are included in total resources on the Combined Statement of Budgetary Resources, but are not included in the President's Budget.

(d) Expired funds have carry-overs of unobligated balances and recoveries of obligations that are included in total resources on the Combined Statement of Budgetary Resources until they are canceled, but are not included in the President's Budget.

(e) New obligations in expired funds are shown as a part of obligations incurred on the Combined Statement of Budgetary Resources, but are not included in the President's Budget.

(f) Canceled appropriations are not shown in the President's Budget, but are reported as a reduction to resources in the Combined Statement of Budgetary Resources.

(g) Difference due to rounding by millions.

(19) Reconciliation of Net Cost of Operations to Budget