Agency financial report Fiscal Year 2010

2010·21.3 MB·English

by  United States. Department of the Interior

U. S. DE PARTME NT
INTE R IOR
OF THE
FISCAL YEAR 2010
AGENCY FINANCIAL REPORT
November 15, 2010

TABLE OF CONTENTS
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Message From the Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
About This Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 1: Management’s Discussion and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Mission and Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Analysis of Performance Goals and Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Analysis of Systems, Controls and Legal Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Analysis of Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Analysis of What’s Ahead – A Forward Look . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 2: Financial Section . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Message from the Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Response to Independent Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Principal Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Statement of Net Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Statement of Changes in Net Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Statement of Budgetary Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Statement of Custodial Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Notes to Principal Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Required Supplementary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Required Supplementary Stewardship Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Section 3: Other Accompanying Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Summary of Inspector General’s Major Management Challenges . . . . . . . . . . . . . . . . . . . . . . . . 137
Interior’s Response to Major Management Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149
Summary of Financial Statement Audit and Management Assurances . . . . . . . . . . . . . . . . . . . 159
Summary of Improper Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160
Glossary of Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
We Would Like to Hear From You . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165
INTERIOR FINANCIAL REPORT  FY 2010
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MESSAGE FROM THE SECRETARY
I am pleased to submit the U.S. Department of the
Interior’s Fiscal Year 2010 Agency Financial Report, which
updates the public and Congress on the Department’s
financial statements, independent auditors’ report,
and performance.
I am particularly proud to report our 14th consecutive
unqualified audit, a reflection of the Department’s
continuing commitment to sound financial management.
Effective management is vital to carrying out our complex
and multi-faceted mission and achieving goals for the
advancement of a new energy frontier, tackling the
impacts of climate change, improving the sustainable use
of water, protecting America’s great outdoors, engaging
youth in natural resource conservation, and promoting
economic development, community safety, and education
in Indian communities. As reflected in these goals, the
Department’s relevance is substantial. Measured by
the economic impacts on the national economy, the
Department’s programs support approximately $370
billion in economic activity—the programs are an engine of prosperity for the future.
At the outset of this Administration, President Obama set a high standard for accountability,
transparency, and ethics in Government. The Department continues working hard to uphold
this high standard. As Secretary of the Interior, I have made it a priority to strengthen our
ethics programs, increase transparency in the conduct of our business, ensure strong scientific
support for decision-making, and improve openness and collaboration with the public. I am
proud of the reforms we are making on behalf of the American people under extremely
challenging circumstances.
The unprecedented disaster at the Deepwater Horizon rig in the Gulf of Mexico has
underscored the urgency of implementing substantive reforms. We are determined to fulfill
our responsibilities effectively and in a manner that facilitates the balanced, responsible,
and sustainable development of the resources entrusted to us. I signaled the reform of the
Minerals Management Service by renaming it the Bureau of Ocean Energy Management,
Regulation and Enforcement and announced plans to restructure ocean energy management
programs into three new entities; the Bureau of Ocean Energy Management, the Bureau of
Safety and Environmental Enforcement, and the Office of Natural Resources Revenue. The
30-day report to the President, Increased Safety Measures for Energy Development on the
Outer Continental Shelf, May 27, 2010, and the report of the Safety Oversight Board, U.S.
Department of the Interior Outer Continental Shelf Safety Oversight Board Report to Secretary
of the Interior Ken Salazar, are the foundation for reforms that will guide the implementation
of safe and environmentally-sound offshore oil and gas operations. There will be additional
recommendations from the President’s National Commission on the BP Deepwater Horizon Oil
Spill and Offshore Drilling, ongoing investigations, and other activities that enhance the safety
of Outer Continental Shelf operations.
In the aftermath of the Gulf oil spill disaster, our continued response actions, clean-up, and
assessment of damages to the affected coastal and marine areas under our jurisdiction remain
of utmost importance. In the wake of the oil spill, I dispatched my senior staff to help oversee
and coordinate the response, including 800 to 900 staff that protected the shore line from the
impacts of oil, rescued wildlife, and coordinated with states to protect cultural resources. The
Department continues its efforts working closely with trustees overseeing natural resources
INTERIOR FINANCIAL REPORT  FY 2010 INTRODUCTION
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MESSAGE FROM THE SECRETARY
damage assessments and developing plans for long-term restoration. The Department is
committed to helping the people and communities of the Gulf Coast region protect important
places and resources and will take actions based on valuable lessons learned to help prevent
future oil spills.
Despite the demands placed on the Department’s bureaus and offices by the oil spill in 2010, we
advanced our strategic goals and high priority performance goals for renewable energy, climate
change adaptation, water conservation, youth stewardship, and safe Indian communities. We
continued to focus on the development of a new energy frontier, expanding renewable energy
opportunities offshore and onshore. We are helping the Nation move beyond conventional oil
and gas development and devote attention and new resources to renewable energy programs
and ensure environmental protection.
The Department’s accomplishments in 2010 related to high priority performance goals included:
our efforts in water conservation resulting in an increase of 150,000 acre-feet of enabled
conservation water supply for agricultural, municipal, industrial, and environmental uses,
significantly increasing the law enforcement presence in four targeted Indian communities in
order to reduce violent crime, greatly accelerating the employment of youth through direct
hires and partnerships, and establishing climate science centers and Landscape Conservation
Cooperatives.
During FY 2010, we participated in a national dialogue about conservation, hosting the
President’s White House Conference on the Great Outdoors in April at the Department and
engaging in 25 listening sessions across the country. The results of these listening sessions will
be used to guide modern-day land conservation and reconnect Americans to the outdoors.
The Department’s stewardship of the Nation’s lands and diverse natural and cultural resources
affects the lives of all Americans. These important functions and many others are administered
by our 70,000 employees. We carry out our mission with great dedication, distinction, openness,
and accountability. On September 21, 2010, I honored the life and legacy of Stewart Lee Udall
with the dedication of the Main Interior Building as the “Stewart Lee Udall Department of the
Interior Building,” thereby honoring a legacy and commitment to protecting America’s natural
treasures and resources and setting an example of committed public service to the Nation.
This report provides measurable results of our programs, the status of the Department’s
compliance with certain legal and regulatory requirements, and information on management
challenges, and the steps we are taking to improve our financial performance and
management. The financial and performance information presented in this report is
fundamentally complete and reliable as required by the Office of Management and Budget.
The annual assurance statement required by the Federal Managers’ Financial Integrity Act of
1982 (FMFIA) concludes that the Department can provide reasonable assurance that, with the
exception of one material weakness—Radio Communication—the Department’s systems of
management, accounting, and administrative controls, taken as a whole, meet the objectives
specified in Section 2 of the FMFIA.
Interior has selected the AFR as an alternative to the Performance Accountability Report (PAR).
In addition to the audited financial statements, the AFR presents the results of the annual
assessment of program leadership and stewardship of the resources and public funds entrusted
to the Department, and it provides a comprehensive snapshot of the most important financial
information related to the programs we manage. This financial report includes a brief summary
of performance information; the Annual Performance Report (APR) will provide a more
comprehensive account of performance. The goals and mission areas contained in the FY 2007-
INTRODUCTION INTERIOR FINANCIAL REPORT  FY 2010
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MESSAGE FROM THE SECRETARY
2012 Strategic Plan are reflected in the four Mission Areas: Resource Protection, Resource Use,
Recreation, and Serving Communities. The achievements related to these goals are reflected in
this AFR.
In FY 2010, the auditors’ report contained no significant deficiencies that were considered to
be material weaknesses. While we have no material weaknesses we do recognize that we have
significant deficiencies and understand the importance of correcting these. As such we have put
a very high priority on addressing and correcting each deficiency.
I am proud of this report and of the progress we are making at the Department. We are
dedicated to upholding the trust of the American people, improving our stewardship of the
Nation’s resources, and strengthening our delivery of programs and services in the years ahead.
I hope you will review this report and recognize our significant efforts to continue improving
financial management, performance, accountability and transparency.
Ken Salazar
Secretary of the Interior
November 15, 2010
INTERIOR FINANCIAL REPORT  FY 2010 INTRODUCTION
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AGENCY FINANCIAL REPORT  FY 2010
ABOUT THIS REPORT
The U.S. Department of the Interior’s Agency
Financial Report (AFR) for Fiscal Year (FY) 2010
provides performance and financial information
that enables Congress, the President, and the
public to assess the performance of Interior
relative to its mission and stewardship of the
resources entrusted to it. This AFR satisfies the
reporting requirements of the following major
legislation:
 Chief Financial Officers Act of 1990
 Government Management
Reform Act of 1994
 Reports Consolidation Act of 2000
 Office of Management and Budget
Circular No. A-136
The Office of Financial Management chooses to
produce the Agency Financial Report rather than
the alternative Performance and Accountability
Report. The Annual Performance Report with
detailed performance information that meets
Government Performance and Results Act
requirements is produced and transmitted
with the Congressional Budget Justification.
A Summary of Performance and Financial
Information (SPFI) is also produced. It is a citizens’
report that summarizes this information in a brief,
user friendly format. The AFR may be viewed
online at www.doi.gov/pfm/finstate/index.html
or on compact disc by submitting a request to:
U.S. Department of the Interior
Office of Financial Management
Mail Stop 2557
1849 C Street, NW
Washington, DC 20240
INTRODUCTION INTERIOR FINANCIAL REPORT  FY 2010
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