FY 2001 Performance and Accountability Report Homepage Management Discussion and Analysis OPM's Mission and Strategic Goals FY 2001 Performance Summary Resources Used to Accomplish Goals Quality of Performance Data Analysis of Our Financial Performance Systems, Controls and Legal Compliance Looking Ahead Limitations of the Consolidated Financial Statements

 

Management Discussion and Analysis

Analysis of Our Financial Performance

 

"Clean" Audit Opinions

These are the second agency-wide consolidated financial statements we have prepared. We are pleased to report that for the second consecutive year we have received an unqualified ("clean") opinion from our auditors, KPMG LLP, on the consolidated statements as well as on the stand-alone financial statements of the Retirement, Health Benefits and Life Insurance Programs. An unqualified opinion means that our financial statements were fairly stated in all material respects. Moreover, our auditors did not report any material weaknesses in our internal controls over our financial reporting.

 

Audit Options
	1997	1998	1999	2000	2001
OPM Consolidated	N/A*	N/A*	N/A*	"Clean"	"Clean"
Retirement Program	"Clean"	"Clean"	"Clean"	"Clean"	"Clean"
Health Benefits Program	Qualified	"Clean"	"Clean"	"Clean"	"Clean"
Life Insurance Program	"Clean"	"Clean"	"Clean"	"Clean"	"Clean"

 

Analysis of Balance Sheet

The Balance Sheet presents the total amounts we have available for our use [assets] against the total amounts we owe [liabilities] and the amount that comprises the difference [net position].

Assets. We had $585.3 billion in total assets at the end of fiscal year 2001, compared with $552.1 billion at the end of fiscal year 2000, an increase of 6 percent. The balance sheet separately identifies intragovernmental assets from all other assets. Almost all—$583.6 billion—of our assets are intragovernmental, representing our claims against other Federal entities.

Our largest asset, Investments [$572.8 billion], represents 98 percent of our total assets at the end of fiscal year 2001. We invest all Retirement, Health Benefits, and Life Insurance Program balances that we do not immediately need for payment, but only in special securities issued by the U.S. Treasury. As we routinely collect more money than we disburse, our investment portfolio continued to grow—by 6 percent in fiscal year 2001. Our next largest asset reflects the interest owed to us on our investments by the U.S. Treasury-at the end of FY 2001, it was $9.2 billion.

Data: Growth of OPM Assets		Data: Increase in OPM Liabilities

 

Liabilities. We have three very large, long-term liabilities that we categorize on the Balance Sheet as "Actuarial Liabilities." We report Actuarial Liabilities for each of the earned benefit Programs that we administer: Retirement, Health Benefits, and Life Insurance Programs. These Actuarial Liabilities reflect an estimate of the government's future cost, expressed in today's dollars, of providing retirement, life insurance, and post-retirement health benefits to employees and annuitants. To compute them, our actuaries make many assumptions about the future economy and about the demographics of the future Federal workforce and annuitant population.

The Pension Liability is an estimate of the government's future, long-term cost to provide CSRS and FERS benefits to current employees and annuitants. It is $1,069.5 billion at the end of fiscal year 2001, an increase of $38.4 billion from the end of last year [see discussion of Pension Expense below].

The Postretirement Health Benefits Liability, the government's future, long-term cost to provide health benefits to active employees after they retire, is $191.5 billion at the end of fiscal year 2001. This reflects a small decrease from the $192.2 billion Postretirement Health Benefits Liability at the end of fiscal year 2000 [see discussion of Postretirement Health Benefits Expense below].

The Actuarial Life Insurance Liability is different from the Pension and Postretirement Health Benefits Liabilities. Whereas the other two are liabilities for "post-retirement" benefits only, the Actuarial Life Insurance Liability is an estimate of the government's future, long-term cost for both pre-retirement and post-retirement life insurance benefits [see discussion of Postretirement Health Benefits Expense below].

Net Position. Net Position is the difference between our total assets and our total liabilities. At the end of fiscal year 2001, our Net Position is a negative $710.2 billion dollars, which means that our liabilities exceed our assets by this amount. At the end of fiscal year 2000, our Net Position was a negative $703.6 billion. As can be seen on the Statement of Changesin Net Position, our Net Position decreased as a result of the net cost we incurred to operate our programs, which was partially offset by a "transfer-in" of $21.6 billion to the Retirement Program from the General Fund of the U.S. Treasury.

The reason for our negative Net Position is the large Actuarial Liabilities that Federal accounting standards require we report on our Balance Sheet. In fact, the Retirement, Health Benefits, and Life Insurance Programs are funded in a manner that ensures that there will be sufficient assets available to pay benefits as they come due well into the future. Chart Net Assets shows that the net assets we have available to pay benefits increased by almost six percent in FY 2001.

Net Assets
	2001	2000	Change
Total Assets	$585,320	$552,121	$33,199
Less "Non-Actuarial" Liabilities	8,350	7,715	635
Net Assets Available to Pay Benefits	$576,970	$544,406	$32,564

 

Analysis of the Statement of Net Cost

The Statement of Net Cost presents our net cost of operations by our major programmatic outputs or "responsibility segments." We have defined responsibility segments by the four major types of services we provide and have assigned all of our costs of doing business and the associated revenues to them. These result in the Net Cost to Provide CSRS, FERS, Health and Life Insurance Benefits and the Cost to Provide Human Resource Services.

Net Cost to Provide CSRS Benefits. As can be seen in the chart Net Cost to Provide CSRS Benefits, the gross cost to provide a CSRS benefit, the associated earned revenues, and, therefore, the Net Cost to Provide CSRS Benefits in fiscal year 2001 are all very comparable to FY 2000.

Due to Federal accounting standards, the amount we paid in CSRS benefits is not shown on the Statement of Net Cost. In FY 2001, we paid benefits of $45.8 billion, as compared with $44.1 billion in FY 2000. The increase of 3.9 percent reflects both a larger annuity roll and the effect of the cost-of-living increase.

Net Cost to Provide CSRS Benefits
(In Billions)
	2001	2000	Change
Gross Cost	$71.1	$70.4	$0.7
Associated Revenues	37.7	37.5	0.2
Net Cost	$33.4	$32.9	$0.5

Net Cost to Provide FERS Benefits. Unlike in FY 2000, the Net Cost to Provide FERS Benefits was "negative" in FY 2001, which means that the revenues associated with providing a FERS benefit exceeded the gross cost to do so by $4.0 billion. Both the gross cost and the associated revenues changed significantly from FY 2000. The Pension Expense, the sole component of gross cost, declined $3.5 billion due to changes in economic and demographic assumptions by the actuary. The associated earned revenues increased by $1.4 billion (8.2 percent), reflecting contributions by and for the growing population of covered employees and investment earnings on the increasing FERS inflows.

As with the CSRS, Federal accounting standards do not afford the disclosure of the amount we paid in FERS benefits on the Statement of Net Cost. In FY 2001, we paid benefits of $1.4 billion, as compared to $1.2 billion in FY 2000, reflecting both a larger annuity roll and the effect of the cost-of-living increase.

Net Cost to Provide FERS Benefits
(In Billions)
	2001	2000	Change
Gross Cost	$14.5	$18.0	$(3.5)
Associated Revenues	18.5	17.1	1.4
Excess of Revenues Over Gross Cost	$(4.0)	$0.9	$(4.9)

Net Cost to Provide Health Benefits. The Net Cost to Provide Health Benefits in fiscal year 2001 is $4.3 billion, a decrease of $17.6 billion from fiscal year 2000. The reduction in the Net Cost to Provide Health Benefits can be attributed to a decrease in the Post-retirement Health Benefits Expense of $17.1 billion. An actuarial valuation requires many assumptions about future events. When the actuary changes one or more of these assumptions, the result will likely be an actuarial gain or loss. The decrease in the Post-retirement Health Benefits Expense in FY 2001 results mainly from a large actuarial gain as a consequence of changes in the actuary's economic and demographic assumptions.

Net Cost to Provide Health Benefits
(In Billions)
	2001	2000	Change
Gross Cost	$20.3	$36.5	$(16.2)
Associated Revenues	16.0	14.6	1.4
Net Cost	$4.3	$21.9	$(17.6)

Due to accounting and actuarial reporting standards, a portion of certain costs incurred for health benefits claims, premiums to HMOs, and administration are netted against, and thereby reduce, the Postretirement Health Benefits Liability. So that we may provide the reader of the financial statements with information about these costs, they are presented in the table Costs Netted Against the Postretirement Health Benefits Liability.

Costs Netted Against the Postretirement Health Benefits Liability
(In Billions)
	Disclosed	Applied to PRHB	Total 2001	Total 2000
Health Benefits Claims	$9.8	$5.4	$15.2	$14.2
Premiums	3.3	1.3	4.6	4.5
Administrative and Other	$0.6	$0.6	$1.2	$1.1

Net Cost to Provide Life Insurance Benefits. Unlike the usual circumstance, the Net Cost to Provide Life Insurance Benefits was not "negative" in FY 2001. This means that in FY 2001 the gross cost of providing benefits exceeded the amount of the revenues associated with it. In FY 2001, the gross cost to provide Life Insurance benefits increased by $458 million (15.6 percent), attributable to an equivalent increase in the Actuarial Life Insurance Liability ["Future Benefits Expense"]. The Future Benefits Expense was $400 million greater in fiscal year 2001 due to an increase in the total amount of life insurance-in-force and a reduction in the actuary's assumption about long-term interest rates. The increase in gross cost was partially offset by a $174 million (5.5 percent) increase in associated revenues, due both to the greater insurance-in-force and to the returns on a larger investment portfolio.

Net Cost to Provide Life Insurance Benefits
(In Millions)
	2001	2000	Change
Gross Cost	$3,395	$2,937	$458
Associated Revenues	3,341	3,167	174
Net Cost (Excess of Revenue)	$54	$(230)	$284

Analysis of the Statement of Budgetary Resources

We may incur obligations and make payments to the extent that we have budgetary resources to cover them. The Statement of Budgetary Resources depicts the sources of our budgetary resources, their status at the end of the year, and the relationship between our budgetary resources and the outlays we made against them.

As can be seen from the Statement of Budgetary Resources, a total of $98.9 billion in budgetary resources was made available to us for fiscal year 2001. Our budgetary resources in FY 2001 derive from that carried over from FY 2000 ($26.0 billion) as well as the three major sources of new budgetary resources (Source of Budgetary Resources graph:

(1) Appropriations = $5.7 billion

(2) Appropriated receipts = $47.5 billion

(3) Spending authority from offsetting collections (SAOC) = $19.7 billion.

Appropriations are Acts of Congress that authorize Federal agencies to incur obligations and to make payments for specified purposes. Our appropriations were principally to fund contributions for retirees and survivors who participate in the Health Benefits Program.

Both Appropriated Receipts and Spending Authority from Offsetting Collections generally derive from collections. Collections by the Retirement Program, such as earnings on investments and contributions made by and for those participating, are classified as "Appropriated Receipts," whereas collections by the Health Benefits and Life Insurance and Revolving Fund Programs are classified as "Spending Authority from Offsetting Collections."

From the $98.9 billion in budgetary resources we had available to us during fiscal year 2001, we incurred obligations of $71.3 billion, mainly for benefits for participants in the Retirement, Health Benefits and Life Insurance Programs (Obligations Incurred by Catgory). Most of the excess of budgetary resources we had available in fiscal year 2001 over the obligations we incurred against those resources is classified as being "unavailable" (for obligation) at year-end.

Data: Source of Budgetary Resources		Data: Obligations Incurred by Category

 

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