Federal Trade Commission Audited Financial Statements for Fiscal Year 1999

Audit Report Number:
00-045

Table of Contents

Management Overview

Inspector General Opinion

Financial Statements

Balance Sheets
Statements of Net Cost 
Statements of Changes in Net Position 
Statements of Budgetary Resources
Statements of Financing
Statements of Custodial Activity

Notes to Financial Statements

Organization and Summary of Significant Accounting Policies
Fund Balances with Treasury 
Cash and Other Monetary Assets 
Accounts Receivable
Property, Plant, and Equipment, Net
Liabilities Not Covered by Budgetary Resources 
Net Position
Commitments and Contingencies
Exchange Revenue 
Pension Expense
Custodial Activities

Exhibit A - Accrual Adjustments
Exhibit B - Change in Liability Accounts

Required Supplementary Information

Management Overview

FTC and Its Mission

The Federal Trade Commission (FTC) was created by the Federal Trade Commission Act of 1914. The FTC's mandate is to enforce federal antitrust, competition and consumer protection laws. To this end, the FTC's mission implements a core function of government: to protect consumers and enhance competition by eliminating unfair or deceptive acts or practices in the marketing of goods and services, and by ensuring that consumer markets function competitively.

The FTC's work is carried out through two missions. Maintaining Competition works to ensure that the market place is free from anticompetitive mergers and other anticompetitive business practices. Consumer Protection works to ensure that consumer information in the marketplace is not deceptive or misleading. Economic analysis, technical support, and management and administration are provided to each mission by support organizations.

Limitations of the Financial Statements

Responsibility for the integrity and objectivity of the financial information presented in the financial statements rests with FTC management. The accompanying financial statements have been prepared in conformity with the hierarchy of accounting principles approved by the principals of the Federal Accounting Standards Advisory Board (FASAB) and the Office of Management and Budget (OMB) Bulletin 97-01, Form and Content of Agency Financial Statements. FTC is fully committed to the principles and objectives of both the Chief Financial Officers (CFOs) Act of 1990, and the Federal Financial Management Improvement Act of 1996. The fiscal year 1999 financial statements have been prepared with full consideration of the requirements of both acts. Comparative data for the prior fiscal year is presented. The statements should be read with the realization that they are for a component of the U.S. Government, i.e., a sovereign entity.

Audit of FTC's 1999 Principal Statements

The Office of Inspector General of the Federal Trade Commission has examined the agency's financial statements. The Inspector General's report on the principal statements, internal controls, and compliance with certain laws and regulations accompanies the statements.

Financial Resources and Results of Operations

The accompanying statements summarize the FTC's financial position, disclose the net cost of operations and changes in net position, provide information on budgetary resources and financing and present the sources and disposition of custodial revenue for the years ended September 30, 1999 and 1998.

The FTC had total assets of $115.5 million and $99.2 million as of September 30, 1999 and 1998 respectively. Approximately $44.4 million and $25.0 million of the 1999 and 1998 assets, respectively, were funds collected or to be collected for consumer redress. Another $26.6 million in 1999 and $27.1 million in 1998 represent undisbursed Hart-Scott-Rodino (HSR) premerger filing fees, and the remainder represents fund balances in appropriated accounts, account receivables and net capital assets.

Funding Sources FY1999The gross cost of operations during the 1999 fiscal year was approximately $117.5 million, a $7.4 increase over 1998. The majority of this increase was associated with the maintaining competition mission. Several financing sources were received which funded these expenses, including premerger filing fees, direct appropriations provided by Congress, reimbursements received from other government agencies, prior-year unobligated carryover amounts and imputed revenue to cover unfunded benefits. The FTC also received additional resources of $2.6 million transferred from the Y2K Contingent Emergency Fund in accordance with the Omnibus Consolidated and Emergency Supplemental Appropriation Act. These funds were used to fund Y2K compliance issues at the agency. The accompanying pie chart details the percentages of these various financing sources.

During 1999, $97.5 million in fees were collected under the premerger notification program as required by the HSR Act. This was a $3.3 million decrease over the previous year fee collection of $100.8 million. Fee collections, to include carryover fees from prior years, funded approximately 86 percent and 80 percent of agency operations in 1999 and 1998, respectively. The FTC collects a filing fee from each acquiring business entity that files a Notification and Report form transaction. The $45,000 fee, which is set by law, is divided equally between the FTC and the Antitrust Division of the Department of Justice (DOJ). The amounts collected for DOJ are shown as nonexchange revenue on the Statement of Custodial Activity.

Of the $117.5 million in gross operating costs, $112.9 million was funded through budget authority. The remaining $4.6 million represents costs which will be funded in a future period. During 1999, expenses for salaries and related benefits totaled $82.4 million, or 70.1 percent, of the total expenses incurred. Lease space rental amounted to $10.6 million, or 9.1 percent, and the remaining $24.5 million, or 20.8 percent, included travel, facility maintenance, utilities, Y2K compliance, and other items. This supported 964 staff-years which were employed in fulfilling the FTC's mission. In fiscal year 1999, the net cost of operations, was $19.5 million, compared to $8.7 million for 1998.

Systems and Control

The FTC maintains a system of internal controls to provide reasonable assurance that its assets are protected from fraud and abuse, transactions are properly executed and recorded, and operations are conducted in accordance with established policies and procedures. The FTC's accounting system conforms in all material respects with the principles, standards, and related requirements specified in the Federal Financial Management Improvement Act of 1996.

The FTC's accounting, personnel, payroll, and accounts payable processing is performed under contract by the Department of Interior's (DOI) National Business Center in Denver, Colorado. FTC has controls in place to ensure the integrity of both payment and payroll processing.

Year 2000 (Y2K) Issues

All FTC's ten mission critical systems, those application systems that are critical to performing the antitrust and consumer protection mission of the agency, have been certified as Y2K compliant. Two systems, the Federal Financial System (FFS) and the Federal Personnel Payroll System (FPPS), which are used by the agency through its contract with the DOI National Business Center have been fully tested and are certified as Y2K compliant Equipment, including central computer facilities, desktop personal computers, printers, telephone systems, etc., have been examined by the FTC or certified by their vendor as Y2K compliant. The final project, installation of a new Y2K compliant security building access system, was completed in December 1999.

The FTC submitted a Y2K Emergency Funding request to OMB for $2,599,000 in order to support a government-wide Y2K consumer hotline, to complete upgrade network infrastructure, to replace physical equipment, and to correct Y2K deficiencies found in testing. The FTC has obligated $2,244,000 of which $769,000 have been expended through September 30, 1999. FTC had a Y2K contingency plan in place, and submitted a Business Continuity and Contingency Plan to OMB, however, the FTC experienced no significant disruptions of agency operations during actual Y2K conversion.

Custodial Activity

To prevent fraud, deception, and unfair business practices in the marketplace, the FTC's enforcement staff seeks to identify practices that cause the greatest consumer injury, stopping these practices through law enforcement, and preventing consumer injury through education. Fighting fraud is one of the Commission's highest priorities; consumers are bilked out of billions of dollars a year by perpetrators of traditional fraud and fraud on the Internet. In fraud cases, the Commission files actions in federal district court to bring an immediate halt to ongoing business activities and freeze defendants' assets. The Commission then pursues court orders that permanently ban the fraudulent activities and provide redress to consumers. In non-fraud cases, usually involving advertising claims, redress may be obtained for consumers in settlement of administrative complaints. In addition, when a company or individual violates an FTC Trade Regulation Rule, a statute enforced by the agency, or a prior agency order, the Commission seeks Federal district court orders permanently barring future violations and requiring payment of civil penalties. As these agency enforcement activities generate substantial amounts of nonexchange revenue, a Statement of Custodial Activity (SCA) forms part of the FTC's financial statement package.

The SCA is a required financial statement under Statement of Federal Financial Accounting Concepts (SFFAC) No. 2 for those Federal agencies that collect nonexchange revenues (e.g., taxes, duties, fines, and penalties) for the General Fund of the Treasury, a trust fund, or other recipient entities. The fiscal year 1999 SCA for the agency shows nonexchange revenue of $130.5 million for activities performed by the agency under its two major enforcement missions: maintaining competition and consumer protection.

Strategic and Performance Information

The FTC is the only federal agency with broad powers to promote and protect consumer welfare throughout the economy. Its work is based on the belief that competition among producers, and accurate information in the hands of consumers, bring the best products and lowest prices to the marketplace, spur innovation, and strengthen the economy. The FTC performs its work through two missions - Consumer Protection and Maintaining Competition. Following, for each mission, is a narrative description of strategic objectives and a tabular exhibit of FY 1999 accomplishments.

Consumer Protection

The goal of the Consumer Protection mission is to prevent fraud, deception, and unfair business practices in the marketplace. The CP mission works to accomplish this goal through three objectives:

Objective 1- Identify fraud, deception, and unfair practices that cause the greatest consumer harm. Performance is measured in this objective by the cumulative number of consumer complaints and inquires in the FTC Consumer Information System. The FTC uses the complaints in this database to identify problem areas as reported by the public. This use of the complaint data enables the mission to rapidly detect and respond to fraud, deception, and other illegal practices, resulting in effective targeting of the mission's law enforcement resources. Further, to increase the effectiveness of law enforcement agencies across the United States and Canada, the complaint data is shared with over 200 external federal, state and local partners.  

Objective 2- Stop fraud, deception, and unfair practices through law enforcement. This objective has both a fraud and non-fraud component. In the fraud component, the ultimate goal of the mission is to save consumers money. This is done by stopping fraudulent operators usually through successful litigation or settlement with the agency. Consumer savings are increased through the mission's leading of joint enforcement initiatives with Federal, state, local, and international partners.

The goal of the non-fraud component is to increase compliance with the laws against deceptive and unfair practices, thereby ensuring that consumers have more accurate and complete information for their purchasing decisions. Compliance is increased by targeting areas for law enforcement and by encouraging industry self-regulation.

Objective 3- Prevent consumer injury through education. The mission develops education campaigns to accompany each of its major law enforcement initiatives. Public education programs benefit consumers by alerting them to their rights under various consumer protection laws and providing practical tips on how to recognize and avoid scams and rip-offs. To reach the broadest-possible audience, the mission makes maximum use of the national media, the FTC's website, ftc.gov, and the inter-agency consumer.gov website. The mission's messages also reach the public through the FTC's Consumer Response Center and the hundreds of consumer protection partners who distribute its materials, link to the FTC website, or post the mission's messages on their website.

Maintaining Competition

The goal of the Maintaining Competition mission is to prevent anticompetitive mergers and other anticompetitive business practices in the marketplace. The MC mission works to accomplish its goal through three objectives:

Objective 1- Identify anticompetitive mergers and practices that cause the greatest consumer injury. Premerger notification requirements of the Hart-Scott-Rodino (H-S-R) Act provide the primary means for identifying potentially anticompetitive mergers. Mergers that are anticompetitive can drive up consumer prices by millions of dollars every year and can significantly diminish output, product quality, innovation and consumer choice. To prevent this outcome, mission staff review all filings made for proposed mergers, acquisitions and joint ventures, and perform preliminary antitrust review for every transaction that is filed with the Commission. A number of other means are also used to identify matters requiring potential law enforcement action. Current investigations often provide information and expertise that leads to follow-on investigations of likely investigations. The mission also receives numerous inquiries and complaints from customers and competitors throughout the country. To ensure the effectiveness of its work, the mission closely monitors compliance with its divestiture orders and continues to build on its efforts to improve the speed of divestitures.  

Objective 2- Stop anticompetitive mergers and practices through law enforcement. This objective has both a fraud and non-fraud component. The core of the merger enforcement component focuses on mergers among divergent competitors. The mission also acts against vertical and potential competition mergers and joint ventures that harm or threaten to harm competition. A major focus is directed at transactions in industries in which the Commission has particular expertise, including energy and natural resources, food, health care, consumer goods and services, pharmaceuticals, defense and aerospace, video programming and distribution (cable television), and various manufacturing industries.

The mission's nonmerger activities focus on business activities that significantly threaten competition and harm consumers. These activities may be between direct competitors, between suppliers and customers, or between potential competitors. The common thread among the investigations and cases brought is that the activities being challenged threaten to harm competition. In addition, the mission employs a forward-looking analysis to undertake projects that examine the legal, economic and policy implications of agreements among competitors; various distributional arrangements; issue appropriate enforcement policy statements; and continue its efforts on issues related to single firm anticompetitive behavior.

Objective 3- prevent consumer injury through education. The mission increases the awareness of antitrust law through guidance to the business community; outreach efforts to Federal, state and local agencies, business groups and consumers; development and publication of antitrust guidelines and policy statements; and speeches and publications. The goal of these efforts is to publicize the mission's antitrust law and business intentions, with the likely result of deterring future anticompetitive behavior.

Fiscal Year 1999 Year-End Review
Annual Performance Measures

Consumer Protection Mission

Goal 1:
Prevent fraud, deception, and unfair
business practices in the marketplace.

 
FY 1999
Target
FY 1999 
Actual
Percent Achieved
Objective 1.1-Identify fraud, deception, and unfair practices that cause the greatest consumer injury:
Measure 1.1.1: Cumulative number of consumer complaints and inquiries entered in database.
200,000
398,558
199%
Objective 1.2-Stop fraud, deception and unfair practices through law enforcement:
Measure 1.2.1: Dollar savings for consumers from FTC actions which stop fraud.
$200
million
$454.1
million
227%
Measure 1.2.2: Increase compliance in areas targeted for law enforcement.
20%
59%
n/a
Measure 1.2.3: Increase compliance in targeted self-regulated areas.
10%
55%
n/a
Measure 1.2.4: Percentage of targeted industry brought into compliance through law enforcement and self regulation.
50-75%
78%
n/a
Objective 1.3-Prevent consumer injury through education:
Measure 1.3.1: Number of education publications distributed to or accessed electronically by consumers.
7.25
million
8.589
million
118%

Maintaining Competition Mission

Goal 2:
Prevent anticompetitive mergers and other
anticompetitive business practices in the marketplace.

 
FY 1999
Target
FY 1999 
Actual
Percent Achieved
Objective 2.1-Identify anticompetitive mergers and practices that cause the greatest consumer injury:
Measure 2.1.1: Average number of days for review of HSR-reported transactions.
20
19
n/a

Measure 2.1.2: Number of non-merger investigations opened per year.

45 to 70
45
n/a

Objective 2.2-Stop anticompetitive mergers and practices through law enforcement:

Measure 2.2.1: Positive outcome of cases brought by FTC due to alleged violations.
80%
80%
n/a
Measure 2.2.2: Dollar savings for consumers resulting from FTC actions.
$200
million
$1.2
billion
600%
Measure 2.2.3: Average time, in months, from proposed consent orders to divestitures.
9
4
156%
Objective 2.3-Prevent consumer injury through education:
Measure 2.3.1: Identify and survey FTC "customers" in the marketplace.
design survey
design survey
n/a
Measure 2.3.2: Average number of days to issue advisory opinions in health care area.
90
63
n/a

UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580

Office of Inspector General

Chairman Pitofsky:

The Office of Inspector General has audited the Federal Trade Commission's (the Commission) Balance Sheets as of September 30, 1999 and 1998, and the related Statements of Net Cost, Statements of Changes in Net Position, Statements of Budgetary Resources, Statements of Financing, and Statements of Custodial Activity for the years then ended, and has considered internal control over financial reporting and the FTC's compliance with laws and regulations.

Opinion on Financial Statements

In our opinion, the financial statements referred to above, including the notes thereto, present fairly, in all material respects, the Commission's assets, liabilities and net position as of September 30, 1999 and 1998, and the net costs and changes in net position, its budgetary resources, financing and custodial activities for the years then ended, in conformity with generally accepted accounting principles for federal government entities.

Other Accompanying Information

Our audit was conducted for the purpose of forming an opinion on the FY 1999 and 1998 principal financial statements of the Commission taken as a whole. The information discussed below is presented for purposes of additional analysis and is not a required part of the principal financial statements.

The information in the Required Supplementary Information section has been subjected to the auditing procedures applied in the audit of the Commission's principal financial statements and, in our opinion, is fairly stated in all material respects in relation to the principal financial statements taken as a whole.

The information in the Management Overview of the Commission's annual financial statements has not been subjected to the auditing procedures applied in the audits of the financial statements and, accordingly, we express no opinion on it. This information is, however, addressed in our assessment of internal control discussed below.

Opinion on Internal Control

We considered the Commission's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. Consequently, we do not provide an opinion on internal controls.

With respect to internal control relating to performance measures included in the Management Overview of the Commission, we obtained an understanding of the design of internal controls relating to the existence and completeness assertions, as required by OMB Bulletin 98-08. Our procedures were not designed to provide assurance on internal control over reported performance measures, and accordingly, we do not provide an opinion on such controls. However, we noted certain deficiencies in internal control over reported performance measures that, in our judgment, could adversely affect the agency's ability, in selected performance measures, to present relevant performance information.

Our findings and management's comments on the internal control over performance measures findings and recommendations, including corrective actions taken or planned, are included in a separate audit report. (Review of Systems Used to Collect Data for Annual Performance Measures Under the Government Performance and Results Act; AR 00-44).

In summary, our review of nine of the agency's thirteen performance measures as contained in the Commission's FY 2001 Budget Request found that the methodology to be used for accumulation of selected performance data was not sufficiently defined to allow for the reporting of measures in an accurate and consistent manner. Our concerns were discussed with representatives of each of the principle bureaus and efforts are now underway to better define precisely what data elements are to comprise each performance measure. The OIG believes that the best way to attack this weakness is for the GPRA task force to define the rationale behind each of the thirteen performance measures; i.e., clearly articulate how consumers/businesses are better off when the FTC meets or exceeds its performance targets.

Reportable Conditions

Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be reportable conditions. Under standards issued by the American Institute of Certified Public Accountants, reportable conditions are matters coming to our attention relating to significant deficiencies in the design or operation of the internal control that, in our judgement, could adversely affect the Commission's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. Material weaknesses are reportable conditions in which the design or operation of one or more of the specific internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited or material to a performance measure or aggregation of related performance measures, may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. However, we noted no matters involving the internal control and its operation that we considered to be material weaknesses as defined above.

We noted certain other matters involving the internal control over financial reporting that we have reported to the Commission's management in a separate letter (management letter 00-045A).

Compliance with Laws and Regulations

As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of the Commission's 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 98-08, including the requirements referred to in the Federal Financial Management Improvement Act (FFMIA) of 1996. However, the objective of our audit of these financial statements, including our tests of compliance with selected provisions of applicable laws and regulations, was not to provide an opinion on overall compliance with such provisions. Accordingly, we do not express such an opinion.

Material instances of noncompliance are failures to follow requirements, or violations of prohibitions contained in statutes and regulations, that cause us to conclude that the aggregation of the misstatements resulting from those failures or violations is material to the statement of financial position referred to above or that sensitivity warrants disclosure thereof.

The results of our tests of compliance disclosed no instances of noncompliance with laws and regulations that are required to be reported under Government Auditing Standards or OMB Bulletin 98-08 "Audit Requirements for Federal Financial Statements."

Under FFMIA, we are required to report whether the agency's financial management systems substantially comply with the Federal financial management systems requirements, Federal accounting standards, and the United States Government Standard General Ledger at the transaction level. To meet this requirement, we performed tests of compliance using the implementation guidance for FFMIA included in Appendix D of OMB Bulletin 98-08.

The results of our tests disclosed no instances in which the agency's financial management systems did not substantially comply with the three requirements discussed in the preceding paragraph.

With respect to items not tested, nothing came to our attention to cause us to believe the Commission had not complied, in all respects, with those provisions. In addition, we noted certain nonmaterial instances of noncompliance that we have reported to the management.

Responsibilities and Methodology

Management has the responsibility for:

  • preparing the financial statements in conformity with generally accepted accounting principles for federal government entities described in Note 1 to the financial statements;
  • establishing and maintaining an effective internal control over financial reporting; and
  • complying with applicable laws and regulations.

Our responsibility is to express an opinion on these financial statements based on our audit. Generally accepted auditing standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misrepresentation and presented fairly in accordance with the basis of accounting described in Note 1 to the financial statements. We performed tests of controls in order to determine our auditing procedures for the purpose of expressing our opinion on these financial statements and not to provide an opinion on the internal control over financial reporting. We are also responsible for testing compliance with selected provisions of applicable laws and regulations that may materially affect the financial statements.

In order to fulfill these responsibilities, we

  • obtained an understanding of the design of relevant internal controls and determined whether they had been placed in operation;
  • assessed control risk;
  • examined, on a test basis, evidence supporting the amounts and disclosures in the financial statements;
  • assessed the accounting principles used and significant estimates made by management;
  • evaluated the overall presentation of the financial statements;
  • tested compliance with selected provisions of the laws and regulations that may materially affect the financial statements; and
  • performed other procedures that we considered necessary in the circumstances.

Our audit was conducted in accordance with generally accepted auditing standards; Government Auditing Standards, as issued by the Comptroller General of the United States; and OMB Bulletin 98-08, "Audit Requirements for Federal Financial Statements." We believe that our audit provides a reasonable basis for our opinion.

While this report is intended for the information of the Commission, it is also a matter of public record, and its distribution is, therefore, not restricted.

Washington, D.C.
February 11, 2000

Inspector General
Federal Trade Commission

Federal Trade Commission Balance Sheets As of September 30, 1999 and 1998

 
1999
1998
Entity Assets:
Intragovernmental Assets:
Fund Balance with Treasury (Note 2)
43,180,350
46,226,138
Accounts Receivable, Net (Note 4)
129,727
81,918
Advances and Prepayments

0

1,073
Total Intragovernmental Assets
43,310,077
46,309,129
Cash and Other Monetary Assets (Note 3)
5,510
6,660
Accounts Receivable, Net (Note 4)

0

37,355
Property, Plant, and Equipment, Net (Note 5)
42,090
126,269
Total Entity Assets
43,357,677
46,479,413
Non-Entity Assets:
Intragovernmental Assets:
Fund Balance with Treasury (Note 2)
32,235,572
31,567,384
Cash and Other Monetary Assets (Note 3)
30,086,600
18,479,538
Accounts Receivable, Net (Note 4)
9,804,337
2,634,532
Total Non-Entity Assets
72,126,608
52,681,454
Total Assets
115,484,285
99,160,867
Liabilities:
Liabilities Covered by Budgetary Resources:
Accounts Payable
2,165,700
1,395,327
Accrued Salaries
4,311,796
4,603,631
Total Liabilities Covered by Budgetary Resources
6,477,496
5,998,958
Liabilities Not Covered by Budgetary Resources (Note 6)
Intragovernmental Liabilities:
Undisbursed Premerger Filing Fees
26,628,753
27,022,518
Other Liabilities
870,569
367,677
Total Intragovernmental Liabilities
27,499,322
27,390,195
Future Workers' Compensation
2,114,961
1,961,403
Accrued Annual Leave
5,650,321
6,179,794
With the Public
44,867,177
25,529,856
 
62,632,459
33,671,053
Total Liabilities Not Covered by Budgetary Resources
80,131,781
6,061,248
Net Position: (Note 7)
Balances:
Unexpected Appropriations
3,001,818
1,981,161
Cumulative Results of Operations
25,873,190
30,119,500
Total Net Position
28,875,008
32,100,661
Total Liabilities and Net Position
115,484,285
99,160,867

Federal Trade Commission Statements of Net Cost For the years ended September 30, 1999 and 1998

 
1999
1998
Costs:
Maintaining Competition Mission:
Intragovernmental
15.380,502 14,291,391
With the Public
41,860,835 38,043,027
Total mission cost
57,241,337 52,334,418
Less exchange revenues (Note 9)
Intragovernmental
(521,135) (520,517)
With the public
(97,469,991) (100,845,015)
Total exchange revenues
(97,991,125) (101,365,532)
Net mission revenue
(40,749,788) (49,031,114)
Consumer Protection Mission
Intragovernmental
15,778,504 15,343,023
With the public
44,450,165 42,386,209
Total mission cost
60,228,669 57,729,209
Net Cost of Operations
19,478,881 8,698,118

FEDERAL  TRADE COMMISSION STATEMENTS OF CHANGES IN NET POSITION For the years ended September 30, 1999 and 1998

 
1999
1998
Cost of Operations
(19,478,881) (8,698,118)
Financing Sources: (Other than exchange revenue)
Appropriations
10,978,074 18,573,888
Imputed financing (Note 1f)
4,254,497 4,103,964
Total Financing Resources
15,232,571 22,677,852
Net Results of Operations
(4,246,310) 13,979,734
Increase (Decrease) in Unexpended Appropriations
1,020,657 (111,263)
Changes In Net Position
(3,225,653) 13,868,471
Net Position - Beginning of Period
32,100,661 18,232,190
Net Position - End of Period
28,875,008 32,100,661

FEDERAL TRADE COMMISSION STATEMENTS OF BUDGETARY RESOURCES
For the years ended September 30, 1999 and 1998

 
1999
1998
Budgetary Resources:
Budget authority
12,770,000  18,500,000
Unobligated balances-beginning of period
  33,981,699   21,432,216
Spending authority from offsetting collections
Hart-Scott-Rodino fees
For current year apportionment
       76,500,000         70,000,000
To be apportioned in subsequent fiscal year
       20,969,991         30,845,015
Total Hart-Scott-Rodino fees
       97,469,991       100,845,015
Reimbursable Authority
            521,134   520,517
Adjustments
         1,060,144   (667,724)
Total Budgetary Resources
 145,802,968   140,630,024
Status of Budgetary Resources:
Obligations incurred
Maintaining Competition Mission
       58,253,924   50,444,657
Consumer Protection Mission
       61,857,260   56,203,668
Total obligations incurred
      120,111,184       106,648,325
Unobligated balances available
  24,580,985   32,588,187
Unobligated balances-not available
  1,110,799   1,393,512
Total Status of Budgetary Resources
 145,802,968   140,630,024
Outlays:
Obligations incurred
  120,111,184   106,648,325
Less: spending authority from offsetting collections and adjustments
  (99,760,681) (100,735,183)
Obligated balance, net - beginning of period
12,244,438 10,090,226
Less: obligated balance, net - end of period
(17,494,075) (12,244,438)
Total Outlays
 15,100,866  3,758,930

Federal Trade Commission Statements of Financing
For the years ended September 30, 1999 and 1998

 
1999
1998
Obligations and Nonbudgetary Resources:
Obligations Incurred
120,111,184 106,648,325
Less: Spending authority from offsetting collections and adjustments
(99,760,681) (100,735,183)
Financing imputed for cost subsidies (Note 1f)
4,254,497 4,103,964
Other
(61,857)

0

Total Obligations and non-budgetary resources
24,543,143 10,017,106
Resources That Do Not Fund Net Cost of Operations:
Change in amount of goods, services, and benefits ordered by not yet received or provided
(4,773,822) (2,112,394)
Costs That Do Not Require Resources:
Depreciation and amortization
84,179 84,179
Financing Sources Yet to be Provided
(374,619) 709,227
Net Cost of Operations
19,478,881 8,698,118

Federal Trade Commission Statements of Custodial Activity
Fiscal Year Ended 09/30/99

(With Combined Totals for Fiscal Year Ended 09/30/98)
(In Dollars)
(Refer to Note 11)

 
MC
Mission
CP
Mission
1999
Total
1998
Total
Sources of Collections
Cash Collections:
Premerger Filing Fees (Net of
Refunds) (a)
97,469,991

0

97,469,991 100,845,015
Civil Penalties and Fines (b)
0
4,039,298 4,039,298 8,790,046
Redress (c)
0
21,631,516 21,631,516 17,812,538
Funeral Rule Violations
0
57,736 57,736 90,780
Net Collections 97,469,991 25,728,550 123,198,541 127,538,379
Accural Adjustments (d)

0

7,304,806 7,304,806 (5,326,246)
Total Revenues 97,469,991 33,033,356 130,503,347 122,176,133
Disposition of Revenue Collected
Amounts Transferred to:
Treasury General Fund 8,564 6,220,657 6,229,221 15,584,193
Department of Justice

97,998,781

0

97,998,781 96,884,108
Consumer Redress
0
4,843,464 4,843,464 20,941,837
Receiver and Other Accounts (e)
0
1,711,212 1,711,212 4,536,368
Contractor Fees Net of Interest Earned (f)
0
275,516 275,516 212,373
Net Disbursements 98,007,345 13,050,849 111,058,194 138,158,879
Change in Liability Accounts (g) (537,354) 19,982,507 19,445,153 (15,982,746)
Total Disposition of Revenues Collected 97,469,991 33,033,356 130,503,347 122,176,133
Net Custodial Collections
0
0
0
0

Note 1 - Organization and Summary of Significant Accounting Policies

(a) Basis of Presentation 

The financial statements have been prepared from the books and records of FTC, in accordance with the form and content requirements of OMB Bulletin 97-01, as amended, and FTC's accounting policies, as summarized in Note 1(b). These statements are different from the financial reports also prepared by FTC pursuant to OMB directives, used to monitor the use of budgetary resources.

In addition, the accompanying statements include information on the activities of the agency's consumer redress program. Independent agents contracted to administer the program under the oversight of FTC program offices maintain the financial records for consumer redress activity. The consumer redress program is subject to independent audit and review by the Office of Inspector General.

(b) Basis of Accounting

On October 19, 1999 the Council of the American Institute of Certified Public Accountants (AICPA) recognized the Federal Accounting Standards Advisory Board (FASAB) as the body designated to establish generally accepted accounting principles (GAAP) for Federal governmental entities under Rule 203, "Accounting Principles," of the AICPA's Code of Professional Conduct. The FTC financial statements are prepared in accordance with GAAP for Federal government entities.

Transactions are recorded on an accrual accounting basis as well as a budgetary basis. Under the accrual method, revenues are recognized when earned and expenses are recognized when a liability is incurred, without regard to receipt or payment of cash. Budgetary accounting facilitates compliance with legal constraints and controls over the use of federal funds. The accompanying financial statements are prepared on the accrual basis of accounting.

(c) Reporting Entity

The FTC was created by the Federal Trade Commission Act in 1914. The FTC enforces a variety of federal anti-trust and consumer protection laws. The FTC seeks to ensure that the nation's markets function competitively, and are vigorous, efficient, and free of undue restrictions. The FTC also works to enhance the smooth operation of the marketplace by eliminating acts or practices that are unfair or deceptive. In general, FTC's efforts are directed toward stopping actions that threaten consumers' opportunities to exercise informed choice. Finally, the FTC undertakes economic analysis to support its law enforcement efforts and to contribute to the policy deliberations of the Congress, the Executive Branch, other independent agencies, and state and local governments when requested.

During fiscal year 1999, the FTC underwent a reorganization resulting in the following eight offices in seven regions: Northeast (New York, New York); Southeast (Atlanta, Georgia); Midwest (Chicago, Illinois); East Central (Cleveland, Ohio); West (San Francisco & Los Angeles, California); Southeast (Dallas, Texas); and Northwest (Seattle, Washington).

The accompanying financial statements include the accounts for appropriated funds and other fund groups described below for which the FTC maintains financial records, and for the consumer redress accounts for which the agency has management oversight.

General Funds These funds consist of salaries and expense appropriation accounts used to fund the agency operations and capital expenditures.

Deposit and Suspense Funds These funds are maintained to account for receipts awaiting proper classification, or held in escrow, until ownership is established and proper distributions can be made.

Receipt Accounts The FTC collects civil penalties and other miscellaneous receipts, which are not retained by the FTC. These receipts are deposited directly to an U. S. Treasury receipt account.

(d) Budgets and Budgetary Accounting

Congress annually passes appropriations that provide FTC with authority to obligate funds for necessary expenses to carry out mandated program activities. These funds are available until expended. The funds appropriated are subject to OMB apportionment of funds in addition to Congressional restrictions on the expenditure of funds. Also, FTC places internal restrictions to ensure the efficient and proper use of all funds. Prior to fiscal year 1996, Congress passed appropriations of one-year for FTC operations. These one-year funds are available for obligation for one year and are canceled and cannot be used for disbursements after five years have elapsed from the year in which the appropriation was available for obligation.

(e) Revenues and Other Financing Sources

The FTC received approximately 10 percent and 17 percent for 1999 and 1998, respectively, of the funding needed to support its operations through annual appropriations that may be used, within statutory limits, for operating and capital expenditures.

Additional amounts are earned through the collection of fees under the Hart-Scott-Rodino (HSR) Anti-Trust Improvement Act of 1976. This Act, in part, requires the filing of pre-merger notifications with the FTC and the Anti-Trust Division of the Department of Justice and establishes a waiting period before certain acquisitions may be consummated. The FTC retains one half of the HSR premerger filing fees collected. This fee revenue funded approximately 86 percent and 80 percent for 1999 and 1998, respectively, of the agency's operations. Revenue is recognized when earned, i.e. all required documentation under the HSR Act has been received by the agency. Fees not retained by the FTC are not reported as revenue and are maintained in a suspense fund until transferred to the Department of Justice.

The FTC also obtains funds through reimbursement for services performed for other Federal agencies, typically to provide technical assistance on anti-trust laws and competition policy. Revenue is recognized when the services have been provided under the reimbursable agreement.

(f) Imputed Financing

FTC recognizes costs of pensions and other retirement benefits during employees' active years of service, but does not fully recognize the cost for the pensions, health benefits, or life insurance that employees receive once they retire. Consequently, an imputed financing source is recognized in the amount of $4,254,497 and $4,103,964 as of September 30, 1999 and 1998, respectively. The amount recognized is equal to the amount of current year unfunded pension and other retirement benefits costs which are subsidized by the Office of Personnel Management..

Associated costs are also included in the Statement of Net Costs. Factors used in the calculation of these benefit expenses were provided by the Office of Personnel Management in keeping with SFFAS No. 5, Accounting for Liabilities of the Federal Government.

(g) Fund Balances with the U.S. Treasury

With the exception of cash held in consumer redress custodial accounts by FTC's contracted agents, FTC does not maintain cash in commercial bank accounts. Cash receipts and disbursements are processed by the U.S. Treasury. Fund balances with Treasury are primarily appropriated funds that are available to pay current liabilities and finance authorized purchase commitments, and restricted funds which include deposit and suspense funds. The FTC's fund balances with Treasury are carried forward until goods or services are received and payment is made, or until such time as funds are returned to the U.S. Treasury.

(h) Accounts Receivable

Entity accounts receivables include amounts due from other Federal entities, and from current and former employees and vendors, for 1999 only. Non-Entity accounts receivable are for civil monetary penalties imposed as a result of the FTC's enforcement activities and for uncollected redress judgments. Since FTC does not retain these receipts, a corresponding liability is also recorded for these accounts receivable.

Opening judgment receivable balances reflect the FASAB standard for the recognition of losses using the collection criterion of "more likely than not". This criterion represents a more stringent criterion than used in the private sector under generally accepted accounting principles (GAAP). In Statement of Federal Financial Accounting Standards (SFFAS) No. 1, the Board states that it is appropriate to recognize the nature of federal receivables which, unlike trade accounts of private firms or loans made by banks, are not created through credit screening procedures. Rather, these receivables arise because of the assessment of fines from regulatory violations. In these circumstances, historical experience and economic factors indicate that these types of claims are frequently not fully collectible.

The FTC recognizes an allowance for uncollectible accounts receivable by individual account analysis based on the debtor's ability to pay, willingness to pay, and the probable recovery of amounts from secondary sources, including liens, garnishments, and other applicable collection tools.

(i) Advances and Prepayments

Payments in advance of the receipt of goods and services are recorded as advances and recognized as expense when the related goods and services are received. Advances are principally advances to FTC employees for official travel.

(j) Property and Equipment

Commercial vendors and the General Services Administration, which charges FTC a Standard Level Users Charge (SLUC) which approximates the commercial rental rates for similar properties, provide the land and buildings in which FTC operates.

Equipment is stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. All equipment with an acquisition value greater than $100,000 and a useful life of over two years is capitalized. Items purchased which do not meet these criteria are expensed. During fiscal year 1997, the FTC began capitalizing equipment in accordance with Statement of Federal Financial Accounting Standard Number 6, Accounting for Property, Plant and Equipment.

(k) Liabilities

Liabilities represent the amount of monies or other resources that are likely to be paid as the result of a transaction or event that has already occurred. Liabilities classified as not covered by budgetary resources are liabilities for which appropriations have not been enacted, and liabilities resulting from the agency's custodial activities (see Note 11). Also, the Government, acting in its sovereign capacity can abrogate FTC liabilities (other than contracts).

(l) Future Worker's Compensation and Accrued FECA

The FTC records an estimated liability for future workers' compensation claims based on data provided from the Department of Labor (DOL). FTC also records a liability for actual claims paid on its behalf by the DOL.

(m) Annual, Sick and Other Leave

Annual leave is accrued as it is earned and the liability is reduced as leave is taken. At year-end, the balance in the accrued annual leave account is adjusted to reflect the liability at current pay rates and leave balances. All annual leave is unfunded, and accordingly, is reflected, as a liability not covered by budgetary resources. Sick and other leave is expensed when incurred.

(n) Post-Retirement Health Benefits and Life Insurance

As required by SFFAS #5, Accounting for Liabilities of the Federal Government, the FTC is recognizing its share of the future cost of post-retirement health benefits and life insurance for FTC employees while they are still employed. OPM has provided the FTC with certain cost factors that estimates the true cost of providing the post retirement benefit to current employees. During fiscal years 1999 and 1998, the cost factors relating to health benefits were $2,731 and $2,529 per employee enrolled in the Federal Employees Health Benefits program, respectively. The total cost recognized during fiscal years 1999 and 1998 were $2,195,041 and $2,008,026, respectively.

During fiscal years 1999 and 1998, the cost factor relating to life insurance was 0.02% of basic pay for employees enrolled in the Federal Employee Group Life Insurance program. The total costs recognized for the years ended September 30, 1999 and 1998 were $8,604 and $8,026, respectively.

(o) Retirement Plans

Approximately 39 percent of FTC's employees participate in the Civil Service Retirement System (CSRS), to which FTC makes matching contributions equal to 7.25 percent of pay. On January 1, 1984, the Federal Employees Retirement System (FERS) went into effect pursuant to Public Law 99-335. FERS and Social Security automatically cover employees hired after December 31, 1983, while employees hired prior to January 1, 1984 may elect to either join FERS or remain in the CSRS. The FTC also contributes to FERS on behalf of its employees.

One primary difference between FERS and CSRS is the government contribution to the Thrift Savings Plan (TSP) that FERS employees receive. FERS covered employees may contribute up to ten percent of pay to the TSP plan. FTC automatically contributes one percent of basic pay, in addition to matching employee contributions up to an additional four percent of pay. CSRS covered employees may contribute up to five percent of earnings to TSP but do not receive a matching contribution. Employees participating in FERS are covered under the Federal Insurance Contributions Act (FICA) for which FTC contributes a matching amount to the Social Security Administration.

Although FTC contributes a portion for pension benefits and makes the necessary payroll withholdings, it is not responsible for contribution refunds, employee retirement benefits, or the retirement plan assets. Therefore, the FTC financial statements do not report CSRS and FERS assets, accumulated plan benefits, or unfunded liabilities, if any, which may be applicable to employee. Such reporting is the responsibility of the Office of Personnel Management (OPM).

However, as required by Statement of Federal Financial Accounting Standard (SFFAS) Number 5, Accounting for Liabilities of the Federal Government, beginning in fiscal year 1997, FTC began recognizing its share of the cost of providing a pension benefit to eligible employees. OPM has provided FTC with certain cost factors that estimate the true cost of providing the pension benefits to current employees. The cost factors range from 24.2% to 40% of basic pay for CSRS covered employees and 11.5% to 24.6% of basic pay for FERS covered employees during fiscal years 1999 and 1998. FTC recognized approximately $2,050,852 and $2,087,912 in pension expense during fiscal years 1999 and 1998, respectively (see Note 10).

(p) Net Position

FTC's net position is comprised of the following: 1. Unexpended appropriations represent the amount of unobligated and unexpended budget authority. Unobligated balances are the amount of appropriations or other authority remaining after deducting the cumulative obligations from the amount available for obligation and undelivered orders.   2. Cumulative results of operations represents the net results of operations since inception plus the cumulative amount of prior period adjustments, the remaining book value of capitalized assets, and future funding requirements.

(q) Comparative Data

Certain 1998 financial statement line items have been reclassified to conform to the current year's presentation.

Note 2 - Fund Balances with Treasury

Fund balances with Treasury consisted of the following at September 30, 1999 and 1998:

  Obligated Available Restricted Unobligated 1999
Total
1998
Total
General Funds $17,494,075 $24,575,476 $1,110,799 $43,180,350 $46,226,138
Suspense Funds
Undecided Civil Penalty Cases 0 0 0 130,509 100,430
Undistributed Pre-Merger Filing due DOJ 0 0 0 26,628,753 27,022,518
Amounts to be transferred to Treasury 0 0 0

0

8,564

Deposit Funds-Redress 0 0 0 5,318,854 4,300,872
Other 0 0 0 157,456 135,000
Total $17,494,075 $24,575,476 $1,110,799 $75,415,922 $77,793,522

The restricted unobligated fund balance is related to expired authority and is only available for adjustments. The obligated balance includes accounts payable and undelivered orders that have drawn down on unexpended appropriations but have not yet decreased the cash balance on hand.

During fiscal years 1999 and 1998, the FTC returned $754,750 and $37,380, respectively to the U.S. Treasury from the expired appropriations 2940100 and 2930100.

Other Information Deposit and suspense funds amounting to $32,235,572 and $31,567,384 as of September 30, 1999 and 1998, respectively, stated above are not available to finance FTC activities and are classified as non-entity assets and a corresponding liability is also recorded.

Note 3 - Cash and Other Monetary Assets

Cash and other monetary assets held as entity assets consist of cash held in imprest funds. Cash and other monetary assets held as non-entity assets consist of deposits in transit for premerger filing fees and redress judgment amounts on deposit with FTC's distribution agents. A corresponding liability is recorded for these assets. Cash and other monetary assets consisted of the following at September 30, 1999 and 1998:

  1999 1998
Entity $ 5,510 $ 6,660
Non-Entity - deposits in transit 157,519 180,000
 - redress contractors 29,929,180 18,299,538
  $30,086,699 $18,479,538

Note 4 - Accounts Receivable

Accounts receivable consisted of the following, as of September 30, 1999 and 1998:

  Gross Allowance 1999
Net
1998
Net
Entity Assets:
Intragovernmental - Accounts Receivable $ 129,727 $ 0 $ 129,727 $ 81,918
With the Public - 
Accounts Receivable
$ 0 $ 0 $ 0 $ 37,355
Total Entity Assets $ 129,727 $ 0 $ 129,727 $ 119,273
Non-Entity Assets:
Consumer Redress $96,594,916 $87,421,254 $ 9,173,662 $2,379,016
Civil Penalties 745,013 114,338 630,675 120,516
Other       135,000
Total Non-Entity Assets $97,339,929 $87,535,592 $ 9,804,337 $2,634,532

For more detailed information on judgments receivable see Exhibit A.

Note 5 - Property, Plant, and Equipment, Net

Capitalized property and equipment, net of accumulated depreciation, consisted of the following as of September 30, 1999 and 1998:

Asset Class Service Life Acquisition Value Accumulated Depreciation 1999
Net Book Value
1998
Net Book Value
Office Equipment & Furniture

5 Years

$420,895 $378,805 $42,090 $126,269

Property and equipment are depreciated using the straight-line method. Depreciation expense was $84,179 for each of the fiscal years ending September 30, 1999 and 1998.

Note 6 - Liabilities Not Covered by Budgetary Resources

Liabilities not covered by budgetary resources consisted of the following as of September 30, 1999 and 1998:

(a) Intragovernmental and With the Public

  1999 1998

Intragovernmental -

Undisbursed Premerger Filing Fees $26,628,753 $27,022,518
Civil Penalty Collections Due $630,676 $120,516
Amounts to be Disgorged to Treasury  0 8,564
Accrued FECA Claims 239,893 238,597
Total $870,569 $367,677
With the Public -
Undisbursed Redress  $35,248,033 $22,600,410
Redress Net Collections Due 9,173,662 2,379,016
Other 45,482 550,430
Total  $44,867,177 $25,529,856

(b) Other Information

Civil Penalty Collections Due represents the contra account for accounts receivable due for civil monetary penalties which are transferred to the general fund of the Treasury upon receipt.

Amounts to be Disgorged to Treasury include amounts for reconciled statements of differences and miscellaneous receipts.

Undisbursed Premerger Filing Fees represent filing fees collected under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976 that are held in suspense until distribution to the Justice Department or the FTC.

Undisbursed Redress includes redress in FTC's Treasury deposit account, or with FTC redress contractors.

Other consists primarily of deposits in transit and undisbursed cash in the suspense liability account for 1999 and 1998.

Future Workers' Compensation is the estimated liability for future workers' compensation claims based on data provided by the DOL. Refer to Note 1(l).

Accrued Annual Leave represents the liability not covered by budgetary resources for accrued annual leave of FTC employees. Refer to Note 1(m).

Note 7 - Net Position

Net position consisted of the following as of September 30, 1999 and 1998:

  1999 1998
Unexpended Appropriations:
Unobligated - Available $ 354,963 $ 0
- Unavailable 1,110,799 1,393,512
- Undelivered Orders 1,536,056 587,649
Total Unexpended Appropriations 3,001,818 1,981,161
Cumulative Results of Operations:
Invested Capital 42,090 126,269
Retained Fees:
Unobligated 24,226,022 32,588,187
Undelivered Orders 9,610,253 5,784,838
Future Funding Requirements (8,005,175) (8,379,794)
Total Cumulative Results of Operations 25,873,190 30,119,500
Total Net Position $28,875,008 $32,100,661

Note 8 - Commitments and Contingencies

Commitments FTC is committed under obligations for goods and services which have been ordered but not yet received (undelivered orders) at fiscal year end. Undelivered orders were $11,146,309 and $6,372,487 as of September 30, 1999 and 1998, respectively.

Contingencies The FTC is a party in various administrative proceedings, legal actions, and claims brought by or against it. In the opinion of FTC management and legal counsel, the ultimate resolution of these proceedings, actions and claims, will not materially affect the financial position or results of operation of the FTC.

Leases The FTC rents approximately 361,537 square feet of space in both commercial and government-owned properties for use as offices, storage and parking. Space leases for government-owned property are made with the General Services Administration (GSA). Leases of commercial property are made through and managed by GSA. The Commission has leases on three government-owned properties and 12 commercial properties. The FTC's current leases expire at various dates through 2002.

Rent expenditures for the years ended September 30, 1999 and 1998 were approximately $10 million each year. This amount is net of a GSA credit of approximately $1.8 million for each of the fiscal years 1999 and 1998, relating to the main headquarters building. Future minimum lease payments due under leases of government-owned property as of September 30, 1999 are as follows:

Fiscal Year

2000 

$ 4,736,037

2001 

4,878,118

2002 

5,024,461

Thereafter 

5,175,195

Total future minimum lease payments

 $19,813,811

Future minimum lease payments under leases of commercial property due as of September 30, 1999 are as follows:

Fiscal Year

2000  $ 6,266,914
2001  6,454,922
2002  6,648,570
Thereafter  6,848,027
Total future minimum lease payments $26,218,433

Note 9 - Exchange Revenue

The Federal Accounting Standards Advisory Board defines exchange revenue as inflows of resources to a governmental entity that the entity has earned. They arise from exchange transactions that occur when each party to the transaction sacrifices value and receives value in return. (Statement of Recommended Accounting Standards No. 7.) At the FTC, exchange revenue is recognized for premerger filing fees paid under the HSR Act. Filing fee amounts are set by law; in fiscal years 1999 and 1998, the statutory filing fee was $45,000 per qualifying filing. Amounts are earned when the premerger filing is accepted by the agency. Filing fees in the amount of $97,469,991 and $100,845,015 were earned during fiscal years ended September 30, 1999 and 1998, respectively.

Exchange revenue is also earned for services provided to other government agencies through reimbursable agreements. FTC recovers the full cost of services, primarily salaries and related expenses. Amounts are earned at the time the expenditures are incurred against the reimbursable order. During fiscal years 1999 and 1998, FTC earned $514,572 and $425,045 under agreements with the U.S. Agency for International Development to provide technical assistance on competition and antitrust laws to countries in the Former Soviet Union, Ukraine, Eastern Europe and South America. The FTC also earned $6,562 and $32,021 under miscellaneous reimbursable agreements with the Housing and Urban Development Agency and the U.S. Merit Systems Protection Board during fiscal years 1999 and 1998, respectively. An additional $63,451 was earned for miscellaneous reimbursable agreements with the Federal Communications Commission during fiscal year 1998 only.

Note 10 - Pension Expense

The Commission recognizes the full cost of providing future pension benefits to eligible employees while they are working. The excess of total pension expense over the amounts contributed by FTC and its employees must be financed by OPM. FTC recognizes an imputed financing source equal to this excess amount. Pension expense in 1999 and 1998 consisted of the following:

 

1999

1998

 

Employer Contributions

Accumulated
Costs Imputed
to OPM

Total
Pension Expense

Total
Pension Expense

Civil Service Retirement System $2,250,358 $2,050,852 $4,301,210 $4,420,653
Federal Employee's Retirement System 4,038,686 0 4,038,686 3,697,343
Thrift Savings Plan 1,623,338 0 1,623,338 1,431,547
Totals $7,912,382 $2,050,852 $9,963,234 $9,549,543

Note 11 - Custodial Activities

The FTC functions in a custodial capacity with respect to revenue transferred or transferable to recipient government entities or the public. These amounts are not reported as revenue to the FTC. The major components of the FTC's custodial activities are discussed below.

(a) Pre-Merger Filing Fees

All Hart-Scott-Rodino (HSR) premerger filing fees are collected by the FTC pursuant to section 605 of P.L. 101-162, as amended, and are divided evenly between the FTC and the Department of Justice. The collected amounts are then credited to the appropriations accounts of the two agencies (FTC's "Salaries and Expenses" and DOJ's "Salaries and Expenses, Antitrust Division"). During fiscal years 1999 and 1998, respectively, FTC collected $194,939,982 and $201,690,031 in HSR fees. Half of this amount, $97,469,991 in 1999, and $100,845,015 in 1998, was held for transfer to DOJ. As of September 30, 1999 and 1998 collections not transferred to DOJ total $26,628,753 and $27,022,518, respectively.

(b) Civil Penalties and Fines

Civil penalties collected in connection with the settlement or litigation of the FTC's administrative or federal court cases are collected by either the FTC or DOJ as provided for by law. DOJ assesses a fee equivalent to three percent of amounts collected before remitting them to the agency. The agency then deposits these collections into the U. S. Treasury. In 1999 and 1998 collections by DOJ remitted directly to Treasury on FTC cases amounted to an additional $4.2 million and $500,000, respectively, which are not reflected in the financial statements.

(c) Redress

The Commission obtains consumer redress in connection with the settlement or litigation of both its administrative and its federal court cases. The Commission attempts to distribute funds thus obtained to consumers whenever possible. If consumer redress is not practical, the funds are paid (disgorged) to the U. S. Treasury. Major components of the program include eligibility determination, disbursing redress to claimants, and accounting for the disposition of these funds. Collections made against court-ordered judgments totaled $21,631,516 and $17,812,538 during fiscal years 1999 and 1998, respectively.

The sources of these collections are as follows:

Source

1999

1998

Contractors $11,802,825 $11,325,346
Receivers 1,742,579 3,918,394
FTC 8,086,112 2,568,798
Total $21,631,516 $17,812,538

(d) Accrual Adjustments

These adjustments represent the difference between the agency's opening and closing accounts receivable balances. Accounts receivable are the funds owed to the agency (as a custodian) and ultimately to consumers or other entities. See Exhibit A for computation of accrual adjustments to the Statement of Custodial Activity.

(e) Receiver Accounts and Other Accounts

Receiver and other accounts primarily consist of funds collected by receivers and passed through to consumers during the year.

(f) Contractor Fees Net of Interest Earned

Collections against monetary judgments are often deposited with one of the agency's three redress contractors until distributions to consumers occur. Funds are deposited in interest bearing accounts, and the interest earnings are used to fund administrative expenses. Contractor expenses for the administration of redress activities and funds management amounted to $958,581 and $1,427,482 during the years ended September 30, 1999 and 1998, respectively.

Interest earned was $683,065 and $1,215,109 during fiscal years 1999 and 1998, respectively, with the difference of $275,516 and $212,373 representing expenses in excess of earnings.

(g) Change in Liability Accounts

Liability accounts contain funds that are in the custody of the agency or its agents, and are owed to others (consumers, receivers for fees, and/or the Department of Justice.) See Exhibit B for the computation of liability account changes.

(h) Current Year Judgments

A judgment is a formal decision handed down by a court. For the purposes of this financial statement, judgments include amounts that defendants have agreed, or are ordered, to pay, for the purpose of making restitution to consumers deemed to have been harmed by the actions of the defendant(s) in the case. In fiscal years 1999 and 1998, the agency obtained monetary judgments against defendants totaling $140 million and $55 million, respectively.

In addition to the $140 million in judgments received during fiscal year 1999, another $48.9 million in refunds was ordered to be paid by defendants.

(i) Treasury Referrals

Monetary judgments six months or more past due are referred to the Department of Treasury for follow up collection efforts in keeping with the Debt Collection Improvement Act of 1996. Treasury's Debt Management Services (DMS) administers the program, and deducts 18 percent from amounts ultimately collected for its fee. Collections net of fees are returned to the FTC for distribution to either consumers, in the form of redress, or to the general fund of the Treasury as disgorged amounts. In fiscal years 1999 and 1998, $608,356 and $361,732 (net of fees) was collected based on FTC referrals. The DMS will not accept cases where defendants are in bankruptcy or a foreign defendant is involved.

The FTC does not refer cases to DMS while they are in receivership. During 1999 and 1998, $22,913,153 and $26,826,963 were referred to the DMS for collection.

(j) Adjustments to the Allowance

Adjustments to the allowance for redress represents amounts formally written off during the year in the amount of $41,525,198 and adjustments to the provision for uncollectable  amounts of $73,724,464.

Exhibit A

FEDERAL TRADE COMMISSION
Notes to Statements of Custodial Activity
Change in Liability Accounts
September 30, 1999 and 1998

  MC Mission CP Mission 1999
Total
1998
Total
Civil Penalty Civil Penalty Redress Subtotal
CP
Part 1

Judgments Receivable-Net Beginning

0 120,516 2,379,016 2,499,532 2,499,532 7,861,778
Add:
Current Year Judgments (Note 11h) 0 4,714,095 140,480,148 145,194,243 145,194,243 60,238,403
Prior Year Recoveries 0 115,512 3,195,676 3,311,188 3,311,188 4,260,071

Less:

Collections by FTC/Contractors/Receivers 0 (4,039,298) (21,631,516) (25,670,814) (25,670,814) (26,602,584)
Collections by DOJ for Litigation Fees/Other 0 (165,811)

0

(165,811) (165,811) (64,119)
Adjustments to Allowance (Note 11j) 0 (114,338) (115,249,662) (115,364,000) (115,364,000) (43,194,017)
Judgments Receivable - Net, Ending 0 630,676 9,173,662 9,804,338 9,804,338 2,499,532

Part 2

Judgments Receivable - Net Ending 0 630,676 9,173,662 9,804,338 9,804,338 2,499,532
Judgments Receivable - Net Beginning 0 120,516 2,379,016 2,499,532 2,499,532 7,861,778
Accrual Adjustment: 0 510,160 6,794,646 7,304,806 7,304,806  (5,362,246)

Exhibit B

Federal Trade Commission
Notes to Statements of Custodial Activity
Change in Liability Accounts
September 30, 1999 and 1998

  MC Mission CP Mission Total
Pre-Merger Civil Penalty Subtotal MC Civil Penalty Redress Subtotal - CP

Fiscal Year 1999

Liabilities @ 09/30/99 26,943,728 0 26,943,728 761,184 44,421,695 45,182,879  72,126,607
Liabilities @ 09/30/98 27,481,082 0 27,481,082 220,946 24,979,426 25,200,372 52,681,454
Change in Liability Accounts (537,354) 0  (537,354) 540,238 19,442,269   19,445,153

Fiscal Year 1998

Liabilities @ 09/30/98 27,481,082 0 27,481,082 220,946 24,979,426  25,200,372 52,681,454
Liabilities @ 09/30/97 23,482,749 3,000,000 26,482,749 820,632 41,360,819 42,181,451 68,664,200
Change in Liability Accounts (3,998,333) (3,000,000) (998,333) (599,686) (16,381,393) (16,981,079) (15,982,746)

Required Supplementary Information
Intra-governmental Trading Partners
Fiscal Year Ended 09/30/99
(In Dollars)

Trading Partner Agency Fund Balance with Treasury Accounts Receivable Total
Entity Non-Entity
Intra-governmental Assets:
Treasury 43,180,350 32,235,572

0

75,415,922
Agency of International Development 0 0 123,895 123,895
Other Government Agencies 0 0 5,832 5,832
Total 43,180,350 32,235,572 129,727 75,545,649
 
Trading Partner Agency Accounts Payable  
Intra-governmental Liabilities-Not Covered by Governmental Resources
Department of Justice 26,628,753  
Department of Labor 239,894
Treasury 630,675
Total 27,499,322