Intra-Department of Justice (DOJ)/Intragovernmental Financial Activities

click here to download 2001 Annual Report pdf

FPI’s financial activities interact with and are dependent upon those of DOJ and the federal government as a whole. The following is a discussion of certain intra-DOJ and intragovernmental activities and their relationship with FPI:

Relationship with the Federal Bureau of Prisons
FPI and the Federal Bureau of Prisons (BOP) have a unique relationship in that the nature of their respective missions requires the sharing of facilities and responsibilities relative to the custody, training and employment of federal inmates. The Director of the BOP serves as the Chief Executive Officer of FPI and the Chief Operating Officer of FPI serves as an Assistant Director of the BOP. The BOP provides land to FPI for the construction of its manufacturing facilities and both FPI and BOP share certain facilities, generally at no cost to FPI.

Self Insurance
In accordance with federal government policy, FPI is uninsured with respect to property damage, product liability, and other customary business loss exposures. Losses incurred are absorbed as a current operating expense or, if they are induced by factors related to FPI’s relationship with the Federal Prison System, may be reimbursed by BOP. Certain other costs, principally relating to personal injury claims, are paid directly by the federal government.

Federal Employees Compensation Act
The Federal Employees Compensation Act (FECA) provides income and medical cost protection to federal civilian employees injured on the job, employees who have incurred a work-related occupational disease, and beneficiaries of employees whose death is attributable to a job related injury or occupational disease. The United States Department of Labor (DOL), which administers FECA, annually charges each federal agency and department for its applicable portion of claims and benefits paid in the preceding year. During the fiscal years ended September 30, 2001 and 2000, such claims and benefits, as charged to FPI, approximated $ 799,000 and $ 684,000 respectively, for which the related current liability is disbursed in the subsequent period. DOL also calculates the liability of the federal government for future claims and benefits, which includes the estimated liability of death, disability, medical, and other approved costs. Future claims and benefits are determined from an actuarial extrapolation, utilizing historical benefit payment patterns and calculations of projected future benefit payments discounted to current value over a 23.5 year period. FPI’s estimated future liability approximated $7,979,000 and $5,710,000 at September 30, 2001 and 2000, respectively.

Retirement
Substantially all of FPI’s civilian employees are covered under either the Civil Service Retirement System (CSRS) or the Federal Employees Retirement System (FERS). For employees covered under CSRS (those employees hired prior to January 1, 1984), FPI withholds approximately 7 percent (for normal retirement) or 7.5 percent (for hazardous duty retirement) of each employee’s salary and contributes a matching amount to the fund. CSRS covered employees do not have Federal Insurance Contributions Act (FICA) withholdings and, thus, are not fully eligible to receive Social Security benefits. For employees covered under FERS (generally those employees hired on or after January 1, 1984), FPI withholds, in addition to FICA withholdings, approximately 1.3 percent of employee gross earnings, and matches such withholdings with a 7.0 percent contribution.

Under FERS, employees also receive retirement benefits from Social Security and, if applicable, benefits from a defined contribution plan (thrift). Under the thrift plan, an employee may contribute (tax deferred) up to 10 percent of salary to an investment fund. FPI then matches this amount up to 5 percent. Those employees which elected to remain under CSRS after January 1, 1984 continue to receive benefits in place, and may also contribute (tax deferred) up to 6 percent of their salary to the thrift plan, but with no matching amount contributed by FPI.

CSRS and FERS are multi-employer plans. Although FPI funds a portion of pension benefits relating to its employees, and provides for the necessary payroll withholdings, it does not maintain or report information with respect to the assets of the plans, nor does it report actuarial data with respect to accumulated plan benefits or the pension liability relative to its employees. The reporting of such amounts is the responsibility of the U.S. Office of Personnel Management.

FPI’s contribution to both plans was approximately $20,580,000 and $16,615,000 for the years ended September 30, 2001 and 2000, respectively.

In addition, based on the requirements of Statement of Federal Financial Accounting Standard No. 5, Accounting for Liabilities of the Federal Government (SFFAS No. 5), FPI must recognize its share of the cost of providing pension benefits to eligible employees utilizing cost factors determined by the Office of Personnel Management. The effect of the implementation of SFFAS No. 5 guidance resulted in the increase of pension expense, a component of general and administrative expense by approximately $3,217,000 and $3,349,000 in the fiscal years ended September 30, 2001 and 2000, respectively, with an offsetting credit to other income in each respective year. However, because of the offsetting credit, the recording of these costs have no impact on reported net income (loss).

Health Benefits and Life Insurance
FPI, through the Office of Personnel Management (OPM), offers health and life insurance plans under which premium costs for health care are shared between FPI and the employees. A substantial portion of life insurance premiums are paid for by employees. Amounts paid by FPI for health benefits approximated $5,869,000 and $4,023,000 for the fiscal years ended September 30, 2001 and 2000, respectively.

OPM also provides health care and life insurance benefits for FPI’s retired employees. Based on the requirements of SFFAS No. 5, FPI must recognize an expense related to its share of the cost of such post-retirement health benefits and life insurance on a current basis (while its employees are still working), with an offsetting credit to other income. Costs in this regard, which approximated $4,406,000 and $4,038,000 during the fiscal years ended September 30, 2001 and 2000, respectively, were determined by OPM utilizing cost factors which estimate the cost of providing post-retirement benefits to current employees. However, because of the offsetting credit, the recording of these costs have no impact on reported net income (loss).

Future post-retirement health care and life insurance benefit costs are not reflected as a liability on FPI’s financial statements, as such costs are expected to be funded in future periods by OPM.