text:
 |
 52012PC0607
 Pasiūlymas TARYBOS SPRENDIMAS dėl Europos Sąjungos pozicijos, kurios ji turi laikytis Jungtinių Tautų Europos ekonomikos komisijos administraciniame komitete, dėl Vaikų apsaugos sistemų tobulinimo taisyklės projekto /* COM/2012/0607 final - 2012/0291 (NLE) */
 AIŠKINAMASIS MEMORANDUMAS
 1. PASIŪLYMO
 APLINKYBĖS
 ·
 Pasiūlymo pagrindas ir tikslai
 Jungtinių Tautų Europos ekonomikos
 komisija (JT EEK) tarptautiniu lygmeniu rengia suderintus reikalavimus, kuriais
 siekiama pašalinti pataisyto 1958 m. susitarimo šalių prekybos
 variklinėmis transporto priemonėmis ir sistemomis tokioms
 variklinėms priemonėms technines kliūtis ir užtikrinti
 aukštą tokių transporto priemonių ir sistemų saugos ir
 aplinkos apsaugos lygį.
 JT EEK neseniai parengė taisyklės
 „Vienodos nuostatos dėl variklinėse transporto priemonėse
 naudojamų patobulintų vaikų apsaugos sistemų patvirtinimo“[1], projektą. Šios
 taisyklės projekto tikslas – užtikrinti variklinėse transporto
 priemonėse vežamų vaikų, sėdinčių tokiose
 vaikų apsaugos priemonėse, aukšto lygio saugumą.
 ES lygiu, Tarybos direktyvos 91/671/EEB
 dėl privalomo saugos diržų ir vaikų apsaugos sistemų
 naudojimo transporto priemonėse[2]
 2 straipsniu įpareigojama variklinėse transporto priemonėse
 naudoti tinkamas vaikų apsaugos sistemas.
 Šiuo pasiūlymu siekiama apibrėžti
 Sąjungos poziciją dėl JT EEK taisyklės, susijusios su
 vaikų apsaugos sistemų tobulinimu, projekto, ir galiausiai sudaryti
 sąlygas Sąjungai, atstovaujamai Komisijos, balsuoti už šį
 projektą.
 Vėlesniu etapu imamasi veiksmų, kad
 JT EEK taisyklę dėl vaikų apsaugos sistemų tobulinimo
 būtų galima taikyti Europos Sąjungoje tokių sistemų
 tipui patvirtinti ir ES piliečiams naudojant tokias priemones.
 ·
 Bendrosios aplinkybės
 2009 m. liepos 13 d. Europos
 Parlamento ir Tarybos reglamente (EB) Nr. 661/2009 dėl
 variklinių transporto priemonių, jų priekabų ir joms
 skirtų sistemų, sudėtinių dalių bei atskirų
 techninių mazgų tipo patvirtinimo, atsižvelgiant į jų
 bendrąją saugą, reikalavimų[3]
 yra nustatyti pagrindiniai vaikų apsaugos sistemų tipo patvirtinimo
 reikalavimai, darant tiesioginę nuorodą į JT EEK taisyklę
 Nr. 44 „Vienodos nuostatos dėl variklinių transporto
 priemonių keleiviams vaikams skirtų apsaugos priemonių
 patvirtinimo („vaikų apsaugos priemonės“)[4]. Buvo būtina įtraukti
 tiesioginę nuorodą į konkrečius vaikų apsaugos
 sistemų tipo patvirtinimo reikalavimus pagal JT EEK ir taip pat ES lygiu.
 Dabar yra tikimasi, kad Sąjunga balsuos
 už susijusios JT EEK vaikų apsaugos sistemų tobulinimo taisyklės
 projektą, siekiant bendrų, tarptautiniu lygiu suderintų reikalavimų,
 kurie palengvintų tarptautinę prekybą. Tai suteiks Europos
 bendrovėms galimybę laikytis visame pasaulyje, t. y. pataisyto
 1958 m. susitarimo, susijusio su naujos kartos vaikų apsaugos
 sistemomis, susitariančiosiose šalyse, pripažintų reikalavimų.
 ·
 Pasiūlymo srityje galiojančios
 nuostatos
 Tarybos direktyva 77/541/EEB dėl
 valstybių narių įstatymų, reglamentuojančių
 motorinių transporto priemonių saugos diržus ir keleivio apsaugos
 sistemas, suderinimo[5],
 atsižvelgiant į XVII priede nustatytus vaikų apsaugos sistemų
 reikalavimus.
 Tarybos direktyva 91/671/EEB dėl
 privalomo saugos diržų ir vaikų apsaugos sistemų naudojimo
 transporto priemonėse, įskaitant vaikų apsaugos sistemų
 naudojimą variklinėse transporto priemonėse.
 Reglamentas (EB) Nr. 661/2009 dėl bendrosios
 saugos, kuriame daroma tiesioginė nuoroda į JT EEK taisyklę
 Nr. 44 – Vienodos nuostatos dėl variklinių transporto
 priemonių keleiviams vaikams skirtų apsaugos priemonių
 patvirtinimo („vaikų apsaugos priemonės“).
 ·
 Derėjimas su kitomis Sąjungos politikos
 sritimis ir tikslais
 Pasiūlymas atitinka Direktyvos 91/671/EEB
 tikslus dėl saugos diržų ir vaikų apsaugos sistemų
 naudojimo, taigi atitinka ir ES tikslą nustatyti aukšto lygio kelių
 eismo saugą vežant vaikus variklinėmis transporto priemonėmis.
 2. KONSULTACIJŲ SU
 SUINTERESUOTOSIOMIS ŠALIMIS IR POVEIKIO VERTINIMO REZULTATAI
 · Konsultacijos su suinteresuotomis šalimis
 Europos Komisija, rengdama pasiūlymą, konsultavosi su suinteresuotaisiais subjektais. Buvo surengtos bendros konsultacijos neformalioje JT EEK vaikų apsaugos sistemų darbo grupėje, kuri veikia pasyviosios saugos darbo grupėje. Taip pat buvo išplatinta informacija, o derinant projektą vyko tolesnės diskusijos Variklinių transporto priemonių techniniame komitete. · Poveikio vertinimas Europos Komisija atliko Reglamento (EB) Nr. 661/2009 poveikio vertinimą, apėmusį vaikų apsaugos sistemas. Nuostatos dėl patobulintų vaikų apsaugos sistemų yra papildomos. Atliktos kitos svarbios analizės vykdant septintosios bendrosios programos projektą „Vaikų pažangioji sauga Europos keliuose“ (CASPER) ir projektą „Vyresnių vaikų apsauga“ (EPOCh). Į jų rezultatus atsižvelgė neformali JT EEK pasyviosios saugos darbo grupėje veikianti vaikų apsaugos sistemų darbo grupė.
 3. TEISINIAI PASIŪLYMO
 ASPEKTAI
 ·
 Siūlomų veiksmų santrauka
 Atsižvelgdama į šį
 pasiūlymą Sąjunga, atstovaujama Komisijos, galės balsuoti
 už šį JT EEK taisyklių projektą dėl vaikų
 apsaugos sistemų tobulinimo.
 ·
 Teisinis pagrindas
 Siekiant prisitaikyti prie Sutarties dėl
 Europos Sąjungos veikimo ypatumų, pirmiau naudotas teisinis
 pagrindas, nurodytas 1 konstatuojamojoje dalyje, buvo pakeistas tiesiogine
 nuoroda į 218 straipsnio 9 dalį, dėl to turėjo
 būti pakeistas pasirengimo WP 29 posėdžiams procesas, taigi
 keitėsi ir teisinė forma – dabar tai yra Tarybos, ne Komisijos
 sprendimas, kuris pasirengimo proceso metu naudotas pastaruosius 14 metų.
 ·
 Subsidiarumo principas
 Vaikų apsaugos sistemų reikalavimai
 ES lygiu yra jau suderinti. Naujos nuostatos tik papildo naujos kartos
 vaikų apsaugos sistemų reikalavimus. Tik Sąjunga gali balsuoti
 už tokius tarptautinius dokumentus kaip JT EEK taisyklių projektai ir
 įtraukti juos į Sąjungos variklinėse transporto
 priemonėse naudojamų apsaugos sistemų tipo patvirtinimo
 sistemą. Taip ne tik išvengiama vidaus rinkos susiskaidymo, bet ir visoje
 ES užtikrinami vienodi saugos standartai. Be to, esama masto ekonomijos
 privalumų: gaminiai gali būti gaminami visai Europos ir netgi
 tarptautinei rinkai ir jų nereikia specialiai pritaikyti, kad būtų
 gautas nacionalinis tipo patvirtinimas kiekvienoje valstybėje narėje
 ar kitose JT EEK narėse.
 Todėl pasiūlymas atitinka
 subsidiarumo principą.
 ·
 Proporcingumo principas
 Pasiūlymas atitinka proporcingumo
 principą, kadangi juo nesiekiama daugiau nei būtina norint
 įgyvendinti tinkamo vidaus rinkos veikimo užtikrinimo tikslus, tuo
 pačiu išlaikant aukštą visuomenės saugos ir apsaugos lygį.
 ·
 Pasirinkta priemonė
 Siūloma priemonė – Tarybos
 sprendimas.
 Šis pasirinkimas laikomas tinkamu, nes
 atitinka SESV 218 straipsnio 9 dalies reikalavimus.
 4. POVEIKIS BIUDŽETUI
 Pasiūlymas neturi poveikio Sąjungos
 biudžetui.
 2012/0291 (NLE)
 Pasiūlymas
 TARYBOS SPRENDIMAS
 dėl Europos Sąjungos pozicijos,
 kurios ji turi laikytis Jungtinių Tautų Europos ekonomikos komisijos
 administraciniame komitete, dėl Vaikų apsaugos sistemų
 tobulinimo taisyklės projekto
 EUROPOS SĄJUNGOS TARYBA,
 atsižvelgdama į Sutartį dėl
 Europos Sąjungos veikimo, ypač į jos 114 straipsnį
 kartu su 218 straipsnio 9 dalimi,
 atsižvelgdama į Europos Komisijos
 pasiūlymą,
 kadangi:
 (1) Tarybos sprendimu 97/836/EB[6] Sąjunga prisijungė
 prie Jungtinių Tautų Europos ekonomikos komisijos (JT EEK) susitarimo
 dėl suvienodintų techninių normų priėmimo
 ratinėms transporto priemonėms, įrangai ir dalims, kurios gali
 būti montuojamos ir (arba) naudojamos ratinėse transporto
 priemonėse, ir pagal tas normas suteiktų patvirtinimų abipusio
 pripažinimo sąlygų (pataisytas 1958 m. susitarimas);
 (2) standartizuotais JT EEK
 taisyklės „Vienodos nuostatos dėl variklinėse transporto
 priemonėse naudojamų patobulintų vaikų apsaugos
 sistemų patvirtinimo“[7]
 projekto reikalavimais ketinama pašalinti technines pataisyto 1958 m.
 susitarimo šalių prekybos variklinėms transporto priemonėms
 skirtomis vaikų apsaugos sistemomis kliūtis ir užtikrinti, kad tokios
 sistemos suteiktų aukšto lygio saugą ir apsaugą;
 (3) reikėtų nustatyti,
 kokios pozicijos dėl minėto JT EEK taisyklės projekto
 priėmimo turėtų būti Sąjungos vardu laikomasi
 pataisyto 1958 m. susitarimo administraciniame komitete,
 PRIĖMĖ ŠĮ
 SPRENDIMĄ:
 1 straipsnis
 Europos Sąjungos, atstovaujamos
 Komisijos, pozicija pataisyto 1958 m. susitarimo administraciniame
 komitete – balsuoti už JT EEK taisyklės „Vienodos nuostatos dėl
 variklinėse transporto priemonėse naudojamų patobulintų
 vaikų apsaugos sistemų patvirtinimo“ projektą, pateiktą dokumente
 ECE TRANS/ WP.29/2012/53.
 2 straipsnis
 Šis sprendimas įsigalioja pranešimo apie
 jį dieną.
 3 straipsnis
 Šis sprendimas skirtas Europos Komisijai.
 Priimta Briuselyje
 Tarybos
 vardu
 Pirmininkas
 [1] JT
 EEK dokumentas ECE TRANS/WP.29/2012/53.
 [2] OL L 373, 1991 12 31, p. 26.
 [3] OL L 200, 2009 7 31, p. 1.
 [4] OL L 233, 2011 9 9, p. 95.
 [5] OL L 220, 1977 8 29, p. 95.
 [6] OL L 346, 1997 12 17, p. 78.
 [7] JT EEK dokumentas ECE TRANS/WP.29/2012/53.


type: wikipedia

text:
Mihklipäev on peaingel Miikaeli nimepäev, mida tähistatakse 29. septembril. Maausulistel on sama päev tähistatud nimetusega kasupäev.
 Katoliku kirikus on 29. septembril kirikupüha, pühade peainglite Miikaeli, Gabrieli ja Raafaeli püha. Anglikaani kirikus on sel päeval püha Miikaeli ja kõikide inglite püha.
 Püha Miikaeli kultus sai alguse 4. sajandil idakirikus ning jõudis läänekirikusse 5. sajandiks, mil tema püha hakati tähistama 29. septembril.
 Keskajal oli mihklipäev suur usupüha. Paljudes Euroopa maades langes see lõikuse ajale. Tekkisid mihklipäevaga seotud rahvatraditsioonid.
 Mihklipäev eesti rahvakalendris
 Eesti rahvakalendris tähistati mihklipäeva 29. septembril Juliuse kalendri järgi, millele Gregoriuse kalendris praegu vastab 12. oktoober.
 Mihklipäev lõpetas jüripäevaga alanud suvepoolaasta. Selleks päevaks pidid välistööd olema lõpetatud. Mihklipäeval tapeti lammas, mille juurde öeldi: "Igal oinal oma mihklipäev". Pruuliti õlut, toidulaud oli rikkalik. Söödi sülti, klimpide ja aedviljaga lihasuppi, keedetud liha ja verikäkke – kõik lambast. Mõnel pool tapeti ka kodulinde. Küpsetati rukki-, odra- ja nisuleiba, sepikut, saia ja kooke, samuti naerist ja kaalikaid.
 Lõikuspüha ja välistööde lõpu kõrval pühitseti ka suvilistega lepingute lõpetamist ning mõisast vabastati teovaimud. Käidi kõrtsis ja mihklilaadal.
 Karjased tegid koos mihklituld, sellel küpsetati kaasavõetud kaalikaid ja kartuleid. Tartu- ja Võrumaal ajasid nad valget oinast või kodukitse kolm korda ümber kivi, et lumi rutem maha tuleks. Karja koju tulles vaadati, kas loomadel on kõrsi suus – see tähendas talvist toidupuudust. Pärast mihklipäeva karja eriti välja ei aetud, kui veel aetigi, siis kariloomad ilma kelladeta ja karjane karjasesarveta. Usuti, et mihklipäevast on hundil luba loomi murda, ega jäetud loomi ööseks välja.
 Kuuvalge ja päikesepaiste mihklipäeval tähendasid, et loomasöödast puudust ei tule.
 Pärast mihklipäeva elustus taas küla seltskondlik elu, mis oli jaanipäevajärgsel kibedal tööajal soiku jäänud. Algas pulmapidude kõrghooaeg, mis kestis jaanuari alguseni.
 Mihklipäev teiste maade rahvakalendris
 Inglismaa
 Inglismaal ja Walesis oli mihklipäev (Michaelmas) üks aastaaja vahetuse, maksude tasumise ning sulaste ja teenijate palkamise päevadest (quarter day).
 Inglismaal söödi mihklipäeval hane: see pidi järgneval aastal päästma rahahädast.
 Iirimaa
 Iiri kalendris oli mihklipäev (Michaelmas) üks aastaaegade vahetuse ja maksude tasumise päevadest (quarter day).
 Iirimaal tähendas mihklipäevakoogi sisse peidetud sõrmuse leidmine peatset abiellumist.
 Sügissemester
 Oxfordi ja Cambridge'i ülikoolis nimetatakse mihklipäeva paiku algavat kaheksanädalast õppetööperioodi mihklipäeva järgi Michaelmas term.
 Viited
 Välislingid
 Mihklipäev ehk kasupäev
 Eesti rahvakalender


text:
Spahi (også sipahi, sepahi eller spakh; fra tyrkisk sipahi, oprindelig fra persisk سپاهی, sepâhi) var oprindeligt navnet på det fornemste af seks rytterkorps ("kapu kuli"), som aflønnedes af den osmanniske statskasse. Senere overgik navnet til alle disse korps og endelig til alt irregulært rytteri.
 Franskmændene brugte betegnelsen for det rytteri, som de oprettede i Afrika af nordafrikanske styrker. Spahi, som oprindelig kun var beregnet til ordonnanstjeneste, udgjorde i 1834 4 eskadroner, men var i 1845 vokset til 3 regimenter, hver på 6 eskadroner. De blev siden ligestillet med det øvrige kavaleri. 1er régiment de spahis, en panserbataljon i 6. lette panserbrigade (6ème BLB), er i dag alene om at bære det nordafrikanske kavaleris traditioner i den franske hær.
 Det engelske udtryk sepoy kommer af spahi, fra persisk via urdu.
 Eksterne henvisninger
 Om spahi i Brockhaus Conversations-Lexikon, bind 5, Amsterdam 1809, s. 326-327
 Om spahi i Herders Conversations-Lexikon, Freiburg im Breisgau 1857, bind 5, s. 260.
 Om spahi i Pierer's Universal-Lexikon, bind 16, Altenburg 1863, s. 325.
 Musee de Spahis, Senlis, France
 Om spahi på LookLex
 Militær


type: other

jurisdiction: US

text: b"FEDERAL PRISON INDUSTRIES, INC.\n\n\n ANNUAL FINANCIAL STATEMENTS \n\n FISCAL YEAR 2011 \n\n U.S. Department of Justice \n\n Office of the Inspector General \n\n Audit Division \n\n\n Audit Report 12-06 \n\n December 2011\n\n\n\x0c\x0c FEDERAL PRISON INDUSTRIES, INC. \n\n ANNUAL FINANCIAL STATEMENTS \n\n FISCAL YEAR 2011\n\n\n\n OFFICE OF THE INSPECTOR GENERAL \n\n COMMENTARY AND SUMMARY\n\n\n\n This audit report contains the Annual Financial Statements of the\nFederal Prison Industries, Inc. (FPI) for the fiscal years (FY) ended\nSeptember 30, 2011, and September 30, 2010. In accordance with the\nGovernment Corporation Control Act, as amended (31 U.S.C. \xc2\xa79105), and\nunder the direction of the Office of the Inspector General (OIG), Cotton &\nCompany LLP performed the audit in accordance with U.S. generally\naccepted government auditing standards. The audit resulted in an\nunqualified opinion on the FY 2011 financial statements. An unqualified\nopinion means that the financial statements present fairly, in all material\nrespects, the financial position and the results of the entity\xe2\x80\x99s operations in\nconformity with U.S. generally accepted accounting principles. For FY 2010,\nthe FPI also received an unqualified opinion on its financial statements (OIG\nReport No. 11-06).\n\n Cotton & Company LLP also issued reports on internal control over\nfinancial reporting and on compliance and other matters. The auditors did\nnot identify any significant deficiencies in the FY 2011 Independent Auditors\xe2\x80\x99\nReport on Internal Control over Financial Reporting. In the FY 2011\nIndependent Auditors\xe2\x80\x99 Report on Compliance and Other Matters, the auditors\nidentified no instances of non-compliance with applicable laws and\nregulations and the Federal Financial Management Improvement Act of\n1996.\n\n The OIG reviewed Cotton & Company LLP\xe2\x80\x99s reports and related\ndocumentation and made necessary inquiries of its representatives. Our\nreview, as differentiated from an audit in accordance with U.S. generally\naccepted government auditing standards, was not intended to enable us to\nexpress, and we do not express, an opinion on the FPI\xe2\x80\x99s financial\nstatements, conclusions about the effectiveness of internal control,\nconclusions on whether the FPI\xe2\x80\x99s financial management systems\nsubstantially complied with the Federal Financial Management Improvement\nAct of 1996, or conclusions on compliance with laws and regulations. Cotton\n& Company LLP is responsible for the attached auditors\xe2\x80\x99 reports dated\nNovember 1, 2011, and the conclusions expressed in the reports. However,\nour review disclosed no instances where Cotton & Company LLP did not\ncomply, in all material respects, with U.S. generally accepted government\nauditing standards.\n\x0cThis page intentionally left blank.\n\n\n\x0c FEDERAL PRISON INDUSTRIES, INC.\n\n\n ANNUAL FINANCIAL STATEMENTS\n\n\n FISCAL YEAR 2011\n\n\n\n TABLE OF CONTENTS\n\n\n\n PAGE\n\nMESSAGE FROM THE ACTING CHIEF EXECUTIVE OFFICER AND\n THE CHIEF OPERATING OFFICER.........................................................1\n\n\n\nMANAGEMENT'S DISCUSSION AND ANALYSIS..........................................5\n\n\n\nINDEPENDENT AUDITORS\xe2\x80\x99 REPORTS\n\n\n\n REPORT ON FINANCIAL STATEMENTS ................................................ 15\n\n\n\n REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING............ 17\n\n\n\n REPORT ON COMPLIANCE AND OTHER MATTERS ................................ 19\n\n\n\nPRINCIPAL FINANCIAL STATEMENTS AND RELATED NOTES\n\n\n\n BALANCE SHEETS ........................................................................... 23\n\n\n\n STATEMENTS OF OPERATIONS AND CUMULATIVE RESULTS OF\n\n\n OPERATIONS ............................................................................. 24\n\n\n\n STATEMENTS OF CASH FLOWS ......................................................... 25\n\n\n\n NOTES TO FINANCIAL STATEMENTS.................................................. 26\n\n\n\x0cThis page intentionally left blank.\n\n\n\x0c \xe2\x80\xa2 -- .\nunlcor \n We're fife changing.\n\n\n\n\n November 9, 2011\n\n\n\n\nWe are pleased to present the Fiscal Year 2011 Annual Management Report to the Congress of\nthe United States. This report includes FPI's commercial financial statements, Management's\nDiscussion and Analysis, Office of the Inspector General Commentary and Summary, and the\nindependent auditor's report on the Corporation's financial statement, internal controls,\ncompliance and other matters. FPI received an unqualified audit opinion on its financial\nstatements and it was free of significant deficiencies or material weaknesses.\n\nThe FPI program is one of the Bureau of Prisons' (BOP) most important correctional\nmanagement and reentry programs. It was established by statute and Executive Order in 1934, to\nprovide opportunities for education and work-related experiences to federal offenders. FPI's\nmission is to employ and train as many Federal inmates as possible, while maintaining its self\xc2\xad\nsufficiency without appropriated funds, and minimizing its impact on private sector business.\nThe program reduces recidivism, increases the likelihood that participants will be gainfully\nemployed upon release, and is a significant contributor to the safe and effective management of\nBOP facilities.\n\nAs a federal government corporation, FPI must function as a program and a business and faces a\ndynamic set of external as well as internal constraints. In recent years, the nation's economic\ntrend has had a trickle down effect on FPI. Increased competition for government business,\nreduced discretionary spending of its government customers and adverse legislation affecting\nFPI's mandatory source have impacted FPI's ability to operate at the same level it has in prior\nyears. During fiscal year 2009, FPI recognized this downward trend and began taking the\nnecessary steps to ensure that it remains viable during these challenging economic times.\n\nFPI is committed to maintaining a lean organization to ensure it continues to function as an\neffective program and meet its core mission. Toward this end, in an effort to conserve\nresources, FPI has taken steps over the last three years to ensure that its factory capacity is\ncommensurate with its customers' current demand. Additionally, FPI has made progress toward\nreducing factory overhead and general administrative expenses. While FPI incurred an operating\nloss for fiscal year 2011, the loss represented only two tenths of one percent of its sales for the\nyear.\n\nMaintaining cash is also an important component of FPI's plan to respond to the future demands\nof its customers. FPI continues to focus on reducing its inventories, delaying purchases,\n\n\n\n A Life-Changing Program - unicor.gov\n -1-\n\x0cminimizing capital expenditures and ensuring that accounts receivable are collected promptly.\nDuring fiscal year 2011 FPI was successful in increasing its cash balance by $28.7 million.\n\nFPI remains grateful for the outstanding contributions and dedication of its staff as well as the\nexceptional leadership provided by FPI's Board of Directors during these difficult financial\ntimes.\n\n\n\n\n /~R.\xc2\xa3MfL\nThomas R. Kane, Acting Chief Executive Officer erating Officer\n\n\n\n\n A Life-Changing Program - unicor.gov\n -2-\n\x0cU.S. DEPARTMENT OF JUSTICE\n\n\n\nFEDERAL PRISON INDUSTRIES, INC.\n\n\n MANAGEMENT\xe2\x80\x99S\n DISCUSSION & ANALYSIS\n (UNAUDITED)\n\n\n\n\n -3-\n\x0cThis page intentionally left blank.\n\n\n\n\n\n\n -4-\n\x0c U.S. Department of Justice\n\n\n Federal Prison Industries, Inc.\n\n\n Management\xe2\x80\x99s Discussion and Analysis\n\n\n (Unaudited)\n\n\n\n\nMission\n\nIt is the mission of Federal Prison Industries, Inc. (FPI) to employ and provide job skills training to\nthe greatest practicable number of inmates confined within the Federal Bureau of Prisons; contribute\nto the safety and security of our Nation\xe2\x80\x99s federal correctional facilities by keeping inmates\nconstructively occupied; provide market-quality products and services; operate in a self-sustaining\nmanner; and minimize FPI\xe2\x80\x99s impact on private business and labor.\n\nOrganizational Structure of Federal Prison Industries, Inc.\n\nFPI is a wholly-owned government corporation created by Congress in 1934. FPI is authorized to\noperate industries in federal penal and correctional institutions and disciplinary barracks (18 U.S.C. \xc2\xa7\n4121 to \xc2\xa7 4129). The Director of the Federal Bureau of Prisons (BOP), who has jurisdiction over all\nfederal correctional institutions, is the Chief Executive Officer. General management of FPI is\nprovided by the Chief Operating Officer who also serves as an Assistant Director for the BOP.\n\nIn fiscal year 2011, FPI operated in seven business segments: Clothing and Textiles, Electronics,\nFleet Management and Vehicular Components, Industrial Products, Office Furniture, Recycling, and\nServices. FPI has industrial and service operations at 88 factories located at 66 prison facilities\nrepresenting approximately 8% of the work eligible inmate population as of September 30, 2011.\nFactories are operated by FPI supervisors and managers, who train and oversee the work of inmates.\nThe factories utilize raw material and component parts purchased from the private sector to produce\nfinished goods. Orders for goods and services are obtained through marketing and sales efforts\nmanaged by FPI staff. Some products and all services are provided on a non-mandatory, preferred\nsource basis.\n\nFPI processes primarily all customer orders and invoicing through a centralized customer service and\naccounts receivable center at Lexington, Kentucky. Vendor payments are processed at a centralized\naccounts payable center at the Butner, North Carolina facility. In addition, FPI performs product\ndevelopment, testing and costing at its facility in Englewood, Colorado.\n\nFinancial Structure\n\nFPI operates as a revolving fund and does not receive an annual appropriation. The majority of\nrevenues are derived from the sale of products and services to other federal departments, agencies,\nand bureaus. Operating expenses such as the cost of raw materials and supplies, inmate wages, staff\nsalaries, and capital expenditures are applied against these revenues resulting in operating income or\nloss, which is reapplied toward operating costs for future production. In this regard, FPI makes\n\n\n\n\n -5-\n\x0ccapital investments in buildings and improvements, machinery, and equipment as necessary in the\nconduct of its industrial operation.\n\nFPI sells products and services to the majority of federal departments, agencies and bureaus. FPI\xe2\x80\x99s\nlargest federal government customers include the Department of Defense (DOD), the Department of\nHomeland Security (DHS), the Department of Justice (DOJ), the General Services Administration\n(GSA), and the Social Security Administration (SSA).\n\nCritical Accounting Policies\n\nThe following discussion and analysis of FPI\xe2\x80\x99s financial condition, results of operations, liquidity\nand capital resources are based upon FPI\xe2\x80\x99s financial statements, which have been prepared in\naccordance with U.S. generally accepted accounting principles based on accounting standards issued\nby the Financial Accounting Standards Board (FASB), the private sector standards-setting body.\nThese generally accepted accounting principles require FPI management to make estimates and\njudgments that affect the reported amount of assets, liabilities, revenues and expenses. In this regard,\nFPI management evaluates the estimates on an on-going basis, including those related to product\nreturns, bad debt, inventories, long-lived assets, and contingencies and litigation. FPI bases its\nestimates upon historical experience and various other assumptions that FPI believes are reasonable\nunder the circumstances. The actual results may differ from these estimates when assumptions or\nconditions change.\n\nFPI believes that some of its accounting policies involve complex or higher degrees of judgment than\nits other accounting policies. The following accounting policies have been identified by FPI\nmanagement as being critical and therefore require more significant estimates or reliance on a higher\ndegree of judgment on the part of FPI management.\n\nRevenue recognition: Revenue is generally recognized when 1) delivery has occurred or services\nhave been rendered, 2) persuasive evidence of an arrangement exists, 3) there is a fixed or\ndeterminable price, and 4) collectability is reasonably assured. Revenue from contracts that specify a\ncustomer acceptance criteria is not recognized until either customer acceptance is obtained or upon\ncompletion of the contract. Sales returns are primarily replaced with like items and are recorded as\nthey occur.\n\nRevenue is recognized on multiple element (numerous stages of product delivery, set up, and\ninstallation) agreements as a single unit of accounting for manufactured items when the product has\nbeen accepted by the customer. Revenue for services provided on behalf of FPI is recognized when\nthe service provider presents a valid invoice including a customer acceptance or completion notice.\n\nAllowance for doubtful accounts receivable: The allowance for doubtful accounts is based upon\nan analysis of several factors including payment trends, historical write off experience, credit quality\nfor non-governmental accounts, and specific analysis of collectability of an account. During the\ncourse of time, these factors may change which will cause the allowance level to adjust accordingly.\nAs part of their analysis, customer accounts determined to be unlikely to be paid are recorded as a\ncharge to bad debt expense in the income statement and the allowance account is increased. When it\n\n\n\n -6-\n\x0cbecomes certain that a customer account will not be paid, the receivable is written off by removing\nthe balance from accounts receivable.\n\nAs of September 30, 2011 and September 30, 2010, FPI had established an allowance for bad debt in\nthe amount of $.66 million and $.83 million on accounts receivable balances of $47.34 million and\n$34.83 million, respectively.\n\nInventory Valuation: FPI maintains its inventory primarily for the manufacture of goods for sale to\nits customers. FPI\xe2\x80\x99s inventory is composed of three categories: Raw Materials, Work-in-Process,\nand Finished Goods. These categories are generally defined by FPI as follows: Raw Materials\nconsist of materials that have been acquired and are available for the production cycle, Work-in-\nProcess is composed of materials that have moved into the production process and have some\nmeasurable amount of labor and overhead added by FPI, Finished Goods are materials with FPI\nadded labor and overhead that have completed the production cycle and are awaiting sale to\ncustomers.\n\nRaw material inventory value is based upon moving average cost. Inventories are valued at the\nlower of average cost or market value (LCM) and include materials, labor and manufacturing\noverhead. Market value is calculated on the basis of the contractual or anticipated selling price, less\nallowance for administrative expenses. FPI values its finished goods and sub-assembly items at a\nstandard cost that is periodically adjusted to approximate actual cost. FPI has established inventory\nallowances to account for LCM adjustments and obsolete items that may not be utilized in future\nperiods.\n\n\nProgram Values\n\nIt is the mission of Federal Prison Industries, Inc. (FPI) to employ and provide job skills training to\nthe greatest practicable number of inmates confined within the Federal Bureau of Prisons; contribute\nto the safety and security of our Nation\xe2\x80\x99s federal correctional facilities by keeping inmates\nconstructively occupied; provide market-quality products and services; operate in a self-sustaining\nmanner; and minimize FPI\xe2\x80\x99s impact on private business and labor.\n\nThe goal of FPI is to reduce undesirable inmate idleness by providing a full-time work program for\ninmate populations (goal of approximately 25 percent of \xe2\x80\x9cwork eligible\xe2\x80\x9d inmates). Many of the\ninmates do not have marketable employment skills. FPI provides a program of constructive\nindustrial work and services wherein job skills can be developed and work habits acquired.\n\nAs with most governmental programs, the real value of the entity is not readily measured in dollars\nand cents and is not always contained in the financial reports. FPI has existed as an effective\ncorrectional program for 77 years. Over the course of these years, FPI has positively impacted the\nlives of countless inmates and staff members that reside and work in the Bureau of Prisons and the\nsurrounding local communities in which we live.\n\nIt is impossible to quantify the extent to which FPI\xe2\x80\x99s success has prevented inmate unrest that would\n\n\n\n -7-\n\x0chave been costly in lives as well as dollars. In the face of an escalating inmate population and an\nincreasing percentage of inmates with histories of violence, FPI\xe2\x80\x99s programs have helped ease tension\nand avert volatile situations, thereby protecting lives and federal property. Prisons without\nmeaningful activities for inmates are dangerous prisons, and dangerous prisons are expensive\nprisons. The work and education programs of FPI have played an essential role in protecting lives,\npreserving stability and saving money in America\xe2\x80\x99s federal prisons.\n\nAt the same time, FPI has met its other goal of offering opportunities for inmates who want to take\nthe personal responsibility for rehabilitating themselves. Most inmates eventually will be returned to\nsociety; industrial and educational programs can help them to steer clear of criminal activity after\nrelease. FPI plays a vital role in management of inmates, and also improves the likelihood that\ninmates will remain crime-free upon their release from BOP custody. A comprehensive study\nconducted by the BOP demonstrated that FPI provides inmates with an opportunity to develop work\nethics and skills, contributes substantially to lower recidivism and increases job-related success of\ninmates upon release. This study indicates that inmates involved in FPI work programs and\neducational programs are substantially less likely to return to prison. The impact on the lives of\npeople who live in the communities in which these inmates will return is immeasurable. Countless\nlives are spared the devastating impact of continued criminal activity.\n\n\nAnalysis of Financial Statements\n\nCash and Investments\n\nCash and Cash Equivalents decreased $30.9 million. This is primarily the result of a decrease in\ncash advances of $59.6 million. FPI\xe2\x80\x99s cash advances are primarily for the purchase of inventory in\nsupport of the Fleet Management and Vehicular Components vehicle retrofitting operation. The\nprimary customer for these operations is the Department of Homeland Security; advances fluctuate\nthroughout the year as they receive appropriations. Reductions in inventory along with successful\ncost containment measures resulted in an increase in FPI (non-advance) cash of $28.7 million during\nfiscal year 2011. Other factors which affected the overall change in cash include a $12.7 million\nincrease in Accounts Receivable and a decrease in inventory of $69.4 million.\n\nAccounts Receivable\n\nThe Accounts Receivable balance increased $12.7 million during fiscal year 2011. The Accounts\nReceivable balance of $46.7 million as of September 30, 2011, represents 78.9 percent of\nSeptember\xe2\x80\x99s total revenues. FPI\xe2\x80\x99s average days to collect for fiscal year 2011 was approximately 25\nand was 24 in the month of September while the average days to collect for fiscal year 2010 was 24\nand was 18 for the month of September 2010. Although sales were approximately the same for\nSeptember 2011 ($59.2 million) and September 2010 ($59.6 million), collections during the month\nof September 2010 were exceptional and extraordinary which resulted in extremely low accounts\nreceivable balance. The Accounts Receivable balance over sixty days old represented only 5 percent\nof the total balance as of September 30, 2011.\n\n\n\n\n -8-\n\x0cInventory\n\nInventory decreased by $69.4 million during fiscal year 2011. FPI continued to place an increased\nemphasis on inventory reduction during fiscal year 2011. While some business segments achieved\nreductions, the Electronics and Fleet Management and Vehicular Component business segments\nwere the primary contributors to the reduction with decreases of $32.2 and $42.6 respectively. The\nElectronics segment decrease can be attributed to the sale of solar panel raw materials through GSA\ntotaling $32.7 million. The decrease in Fleet Management business segment can be attributed to a\ndecrease of $30.8 million in current backlog as of September 30, 2011, compared to September 30,\n2010. Modest increases resulted for Office Furniture, Services, and Clothing and Textiles business\nsegments.\n\nLiabilities\n\nTotal Liabilities decreased by $101 million during fiscal year 2011. Advances Payable decreased\n$98.6 million during fiscal year 2011. This decrease is attributable to a change in customer advances\npayable on hand primarily for the retrofitting of vehicles for the Department of Homeland Security\n(DHS) as a result of a decrease in customer contracts. Accounts Payable remained fairly consistent\nbetween the two fiscal years accounting for a $1.2 million decrease.\n\nRevenue, Cost of Revenue and Net Loss\n\nTotal Revenue increased by $46.1 million while total cost of revenue decreased by $8.0 million. The\nincrease in revenue resulted from the sale of Solar Cells of $32.7 million, increase in Interagency\nSolutions Group services of $17.3 million, and an increase in installation services performed\nprimarily for Office Furniture business segment of $10.3 million. These substantial increases were\noffset by a decrease in sales of $31.6 million. Two of the largest business segments showing a\ndecrease in sales were Electronics with $22.7 million and Fleet with $27.4 million. The Office\nFurniture and Industrial Products business segments had offsetting increases of $26.5 million $11.3\nmillion in sales respectively. The decrease in Cost of Revenues is the result of FPI\xe2\x80\x99s efforts to\nreduce inventories and expenditures though capacity reductions. Net Loss decreased $54.5 million in\nfiscal year 2011 compared to fiscal year 2010. Factory Earnings were $56.4 million higher in fiscal\nyear 2011 than the previous fiscal year with six out of the seven business segments showing\nimproved earnings. The Clothing and Textiles business segment was the only group with slightly\nlower earnings in fiscal year 2011.\n\nBusiness Segments\n\nIn fiscal year 2011, FPI\xe2\x80\x99s businesses were organized, managed and internally reported as seven\noperating segments based on products and services. These segments are Clothing and Textiles;\nElectronics; Fleet Management and Vehicular Components; Industrial Products; Office Furniture;\nRecycling; and Services. FPI is not dependent on any single product as a primary revenue source;\nhowever, it is dependent on the federal government market for the sale of its products. FPI\xe2\x80\x99s net\nindustrial income (earnings) at the business segment level consists of sales offset by cost of goods\nsold and under /over applied overhead. Fiscal Year 2010 net sales of $776,984 included $4,088\n\n\n\n\n -9-\n\x0crecorded to FPI\xe2\x80\x99s Corporate Office. FPI\xe2\x80\x99s net sales and earnings for the fiscal years ended\nSeptember 30, 2011 and 2010 for each of its current business segments is presented for comparative\npurposes:\n\n\nBusiness Segment Fiscal Year\nClothing and Textiles 2011 2010\nSales $238,631 $246,470\nEarnings $34,035 $35,885\nElectronics\nSales $76,443 $99,107\nEarnings ($7,391) ($45,360)\nFleet Management and Vehicular Components\nSales $177,863 $205,221\nEarnings $14,112 $7,029\nIndustrial Products\nSales $55,281 $44,029\nEarnings $7,004 $5,999\nOffice Furniture\nSales $155,819 $129,312\nEarnings $11,141 $2,880\nRecycling\nSales $15,276 $13,596\nEarnings $4,555 $3,586\nServices\nSales $26,110 $35,161\nEarnings ($1,447) ($4,385)\nCorporate Total\nSales $745,423 $772,896\nEarnings $62,009 $5,634\n\n\nPossible Future Effects of Existing Events and Conditions\n\nAs reported in fiscal years 2009 and 2010, FPI continues to face the negative impact of economic and\nlegislative forces. In fiscal years 2011 and beyond, FPI faces the additional challenge of the\nshrinking federal budget, the resulting decline in discretionary spending and the ultimate impact of\n\n\n\n -10-\n\x0cdecline in FPI sales. FPI continues to address these external challenges through aggressively\npursuing new customers and new products, involvement in legislative initiatives, capacity reductions,\nand strict measures to control cash.\n\nDuring fiscal year 2011, FPI encountered a decline in sales for the second consecutive year and\nexperienced a net loss for the third consecutive year. However, FPI\xe2\x80\x99s net loss for fiscal year 2011\nwas $1.8 million, a considerable improvement compared to the original projected loss for fiscal year\n2011 of $12.6 million, and actual losses of $36.9 and $56.3 million in fiscal years 2009 and 2010,\nrespectively. Included in the $56.3 million dollar loss during fiscal year 2010 were write-offs totaling\n$35.1 million in military helmet inventory and solar cells. $4.6 million in fiscal year 2011 losses\nwere due to Property, Plant and Equipment (PP&E) losses related to capacity reductions announced\nin prior years. If the referenced PP&E losses were to be factored out, FPI would have achieved net\nincome of $2.8 million for fiscal year 2011. The improved results for fiscal year 2011 were primarily\ndue to prior capacity reductions and ongoing efficiency measures.\n\nFPI\xe2\x80\x99s Cash position remains strong. During fiscal year 2011, in addition to capacity and overhead\nreductions, FPI focused efforts towards maintaining minimal inventory on hand, collections of\nreceivables and reducing capital improvements. As a result of these efforts, FPI achieved a $28.7\nmillion increase in operating cash during fiscal year 2011. FPI developed a realistic fiscal year 2012\noperating plan which includes a sales reduction of $66 million compared to fiscal year 2011 actual\nresults and projects a $23.6 million loss (including PP&E loss of $8 million). However, despite the\nplanned reduction in sales and earnings, operating cash is expected to remain stable. FPI remains\nconfident that through continued efforts toward maintaining capacity commensurate with demand, a\nstable balance sheet, and a strong cash balance while continuing to develop new sales opportunities,\nit will minimize the impact of these external challenges and ensure FPI continues to have the\nresources to meet its goals.\n\nIn December 2009, the Department of Justice, Office of Inspector General, initiated an investigation\nregarding the manufacturing and quality procedures for some of the military helmets produced by\nFPI. This investigation is still ongoing. FPI\xe2\x80\x99s management is committed to ensuring FPI produces a\nquality product that meets the requirements of our customers.\n\n\n\n\n -11-\n\x0cThis page intentionally left blank.\n\n\n\n\n\n\n -12-\n\x0cU.S. DEPARTMENT OF JUSTICE\n\n\n\nFEDERAL PRISON INDUSTRIES, INC.\n\n\n INDEPENDENT AUDITORS\xe2\x80\x99 REPORTS\n\n\n\n\n -13-\n\x0cThis page intentionally left blank.\n\n\n\n\n\n\n -14-\n\x0c INDEPENDENT AUDITORS\xe2\x80\x99 REPORT ON FINANCIAL STATEMENTS\n\n\nActing Inspector General\nUnited States Department of Justice\n\n\nActing Chief Executive Officer\nBoard of Directors\nFederal Prison Industries, Inc.\nUnited States Department of Justice\n\n\nWe have audited the accompanying Balance Sheets of the Federal Prison Industries, Inc. (FPI), a component of the\nUnited States Department of Justice (DOJ), as of September 30, 2011 and 2010, and the related Statements of\nOperations and Cumulative Results of Operations, and Statements of Cash Flows for the years then ended. These\nfinancial statements are the responsibility of FPI\xe2\x80\x99s management. Our responsibility is to express an opinion on\nthese financial statements based on our audits.\n\nWe conducted our audits in accordance with auditing standards generally accepted in the United States of\nAmerica; the standards applicable to financial audits contained in Government Auditing Standards, issued by the\nComptroller General of the United States; and Office of Management and Budget (OMB) Bulletin No. 07-04, Audit\nRequirements for Federal Financial Statements, as amended. Those standards and OMB Bulletin No. 07-04 require\nthat we plan and perform the audits to obtain reasonable assurance about whether the financial statements are\nfree of material misstatement. An audit includes consideration of internal control over financial reporting as a\nbasis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of\nexpressing an opinion on the effectiveness of FPI\xe2\x80\x99s internal control over financial reporting. Accordingly, we\nexpress no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and\ndisclosures in the financial statements. An audit also includes assessing the accounting principles used, and\nsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We\nbelieve that our audits provide a reasonable basis for our opinion.\n\nIn our opinion, the financial statements referred to above present fairly, in all material respects, the financial\nposition of the United States Department of Justice, Federal Prison Industries, Inc. as of September 30, 2011 and\n2010, and the results of its operations and cash flows for the years then ended, in conformity with accounting\nprinciples generally accepted in the United States of America.\n\nAccounting principles generally accepted in the United States of America and OMB Circular No. A-136, Financial\nReporting Requirements, require that the Management\xe2\x80\x99s Discussion and Analysis be presented to supplement the\nbasic financial statements. Such information, although not a part of the basic financial statements, is required by\nthe Federal Accounting Standards Advisory Board and OMB, who consider it to be an essential part of financial\nreporting for placing the basic financial statements in an appropriate operational, economic, or historical context.\nWe have applied certain limited procedures to the required supplementary information in accordance with\nauditing standards generally accepted in the United States of America, which consisted of inquiries of management\nabout the methods of preparing the information and comparing the information for consistency with\n\n\n\n\n -15-\n\x0cmanagement\xe2\x80\x99s responses to our inquiries, the basic financial statements, and other knowledge we obtained during\nour audit of the basic financial statements. We do not express an opinion or provide any assurance on the\ninformation because the limited procedures do not provide us with sufficient evidence to express an opinion or\nprovide any assurance.\n\nIn accordance with Government Auditing Standards, we have also issued our reports dated November 1, 2011, on\nour consideration of FPI\xe2\x80\x99s internal control over financial reporting and on our tests of its compliance with certain\nprovisions of applicable laws and regulations. The purpose of those reports is to describe the scope of our testing\nof internal control over financial reporting and compliance and the results of that testing, and not to provide an\nopinion on the internal control over financial reporting or on compliance. Those reports are an integral part of an\naudit performed in accordance with Government Auditing Standards and should be read in conjunction with this\nreport in assessing the results of our audits.\n\n\nCOTTON & COMPANY LLP\n\n\n\n\nAlan Rosenthal, CPA, CFE\nPartner\n\nNovember 1, 2011\nAlexandria, Virginia\n\n\n\n\n -16-\n\x0c INDEPENDENT AUDITORS\xe2\x80\x99 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING\n\n\nActing Inspector General\nUnited States Department of Justice\n\n\nActing Chief Executive Officer\nBoard of Directors\nFederal Prison Industries, Inc.\nUnited States Department of Justice\n\n\nWe have audited the Balance Sheets of the Federal Prison Industries, Inc. (FPI), a component of the United States\nDepartment of Justice (DOJ), as of September 30, 2011 and 2010, and the related Statements of Operations and\nCumulative Results of Operations, and Statements of Cash Flows for the years then ended, and have issued our\nreport thereon dated November 1, 2011. We conducted our audits in accordance with auditing standards\ngenerally accepted in the United States of America; standards applicable to financial audits contained in\nGovernment Auditing Standards, issued by the Comptroller General of the United States; and Office of\nManagement and Budget (OMB) Bulletin No. 07-04, Audit Requirements for Federal Financial Statements, as\namended.\n\nFPI\xe2\x80\x99s management is responsible for establishing and maintaining effective internal control over financial\nreporting. In planning and performing our fiscal year 2011 audit, we considered FPI\xe2\x80\x99s internal control over\nfinancial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on\nthe financial statements, but not for the purpose of expressing an opinion on the effectiveness of FPI\xe2\x80\x99s internal\ncontrol over financial reporting. Accordingly, we do not express an opinion on the effectiveness of FPI\xe2\x80\x99s internal\ncontrol over financial reporting or on management\xe2\x80\x99s assertion on internal control included in Management\xe2\x80\x99s\nDiscussion and Analysis. We limited our internal control testing to only those controls necessary to achieve the\nobjectives described in Government Auditing Standards and OMB Bulletin No. 07-04. We did not test all internal\ncontrols relevant to operating objectives as broadly defined by the Federal Managers\xe2\x80\x99 Financial Integrity Act of\n1982, such as controls relevant to ensuring efficient operations.\n\nA deficiency in internal control exists when the design or operation of a control does not allow management or\nemployees, in the normal course of performing their assigned functions, to prevent, or detect and correct\nmisstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal\ncontrol, such that there is a reasonable possibility that a material misstatement of the entity\xe2\x80\x99s financial statements\nwill not be prevented, or detected and corrected on a timely basis.\n\nOur consideration of internal control over financial reporting was for the limited purpose described in the second\nparagraph and was not designed to identify all deficiencies in internal control over financial reporting that might\nbe deficiencies, significant deficiencies, or material weaknesses. In our fiscal year 2011 audit, we did not identify\nany deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined\nabove.\n\n\n\n\n -17-\n\x0cThis report is intended solely for the information and use of FPI\xe2\x80\x99s management, DOJ Office of the Inspector\nGeneral, DOJ Justice Management Division, OMB, U.S. Government Accountability Office, and the U.S. Congress; it\nis not intended to be and should not be used by anyone other than these specified parties.\n\n\nCOTTON & COMPANY LLP\n\n\n\n\nAlan Rosenthal, CPA, CFE\nPartner\n\nNovember 1, 2011\nAlexandria, Virginia\n\n\n\n\n -18-\n\x0c INDEPENDENT AUDITORS\xe2\x80\x99 REPORT ON COMPLIANCE AND OTHER MATTERS\n\n\nActing Inspector General\nUnited States Department of Justice\n\n\nActing Chief Executive Officer\nBoard of Directors\nFederal Prison Industries, Inc.\nUnited States Department of Justice\n\n\nWe have audited the Balance Sheets of the Federal Prison Industries, Inc. (FPI), a component of the United States\nDepartment of Justice (DOJ), as of September 30, 2011 and 2010, and the related Statements of Operations and\nCumulative Results of Operations, and the Statements of Cash Flows for the years then ended, and have issued our\nreport thereon dated November 1, 2011. We conducted our audits in accordance with auditing standards\ngenerally accepted in the United States of America; standards applicable to financial audits contained in\nGovernment Auditing Standards, issued by the Comptroller General of the United States; and Office of\nManagement and Budget (OMB) Bulletin No. 07-04, Audit Requirements for Federal Financial Statements, as\namended.\n\nFPI\xe2\x80\x99s management is responsible for complying with laws, regulations, and contract agreements applicable to the\nFPI. As part of obtaining reasonable assurance about whether FPI\xe2\x80\x99s fiscal year 2011 financial statements are free\nof material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, and\ncontract agreements, noncompliance with which could have a direct and material effect on the determination of\nfinancial statement amounts, and certain provisions of other laws and regulations specified in OMB Bulletin\nNo. 07-04, including the provisions referred to in Section 803(a) of the Federal Financial Management\nImprovement Act of 1996 (FFMIA). However, providing an opinion on compliance with those provisions was not an\nobjective of our audit, and accordingly, we do not express such an opinion. The results of our tests of compliance\ndescribed in the preceding paragraph of this report, exclusive of those referred to in FFMIA, disclosed no instances\nof noncompliance or other matters that are required to be reported under Government Auditing Standards and\nOMB Bulletin No. 07-04.\n\nUnder FFMIA, we are required to report whether FPI\xe2\x80\x99s financial management systems substantially comply with\nfederal financial management system requirements; applicable federal accounting standards; and application of\nthe United States Standard General Ledger at the transaction level based upon U.S. generally accepted accounting\nprinciples issued by the Financial Accounting Standards Board, as applicable to the FPI in accordance with the\nprovisions of the Government Corporation Control Act of 1945 (31 U.S.C. \xc2\xa79101 to 9110) and Statement of Federal\nFinancial Accounting Standards No. 34, The Hierarchy of Generally Accepted Accounting Principles, Including the\nApplication of Standards Issued by the Financial Accounting Standards Board. To meet this requirement, we\nperformed tests of compliance with FFMIA Section 803(a) requirements.\n\nThe results of our tests of FFMIA disclosed no instances in which FPI\xe2\x80\x99s financial management systems did not\nsubstantially comply with the requirements described in the preceding paragraph.\n\n\n\n\n -19-\n\x0cThis report is intended solely for the information and use of FPI\xe2\x80\x99s management, DOJ Office of the Inspector\nGeneral, DOJ Justice Management Division, OMB, U.S. Government Accountability Office, and the U.S. Congress; it\nis not intended to be and should not be used by anyone other than these specified parties.\n\n\nCOTTON & COMPANY LLP\n\n\n\n\nAlan Rosenthal, CPA, CFE\nPartner\n\nNovember 1, 2011\nAlexandria, Virginia\n\n\n\n\n -20-\n\x0cU.S. DEPARTMENT OF JUSTICE\n\n\n\nFEDERAL PRISON INDUSTRIES, INC.\n\n\n PRINCIPAL FINANCIAL STATEMENTS\n\n\n AND RELATED NOTES\n\n\n\n\n\n\n -21-\n\x0cThis page intentionally left blank.\n\n\n\n\n\n\n -22-\n\x0c Federal Prison Industries, Inc.\n Balance Sheets\n\nAs of September 30,\n(DOLLARS IN THOUSANDS) 2011 2010\n\nAssets\n\nCurrent:\n Cash and cash equivalents $ 291,510 $ 322,448\n Accounts receivable, net 46,680 34,006\n Inventories, net 133,934 203,331\n Other assets 2,582 3,691\n Total current assets 474,706 563,476\n\nProperty, plant and equipment, net 102,775 116,896\n Total Assets $ 577,481 $ 680,372\n\nLiabilities and United States Government Equity\n\nCurrent:\n Accounts payable $ 42,192 $ 43,359\n Deferred revenue 99,669 198,217\n Accrued salaries and wages 10,620 11,244\n Accrued annual leave 8,892 9,911\n Other accrued expenses 9,681 9,950\n Total current liabilities 171,054 272,681\n\nFECA actuarial liability 16,403 15,857\n Total Liabilities 187,457 288,538\n\nUnited States Government Equity\n Initial capital 4,176 4,176\n Cumulative results of operations 385,848 387,658\n\n Total United States Government Equity 390,024 391,834\n Total Liabilities and United States Government Equity $ 577,481 $ 680,372\n\n The accompanying notes are an integral part of these financial statements.\n\n\n\n\n -23-\n\x0c Federal Prison Industries, Inc.\n Statements of Operations and Cumulative Results of Operations\n\nFor the fiscal years ended September 30,\n(DOLLARS IN THOUSANDS) 2011 2010\n\nRevenue:\n\n Net sales $ 745,423 $ 776,984\n\n Other revenue 154,654 77,025\n\n Total revenue 900,077 854,009\n\nCost of revenue:\n\n Cost of sales 683,928 763,327\n\n Cost of other revenue 146,642 75,267\n\n Total Cost of Revenue 830,570 838,594\n\nGross profit 69,507 15,415\n\nOperating expenses:\n\n Sales and marketing 7,237 5,907\n\n General and administrative 105,103 106,535\n\n\n Total operating expenses 112,340 112,442\n\n\nLoss from operations (42,833) (97,027)\n\nInterest income 191 259\n\nInterest expense (3) (4)\n\nOther income, net 40,835 40,444\n\n\nNet loss (1,810) (56,328)\n\nCumulative results of operations, beginning of fiscal year 387,658 443,986\n\n\nCumulative results of operations, end of fiscal year $ 385,848 $ 387,658\n\n\n The accompanying notes are an integral part of these financial statements.\n\n\n\n\n -24-\n\x0c Federal Prison Industries, Inc.\n Statements of Cash Flows\n\nFor the fiscal years ended September 30, \n\n(DOLLARS IN THOUSANDS) 2011 \n 2010\n\nCASH FLOWS FROM OPERATING ACTIVITIES\n\nNet loss $ (1,810) $ (56,328)\nAdjustments to reconcile net income to net cash\n provided by operating activities:\n\n Depreciation and amortization 10,469 11,120\n Loss on disposal of property, plant and equipment 4,985 4,079\n Changes in:\n Accounts receivable (12,674) 21,706\n Inventories 69,397 60,901\n Other assets 1,109 2,271\n Accounts payable and accrued expenses (2,531) (5,352)\n Deferred revenue (98,549) 6,903\n\nNet cash provided by (used in) operating activities (29,604) 45,300\n\n\nCASH FLOWS FROM INVESTING ACTIVITIES\n\n Purchases of property, plant and equipment (1,334) (8,416)\n Construction-in-progress of plant facilities - 5\n\nNet cash used in investing activities (1,334) (8,411)\n\n\nNet increase (decrease) in cash and cash equivalents (30,938) 36,889\nCash and cash equivalents, beginning of fiscal year 322,448 285,559\nCash and cash equivalents, end of fiscal year $ 291,510 $ 322,448\n\n\n\n\n The accompanying notes are an integral part of these financial statements.\n\n\n\n\n -25-\n\x0c Fiscal Years 2011 and 2010\n Notes to Financial Statements\n (Dollars in Thousands)\n\nNote 1. Organization and Mission\n\nFederal Prison Industries, Inc. (FPI) was established in 1934 by an act of the United States Congress.\nFPI operates under the trade name UNICOR, as a wholly-owned federal government corporation\nwithin the Department of Justice, and functions under the direction and control of a Board of\nDirectors, (the \xe2\x80\x9cBoard\xe2\x80\x9d). Members of the Board are appointed by the President of the United States\nof America and represent retailers and consumers, agriculture, industry, labor, the Attorney General,\nand the Secretary of Defense. FPI\xe2\x80\x99s statutory mandate is to provide employment and training for\ninmates in the Federal Prison System while remaining self-sufficient through the sale of its products\nand services.\n\nFPI\xe2\x80\x99s federal government customers include departments (percent of Revenue shown in parenthesis),\nagencies and bureaus such as the Department of Defense (47%), the Department of Homeland\nSecurity (18%), the Department of Justice (9%), the General Services Administration (5%), and the\nSocial Security Administration (5%). These and other federal organizations are generally required to\npurchase products from FPI, if its products meet the customer\xe2\x80\x99s price, quality, and delivery\nstandards, under a mandatory source preference specified in FPI\xe2\x80\x99s enabling statute and the Federal\nAcquisition Regulation.\n\nFPI has industrial and service operations at 88 and 94 factories located at 66 and 70 prison facilities\nthat employed 14,200 and 15,907 inmates representing approximately 8% and 9% of the work\neligible inmate population as of September 30, 2011 and September 30, 2010, respectively.\n\n\nNote 2. Summary of Significant Accounting Policies\n\nBasis of Accounting\n\nFPI transactions are recorded on the accrual basis of accounting. Under the accrual basis, revenues\nare recorded when earned and expenses are recorded when incurred, regardless of when the cash is\nexchanged.\n\nBasis of Presentation\n\nFPI has historically prepared its external financial statements in conformity with U.S. generally\naccepted accounting principles based on accounting standards issued by the Financial Accounting\nStandards Board (FASB), the private sector standards-setting body. The Federal Accounting\nStandards Advisory Board (FASAB) has been designated as the standards-setting body for federal\nfinancial reporting entities with respect to the establishment of US GAAP. FASAB allows certain\ngovernment agencies to utilize FASB standards for Financial Statement presentations.\n\n\n\n\n -26-\n\x0c Fiscal Years 2011 and 2010\n Notes to Financial Statements\n (Dollars in Thousands)\n\n\nUse of Estimates\n\nThe preparation of financial statements in conformity with US GAAP requires management to make\nestimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of\ncontingent assets and contingent liabilities at the date of the financial statements and reported\namounts of revenues and expenses during the reporting period. Actual results may differ from those\nestimates.\n\nCash and Cash Equivalents\n\nFPI considers all highly liquid investments purchased with an original maturity of three months or\nless to be cash equivalents. FPI limits its investment activities and cash equivalents to short-term\novernight repurchase agreements with the Bureau of Public Debt of the United States Treasury. The\nmarket value of these overnight repurchase agreements is equivalent to cost.\n\nAccounts Receivable / Concentration of Credit Risk\n\nFinancial instruments that potentially subject FPI to concentrations of credit risk consist primarily of\naccounts receivable. FPI sells products and services to various federal government departments,\nagencies and bureaus, as well as certain private sector companies, without requiring collateral.\nAccounts receivable consists of amounts due from those entities and is stated net of an allowance for\ndoubtful accounts.\n\nFPI routinely assesses the payment histories of its federal customers and the financial strength of its\nprivate sector customers and maintains allowances for anticipated losses as they become evident. In\nthis regard, an insignificant amount of accounts receivable remained past due at September 30, 2011\nand September 30, 2010. A majority of these past due items relate to billings to various entities\nwithin Department of Defense (DOD) who rely on the Defense Finance and Accounting Service\n(DFAS) to process vendor payments. Historically, customer payments processed through DFAS\nhave generally taken longer to receive than payments from other federal and private sector\ncustomers. FPI believes that ultimately, a majority of its past-due accounts receivable are fully\ncollectable. The amount due FPI, net of allowances, from DOD for the fiscal years ended September\n30, 2011 and 2010 was $27,399 and $19,067 respectively.\n\nWhile federal accounts receivable are normally fully collectible in accordance with federal law, FPI\nhas established an allowance for future losses against its federal accounts receivable to account for\npotential billing errors related to pricing and customer discounts, as well as instances of expired or\ncancelled funding from its federally appropriated customers. At September 30, 2011 and 2010, FPI\xe2\x80\x99s\nallowance for doubtful accounts is stated at approximately $660 and $825, respectively, of which\napproximately $131 and $224, respectively, represents the amounts allocated against federal\naccounts receivable.\n\n\n\n -27-\n\x0c Fiscal Years 2011 and 2010\n Notes to Financial Statements\n (Dollars in Thousands)\n\n\nInventories\n\nFPI maintains its inventory primarily for the manufacture of goods for sale to its customers. FPI\xe2\x80\x99s\ninventory is composed of three categories: Raw Materials, Work-in-Process, and Finished Goods.\nThese categories are generally defined by FPI as follows: Raw Materials consist of materials that\nhave been acquired and are available for the production cycle, Work-in-Process is composed of\nmaterials that have moved into the production process and have some measurable amount of labor\nand overhead added by FPI, Finished Goods are materials with FPI added labor and overhead that\nhave completed the production cycle and are awaiting sale to customers.\n\nRaw material inventory value is based upon moving average cost. Inventories are valued at the\nlower of average cost or market value (LCM) and include materials, labor and manufacturing\noverhead. Market value is calculated on the basis of the contractual or anticipated selling price, less\nallowance for administrative expenses. FPI values its finished goods and sub-assembly items at a\nstandard cost that is periodically adjusted to approximate actual cost. FPI has established inventory\nallowances to account for LCM adjustments and obsolete items that may not be utilized in future\nperiods.\n\nAdvances to Vendors\n\nFPI generally does not offer advances to the public, however, where warranted, FPI will on occasion\nmake an advance to a vendor upon their request. Historically, these advances have been insignificant\nand made primarily to the Industries for the Blind. During 2008, FPI established a program to\nproduce solar panels in anticipation of an expanding federal market as a result of Executive Order\n13423 \xe2\x80\x9cStrengthening Federal Environmental, Energy, and Transportation Management,\xe2\x80\x9d which\nrequires federal agencies to improve energy efficiencies by the year 2015. A majority of advances in\nfiscal year 2011 were given to the suppliers of the raw materials to produce solar panels. Prior to\nissuing advances to a vendor, the Centralized Accounts Receivable section performs a review as\nthough they were a public customer, to include performing a due diligence review to assess risk and\na review of applicant financial statements. A letter of credit is obtained as needed based on the\nresults of this review. The FPI Controller approves advances prior to their disbursement. Advances\nare reduced by offset to the vendor invoice as goods are delivered.\n\nRevenue Recognition\n\nFPI sells a wide range of products and services to a diversified base of customers, primarily\ngovernmental departments, agencies and bureaus. Revenue is generally recognized when delivery\nhas occurred or services have been rendered, persuasive evidence of an arrangement exists, there is a\nfixed or determinable price, and collectability is reasonably assured. Revenue from contracts that\nrequire customer acceptance are not recognized until either customer acceptance is obtained, or upon\ncompletion of the contract. Sales returns are primarily replaced with like items and are recorded as\nthey occur.\n\n -28-\n\x0c Fiscal Years 2011 and 2010\n Notes to Financial Statements\n (Dollars in Thousands)\n\nRevenue is recognized on multiple element agreements as a single unit of accounting for\nmanufactured items when the product has been accepted by the customer. Revenue for services\nprovided on behalf of FPI through an outside company is recognized when the service provider\npresents a valid invoice including a customer acceptance or completion notice.\n\nFPI records as other revenue the shipping and handling costs that have been billed to our customers,\ninstallation costs for FPI products, and items procured for its customers as part of procurement\nservices provided by the Interagency Solutions and Procurement Branch. The cost of providing this\nservice is recorded as a cost of other revenue.\n\nDeferred revenue is comprised of customer cash advances, which have been paid to FPI prior to the\nmanufacturing of goods, delivery of goods, or performance of services.\n\nOther income includes imputed financing for retirement, health benefits and life insurance (Note 8).\n\n\nProperty, Plant and Equipment\n\nProperty, plant and equipment are stated at cost, net of accumulated depreciation. Depreciation is\ncomputed using the straight-line method over the following estimated useful lives:\n\n Years\nMachinery & Equipment 5 - 25\nComputer Hardware 5 - 10\nComputer Software 3-5\nBuilding & Improvements 24- 40\n\nUpon retirement or disposition of property and equipment, the related gain or loss is reflected in the\nstatements of operations. Repairs and maintenance costs are expensed as incurred.\n\nTaxes\n\nAs a wholly-owned corporation of the federal government, FPI is exempt from federal and state\nincome taxes, gross receipts tax, and property taxes.\n\nReclassifications\n\nCertain fiscal year 2010 financial statement line items have been reclassified to conform with the\ncurrent year presentation. The reclassifications had no material effect on total assets, liabilities,\nequity, cumulative results of operations or cash flows as previously reported.\n\n\n\n\n -29-\n\x0c Fiscal Years 2011 and 2010\n Notes to Financial Statements\n (Dollars in Thousands)\n\nNote 3. Accounts Receivable, Net\n\nAccounts receivable, net consists of the following:\n\nAs of September 30, 2011 2010\n\nIntragovernmental billed receivables $ 34,491 $ 25,443\nPrivate sector billed receivables 12,849 9,388\n 47,340 34,831\n Less allowance for doubtful accounts 660 825\n\nAccounts receivable, net $ 46,680 $ 34,006\n\nFPI incurred bad debt expense of $(66) and $546, respectively, for the fiscal years ended September\n30, 2011 and 2010.\n\n\nNote 4. Inventories, Net\n\nInventories, net consist of the following:\n\nAs of September 30, 2011 2010\nRaw materials $ 46,988 $ 103,411\nRaw materials \xe2\x80\x93 vehicles 17,500 50,298\nWork-in-process 25,857 31,312\nFinished sub-assemblies 6,138 8,576\nFinished goods 35,206 36,399\nFinished goods \xe2\x80\x93 acceptance contracts 29,510 22,074\n 161,199 252,070\nLess inventory allowance 27,265 48,739\n\nInventories, net $ 133,934 $ 203,331\n\n\n$17,500 of FPI\xe2\x80\x99s fiscal year 2011 and $50,298 of FPI\xe2\x80\x99s fiscal year 2010, raw materials balance\nrepresents vehicles and component parts for use in the Fleet Management and Vehicular Components\nbusiness group\xe2\x80\x99s retrofit product line. A majority of that inventory balance has been contracted on\nbehalf of the Customs and Border Protection and Bureau of Immigration and Customs Enforcement\nof the Department of Homeland Security (DHS) for retrofit services that are performed by FPI. As\npart of an interagency agreement, DHS provides advance funding to FPI to procure these vehicles.\nRevenue is recognized by FPI at the time of shipment of retrofitted vehicles to DHS.\n\n\n\n -30-\n\x0c Fiscal Years 2011 and 2010\n Notes to Financial Statements\n (Dollars in Thousands)\n\n$29,510 of FPI\xe2\x80\x99s fiscal year 2011 and $22,074 of its fiscal year 2010 finished goods balance\nrepresents goods shipped to customers or their agents for unrecognized revenue due to acceptance\ncriteria within the customer contract. The balances as of September 30, 2011 and September 30,\n2010 are primarily systems furniture installations and destination acceptance contracts shipped after\nthe cutoff date for revenue recognition.\n\nIncluded in total inventories as of September 30, 2011 and September 30, 2010, is $16,345 and\n$42,393 in raw materials, work-in-process and finished goods in support of the solar panel product\nline respectively.\n\n\nNote 5. Property, Plant and Equipment, Net\n\nProperty, plant and equipment, net consist of the following:\n\nAs of September 30, 2011 2010\n\nBuildings and improvements $ 178,347 $ 179,656\nMachinery and equipment 104,052 109,453\nComputer hardware 2,149 1,970\nComputer software 6,506 6,484\n 291,054 297,563\nLess accumulated depreciation 188,279 180,667\nProperty, plant and equipment, net $ 102,775 $ 116,896\n\n\nDepreciation and amortization expense totaled $10,469 and $11,120 for the fiscal years ended\nSeptember 30, 2011 and 2010, respectively. During fiscal year 2011, FPI invested $1,334 for the\npurchase and construction of property, plant and equipment. During fiscal years 2011 and 2010, FPI\ndeactivated factories in an effort to reduce excess factory capacity. As a result of these deactivations,\nFPI incurred losses on property plant and equipment of $4,599 in fiscal year 2011, and $4,039 in\nfiscal year 2010.\n\n\n\n\n -31-\n\x0c Fiscal Years 2011 and 2010\n Notes to Financial Statements\n (Dollars in Thousands)\n\n\nNote 6. Other Accrued Expenses\n\nOther accrued expenses consist of the following:\n\nAs of September 30, 2011 2010\n\nMaterials in transit $ 1,108 $ 1,607\nRelocation travel expense 1,053 1,107\nFECA liabilities \xe2\x80\x93 current portion 1,942 1,656\nFinancial audit expense 530 461\nTelecommunication expense 1,132 934\nUtilities 936 1,204\nWarranty expense 444 451\nOther expense 2,536 2,530\n\nOther accrued expenses $ 9,681 $ 9,950\n\n\nIncluded in other expense as of September 30, 2011 and September 30, 2010 are accruals for Intra-\nDepartmental agreements of $622 and $501 and accruals for vendor invoices of $645 and $1,292,\nrespectively.\n\n\nNote 7. Business Segments\n\nFPI\xe2\x80\x99s businesses are organized, managed and internally reported as seven operating segments based\non products and services. These segments are Clothing and Textiles; Electronics; Fleet Management\nand Vehicular Components; Industrial Products; Office Furniture; Recycling; and Services. These\nsegments represent virtually all of FPI\xe2\x80\x99s product lines. FPI is not dependent on any single product as\na primary revenue source; however, it is dependent on the federal government market for the sale of\nits products and services. Fiscal year 2010 net sales of $776,984 included $4,088 recorded to FPI\xe2\x80\x99s\nCorporate Office. FPI\xe2\x80\x99s net sales for the fiscal years ended September 30, 2011 and 2010 for each of\nits business segments is presented for comparative purposes:\n\n\n\n\n -32-\n\x0c Fiscal Years 2011 and 2010\n Notes to Financial Statements\n (Dollars in Thousands)\n\n\nNet Sales\nFor the years ended September 30, 2011 2010\n\nBusiness Segment\n\nClothing and Textiles $ 238,631 $ 246,470\nElectronics 76,443 99,107\nFleet Management and Vehicular Components 177,863 205,221\nIndustrial Products 55,281 44,029\nOffice Furniture 155,819 129,312\nRecycling 15,276 13,596\nServices 26,110 35,161\n\n\nNet sales $ 745,423 $ 772,896\n\n\nRegulatory Compliance\n\nFPI\xe2\x80\x99s ability to add or to expand production of a specified product is regulated by the Federal Prison\nIndustries Reform Act (\xe2\x80\x9cthe Act\xe2\x80\x9d). The Act provides specific guidelines to FPI regarding its\nmethodology for evaluating and reporting new or expanded products, including requiring FPI to\nprovide direct notice to trade associations and interested parties of such actions. Finally, publication\nof annual decisions of the FPI Board of Directors and semi-annual sales disclosures are mandated\nunder the Act.\n\n\nNote 8. Intra-Department of Justice (DOJ) / Intragovernmental Financial Activities\n\nFPI\xe2\x80\x99s financial activities interact with and are dependent upon those of DOJ and the federal\ngovernment as a whole. The following is a discussion of certain intra-DOJ and intragovernmental\nactivities and their relationship with FPI:\n\nRelationship with the Federal Bureau of Prisons\n\nFPI and the Federal Bureau of Prisons (BOP) have a unique relationship in that the nature of their\nrespective missions requires the sharing of facilities and responsibilities relative to the custody,\ntraining and employment of federal inmates. The Director of the BOP, who has jurisdiction over all\nfederal penal correctional institutions, is the Chief Executive Officer (CEO). General management of\nFPI is provided by the Chief Operating Officer who also serves as an Assistant Director of the BOP.\nThe BOP provides land to FPI for the construction of its manufacturing facilities and both FPI and\nBOP share certain facilities, generally at no cost to FPI. In accordance with Managerial Cost\nAccounting Concepts a reasonable estimate of these costs as provided by the BOP is included in\n -33-\n\x0c Fiscal Years 2011 and 2010\n Notes to Financial Statements\n (Dollars in Thousands)\n\ngeneral expense and other income of FPI for the fiscal years ended September 30, 2011 and 2010,\nrespectively.\n\nSelf Insurance\n\nIn accordance with federal government policy, FPI is uninsured with respect to property damage,\nproduct liability, and other customary business loss exposures. Losses incurred are absorbed as a\ncurrent operating expense of FPI or, if they are induced by factors related to FPI\xe2\x80\x99s relationship with\nthe Federal Prison System, may be reimbursed by BOP. Certain other costs, principally relating to\npersonal injury claims, are paid directly by the federal government.\n\nFederal Employees Compensation Act\n\nThe Federal Employees Compensation Act (FECA) provides income and medical cost protection to\ncover federal civilian employees injured on the job, employees who have incurred a work-related\noccupational disease, and beneficiaries of employees whose death is attributable to a job related\ninjury or occupational disease. The United States Department of Labor (DOL), which administers\nFECA, annually charges each federal agency and department for its applicable portion of claims and\nbenefits paid in the preceding year. As of September 30, 2011 and September 30, 2010, the accrued\nFECA liabilities as charged to FPI, approximated $1,942 and $1,656, respectively.\n\nDOL also calculates the liability of the federal government for future claims and benefits, which\nincludes the estimated liability of death, disability, medical, and other approved costs. Future claims\nand benefits are determined from an actuarial extrapolation, utilizing historical benefit payment\npatterns and calculations of projected future benefit payments discounted to current value over a 23.5\nyear period. FPI\xe2\x80\x99s estimated future liability approximated $16,403 and $15,857 at September 30,\n2011 and 2010, respectively.\n\nRetirement\n\nSubstantially all of FPI\xe2\x80\x99s civilian employees are covered under either the Civil Service Retirement\nSystem (CSRS) or the Federal Employees Retirement System (FERS). For employees covered under\nCSRS (those employees hired prior to January 1, 1984), FPI contributed approximately 7 percent (for\nnormal retirement) or 7.5 percent (for hazardous duty retirement) of each employee\xe2\x80\x99s salary. CSRS\ncovered employees do not have Federal Insurance Contributions Act (FICA) withholdings and, thus,\nare not fully eligible to receive Social Security benefits. For employees covered by the FERS,\n(generally those employees hired on or after January 1, 1984), FPI contributed (for normal\nretirement) 11.7 and 11.2 percent for fiscal years ended September 30, 2011 and September 30,\n2010, respectively. FPI contributed (for hazardous retirement) 25.7 and 24.9 percent for fiscal years\nended September 30, 2011 and September 30, 2010, respectively.\n\nUnder FERS, employees also receive retirement benefits from Social Security and, if applicable,\nbenefits from a defined contribution plan (thrift). Under the thrift plan, an employee may contribute\n(tax deferred) to an investment fund, up to $16,500 of salary for the fiscal years ended September 30,\n -34-\n\x0c Fiscal Years 2011 and 2010\n Notes to Financial Statements\n (Dollars in Thousands)\n\n2011 and September 30, 2010. FPI then matches this amount up to 4 percent, in addition to an\nautomatic 1 percent that is contributed for all FERS employees. Those employees, which elected to\nremain under CSRS after January 1, 1984, continue to receive benefits in place, and may also\ncontribute (tax deferred) up to $16,500 of salary to the thrift plan, but with no matching amount\ncontributed by FPI.\n\nCSRS and FERS are multi-employer plans. Although FPI funds a portion of pension benefits\nrelating to its employees, and provides for the necessary payroll withholdings, it does not maintain or\nreport information with respect to the assets of the plans, nor does it report actuarial data with respect\nto accumulated plan benefits or the pension liability relative to its employees. The reporting of such\namounts is the responsibility of the United States Office of Personnel Management (OPM).\n\nFPI\xe2\x80\x99s contribution to both plans approximated $29,352 and $31,465 for the fiscal years ended\nSeptember 30, 2011 and 2010, respectively.\n\nFPI must recognize its share of the cost of providing pension benefits to eligible employees utilizing\ncost factors determined by the OPM. Included in general and administrative expense is\napproximately $3,531 and $2,209 in the fiscal years ended September 30, 2011 and 2010,\nrespectively, with an offsetting credit to other income on the Statements of Operations and\nCumulative Results of Operations.\n\nHealth Benefits and Life Insurance\n\nFPI, through the OPM, offers health and life insurance plans under which premium costs for health\ncare are shared between FPI and the employees. A substantial portion of life insurance premiums are\npaid for by employees. Amounts paid by FPI for health benefits and life insurance approximated\n$10,334 and $10,739 for the fiscal years ended September 30, 2011 and 2010, respectively.\n\nOPM also provides health care and life insurance benefits for FPI\xe2\x80\x99s retired employees. FPI must\nrecognize an expense related to its share of the cost of such post-retirement health benefits and life\ninsurance on a current basis (while its employees are still working), with an offsetting credit to other\nincome. Costs in this regard, which approximated $7,405 and $7,778 during the fiscal years ended\nSeptember 30, 2011 and 2010, respectively, were determined by OPM utilizing cost factors used to\nestimate the cost of providing post-retirement benefits to current employees. However, because of\nthe offsetting credit, which is reflected as other income on the Statements of Operations and\nCumulative Results of Operations, the recording of these costs has no impact on reported net income\nor cash flows.\n\nFuture post-retirement health care and life insurance benefit costs are not reflected as a liability on\nFPI\xe2\x80\x99s financial statements, as such costs are expected to be funded in future periods by OPM.\n\n\n\n\n -35-\n\x0c Fiscal Years 2011 and 2010\n Notes to Financial Statements\n (Dollars in Thousands)\n\nNote 9. Sales and Marketing, General and Administrative Expenses\n\nSales and marketing, general and administrative expenses consist of the following:\n\n\nSales and marketing, general and administrative expenses\nFiscal years ended September 30, 2011 2010\n\nSalaries, wages and benefits $ 46,491 $ 47,841\nPermanent change of station expense 1,350 700\nPurchases of minor equipment 307 389\nContract services 9,787 9,225\nBad debt expense (66) 539\nCredit card service fees 897 1,093\nTravel 1,721 1,723\nPersonal computer expense 2,290 910\nAccident compensation 2,409 3,482\nFinancial audit 1,690 1,681\nMarketing 1,793 1,791\nDepreciation 2,056 2,005\nNet loss on disposition of assets 4,984 4,068\nTelecommunication expense 2,976 3,159\nOther expense (2,745) (3,599)\nImputed pension costs (Note 8) 3,531 2,209\nImputed post-retirement health\n care and life insurance cost (Note 8) 7,405 7,778\nImputed operating costs 25,464 27,448\n\nSales and marketing, general\n and administrative expenses $ 112,340 $ 112,442\n\n\nOther expense is comprised primarily of inmate wages, maintenance agreements, and distributions to\nfactory operations. FPI distributes certain General and Administrative expenses that benefit all\nlocations to the individual factory levels. These charges include Computer licenses and fees, Civilian\nand Inmate Accident Compensation, and Check Charges. These charges totaled $8.1 million for\nfiscal year 2011 and $9.3 million for fiscal year 2010. Contract services consist primarily of\nconsulting and sales and marketing fees. Salaries, wages and benefits are shown net of the imputed\nfinancing offsetting credit (Note 8).\n\n\n\n\n -36-\n\x0c Fiscal Years 2011 and 2010\n Notes to Financial Statements\n (Dollars in Thousands)\n\nNote 10. Commitments and Contingencies\n\nLegal Contingencies\n\nFPI is party to various administrative proceedings, legal actions, and claims. FPI was party to no\nlegal proceedings that are expected to result in a probable loss; accordingly, the balance sheets\ncontain no liabilities for contingencies. Legal actions where management and the Chief Council\nconsider adverse decisions reasonably possible and the amounts are reasonably estimable, should not\nresult in judgments which would have a material adverse effect on the organizations financial\nstatements. Furthermore, there are cases where amounts have not been accrued or disclosed because\nthe amounts of the potential loss cannot be estimated or the likelihood of an unfavorable outcome is\nconsidered remote.\n\nLease Commitments\n\nFPI leases certain facilities, machinery, vehicles and office equipment under noncancelable capital\nand operating lease agreements that expire over future periods. Many of these lease agreements\nprovide FPI with the option (after initial lease term) to either purchase the leased item at the then fair\nvalue or to renew the lease for additional periods of time. As of September 30, 2011, future capital\nlease payments due and future operating lease commitments total $149 and $146, respectively.\n\nProduct Warranty\n\nFPI offers its customers a promise of an \xe2\x80\x9cEscape Proof Guarantee\xe2\x80\x9d on the products it manufactures.\nFPI has analyzed the historical pattern of warranty returns and the adequacy of the warranty returns\nand allowances. In this regard, FPI has established an estimate of future warranty returns related to\ncurrent period product revenue.\n\nMinimum Buy Contracts\n\nFPI has entered into firm purchase commitments for solar panel materials totaling $13,129 to be\ndelivered in fiscal year 2012 and $23,672 to be delivered in fiscal year 2015.\n\nChanges in aggregate product warranty liability\nFiscal years ended September 30, 2011 2010\n\nBalance at the beginning of the period $ 451 $ 478\nAccruals for warranties issued during the period 353 342\nSettlements made (in cash or in kind) during the period (360) (369)\n\nBalance at the end of the period $444 $ 451\n\n\n\n\n -37-\n\x0c Fiscal Years 2011 and 2010\n Notes to Financial Statements\n (Dollars in Thousands)\n\nCongressional Limitation on Administrative Expenses\n\nCongress has imposed an annual spending limit on certain administrative expenses relating to FPI\xe2\x80\x99s\ncentral office management. These costs include salaries for management personnel, travel expenses\nand supplies. The following is a comparison of actual expenses to the limitation imposed:\n\nCongressional limitation on administrative expenses\nFiscal years ended September 30, 2011 2010\n\nCongressional limitation on expenses $ 2,695 $ 2,700\n\nExpenses incurred subject to Congressional limitation $ 1,775 $ 2,025\n\n\n\n\n -38-\n\x0c"