10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2012

Commission file number: 1-12997

MAXIMUS, INC.

(Exact name of registrant as specified in its charter)

Virginia (State or other jurisdiction of incorporation or organization)	54-1000588 (I.R.S. Employer Identification No.)
1891 Metro Center Drive, Reston, Virginia (Address of principal executive offices)	20190 (Zip Code)

Registrant’s telephone number, including area code: (703) 251-8500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, no par value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No x

The aggregate market value of outstanding voting stock held by non-affiliates of the registrant as of March 31, 2012 was $1,354,461,804 based on the last reported sale price of the registrant’s Common Stock on The New York Stock Exchange as of the close of business on that day.

There were 34,088,737 shares of the registrant’s Common Stock outstanding as of November 1, 2012.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement for its 2013 Annual Meeting of Shareholders to be held on March 20, 2013, which definitive Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of the registrant’s fiscal year, are incorporated by reference into Part III of this Form 10-K.

MAXIMUS, Inc.

Form 10-K

September 30, 2012

Table of Contents

PART I		3
ITEM 1.	Business	3
ITEM 1A.	Risk Factors	12
ITEM 2.	Properties	12
ITEM 3.	Legal Proceedings	12
ITEM 4.	Mine Safety Disclosures	12
PART II		13
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	13
ITEM 6.	Selected Financial Data	15
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	16
ITEM 7A.	Quantitative and Qualitative Disclosures About Market Risk	25
ITEM 8.	Financial Statements and Supplementary Data	26
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	55
ITEM 9A.	Controls and Procedures	56
PART III		58
ITEM 10.	Directors, Executive Officers and Corporate Governance	58
ITEM 11.	Executive Compensation	58
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	58
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	58
ITEM 14.	Principal Accounting Fees and Services	58
PART IV		59
ITEM 15.	Exhibits, Financial Statement Schedules	59

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

Included in this Annual Report on Form 10-K are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, forecasts and projections about our company, the industry in which we operate and other matters, as well as management’s beliefs and assumptions and other statements that are not historical facts. Words such as “anticipate,” “believe,” “could,” “expect,” “estimate,” “intend,” “may,” “opportunity,” “plan,” “potential,” “project,” “should,” and “will” and similar expressions are intended to identify forward-looking statements and convey uncertainty of future events or outcomes. These statements are not guarantees and involve risks, uncertainties and assumptions that are difficult to predict. Actual outcomes and results may differ materially from such forward- looking statements due to a number of factors, including without limitation,

·a failure on our part to comply with federal, state or local laws governing our business, which might result in us being subject to fines, penalties and other sanctions;

·a failure to meet performance requirements in our contracts, which might lead to contract termination and liquidated damages;

·the outcome of reviews or audits by federal, state and local governments, which might result in financial penalties and reduce our ability to respond to invitations for new work;

·matters related to business we have disposed of or divested;

·other factors set forth in Exhibit 99.1 of this Annual Report on Form 10-K under the caption “Special Considerations and Risk Factors.”

As a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. Additionally, we caution investors not to place undue reliance on any forward-looking statements as these statements speak only as of the date when made. Except as otherwise required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether resulting from new information, future events or otherwise.

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PART I

ITEM 1.  Business.

Throughout this annual report, the terms “MAXIMUS,” “Company,” “we,” “our” and “us” refer to MAXIMUS, Inc. and its subsidiaries. A list of key terms is included in a glossary at the end of this section.

General

MAXIMUS is a provider of business process services (“BPS”) to government health and human services agencies under its mission of Helping Government Serve the People.®The Company is primarily focused on operating government-sponsored programs such as Medicaid, Children’s Health Insurance Program (CHIP), health insurance exchanges and other health care reform initiatives, Medicare, welfare-to-work, child support services and other government programs. We use our expertise, innovative business processes and advanced technological solutions to help government agencies run efficient, cost-effective programs and to improve program accountability, while enhancing the quality of services provided to beneficiaries. The Company serves both domestic and international governments, providing administrative services in the United States, Australia, Canada, the United Kingdom and Saudi Arabia. MAXIMUS was founded in 1975 and operates as a Virginia corporation.

The Company’s core health and human services business has benefited from steady demand over the last five years and has not experienced any material adverse change in demand as a result of government budgetary pressures. In addition, as a result of the 2012 U.S presidential election, federal and state governments must move forward with the implementation of the requirements of the Affordable Care Act as mandated under the 2010 law. These requirements include initiatives to expand health insurance coverage to millions of Americans and we believe MAXIMUS is well positioned to support our government clients in this roll-out. We also believe the critical nature of our services in helping U.S. governments provide and operate important safety net programs, such as Medicaid, welfare-to-work and CHIP, to the most vulnerable populations helps insulate our services from significant downward pressure, particularly during an economic downturn. We also administer several international government-sponsored programs, most notably welfare-to-work, to help people in Australia, the United Kingdom and Saudi Arabia find employment and achieve self-sufficiency. Favorable legislation and austerity measures that seek to help governments reduce costs and run more efficiently may continue to create demand for our core services.

For the fiscal year ended September 30, 2012, we had revenue from continuing operations of $1,050.1 million and net income from continuing operations of $76.1 million.

During fiscal 2012, the Company completed the acquisition of PSI Services Holding, Inc. and its wholly-owned subsidiary, Policy Studies, Inc. (“PSI”). PSI operations are consistent with, and have been integrated into, our Health and Human Services Segments. The acquisition will strengthen the Company’s business in the United States through new resources and customers as well as providing additional experience and knowledge of the health and human services markets.

The Company operates in the United States, Australia, Canada, the United Kingdom and Saudi Arabia. The distribution of revenues and assets among the United States, Australia and the rest of the world are included in “Note 2. Business Segments” within Item 8 of this Form 10-K.

Our Business Segments

The Company operates in two business segments, Health Services and Human Services. For more information concerning our segment presentation, including comparative revenue, gross profit, operating profit, identifiable assets and related financial information for the 2012, 2011 and 2010 fiscal years, see “Note 2. Business Segments” within Item 8 of this Form 10-K.

Health Services Segment

Our Health Services Segment generated 64% of our total revenue in fiscal 2012, of which approximately half was generated by contracts with the States of California and Texas. The Health Services Segment provides a variety of business process services, as well as related consulting services, for state, provincial and federal government programs, including Medicaid, CHIP, SNAP (Supplemental Nutrition Assistance Program), Medicare and Health Insurance BC (British Columbia). The segment’s services help improve the efficiency, cost effectiveness, quality and accountability of government-sponsored health benefit programs. In this segment, our BPS and consulting services can be described as follows:

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·Comprehensive government health insurance program administration

·Health insurance program eligibility and enrollment services to improve access to health care for citizens and help beneficiaries make the best choice for their health insurance coverage

·Eligibility and enrollment modernization for government health benefit programs

·Health insurance exchange design and operations

·Consumer outreach and education, including multilingual customer contact centers and multi-channel self-service options, such as Web-based portals, for easy enrollment

·Application assistance and independent enrollment counseling to beneficiaries

·Premium payment processing and administration, such as invoicing and reconciliation

·Objective, evidence-based health appeals

·Independent medical reviews

·Health plan oversight

·Comprehensive eHealth solutions with the Medigent® product suite

·Medicaid Management Information System (MMIS) planning and oversight

·Specialized program consulting services

The Health Services business is not subject to significant effects from seasonality; however it experiences revenue and margin fluctuations due to transaction-based work, such as periodic program open enrollment and activity related to contract life cycles. During the first quarter of our fiscal year, reductions in working days due to holidays and vacations may impact our sales and accounts receivable, but the effect is generally not significant.

Human Services Segment

Our Human Services Segment generated 36% of our total revenue in fiscal 2012, with approximately half generated outside the United States, primarily in Australia and the United Kingdom. The Human Services Segment provides federal, national, state and county human services agencies with a variety of business process services as well as related consulting services for welfare-to-work programs, child support services, higher education services and K-12 special education services.Our services can be described as follows:

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·Comprehensive welfare-to-work services — including eligibility determination, case management, job-readiness preparation, job search and employer outreach, job retention and career advancement, and selected educational and training services — to help disadvantaged individuals transition from government assistance programs to sustainable employment and economic independence

·Full and specialized child support case management services, customer contact center operations, and program and systems consulting services

·Management tools and professional consulting services for higher education institutions

·K-12 special education case management solutions

·Program consulting services including independent verification and validation, cost allocation plans, repeatable management services and other specialized consulting offerings

·Tax credit and employer services

Consistent with the Health Services Segment, the Human Services Segment may experience some seasonality due to holidays and vacations. In addition, during the fourth quarter of our fiscal year, the segment typically benefits from high margin contributions from our tax credit business.

Discontinued Operations

On September 30, 2010, the Company sold its Enterprise Resource Planning (ERP) division. The results of operations of this business have been included within “discontinued operations” for all periods shown in this Annual Report.

Market Overview

We expect that demand for our core health and human services offerings will continue to increase, driven by new legislation, austerity measures and increasing caseloads, as governments strive to deliver more services with fewer resources. Legislation such as the Affordable Care Act (ACA) in the United States and welfare reform initiatives abroad has created increased demand for our services and should continue to create increased demand over the next several years. We believe that we remain well-positioned to benefit from this increasing demand as governments look for ways to improve overall program efficiency and achieve value for funds spent on social benefits programs.

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Demand for our services is contingent upon factors that affect government, including:

·The need for U.S. state governments, which run federally mandated and federally funded programs such as Medicaid and CHIP, to deliver efficient, cost-effective services to program beneficiaries while meeting requirements to maintain federal matching funds

·The requirement of state governments to implement federal initiatives, such as the ACA, which will expand health insurance coverage to millions of Americans

·The impact of continued budgetary pressures, which result in governments having to operate more programs with the same level of resources and/or implement cost-control measures

·The need to improve business processes, push innovations, and update technology for public programs with many governments seeking outside sources of support as more government workers become eligible for retirement and stovepipe systems and antiquated processes cannot scale effectively to support projected caseload growth

As a result, governments utilize BPS companies, such as MAXIMUS, to help them deliver innovative, efficient, cost-effective services to beneficiaries on their behalf. MAXIMUS possesses the knowledge and resources to operate government health and human programs efficiently, while maintaining the service levels demanded by our government clients. With the ability to tightly balance resources with demand, MAXIMUS also offers the flexibility and scalability that governments do not always possess.

Health Services Market Environment

Over the past decade, health care costs have substantially risen in the United States, a trend that is expected to continue. U.S. health care spending, among the highest of all industrialized countries, is increasing at a rate that outpaces inflation and national income growth. Stemming these costs, as well as improving quality and access to health care, is a major policy priority for governments.

In recent years, state fiscal realities have prompted states to reexamine their Medicaid programs. Many states have made changes to benefits, most notably through benefit changes and the expansion of managed care to new populations — including the aged, blind and disabled populations — that have historically been served through fee-for-service Medicaid. Although these populations represent only a quarter of the total Medicaid population, they are responsible for approximately 70% of the costs. MAXIMUS has already benefitted from Medicaid managed care expansion in our current programs. We believe the Company remains well-positioned to benefit from future Medicaid managed care expansion due to our existing client base of states where we serve as the administrative enrollment vendor for 17 Medicaid managed care programs, which represents approximately 52% of the total Medicaid managed care population.

In March 2010, Congress passed the ACA, a comprehensive overhaul of the U.S. health insurance system that initially seeks to expand access to health care, while ultimately improving quality and reducing overall delivery costs. Most notably, the ACA aims to expand health insurance coverage to more than 30 million Americans through Medicaid expansion and subsidized insurance coverage purchased through health insurance exchanges. In June 2012, the U.S. Supreme Court ruled that Medicaid expansion under the ACA was optional for states. Nevertheless, the Congressional Budget Office estimates that most states will expand Medicaid coverage over the next several years. The ACA also extends CHIP through 2019, provides increased matching federal funds, and guarantees funding through 2015. We currently serve as the administrative vendor for CHIP in nine states, which represents approximately 59% of the total CHIP population.

The law also promotes the integration of new health insurance exchanges with existing state Medicaid and CHIP programs to provide a “no wrong door” entry for program beneficiaries. A health insurance exchange is an insurance marketplace where individuals and small businesses can shop, compare and buy affordable and qualified health benefit plans. We believe MAXIMUS is well-positioned to provide services to the federal and state health insurance exchanges, since many of the core functions of a health insurance exchange are similar to the functions that we provide under Medicaid and CHIP, including consumer outreach and education, eligibility and enrollment, customer contact centers, Web portals, and comprehensive business process managed services to help beneficiaries navigate the new health insurance exchanges and enroll in health insurance plans.

The ACA also includes enhanced consumer protections for health insurance appeals. The law requires an independent, evidence-based external review process and the option for individuals to appeal coverage determinations or claims to insurance companies. This expands the requirement to states that do not have an existing compliant external review process and non-governmental, self-insured plans which previously were not required to have an objective independent health appeals process. MAXIMUS is one of the largest providers of evidence-based health insurance appeals to Medicare and more than 30 state agencies.

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We believe the current health environment positions the Company to benefit from demand as governments must meet the requirements established under the ACA. In an effort to achieve compliance with the law, we believe states will turn to business process service providers such as MAXIMUS to provide repeatable processes, proven solutions and consumer-friendly services. Overall, we expect the underlying demand for our services to increase over the next several years due to the requirement for governments to provide these services to beneficiaries on an expanding and ongoing basis.

Human Services Market Environment

The Human Services market has experienced increased demand driven by the need for governments to reduce costs and improve efficiency of social benefits programs. The most dynamic portion of the market is in the welfare-to-work arena where governments worldwide are seeking to reform their programs as an important component of comprehensive fiscal austerity measures. Many governments are modeling new welfare reforms after established programs in Australia and the United States. These models, with which MAXIMUS has a substantial amount of experience, knowledge and expertise, are being emulated around the world through privatized efforts, with MAXIMUS being a leading provider.

We believe we are well-positioned to compete for these global welfare-to-work opportunities because of our established presence, strong brand recognition, and ability to achieve the requisite performance requirements and outcomes outlined in the new reform measures. We offer clients demonstrated results and more than twenty years of proven experience in administering welfare-to-work programs in several states and countries.

Since 1997, we have provided comprehensive welfare-to-work case management services throughout the United States. In Australia, MAXIMUS is one of the largest and highest rated welfare-to-work providers where we operate more than 80 sites and 70 outreach locations. We also have an established presence in the United Kingdom’s welfare-to-work market and presently provide employment and job training services under the country’s ambitious reform effort called The Work Programme. This program is a key component of the coalition government’s austerity plan to reduce mounting debt. The new Work Programme consolidates many of the U.K.’s disparate welfare-to-work programs — including the Flexible New Deal, Pathways to Work and Work Choice — into a single back-to-work program. Under the predecessor Flexible New Deal program, MAXIMUS was the highest rated provider for job placements and job retention. In fiscal 2012, we expanded our geographic reach in the welfare-to-work market with new programs in Canada and Saudi Arabia.

In addition to welfare reform, we have seen an increase in initiatives to utilize private firms for children’s services such as child support enforcement. MAXIMUS currently provides services to the Family Maintenance Enforcement Program in British Columbia as well as several jurisdictions throughout the United States, including Shelby County, Tennessee and Baltimore City, Maryland, two of the largest child support privatization efforts in the nation.

We believe ongoing reform initiatives as well as measures to reduce costs and improve efficiencies, coupled with our outstanding performance, expertise and proven solutions will continue to drive demand for our core human services business across multiple geographies.

Our Clients

Our primary customers are government agencies, with the majority at the federal, provincial and state level and, to a lesser extent, some at the county and municipal level. In the United States, when our direct customers are state governments, a significant amount of our revenue is ultimately provided by the U.S. federal government in the form of cost sharing arrangements with the states, such as is the case with Medicaid programs. In fiscal 2012, approximately 61% of our total revenue was derived from state and local government agencies whose programs received significant federal funding, 26% from foreign government agencies, 9% from U.S.-based federal government agencies, and 4% from other sources (such as municipal or commercial customers).

For the year ended September 30, 2012, we derived approximately 18% and 10% of our consolidated revenue from contracts with the States of Texas and California, respectively, and 16% of our consolidated revenue from the Government of Australia. Revenue from California and Texas is principally in our Health Services Segment; revenue from Australia is principally within our Human Services Segment.

We typically contract with government clients under four primary contract types: performance based, cost plus, fixed fee for service, and time and materials. For the year ended September 30, 2012, 44% of our contracts were performance based, 25% were cost plus, 27% were fixed fee for service, and 4% were time and materials.

Generally, the relationships with our clients are long-term, multi-year contracts, subject to option years and periodic rebids. See the “Backlog” section below for more details.

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Competitive Advantages

We offer a private sector alternative for the administration and management of critical government-funded health and human services programs. Our reputation and extensive experience over the last 37 years give us a competitive advantage as governments value the level of expertise, proven delivery and brand recognition that MAXIMUS brings to its customers. The following are the competitive advantages that allow us to capitalize on various market opportunities:

Proven track record, ability to deliver outcomes and exceptional brand recognition. Since 1975, we have successfully assisted governments in delivering cost-effective services to beneficiaries of government programs. We operate large-scale program management operations on behalf of government agencies, improving the quality of services provided to beneficiaries, and achieving the necessary outcomes to help these governments cost-effectively achieve their program goals. This has further enhanced our brand recognition as a proven partner with government agencies.

Subject matter expertise. Our workforce includes many individuals who possess substantial subject matter expertise in areas critical to the successful design, implementation, administration and operation of government health and human services programs. Many of our employees have worked for governments in management positions and can offer insights into how we can best provide valuable, practical and effective services to our clients.

Intellectual property that supports the administration of government programs. We have proprietary case management solutions to support our health and human services business lines. By leveraging a common framework, MAXIMUS shortens, and sometimes eliminates, the development lifecycle to enable configuration for accelerated takeover of operations, providing clients with a significant amount of flexibility and support. By taking advantage of a large number of shared technical and business components, we reduce development costs and deliver clients increased capabilities and efficiencies related to workflow, calendaring and action plan management. As a market-share leader in CHIP and Medicaid, our shared core infrastructure provides price competitive advantages over other potential competitors. We have also made investments in business process modeling and monitoring tools to further enhance our operational efficiency. These assets, when combined with our subject matter expertise, offer clients significant advantages over pure service providers who depend on third-party software.

Flexibility and Scalability. We are experienced in launching large scale operations under compressed time frames. We offer clients the flexibility and scalability to deliver the people, processes and technology to complete short-term and long-term contractual assignments in the most efficient and cost effective manner.

Financial strength. We maintain a strong balance sheet, generate consistent annual cash flow, and have minimal long-term debt. We possess the financial flexibility and sufficient cash on-hand to support client operations including ongoing technology investments and working capital for high-profile public health and human services programs.

Focused portfolio of services with a single-market emphasis. We are one of the largest publicly traded companies that provide a portfolio of BPS health and human services specifically to government customers. Our government program expertise and proven ability to deliver defined, measurable outcomes differentiate us from other firms and non-profit organizations with limited resources and skill sets, as well as from large consulting firms that serve multiple industries but lack the focus necessary to manage the complexities of serving health and human services government agencies efficiently.

Established international presence. International governments are seeking to improve government-sponsored health and human services programs and contain costs. We have an established presence in Australia, Canada, the United Kingdom and we launched a new pilot program in Saudi Arabia. Our international efforts are focused on delivering cost effective welfare-to-work and health insurance eligibility and enrollment services to beneficiaries on behalf of governments.

Expertise in competitive bidding. Government agencies typically award contracts through a comprehensive, complex and competitive Requests for Proposals (RFPs) and bidding process. With more than 35 years of experience in responding to RFPs, we have the necessary experience and resources to navigate government procurement processes. We possess the expertise and experience to assess and allocate the appropriate resources necessary for successful project completion in accordance with contractual terms.

Competition

The market for providing our services to government agencies can be competitive and subject to rapid change. However, given the specialized nature of our services and the programs we serve, the market is difficult for new, unknown competitors. The complex nature of competitive bidding and required investment in subject-matter expertise, repeatable processes and support infrastructure creates significant barriers to entry for potential new competitors unfamiliar with the nature of government procurement.

Our primary competitors in the Health Services Segment market in the United States are Affiliated Computer Services, a Xerox Company; Electronic Data Systems, an HP Company; and specialized private service providers. Our primary competitors in the Human Services Segment market include Serco, Atos Origin, Ingeus, other specialized consulting companies and non-profit organizations such as United Way, Goodwill and Catholic Charities. In the areas in which we compete, we consider ourselves to be the largest or second largest provider.

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Business Growth Strategy

Our goal is to enable future growth by remaining a leading provider of operations program management and consulting services to government agencies. The key components of our business growth strategy include the following:

·Pursue new domestic and international business opportunities and expand our customer base. With more than 35 years of business expertise in the government market, we continue to be a leader in developing innovative solutions to meet the evolving needs of government agencies. We seek to grow our domestic and international base businesses by leveraging our existing core capabilities, consistently delivering the required outcomes for governments to achieve program goals, and pursuing opportunities with new and current clients.

·Grow long-term, recurring revenue streams. We seek to enter into long-term relationships with clients to meet their ongoing and long-term business objectives. As a result, long-term contracts (three to five years with additional option years) are often the preferred method of delivery for customers and are also beneficial to the Company.

·Pursue strategic acquisitions. We will selectively identify and pursue strategic acquisitions. Acquisitions can provide us with a rapid, cost-effective method to enhance our services, obtain additional skill sets, expand our customer base, cross-sell additional services, enhance our technical capabilities, and establish or expand our geographic presence.

·Continue to optimize our current operations and drive innovation and quality to customers. MAXIMUS continues to seek efficiencies and optimize operations in order to achieve sustainable, profitable growth. We will continue to drive improved business process managed services to clients to improve cost effectiveness, program efficiency and overall program scalability as governments deal with rising demand and increasing caseloads.

·Recruit and retain highly skilled professionals. We continually strive to recruit motivated individuals including top managers from larger organizations, former government officials, and consultants experienced in our service areas. We believe we can continue to attract and retain experienced personnel by capitalizing on our single-market focus and our reputation as a premier government services provider.

·Focus on core health and human services business lines. We have centered our core business offerings on delivering business process managed services to government health and human services agencies. Our sharpened focus and established presence positions us to benefit from Health Care Reform in the United States and welfare reform initiatives abroad.

See Exhibit 99.1 of this Annual Report on Form 10-K under the caption “Special Considerations and Risk Factors” for information on risks and uncertainties that could affect our business growth strategy.

Marketing and Sales

We generate new business opportunities by establishing and maintaining relationships with key government officials, policy makers and decision makers to understand the evolving needs of government agencies as they seek to optimize their programs. We have a team of business development professionals who ensure that we understand the needs, requirements, legislative initiatives and priorities of our current and prospective customers. In conjunction with our subject matter experts and marketing consultants, our business development professionals create and identify new business opportunities and ensure that we proactively introduce our solutions and services early in the procurement cycle. As part of the procurement, we respond to competitive RFPs through the government procurement process and employ world-class proposal operations to support these efforts.

Legislative Initiatives

MAXIMUS actively monitors legislative initiatives and responds to opportunities as they develop. Over the past several years, legislative initiatives created new growth opportunities and potential markets for MAXIMUS. Legislation passed in the United States (US), the United Kingdom (UK), the European Union (EU) and Canada has significant public policy implications for all levels of government and presents viable business opportunities in the health and human services arena. MAXIMUS is well-positioned to meet the operations program management and consulting needs resulting from legislative actions and subsequent regulatory and program implementation efforts.

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Some recent legislative initiatives that have created new growth opportunities for us in the government market include the following:

ACA. In March 2010, the United States enacted comprehensive health care reform, known as the Affordable Care Act (ACA). This law expands access to health coverage to more than 30 million Americans, protects consumer rights, controls health care costs, and improves the overall health care delivery system over the course of the next four years and beyond. Many components of the ACA will require states to pass legislation and create program regulations, but the law also provides for a federal administrative option for those states that choose not to implement the law at the state level. On June 28, 2012, the Supreme Court of the United States upheld ACA while allowing states to opt out of the previously mandated Medicaid expansion. The law presents several business opportunities for MAXIMUS to offer our expertise in the administration of public programs, including:

·Establishment of state and federal exchanges, insurance marketplaces where individuals and small businesses can buy affordable and qualified health benefit plans as well as initiate the process for enrolling in public health insurance programs

·Expansion of Medicaid in those states that elect to receive federal matching funds to cover more low-income individuals and families; as a result of the June 2012 Supreme Court decision, some states may opt out of the Medicaid expansion or may phase-in the expansion over time and as health insurance exchanges offer new avenues to enrollment; states may also see an increase in participation rates among Medicaid-eligible individuals

·Extension of CHIP through 2019 and the extension of funding through 2015, which is two additional years beyond the CHIPRA of 2009

·Funding up to 90% of total costs to promote the integration of state eligibility processing associated with health and human services entitlement programs

·Development of consumer-friendly education and outreach materials, including easy-to-use websites, so beneficiaries with varying literacy levels can compare options and select the appropriate health insurance coverage

·Funding for long-term care initiatives that allow states to offer home and community based services to elderly and disabled individuals through Medicaid rather than institutional care in nursing homes

·Creation of Pre-Existing Condition Insurance Plans (PCIP) to provide health coverage through high-risk pools to individuals who have been denied health insurance by private insurance companies because of a pre-existing condition

·Expansion of independent medical appeals services to provide consumer protection through an external review process and the option for individuals to appeal coverage determinations or claims to insurance companies

·Implementation of eHealth requirements for a secure, confidential and electronic exchange of health information

·Funding and coordination of state demonstration projects associated with integrating different funding streams, maintaining or improving care, and reducing costs for the dual-eligible population (individuals eligible for both Medicaid and Medicare)

Shift to Medicaid Managed Care.As Medicaid programs become larger, more complex and costly, states look to new models. Estimates from the Centers for Medicare and Medicaid Services (CMS) indicate that although the fee-for-service system covers less than half of the total Medicaid population, it accounts for more than 80% of all Medicaid spending. In response, several states have initiatives to reduce the current costs of Medicaid by moving different populations of beneficiaries from fixed-fee-for-service models to managed care, which represents new growth opportunities for MAXIMUS.

CHIPRA. CHIPRA was signed into law on February 2, 2009, extending the previous SCHIP program. As part of the ACA, CHIP has been extended through 2019 and funding has been extended through 2015, which is two additional years beyond the original CHIPRA Act. By expanding state options to find and enroll eligible children through “express lane eligibility” and “auto enrollment,” CHIPRA has presented MAXIMUS with an opportunity to expand our partnerships with states for the administration of CHIP programs. The advent of state and federal exchanges at the beginning of 2014 will increase participation of eligible children in CHIP.

Work Programme in the United Kingdom. The Work Programme, part of the Coalition government’s debt reduction measures, is a government-sponsored welfare-to-work model that consolidates several existing employment programs into a single comprehensive back-to-work program in an effort to achieve higher quality, longer-term and sustainable employment outcomes for job seekers in the United Kingdom. The Work Programme presented new opportunities for MAXIMUS and the Company has been delivering employment services throughout Thames Valley, Hampshire and the Isle of Wight and West London since June 2011.

Employment Program of British Columbia. In 2009, the Province of British Columbia (BC) and the Government of Canada signed a Labour Market Development Agreement that delegates responsibility for delivery of employment and training programs from the federal to the provincial level. In response, the new Employment Program of BC was created to provide all British Columbians eligible for work a single point of entry to employment and labor market services. This program represents a shift in policy to a consolidation and integration of programs into a “one-stop” and “employment first” model with required contracted services that are responsive, inclusive, accessible and client-centered. This program presented an opportunity for MAXIMUS to expand its workforce services offerings to new jurisdictions.

10

Deficit Reduction Act of 2005 (DRA). Enacted in the spring of 2006, the DRA reauthorized the TANF program of 1996 through 2010. The DRA includes a number of key health and human service issues important to the Company’s core health and human service businesses in the United States. The DRA requires states to engage more TANF cases in productive activities to find employment in order to achieve self-sufficiency, as well as establish and maintain work participation rates and verification procedures. The DRA also provides states with additional flexibility to make reforms to their Medicaid programs.

Backlog

At September 30, 2012, we estimated that we had approximately $2.9 billion of revenue in backlog. Backlog represents an estimate of the remaining future revenue from existing signed contracts and revenue from contracts that have been awarded, but not yet signed. Our backlog estimate includes revenue expected under the current terms of executed contracts and revenue from contracts in which the scope and duration of the services required are not definite but estimable (such as performance-based contracts), but does not assume any contract renewals.

Increases in backlog result from the awarding of new contracts or the extension or renewal of existing contracts and option periods. Reductions come from fulfilling contracts and early termination of contracts. Increases and decreases can follow from changes in estimates.

Our contracts typically contain provisions permitting government customers to terminate the contract on short notice, with or without cause. The backlog associated with our performance-based contracts is an estimate based upon management experience of case loads and similar transaction volume from which actual results may vary.

We believe that period-to-period backlog comparisons are difficult and do not necessarily accurately reflect future revenue we may receive. The actual timing of revenue receipts, if any, on projects included in backlog could change for any of the aforementioned reasons. The dollar amount by segment of our backlog as of September 30, 2012 and 2011 was as follows:

	As of September 30,
	2012		2011
	(In millions)
Health Services	$	1,412	1,505
Human Services	1,488		1,395
Total	$	2,900	2,900

The Company’s BPS businesses typically involve contracts covering a number of years. At September 30, 2012, the average weighted life of these contracts was in excess of 4.6 years, including options. Although the exercise of options is uncertain, we believe the incumbent contractor enjoys significant advantages. The longevity of these contracts assists management in predicting revenues, operating income and cash flows. The Company expects approximately 38% of the backlog balance to be recognized in fiscal 2013 and expects backlog, in addition to anticipated option period renewals, to represent 90% of estimated 2013 revenues.

Employees

As of September 30, 2012, we had 8,657 employees, consisting of 5,634 employees in the Health Services Segment, 2,798 employees in the Human Services Segment and 225 corporate administrative employees. Our success depends in large part on attracting, retaining and motivating talented, innovative and experienced professionals at all levels.

As of September 30, 2012, 403 of our employees in Canada were covered under three different collective bargaining agreements, each of which has different components and requirements. There are 391 employees covered by two collective bargaining agreements with the British Columbia Government and Services Employees’ Union and 12 employees covered by a collective bargaining agreement with the Professional Employees Association. These collective bargaining agreements expire in 2015.

As of September 30, 2012, 906 of our employees in Australia were covered under a Collective Agreement, which is similar in form to a collective bargaining agreement. The Collective Agreement is renewed annually.

None of our other employees are covered under any such agreement. We consider our relations with our employees to be good.

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Other information

Our principal executive offices are located at 1891 Metro Center Drive, Reston, Virginia, 20190. Our telephone number is 703-251-8500. Our Internet address is http://www.maximus.com. We make our website information available for information purposes only. It should not be relied upon for investment purposes, nor is it incorporated by reference into this Form 10-K.

We make our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and the proxy statement for our annual shareholders’ meeting, as well as any amendments to those reports, available free of charge through our website as soon as reasonably practical after we file that material with, or furnish it to, the SEC. Our SEC filings may be accessed through the Investor Relations page of our website. These materials, as well as similar materials for other SEC registrants, may be obtained directly from the SEC through their website at http://www.sec.gov. This information may also be read and copied at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

Glossary

Key terms included in this section of our Annual Report on Form 10-K include the following:

ACA — The Affordable Care Act, also known as Health Reform or Health Care Reform

CHIP — Children’s Health Insurance Program

CHIPRA — Children’s Health Insurance Program Reauthorization Act

TANF — Temporary Assistance to Needy Families

ITEM 1A.  Risk Factors.

Our operations are subject to many risks that could adversely affect our future financial condition and performance and, therefore, the market value of our securities. See Exhibit 99.1 of this Annual Report on Form 10-K under the caption “Special Considerations and Risk Factors” for information on risks and uncertainties that could affect our future financial condition and performance. The information in Exhibit 99.1 is incorporated by reference into this Item 1A.

ITEM 2.  Properties.

We own a 60,000 square foot office building in Reston, Virginia. We also lease offices for management and administrative functions in connection with the performance of our services. At September 30, 2012, we leased 92 offices in the United States totaling approximately 1,417,000 square feet. In four countries outside the United States, we leased 146 offices containing approximately 543,000 square feet. The lease terms vary from month-to-month to seven-year leases and are generally at market rates. In the event that a property is used for our services in the United States, we typically negotiate clauses to allow termination of the lease if the service contract is terminated by our customer. Such clauses are not standard in overseas leases.

We believe that our properties are maintained in good operating condition and are suitable and adequate for our purposes.

ITEM 3.  Legal Proceedings.

The Company is involved in various legal proceedings, including contract and employment claims, in the ordinary course of its business. The matters reported on below involve significant pending or potential claims against us.

In March 2009, a state Medicaid agency asserted a claim against MAXIMUS, related to a discontinued business line, in the amount of $2.3 million in connection with a contract MAXIMUS had through February 1, 2009 to provide Medicaid administrative claiming services to school districts in the state. MAXIMUS entered into separate agreements with the school districts under which MAXIMUS helped the districts prepare and submit claims to the state Medicaid agency which, in turn, submitted claims for reimbursement to the federal government. No legal action has been initiated. The state has asserted that its agreement with MAXIMUS requires the Company to reimburse the state for the amounts owed to the federal government. However, the Company’s agreements with the school districts require them to reimburse MAXIMUS for such payments and therefore MAXIMUS believes the school districts are responsible for any amounts disallowed by the state Medicaid agency or the federal government. Accordingly, the Company believes its exposure in this matter is limited to its fees associated with this work and that the school districts will be responsible for the remainder. MAXIMUS has exited the federal healthcare claiming business and no longer provides the services at issue in this matter.

In 2008 MAXIMUS sold the SchoolMAX student information system business line as part of the divestiture of the MAXIMUS Education Systems division. In 2011, a school district which was a SchoolMAX client initiated the dispute resolution process under their contract. The client raised a number of issues pertaining to services and products delivered under the contract. The parties participated in various mediation sessions during 2011, but they did not reach a resolution. In April 2012, the client filed a formal arbitration notice alleging that MAXIMUS and the buyer failed to (i) use best practices in developing the software and (ii) deliver and test product releases as required by the contract. The client contends that those failures resulted in damages of at least $10 million. MAXIMUS and the buyer are contesting the client’s claims. We cannot at this time reasonably estimate the possible loss that could be incurred if the plaintiff were to prevail but we believe that we have substantial defenses. In addition, we believe that we are entitled to indemnification from the buyer of the business for the claims asserted in the arbitration notice. Recently, the client has asserted that MAXIMUS defrauded the client in 2007 or 2008 by misrepresenting its intentions regarding the sale of the Education Systems division. That allegation is not part of the arbitration, and no formal claim or lawsuit has been filed. The company believes it has a number of defenses to that allegation and would contest it vigorously.

ITEM 4.  Mine Safety Disclosures

Not applicable

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PART II

ITEM 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock trades on the New York Stock Exchange under the symbol “MMS.” The following table sets forth, for the fiscal periods indicated, the range of high and low sales prices for our common stock and the cash dividends per share declared on the common stock.

	Price Range
	High		Low		Dividends
Year Ended September 30, 2012:
First Quarter	$	42.73	$	33.48	$	0.09
Second Quarter	46.79		40.26		0.09
Third Quarter	51.93		39.93		0.09
Fourth Quarter	60.05		48.48		0.09
Year Ended September 30, 2011:
First Quarter	$	34.00	$	28.88	$	0.06
Second Quarter	40.62		31.25		0.075
Third Quarter	42.57		37.42		0.075
Fourth Quarter	42.77		31.23		0.09

As of October 31, 2012, there were 55 holders of record of our outstanding common stock. The number of holders of record is not representative of the number of beneficial owners due to the fact that many shares are held by depositories, brokers, or nominees. We estimate there are approximately 12,273 beneficial owners of our common stock.

We expect to continue our policy of paying regular cash dividends, although there is no assurance as to future dividends. Future cash dividends, if any, will be paid at the discretion of our Board of Directors and will depend, among other things, upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors our Board of Directors may deem relevant.

The following table sets forth the information required regarding repurchases of common stock that we made during the three months ended September 30, 2012:

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans (1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan (in thousands)
Jul. 1, 2012 — Jul. 31, 2012	—	$	—	—	$	131,243
Aug. 1, 2012 — Aug 31, 2012	—	—		—	$	131,256
Sep. 1, 2012 — Sep. 30, 2012	65,800	58.57		65,800	$	127,403
Total	65,800	$	58.57	65,800

(1)Under a resolution adopted on November 8, 2011, the Board of Directors has authorized the repurchase, at management’s discretion, of up to an aggregate of $125.0 million of the Company’s common stock. The resolution also authorized the use of option exercise proceeds for the repurchase of the Company’s common stock.

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Stock Performance Graph

The following graph compares the cumulative total shareholder return on our common stock for the five-year period from September 30, 2007 to September 30, 2012, with the cumulative total return for the NYSE Stock Market (U.S. Companies) Index and a peer group comprising Accenture, CGI, Hewlett Packard, IBM and Xerox. The peer group companies represent a mix of information technology, BPS and management consultancy businesses and reflect a cross section of businesses against whom the Company competes for business and executive talent. The peer group is weighted by market capitalization. This graph assumes the investment of $100 on September 30, 2007 in our common stock, the NYSE Stock Market (U.S. Companies) Index, and our peer group and assumes dividends are reinvested.

Comparison of Five—Year Cumulative Total Returns

Performance Graph for

MAXIMUS, INC.

Notes:

A.The lines represent index levels derived from compounded daily returns that include all dividends.

B.The indexes are reweighted daily, using the market capitalization on the previous trading day.

C.If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.

D.The index level for all series was set to $100.0 on 09/30/2007.

Prepared by Zacks Investment Research, Inc. Copyright 1960-2012 CRSP Center for Research in Security Prices, Graduate School of Business, University of Chicago. Used with permission. All rights reserved.

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ITEM 6.  Selected Financial Data.

We have derived the selected consolidated financial data presented below, as adjusted for discontinued operations, from our consolidated financial statements and the related notes. The revenue and operating results related to the acquisition of companies using the purchase accounting method are included from the respective acquisition dates. The selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included as Item 7 of this Annual Report on Form 10-K and with the Consolidated Financial Statements and related Notes included as Item 8 of this Annual Report on Form 10-K. The historical results set forth in this Item 6 are not necessarily indicative of the results of operations to be expected in the future.

	Year Ended September 30,
	2012		2011			2010			2009			2008
	(In thousands, except per share data)
Statement of Operations Data:
Revenue	$	1,050,145	$	929,633		$	831,749		$	720,108		$	699,552
Acquisition-related expenses (1)	2,876		—			254			—			—
Legal and settlement expense (recovery), net (2)	90		(808		)	(5,605		)	(4,271		)	38,358
Gain on sale of building (3)	—		—			—			—			3,938
Operating income from continuing operations	127,575		122,401			107,406			88,589			46,028
Income from continuing operations	76,099		82,142			69,397			53,841			29,462
Income (loss) from discontinued operations (4)	34		(974		)	1,012			(7,301		)	(22,785		)
Net income	$	76,133	$	81,168		$	70,409		$	46,540		$	6,677
Basic Earnings (loss) per share:
Income (loss) from continuing operations	$	2.25	$	2.39		$	1.99		$	1.53		$	0.77
Income (loss) from discontinued operations	—		(0.03		)	0.03			(0.21		)	(0.59		)
Basic earnings (loss) per share	$	2.25	$	2.36		$	2.02		$	1.32		$	0.18
Diluted Earnings (loss) per share:
Income (loss) from continuing operations	$	2.19	$	2.31		$	1.93		$	1.51		$	0.76
Income (loss) from discontinued operations	—		(0.03		)	0.03			(0.21		)	(0.59		)
Diluted earnings (loss) per share	$	2.19	$	2.28		$	1.96		$	1.30		$	0.17
Weighted average shares outstanding:
Basic	33,867		34,417			34,827			35,141			38,120
Diluted	34,806		35,531			35,930			35,773			38,610
Cash dividends per share of common stock	$	0.36	$	0.30		$	0.24		$	0.23		$	0.20

	At September 30,
	2012		2011		2010		2009		2008
	(In thousands)
Balance Sheet Data:
Cash and cash equivalents	$	189,312	$	172,950	$	155,321	$	87,815	$	119,605
Working capital	249,548		227,383		191,461		164,646		149,966
Total assets	695,293		565,279		527,741		433,234		454,954
Long-term debt	1,736		1,696		1,411		—		—
Total shareholders’ equity	451,106		374,457		338,789		297,128		275,706

(1)Acquisition-related expenses are the incremental costs incurred as a consequence of the acquisitions of Policy Studies, Inc. during fiscal 2012 and DeltaWare, Inc. during fiscal 2010. These costs include legal fees, valuation costs, severance and costs related to the termination of redundant service contracts. Prior to October 1, 2009, the costs of successful acquisitions would have been included within the purchase price of the transaction and would have increased the Company’s goodwill balance.

(2)Legal and settlement expense (recovery), net consists of costs, net of reimbursed insurance claims, related to significant legal settlements and non-routine legal matters, including future probable legal costs estimated to be incurred in connection with those matters. See “Note 17. Legal and settlement expense (recovery), net” to our consolidated financial statements for additional information.

(3)During the year ended September 30, 2008, the Company sold a 21,000 square foot administrative building in McLean, Virginia and recognized a pre-tax gain on the sale of $3.9 million.

(4)Income (loss) from discontinued operations includes the results of divisions that the Company has disposed of, as well as the net gain or loss recorded in these transactions.

During the year ended September 30, 2008, the Company sold a number of divisions, including the Security Solutions, Justice Solutions, Education Systems and Asset Solutions divisions, as well as Unison MAXIMUS, Inc. During the year ended September 30, 2010, the Company sold its ERP division. The operating results of these divisions are all shown as discontinued operations for all periods presented. The Company recorded an additional loss on the sale of the ERP division in the year ended September 30, 2011 as the final sales price was resolved.

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ITEM 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operation.

The following discussion and analysis of financial condition and results of operations is provided to enhance the understanding of, and should be read in conjunction with, our Consolidated Financial Statements and the related Notes.

Business Overview

We provide business process services (“BPS”) to government health and human services agencies under our mission of Helping Government Serve the People.®Our business is focused almost exclusively on administering government-sponsored programs such as Medicaid, CHIP, health care reform, welfare-to-work, Medicare, child support enforcement and other government programs. Founded in 1975, we are one of the largest pure-play health and human services administrative providers to governments in the United States, Australia, Canada and the United Kingdom. We use our expertise, experience and advanced technological solutions to help government agencies run efficient, cost-effective programs and to improve program accountability, while enhancing the quality of services provided to program beneficiaries.

The Company is managed through two segments, Health Services and Human Services. The Health Services Segment provides a variety of business process services, as well as consulting services for state, provincial and federal programs, such as Medicaid, CHIP, Medicare and the British Columbia Health Insurance Program. The Human Services Segment includes a variety of BPS, case management, job training and support services for programs such as welfare-to-work, child support enforcement, K-12 special education and other specialized consulting services.

During recent years, the Company has focused on its core health and human services, expanding these operations in the United States and internationally, while disposing of non-core businesses. This approach has resulted in the Company earning an increasing share of its revenues from overseas markets, up from 16% in 2008 to 26% in 2012. We believe that this focus, balanced by a risk-management structure, has enabled the Company to attain profitable growth in recent years. The Company believes that a combination of its record of results, robust financial performance and global experience leaves it well-positioned to capitalize on opportunities in its existing markets and elsewhere.

During fiscal 2012, the Company completed the acquisition of PSI Services Holding, Inc. and its wholly-owned subsidiary, Policy Studies, Inc. (“PSI”). PSI operations are consistent with, and have been integrated into, our Health and Human Services Segments. The acquisition will strengthen the Company’s business in the United States through new resources and customers as well as providing additional experience and knowledge of the health and human services markets.

Industry considerations

Within the United States, fiscal pressures remain a challenge for state governments while at the same time they are also facing increasing demand for critical services from the most vulnerable members of society. The majority of states are required to balance their budgets each year and states have taken steps to more efficiently manage their social programs, including Medicaid. Since Medicaid accounts for a large portion of states’ budgets, many states have taken steps to control costs by shifting more populations to managed care, increasing co-pays, reducing provider rates, and modifying benefits. As more populations shift into managed care, demand for our administrative services and program volumes generally increases.

The situation for international governments is also challenging, with each of the areas in which MAXIMUS operates offering unique local issues in addition to general global economic factors. Both Australia and the United Kingdom have implemented measures to deal with significant debt and commitments and both have implemented welfare reform as a means to better manage resources.  Companies like MAXIMUS may benefit from the need for governments to reform certain benefits programs.

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Results of Operations

Consolidated

The following table sets forth, for the fiscal year ends indicated, selected statements of operations data:

	Year ended September 30,
	2012			2011			2010
	(dollars in thousands, except per share data)
Revenue	$	1,050,145		$	929,633		$	831,749
Gross profit	287,943			253,651			220,833
Selling, general and administrative expense	157,402			132,058			118,778
Selling, general and administrative expense as a percentage of revenue	15.0		%	14.2		%	14.3		%
Operating income excluding acquisition —related expenses and legal and settlement expenses and recoveries	130,541			121,593			102,055
Operating income excluding legal and settlement expense as a percentage of revenue	12.4		%	13.1		%	12.3		%
Acquisition-related expenses	2,876			—			254
Legal and settlement expense (recovery), net	90			(808		)	(5,605		)
Operating income from continuing operations	127,575			122,401			107,406
Operating margin from continuing operations	12.1		%	13.2		%	12.9		%
Interest and other income, net	4,176			3,495			916
Income from continuing operations before income taxes	131,751			125,896			108,322
Provision for income taxes	55,652			43,754			38,925
Tax rate	42.2		%	34.8		%	35.9		%
Income (loss) from discontinued operations, net of income taxes	—			(133		)	1,040
Loss on disposal	34			(841		)	(28		)
Net income	$	76,133		$	81,168		$	70,409
Basic Earnings per share:
Income from continuing operations	$	2.25		$	2.39		$	1.99
Income (loss) from discontinued operations	—			(0.03		)	0.03
Basic earnings per share	$	2.25		$	2.36		$	2.02
Diluted Earnings per share:
Income from continuing operations	$	2.19		$	2.31		$	1.93
Income (loss) from discontinued operations	—			(0.03		)	0.03
Diluted earnings per share	$	2.19		$	2.28		$	1.96

The following provides an overview of the significant elements of our Consolidated Statements of Operations. As both of our business segments have different factors driving revenue growth and profitability, the sections that follow cover these segments in greater detail.

We discuss constant currency revenue information to provide a framework for assessing how our business performed excluding the effect of foreign currency rate fluctuations. To provide this information, revenue from foreign operations is converted into United States dollars using average exchange rates from the previous fiscal year.

We discuss operating income from continuing operations excluding acquisition-related expenses and legal and settlement expenses and recoveries. Acquisition-related expenses relate to costs incurred directly as a consequence of the acquisitions of Policy Studies, Inc. (“PSI”) in fiscal 2012 and DeltaWare Services, Inc. (“DeltaWare”) in fiscal 2010. Legal and settlement expenses and recoveries are typically driven by factors that are not consistent with other drivers of our business and the timing and extent of these expenses and recoveries may have an unusual effect on our financial results. In recent years, we have received the benefits of insurance recoveries from a matter resolved during fiscal 2008 and these recoveries are not expected to continue. Offsetting these, we have incurred other legal charges for significant, non-routine matters which are also not expected to continue to occur. We believe that excluding acquisition-related expenses and legal and settlement expenses and recoveries provides a framework for comparing the performance of the business between periods.

The Company acquired PSI on April 30, 2012 and the financial results above include the performance of PSI for all periods after this date. The year ended September 30, 2012 includes $60.1 million of revenue contributed by PSI. The Company acquired DeltaWare on February 10, 2010 and the financial results include the performance of DeltaWare for all periods after this time. The acquisition of DeltaWare did not make a significant contribution to revenue or operating income. We provide organic revenue growth information to provide a framework for assessing how our business performed excluding the effects of acquisitions. Organic revenue growth comparisons between fiscal 2012 and fiscal 2011 are performed excluding all PSI revenues. Comparisons for the 2011 and 2010 fiscal years are performed excluding DeltaWare results.

17

Constant currency revenue, organic growth and operating income excluding acquisition-related expenses and legal and settlement expenses and recoveries are non-GAAP numbers. We believe that these numbers provide a useful basis for assessing the Company’s performance. The presentation of these non-GAAP numbers is not meant to be considered in isolation, or as an alternative to revenue growth or operating income as measures of performance.

Revenue increased 13.0% to $1,050.1 million for the year ended September 30, 2012, compared with the prior year. On a constant currency basis, growth would have been 13.2%. Organic growth was 6.5%. Organic growth was driven by the Health Services Segment, which was offset by declines in revenue from our international operations in the Human Services Segment.

Revenue increased 11.8% to $929.6 million for the year ended September 30, 2011, compared with the prior year. On a constant currency basis, the revenue growth would have been 8.4%. The principal driver of growth was new work in the Human Services Segment.

See information on the individual segments below for discussion of drivers.

Selling, general and administrative expense (SG&A) consists of costs related to general management, marketing and administration. These costs include salaries, benefits, bid and proposal efforts, travel, recruiting, continuing education, employee training, non-chargeable labor costs, facilities costs, printing, reproduction, communications, equipment depreciation, intangible amortization and legal expenses incurred in the ordinary course of business. SG&A has increased in absolute terms and as a percentage of revenue owing to significant business development activity, including the preparation of bids and proposals.

Acquisition-related expenses are direct costs incurred as a consequence of the acquisition of PSI (in 2012) and DeltaWare (in 2010). These include legal fees, brokerage fees, due diligence, valuation reports, contract terminations related to redundant support services and severance.

Legal and settlement expense (recovery), net consists of costs, net of reimbursed insurance claims, related to significant legal settlements and non-routine legal matters, including future probable legal costs estimated to be incurred in connection with those matters. Legal expenses incurred in the ordinary course of business are included in selling, general and administrative expense. Legal and settlement expenses (recoveries) are summarized below (in thousands):

	Year ended September 30,
	2012			2011			2010
Insurance recoveries	$	(1,180	)	$	—		$	(7,500	)
Employee lawsuit	600			—			—
Client indemnification	490			—			—
Other	180			(808		)	1,895
Total	$	90		$	(808	)	$	(5,605	)

The insurance recoveries in fiscal 2012 and 2010 relate to a litigation settlement in fiscal 2008. During the fourth quarter of fiscal year 2012, the company agreed to settle a lawsuit brought by a former employee, and the company accrued $600,000 consisting of settlement and legal costs related to that matter. The company has also accrued $490,000 relating to client indemnification of funds misapprapriated by a former employee. During the 2011 fiscal year, the Company reversed a legal expense previously recognized in fiscal 2010 for a matter which concluded without liability to the Company.

Operating income from continuing operations increased 4.2% to $127.6 million for the year ended September 30, 2012, compared to the prior year. Excluding the acquisition-related expenses and legal and settlement expense, growth would have been 7.4%. This growth was driven by the acquisition of PSI, new work in our Health Services segment and certain one-time benefits in our Human Services segment.

Operating income from continuing operations increased 14.0% in fiscal 2011 compared to fiscal 2010, from $107.4 million to $122.4 million. The increase of $15.0 million was driven by growth in the business, the benefits of favorable exchange rates on foreign-sourced income, and increasing economies of scale in operating the business.

The increase in interest and other income between 2010 and 2012 is primarily attributable to increases in cash balances in jurisdictions which have high interest rates. At September 30, 2012, 66% of the Company’s cash is held in jurisdictions other than the United States compared with 24% at September 30, 2009. The increase has been driven by strong cash flows in international businesses.

18

Our effective tax rates were 42.2%, 34.8%, and 35.9% in 2012, 2011 and 2010, respectively. The tax charge for the year ended September 30, 2012 includes a charge of $2.7 million to correct an error from prior years. Without this adjustment, the tax rate would have been 40.3%. We do not believe this adjustment is material to the financial statements. The tax rate increased in fiscal 2012 owing to the effect of a greater share of the Company’s income being earned in the United States, which has a higher corporate tax charge than other jurisdictions in which the Company does business. The increase in United States profits was driven by organic growth, the acquisition of PSI, which conducts business entirely within the United States, and the anticipated decline in profits in the United Kingdom owing to a transition between contracts which is discussed below.

Health Services Segment

	Year ended September 30,
	2012			2011			2010
	(dollars in thousands)
Revenue	$	671,181		$	565,881		$	514,258
Gross profit	172,456			147,239			130,276
Operating income	80,619			74,715			64,725
Operating margin percentage	12.0		%	13.2		%	12.6		%

The Health Services Segment provides a variety of business process services, as well as consulting services for state, provincial and federal programs, such as Medicaid, CHIP, Medicare and the British Columbia Health Insurance Program.

Revenue increased by 18.6%, or 18.9% on a constant currency basis, in fiscal 2012 compared to fiscal 2011. Organic growth was 14.8%. In addition to PSI’s results, the Company also benefitted from new work and expansion on existing contracts including the expansion of Medicaid managed care, primarily in Texas. Operating margin declined in fiscal 2012. The Texas contract operates at a lower margin than that of our other work and it is the principal driver of the decline in operating margin. The segment also benefitted in 2012 from $10.2 million of additional revenue and operating income related to a contract amendment.

Revenue increased by 10.0% in fiscal 2011 compared to fiscal 2010. The principal driver of this growth was the expansion of existing work, with contracts in Texas and British Columbia contributing the majority of the increase. In Texas, the Company benefitted from increases in transaction-based activities as more Medicaid populations are shifted into managed care plans. In British Columbia, additional work was being driven by the modernization of a system linking all pharmacies across the Province. Further growth in revenue was generated by higher volumes in transaction-based work in the Company’s federal appeals practice. Operating margin in 2011 was higher compared to fiscal 2010, principally due to the volume growth in the federal practice and the add-on work in British Columbia.

Human Services Segment

	Year ended September 30,
	2012			2011			2010
	(dollars in thousands)
Revenue	$	378,964		$	363,752		$	317,491
Gross profit	115,487			106,412			90,557
Operating income	49,922			46,822			39,490
Operating margin percentage	13.2		%	12.9		%	12.4		%

The Human Services Segment includes a variety of business process services, case management, job training and support services for programs such as welfare-to-work programs, child support enforcement, K-12 special education and other specialized consulting services.

Revenue increased 4.2% to $379.0 million in fiscal year 2012 compared to fiscal 2011. On a constant currency basis, the growth would have been 4.4%. Excluding acquisition driven growth from PSI, segment revenues would have declined 6.4%. This decline was principally driven by the Company’s United Kingdom operations where the “Flexible New Deal” contract, which was in place through much of fiscal 2011, was terminated and replaced with the “Work Programme”. The decline in revenues was anticipated and reflects the back-ended payment structure of the Work Programme where a greater share of the revenue is earned when individuals remain in sustained employment for a pre-determined period of time, typically six months. Segment results were also tempered by lower revenue from our Australian operations due to the completion of short-term projects which concluded earlier in the year as well as lower caseload volumes. The operating margin in fiscal 2012 received the benefit of $6.8 million related to changes on a fixed price contract, partially offset by the dampened margins from the transition to the “Work Programme”.

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Revenue increased 14.6% to $363.8 million in fiscal 2011 compared to fiscal 2010. On a constant currency basis, the growth would have been 6.9%. Growth was principally driven by our welfare-to-work businesses, particularly in Australia and the United Kingdom. The Australian business provided much of this growth driven by strong volumes, new short-term assignments and performance. Within the United Kingdom, we accelerated the recognition of deferred revenue as a result of the earlier end date of the Flexible New Deal which was offset by cost increases related to the start-up of the Work Programme contract. Operating margins improved compared to the prior year, principally due to increased contract performance in Australia and profit improvement on the Flexible New Deal contract in the United Kingdom. The Company also incurred $7.3 million of charges related to a fixed-price education contract in the United States, compared to a similar charge of $10.3 million in fiscal 2010. No further charges have been incurred by this project since the second quarter of fiscal 2011.

Discontinued Operations

On September 30, 2010, the Company sold its ERP division for cash proceeds of $5.6 million, net of transaction costs of $0.7 million, and recognized a pre-tax loss on sale of less than $0.1 million. The Company previously recorded a pre-tax loss on sale of $1.3 million in fiscal 2009. In 2011, the Company resolved a dispute with the buyer regarding the purchase price adjustment clause in their contract and recorded a loss of $1.7 million.

The Company continues to record small gains on the sale of Unison MAXIMUS, Inc. (“Unison”), a business which was sold in May 2008.  The consideration for the sale included a promissory note which is fully reserved. Small payments continue to be received on this note but owing to uncertainties over the collectability of the full balance, the Company has only recorded a gain on sale where recovery is considered assured, which is typically when cash payments are received.

Liquidity and Capital Resources

In recent years, the Company has relied upon cash flows from operations to fund operations, capital expenditures, acquisitions, share repurchases and dividends. Both domestic and overseas locations have remained self-sufficient in funding operations and capital resources. The Company expects to be able to continue to fund operations and capital expenditures from operating cash flows. In prior periods, the Company has faced short-term payment delays from state customers, all of which were ultimately recovered. The Company believes its liquidity and capital positions are adequate to weather short-term payment delays. In the event of more protracted delays, the Company may be required to seek additional capital sources, amend payment terms or take other actions. Extended payment delays could adversely affect the Company’s cash flows, operations and profitability.

At September 30, 2012, the Company held $189.3 million in cash and cash equivalents. Approximately 66% of these funds are held in overseas locations, principally in Australia. If we were to transfer these funds to the United States, the Company would be required to accrue and pay additional taxes. We have no requirement to repatriate these funds as we believe we have access to sufficient funds in the United States to fund our operations, capital outlays, dividends, share repurchases or any other requirements. Accordingly, we do not intend to repatriate these funds held overseas and we have not attempted to quantify the charges that might arise if we were to make this transaction. The charges would vary based upon tax legislation in the United States and in the overseas jurisdictions as well as the manner and timing of these transactions.

The Company currently has no debt, with the exception of a $1.7 million interest-free loan from the Atlantic Innovation Fund of Canada, the funds of which must be used for certain investment projects in Prince Edward Island. At September 30, 2012, the Company has access to up to $19.5 million from a credit facility in the United States. These funds are available to cover short-term cash requirements and other potential capital outlays, including share repurchases and acquisitions. Also at September 30, 2012, the Company had letters of credit totaling $18.5 million and performance bond commitments totaling $48.0 million. The letters of credit and performance bonds are typically renewed annually and remain in place until the contractual obligations have been satisfied. Although the triggering events vary from contract to contract, in general we would only be liable for the amount of these guarantees in the event of default of our obligations under each contract, the probability of which we believe is remote.

Our primary source of cash is revenues received from customers. Our collection of cash is driven by billing schedules and payment terms which can vary based upon a number of factors, including contract type. In certain contracts, particularly international welfare-to-work contracts, cash receipts are structured around our performance, which may take several quarters to be realized. In these cases, contracts will typically result in cash outflows over the early period of the contract and the ultimate cash flows of the contract will be subject to risk until the performance outcomes are known. Certain contracts require significant financial outlay in terms of capital assets and in reimbursable start-up costs. These expenditures result in our use of cash which may be reimbursed during the set-up phase or over the life of the contract. Related revenue may also be deferred during the set-up phase. At September 30, 2012, management considered that the net book value of all capital assets, including deferred contract costs, was less than the expected future cash flows related to these assets.

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The Company’s acquisition of PSI in April 2012 resulted in a net cash payment of $66.0 million. In addition, the Company incurred approximately $2.9 million of expenses related to the acquisition including the costs of third-party due diligence, integration, severance and contract termination charges. The acquisition of DeltaWare in February 2010 resulted in a net payment of $12.0 million in 2010 and subsequent payments of contingent consideration of $1.0 million and $2.1 million in fiscal 2011 and 2012. The funds utilized for these acquisitions came from cash based in the United States.

The following table provides a summary of our cash flow information for the years ended September 30, 2012, 2011, and 2010:

	Year ended September 30,
	2012			2011			2010
	(dollars in thousands)
Net cash provided by (used in):
Operating activities—continuing operations	$	115,160		$	97,585		$	140,971
Operating activities—discontinued operations	—			(725		)	(2,530		)
Investing activities—continuing operations	(86,612		)	(25,877		)	(32,395		)
Financing activities—continuing operations	(17,765		)	(51,608		)	(42,402		)
Effect of exchange rates on cash and cash equivalents	5,579			(1,746		)	3,862
Net increase (decrease) in cash and cash equivalents	$	16,362		$	17,629		$	67,506

Cash provided by operating activities was $115.2 million in fiscal 2012, an increase of $17.6 million from fiscal 2011. The increase was primarily driven by increases in cash receipts from customers. This was driven by increases in revenue as well as the timing of cash receipts on certain projects which do not directly correspond with revenue recognition.

Cash provided by operating activities from continuing operations was $97.6 million in fiscal 2011, a decline of $43.4 million compared to fiscal 2010. The principal driver for this decline was the cash flows associated with the United Kingdom’s Flexible New Deal program, which provided significant up-front funds during fiscal 2010, resulting in a larger deferred revenue balance. In the United Kingdom, we received $22.7 million of cash in excess of revenues in fiscal 2010 and recognized revenues in excess of cash receipts of $9.0 million in fiscal 2011, a net change in deferred revenue of $31.7 million. Fiscal 2011 cash flows were also adversely affected by the timing of tax payments, with payments in excess of expense of $8.4 million, resulting in prepaid income taxes. These declines were offset by an increase in net income of $10.8 million.

Cash provided by operating activities from discontinued operations relates to the Company’s ERP division, which was disposed of on September 30, 2010. Payments made in fiscal 2011 principally relate to the settlement of payroll and other liabilities that remained with the Company at the date of disposal.

Cash used in investing activities was $86.6 million in fiscal 2012, compared with $25.9 million in fiscal 2011. Fiscal 2012 included a net cash payment of $66.0 million for the acquisition of PSI, offset by $2.2 million from the divestiture of the Company’s ERP division. This increase was offset by a decline in capitalized software costs following the completion of a number of capital software projects in the United States in 2011.

Cash used in investing activities from continuing operations was $25.9 million in fiscal 2011, compared with $32.4 million in 2010. The decline of $6.5 million was principally caused by a $12.0 million payment in fiscal 2010 to acquire DeltaWare. The balance of the difference was caused by $3.5 million additional capital expenditure in the 2011 fiscal year principally in the United States and British Columbia, and a $1.7 million receipt from the sale of the ERP business in fiscal 2010.

Cash used in financing activities from continuing operations was $17.8 million, $51.6 million, and $42.4 million in fiscal years 2012, 2011 and 2010, respectively. These cash flows were principally driven by repurchases of common stock of $13.0 million, $56.5 million and $40.2 million in 2012, 2011 and 2010, respectively. The Company also paid $12.2 million, $10.3 million and $8.4 million in dividends in 2012, 2011 and 2010, respectively, with the increases driven by changes in the dividend per share amount. The fiscal 2011 year also showed a significant cash inflow from employee stock transactions and the tax benefits from these transactions. The Company ceased offering stock options in 2008 and a number of awards were due to expire during fiscal 2011 and 2012. This, combined with recent increases in our share price, would appear to have resulted in this increased cash flow. Fewer options are now available to be exercised and all will be exercised or will expire prior to fiscal 2017.

21

The beneficial effect of exchange rates of cash and cash equivalents of $5.6 million in the 2012 fiscal year reflects the strengthening of the United States Dollar and increases in our overseas cash balances, notably in Australia.

To supplement our statements of cash flows presented on a GAAP basis, we use the non-GAAP measure of free cash flows from continuing operations to analyze the funds generated from operations. We believe free cash flow from continuing operations is a useful basis for comparing our performance with our competitors. The presentation of non-GAAP free cash flows from continuing operations is not meant to be considered in isolation, or as an alternative to net income as an indicator of performance, or as an alternative to cash flows from operating activities as a measure of liquidity. We calculate free cash flow from continuing operations as follows:

	Year ended September 30,
	2012			2011			2010
	(dollars in thousands)
Cash provided by operating activities — continuing operations	$	115,160		$	97,585		$	140,971
Purchases of property and equipment	(18,369		)	(18,506		)	(13,936		)
Capitalized software costs	(4,779		)	(7,608		)	(8,672		)
Free cash flow from continuing operations	$	92,012		$	71,471		$	118,363

Repurchases of the Company’s common stock

The Board of Directors has authorized the repurchase, at management’s discretion, of limited amounts of the Company’s common stock. The resolutions have also authorized the use of option exercise proceeds for the repurchase of the Company’s common stock. During the years ended September 30, 2012, 2011 and 2010, the Company has repurchased 306,000, 1,597,458 and 1,501,528 common shares at a cost of $12.8 million, $57.5 million and $40.2 million, respectively. Up to $127.4 million remained available for repurchase under the most recent board authorization as of September 30, 2012 and, between October 1, 2012 and November 16, 2012, the Company purchased an additional 168,500 shares at a cost of $9.7 million.

Dividend

On October 5, 2012, the Company’s Board of Directors declared a quarterly cash dividend of $0.09 for each share of the Company’s common stock outstanding. The dividend will be paid on November 30, 2012 to shareholders of record on November 15, 2012. Based on the number of shares outstanding, the payment will be approximately $3.1 million.

Obligations and Commitments

The following table summarizes our contractual obligations at September 30, 2012 that require the Company to make future cash payments (in thousands):

	Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(Dollars in thousands)
Operating leases	$	113,758	$	36,395	$	49,507	$	18,554	$	9,302
Long-term debt	1,736		178		356		356		846
Deferred compensation plan liabilities (1)	12,408		667		824		436		10,481
Total (2)	$	127,902	$	37,240	$	50,687	$	19,346	$	20,629

(1)Deferred compensation plan liabilities are typically payable at times elected by the employee at the time of deferral. However, early withdrawal is permitted for certain conditions, including employee hardship or termination, which may accelerate the payment of these liabilities.

(2)Due to the uncertainty with respect to the timing of future cash flows associated with the Company’s unrecognized income tax benefits at September 30, 2012, we are unable to reasonably estimate settlements with taxing authorities. The above Contractual Obligations table does not reflect unrecognized income tax benefits of approximately $1.1 million, of which approximately $0.4 million is related interest and penalties. See “Note 18. Income Taxes” of the Consolidated Financial Statements for a further discussion on income taxes.

The contractual obligations table also omits our liabilities with respect to acquisition-related contingent consideration. As part of the acquisition arrangement for DeltaWare, we agreed to pay up to four million Canadian Dollars in the event that certain sales targets are reached up to 2016. At present, we have accrued $406,000 based upon a probability-weighted assessment of our likely payments under this arrangement. At this time, no sales arrangements have been entered into which would require a payment to be made. See “Note 5. Acquisitions” of the Consolidated Financial Statements for additional information on this balance.

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Off-balance Sheet Arrangements

We do not have material off-balance sheet risk or exposure to liabilities that are not recorded or disclosed in our financial statements. While we have significant operating lease commitments for office space, those commitments are generally tied to the period of performance under related contracts. Additionally, although on certain contracts we are bound by performance bond commitments and standby letters of credit, we have not had any defaults resulting in draws on performance bonds. Also, we do not speculate in derivative transactions.

Effects of Inflation

As measured by revenue, approximately 25% of our business is conducted under cost-reimbursable contracts which adjust revenue to cover costs increased by inflation. Approximately 4% of the business is time-and-material contracts where labor rates are often fixed for several years. We generally have been able to price these contracts in a manner that accommodates the rates of inflation experienced in recent years. The remaining portions of our contracts are fixed-price and performance-based and are typically priced to account for the likely inflation from period to period to mitigate the risk of our business being adversely affected by inflation.

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities and the reported amounts of revenue and expenses. On an ongoing basis, we evaluate our estimates including those related to revenue recognition and cost estimation on certain contracts, the realizability of goodwill, and amounts related to income taxes, certain accrued liabilities and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.

We believe that our critical accounting policies are as follows:

Revenue Recognition. Revenue is generated from contracts with various pricing arrangements, including: (1) fixed-price; (2) performance-based criteria; (3) costs incurred plus a negotiated fee (“cost-plus”); and (4) time-and-materials. Also, some contracts contain “not-to-exceed” provisions. Of the contracts with “not-to-exceed” provisions, to the extent we estimate we will exceed the contractual limits, we treat these contracts as fixed-price. For fiscal 2012, revenue from performance-based contracts was approximately 44% of total revenue; revenue from cost-plus contracts was approximately 25% of total revenue; revenue from fixed-price contracts was approximately 27% of total revenue; and revenue from time-and-materials contracts was approximately 4% of total revenue. A majority of the contracts with state and local government agencies have been fixed-price and performance-based, and our contracts with the federal government generally have been cost-plus. Fixed-price and performance-based contracts generally offer higher margins but typically involve more risk than cost-plus or time-and-materials reimbursement contracts.

We recognize revenue on arrangements as work is performed and amounts are earned. We consider amounts to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable, and collectability is reasonably assured.

We recognize revenue on performance-based contracts when earned, which generally occurs when amounts are billable to customers. For certain contracts, this may result in revenue being recognized in irregular increments.

Revenue on cost-plus contracts is recognized based on costs incurred plus an estimate of the negotiated fee earned. Revenue on time and materials contracts is recognized based on hours worked and expenses incurred.

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We recognize revenue on fixed-priced contracts when earned, as services are provided. Revenue is generally recognized on a straight-line basis unless evidence suggests that revenue is earned or obligations are fulfilled in a different pattern. With fixed-price contracts, we are subject to the risk of potential cost overruns. The timing of expense recognition may result in irregular profit margins.

For certain fixed-price contracts, primarily systems design, development and implementation, we recognize revenue based on costs incurred using estimates of total expected contract revenue and costs to be incurred. The cumulative impact of any revisions in estimated revenue and costs is recognized in the period in which the facts that give rise to the revision become known. Provisions for estimated losses on incomplete contracts are provided for in full in the period in which such losses become known. This policy may result in revenues being recognized at different points from amounts being billable.

Where contracts have multiple deliverables, we evaluate these deliverables at the inception of each contract and as each item is delivered. As part of this evaluation, we consider whether a delivered item has value to a customer on a stand-alone basis and whether the delivery of the undelivered items is considered probable and substantially within our control, if a general right of return exists. Where deliverables, or groups of deliverables, have both of these characteristics, we treat each deliverable item as a separate unit of accounting, allocate a relative selling price to each deliverable and apply the relevant revenue recognition guidance to each deliverable. For transactions entered into prior to October 1, 2010, the ability to isolate deliverables as separate units of accounting also required objective and reliable evidence of the fair market value of the undelivered items. This change in accounting rules did not have a material effect on the Company’s business.

Impairment of Goodwill. Goodwill is typically obtained by the Company as a result of business combinations. Goodwill represents the difference between the consideration paid in acquiring the business and the fair value of the identifiable net assets acquired.

Goodwill is not amortized but is subject to impairment testing on an annual basis, or more frequently if impairment indicators arise. Impairment testing is performed at the reporting unit level. Performing the goodwill impairment test requires judgment, including how we define reporting units and determine their fair value. A reporting unit is the operating segment, or a business one level below that operating segment (the component level) if discrete financial information is prepared and reviewed regularly by segment management. However, components are aggregated if they have similar economic characteristics. We recognize an impairment charge for any amount by which the carrying amount of a reporting unit’s goodwill exceeds its fair value. We use discounted cash flows to establish fair values. When available and as appropriate, we use comparative market multiples to corroborate the discounted cash flow results. When a portion of a reporting unit is disposed of, goodwill is allocated using the relative fair value method for purposes of calculating the gain or loss on disposal. In addition, a goodwill impairment test is performed for the remaining portion of the reporting unit.

The Company performs its annual impairment test as of July 1 of each year. At July 1, 2012, the Company performed the annual impairment test and determined that there had been no impairment of goodwill.

Changes in estimates and assumptions we make in conducting our goodwill impairment assessment could affect the estimated future fair value of one or more of our reporting units and could result in a goodwill impairment in the future. However, a 25% decline in the estimated fair value of any of our reporting units at July 1, 2012 would not have resulted in a goodwill impairment charge.

Long-Lived Assets (Excluding Goodwill) In addition to goodwill, the Company’s assets include property and equipment, internal-use capitalized software, intangible assets related to acquisitions and deferred contract costs, being the contractually recoverable costs related to direct set-up costs at the establishment of a contract. These assets are expensed over the period which we believe to represent their useful economic life. We review these assets whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Our review would typically be based upon the projection of undiscounted future operating cash flows related to the particular asset or asset group. To the extent that such projections indicate that future undiscounted cash flows are not sufficient to cover the carrying amount, we recognize a non-cash impairment charge to reduce the carrying amount to equal future discounted cash flows.

Allowance for Doubtful Accounts. We maintain an allowance for doubtful accounts at an amount we estimate to be sufficient to cover the risk of collecting less than full payment on our receivables. On a regular basis we re-evaluate our client receivables, especially receivables that are past due, and reassess our allowance for doubtful accounts based on specific client collection issues. If our clients were to express dissatisfaction with the services we have provided, additional allowances may be required.

24

Contingencies. From time to time, we are involved in legal proceedings, including contract and employment claims, in the ordinary course of business. We assess the likelihood of any adverse judgments or outcomes to these contingencies as well as potential ranges of probable losses and establish reserves accordingly. The amount of reserves required may change in future periods due to new developments in each matter or changes in approach to a matter such as a change in settlement strategy.

Income Taxes. To record income tax expense, we are required to estimate our income taxes in each of the jurisdictions in which we operate. In addition, income tax expense at interim reporting dates requires us to estimate our expected effective tax rate for the entire year. This process involves estimating our actual current tax liability together with assessing temporary differences that result in deferred tax assets and liabilities and expected future tax rates. Circumstances that could cause our estimates of income tax expense to change include: the impact of information that subsequently becomes available as we prepare our tax returns; revision to tax positions taken as a result of further analysis and consultation; changes in the geographic mix of our business; the actual level of pre-tax income; changes in tax rules, regulations and rates; and changes mandated as a result of audits by taxing authorities.

We may also establish tax reserves when, despite our belief that our tax return positions are fully supportable, we believe that certain positions are subject to challenge and that we may not fully succeed. We adjust these reserves in light of changing facts, such as the progress of a tax audit, new case law or expiration of a statute of limitations.

The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon the technical merits, it is “more-likely-than-not” that the position will be sustained upon examination.

ITEM 7A.  Quantitative and Qualitative Disclosures About Market Risk.

We believe that our exposure to market risk related to the effect of changes in interest rates, commodity prices and other market risks with regard to instruments entered into for trading or for other purposes is immaterial.

The Company is exposed to foreign exchange fluctuations in the Australian Dollar, the Canadian Dollar, and the British Pound. During the year ended September 30, 2012, the Company earned approximately 26% of revenues and 27% of operating income from foreign subsidiaries. At September 30, 2012, approximately 36% of the Company’s assets are held by foreign subsidiaries. The Company mitigates its foreign exchange risks through maintaining sufficient capital within its foreign subsidiaries to support the short-term and long-term capital requirements of these businesses. The Company’s foreign subsidiaries typically incur costs in the same currency as they earn revenues, thus limiting the Company’s exposure to unexpected fluctuations. The operations of the U.S. business do not depend upon cash flows from foreign subsidiaries.

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ITEM 8.  Financial Statements and Supplementary Data.

The following consolidated financial statements and supplementary data are included as part of this Annual Report on Form 10-K:

Report of Independent Registered Public Accounting Firm	27
Consolidated Statements of Operations for the years ended September 30, 2012, 2011 and 2010	28
Consolidated Statements of Comprehensive Income for the years ended September 30, 2012, 2011 and 2010	29
Consolidated Balance Sheets as of September 30, 2012 and 2011	30
Consolidated Statements of Cash Flows for the years ended September 30, 2012, 2011 and 2010	31
Consolidated Statements of Changes in Shareholders’ Equity for the years ended September 30, 2012, 2011 and 2010	32
Notes to Consolidated Financial Statements	33

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of MAXIMUS, Inc.

We have audited the accompanying consolidated balance sheets of MAXIMUS, Inc. as of September 30, 2012 and 2011, and the related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the three years in the period ended September 30, 2012.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of MAXIMUS, Inc. at September 30, 2012 and 2011, and the consolidated results of its operations and its cash flows for each of the three years in the perirod ended September 30, 2012, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), MAXIMUS, Inc.’s internal control over financial reporting as of September 30, 2012, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated November 16, 2012 expressed an unqualified opinion thereon.

/s/Ernst & Young LLP

McLean, Virginia

November 16, 2012

27

MAXIMUS, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

	Year ended September 30,
	2012		2011			2010
Revenue	$	1,050,145	$	929,633		$	831,749
Cost of revenue	762,202		675,982			610,916
Gross profit	287,943		253,651			220,833
Selling, general and administrative expenses	157,402		132,058			118,778
Acquisition-related expenses	2,876		—			254
Legal and settlement expense (recovery), net (Note 17)	90		(808		)	(5,605		)
Operating income from continuing operations	127,575		122,401			107,406
Interest and other income, net	4,176		3,495			916
Income from continuing operations before income taxes	131,751		125,896			108,322
Provision for income taxes	55,652		43,754			38,925
Income from continuing operations	76,099		82,142			69,397
Discontinued operations, net of income taxes:
Income (loss) from discontinued operations	—		(133		)	1,040
Gain (loss) on disposal	34		(841		)	(28		)
Income (loss) from discontinued operations	34		(974		)	1,012
Net income	$	76,133	$	81,168		$	70,409
Basic earnings per share:
Income from continuing operations	$	2.25	$	2.39		$	1.99
Income (loss) from discontinued operations	—		(0.03		)	0.03
Basic earnings per share	$	2.25	$	2.36		$	2.02
Diluted earnings per share:
Income from continuing operations	$	2.19	$	2.31		$	1.93
Income (loss) from discontinued operations	—		(0.03		)	0.03
Diluted earnings per share	$	2.19	$	2.28		$	1.96
Dividends per share	$	0.36	$	0.30		$	0.24
Weighted average shares outstanding:
Basic	33,867		34,417			34,827
Diluted	34,806		35,531			35,930

See notes to consolidated financial statements.

28

MAXIMUS, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

	Year ended September 30,
	2012		2011			2010
Net income	$	76,133	$	81,168		$	70,409
Foreign currency translation adjustments	7,760		(2,050		)	6,262
Comprehensive income	$	83,893	$	79,118		$	76,671

See notes to consolidated financial statements.

29

MAXIMUS, Inc.

CONSOLIDATED BALANCE SHEETS

(In thousands)

	September 30,
	2012			2011
ASSETS
Current assets:
Cash and cash equivalents	$	189,312		$	172,950
Restricted cash	11,593			4,839
Accounts receivable—billed, net	172,705			146,900
Accounts receivable—unbilled	10,539			7,170
Prepaid income taxes	3,800			12,959
Deferred income taxes	22,207			19,256
Prepaid expenses and other current assets	38,528			27,202
Total current assets	448,684			391,276
Property and equipment, net	58,798			51,740
Capitalized software, net	27,390			26,616
Goodwill	112,032			71,323
Intangible assets, net	25,330			5,651
Deferred contract costs, net	9,284			8,020
Deferred income taxes	1,369			732
Deferred compensation plan assets	9,220			8,004
Other assets	3,186			1,917
Total assets	$	695,293		$	565,279
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	71,314		$	55,470
Accrued compensation and benefits	56,105			47,748
Deferred revenue	61,840			47,902
Current portion of long-term debt	178			42
Acquisition-related contingent consideration	—			1,840
Income taxes payable	3,100			5,104
Other liabilities	6,599			5,787
Total current liabilities	199,136			163,893
Deferred revenue, less current portion	19,550			2,575
Long-term debt	1,558			1,654
Acquisition-related contingent consideration, less current portion	406			388
Income taxes payable, less current portion	1,412			1,484
Deferred income taxes	10,384			11,945
Deferred compensation plan liabilities, less current portion	11,741			8,883
Total liabilities	244,187			190,822
Commitments and contingencies (Notes 12 and 13)
Shareholders’ equity:
Common stock, no par value; 60,000 shares authorized; 56,516 and 56,018 shares issued and 33,985 and 33,793 outstanding at September 30, 2012 and September 30, 2011, at stated amount, respectively	395,967			377,579
Treasury stock, at cost; 22,531 and 22,225 shares at September 30, 2012 and September 30, 2011, respectively	(429,646		)	(416,850		)
Accumulated other comprehensive income	20,240			12,480
Retained earnings	464,545			401,248
Total shareholders’ equity	451,106			374,457
Total liabilities and shareholders’ equity	$	695,293		$	565,279

See notes to consolidated financial statements.

30

MAXIMUS, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

	Year ended September 30,
	2012			2011			2010
Cash flows from operating activities:
Net income	$	76,133		$	81,168		$	70,409
Adjustments to reconcile net income to net cash provided by operating activities:
(Income) loss from discontinued operations	(34		)	974			(1,012		)
Depreciation and amortization	26,460			22,845			18,340
Deferred income taxes	(3,274		)	1,758			(3,172		)
Deferred interest income on note receivable	—			—			263
Non-cash equity based compensation	12,077			9,485			7,918
Changes in assets and liabilities, net of effects of business combinations and divestitures:
Accounts receivable—billed	(7,213		)	(11,584		)	38
Accounts receivable—unbilled	2,214			10,068			2,415
Prepaid expenses and other current assets	(6,018		)	(2,573		)	(1,740		)
Deferred contract costs	(1,221		)	(1,309		)	1,541
Accounts payable and accrued liabilities	6,485			7,312			(407		)
Accrued compensation and benefits	(2,648		)	4,490			7,883
Deferred revenue	9,827			(11,779		)	31,294
Income taxes	6,885			(10,814		)	6,374
Other assets and liabilities	(4,513		)	(2,456		)	827
Cash provided by operating activities—continuing operations	115,160			97,585			140,971
Cash used in operating activities—discontinued operations	—			(725		)	(2,530		)
Cash provided by operating activities	115,160			96,860			138,441
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired	(66,003		)	—			(11,960		)
Purchases of property and equipment	(18,369		)	(18,506		)	(13,936		)
Capitalized software costs	(4,779		)	(7,608		)	(8,672		)
Proceeds from sales of discontinued operations	2,240			—			1,700
Proceeds from note receivable	299			237			473
Cash used in investing activities—continuing operations	(86,612		)	(25,877		)	(32,395		)
Cash used in investing activities—discontinued operations	—			—			—
Cash used in investing activities	(86,612		)	(25,877		)	(32,395		)
Cash flows from financing activities:
Cash dividends paid	(12,180		)	(10,327		)	(8,375		)
Repurchases of common stock	(12,977		)	(56,540		)	(40,217		)
Employee stock transactions	1,977			8,980			2,763
Tax benefit due to option exercises and restricted stock units vesting	7,268			6,996			2,901
Issuance of long-term debt	—			304			533
Repayment of long-term debt	(44		)	—			(7		)
Acquisition-related contingent consideration	(1,809		)	(1,021		)	—
Cash used in financing activities	(17,765		)	(51,608		)	(42,402		)
Effect of exchange rate changes on cash	5,579			(1,746		)	3,862
Net increase (decrease) in cash and cash equivalents	16,362			17,629			67,506
Cash and cash equivalents, beginning of period	172,950			155,321			87,815
Cash and cash equivalents, end of period	$	189,312		$	172,950		$	155,321

See notes to consolidated financial statements.

31

MAXIMUS, Inc.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands)

	Common Shares Outstanding		Common Stock			Treasury Stock			Accumulated Other Comprehensive Income			Retained Earnings			Total Shareholders’ Equity
Balance at September 30, 2009	35,198		$	338,739		$	(319,149	)	$	8,268		$	269,270		$	297,128
Net income	—		—			—			—			70,409			70,409
Foreign currency translation	—		—			—			6,262			—			6,262
Cash dividends	—		—			—			—			(8,375		)	(8,375		)
Dividends on RSUs	—		375			—			—			(375		)	—
Repurchases of common stock	(1,502	)	—			(40,217		)	—			—			(40,217		)
Employee stock transactions	652		2,763			—			—			—			2,763
Non-cash equity based compensation	—		7,918			—			—			—			7,918
Tax benefit due to option exercises	—		2,901			—			—			—			2,901
Balance at September 30, 2010	34,348		352,696			(359,366		)	14,530			330,929			338,789
Net income	—		—			—			—			81,168			81,168
Foreign currency translation	—		—			—			(2,050		)	—			(2,050		)
Cash dividends	—		—			—			—			(10,327		)	(10,327		)
Dividends on RSUs	—		522			—			—			(522		)	—
Repurchases of common stock	(1,597	)	—			(57,484		)	—			—			(57,484		)
Employee stock transactions	1,042		7,880			—			—			—			7,880
Non-cash equity based compensation	—		9,485			—			—			—			9,485
Tax benefit due to option exercises	—		6,996			—			—			—			6,996
Balance at September 30, 2011	33,793		377,579			(416,850		)	12,480			401,248			374,457
Net income	—		—			—			—			76,133			76,133
Foreign currency translation	—		—			—			7,760			—			7,760
Cash dividends	—		—			—			—			(12,180		)	(12,180		)
Dividends on RSUs	—		656			—			—			(656		)	—
Repurchases of common stock	(306	)	—			(12,796		)	—			—			(12,796		)
Employee stock transactions	498		(1,613		)	—			—			—			(1,613		)
Non-cash equity based compensation	—		12,077			—			—			—			12,077
Tax benefit due to option exercises	—		7,268			—			—			—			7,268
Balance at September 30, 2012	33,985		$	395,967		$	(429,646	)	$	20,240		$	464,545		$	451,106

See notes to consolidated financial statements.

32

MAXIMUS, Inc.

Notes to Consolidated Financial Statements

For the years ended September 30, 2012, 2011 and 2010

1. Business and summary of significant accounting policies

(a) Description of business

MAXIMUS, Inc. (the “Company” or “we”) provides business process services (“BPS”) to government health and human services agencies in the United States and to foreign governments. The Company conducts its operations through two business segments: Health Services and Human Services. The Health Services Segment provides a variety of business process managed services and administrative support services for state, federal, national and local government programs, including Medicaid, CHIP, Health Care Reform, Medicare and Health Insurance BC (British Columbia). The Human Services Segment provides a variety of administrative support and case management services for federal, national, state and county human services agencies including welfare-to-work programs, child support enforcement, higher education services and K-12 special education services.

Other than disclosed in Note 21, the Notes to Consolidated Financial Statements reflect operating results from continuing operations.

(b) Principles of consolidation

The consolidated financial statements include the accounts of MAXIMUS, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

(c) Revenue recognition

Revenue is generated from contracts with various pricing arrangements, including: (1) fixed-price; (2) performance-based criteria; (3) costs incurred plus a negotiated fee (“cost-plus”); and (4) time-and-materials. Also, some contracts contain “not-to-exceed” provisions. Of the contracts with “not-to-exceed” provisions, to the extent we estimate we will exceed the contractual limits, we treat these contracts as fixed-price. For fiscal 2012, revenue from performance-based contracts was approximately 44% of total revenue; revenue from cost-plus contracts was approximately 25% of total revenue; revenue from fixed-price contracts was approximately 27% of total revenue; and revenue from time-and-materials contracts was approximately 4% of total revenue. A majority of the contracts with state, local and foreign government agencies have been fixed-price and performance-based, and our contracts with the federal government generally have been cost-plus. Fixed-price and performance-based contracts generally offer higher margins but typically involve more risk than cost-plus or time-and-materials reimbursement contracts.

We recognize revenue on arrangements as work is performed and amounts are earned. We consider amounts to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable, and collectability is reasonably assured.

We recognize revenue on performance-based contracts when earned, which generally occurs when amounts are billable to customers. For certain contracts, this may result in revenue being recognized in irregular increments.

Revenue on cost-plus contracts is recognized based on costs incurred plus an estimate of the negotiated fee earned. Revenue on time and materials contracts is recognized based on hours worked and expenses incurred.

We recognize revenue on fixed-priced contracts when earned, as services are provided. Revenue is generally recognized on a straight-line basis unless evidence suggests that revenue is earned or obligations are fulfilled in a different pattern. With fixed-price contracts, we are subject to the risk of potential cost overruns. The timing of expense recognition may result in irregular profit margins.

33

For certain fixed-price contracts, primarily systems design, development and implementation, we generally recognize revenue based upon costs incurred to date and our anticipated gross profit. The cumulative impact of any revisions in estimated revenue and costs is recognized in the period in which the facts that give rise to the revision become known. Provisions for estimated losses on incomplete contracts are provided for in full in the period in which such losses become known. This policy may result in revenues being recognized at different points from amounts being billable. Where the Company enters into contracts where significant uncertainty exists over the ability of management to estimate the future costs, the Company will typically defer all revenue until such time as future costs are estimable or the system implementation is complete.

Where contracts have multiple deliverables, we evaluate these deliverables at the inception of each contract and as each item is delivered. As part of this evaluation, we consider whether a delivered item has value to a customer on a stand-alone basis and whether the delivery of the undelivered items is considered probable and substantially within our control, if a general right of return exists. Where deliverables, or groups of deliverables, have both of these characteristics, we treat each deliverable item as a separate element in the arrangement, allocate a portion of the allocable arrangement consideration using the relative selling price method to each element and apply the relevant revenue recognition guidance to each element. For transactions entered into prior to October 1, 2010, the ability to isolate deliverables as separate elements also required objective and reliable evidence of the fair market value of the undelivered items. This change in accounting rules did not have a material effect on the Company’s business.

Sales and purchases in jurisdictions subject to indirect taxes, such as value added tax, are recorded net of tax collected and paid.

(d) Cash and cash equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents are valued at cost, which approximates market.

(e) Restricted cash

Restricted cash represents amounts held as collateral for lease, credit card and letter of credit arrangements, as well as funds held on behalf of clients.

(f) Accounts receivable and allowance for doubtful accounts

Accounts receivable are recorded at their face amount less an allowance for doubtful accounts. We maintain an allowance for doubtful accounts at an amount we estimate to be sufficient to cover the risk of collecting less than full payment on our receivables. On a regular basis we re-evaluate our client receivables, especially receivables that are past due, and reassess our allowance for doubtful accounts based on specific client collection issues.

(g) Property and equipment

Property and equipment is stated at cost and depreciated using the straight-line method based on estimated useful lives not to exceed 39.5 years for the Company’s buildings and between three and seven years for office furniture and equipment. Leasehold improvements are amortized over their useful life or the remaining term of the lease, whichever is shorter.

(h) Software development costs

All of the software development costs included within continuing operations relate to software which is intended for the Company’s internal use. Direct costs of time and material incurred for the development of application software for internal use are capitalized and amortized using the straight-line method over the estimated useful life of the software, ranging from three to eight years.

(i) Deferred contract costs

Deferred contract costs consist of contractually recoverable direct set-up costs relating to long-term service contracts in progress. These costs include direct and incremental costs incurred prior to the commencement of us providing service to enable us to provide the contracted services to our customer. Such costs are expensed over the period services are provided under the long-term service contract.

34

(j) Goodwill and intangible assets

Goodwill is obtained by the Company as a result of business combinations. Goodwill represents the difference between the consideration paid in acquiring the business and the fair value of the identifiable net assets acquired.

Goodwill is not amortized but is subject to impairment testing on an annual basis, or more frequently if impairment indicators arise. Impairment testing is performed at the reporting unit level. A reporting unit is the operating segment, or a business one level below that operating segment (the component level) if discrete financial information is prepared and reviewed regularly by segment management. However, components are aggregated if they have similar economic characteristics. We recognize an impairment charge for any amount by which the carrying amount of a reporting unit’s goodwill exceeds its fair value. We use discounted cash flows to establish fair values. When a portion of a reporting unit meeting the definition of a business is disposed of, goodwill is allocated using the relative fair value method for purposes of calculating the gain or loss on disposal. In addition, a goodwill impairment test is performed for the remaining portion of the reporting unit.

The Company performs its annual impairment test as of July 1 of each year. At July 1, 2012, the Company performed the annual impairment test and determined that there had been no impairment of goodwill.

Intangible assets from acquisitions, which consist primarily of customer contracts and relationships, technology-based intangibles and non-competition agreements, are amortized using the straight-line method over one to ten years, based on their estimated useful lives.

(k) Long-lived assets (excluding goodwill)

The Company reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be fully recoverable. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Our review is based on our projection of the undiscounted future operating cash flows of the related customer project. To the extent such projections indicate that future undiscounted cash flows are not sufficient to recover the carrying amount, we recognize a non-cash impairment charge to reduce the carrying amount to equal projected future discounted cash flows. No impairment charges were recorded in the three years ending September 30, 2012.

(l) Leases

We lease office space under operating leases. Some of the lease agreements contain one or more of the following provisions or clauses: tenant allowances, rent holidays and rent escalation clauses. For the purpose of recognizing these provisions on a straight-line basis over the terms of the leases, we use the date of initial possession to begin amortization, which is generally when we enter the space and begin to make improvements in preparation of intended use.

For incentives received from the landlord, such as payments for tenant improvements or rent holidays, we record a deferred rent liability and amortize the deferred rent over the terms of the leases as reductions to rent expense. For scheduled rent escalation clauses during the lease term or for rental payments commencing at a date other than the date of initial occupancy, we record the minimum rental payments on a straight-line basis over the terms of the leases. Where rent escalations are based upon CPI, we recognize rent expense on a straight-line basis assuming the CPI rate in place at the inception of the lease. Increases or decreases in lease payments that result from subsequent changes in the index are contingent rentals and thus affect the determination of income as accruable.

In addition, some of our operating leases contain exit clauses, which include termination fees associated with exiting a lease prior to the expiration of the lease term. We record termination obligations when we give notice to the landlord that we have elected the termination clause of such agreement. Our leases within the United States generally allow us to terminate an arrangement if the related customer contract is terminated or materially altered.

(m) Legal and settlement expense (recovery), net

Legal and settlement expense (recovery), net consists of costs, net of reimbursed insurance claims, related to significant legal settlements and non-routine legal matters, including future probable legal costs estimated to be incurred in connection with those matters. Legal expenses incurred in the ordinary course of business are included in selling, general and administrative expense.

(n) Income taxes

Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates expected to be in effect during the year in which the differences reverse. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income tax expense in the period that includes the enactment date. A tax benefit or expense is recognized for the net change in the deferred tax asset or liability during the year and the current tax liability for the year. We evaluate the realizability of our net operating loss carryforwards, which requires us to make certain estimates relating to the future operating results and cash flows to assess the valuation of the related deferred tax assets.

35

The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon the technical merits, it is “more-likely-than-not” that the position will be sustained upon examination.

(o) Foreign currency

For all foreign operations, the functional currency is the local currency. The assets and liabilities of foreign operations are translated into U.S. dollars at period-end exchange rates, and revenue and expenses are translated at average exchange rates for the year. The resulting cumulative translation adjustment is included in accumulated other comprehensive income on the consolidated balance sheet. Gains and losses from foreign currency transactions are included in interest and other income and are typically immaterial.

(p) Earnings per share

The Company presents both basic and diluted earnings per share on the face of the Consolidated Statements of Operations.

Basic earnings per share exclude dilution and are computed by dividing net income by the weighted average number of common shares outstanding for the period.

Diluted earnings per share reflect potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted earnings per share include the incremental effect of stock options and restricted stock units calculated using the treasury stock method.

(q) Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates used by the Company include estimates of profits or loss on contracts in process, estimates of collectability of receivables, evaluation of asset impairment, accrual of estimated liabilities, and valuation of acquisition-related contingent consideration liabilities.

(r) Contingencies

From time to time, we are involved in legal proceedings, including contract and employment claims, in the ordinary course of business. We assess the likelihood of any adverse judgments or outcomes to these contingencies as well as potential ranges of probable losses and establish reserves accordingly. The amount of reserves required may change in future periods due to new developments in each matter or changes in approach to a matter such as a change in settlement strategy.

(s) Reclassifications

Certain financial results have been reclassified to conform with the current year presentation.

36

2. Business segments

The Company is organized and managed based upon the services it provides. We operate in two business segments, Health Services and Human Services. The results of these segments for the three years ended September 30, 2012 are shown below (in thousands):

	Year ended September 30,
	2012			2011			2010
Revenue:
Health Services	$	671,181		$	565,881		$	514,258
Human Services	378,964			363,752			317,491
Total	$	1,050,145		$	929,633		$	831,749
Gross Profit:
Health services	$	172,456		$	147,239		$	130,276
Human Services	115,487			106,412			90,557
Total	$	287,943		$	253,651		$	220,833
Selling, general and administrative expense:
Health Services	$	91,837		$	72,524		$	65,551
Human Services	65,565			59,590			51,067
Corporate / Other	—			(56		)	2,160
Total	$	157,402		$	132,058		$	118,778
Operating income from continuing operations (before income taxes):
Health Services	$	80,619		$	74,715		$	64,725
Human Services	49,922			46,822			39,490
Corporate / Other	—			56			(2,160		)
Acquisition-related expenses and legal and settlement expense, net	(2,966		)	808			5,351
Total	$	127,575		$	122,401		$	107,406
Depreciation and amortization:
Health Services	$	14,257		$	12,120		$	9,055
Human Services	8,790			7,842			6,623
Corporate / Other	3,413			2,883			2,662
Total	$	26,460		$	22,845		$	18,340

Corporate/Other operating income reflects the allocation of corporate depreciation and amortization to the Health Services and Human Services segments.

The Company operates primarily in the United States, Australia, Canada, the United Kingdom and Saudi Arabia. During fiscal 2010 and 2009, the Company also operated in Israel.

Revenues for the Company were distributed as follows (in thousands):

	Year ended September 30,
	2012		2011		2010
United States	$	775,871	$	630,812	$	606,396
Australia	163,482		176,814		135,635
Rest of World	110,792		122,007		89,718
Total	$	1,050,145	$	929,633	$	831,749

Identifiable assets for the segments are shown below (in thousands):

Identifiable assets:

	Year Ended September 30
	2012		2011
Health Services	$	266,017	$	224,400
Human Services	305,376		212,791
Corporate / Other	123,900		128,088
Total	$	695,293	$	565,279

37

Total long-lived assets of the Company, consisting of property and equipment, capitalized software costs and deferred compensation costs, were distributed as follows (in thousands):

	Year Ended September 30
	2012		2011
United States	$	56,188	$	51,245
Canada	24,110		20,096
Australia	10,358		12,260
Rest of World	4,752		2,759
Total	$	95,408	$	86,360

3. Concentrations of Credit Risk and Major Customers

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of accounts receivable, billed and unbilled.

The Company operates predominantly in the United States. Revenue from foreign-based projects and offices was 26%, 32%, and 27% of total revenue for the years ended September 30, 2012, 2011 and 2010, respectively.

In fiscal 2012, approximately 61% of our total revenue was derived from state and local government agencies whose programs received significant federal funding; 26% from foreign customers; 9% from federal government agencies; and 4% from other sources, such as commercial customers.

The Company has three customers who each provide over 10% of the Company’s annual revenues; the government of the Commonwealth of Australia and the governments of the States of California and Texas. Revenue from Australia is exclusively within the Human Services segment and revenue from Texas and California is principally recorded by the Human Services segment. The proportion of revenue recognized from each of these customers is as follows:

	Year ended September 30,
	2012		2011		2010
Texas	18	%	16	%	16	%
Australia	16	%	19	%	16	%
California	10	%	11	%	12	%

4. Earnings per share

The following table sets forth the components of basic and diluted earnings per share (in thousands):

	Year ended September 30,
	2012		2011			2010
Numerator:
Income from continuing operations	$	76,099	$	82,142		$	69,397
Income (loss) from discontinued operations	34		(974		)	1,012
Net income	$	76,133	$	81,168		$	70,409
Denominator:
Weighted average shares outstanding	33,867		34,417			34,827
Effect of dilutive securities:
Employee stock options and unvested restricted stock awards	939		1,114			1,103
Denominator for diluted earnings per share	34,806		35,531			35,930

For the year ended September 30, 2011, 15,000 unvested restricted stock units were excluded from the calculation of diluted earnings per share as the effect of including them would be anti-dilutive. No shares were excluded from the computation in computing earnings per share in the years ended September 30, 2012 or 2010.

38

5. Acquisitions

PSI

On April 30, 2012 (the acquisition date), the Company acquired 100% of the share capital of PSI Services Holding, Inc. and its wholly-owned subsidiary, Policy Studies, Inc. (PSI). The final cash consideration will be based upon a mutually-agreed assessment of the balance sheet at the acquisition date and is currently estimated to be $63.2 million.

PSI supports clients in the administration of a number of health and human services programs exclusively within the United States. MAXIMUS acquired PSI, among other reasons, to strengthen its leadership in the administration of public health and human services programs. The acquired assets and business have been integrated into the Company’s Health Services and Human Services segments.

The assets and liabilities of PSI are recorded in the Company’s financial statements at their fair values as of the date of the acquisition. An initial valuation was performed at June 30, 2012 and this valuation has been updated through September 30, 2012 (below, in thousands)

	Preliminary Purchase Price Allocation
	As ofJune 30, 2012		Adjustments			As ofSeptember 30, 2012
Accounts receivable and unbilled receivables	$	22,875	$	142		$	23,017
Other current assets	9,527		—			9,527
Deferred income taxes	2,629		(698		)	1,931
Property and equipment	6,411		—			6,411
Other assets	1,332		—			1,332
Intangible assets	22,883		(700		)	22,183
Total identifiable assets acquired	65,657		(1,256		)	64,401
Accounts payable and other liabilities	20,845		(179		)	20,666
Deferred revenue	5,752		13,944			19,696
Deferred taxation	7,537		(7,537		)	—
Total liabilities assumed	34,134		6,228			40,362
Net identifiable assets acquired	31,523		(7,484		)	24,039
Goodwill	32,705		6,456			39,161
Net assets acquired	$	64,228	$	(1,028	)	$	63,200

In the fourth quarter 2012, a net increase of $6.5 million was made to goodwill as the Company finalized the allocation of the purchase price. This position is still subject to change as the final consideration balance is agreed with the former owners of PSI. The principal driver of this increase was an increase in the future obligations related to a loss-making system-integration contract acquired with PSI. This obligation, net of future cash flows, was valued at $15.1 million and will be treated as deferred revenue. This valuation was based upon our understanding of the contract terms and conditions, our estimates of the future costs of completing the contract and the likely profit margin that a participant providing a similar service would most likely charge to cover their overhead costs and their required rate of return. This valuation also affected the related intangible assets and deferred taxation.

The Company is still completing its evaluation of the valuation of the assets and liabilities acquired. In particular, the Company continues to evaluate the closing tax position of PSI within all of the jurisdictions in which it operates. The identifiable assets acquired and liabilities assumed were recognized and measured as of the acquisition date based upon their estimated fair values. The excess of the acquisition date fair value of consideration over the estimated fair value of the net assets acquired was recorded as goodwill and allocated to the Company’s two segments, Health Services and Human Services, based upon the respective valuations of the businesses. The Company considers the goodwill to represent a number of potential strategic and financial benefits that are expected to be realized as a result of the acquisition, including, but not limited to bringing new capabilities to MAXIMUS and the assembled workforce. Goodwill is not expected to be deductible for tax purposes.

Included in the purchase price allocation are deferred taxes related to a net operating loss carryforward of $10.5 million.

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The valuation of the intangible assets acquired is summarized below (in thousands).

	Useful life	Fair value
Customer relationships	7-8 years	$	16,600
Tradename	5 years	3,800
Technology-based intangible assets	1-5 years	1,783
Total intangible assets		$	22,183

The total weighted average amortization period is 6.8 years.

Our consolidated statement of operations includes $60.1 million of revenue for the year ended September 30, 2012 generated by the acquired PSI business. The integration of PSI into the Company’s operating and administrative infrastructure does not allow us to identify a meaningful measure of operating income for the acquired PSI business.

During the year ended September 30, 2012, the Company incurred $2.9 million of costs directly related to the acquisition of PSI. These costs include legal fees, valuation costs, severance and costs related to the termination of redundant service contracts.

The following table presents the results for the Company for the year ended September 30, 2012 as though the acquisition of PSI had occurred on October 1, 2010. The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of the results of the Company if the acquisition had taken place at this time. The pro forma results presented include acquisition related costs, amortization charges for acquired intangible assets, adjustments to lease expenses, elimination of intercompany transactions, adjustments to interest and other expenses and related tax effects. The pro forma results in 2011 include costs directly related to the acquisition, including severance costs, which were incurred by the Company after the acquisition date (in thousands).

	Unaudited pro forma results for the year ended September 30,
	2012		2011
Revenue	$	1,132,177	$	1,065,345
Income from continuing operations	75,252		82,993

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DeltaWare

On February 10, 2010 (the DeltaWare acquisition date), the Company acquired 100% of the share capital of DeltaWare, Inc. (DeltaWare). DeltaWare is a Canadian company specializing in health administration management systems. MAXIMUS acquired DeltaWare, among other reasons, to broaden its core health services offerings and strengthen its position in the administration of public health programs. The acquired assets and business have been integrated into the Company’s Health Services segment.

The estimated DeltaWare acquisition date fair value of consideration transferred, assets acquired and liabilities are presented below (in thousands).

	Purchase price allocation
Cash, net of cash acquired	$	10,385
Contingent consideration obligations	3,015
Total fair value of consideration	$	13,400
Accounts receivable	$	2,010
Other tangible assets	1,571
Intangible assets	6,060
Total identifiable assets acquired	9,641
Accounts payable and other liabilities	2,125
Loans payable	870
Deferred revenue	723
Total liabilities assumed	3,718
Net identifiable assets acquired	5,923
Goodwill	7,477
Net assets acquired	$	13,400

The acquisition consideration comprised an initial cash payment, followed by additional payments (contingent consideration) totaling up to seven million Canadian Dollars. During fiscal years 2012 and 2011, the Company paid $2.1million and $1.0 million, respectively, of contingent consideration. These payments were made based upon the achievement of profitability targets. The Company must also pay the former owners of DeltaWare up to four million Canadian Dollars ($4.0 million) based upon the Company making sales of DeltaWare’s products in particular geographic markets prior to December 2016. The Company has recorded a long-term liability of $0.4 million which represents the payment that management assesses will likely be paid. In the event that such sales are anticipated by the Company, this could result in an increase to this liability based upon the size and location of the sales. No such sales have been made to date and the likelihood of future sales between this time and December 2016 is considered low. Management reviews the likelihood of future sales on a quarterly basis and, to the extent that sales opportunities are identified, proposals submitted or contracts won, the Company updates its probability weighted assessment of payment. Changes in this assessment will result in an expense or credit to earnings. The contingent consideration payable for any single contract signed would be based upon the population of the area served but would be capped at one million Canadian Dollars per sale.

The Financial Accounting Standards Board (“FASB”) requires the classification of all assets and liabilities subject to fair value measurement based upon the inputs required for their valuation. Based upon these assessments, the Company recorded charges of $0.1 million and $0.2 million in fiscal 2012 and 2011, respectively, reflecting increases in the estimated payment of consideration. As the inputs required for the valuation of contingent consideration liabilities require significant judgment, they are considered to be Level 3 inputs under the FASB classification.

The effect on the financial statements is summarized below (in thousands):

	Contingent consideration
Balance at September 30, 2011	$	2,228
Additional estimated consideration	101
Payment of consideration	(2,059		)
Foreign currency translation	136
Balance at September 30, 2012	$	406

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The identifiable assets acquired and liabilities assumed were recognized and measured as of the acquisition date based upon their estimated fair values. The excess of the acquisition date fair value of consideration over the estimated fair value of the net assets acquired was recorded as goodwill. The Company considers the goodwill to represent a number of potential strategic and financial benefits that are expected to be realized as a result of the acquisition, including, but not limited to bringing new capabilities to MAXIMUS in the adjacent markets and opportunities to expand its geographic reach.

The valuation of the intangible assets acquired is summarized below (in thousands).

	Useful life	Fair value
Technology-based intangibles	8.5 years	$	3,733
Customer contracts and relationships	8-10 years	1,474
Non-compete arrangements	4 years	239
Trade name	10 years	614
Total intangible assets		$	6,060

The total weighted average amortization period was 8.6 years.

Of the total fair value of consideration, $7.5 million was allocated to goodwill. Goodwill is not expected to be deductible for income tax purposes.

The results of DeltaWare were not material for any periods shown.

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6. Accounts receivable reserve

In evaluating the net realizable value of accounts receivable, the Company considers such factors as current economic trends, customer credit-worthiness, and changes in the customer payment terms and collection trends. Changes in the assumptions used in analyzing a specific account receivable may result in a reserve being recognized in the period in which the change occurs.

Changes in the reserves against current billed accounts receivable were as follows (in thousands):

	Year ended September 30,
	2012			2011			2010
Balance at beginning of year	$	3,265		$	1,845		$	5,249
Additions to reserve	2,061			3,063			1,594
Deductions	(1,351		)	(1,643		)	(4,998		)
Balance at end of year	$	3,975		$	3,265		$	1,845

At September 30, 2012 and 2011, $3.2 million and $4.2 million of our billed receivables related to amounts pursuant to contractual retainage provisions. We anticipate that the majority of the fiscal 2012 balance will be collected during the 2013 fiscal year.

7. Goodwill and intangible assets

Changes in goodwill for the years ended September 30, 2012 and 2011 are as follows (in thousands):

	Health Services			Human Services		Total
Balance as of September 30, 2010	$	43,270		$	27,981	$	71,251
Foreign currency translation	(28		)	100		72
Balance as of September 30, 2011	43,242			28,081		71,323
Goodwill acquired with PSI (Note 5)	19,898			19,263		39,161
Foreign currency translation	377			1,171		1,548
Balance as of September 30, 2012	$	63,517		$	48,515	$	112,032

During the year ended September 30, 2012, the Company acquired PSI, resulting in additional goodwill of $39.2 million.

There have been no impairment charges in our goodwill related to continuing operations.

The following table sets forth the components of intangible assets (in thousands):

	As of September 30, 2012						As of September 30, 2011
	Cost		Accumulated Amortization		Intangible Assets, net		Cost		Accumulated Amortization		Intangible Assets, net
Technology-based intangible assets	$	9,114	$	4,909	$	4,205	$	7,146	$	4,097	$	3,049
Customer relationships	20,167		3,082		17,085		3,454		1,513		1,941
Trademarks	4,450		497		3,953		620		102		518
Non-compete arrangements	254		167		87		242		99		143
Total	$	33,985	$	8,655	$	25,330	$	11,462	$	5,811	$	5,651

The intangible assets include $3.4 million of fully-amortized technology-based assets still in use by the Company. The Company’s intangible assets have a weighted average remaining life of 6.3 years, comprising 4.7 years for technology-based intangible assets, 7.1 years for customer contracts and relationships, 4.9 years for the trademarks and 1.3 years for non-compete arrangements. Amortization expense for the years ended September 30, 2012, 2011 and 2010 was $2.7 million, $2.2 million and $2.1 million, respectively. Future amortization expense is estimated as follows (in thousands):

	Future amortization expense
Year ending September 30, 2013	$	4,921
Year ending September 30, 2014	3,816
Year ending September 30, 2015	3,795
Year ending September 30, 2016	3,795
Year ending September 30, 2017	3,412
Thereafter	5,591
Total	$	25,330

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8. Property and equipment

Property and equipment, at cost, consist of the following (in thousands):

	As of September 30,
	2012			2011
Land	$	1,800		$	1,800
Building and improvements	11,588			11,485
Office furniture and equipment	107,859			94,558
Leasehold improvements	20,263			9,798
	141,510			117,641
Less: Accumulated depreciation and amortization	(82,712		)	(65,901		)
Total property and equipment, net	$	58,798		$	51,740

Fixed asset depreciation expense for the years ended September 30, 2012, 2011 and 2010 was $18.8 million, $15.1 million and $12.9 million respectively.

9. Software development costs

Software development costs consist of the following (in thousands):

	As of September 30,
	2012			2011
Capitalized software development costs	$	46,767		$	40,798
Less: Accumulated amortization	(19,377		)	(14,182		)
Total Software development costs, net	$	27,390		$	26,616

Capitalized software amortization expense for the years ended September 30, 2012, 2011 and 2010 was $4.9 million, $5.5 million and $3.4 million respectively.

10. Deferred contract costs

Deferred contract costs consist of contractually recoverable direct set-up costs relating to long-term service contracts in progress. These costs include direct and incremental costs incurred prior to the commencement of us providing contracted services to our customers. Deferred contract costs consist of the following (in thousands):

	As of September 30,
	2012			2011
Deferred contract costs	$	16,147		$	12,826
Less: accumulated amortization	(6,863		)	(4,806		)
Total deferred contract costs, net	$	9,284		$	8,020

Deferred contract cost amortization expense for the years ended September 30, 2012, 2011 and 2010 was $2.0 million, $1.7 million and $1.7 million respectively.

11. Credit facilities

On January 25, 2008, the Company entered into a Revolving Credit Agreement providing for a senior secured revolving credit facility, with SunTrust Bank as administrative agent, issuing bank and swingline lender, and a syndicate of other lenders (the “Credit Facility”). The Credit Facility provides for a $35.0 million revolving line of credit commitment, which may be used (i) for revolving loans, (ii) for swingline loans, subject to a sublimit of $5.0 million, and (iii) to request the issuance of letters of credit on the Company’s behalf, subject to a sublimit of $25.0 million. The Company may request an increase in the commitment under the Credit Facility, such that the aggregate commitments under the Credit Facility shall at no time exceed $75.0 million. The credit available under the Credit Facility may be used, among other purposes, to refinance the Company’s current indebtedness, to repurchase shares of the Company’s capital stock and to finance the ongoing working capital, capital expenditure and general corporate needs of the Company.

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Subject to applicable conditions, the Company may elect interest rates on its revolving borrowings calculated by reference to (i) the prime lending rate as announced by SunTrust Bank (or, if higher, the federal funds effective rate plus 0.50%) (a “Base Rate Borrowing”), or (ii) the reserve adjusted rate per annum equal to the offered rate for deposits in U.S. dollars for a one (1), two (2), three (3) or six (6) month period in the London Inter-Bank Market (a “LIBOR Borrowing”), and, in each case, plus an applicable margin that is determined by reference to the Company’s then-current leverage ratio. For swingline borrowings, the Company will pay interest at the rate of interest for a one (1) month LIBOR Borrowing, plus the applicable margin, or at a rate to be separately agreed upon by the Company and the administrative agent.

At September 30, 2012, the Credit Facility had issued five letters of credit totaling $15.5 million on behalf of the Company. Three letters of credit totaling $15.2 million may be called by a customer in the event that the Company defaults under the terms of a contract, the probability of which we believe is remote. Two letters of credit totaling $0.3 million have been issued in relation to the Company’s insurance policies. These letters of credit are typically held over the life of the arrangement to which they related. At September 30, 2012, the Company has capacity to borrow, subject to covenant constraints, of up to $19.5 million under this agreement. In addition, two letters of credit for $3.0 million have been issued on behalf of the Company by another financial institution.

The Credit Facility matures on January 25, 2013, at which time all outstanding borrowings must be repaid and all outstanding letters of credit must be terminated or cash collateralized.

The Credit Facility provides for the payment of specified fees and expenses, including an up-front fee and commitment and letter of credit fees, and contains customary financial and other covenants that require the maintenance of certain ratios including a maximum leverage ratio and a minimum fixed charge coverage ratio. The Company was in compliance with all covenants in the amended Credit Facility as of September 30, 2012. The Company’s obligations under the Credit Facility are guaranteed by certain of the Company’s direct and indirect subsidiaries (collectively, the “Guarantors”) and are secured by substantially all of MAXIMUS’ and the Guarantors’ present and future tangible and intangible assets, including the capital stock of subsidiaries and other investment property.

In addition to this credit facility, the Company has a loan agreement with the Atlantic Innovation Fund of Canada. This provides for a loan of up to 1.8 million Canadian Dollars, which must be used for specific technology-based research and development. The loan has no interest charge. This balance is repayable in forty quarterly installments with the first payment being made in July 2012. At September 30, 2012, $1.7 million (1.7 million Canadian Dollars) was outstanding under this agreement.

Certain contracts require us to provide a surety bond as a guarantee of performance. At September 30, 2012 and September 30, 2011, the Company had performance bond commitments totaling $48.0 million and $16.9 million, respectively. These bonds are typically renewed annually and remain in place until the contractual obligations have been satisfied. Although the triggering events vary from contract to contract, in general, we would only be liable for the amount of these guarantees in the event of default in our performance of our obligations under each contract, the probability of which we believe is remote.

12. Commitments and contingencies

Litigation

The Company is involved in various legal proceedings, including the matters described below, in the ordinary course of its business.

In March 2009, a state Medicaid agency asserted a claim against MAXIMUS, related to a discontinued business line, in the amount of $2.3 million in connection with a contract MAXIMUS had through February 1, 2009 to provide Medicaid administrative claiming services to school districts in the state. MAXIMUS entered into separate agreements with the school districts under which MAXIMUS helped the districts prepare and submit claims to the state Medicaid agency which, in turn, submitted claims for reimbursement to the federal government. No legal action has been initiated. The state has asserted that its agreement with MAXIMUS requires the Company to reimburse the state for the amounts owed to the federal government. However, the Company’s agreements with the school districts require them to reimburse MAXIMUS for such payments and therefore MAXIMUS believes the school districts are responsible for any amounts disallowed by the state Medicaid agency or the federal government. Accordingly, the Company believes its exposure in this matter is limited to its fees associated with this work and that the school districts will be responsible for the remainder. MAXIMUS has exited the federal healthcare claiming business and no longer provides the services at issue in this matter.

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In 2008 MAXIMUS sold the SchoolMAX student information system business line as part of the divestiture of the MAXIMUS Education Systems division. In 2011, a school district which was a SchoolMAX client initiated the dispute resolution process under their contract. The client raised a number of issues pertaining to services and products delivered under the contract. The parties participated in various mediation sessions during 2011, but they did not reach a resolution. In April 2012, the client filed a formal arbitration notice alleging that MAXIMUS and the buyer failed to (i) use best practices in developing the software and (ii) deliver and test product releases as required by the contract. The client contends that those failures resulted in damages of at least $10 million. MAXIMUS and the buyer are contesting the client’s claims. We cannot at this time reasonably estimate the possible loss that could be incurred if the plaintiff were to prevail but we believe that we have substantial defenses. In addition, we believe that we are entitled to indemnification from the buyer of the business for the claims asserted in the arbitration notice. Recently, the client has asserted that MAXIMUS defrauded the client in 2007 or 2008 by misrepresenting its intentions regarding the sale of the Education Systems division. That allegation is not part of the arbitration, and no formal claim or lawsuit has been filed. The company believes it has a number of defenses to that allegation and would contest it vigorously.

Flexible New Deal contract liabilities and contingent gains

In August 2009, the Company commenced work for the United Kingdom government as a provider of services under the “Flexible New Deal,” a welfare-to-work initiative. The work was performed in the Company’s Human Services Segment. This initiative was terminated for all contract providers during the 2011 fiscal year and replaced with the “Work Programme,” under which MAXIMUS also performs services. As a consequence of the termination of the Flexible New Deal, MAXIMUS incurred certain costs related to the termination of leases, including property leases for offices which are no longer occupied by the Company but for which the Company then retained responsibility for future lease payments. For properties which were exited, the Company recognized a liability for future lease rentals, service charges and property taxes for which it was liable, offset by anticipated future sublease rentals. The Company initially recorded a reserve of $0.5million at September 30, 2011 to cover these liabilities, which reserve has been fully utilized at September30, 2012.

As part of the Flexible New Deal contract, MAXIMUS was entitled to reimbursement for costs incurred as a consequence of early termination, as well as a contract settlement for payments the Company would have received for realizing certain long-term goals under the contract. During the year ended September 30, 2012, MAXIMUS received a payment of $2.7million for revenue foregone and $1.7million of cost recoveries, net of subcontractor expenses.

Contracts

During the year ended September30, 2012, the Company recorded a gain of $6.8million on a fixed price contract owing to changes in our estimate to complete the work and the execution of a change order. During the year ended September 30, 2011, the Company recorded a charge of $7.3million on the same contract. The Company has no further liabilities relating to anticipated losses on this contract.

During the year ended September30, 2012, the Company signed an amendment on a significant Health Services contract. As a consequence, the Company recognized additional revenue in the period of $10.2million.

Employment agreements

The Company has an employment agreement with its chief executive officer with a term ending in fiscal 2014.

Collective bargaining agreements

Approximately 15% of our employees are covered by collective bargaining agreements or similar arrangements. These agreements are typically renewed annually.

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13. Leases

The Company leases office space under various operating leases. The terms of leases typically provide for certain minimum payments as well as increases in lease payments based upon the operating cost of the facility and the consumer price index. Rent expense for the years ended September 30, 2012, 2011 and 2010 was $37.6 million, $32.0 million and $30.2 million respectively. Contingent lease rental expense, caused by CPI escalators in lease agreements, represented less than $0.2 million of this cost in any year.

Minimum future payments under leases in effect as of September 30, 2012 are as follows (in thousands):

	Operating Leases
Year ended September 30,
2013	$	36,395
2014	28,048
2015	21,459
2016	10,081
2017	8,473
Thereafter	9,302
Total minimum lease payments	$	113,758

14. Employee benefit plans and deferred compensation

The Company has 401(k) plans for the benefit of all employees who meet certain eligibility requirements. The plans provide for Company match, specified Company contributions, and/or discretionary Company contributions. During the years ended September 30, 2012, 2011 and 2010, the Company contributed $3.0 million, $3.0 million and $3.2 million to the 401(k) plans, respectively.

The Company also has a deferred compensation plan, which is a non-qualified plan available to a restricted number of highly compensated employees. The plan enables participants to defer compensation for tax purposes. These deferred employee contributions are held within a rabbi trust with investments directed by the respective employees. The assets of the rabbi trust are available to satisfy the claims of general creditors in the event of bankruptcy of the Company. The balance sheet at September 30, 2012 includes $1.5 million of cash and cash equivalents; an asset of $9.2 million related to life insurance assets, which are held at cash surrender value; and liabilities totaling $12.4 million related to the deferred compensation plan liabilities.

15. Stock-based compensation

In March 2012, the Company’s shareholders approved the 2011 Equity Incentive Plan which superseded the Company’s 1997 Equity Incentive Plan. Under these plans, the Company is authorized to grant stock options, restricted stock units (“RSUs”) and other forms of equity awards to officers, employees and directors of the Company. At September 30, 2012, 1,647,669 million shares remained available for grants under the Company’s stock plans. The Company typically issues new shares in satisfying its obligations under its stock plans.

In recent years, the Company has granted equity awards to officers, employees and directors in the form of RSUs. Generally, RSUs issued before 2009 vest ratably over six years. RSUs issued since then vest ratably over five years. The fair value of the RSUs, based on the Company’s stock price at the grant date, is expensed in equal installments over the vesting period. For the fiscal years ended September 30, 2012, 2011 and 2010, compensation expense recognized related to RSUs was $12.1 million, $9.4 million and $7.1 million, respectively. Employees who are granted RSUs also receive dividend-equivalent payments in the form of additional RSUs. However, until the shares are issued, they have no voting rights and employees may not buy or sell these RSUs. In the event that an award is forfeited, the dividend-equivalent payments received by the holder with respect to that award are also forfeited.

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A summary of the Company’s RSU activity for the year ended September 30, 2012, is as follows:

	Shares		Weighted- Average Grant-Date Fair Value
Non-vested shares outstanding at September 30, 2011	1,527,686		$	22.64
Granted	414,894		42.01
Vested	(452,804	)	24.32
Forfeited	(43,706	)	21.35
Non-vested shares outstanding at September 30, 2012	1,446,070		27.71

The weighted-average grant-date fair value of RSUs granted in the years ended September 30, 2011 and 2010 was $31.80 and $23.58, respectively. The total fair value of RSUs vesting during the year was $25.0 million, $14.5 million and $9.9 million in the years ended September 30, 2012, 2011 and 2010, respectively. As of September 30, 2012, the total remaining unrecognized compensation cost related to unvested RSUs was $28.1 million. This charge is expected to be realized over 4 years, with a weighted average life of 1.6 years.

The Company previously granted stock options to certain employees. These were granted at exercise prices equal to the fair market value of the Company’s common stock at the date of grant and generally vest ratably over a period of four years. Options issued prior to fiscal 2005 expire ten years after date of grant; those issued since expire after six years. The Company has transitioned towards providing RSUs rather than options and, accordingly, no options have been granted since 2008. Compensation expenses related to stock options was less than $100,000 in the year ended September 30, 2012 and no future charges relating to stock options are anticipated. For the fiscal years ended September 30, 2011 and 2010, compensation expense related to stock options was $0.1 million and $0.8 million, respectively.

A summary of the Company’s stock option activity for the year ended September 30, 2012, is as follows:

	Options		Weighted Average Exercise Price
Outstanding at September 30, 2011	765,676		$	16.18
Exercised	(404,563	)	15.92
Forfeited or expired	(934	)	15.37
Outstanding and exercisable at September 30, 2012	360,179		16.52

The intrinsic value of outstanding and exercisable stock options at September 30, 2012, was $15.6 million with a weighted average remaining life of 2.5 years.

The following table summarizes information pertaining to the stock options vested and exercised for the years presented (in thousands):

	Year ended September 30,
	2012		2011		2010
Aggregate intrinsic value of all stock options exercised	$	10,920	$	15,102	$	4,730
Net cash proceeds from exercise of stock options	6,441		12,482		5,948

The total income tax benefit recognized in the income statement for share-based compensation arrangements was $4.3 million, $3.7 million and $3.1 million for the fiscal years ended September 30, 2012, 2011 and 2010, respectively.

Employees are permitted to forfeit a certain number of shares to cover their personal tax liability. Amounts paid to cover this liability by the Company were $4.5 million, $3.5 million and $3.2 million in the years ended September 30, 2012, 2011 and 2010.

Cash flows resulting from the tax benefits generated from tax deductions in excess of the compensation costs recognized for those options and RSUs (excess tax benefits) are classified as financing cash flows.

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16. Stock repurchase programs

Under resolutions adopted in July 2008 and September 2010, the Board of Directors authorized the repurchase, at management’s discretion, of up to an aggregate of $175.0 million of the Company’s common stock. In November 2011, this plan was replaced with a new program which authorized up to $125.0 million of repurchases. These resolutions also authorized the use of option exercise proceeds for the repurchase of the Company’s common stock. During the years ended September 30, 2012, 2011 and 2010, the Company has repurchased 306,000, 1,597,458 and 1,501,528 common shares at a cost of $12.8 million, $57.5 million, and $40.2 million respectively. At September 30, 2012, $127.4 million remained available for future stock repurchases.

As of November 16, 2012, the Company had repurchased an additional 168,500 shares at a cost of $9.7 million during the first quarter of fiscal 2013.

17. Legal and settlement expense (recovery), net

Legal and settlement expense (recovery), net consists of costs, net of reimbursed insurance claims, related to significant legal settlements and non-routine legal matters, including future probable legal costs estimated to be incurred in connection with those matters. Legal expenses incurred in the ordinary course of business are included in selling, general and administrative expense.  Expenses for the three years ended September 30, 2012 are shown below (in thousands):

	Year ended September 30,
	2012			2011			2010
Insurance recoveries	$	(1,180	)	$	—		$	(7,500	)
Employee lawsuit	600			—			—
Client indemnification	490			—			—
Other	180			(808		)	1,895
Total	$	90		$	(808	)	$	(5,605	)

The insurance recoveries in fiscal 2012 and 2010 relate to a litigation settlement in fiscal 2008.

During the fourth quarter of fiscal year 2012, the company agreed to settle a lawsuit brought by a former employee, and the company accrued $600,000 consisting of settlement and legal costs related to that matter. Also, the company has accrued $490,000 relating to client indemnification of funds misapprapriated by a former employee.

During the 2011 fiscal year, the Company reversed a legal expense previously recognized in fiscal 2010 for a matter which concluded without liability to the Company.

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18. Income taxes

The Company’s components of income from continuing operations before income taxes and the corresponding provision for income taxes is as follows (in thousands):

	Year ended September 30,
	2012		2011		2010
Income from continuing operations before income taxes:
United States	$	93,418	$	66,842	$	66,162
Foreign	38,333		59,054		42,160
Income from continuing operations before income taxes	$	131,751	$	125,896	$	108,322

	Year ended September 30,
	2012			2011			2010
Current provision:
Federal	$	36,348		$	20,090		$	23,712
State and local	9,006			4,484			5,197
Foreign	13,572			17,422			13,188
Total current provision	58,926			41,996			42,097
Deferred tax expense (benefit):
Federal	$	(1,272	)	$	1,572		$	(1,678	)
State and local	(471		)	397			(278		)
Foreign	(1,531		)	(211		)	(1,216		)
Total deferred tax expense (benefit)	(3,274		)	1,758			(3,172		)
Income tax expense	$	55,652		$	43,754		$	38,925

The provision for income taxes differs from that which would have resulted from the use of the federal statutory income tax rate as follows (in thousands):

	Year ended September 30,
	2012			2011			2010
Federal income tax provision at statutory rate of 35%	$	46,113		$	44,063		$	37,913
State income taxes, net of Federal benefit	5,558			3,175			3,153
True up to prior year	2,715			—			—
Permanent items	2,808			314			1,263
Foreign taxation	(1,950		)	(3,644		)	(2,177		)
Valuation allowances on net operating loss carryforwards	305			(16		)	(33		)
Other	103			(138		)	(1,194		)
Income tax expense	$	55,652		$	43,754		$	38,925

During the year ended September 30, 2012, the Company recorded the correction of an error of $2.7 million. The Company does not believe this correction is material to its consolidated financial statements.

50

The significant items comprising the Company’s deferred tax assets and liabilities as of September 30, 2012 and 2011 are as follows (in thousands):

	As of September 30,
	2012			2011
Deferred tax assets—current:
Deferred revenue	$	14,543		$	12,675
Costs deductible in future periods	11,126			9,315
Net operating loss carryforwards	811			—
Total deferred tax assets—current	26,480			21,990
Deferred tax liabilities—current:
Accounts receivable—unbilled	3,932			2,734
Other	341			—
Total deferred tax liabilities—current:	4,273			2,734
Net deferred tax asset—current	$	22,207		$	19,256
Deferred tax assets—non-current:
Net operating loss carryforwards	$	5,728		$	1,028
Valuation allowance on net operating loss carryforwards	(1,313		)	(1,028		)
Net operating loss carryforwards net of valuation reserve	4,415			—
Deferred revenue	6,737			—
Non-cash equity compensation	4,176			4,012
Cash deductible in future periods	1,021			2,567
Deferred contract costs	—			101
Other	3,055			1,167
Total deferred tax assets—non-current	19,404			7,847
Deferred tax liabilities—non-current
Amortization of goodwill and intangible assets	14,218			3,976
Property and equipment	8,535			10,767
Capitalized software	4,701			4,237
Deferred contract costs	452			—
Other	513			80
Total deferred tax liability—non-current	$	28,419		$	19,060
Net deferred tax liability—non-current	$	9,015		$	11,213

Due to deferred tax assets and liabilities in different tax jurisdictions, the net long-term assets and liabilities are reflected on the accompanying consolidated balance sheet as follows (in thousands):

	As of September 30,
	2012		2011
Long-term assets	$	1,369	$	732
Long-term liabilities	10,384		11,945
Net deferred tax liability—non-current	$	9,015	$	11,213

At September 30, 2012, the Company’s overseas subsidiaries held approximately $108 million of cumulative earnings. We do not provide for U.S. income taxes on these undistributed earnings as we do not have the intention or the need to repatriate these funds. If we were to transfer these funds to the United States, the Company would be required to accrue and pay additional taxes. We have not attempted to quantify the charges which might arise if we were to make this transaction. The charges would vary based upon tax legislation in the United States and the other overseas jurisdictions as well as the manner and timing in which MAXIMUS would make these transactions. The amount of taxes that may be applicable on earnings planned to be reinvested indefinitely outside the United States is not readily determinable given the various tax planning alternatives the Company could employ should it decide to repatriate these earnings.

The Company had $9.5 million of net operating loss carryforwards in the United States at September 30, 2012, resulting in a deferred tax asset of $4.2 million. This balance relates exclusively to the losses held by PSI upon their acquisition in 2012. Although the ability of the Company to use these loss carryforwards will be restricted to an annual allowance, the Company has sufficient profits and time within the jurisdictions where losses have arisen to ensure that these losses will be utilized in full. Accordingly, no reserve has been recorded against these balances. These net operating loss carryforwards expire between 2027 and 2031.

51

The Company had $5.0 million of net operating loss carryforwards in Canada at September 30, 2012, compared with $4.0 million at September 30, 2011. This results in a deferred tax asset of $1.2 million and $1.0 million, respectively. A reserve of $1.1 million and $1.0 million was applied to these balances at September 30, 2012 and 2011, respectively. These net operating loss carryforwards expire through 2027 to 2031.

The Company had $3.4 million of net operating loss carryforwards relating to its United Kingdom subsidiary, resulting in a current deferred tax asset of $0.8 million. No valuation reserve has been recorded against this balance as management believes it will be recovered in full during the fiscal 2013 year. The net operating loss carryforward does not expire.

The Company had $1.2 million of net operating loss carryforwards relating to its Saudi Arabian subsidiary. This results in a deferred tax asset of $0.2 million, which has been fully reserved.

Cash paid for income taxes during the years ended September 30, 2012, 2011, and 2010 was $44.3 million, $45.2 million and $33.3 million, respectively.

The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon the technical merits, it is “more-likely-than-not” that the position will be sustained upon examination. The Company’s net unrecognized tax benefits totaled $1.1 million, $1.2 million and $1.5 million at September 30, 2012, 2011 and 2010, respectively. The total amount of unrecognized tax benefits that, if recognized, would affect the annual effective income tax rate is $1.1 million at September 30, 2012.

The Company reports interest and penalties as a component of income tax expense. In the fiscal years ending September 30, 2012, 2011 and 2010, the Company recognized interest expense relating to unrecognized tax benefits of less than $0.1 million in each year. The net liability balance at September 30, 2012, 2011 and 2010 includes approximately $0.4 million, $0.3 million and $0.3 million, respectively, of interest and penalties.

It is reasonably possible that the total amount of unrecognized tax benefits could decrease within the next twelve months as a result of settlement of expiration of statute of limitations, which could have an impact on the effective tax rate. It is not anticipated that this balance will exceed $0.1 million. The anticipated reversals are related to state tax items, none of which individually are significant.

The Company recognizes and presents uncertain tax positions on a gross basis (i.e., without regard to likely offsets for deferred tax assets, deductions and/or credits that would result from payment of uncertain tax amounts). The reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):

	Year Ended September 30
	2012			2011			2010
Balance at beginning of year	$	1,172		$	1,553		$	2,045
Additions based on tax positions related to the current year	—			—			45
Reductions for tax positions of prior years	—			—			(196		)
Lapse of statute of limitations	(113		)	(381		)	—
Settlements	—			—			(341		)
Balance at end of year	$	1,059		$	1,172		$	1,553

The Company files income tax returns in the United States Federal jurisdiction and in various state and foreign jurisdictions. The Company is no longer subject to U.S. Federal income tax examinations for years before 2009 and is no longer subject to state and local, or foreign income tax examinations by tax authorities for years before 2007. In international jurisdictions, similar rules apply to filed income tax returns, although the tax examination limitations and requirements may vary. The Company is no longer subject to audit by tax authorities for overseas jurisdictions for years prior to 2005.

52

19. Quarterly information (unaudited)

Set forth below are selected quarterly income statement data for the fiscal years ended September 30, 2012 and 2011. The Company derived this information from unaudited quarterly financial statements that include, in the opinion of Company’s management, all adjustments necessary for a fair presentation of the information for such periods. Results of operations for any fiscal quarter are not necessarily indicative of results for any future period.

Earnings per share amounts are computed independently each quarter. As a result, the sum of each quarter’s earnings per share amount may not equal the total earnings per share amount for the respective year.

	Quarter Ended
	Dec. 31, 2011		March 31, 2012			June 30, 2012			Sept. 30, 2012
	(In thousands, except per share data)
Fiscal Year 2012
Revenue:
Health Services	$	158,043	$	161,170		$	170,403		$	181,564
Human Services	81,560		82,282			95,950			119,172
Total revenue	239,603		243,452			266,353			300,736
Gross profit	59,847		64,766			78,701			84,629
Selling, general and administrative expenses	32,756		37,959			43,877			42,810
Operating income from continuing operations:
Health Services	16,783		18,202			25,652			19,982
Human Services	10,308		8,605			9,187			21,822
Consolidating adjustments	—		—			(15		)	15
Acquisition-related expenses	—		233			1,877			766
Legal and settlement expenses (recovery), net	186		(824		)	(352		)	1,080
Operating income from continuing operations	26,905		27,398			33,299			39,973
Discontinued operations, net of income taxes
Income/(loss) from discontinued operations	—		—			—			—
Loss on disposal	46		62			9			(83		)
Loss from discontinued operations	46		62			9			(83		)
Net income	$	17,704	$	14,273		$	20,485		$	23,671
Basic earnings per share:
Income from continuing operations	$	0.52	$	0.42		$	0.60		$	0.70
Loss from discontinued operations	0.01		—			—			—
Basic earnings per share	$	0.53	$	0.42		$	0.60		$	0.70
Diluted earnings per share:
Income from continuing operations	$	0.51	$	0.41		$	0.59		$	0.68
Loss from discontinued operations	—		—			—			—
Diluted earnings per share	$	0.51	$	0.41		$	0.59		$	0.68

53

	Quarter Ended
	Dec. 31, 2010			March 31, 2011			June 30, 2011			Sept. 30, 2011
	(In thousands, except per share data)
Fiscal Year 2011
Revenue:
Health Services	$	130,011		$	137,779		$	141,788		$	156,303
Human Services	84,103			89,337			96,508			93,804
Total revenue	214,114			227,116			238,296			250,107
Gross profit	55,959			63,066			66,399			68,227
Selling, general and administrative expenses	28,667			33,572			35,259			34,560
Operating income from continuing operations:
Health Services	18,823			19,352			15,923			20,617
Human Services	8,503			10,123			14,908			13,288
Consolidating adjustments	(34		)	19			309			(238		)
Legal and settlement expense (recovery), net	—			—			361			(1,169		)
Operating income from continuing operations	27,292			29,494			30,779			34,836
Discontinued operations, net of income taxes
Income/(loss) from discontinued operations	—			(265		)	(65		)	197
Loss on disposal	(105		)	(554		)	(3		)	(179		)
Loss from discontinued operations	(105		)	(819		)	(68		)	18
Net income	$	17,482		$	18,219		$	19,892		$	25,575
Basic earnings per share:
Income from continuing operations	$	0.51		$	0.55		$	0.58		$	0.75
Loss from discontinued operations	—			(0.02		)	(0.01		)	—
Basic earnings per share	$	0.51		$	0.53		$	0.57		$	0.75
Diluted earnings per share:
Income from continuing operations	$	0.50		$	0.54		$	0.56		$	0.73
Loss from discontinued operations	(0.01		)	(0.03		)	—			—
Diluted earnings per share	$	0.49		$	0.51		$	0.56		$	0.73

20. Recent accounting pronouncements

In May 2011, the FASB issued new guidance on fair value disclosure. The guidance changes certain fair value measurement principles and enhances the disclosure requirements, particularly for assets or liabilities which require valuation based upon a Company’s own information and assumptions. This guidance is effective for this year and has resulted in additional disclosures related to our acquisition related contingent consideration.

In 2011, the FASB issued new disclosure guidance related to the presentation of the Statement of Comprehensive Income. This guidance eliminates the current option to report other comprehensive income and its components in the consolidated statement of stockholders’ equity. The requirement to present reclassification adjustments out of accumulated other comprehensive income on the face of the consolidated statement of income has been deferred. We have adopted this accounting policy in this period. This adoption will not have any impact on our financial position or results of operations, but will impact our financial statement presentation.

In 2011, the FASB issued new accounting guidance that simplifies goodwill impairment tests. The new guidance states that a “qualitative” assessment may be performed to determine whether further impairment testing is necessary. We will adopt this accounting standard upon its effective date, which will be periods beginning after October 1, 2012. We do not anticipate that this adoption will have a significant impact on our financial position or results of operations.

54

21. Discontinued operations

On September 30, 2010, the Company sold its ERP division for cash proceeds of $5.6 million, net of transaction costs of $0.7 million, and recognized a pre-tax loss on sale of less than $0.1 million. The Company previously recorded a pre-tax loss on sale of $1.3 million in fiscal 2009. In 2011 the Company resolved a dispute with the buyer regarding the purchase price adjustment clause in their contract and recorded a loss of $1.7 million. The results of this business have been classified within discontinued operations below.

On May 2, 2008, the Company sold its Unison MAXIMUS, Inc. subsidiary for $6.5 million, including a promissory note of $6.4 million, which is fully reserved. The Company recorded a gain on sale of $0.1 million and $0.3 million for the years ended September 30, 2012 and 2011, respectively. The Company continues to monitor the payments on the note but no further gains are certain at this time.

The following table summarizes the operating results of the discontinued operations included in the Consolidated Statements of Operations (in thousands):

	Year Ended September 30,
	2012		2011			2010
Revenue	$	—	$	—		$	27,054
Income (loss) from operations before income taxes	$	—	$	(219	)	$	1,664
Provision for (benefit from) income taxes	—		(86		)	624
Income (loss) from discontinued operations	$	—	$	(133	)	$	1,040
Gain (loss) on disposal before income taxes	$	57	$	(1,390	)	$	(45	)
Provision for (benefit from) income taxes	23		(549		)	(17		)
Gain/(loss) on disposal	$	34	$	(841	)	$	(28	)
Income (loss) from discontinued operations	$	34	$	(974	)	$	1,012

The Company made net payments of approximately $0.7 million in fiscal 2011 related to discontinued operations. These payments principally related to the settlement of customer and employee payments following the sale of the business.

22. Related party transactions

Governor James R. Thompson, one of our outside directors who the Company’s Board of Directors has determined to be independent, is Senior Chairman of the law firm of Winston & Strawn in Chicago. Winston & Strawn has provided certain legal services to the Company. Governor Thompson had no personal involvement in the services provided. In 2012, 2011 and 2010, the Company paid Winston & Strawn $341,015, $248,748, and $150,609 respectively.

23. Subsequent events

Dividend

On October 5, 2012, the Company’s Board of Directors declared a quarterly cash dividend of $0.09 for each share of the Company’s common stock outstanding. The dividend will be paid on November 30, 2012 to shareholders of record on November 15, 2012. Based on the number of shares outstanding, the payment will be approximately $3.1 million.

ITEM 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

55

ITEM 9A.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures.  Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective and designed to ensure that the information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting.  Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of published financial statements in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of September 30, 2012. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on our assessment, we believe that as of September 30, 2012, our internal control over financial reporting was effective based on criteria set forth by COSO in Internal Control—Integrated Framework.

The attestation report concerning the effectiveness of our internal control over financial reporting as of September 30, 2012, issued by Ernst & Young LLP, the independent registered public accounting firm who also audited our consolidated financial statements, is included following this Item 9A.

Changes in Internal Control Over Financial Reporting.  Following the acquisition of PSI in April 2012, the Company commenced the process of aligning the processes and controls of PSI to MAXIMUS’ existing control environment. This process was ongoing during the last fiscal quarter and the alignment was completed by September 30, 2012.

With the exception of the above, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection with the evaluation of our internal control that occurred during our fourth fiscal quarter of 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

56

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of MAXIMUS, Inc.

We have audited MAXIMUS, Inc.’s internal control over financial reporting as of September 30, 2012, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). MAXIMUS, Inc.’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, MAXIMUS, Inc. maintained, in all material respects, effective internal control over financial reporting as of September 30, 2012, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2012 consolidated financial statements of MAXIMUS, Inc. and our report dated November 16, 2012 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

McLean, Virginia

November 16, 2012

57

PART III

The information required by Items 10, 11, 12, 13 and 14 of Part III of Form 10-K has been omitted in reliance on General Instruction G(3) to Form 10-K and is incorporated herein by reference to the Company’s Proxy Statement relating to its 2013 Annual Meeting of Shareholders (the “Proxy Statement”) to be filed with the SEC, except as otherwise indicated below:

ITEM 10.  Directors, Executive Officers and Corporate Governance.

The information required by this Item is incorporated by reference to the Proxy Statement.

ITEM 11.  Executive Compensation.

The information required by this Item is incorporated by reference to the Proxy Statement.

ITEM 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Except for the information disclosed in this Item below, the information required by this Item is incorporated by reference to the Proxy Statement.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information as of September 30, 2012 with respect to shares of our common stock that may be issued under our existing equity compensation plans:

	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans(1)
Equity compensation plans/arrangements approved by the shareholders(2)	1,806,249	$	3.29	1,647,669
Equity compensation plans/arrangements not approved by the shareholders	—	—		—
Total	1,806,249	$	3.29	1,647,669

(1)In addition to being available for future issuance upon exercise of options that may be granted after September 30, 2012, all shares under the 2011 Equity Incentive Plan may be issued in the form of restricted stock, performance shares, stock appreciation rights, stock units, or other stock-based awards.

(2)Includes the 2011 Equity Incentive Plan.

ITEM 13.  Certain Relationships and Related Transactions, and Director Independence.

The information required by this Item is incorporated by reference to the Proxy Statement.

ITEM 14.  Principal Accounting Fees and Services.

The information required by this Item is incorporated by reference to the Proxy Statement.

58

PART IV

ITEM 15. Exhibits, Financial Statement Schedules.

(a)	1.	Financial Statements.
		The consolidated financial statements are listed under Item 8 of this Annual Report on Form 10-K.
	2.	Financial Statement Schedules.
		None. Financial statement schedules are either not required under the related instructions or are inapplicable and therefore have been omitted.
	3.	Exhibits.
		The Exhibits filed as part of this Annual Report on Form 10-K are listed on the Exhibit Index immediately preceding such Exhibits, which Exhibit Index is incorporated herein by reference.
(b)		Exhibits—see Item 15(a)(3) above.
(c)		Financial Statement Schedules—see Item 15(a)(2) above.

59

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

	MAXIMUS, INC.
Dated: November 16, 2012	By:	/s/ RICHARD A. MONTONI
		Richard A. Montoni
		Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ RICHARD A. MONTONI	President, Chief Executive Officer and Director (principal executive officer)	November 16, 2012
Richard A. Montoni
/s/ DAVID N. WALKER	Chief Financial Officer and Treasurer (principal financial and accounting officer)	November 16, 2012
David N. Walker
/s/ PETER B. POND	Chairman of the Board of Directors	November 16, 2012
Peter B. Pond
/s/ RUSSELL A. BELIVEAU	Director	November 16, 2012
Russell A. Beliveau
/s/ JOHN J. HALEY	Director	November 16, 2012
John J. Haley
/s/ PAUL R. LEDERER	Director	November 16, 2012
Paul R. Lederer
/s/ RAYMOND B. RUDDY	Director	November 16, 2012
Raymond B. Ruddy
/s/ MARILYN R. SEYMANN	Director	November 16, 2012
Marilyn R. Seymann
/s/ JAMES R. THOMPSON, JR.	Director	November 16, 2012
James R. Thompson, Jr.
/s/ WELLINGTON E. WEBB	Director	November 16, 2012
Wellington E. Webb

60

EXHIBIT INDEX

Exhibit Number
3.1	Amended and Restated Articles of Incorporation of the Company, as amended.(1)
3.2	Amended and Restated Bylaws of the Company.(2)
4.1	Specimen Common Stock Certificate.(3)
10.1	1997 Equity Incentive Plan, as amended.(4)*
10.2	First Amendment to the 1997 Equity Incentive Plan, as amended.(5)*
10.3	1997 Director Stock Option Plan, as amended.(6)*
10.4	1997 Employee Stock Purchase Plan, as amended.(7)*
10.5	Executive Employment, Non-Compete and Confidentiality Agreement by and between the Company and Richard A. Montoni.(8)*
10.6	First Amendment to the Executive Employment, Non-Compete and Confidentiality Agreement by and between the Company and Richard A. Montoni.(5)*
10.7	Executive Employment, Non-Compete and Confidentiality Agreement by and between the Company and Bruce Caswell.(5)*
10.8	First Amendment to the Executive Employment, Non-Compete and Confidentiality Agreement by and between the Company and Bruce Caswell.(5)*
10.9	Form of Indemnification Agreement by and between the Company and each of the directors of the Company.(9)*
10.10	Amended and Restated Income Continuity Program.(5)*
10.11	Deferred Compensation Plan, as amended.(5)*
10.12	1997 Equity Incentive Plan—Restricted Stock Units—Terms and Conditions.(10)
10.13	1997 Equity Incentive Plan—Non-Qualified Stock Option—Terms and Conditions.(10)
10.14	Purchase Agreement between MAXIMUS, Inc. and UBS AG, London Branch, dated November 15, 2007.(11)
10.15	Revolving Credit Agreement, dated January 25, 2008, by and among MAXIMUS, Inc., as borrower, SunTrust Bank as administrative agent, issuing bank and swingline lender and the other lender parties thereto.(12)
10.16	Security Agreement, dated January 25, 2008, among MAXIMUS, Inc. and certain subsidiaries of MAXIMUS, Inc., in favor of SunTrust Bank.(12)
10.17	Pledge Agreement, dated January 25, 2008, by and among MAXIMUS, Inc. and certain subsidiaries of MAXIMUS, Inc., in favor of SunTrust Bank.(12)
10.18	Extension of Employment Agreement of Richard A. Montoni, dated December 22, 2009 (13)*
10.19	2011 Equity Incentive Plan. (14)
21.1	Subsidiaries of the Company. Filed herewith.
23.1	Consent of Independent Registered Public Accounting Firm. Filed herewith.
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
32.1	Section 906 Principal Executive Officer Certification. Furnished herewith.
32.2	Section 906 Principal Financial Officer Certification. Furnished herewith.
99.1	Special Considerations and Risk Factors. Filed herewith.
101	The following materials from the MAXIMUS, Inc. Annual Report on Form 10-K for the year ended September 30, 2012 formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Statements of Operations, (ii) Consolidated Statements of Comprehensive Income, (iii) Consolidated Balance Sheets, (iv) Consolidated Statements of Cash Flows, (v) Consolidated Statements of Changes in Shareholders’ Equity and (vi) Notes to Consolidated Financial Statements. Filed electronically herewith.

*Denotes management contract or compensation plan.

61

(1)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 (File No. 1-12997) on August 14, 2000 and incorporated herein by reference.

(2)Filed as an exhibit to the Company’s Current Report on Form 8-K (File No. 1-12997) on September 15, 2011 and incorporated herein by reference.

(3)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 (File No. 1-12997) on August 14, 1997 and incorporated herein by reference.

(4)Filed as an exhibit to the Company’s Registration Statement on Form S-8 (File No. 333-136400) on August 8, 2006 and incorporated herein by reference.

(5)Filed as an exhibit to the Company’s Current Report on Form 8-K (File No. 1-12997) on November 27, 2007 and incorporated herein by reference.

(6)Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended September 30, 1997 (File No. 1-12997) on December 22, 1997 and incorporated herein by reference.

(7)Filed as an exhibit to the Company’s Registration Statement on Form S-8 (File No. 333-122711) on February 10, 2005 and incorporated herein by reference.

(8)Filed as an exhibit to the Company’s Current Report on Form 8-K (File No. 1-12997) on April 26, 2006 and incorporated herein by reference.

(9)Filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-21611) on February 12, 1997 and incorporated herein by reference.

(10)Filed as an exhibit to the Company’s Current Report on Form 8-K (File No. 1-12997) on June 23, 2006 and incorporated herein by reference.

(11)Filed as an exhibit to the Company’s Current Report on Form 8-K (File No. 1-12997) on November 20, 2007 and incorporated herein by reference.

(12)Filed as an exhibit to the Company’s Current Report on Form 8-K (File No. 1-12997) on January 29, 2008 and incorporated herein by reference.

(13)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the Quarter ended December 31, 2009  (File No. 1-12997) on February 4, 2010 and incorporated herein by reference.

(14)Filed as an exhibit to the Company’s Proxy Statement on Schedule 14A (File No. 1-12997) on January 27, 2012 and incorporated herein by reference.

62

EX-21.1

EXHIBIT 21.1

MAXIMUS, Inc.

List of Subsidiaries

As of September 30, 2012

Name*	Jurisdiction of Incorporation/Organization
MAXNetwork Pty Limited	Australia
MAXIMUS Canada, Inc.	Canada
MAXIMUS Properties LLC	Virginia
MAXIMUS International, LLC	Virginia
MAXIMUS Federal Services, Inc.	Virginia
MAXIMUS Consulting Services, Inc.	Virginia
MAXIMUS Health Services, Inc.	Indiana
MAXIMUS Human Services, Inc.	Virginia
MAXIMUS K-12 Education, Inc.	Virginia
MAXIMUS Higher Education, Inc.	Virginia
MAXIMUS BC Health, Inc.	British Columbia
MAXIMUS Employment & Training Limited	United Kingdom
MAXIMUS Employment UK Limited	United Kingdom
Policy Studies, Inc.	Colorado
PSI Services Holding, Inc.	Delaware

*The names of other subsidiaries have been omitted from this list because, considered in the aggregate, they would not constitute a significant subsidiary under Securities and Exchange Commission Regulation S-X, Rule 1-02(w).

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements:

(1)   Registration Statements (Form S-8, Nos. 333-88012, 333-41871, 333-62380, 333-75263 and 333-136400) pertaining to the 1997 Equity Incentive Plan of MAXIMUS, Inc.

(2)   Registration Statement (Form S-8, Nos. 333-41867 and 333-122711) pertaining to the 1997 Employee Stock Purchase Plan of MAXIMUS, Inc. and

(3)   Registration Statement (Form S-8, No. 333-41869) pertaining to the 1997 Director Stock Option Plan of MAXIMUS, Inc.

of our report dated November 16, 2012 with respect to the consolidated financial statements of MAXIMUS, Inc., and our report dated November 16, 2012 with respect to the effectiveness of internal control over financial reporting of MAXIMUS, Inc., included in the Annual Report (Form 10-K) for the year ended September 30, 2012.

/s/Ernst & Young LLP

McLean, Virginia
November 16, 2012

EX-31.1

EXHIBIT 31.1

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Richard A. Montoni, certify that:

1.I have reviewed this Annual Report on Form 10-K of MAXIMUS, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 16, 2012	/s/ RICHARD A. MONTONI
	Richard A. Montoni
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David N. Walker, certify that:

1.I have reviewed this Annual Report on Form 10-K of MAXIMUS, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: November 16, 2012	/s/ DAVID N. WALKER
	David N. Walker
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Section 906 CEO Certification

I, Richard A. Montoni, Chief Executive Officer of MAXIMUS, Inc. (“the Company”), do hereby certify, under the standards set forth in and solely for the purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The Annual Report on Form 10-K of the Company for the fiscal year ended September 30, 2012 (the “Annual Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78m or 78o(d)) and

2.The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 16, 2012	/s/ RICHARD A. MONTONI
	Richard A. Montoni
	Chief Executive Officer

EX-32.2

EXHIBIT 32.2

Section 906 CFO Certification

I, David N. Walker, Chief Financial Officer of MAXIMUS, Inc. (“the Company”), do hereby certify, under the standards set forth in and solely for the purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

1.The Annual Report on Form 10-K of the Company for the fiscal year ended September 30, 2012 (the “Annual Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78m or 78o(d)) and

2.The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 16, 2012	/s/ DAVID N. WALKER
	David N. Walker
	Chief Financial Officer

EX-99.1

EXHIBIT 99.1

Special Considerations and Risk Factors

From time to time, we may make forward-looking public statements, such as statements concerning our then-expected future revenue or earnings or concerning projected plans, performance or contract procurement, as well as other estimates relating to future operations. Forward-looking statements may be in reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in press releases or in informal statements made with the approval of an authorized executive officer. The words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” “believe,” “could,” “intend,” “may,” “opportunity,” “plan,” “potential” or similar terms and expressions are intended to identify “forward-looking statements” within the meaning of Section 21E of the Exchange Act and Section 27A of the Securities Act of 1933, as amended, as enacted by the Private Securities Litigation Reform Act of 1995.

We wish to caution you not to place undue reliance on these forward-looking statements that speak only as of the date on which they are made. In addition, we wish to advise you that the factors listed below, as well as other factors we have not currently identified, could affect our financial or other performance and could cause our actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods or events in any current statement.

Except as required by law, we will not undertake and we specifically decline any obligation to publicly release revisions to these forward-looking statements to reflect either a circumstance after the date of the statements or the occurrence of events that may cause us to re-evaluate our forward-looking statements.

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act, we are hereby filing the following cautionary statements identifying important factors that could cause our actual results to differ materially from those projected in forward-looking statements made by us or on our behalf:

We may be subject to fines, penalties and other sanctions if we fail to comply with federal, state and local laws governing our business.

Our business lines operate within a variety of complex regulatory schemes, including but not limited to the Federal Acquisition Regulation (FAR), Cost Accounting Standards, the Truth in Negotiations Act, the Fair Debt Collection Practices Act (and analogous state laws), as well as the regulations governing Medicaid and Medicare. If a government audit uncovers improper or illegal activities by us or we otherwise determine that these activities have occurred, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeitures of profits, suspension of payments, fines and suspension or disqualification from doing business with the government. Any adverse determination could adversely impact our ability to bid in response to requests for proposals (RFPs) in one or more jurisdictions. Further, as a government contractor subject to the types of regulatory schemes described above, we are subject to an increased risk of investigations, criminal prosecution, civil fraud, whistleblower lawsuits and other legal actions and liabilities to which private sector companies are not, the result of which could have a material adverse effect on our financial condition and operating results.

If we fail to satisfy our contractual obligations or meet performance standards, our contracts may be terminated and we may incur significant costs or liabilities, including liquidated damages and penalties, which could adversely impact our operating results, financial condition and our ability to compete for future contracts.

Our contracts may be terminated for our failure to satisfy our contractual obligations or to meet performance standards and often require us to indemnify customers. In addition, some of our contracts contain substantial liquidated damages provisions and financial penalties related to performance failures. Although we have liability insurance, the policy coverage and limits may not be adequate to provide protection against all potential liabilities. Further, for certain contracts, we have posted significant performance bonds or issued letters of credit to secure our performance, indemnification and other obligations. If a claim is made against a performance bond or letter of credit, we would be required to reimburse the issuer for the amount of the claim. Consequently, as a result of the above matters, we may incur significant costs or liabilities, including penalties, which could adversely impact our operating results, financial condition and our ability to compete for future contracts.

We are subject to review and audit by federal, state and local governments at their sole discretion and, if any improprieties are found, we may be required to refund revenue we have received, or forego anticipated revenue, which could have a material adverse impact on our revenues and our ability to bid in response to RFPs.

As a provider of services to government agencies, we are subject to periodic audits and other reviews by federal, state and local governments of our costs and performance, accounting and general business practices relating to our contracts with those government agencies. As part of that process, the government agency reviews our performance on the contract, our pricing practices, our cost structure and our compliance with applicable laws, regulations and standards. Based on the results of these audits, government agencies may demand refunds or adjust our contract-related costs and fees, including internal costs and expense allocation. Although adjustments arising from government audits and reviews have not had a material adverse effect on our results of operations in the past, there can be no assurance that future audits and reviews would not have such effects.

We may face liabilities arising from divested or discontinued businesses.

During 2008 we divested our Security Solutions, Unison, Education Systems, Justice Solutions and Asset Solutions businesses. During fiscal 2010, we divested our ERP Solutions business. The transaction documents for those divestitures contain a variety of representations, warranties and indemnification obligations. We could face indemnification claims and liabilities from alleged breaches of representations or warranties. In addition, the majority of our customer contracts require customer consent to assign those contracts to a third party. Although we are cooperating with the buyers of those businesses to obtain all customer consents, a customer could refuse to consent to an assignment and seek to hold us liable for performance problems or other contractual obligations.

During 2009 we exited the revenue maximization business. Although we no longer provide those services, former projects that we performed for state clients remain subject to federal audits. Our contracts for that business generally provide that the company will refund the portion of its fee associated with any federal disallowance. Accordingly, we may be obligated to refund amounts paid for such revenue maximization services depending on the outcome of future federal audits.

If we fail to accurately estimate the factors upon which we base our contract pricing, we may generate less profit than expected or incur losses on those contracts.

We derived approximately 27% of our fiscal 2012 revenue from fixed-price contracts and approximately 44% of our fiscal 2012 revenue from performance-based contracts. For fixed-price contracts, we receive our fee based on services provided. Those services might include operating a Medicaid enrollment center pursuant to specified standards, designing and implementing computer systems or applications, or delivering a planning document under a consulting arrangement. For performance-based contracts, we receive our fee on a per-transaction basis. These contracts include, for example, child support enforcement contracts, in which we often receive a fee based on the amount of child support collected. To earn a profit on these contracts, we must accurately estimate costs involved and assess the probability of completing individual transactions within the contracted time period. If our estimates prove to be inaccurate, we may not achieve the level of profit we expected or we may incur a net loss on a contract. Although we believe that we have recorded adequate provisions in our financial statements for losses on our fixed-price and cost-plus contracts, as required under U.S. generally accepted accounting principles, we cannot assure you that our contract loss provisions will be adequate to cover all actual future losses.

Adverse judgments or settlements in legal disputes could harm our financial condition and operating results.

We are subject to a variety of lawsuits and other claims that arise from time to time in the ordinary course of our business. These may include lawsuits and claims related to contracts, subcontracts and employment claims and compliance with Medicaid and Medicare regulations as well as laws governing debt collections and child support enforcement. Adverse judgments or settlements in some or all of these legal disputes may result in significant monetary damages or injunctive relief against us. In addition, litigation and other legal claims are subject to inherent uncertainties and management’s view of these matters may change in the future. Those uncertainties include, but are not limited to, costs of litigation, unpredictable court or jury decisions, and the differing laws and attitudes regarding damage awards among the states and countries in which we operate.

We may incur significant costs before receiving related contract payments that could result in increasing the use of cash and accounts receivable.

When we are awarded a contract, we may incur significant expenses before we receive contract payments, if any. These expenses may include leasing office space, purchasing office equipment, and hiring personnel. In other situations, contract terms provide for billing upon achievement of specified project milestones. As a result, in these situations, we are required to expend significant sums of money before receiving related contract payments. In addition, payments due to us from government agencies may be delayed due to billing cycles or as a result of failures to approve governmental budgets in a timely manner. These factors could impact us by increasing the use of cash and accounts receivable. Moreover, these impacts could be exacerbated if we fail to either invoice the government agency or collect our fee in a timely manner.

Many of our projects handle protected health information or other forms of confidential personal information pertaining to participants in government programs, the loss or disclosure of which could adversely affect our business, financial condition and reputation.

As a provider of services under government health and human services programs, we often receive, maintain and transmit protected health information or other types of confidential personal information of the participants in those programs. That information may be regulated by the HIPAA, the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”) or similar laws. The loss, theft or improper disclosure of that information could subject the Company to sanctions under the relevant laws, lawsuits from affected individuals, negative press articles and a loss of confidence from our government clients, all of which could adversely affect our business and financial condition.

We obtain most of our business through competitive bidding in response to government RFPs. We may not be awarded contracts through this process at the same level in the future as in the past, and contracts we are awarded may not be profitable.

Substantially all of our customers are government agencies. To market our services to government customers, we are often required to respond to government RFPs, which may result in contract awards on a competitive basis. To do so effectively, we must estimate accurately our cost structure for servicing a proposed contract, the time required to establish operations and likely terms of the proposals submitted by competitors. We must also assemble and submit a large volume of information within an RFP’s rigid timetable. Our ability to respond successfully to RFPs will greatly impact our business. There is no assurance that we will continue to obtain contracts in response to government RFPs and our proposals may not result in profitable contracts. In addition, competitors may protest contracts awarded to us through the RFP process which may cause the award to be delayed or overturned or may require the customer to reinitiate the RFP process.

Government entities have in the past and may in the future terminate their contracts with us earlier than we expect, which may result in revenue shortfalls and unrecovered costs.

Many of our government contracts contain base periods of one or more years, as well as option periods covering more than half of the contract’s potential duration. Government agencies do not have to exercise these option periods, and they may elect not to exercise them for budgetary, performance or any other reason. Our contracts also typically contain provisions permitting a government customer to terminate the contract on short notice, with or without cause. Termination without cause provisions generally allow the government to terminate a contract at any time, and enable us to recover only our costs incurred or committed, and settlement expenses and profit, if any, on the work completed prior to termination. We may or may not be able to recover all the costs incurred during the start-up phase of a terminated contract.  The unexpected termination of significant contracts could result in significant revenue shortfalls. If revenue shortfalls occur and are not offset by corresponding reductions in expenses, our business could be adversely affected. We cannot anticipate if, when or to what extent a customer might terminate its contracts with us.

If we are unable to manage our growth, our profitability will be adversely affected.

Sustaining our growth places significant demands on our management as well as on our administrative, operational and financial resources. For us to continue to manage our growth, we must continue to improve our operational, financial and management information systems and expand, motivate and manage our workforce. If our growth comes at the expense of providing quality service and generating reasonable profits, our ability to successfully bid for contracts and our profitability will be adversely affected.

We rely on key contracts with state and local governments for a significant portion of our revenue. A substantial reduction in those contracts would materially adversely affect our operating results.

In fiscal 2012, approximately 61% of our total revenue was derived from contracts with state and local government agencies. Any significant disruption or deterioration in our relationship with state and local governments and a corresponding reduction in these contracts would significantly reduce our revenues and could substantially harm our business.

Government unions may oppose outsourcing of government programs to outside vendors such as us, which could limit our market opportunities and could impact us adversely. In addition, our unionized workers could disrupt our operations.

Our success depends in part on our ability to win profitable contracts to administer and manage health and human services programs traditionally administered by government employees. Many government employees, however, belong to labor unions with considerable financial resources and lobbying networks. Unions have in the past applied, and are likely to continue to apply, political pressure on legislators and other officials seeking to outsource government programs. Union opposition to these programs may result in fewer opportunities for us to service government agencies and/or longer and more complex procurements.

We do operate outsourcing programs using unionized employees in Canada. We have experienced opposition from the union, which does not favor the outsourcing of government programs. As a result, we have received negative press coverage as the union continues to oppose our program operations. Such press coverage and union opposition may have an adverse affect on the willingness of government agencies to outsource such projects as well as certain contracts that are operated within a unionized environment. Our unionized workers could also declare a strike which could adversely affect our performance and financial results.

We may be precluded from bidding and performing certain work due to other work we currently perform.

Various laws and regulations prohibit companies from performing work for government agencies that might be viewed as an actual or apparent conflict of interest. These laws may limit our ability to pursue and perform certain types of work. For example, some of our businesses assist government agencies in developing RFPs for various government programs. In those situations, the divisions involved in operating such programs would likely be precluded from bidding on those RFPs. Similarly, regulations governing the independence of Medicaid enrollment brokers and Medicare appeal providers could prevent us from providing services to other organizations such as health plans.

We may lose executive officers and senior managers on whom we rely to generate business and execute projects successfully.

The ability of our executive officers and our senior managers to generate business and execute projects successfully is important to our success. While we have employment agreements with some of our executive officers, those agreements do not prevent them from terminating their employment with us. The loss of an executive officer or senior manager could impair our ability to secure and manage engagements, which could harm our business, prospects, financial condition and results of operations.

Inaccurate, misleading or negative media coverage could adversely affect our reputation and our ability to bid for government contracts.

Because of the public nature of many of our business lines, the media frequently focus their attention on our contracts with government agencies. If the media coverage is negative, it could influence government officials to slow the pace of outsourcing government services, which could reduce the number of RFPs. The media also focus their attention on the activities of political consultants engaged by us, and we may be tainted by adverse media coverage about their activities, even when those activities are unrelated to our business. Moreover, inaccurate, misleading or negative media coverage about us could harm our reputation and, accordingly, our ability to bid for and win government contracts.

We may be unable to attract and retain sufficient qualified personnel to sustain our business.

Our delivery of services is labor-intensive. When we are awarded a government contract, we must quickly hire project leaders and case management personnel. The additional staff also creates a concurrent demand for increased administrative personnel. Our success requires that we attract, develop, motivate and retain:

·experienced and innovative executive officers;

·senior managers who have successfully managed or designed government services programs; and

·information technology professionals who have designed or implemented complex information technology projects.

Innovative, experienced and technically proficient individuals are in great demand and are likely to remain a limited resource. There can be no assurance that we will be able to continue to attract and retain desirable executive officers and senior managers. Our inability to hire sufficient personnel on a timely basis or the loss of significant numbers of executive officers and senior managers could adversely affect our business.

If we fail to establish and maintain important relationships with government entities and agencies, our ability to successfully bid under RFPs may be adversely affected.

To facilitate our ability to prepare bids in response to RFPs, we rely in part on establishing and maintaining relationships with officials of various government entities and agencies. These relationships enable us to provide informal input and advice to the government entities and agencies prior to the development of an RFP. We also engage marketing consultants, including lobbyists, to establish and maintain relationships with elected officials and appointed members of government agencies. The effectiveness of these consultants may be reduced or eliminated if a significant political change occurs. In that circumstance, we may be unable to successfully manage our relationships with government entities and agencies and with elected officials and appointees. Any failure to maintain positive relationships with government entities and agencies may adversely affect our ability to bid successfully in response to RFPs.

The federal government may limit or prohibit the outsourcing of certain programs or may refuse to grant consents and/or waivers necessary to permit private entities, such as us, to perform certain elements of government programs.

The federal government could limit or prohibit private contractors like MAXIMUS from operating or performing elements of certain government programs. State or local governments could be required to operate such programs with government employees as a condition of receiving federal funding. Moreover, under current law, in order to privatize certain functions of government programs, the federal government must grant a consent and/or waiver to the petitioning state or local agency. If the federal government does not grant a necessary consent or waiver, the state or local agency will be unable to outsource that function to a private entity, such as us. This situation could eliminate a contracting opportunity or reduce the value of an existing contract.

Our business could be adversely affected by future legislative or government budgetary and spending changes.

The market for our services depends largely on federal and state legislative programs and the budgetary capability to support programs, including the continuance of existing programs. These programs can be modified or amended at any time by acts of federal and state governments.

Moreover, part of our growth strategy includes aggressively pursuing new opportunities and continuing to serve existing programs scheduled for re-bid, which are or may be created by federal and state initiatives, principally in the area of health and human services.

Over the last several years state budgets have been adversely impacted by the financial and credit crisis, falling tax revenues and worldwide economic slowdown, resulting in state budget deficits. There are a number of alternatives available to states in managing a possible budget deficit, including:

·accessing previously set aside or “rainy day” funds;

·increasing taxes;

·eliminating or reducing services;

·implementing cost containment and savings measures;

·pursuing additional federal assistance; and

·developing additional sources of revenue, such as the legalization of gaming.

While we believe that the demand for our services remains substantial, state budget deficits could adversely impact our existing and anticipated business as well as our future financial performance.

Also, changes in federal initiatives or in the level of federal spending due to budgetary or deficit considerations may have a significant impact on our future financial performance. For example, increased or changed spending on defense, security or anti-terrorism threats may impact the level of demand for our services. Many state programs, such as Medicaid, are federally mandated and fully or partially funded by the federal government. Changes, such as program eligibility, benefits, or the level of federal funding may impact the demand for our services. Certain changes may present new opportunities to us, while other changes may reduce the level of demand for services provided by us, which could materially adversely impact our future financial performance.

If we do not successfully integrate the businesses that we acquire, our results of operations could be adversely affected.

Business combinations involve a number of factors that affect operations, including:

·diversion of management’s attention;

·loss of key personnel;

·entry into unfamiliar markets;

·assumption of unanticipated legal or financial liabilities;

·becoming significantly leveraged as a result of incurring debt to finance an acquisition;

·unanticipated operating, accounting or management difficulties in connection with the acquired entities;

·impairment of acquired intangible assets, including goodwill; and

·dilution to our earnings per share.

Businesses we acquire may not achieve the revenue and earnings we anticipated. Customer dissatisfaction or performance problems with an acquired firm could materially and adversely affect our reputation as a whole. As a result, we may be unable to profitably manage businesses that we have acquired or that we may acquire or we may fail to integrate them successfully without incurring substantial expenses, delays or other problems that could materially negatively impact our business and results of operations.

We may rely on subcontractors and partners to provide clients with a single-source solution.

From time to time, we may engage subcontractors, teaming partners or other third parties to provide our customers with a single-source solution. While we believe that we perform appropriate due diligence on our subcontractors and teaming partners, we cannot guarantee that those parties will comply with the terms set forth in their agreements or remain financially sound. We may have disputes with our subcontractors, teaming partners or other third parties arising from the quality and timeliness of the subcontractor’s work, customer concerns about the subcontractor or other matters. Subcontractor performance deficiencies could result in a customer terminating our contract for default. We may be exposed to liability, and we and our clients may be adversely affected if a subcontractor or teaming partner failed to meet its contractual obligations.

We face competition from a variety of organizations, many of which have substantially greater financial resources than we do; we may be unable to compete successfully with these organizations.

Our primary competitors in the Health Services Segment market in the United States are Affiliated Computer Services, a Xerox Company; Electronic Data Systems, an HP Company; and specialized private service providers. Our primary competitors in the Human Services Segment market include Serco, Atos Origin, Ingeus, other specialized consulting companies and non-profit organizations such as United Way, Goodwill and Catholic Charities.

Many of these companies are national and international in scope, are larger than us, and have greater financial resources, name recognition and larger technical staffs. Substantial resources could enable certain competitors to initiate severe price cuts or take other measures in an effort to gain market share. In addition, we may be unable to compete for the limited number of large contracts because we may not be able to meet an RFP’s requirement to obtain and post a large cash performance bond. Also, in some geographic areas, we face competition from smaller consulting firms with established reputations and political relationships. There can be no assurance that we will be able to compete successfully against our existing or any new competitors.

A number of factors may cause our cash flows and results of operations to vary from quarter to quarter.

Factors which may cause our cash flows and results of operations to vary from quarter to quarter include:

·the terms and progress of contracts;

·caseloads and other volume where revenue is derived on transactional volume on contracts;

·the levels of revenue earned and profitability of fixed-price and performance-based contracts;

·expenses related to certain contracts which may be incurred in periods prior to revenue being recognized;

·the commencement, completion or termination of contracts during any particular quarter;

·the schedules of government agencies for awarding contracts;

·the term of awarded contracts; and

·potential acquisitions.

Changes in the volume of activity and the number of contracts commenced, completed or terminated during any quarter may cause significant variations in our cash flows and results of operations because a large amount of our expenses are fixed.

Our Articles of Incorporation and bylaws include provisions that may have anti-takeover effects.

Our Articles of Incorporation and bylaws include provisions that may delay, deter or prevent a takeover attempt that shareholders might consider desirable. For example, our Articles of Incorporation provide that our directors are to be divided into three classes and elected to serve staggered three-year terms. This structure could impede or discourage an attempt to obtain control of us by preventing stockholders from replacing the entire board in a single proxy contest, making it more difficult for a third party to take control of us without the consent of our Board of Directors. Our Articles of Incorporation further provide that our shareholders may not take any action in writing without a meeting. This prohibition could impede or discourage an attempt to obtain control of us by requiring that any corporate actions initiated by shareholders be adopted only at properly called shareholder meetings.

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Software development costs (Tables)

12 Months Ended

Sep. 30, 2012

Software development costs

Components of software development cost

	As of September 30,
	2012			2011
Capitalized software development costs	$	46,767		$	40,798
Less: Accumulated amortization	(19,377		)	(14,182		)
Total Software development costs, net	$	27,390		$	26,616

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Earnings per share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Numerator:
Income from continuing operations									$ 76,099	$ 82,142	$ 69,397
Income (loss) from discontinued operations	(83)	9	62	46	18	(68)	(819)	(105)	34	(974)	1,012
Net income	$ 23,671	$ 20,485	$ 14,273	$ 17,704	$ 25,575	$ 19,892	$ 18,219	$ 17,482	$ 76,133	$ 81,168	$ 70,409
Denominator:
Basic weighted average shares outstanding									33,867,000	34,417,000	34,827,000
Effect of dilutive securities:
Employee stock options and unvested restricted stock units (in shares)									939,000	1,114,000	1,103,000
Denominator for diluted earnings (loss) per share (in shares)									34,806,000	35,531,000	35,930,000
Restricted stock units
Anti-dilutive securities excluded from computation of earnings per share
Unvested restricted stock units excluded from the calculation of diluted earnings per share										15,000

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Business and summary of significant accounting policies (Details 2) (Total Revenue)	12 Months Ended
	Sep. 30, 2012
Performance-based contracts
Revenue Recognition
Percentage of total revenue	44.00%
Cost-plus contracts
Revenue Recognition
Percentage of total revenue	25.00%
Fixed-price contracts
Revenue Recognition
Percentage of total revenue	27.00%
Time and materials contracts
Revenue Recognition
Percentage of total revenue	4.00%

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Stock repurchase programs (Details) (USD $)	0 Months Ended	12 Months Ended				1 Months Ended
	Nov. 16, 2012	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2010 2008 and 2010 Plan	Nov. 30, 2011 2011 Plan
Stock Repurchase Programs
Stock repurchase programs, authorized amount					$ 175,000,000	$ 125,000,000
Common shares repurchased	168,500	306,000	1,597,458	1,501,528
Common shares repurchased, cost	9,700,000	12,796,000	57,484,000	40,217,000
Amount remaining available for future stock repurchases		$ 127,400,000

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Acquisitions (Details) (USD $)	12 Months Ended
	Sep. 30, 2012 segment	Sep. 30, 2012 Policy Studies, Inc	Apr. 30, 2012 Policy Studies, Inc	Jun. 30, 2012 Policy Studies, Inc Previously reported	Sep. 30, 2012 Policy Studies, Inc Adjusted	Feb. 10, 2010 DeltaWare
Acquisition Disclosures
Share capital acquired (as a percent)			100.00%			100.00%
Purchase price allocation
Cash, net of cash acquired						$ 10,385,000
Contingent consideration obligations						3,015,000
Total fair value of consideration						13,400,000
Accounts receivable and unbilled receivables		23,017,000		22,875,000	142,000	2,010,000
Other tangible assets						1,571,000
Other current assets		9,527,000		9,527,000
Deferred income taxes		1,931,000		2,629,000	(698,000)
Property and equipment		6,411,000		6,411,000
Other assets, net		1,332,000		1,332,000
Intangible assets		22,183,000		22,883,000	(700,000)	6,060,000
Total identifiable assets acquired		64,401,000		65,657,000	(1,256,000)	9,641,000
Accounts payable and other liabilities		20,666,000		20,845,000	(179,000)	2,125,000
Loans payable						870,000
Deferred revenue		19,696,000		5,752,000	13,944,000	723,000
Deferred taxation				7,537,000	(7,537,000)
Total liabilities assumed		40,362,000		34,134,000	6,228,000	3,718,000
Net identifiable assets acquired		24,039,000		31,523,000	(7,484,000)	5,923,000
Goodwill		39,161,000		32,705,000	6,456,000	7,477,000
Net assets acquired		63,200,000		64,228,000	(1,028,000)	13,400,000
Future obligation related to a loss-making system-integration contract		15,100,000
Number of business segments	2
Net operating loss carryforward included in the purchase price allocation of deferred taxes		$ 10,500,000

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Discontinued operations (Tables)

12 Months Ended

Sep. 30, 2012

Discontinued operations

Summary of operating results of discontinued operations included in the consolidated statements of operations

	Year Ended September 30,
	2012		2011			2010
Revenue	$	—	$	—		$	27,054
Income (loss) from operations before income taxes	$	—	$	(219	)	$	1,664
Provision for (benefit from) income taxes	—		(86		)	624
Income (loss) from discontinued operations	$	—	$	(133	)	$	1,040
Gain (loss) on disposal before income taxes	$	57	$	(1,390	)	$	(45	)
Provision for (benefit from) income taxes	23		(549		)	(17		)
Gain/(loss) on disposal	$	34	$	(841	)	$	(28	)
Income (loss) from discontinued operations	$	34	$	(974	)	$	1,012

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Concentrations of Credit Risk and Major Customers (Tables)

12 Months Ended

Sep. 30, 2012

Concentrations of Credit Risk and Major Customers

Schedule of revenue recognized from customers

	Year ended September 30,
	2012		2011		2010
Texas	18	%	16	%	16	%
Australia	16	%	19	%	16	%
California	10	%	11	%	12	%

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Income taxes (Details 2) (USD $)	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Net operating loss carryforwards
Valuation allowance established against the deferred tax asset	$ 1,313,000	$ 1,028,000
Unrecognized tax benefits
Net unrecognized tax benefits	1,100,000	1,200,000	1,500,000
Unrecognized tax benefits that, if recognized, would affect the annual effective income tax rate	1,100,000
Interest and penalties included in net liability balance	400,000	300,000	300,000
Maximum anticipated change in unrecognized tax benefit	100,000
Reconciliation of the beginning and ending amount of gross unrecognized tax benefits
Balance at beginning of year	1,172,000	1,553,000	2,045,000
Additions based on tax positions related to the current year			45,000
Reductions for tax positions of prior years			(196,000)
Lapse of statute of limitations	(113,000)	(381,000)
Settlements, decrease			(341,000)
Balance at end of year	1,059,000	1,172,000	1,553,000
United States
Net operating loss carryforwards
Net operating loss carryforwards	9,500,000
Deferred tax asset, foreign	4,200,000
Canada
Net operating loss carryforwards
Net operating loss carryforwards	5,000,000	4,000,000
Deferred tax asset, foreign	1,200,000	1,000,000
Valuation allowance established against the deferred tax asset	1,100,000	1,000,000
Maximum
Unrecognized tax benefits
Interest expense recognized related to unrecognized tax benefits	100,000	100,000	100,000
United Kingdom subsidiary
Net operating loss carryforwards
Net operating loss carryforwards	3,400,000
Deferred tax asset, foreign	800,000
Saudi Arabian subsidiary
Net operating loss carryforwards
Net operating loss carryforwards	1,200,000
Deferred tax asset, foreign	$ 200,000

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Acquisitions (Details 3) (USD $) In Thousands, unless otherwise specified	3 Months Ended			12 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Sep. 30, 2012	Sep. 30, 2010	Sep. 30, 2012 Policy Studies, Inc	Sep. 30, 2011 Policy Studies, Inc
Acquisition Disclosures
Acquisition-related expenses	$ 766	$ 1,877	$ 233	$ 2,876	$ 254	$ 2,900
Pro forma Information
Revenue						1,132,177	1,065,345
Income from continuing operations						$ 75,252	$ 82,993

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Related party transactions (Details) (Winston & Strawn, USD $)	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Winston & Strawn
Related Party Transactions
Legal fees paid	$ 341,015	$ 248,748	$ 150,609

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Subsequent events (Details) (USD $) In Millions, except Per Share data, unless otherwise specified	12 Months Ended			0 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010	Oct. 05, 2012 Dividend declared
Subsequent Events
Cash dividend declared (in dollars per share)	$ 0.36	$ 0.30	$ 0.24	$ 0.09
Dividend payable				$ 3.1

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Legal and settlement expense (recovery), net (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended						12 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Legal and Settlement Recovery, Net
Insurance recoveries							$ (1,180)		$ (7,500)
Employee lawsuit							600
Client indemnification							490
Other							180	(808)	1,895
Legal and settlement expense, net	$ (1,080)	$ 352	$ 824	$ (186)	$ 1,169	$ (361)	$ 90	$ (808)	$ (5,605)

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Income taxes

12 Months Ended

Sep. 30, 2012

Income taxes

Income taxes

18. Income taxes

The Company’s components of income from continuing operations before income taxes and the corresponding provision for income taxes is as follows (in thousands):

	Year ended September 30,
	2012		2011		2010
Income from continuing operations before income taxes:
United States	$	93,418	$	66,842	$	66,162
Foreign	38,333		59,054		42,160
Income from continuing operations before income taxes	$	131,751	$	125,896	$	108,322

	Year ended September 30,
	2012			2011			2010
Current provision:
Federal	$	36,348		$	20,090		$	23,712
State and local	9,006			4,484			5,197
Foreign	13,572			17,422			13,188
Total current provision	58,926			41,996			42,097
Deferred tax expense (benefit):
Federal	$	(1,272	)	$	1,572		$	(1,678	)
State and local	(471		)	397			(278		)
Foreign	(1,531		)	(211		)	(1,216		)
Total deferred tax expense (benefit)	(3,274		)	1,758			(3,172		)
Income tax expense	$	55,652		$	43,754		$	38,925

The provision for income taxes differs from that which would have resulted from the use of the federal statutory income tax rate as follows (in thousands):

	Year ended September 30,
	2012			2011			2010
Federal income tax provision at statutory rate of 35%	$	46,113		$	44,063		$	37,913
State income taxes, net of Federal benefit	5,558			3,175			3,153
True up to prior year	2,715			—			—
Permanent items	2,808			314			1,263
Foreign taxation	(1,950		)	(3,644		)	(2,177		)
Valuation allowances on net operating loss carryforwards	305			(16		)	(33		)
Other	103			(138		)	(1,194		)
Income tax expense	$	55,652		$	43,754		$	38,925

During the year ended September 30, 2012, the Company recorded the correction of an error of $2.7 million. The Company does not believe this correction is material to its consolidated financial statements.

The significant items comprising the Company’s deferred tax assets and liabilities as of September 30, 2012 and 2011 are as follows (in thousands):

	As of September 30,
	2012			2011
Deferred tax assets—current:
Deferred revenue	$	14,543		$	12,675
Costs deductible in future periods	11,126			9,315
Net operating loss carryforwards	811			—
Total deferred tax assets—current	26,480			21,990
Deferred tax liabilities—current:
Accounts receivable—unbilled	3,932			2,734
Other	341			—
Total deferred tax liabilities—current:	4,273			2,734
Net deferred tax asset—current	$	22,207		$	19,256
Deferred tax assets—non-current:
Net operating loss carryforwards	$	5,728		$	1,028
Valuation allowance on net operating loss carryforwards	(1,313		)	(1,028		)
Net operating loss carryforwards net of valuation reserve	4,415			—
Deferred revenue	6,737			—
Non-cash equity compensation	4,176			4,012
Cash deductible in future periods	1,021			2,567
Deferred contract costs	—			101
Other	3,055			1,167
Total deferred tax assets—non-current	19,404			7,847
Deferred tax liabilities—non-current
Amortization of goodwill and intangible assets	14,218			3,976
Property and equipment	8,535			10,767
Capitalized software	4,701			4,237
Deferred contract costs	452			—
Other	513			80
Total deferred tax liability—non-current	$	28,419		$	19,060
Net deferred tax liability—non-current	$	9,015		$	11,213

Due to deferred tax assets and liabilities in different tax jurisdictions, the net long-term assets and liabilities are reflected on the accompanying consolidated balance sheet as follows (in thousands):

	As of September 30,
	2012		2011
Long-term assets	$	1,369	$	732
Long-term liabilities	10,384		11,945
Net deferred tax liability—non-current	$	9,015	$	11,213

At September 30, 2012, the Company’s overseas subsidiaries held approximately $108 million of cumulative earnings. We do not provide for U.S. income taxes on these undistributed earnings as we do not have the intention or the need to repatriate these funds. If we were to transfer these funds to the United States, the Company would be required to accrue and pay additional taxes. We have not attempted to quantify the charges which might arise if we were to make this transaction. The charges would vary based upon tax legislation in the United States and the other overseas jurisdictions as well as the manner and timing in which MAXIMUS would make these transactions. The amount of taxes that may be applicable on earnings planned to be reinvested indefinitely outside the United States is not readily determinable given the various tax planning alternatives the Company could employ should it decide to repatriate these earnings.

The Company had $9.5 million of net operating loss carryforwards in the United States at September 30, 2012, resulting in a deferred tax asset of $4.2 million. This balance relates exclusively to the losses held by PSI upon their acquisition in 2012. Although the ability of the Company to use these loss carryforwards will be restricted to an annual allowance, the Company has sufficient profits and time within the jurisdictions where losses have arisen to ensure that these losses will be utilized in full. Accordingly, no reserve has been recorded against these balances. These net operating loss carryforwards expire between 2027 and 2031.

The Company had $5.0 million of net operating loss carryforwards in Canada at September 30, 2012, compared with $4.0 million at September 30, 2011. This results in a deferred tax asset of $1.2 million and $1.0 million, respectively. A reserve of $1.1 million and $1.0 million was applied to these balances at September 30, 2012 and 2011, respectively. These net operating loss carryforwards expire through 2027 to 2031.

The Company had $3.4 million of net operating loss carryforwards relating to its United Kingdom subsidiary, resulting in a current deferred tax asset of $0.8 million. No valuation reserve has been recorded against this balance as management believes it will be recovered in full during the fiscal 2013 year. The net operating loss carryforward does not expire.

The Company had $1.2 million of net operating loss carryforwards relating to its Saudi Arabian subsidiary. This results in a deferred tax asset of $0.2 million, which has been fully reserved.

Cash paid for income taxes during the years ended September 30, 2012, 2011, and 2010 was $44.3 million, $45.2 million and $33.3 million, respectively.

The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon the technical merits, it is “more-likely-than-not” that the position will be sustained upon examination. The Company’s net unrecognized tax benefits totaled $1.1 million, $1.2 million and $1.5 million at September 30, 2012, 2011 and 2010, respectively. The total amount of unrecognized tax benefits that, if recognized, would affect the annual effective income tax rate is $1.1 million at September 30, 2012.

The Company reports interest and penalties as a component of income tax expense. In the fiscal years ending September 30, 2012, 2011 and 2010, the Company recognized interest expense relating to unrecognized tax benefits of less than $0.1 million in each year. The net liability balance at September 30, 2012, 2011 and 2010 includes approximately $0.4 million, $0.3 million and $0.3 million, respectively, of interest and penalties.

It is reasonably possible that the total amount of unrecognized tax benefits could decrease within the next twelve months as a result of settlement of expiration of statute of limitations, which could have an impact on the effective tax rate. It is not anticipated that this balance will exceed $0.1 million. The anticipated reversals are related to state tax items, none of which individually are significant.

The Company recognizes and presents uncertain tax positions on a gross basis (i.e., without regard to likely offsets for deferred tax assets, deductions and/or credits that would result from payment of uncertain tax amounts). The reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):

	Year Ended September 30
	2012			2011			2010
Balance at beginning of year	$	1,172		$	1,553		$	2,045
Additions based on tax positions related to the current year	—			—			45
Reductions for tax positions of prior years	—			—			(196		)
Lapse of statute of limitations	(113		)	(381		)	—
Settlements	—			—			(341		)
Balance at end of year	$	1,059		$	1,172		$	1,553

The Company files income tax returns in the United States Federal jurisdiction and in various state and foreign jurisdictions. The Company is no longer subject to U.S. Federal income tax examinations for years before 2009 and is no longer subject to state and local, or foreign income tax examinations by tax authorities for years before 2007. In international jurisdictions, similar rules apply to filed income tax returns, although the tax examination limitations and requirements may vary. The Company is no longer subject to audit by tax authorities for overseas jurisdictions for years prior to 2005.

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Business and summary of significant accounting policies (Details 4)	12 Months Ended
	Sep. 30, 2012
Components of intangible assets
Estimated useful lives of customer contracts and relationships, technology-based intangibles and non-competition agreements	6 years 3 months 18 days
Minimum
Components of intangible assets
Estimated useful lives of customer contracts and relationships, technology-based intangibles and non-competition agreements	1 year
Maximum
Components of intangible assets
Estimated useful lives of customer contracts and relationships, technology-based intangibles and non-competition agreements	10 years

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Stock-based compensation (Tables)

12 Months Ended

Sep. 30, 2012

Stock-based compensation

Summary of RSU activity

	Shares		Weighted- Average Grant-Date Fair Value
Non-vested shares outstanding at September 30, 2011	1,527,686		$	22.64
Granted	414,894		42.01
Vested	(452,804	)	24.32
Forfeited	(43,706	)	21.35
Non-vested shares outstanding at September 30, 2012	1,446,070		27.71

Summary of stock option activity

	Options		Weighted Average Exercise Price
Outstanding at September 30, 2011	765,676		$	16.18
Exercised	(404,563	)	15.92
Forfeited or expired	(934	)	15.37
Outstanding and exercisable at September 30, 2012	360,179		16.52

Summary of information pertaining to stock options vested and exercised

	Year ended September 30,
	2012		2011		2010
Aggregate intrinsic value of all stock options exercised	$	10,920	$	15,102	$	4,730
Net cash proceeds from exercise of stock options	6,441		12,482		5,948

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Discontinued operations (Details) (USD $)	3 Months Ended								12 Months Ended			1 Months Ended	12 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010	May 31, 2008 Unison Maximus Inc. subsidiary	Sep. 30, 2012 Unison Maximus Inc. subsidiary	Sep. 30, 2011 Unison Maximus Inc. subsidiary	Sep. 30, 2011 ERP business	Sep. 30, 2010 ERP business	Sep. 30, 2009 ERP business	Sep. 30, 2010 ERP business Maximum
Discontinued Operations
Sale Price of ERP business, net of transaction costs																$ 5,600,000
Sale of business, transaction costs																700,000
Previously recorded pre-tax loss on sale																	1,300,000
Amount of settlement with purchaser															1,700,000
Sale price of disposal group												6,500,000
Value of promissory note included in sale price												6,400,000
Operating results of the discontinued operations included in the consolidated statements of operations
Revenue											27,054,000
Income (loss) from operations before income taxes										(219,000)	1,664,000
Provision for (benefit from) income taxes										(86,000)	624,000
Income (Loss) from discontinued operations					197,000	(65,000)	(265,000)			(133,000)	1,040,000
Gain (loss) on disposal before income taxes									57,000	(1,390,000)	(45,000)		100,000	300,000				(100,000)
Provision for (benefit from) income taxes									23,000	(549,000)	(17,000)
Gain (loss) on disposal	(83,000)	9,000	62,000	46,000	(179,000)	(3,000)	(554,000)	(105,000)	34,000	(841,000)	(28,000)
Income (loss) from discontinued operations	(83,000)	9,000	62,000	46,000	18,000	(68,000)	(819,000)	(105,000)	34,000	(974,000)	1,012,000
Net payments related to discontinued operations										$ (725,000)	$ (2,530,000)

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Goodwill and intangible assets (Tables)

12 Months Ended

Sep. 30, 2012

Goodwill and intangible assets

Schedule of changes in the carrying amount of goodwill

	Health Services			Human Services		Total
Balance as of September 30, 2010	$	43,270		$	27,981	$	71,251
Foreign currency translation	(28		)	100		72
Balance as of September 30, 2011	43,242			28,081		71,323
Goodwill acquired with PSI (Note 5)	19,898			19,263		39,161
Foreign currency translation	377			1,171		1,548
Balance as of September 30, 2012	$	63,517		$	48,515	$	112,032

Schedule of components of intangible assets

	As of September 30, 2012						As of September 30, 2011
	Cost		Accumulated Amortization		Intangible Assets, net		Cost		Accumulated Amortization		Intangible Assets, net
Technology-based intangible assets	$	9,114	$	4,909	$	4,205	$	7,146	$	4,097	$	3,049
Customer relationships	20,167		3,082		17,085		3,454		1,513		1,941
Trademarks	4,450		497		3,953		620		102		518
Non-compete arrangements	254		167		87		242		99		143
Total	$	33,985	$	8,655	$	25,330	$	11,462	$	5,811	$	5,651

Schedule of estimated future amortization expense

	Future amortization expense
Year ending September 30, 2013	$	4,921
Year ending September 30, 2014	3,816
Year ending September 30, 2015	3,795
Year ending September 30, 2016	3,795
Year ending September 30, 2017	3,412
Thereafter	5,591
Total	$	25,330

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Business segments (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Revenues and assets
Revenue	$ 300,736	$ 266,353	$ 243,452	$ 239,603	$ 250,107	$ 238,296	$ 227,116	$ 214,114	$ 1,050,145	$ 929,633	$ 831,749
Total long-lived assets	95,408				86,360				95,408	86,360
United States
Revenues and assets
Revenue									775,871	630,812	606,396
Total long-lived assets	56,188				51,245				56,188	51,245
CANADA
Revenues and assets
Total long-lived assets	24,110				20,096				24,110	20,096
Australia
Revenues and assets
Revenue									163,482	176,814	135,635
Total long-lived assets	10,358				12,260				10,358	12,260
Rest of World
Revenues and assets
Revenue									110,792	122,007	89,718
Total long-lived assets	$ 4,752				$ 2,759				$ 4,752	$ 2,759

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Leases (Details) (USD $)	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Leases
Rent expense	$ 37,600,000	$ 32,000,000	$ 30,200,000
Maximum contingent lease rental expenses caused by CPI escalators in lease agreements	200,000
Minimum future payments under leases
2013	36,395,000
2014	28,048,000
2015	21,459,000
2016	10,081,000
2017	8,473,000
Thereafter	9,302,000
Total minimum lease payments	$ 113,758,000

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Goodwill and intangible assets (Details 2) (USD $)	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Components of intangible assets
Cost	$ 33,985,000	$ 11,462,000
Accumulated Amortization	8,655,000	5,811,000
Intangible Assets, net	25,330,000	5,651,000
Fully-amortized technology-based assets still in use	3,400,000
Weighted average remaining life of assets not fully amortized	6 years 3 months 18 days
Amortization	2,700,000	2,200,000	2,100,000
Estimated future amortization
Year ended September 30, 2013	4,921,000
Year ended September 30, 2014	3,816,000
Year ended September 30, 2015	3,795,000
Year ended September 30, 2016	3,795,000
Year ended September 30, 2017	3,412,000
Thereafter	5,591,000
Intangible Assets, net	25,330,000	5,651,000
Technology-based intangible assets
Components of intangible assets
Cost	9,114,000	7,146,000
Accumulated Amortization	4,909,000	4,097,000
Intangible Assets, net	4,205,000	3,049,000
Weighted average remaining life of assets not fully amortized	4 years 8 months 12 days
Estimated future amortization
Intangible Assets, net	4,205,000	3,049,000
Customer relationships
Components of intangible assets
Cost	20,167,000	3,454,000
Accumulated Amortization	3,082,000	1,513,000
Intangible Assets, net	17,085,000	1,941,000
Weighted average remaining life of assets not fully amortized	7 years 1 month 6 days
Estimated future amortization
Intangible Assets, net	17,085,000	1,941,000
Trademark
Components of intangible assets
Cost	4,450,000	620,000
Accumulated Amortization	497,000	102,000
Intangible Assets, net	3,953,000	518,000
Weighted average remaining life of assets not fully amortized	4 years 10 months 24 days
Estimated future amortization
Intangible Assets, net	3,953,000	518,000
Non-compete arrangements
Components of intangible assets
Cost	254,000	242,000
Accumulated Amortization	167,000	99,000
Intangible Assets, net	87,000	143,000
Weighted average remaining life of assets not fully amortized	1 year 3 months 18 days
Estimated future amortization
Intangible Assets, net	$ 87,000	$ 143,000

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Business and summary of significant accounting policies (Details)	12 Months Ended
	Sep. 30, 2012 segment
Description of Business
Number of business segments	2

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Business segments

12 Months Ended

Sep. 30, 2012

Business segments

Business segments

2. Business segments

The Company is organized and managed based upon the services it provides. We operate in two business segments, Health Services and Human Services. The results of these segments for the three years ended September 30, 2012 are shown below (in thousands):

	Year ended September 30,
	2012			2011			2010
Revenue:
Health Services	$	671,181		$	565,881		$	514,258
Human Services	378,964			363,752			317,491
Total	$	1,050,145		$	929,633		$	831,749
Gross Profit:
Health services	$	172,456		$	147,239		$	130,276
Human Services	115,487			106,412			90,557
Total	$	287,943		$	253,651		$	220,833
Selling, general and administrative expense:
Health Services	$	91,837		$	72,524		$	65,551
Human Services	65,565			59,590			51,067
Corporate / Other	—			(56		)	2,160
Total	$	157,402		$	132,058		$	118,778
Operating income from continuing operations (before income taxes):
Health Services	$	80,619		$	74,715		$	64,725
Human Services	49,922			46,822			39,490
Corporate / Other	—			56			(2,160		)
Acquisition-related expenses and legal and settlement expense, net	(2,966		)	808			5,351
Total	$	127,575		$	122,401		$	107,406
Depreciation and amortization:
Health Services	$	14,257		$	12,120		$	9,055
Human Services	8,790			7,842			6,623
Corporate / Other	3,413			2,883			2,662
Total	$	26,460		$	22,845		$	18,340

Corporate/Other operating income reflects the allocation of corporate depreciation and amortization to the Health Services and Human Services segments.

The Company operates primarily in the United States, Australia, Canada, the United Kingdom and Saudi Arabia. During fiscal 2010 and 2009, the Company also operated in Israel.

Revenues for the Company were distributed as follows (in thousands):

	Year ended September 30,
	2012		2011		2010
United States	$	775,871	$	630,812	$	606,396
Australia	163,482		176,814		135,635
Rest of World	110,792		122,007		89,718
Total	$	1,050,145	$	929,633	$	831,749

Identifiable assets for the segments are shown below (in thousands):

Identifiable assets:

	Year Ended September 30
	2012		2011
Health Services	$	266,017	$	224,400
Human Services	305,376		212,791
Corporate / Other	123,900		128,088
Total	$	695,293	$	565,279

Total long-lived assets of the Company, consisting of property and equipment, capitalized software costs and deferred compensation costs, were distributed as follows (in thousands):

	Year Ended September 30
	2012		2011
United States	$	56,188	$	51,245
Canada	24,110		20,096
Australia	10,358		12,260
Rest of World	4,752		2,759
Total	$	95,408	$	86,360

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Property and equipment (Details) (USD $)	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Property and equipment, at cost
Property and equipment, gross	$ 141,510,000	$ 117,641,000
Less: Accumulated depreciation and amortization	(82,712,000)	(65,901,000)
Total property and equipment, net	58,798,000	51,740,000
Fixed asset depreciation expense	18,800,000	15,100,000	12,900,000
Land
Property and equipment, at cost
Property and equipment, gross	1,800,000	1,800,000
Building and improvements
Property and equipment, at cost
Property and equipment, gross	11,588,000	11,485,000
Office furniture and equipment
Property and equipment, at cost
Property and equipment, gross	107,859,000	94,558,000
Leasehold improvements
Property and equipment, at cost
Property and equipment, gross	$ 20,263,000	$ 9,798,000

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Legal and settlement expense (recovery), net (Tables)

12 Months Ended

Sep. 30, 2012

Legal and settlement expense (recovery), net

Schedule of matters representing legal and settlement expense (recoveries), net

	Year ended September 30,
	2012			2011			2010
Insurance recoveries	$	(1,180	)	$	—		$	(7,500	)
Employee lawsuit	600			—			—
Client indemnification	490			—			—
Other	180			(808		)	1,895
Total	$	90		$	(808	)	$	(5,605	)

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Related party transactions

12 Months Ended

Sep. 30, 2012

Related party transactions

Related party transactions

22. Related party transactions

Governor James R. Thompson, one of our outside directors who the Company’s Board of Directors has determined to be independent, is Senior Chairman of the law firm of Winston & Strawn in Chicago. Winston & Strawn has provided certain legal services to the Company. Governor Thompson had no personal involvement in the services provided. In 2012, 2011 and 2010, the Company paid Winston & Strawn $341,015, $248,748, and $150,609 respectively.

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Discontinued operations

12 Months Ended

Sep. 30, 2012

Discontinued operations

Discontinued operations

21. Discontinued operations

On September 30, 2010, the Company sold its ERP division for cash proceeds of $5.6 million, net of transaction costs of $0.7 million, and recognized a pre-tax loss on sale of less than $0.1 million. The Company previously recorded a pre-tax loss on sale of $1.3 million in fiscal 2009. In 2011 the Company resolved a dispute with the buyer regarding the purchase price adjustment clause in their contract and recorded a loss of $1.7 million. The results of this business have been classified within discontinued operations below.

On May 2, 2008, the Company sold its Unison MAXIMUS, Inc. subsidiary for $6.5 million, including a promissory note of $6.4 million, which is fully reserved. The Company recorded a gain on sale of $0.1 million and $0.3 million for the years ended September 30, 2012 and 2011, respectively. The Company continues to monitor the payments on the note but no further gains are certain at this time.

The following table summarizes the operating results of the discontinued operations included in the Consolidated Statements of Operations (in thousands):

	Year Ended September 30,
	2012		2011			2010
Revenue	$	—	$	—		$	27,054
Income (loss) from operations before income taxes	$	—	$	(219	)	$	1,664
Provision for (benefit from) income taxes	—		(86		)	624
Income (loss) from discontinued operations	$	—	$	(133	)	$	1,040
Gain (loss) on disposal before income taxes	$	57	$	(1,390	)	$	(45	)
Provision for (benefit from) income taxes	23		(549		)	(17		)
Gain/(loss) on disposal	$	34	$	(841	)	$	(28	)
Income (loss) from discontinued operations	$	34	$	(974	)	$	1,012

The Company made net payments of approximately $0.7 million in fiscal 2011 related to discontinued operations. These payments principally related to the settlement of customer and employee payments following the sale of the business.

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Acquisitions (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended			1 Months Ended	12 Months Ended	1 Months Ended			1 Months Ended						1 Months Ended					1 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010	Apr. 30, 2012 Policy Studies, Inc	Sep. 30, 2012 Policy Studies, Inc	Feb. 28, 2010 DeltaWare	Feb. 10, 2010 DeltaWare	Apr. 30, 2012 Customer relationships Policy Studies, Inc	Apr. 30, 2012 Customer relationships Policy Studies, Inc Minimum	Apr. 30, 2012 Customer relationships Policy Studies, Inc Maximum	Apr. 30, 2012 Tradename Policy Studies, Inc	Feb. 28, 2010 Tradename DeltaWare	Feb. 10, 2010 Tradename DeltaWare	Apr. 30, 2012 Technology-based intangible assets Policy Studies, Inc	Apr. 30, 2012 Technology-based intangible assets Policy Studies, Inc Minimum	Apr. 30, 2012 Technology-based intangible assets Policy Studies, Inc Maximum	Feb. 28, 2010 Technology-based intangible assets DeltaWare	Feb. 10, 2010 Technology-based intangible assets DeltaWare	Feb. 10, 2010 Customer contracts and relationships DeltaWare	Feb. 28, 2010 Customer contracts and relationships DeltaWare Minimum	Feb. 28, 2010 Customer contracts and relationships DeltaWare Maximum	Feb. 28, 2010 Non-compete arrangements DeltaWare	Feb. 10, 2010 Non-compete arrangements DeltaWare
Intangible assets acquired
Useful life												6 years 9 months 18 days		8 years 7 months 6 days			7 years	8 years	5 years	10 years			1 year	5 years	8 years 6 months			8 years	10 years	4 years
Fair value												$ 22,183			$ 6,060	$ 16,600			$ 3,800		$ 614	$ 1,783				$ 3,733	$ 1,474				$ 239
Fair value of the future estimated obligation related contract															3,015
Revenue and net income
Revenue	300,736	266,353	243,452	239,603	250,107	238,296	227,116	214,114	1,050,145	929,633	831,749		60,100
Operating income	$ 39,973	$ 33,299	$ 27,398	$ 26,905	$ 34,836	$ 30,779	$ 29,494	$ 27,292	$ 127,575	$ 122,401	$ 107,406

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Income taxes (Tables)

12 Months Ended

Sep. 30, 2012

Income taxes

Components of income from continuing operations before income taxes

	Year ended September 30,
	2012		2011		2010
Income from continuing operations before income taxes:
United States	$	93,418	$	66,842	$	66,162
Foreign	38,333		59,054		42,160
Income from continuing operations before income taxes	$	131,751	$	125,896	$	108,322

	Year ended September 30,
	2012			2011			2010
Current provision:
Federal	$	36,348		$	20,090		$	23,712
State and local	9,006			4,484			5,197
Foreign	13,572			17,422			13,188
Total current provision	58,926			41,996			42,097
Deferred tax expense (benefit):
Federal	$	(1,272	)	$	1,572		$	(1,678	)
State and local	(471		)	397			(278		)
Foreign	(1,531		)	(211		)	(1,216		)
Total deferred tax expense (benefit)	(3,274		)	1,758			(3,172		)
Income tax expense	$	55,652		$	43,754		$	38,925

Provision for income taxes

	Year ended September 30,
	2012			2011			2010
Federal income tax provision at statutory rate of 35%	$	46,113		$	44,063		$	37,913
State income taxes, net of Federal benefit	5,558			3,175			3,153
True up to prior year	2,715			—			—
Permanent items	2,808			314			1,263
Foreign taxation	(1,950		)	(3,644		)	(2,177		)
Valuation allowances on net operating loss carryforwards	305			(16		)	(33		)
Other	103			(138		)	(1,194		)
Income tax expense	$	55,652		$	43,754		$	38,925

Significant items comprising the Company's deferred tax assets and liabilities

	As of September 30,
	2012			2011
Deferred tax assets—current:
Deferred revenue	$	14,543		$	12,675
Costs deductible in future periods	11,126			9,315
Net operating loss carryforwards	811			—
Total deferred tax assets—current	26,480			21,990
Deferred tax liabilities—current:
Accounts receivable—unbilled	3,932			2,734
Other	341			—
Total deferred tax liabilities—current:	4,273			2,734
Net deferred tax asset—current	$	22,207		$	19,256
Deferred tax assets—non-current:
Net operating loss carryforwards	$	5,728		$	1,028
Valuation allowance on net operating loss carryforwards	(1,313		)	(1,028		)
Net operating loss carryforwards net of valuation reserve	4,415			—
Deferred revenue	6,737			—
Non-cash equity compensation	4,176			4,012
Cash deductible in future periods	1,021			2,567
Deferred contract costs	—			101
Other	3,055			1,167
Total deferred tax assets—non-current	19,404			7,847
Deferred tax liabilities—non-current
Amortization of goodwill and intangible assets	14,218			3,976
Property and equipment	8,535			10,767
Capitalized software	4,701			4,237
Deferred contract costs	452			—
Other	513			80
Total deferred tax liability—non-current	$	28,419		$	19,060
Net deferred tax liability—non-current	$	9,015		$	11,213

Components of noncurrent deferred tax assets (liabilities)

	As of September 30,
	2012		2011
Long-term assets	$	1,369	$	732
Long-term liabilities	10,384		11,945
Net deferred tax liability—non-current	$	9,015	$	11,213

Schedule of reconciliation of the beginning and ending amount of gross unrecognized tax benefits

	Year Ended September 30
	2012			2011			2010
Balance at beginning of year	$	1,172		$	1,553		$	2,045
Additions based on tax positions related to the current year	—			—			45
Reductions for tax positions of prior years	—			—			(196		)
Lapse of statute of limitations	(113		)	(381		)	—
Settlements	—			—			(341		)
Balance at end of year	$	1,059		$	1,172		$	1,553

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Subsequent events

12 Months Ended

Sep. 30, 2012

Subsequent events

Subsequent events

23. Subsequent events

Dividend

On October 5, 2012, the Company’s Board of Directors declared a quarterly cash dividend of $0.09 for each share of the Company’s common stock outstanding. The dividend will be paid on November 30, 2012 to shareholders of record on November 15, 2012. Based on the number of shares outstanding, the payment will be approximately $3.1 million.

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Business and summary of significant accounting policies (Policies)

12 Months Ended

Sep. 30, 2012

Business and summary of significant accounting policies

Principles of consolidation

Principles of consolidation

The consolidated financial statements include the accounts of MAXIMUS, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Revenue recognition

Revenue recognition

Revenue is generated from contracts with various pricing arrangements, including: (1) fixed-price; (2) performance-based criteria; (3) costs incurred plus a negotiated fee (“cost-plus”); and (4) time-and-materials. Also, some contracts contain “not-to-exceed” provisions. Of the contracts with “not-to-exceed” provisions, to the extent we estimate we will exceed the contractual limits, we treat these contracts as fixed-price. For fiscal 2012, revenue from performance-based contracts was approximately 44% of total revenue; revenue from cost-plus contracts was approximately 25% of total revenue; revenue from fixed-price contracts was approximately 27% of total revenue; and revenue from time-and-materials contracts was approximately 4% of total revenue. A majority of the contracts with state, local and foreign government agencies have been fixed-price and performance-based, and our contracts with the federal government generally have been cost-plus. Fixed-price and performance-based contracts generally offer higher margins but typically involve more risk than cost-plus or time-and-materials reimbursement contracts.

We recognize revenue on arrangements as work is performed and amounts are earned. We consider amounts to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable, and collectability is reasonably assured.

We recognize revenue on performance-based contracts when earned, which generally occurs when amounts are billable to customers. For certain contracts, this may result in revenue being recognized in irregular increments.

Revenue on cost-plus contracts is recognized based on costs incurred plus an estimate of the negotiated fee earned. Revenue on time and materials contracts is recognized based on hours worked and expenses incurred.

We recognize revenue on fixed-priced contracts when earned, as services are provided. Revenue is generally recognized on a straight-line basis unless evidence suggests that revenue is earned or obligations are fulfilled in a different pattern. With fixed-price contracts, we are subject to the risk of potential cost overruns. The timing of expense recognition may result in irregular profit margins.

For certain fixed-price contracts, primarily systems design, development and implementation, we generally recognize revenue based upon costs incurred to date and our anticipated gross profit. The cumulative impact of any revisions in estimated revenue and costs is recognized in the period in which the facts that give rise to the revision become known. Provisions for estimated losses on incomplete contracts are provided for in full in the period in which such losses become known. This policy may result in revenues being recognized at different points from amounts being billable. Where the Company enters into contracts where significant uncertainty exists over the ability of management to estimate the future costs, the Company will typically defer all revenue until such time as future costs are estimable or the system implementation is complete.

Where contracts have multiple deliverables, we evaluate these deliverables at the inception of each contract and as each item is delivered. As part of this evaluation, we consider whether a delivered item has value to a customer on a stand-alone basis and whether the delivery of the undelivered items is considered probable and substantially within our control, if a general right of return exists. Where deliverables, or groups of deliverables, have both of these characteristics, we treat each deliverable item as a separate element in the arrangement, allocate a portion of the allocable arrangement consideration using the relative selling price method to each element and apply the relevant revenue recognition guidance to each element. For transactions entered into prior to October 1, 2010, the ability to isolate deliverables as separate elements also required objective and reliable evidence of the fair market value of the undelivered items. This change in accounting rules did not have a material effect on the Company’s business.

Sales and purchases in jurisdictions subject to indirect taxes, such as value added tax, are recorded net of tax collected and paid.

Cash and cash equivalents

Cash and cash equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents are valued at cost, which approximates market.

Restricted cash

Restricted cash

Restricted cash represents amounts held as collateral for lease, credit card and letter of credit arrangements, as well as funds held on behalf of clients.

Accounts receivable and allowance for doubtful accounts

Accounts receivable and allowance for doubtful accounts

Accounts receivable are recorded at their face amount less an allowance for doubtful accounts. We maintain an allowance for doubtful accounts at an amount we estimate to be sufficient to cover the risk of collecting less than full payment on our receivables. On a regular basis we re-evaluate our client receivables, especially receivables that are past due, and reassess our allowance for doubtful accounts based on specific client collection issues.

Property and equipment

Property and equipment

Property and equipment is stated at cost and depreciated using the straight-line method based on estimated useful lives not to exceed 39.5 years for the Company’s buildings and between three and seven years for office furniture and equipment. Leasehold improvements are amortized over their useful life or the remaining term of the lease, whichever is shorter.

Software development costs

Software development costs

All of the software development costs included within continuing operations relate to software which is intended for the Company’s internal use. Direct costs of time and material incurred for the development of application software for internal use are capitalized and amortized using the straight-line method over the estimated useful life of the software, ranging from three to eight years.

Deferred contract costs

Deferred contract costs

Deferred contract costs consist of contractually recoverable direct set-up costs relating to long-term service contracts in progress. These costs include direct and incremental costs incurred prior to the commencement of us providing service to enable us to provide the contracted services to our customer. Such costs are expensed over the period services are provided under the long-term service contract.

Goodwill and intangible assets

Goodwill and intangible assets

Goodwill is obtained by the Company as a result of business combinations. Goodwill represents the difference between the consideration paid in acquiring the business and the fair value of the identifiable net assets acquired.

Goodwill is not amortized but is subject to impairment testing on an annual basis, or more frequently if impairment indicators arise. Impairment testing is performed at the reporting unit level. A reporting unit is the operating segment, or a business one level below that operating segment (the component level) if discrete financial information is prepared and reviewed regularly by segment management. However, components are aggregated if they have similar economic characteristics. We recognize an impairment charge for any amount by which the carrying amount of a reporting unit’s goodwill exceeds its fair value. We use discounted cash flows to establish fair values. When a portion of a reporting unit meeting the definition of a business is disposed of, goodwill is allocated using the relative fair value method for purposes of calculating the gain or loss on disposal. In addition, a goodwill impairment test is performed for the remaining portion of the reporting unit.

The Company performs its annual impairment test as of July 1 of each year. At July 1, 2012, the Company performed the annual impairment test and determined that there had been no impairment of goodwill.

Intangible assets from acquisitions, which consist primarily of customer contracts and relationships, technology-based intangibles and non-competition agreements, are amortized using the straight-line method over one to ten years, based on their estimated useful lives.

Long-lived assets (excluding goodwill)

Long-lived assets (excluding goodwill)

The Company reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be fully recoverable. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Our review is based on our projection of the undiscounted future operating cash flows of the related customer project. To the extent such projections indicate that future undiscounted cash flows are not sufficient to recover the carrying amount, we recognize a non-cash impairment charge to reduce the carrying amount to equal projected future discounted cash flows. No impairment charges were recorded in the three years ending September 30, 2012.

Leases

Leases

We lease office space under operating leases. Some of the lease agreements contain one or more of the following provisions or clauses: tenant allowances, rent holidays and rent escalation clauses. For the purpose of recognizing these provisions on a straight-line basis over the terms of the leases, we use the date of initial possession to begin amortization, which is generally when we enter the space and begin to make improvements in preparation of intended use.

For incentives received from the landlord, such as payments for tenant improvements or rent holidays, we record a deferred rent liability and amortize the deferred rent over the terms of the leases as reductions to rent expense. For scheduled rent escalation clauses during the lease term or for rental payments commencing at a date other than the date of initial occupancy, we record the minimum rental payments on a straight-line basis over the terms of the leases. Where rent escalations are based upon CPI, we recognize rent expense on a straight-line basis assuming the CPI rate in place at the inception of the lease. Increases or decreases in lease payments that result from subsequent changes in the index are contingent rentals and thus affect the determination of income as accruable.

In addition, some of our operating leases contain exit clauses, which include termination fees associated with exiting a lease prior to the expiration of the lease term. We record termination obligations when we give notice to the landlord that we have elected the termination clause of such agreement. Our leases within the United States generally allow us to terminate an arrangement if the related customer contract is terminated or materially altered.

Legal and settlement expense (recovery), net

Legal and settlement expense (recovery), net

Legal and settlement expense (recovery), net consists of costs, net of reimbursed insurance claims, related to significant legal settlements and non-routine legal matters, including future probable legal costs estimated to be incurred in connection with those matters. Legal expenses incurred in the ordinary course of business are included in selling, general and administrative expense.

Income taxes

Income taxes

Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates expected to be in effect during the year in which the differences reverse. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income tax expense in the period that includes the enactment date. A tax benefit or expense is recognized for the net change in the deferred tax asset or liability during the year and the current tax liability for the year. We evaluate the realizability of our net operating loss carryforwards, which requires us to make certain estimates relating to the future operating results and cash flows to assess the valuation of the related deferred tax assets.

The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon the technical merits, it is “more-likely-than-not” that the position will be sustained upon examination.

Foreign currency

Foreign currency

For all foreign operations, the functional currency is the local currency. The assets and liabilities of foreign operations are translated into U.S. dollars at period-end exchange rates, and revenue and expenses are translated at average exchange rates for the year. The resulting cumulative translation adjustment is included in accumulated other comprehensive income on the consolidated balance sheet. Gains and losses from foreign currency transactions are included in interest and other income and are typically immaterial.

Earnings per share

Earnings per share

The Company presents both basic and diluted earnings per share on the face of the Consolidated Statements of Operations.

Basic earnings per share exclude dilution and are computed by dividing net income by the weighted average number of common shares outstanding for the period.

Diluted earnings per share reflect potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted earnings per share include the incremental effect of stock options and restricted stock units calculated using the treasury stock method.

Use of estimates

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates used by the Company include estimates of profits or loss on contracts in process, estimates of collectability of receivables, evaluation of asset impairment, accrual of estimated liabilities, and valuation of acquisition-related contingent consideration liabilities.

Contingencies

Contingencies

From time to time, we are involved in legal proceedings, including contract and employment claims, in the ordinary course of business. We assess the likelihood of any adverse judgments or outcomes to these contingencies as well as potential ranges of probable losses and establish reserves accordingly. The amount of reserves required may change in future periods due to new developments in each matter or changes in approach to a matter such as a change in settlement strategy.

Reclassifications

Reclassifications

Certain financial results have been reclassified to conform with the current year presentation.

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Business and summary of significant accounting policies

12 Months Ended

Sep. 30, 2012

Business and summary of significant accounting policies

Business and summary of significant accounting policies

1. Business and summary of significant accounting policies

(a) Description of business

MAXIMUS, Inc. (the “Company” or “we”) provides business process services ("BPS") to government health and human services agencies in the United States and to foreign governments. The Company conducts its operations through two business segments: Health Services and Human Services. The Health Services Segment provides a variety of business process managed services and administrative support services for state, federal, national and local government programs, including Medicaid, CHIP, Health Care Reform, Medicare and Health Insurance BC (British Columbia). The Human Services Segment provides a variety of administrative support and case management services for federal, national, state and county human services agencies including welfare-to-work programs, child support enforcement, higher education services and K-12 special education services.

Other than disclosed in Note 21, the Notes to Consolidated Financial Statements reflect operating results from continuing operations.

(b) Principles of consolidation

The consolidated financial statements include the accounts of MAXIMUS, Inc. and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

(c) Revenue recognition

Revenue is generated from contracts with various pricing arrangements, including: (1) fixed-price; (2) performance-based criteria; (3) costs incurred plus a negotiated fee (“cost-plus”); and (4) time-and-materials. Also, some contracts contain “not-to-exceed” provisions. Of the contracts with “not-to-exceed” provisions, to the extent we estimate we will exceed the contractual limits, we treat these contracts as fixed-price. For fiscal 2012, revenue from performance-based contracts was approximately 44% of total revenue; revenue from cost-plus contracts was approximately 25% of total revenue; revenue from fixed-price contracts was approximately 27% of total revenue; and revenue from time-and-materials contracts was approximately 4% of total revenue. A majority of the contracts with state, local and foreign government agencies have been fixed-price and performance-based, and our contracts with the federal government generally have been cost-plus. Fixed-price and performance-based contracts generally offer higher margins but typically involve more risk than cost-plus or time-and-materials reimbursement contracts.

We recognize revenue on arrangements as work is performed and amounts are earned. We consider amounts to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable, and collectability is reasonably assured.

We recognize revenue on performance-based contracts when earned, which generally occurs when amounts are billable to customers. For certain contracts, this may result in revenue being recognized in irregular increments.

Revenue on cost-plus contracts is recognized based on costs incurred plus an estimate of the negotiated fee earned. Revenue on time and materials contracts is recognized based on hours worked and expenses incurred.

We recognize revenue on fixed-priced contracts when earned, as services are provided. Revenue is generally recognized on a straight-line basis unless evidence suggests that revenue is earned or obligations are fulfilled in a different pattern. With fixed-price contracts, we are subject to the risk of potential cost overruns. The timing of expense recognition may result in irregular profit margins.

For certain fixed-price contracts, primarily systems design, development and implementation, we generally recognize revenue based upon costs incurred to date and our anticipated gross profit. The cumulative impact of any revisions in estimated revenue and costs is recognized in the period in which the facts that give rise to the revision become known. Provisions for estimated losses on incomplete contracts are provided for in full in the period in which such losses become known. This policy may result in revenues being recognized at different points from amounts being billable. Where the Company enters into contracts where significant uncertainty exists over the ability of management to estimate the future costs, the Company will typically defer all revenue until such time as future costs are estimable or the system implementation is complete.

Where contracts have multiple deliverables, we evaluate these deliverables at the inception of each contract and as each item is delivered. As part of this evaluation, we consider whether a delivered item has value to a customer on a stand-alone basis and whether the delivery of the undelivered items is considered probable and substantially within our control, if a general right of return exists. Where deliverables, or groups of deliverables, have both of these characteristics, we treat each deliverable item as a separate element in the arrangement, allocate a portion of the allocable arrangement consideration using the relative selling price method to each element and apply the relevant revenue recognition guidance to each element. For transactions entered into prior to October 1, 2010, the ability to isolate deliverables as separate elements also required objective and reliable evidence of the fair market value of the undelivered items. This change in accounting rules did not have a material effect on the Company’s business.

Sales and purchases in jurisdictions subject to indirect taxes, such as value added tax, are recorded net of tax collected and paid.

(d) Cash and cash equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents are valued at cost, which approximates market.

(e) Restricted cash

Restricted cash represents amounts held as collateral for lease, credit card and letter of credit arrangements, as well as funds held on behalf of clients.

(f) Accounts receivable and allowance for doubtful accounts

Accounts receivable are recorded at their face amount less an allowance for doubtful accounts. We maintain an allowance for doubtful accounts at an amount we estimate to be sufficient to cover the risk of collecting less than full payment on our receivables. On a regular basis we re-evaluate our client receivables, especially receivables that are past due, and reassess our allowance for doubtful accounts based on specific client collection issues.

(g) Property and equipment

Property and equipment is stated at cost and depreciated using the straight-line method based on estimated useful lives not to exceed 39.5 years for the Company’s buildings and between three and seven years for office furniture and equipment. Leasehold improvements are amortized over their useful life or the remaining term of the lease, whichever is shorter.

(h) Software development costs

All of the software development costs included within continuing operations relate to software which is intended for the Company’s internal use. Direct costs of time and material incurred for the development of application software for internal use are capitalized and amortized using the straight-line method over the estimated useful life of the software, ranging from three to eight years.

(i) Deferred contract costs

Deferred contract costs consist of contractually recoverable direct set-up costs relating to long-term service contracts in progress. These costs include direct and incremental costs incurred prior to the commencement of us providing service to enable us to provide the contracted services to our customer. Such costs are expensed over the period services are provided under the long-term service contract.

(j) Goodwill and intangible assets

Goodwill is obtained by the Company as a result of business combinations. Goodwill represents the difference between the consideration paid in acquiring the business and the fair value of the identifiable net assets acquired.

Goodwill is not amortized but is subject to impairment testing on an annual basis, or more frequently if impairment indicators arise. Impairment testing is performed at the reporting unit level. A reporting unit is the operating segment, or a business one level below that operating segment (the component level) if discrete financial information is prepared and reviewed regularly by segment management. However, components are aggregated if they have similar economic characteristics. We recognize an impairment charge for any amount by which the carrying amount of a reporting unit’s goodwill exceeds its fair value. We use discounted cash flows to establish fair values. When a portion of a reporting unit meeting the definition of a business is disposed of, goodwill is allocated using the relative fair value method for purposes of calculating the gain or loss on disposal. In addition, a goodwill impairment test is performed for the remaining portion of the reporting unit.

The Company performs its annual impairment test as of July 1 of each year. At July 1, 2012, the Company performed the annual impairment test and determined that there had been no impairment of goodwill.

Intangible assets from acquisitions, which consist primarily of customer contracts and relationships, technology-based intangibles and non-competition agreements, are amortized using the straight-line method over one to ten years, based on their estimated useful lives.

(k) Long-lived assets (excluding goodwill)

The Company reviews long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be fully recoverable. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Our review is based on our projection of the undiscounted future operating cash flows of the related customer project. To the extent such projections indicate that future undiscounted cash flows are not sufficient to recover the carrying amount, we recognize a non-cash impairment charge to reduce the carrying amount to equal projected future discounted cash flows. No impairment charges were recorded in the three years ending September 30, 2012.

(l) Leases

We lease office space under operating leases. Some of the lease agreements contain one or more of the following provisions or clauses: tenant allowances, rent holidays and rent escalation clauses. For the purpose of recognizing these provisions on a straight-line basis over the terms of the leases, we use the date of initial possession to begin amortization, which is generally when we enter the space and begin to make improvements in preparation of intended use.

For incentives received from the landlord, such as payments for tenant improvements or rent holidays, we record a deferred rent liability and amortize the deferred rent over the terms of the leases as reductions to rent expense. For scheduled rent escalation clauses during the lease term or for rental payments commencing at a date other than the date of initial occupancy, we record the minimum rental payments on a straight-line basis over the terms of the leases. Where rent escalations are based upon CPI, we recognize rent expense on a straight-line basis assuming the CPI rate in place at the inception of the lease. Increases or decreases in lease payments that result from subsequent changes in the index are contingent rentals and thus affect the determination of income as accruable.

In addition, some of our operating leases contain exit clauses, which include termination fees associated with exiting a lease prior to the expiration of the lease term. We record termination obligations when we give notice to the landlord that we have elected the termination clause of such agreement. Our leases within the United States generally allow us to terminate an arrangement if the related customer contract is terminated or materially altered.

(m) Legal and settlement expense (recovery), net

Legal and settlement expense (recovery), net consists of costs, net of reimbursed insurance claims, related to significant legal settlements and non-routine legal matters, including future probable legal costs estimated to be incurred in connection with those matters. Legal expenses incurred in the ordinary course of business are included in selling, general and administrative expense.

(n) Income taxes

Deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates expected to be in effect during the year in which the differences reverse. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income tax expense in the period that includes the enactment date. A tax benefit or expense is recognized for the net change in the deferred tax asset or liability during the year and the current tax liability for the year. We evaluate the realizability of our net operating loss carryforwards, which requires us to make certain estimates relating to the future operating results and cash flows to assess the valuation of the related deferred tax assets.

The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon the technical merits, it is “more-likely-than-not” that the position will be sustained upon examination.

(o) Foreign currency

For all foreign operations, the functional currency is the local currency. The assets and liabilities of foreign operations are translated into U.S. dollars at period-end exchange rates, and revenue and expenses are translated at average exchange rates for the year. The resulting cumulative translation adjustment is included in accumulated other comprehensive income on the consolidated balance sheet. Gains and losses from foreign currency transactions are included in interest and other income and are typically immaterial.

(p) Earnings per share

The Company presents both basic and diluted earnings per share on the face of the Consolidated Statements of Operations.

Basic earnings per share exclude dilution and are computed by dividing net income by the weighted average number of common shares outstanding for the period.

Diluted earnings per share reflect potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Diluted earnings per share include the incremental effect of stock options and restricted stock units calculated using the treasury stock method.

(q) Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates used by the Company include estimates of profits or loss on contracts in process, estimates of collectability of receivables, evaluation of asset impairment, accrual of estimated liabilities, and valuation of acquisition-related contingent consideration liabilities.

(r) Contingencies

From time to time, we are involved in legal proceedings, including contract and employment claims, in the ordinary course of business. We assess the likelihood of any adverse judgments or outcomes to these contingencies as well as potential ranges of probable losses and establish reserves accordingly. The amount of reserves required may change in future periods due to new developments in each matter or changes in approach to a matter such as a change in settlement strategy.

(s) Reclassifications

Certain financial results have been reclassified to conform with the current year presentation.

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Business Segments (Tables)

12 Months Ended

Sep. 30, 2012

Business segments

Financial information for each of the entity's business segments

	Year ended September 30,
	2012			2011			2010
Revenue:
Health Services	$	671,181		$	565,881		$	514,258
Human Services	378,964			363,752			317,491
Total	$	1,050,145		$	929,633		$	831,749
Gross Profit:
Health services	$	172,456		$	147,239		$	130,276
Human Services	115,487			106,412			90,557
Total	$	287,943		$	253,651		$	220,833
Selling, general and administrative expense:
Health Services	$	91,837		$	72,524		$	65,551
Human Services	65,565			59,590			51,067
Corporate / Other	—			(56		)	2,160
Total	$	157,402		$	132,058		$	118,778
Operating income from continuing operations (before income taxes):
Health Services	$	80,619		$	74,715		$	64,725
Human Services	49,922			46,822			39,490
Corporate / Other	—			56			(2,160		)
Acquisition-related expenses and legal and settlement expense, net	(2,966		)	808			5,351
Total	$	127,575		$	122,401		$	107,406
Depreciation and amortization:
Health Services	$	14,257		$	12,120		$	9,055
Human Services	8,790			7,842			6,623
Corporate / Other	3,413			2,883			2,662
Total	$	26,460		$	22,845		$	18,340

Identifiable assets:

	Year Ended September 30
	2012		2011
Health Services	$	266,017	$	224,400
Human Services	305,376		212,791
Corporate / Other	123,900		128,088
Total	$	695,293	$	565,279

Schedule of revenues by geographic area

	Year ended September 30,
	2012		2011		2010
United States	$	775,871	$	630,812	$	606,396
Australia	163,482		176,814		135,635
Rest of World	110,792		122,007		89,718
Total	$	1,050,145	$	929,633	$	831,749

Schedule of total long-lived assets by geographic area

	Year Ended September 30
	2012		2011
United States	$	56,188	$	51,245
Canada	24,110		20,096
Australia	10,358		12,260
Rest of World	4,752		2,759
Total	$	95,408	$	86,360

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Deferred contract costs (Tables)

12 Months Ended

Sep. 30, 2012

Deferred contract costs

Deferred contract costs

	As of September 30,
	2012			2011
Deferred contract costs	$	16,147		$	12,826
Less: accumulated amortization	(6,863		)	(4,806		)
Total deferred contract costs, net	$	9,284		$	8,020

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Concentrations of Credit Risk and Major Customers (Details)	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Concentrations of Credit Risk and Major Customers
Number of major customers	3
Total Revenue | Foreign customers
Concentrations of Credit Risk and Major Customers
Revenue from major customers (as a percent)	26.00%	32.00%	27.00%
Total Revenue | State and local government agencies
Concentrations of Credit Risk and Major Customers
Revenue from major customers (as a percent)	61.00%
Total Revenue | Federal government agencies
Concentrations of Credit Risk and Major Customers
Revenue from major customers (as a percent)	9.00%
Total Revenue | Other sources, such as commercial customers
Concentrations of Credit Risk and Major Customers
Revenue from major customers (as a percent)	4.00%
Total Revenue | Australia
Concentrations of Credit Risk and Major Customers
Revenue from major customers (as a percent)	16.00%	19.00%	16.00%
Total Revenue | State of Texas
Concentrations of Credit Risk and Major Customers
Revenue from major customers (as a percent)	18.00%	16.00%	16.00%
Total Revenue | State of California
Concentrations of Credit Risk and Major Customers
Revenue from major customers (as a percent)	10.00%	11.00%	12.00%

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Income taxes (Details) (USD $)	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Income from continuing operations before income taxes:
United States	$ 93,418,000	$ 66,842,000	$ 66,162,000
Foreign	38,333,000	59,054,000	42,160,000
Income from continuing operations before income taxes	131,751,000	125,896,000	108,322,000
Current provision:
Federal	36,348,000	20,090,000	23,712,000
State and local	9,006,000	4,484,000	5,197,000
Foreign	13,572,000	17,422,000	13,188,000
Total current provision	58,926,000	41,996,000	42,097,000
Deferred tax expense (benefit):
Federal	(1,272,000)	1,572,000	(1,678,000)
State and local	(471,000)	397,000	(278,000)
Foreign	(1,531,000)	(211,000)	(1,216,000)
Total deferred tax expense (benefit)	(3,274,000)	1,758,000	(3,172,000)
Income tax expense	55,652,000	43,754,000	38,925,000
Reconciliation of actual provision for income taxes and provision for income taxes resulting from the use of federal statutory income tax
Federal income tax provision at statutory rate of 35%	46,113,000	44,063,000	37,913,000
State income taxes, net of Federal benefit	5,558,000	3,175,000	3,153,000
True up to prior year	2,715,000
Permanent items	2,808,000	314,000	1,263,000
Foreign taxation	(1,950,000)	(3,644,000)	(2,177,000)
Valuation allowance on net operating loss carryforwards	305,000	(16,000)	(33,000)
Other	103,000	(138,000)	(1,194,000)
Income tax expense	55,652,000	43,754,000	38,925,000
Statutory income tax rate (as a percent)	35.00%	35.00%	35.00%
Deferred tax assets-current:
Deferred revenue	14,543,000	12,675,000
Costs deductible in future periods	11,126,000	9,315,000
Net operating loss carryforwards, current	811,000
Total deferred tax assets-current	26,480,000	21,990,000
Deferred tax liabilities-current:
Accounts receivable-unbilled	3,932,000	2,734,000
Other	341,000
Total deferred tax liabilities-current:	4,273,000	2,734,000
Net deferred tax asset-current	22,207,000	19,256,000
Deferred tax assets-non-current:
Net operating loss carryforwards, non-current	5,728,000	1,028,000
Valuation allowance on net operating loss carryforwards	(1,313,000)	(1,028,000)
Net operating loss carryforwards net of valuation reserve	4,415,000
Deferred revenue	6,737,000
Non-cash equity compensation	4,176,000	4,012,000
Costs deductible in future periods	1,021,000	2,567,000
Deferred contract costs		101,000
Other	3,055,000	1,167,000
Total deferred tax assets-non-current	19,404,000	7,847,000
Deferred tax liabilities-non-current
Amortization of goodwill and intangible assets	14,218,000	3,976,000
Property and equipment	8,535,000	10,767,000
Capitalized software	4,701,000	4,237,000
Deferred contract costs	452,000
Other	513,000	80,000
Total deferred tax liability-non-current	28,419,000	19,060,000
Net deferred tax liability-non-current	9,015,000	11,213,000
Net deferred tax asset (liability)
Long-term assets	1,369,000	732,000
Long-term liabilities	10,384,000	11,945,000
Net deferred tax liability-non-current	9,015,000	11,213,000
Cumulative earnings from foreign subsidiaries	108,000,000
Cash paid for income taxes	$ 44,300,000	$ 45,200,000	$ 33,300,000

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Revenue	$ 1,050,145	$ 929,633	$ 831,749
Cost of revenue	762,202	675,982	610,916
Gross profit	287,943	253,651	220,833
Selling, general and administrative expenses	157,402	132,058	118,778
Acquisition-related expenses	2,876		254
Legal and settlement expense (recovery), net (Note 17)	90	(808)	(5,605)
Operating income from continuing operations	127,575	122,401	107,406
Interest and other income, net	4,176	3,495	916
Income from continuing operations before income taxes	131,751	125,896	108,322
Provision for income taxes	55,652	43,754	38,925
Income from continuing operations	76,099	82,142	69,397
Discontinued operations, net of income taxes:
Income (loss) from discontinued operations		(133)	1,040
Gain (loss) on disposal	34	(841)	(28)
Income (loss) from discontinued operations	34	(974)	1,012
Net income	$ 76,133	$ 81,168	$ 70,409
Basic earnings per share:
Income from continuing operations (in dollars per share)	$ 2.25	$ 2.39	$ 1.99
Income (loss) from discontinued operations (in dollars per share)		$ (0.03)	$ 0.03
Basic earnings per share (in dollars per share)	$ 2.25	$ 2.36	$ 2.02
Diluted earnings per share:
Income from continuing operations (in dollars per share)	$ 2.19	$ 2.31	$ 1.93
Income (loss) from discontinued operations (in dollars per share)		$ (0.03)	$ 0.03
Diluted earnings per share (in dollars per share)	$ 2.19	$ 2.28	$ 1.96
Dividends per share (in dollars per share)	$ 0.36	$ 0.30	$ 0.24
Weighted average shares outstanding:
Basic (in shares)	33,867	34,417	34,827
Diluted (in shares)	34,806	35,531	35,930

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Quarterly information (unaudited) (Tables)

12 Months Ended

Sep. 30, 2012

Quarterly information (unaudited)

Schedule of selected quarterly income statement data

	Quarter Ended
	Dec. 31, 2011		March 31, 2012			June 30, 2012			Sept. 30, 2012
	(In thousands, except per share data)
Fiscal Year 2012
Revenue:
Health Services	$	158,043	$	161,170		$	170,403		$	181,564
Human Services	81,560		82,282			95,950			119,172
Total revenue	239,603		243,452			266,353			300,736
Gross profit	59,847		64,766			78,701			84,629
Selling, general and administrative expenses	32,756		37,959			43,877			42,810
Operating income from continuing operations:
Health Services	16,783		18,202			25,652			19,982
Human Services	10,308		8,605			9,187			21,822
Consolidating adjustments	—		—			(15		)	15
Acquisition-related expenses	—		233			1,877			766
Legal and settlement expenses (recovery), net	186		(824		)	(352		)	1,080
Operating income from continuing operations	26,905		27,398			33,299			39,973
Discontinued operations, net of income taxes
Income/(loss) from discontinued operations	—		—			—			—
Loss on disposal	46		62			9			(83		)
Loss from discontinued operations	46		62			9			(83		)
Net income	$	17,704	$	14,273		$	20,485		$	23,671
Basic earnings per share:
Income from continuing operations	$	0.52	$	0.42		$	0.60		$	0.70
Loss from discontinued operations	0.01		—			—			—
Basic earnings per share	$	0.53	$	0.42		$	0.60		$	0.70
Diluted earnings per share:
Income from continuing operations	$	0.51	$	0.41		$	0.59		$	0.68
Loss from discontinued operations	—		—			—			—
Diluted earnings per share	$	0.51	$	0.41		$	0.59		$	0.68

	Quarter Ended
	Dec. 31, 2010			March 31, 2011			June 30, 2011			Sept. 30, 2011
	(In thousands, except per share data)
Fiscal Year 2011
Revenue:
Health Services	$	130,011		$	137,779		$	141,788		$	156,303
Human Services	84,103			89,337			96,508			93,804
Total revenue	214,114			227,116			238,296			250,107
Gross profit	55,959			63,066			66,399			68,227
Selling, general and administrative expenses	28,667			33,572			35,259			34,560
Operating income from continuing operations:
Health Services	18,823			19,352			15,923			20,617
Human Services	8,503			10,123			14,908			13,288
Consolidating adjustments	(34		)	19			309			(238		)
Legal and settlement expense (recovery), net	—			—			361			(1,169		)
Operating income from continuing operations	27,292			29,494			30,779			34,836
Discontinued operations, net of income taxes
Income/(loss) from discontinued operations	—			(265		)	(65		)	197
Loss on disposal	(105		)	(554		)	(3		)	(179		)
Loss from discontinued operations	(105		)	(819		)	(68		)	18
Net income	$	17,482		$	18,219		$	19,892		$	25,575
Basic earnings per share:
Income from continuing operations	$	0.51		$	0.55		$	0.58		$	0.75
Loss from discontinued operations	—			(0.02		)	(0.01		)	—
Basic earnings per share	$	0.51		$	0.53		$	0.57		$	0.75
Diluted earnings per share:
Income from continuing operations	$	0.50		$	0.54		$	0.56		$	0.73
Loss from discontinued operations	(0.01		)	(0.03		)	—			—
Diluted earnings per share	$	0.49		$	0.51		$	0.56		$	0.73

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Cash flows from operating activities:
Net income	$ 76,133	$ 81,168	$ 70,409
Adjustments to reconcile net income to net cash provided by operating activities:
(Income) loss from discontinued operations	(34)	974	(1,012)
Depreciation and amortization	26,460	22,845	18,340
Deferred income taxes	(3,274)	1,758	(3,172)
Deferred interest income on note receivable			263
Non-cash equity based compensation	12,077	9,485	7,918
Changes in assets and liabilities, net of effects of business combinations and divestitures:
Accounts receivable-billed	(7,213)	(11,584)	38
Accounts receivable-unbilled	2,214	10,068	2,415
Prepaid expenses and other current assets	(6,018)	(2,573)	(1,740)
Deferred contract costs	(1,221)	(1,309)	1,541
Accounts payable and accrued liabilities	6,485	7,312	(407)
Accrued compensation and benefits	(2,648)	4,490	7,883
Deferred revenue	9,827	(11,779)	31,294
Income taxes	6,885	(10,814)	6,374
Other assets and liabilities	(4,513)	(2,456)	827
Cash provided by operating activities-continuing operations	115,160	97,585	140,971
Cash used in operating activities-discontinued operations		(725)	(2,530)
Cash provided by operating activities	115,160	96,860	138,441
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired	(66,003)		(11,960)
Purchases of property and equipment	(18,369)	(18,506)	(13,936)
Capitalized software costs	(4,779)	(7,608)	(8,672)
Proceeds from sales of discontinued operations	2,240		1,700
Proceeds from note receivable	299	237	473
Cash used in investing activities-continuing operations	(86,612)	(25,877)	(32,395)
Cash used in investing activities	(86,612)	(25,877)	(32,395)
Cash flows from financing activities:
Cash dividends paid	(12,180)	(10,327)	(8,375)
Repurchases of common stock	(12,977)	(56,540)	(40,217)
Employee stock transactions	1,977	8,980	2,763
Tax benefit due to option exercises and restricted stock units vesting	7,268	6,996	2,901
Issuance of long-term debt		304	533
Repayment of long-term debt	(44)		(7)
Acquisition-related contingent consideration	(1,809)	(1,021)
Cash used in financing activities	(17,765)	(51,608)	(42,402)
Effect of exchange rate changes on cash	5,579	(1,746)	3,862
Net increase (decrease) in cash and cash equivalents	16,362	17,629	67,506
Cash and cash equivalents, beginning of period	172,950	155,321	87,815
Cash and cash equivalents, end of period	$ 189,312	$ 172,950	$ 155,321

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Accounts receivable reserve (Details) (Accounts receivable, billed and unbilled, USD $)	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Accounts receivable, billed and unbilled
Changes in the reserves against current billed accounts receivable
Balance at beginning of year	$ 3,265,000	$ 1,845,000	$ 5,249,000
Additions to reserve	2,061,000	3,063,000	1,594,000
Deductions	(1,351,000)	(1,643,000)	(4,998,000)
Balance at end of year	3,975,000	3,265,000	1,845,000
Contractual retainage provisions	$ 3,200,000	$ 4,200,000

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Acquisitions (Tables)

12 Months Ended

Sep. 30, 2012

Policy Studies, Inc

Acquisition Disclosures

Assets and liabilities recorded in the Company's financial statements at their fair values as of the date of the acquisition

	Preliminary Purchase Price Allocation
	As ofJune 30, 2012		Adjustments			As ofSeptember 30, 2012
Accounts receivable and unbilled receivables	$	22,875	$	142		$	23,017
Other current assets	9,527		—			9,527
Deferred income taxes	2,629		(698		)	1,931
Property and equipment	6,411		—			6,411
Other assets	1,332		—			1,332
Intangible assets	22,883		(700		)	22,183
Total identifiable assets acquired	65,657		(1,256		)	64,401
Accounts payable and other liabilities	20,845		(179		)	20,666
Deferred revenue	5,752		13,944			19,696
Deferred taxation	7,537		(7,537		)	—
Total liabilities assumed	34,134		6,228			40,362
Net identifiable assets acquired	31,523		(7,484		)	24,039
Goodwill	32,705		6,456			39,161
Net assets acquired	$	64,228	$	(1,028	)	$	63,200

Valuation of the Intangible Assets Acquired

	Useful life	Fair value
Customer relationships	7-8 years	$	16,600
Tradename	5 years	3,800
Technology-based intangible assets	1-5 years	1,783
Total intangible assets		$	22,183

Schedule of Pro forma information relating to the acquisition

	Unaudited pro forma results for the year ended September 30,
	2012		2011
Revenue	$	1,132,177	$	1,065,345
Income from continuing operations	75,252		82,993

DeltaWare

Acquisition Disclosures

Assets and liabilities recorded in the Company's financial statements at their fair values as of the date of the acquisition

	Purchase price allocation
Cash, net of cash acquired	$	10,385
Contingent consideration obligations	3,015
Total fair value of consideration	$	13,400
Accounts receivable	$	2,010
Other tangible assets	1,571
Intangible assets	6,060
Total identifiable assets acquired	9,641
Accounts payable and other liabilities	2,125
Loans payable	870
Deferred revenue	723
Total liabilities assumed	3,718
Net identifiable assets acquired	5,923
Goodwill	7,477
Net assets acquired	$	13,400

Schedule of the effect on the financial statements of acquisition-related contingent consideration

	Contingent consideration
Balance at September 30, 2011	$	2,228
Additional estimated consideration	101
Payment of consideration	(2,059		)
Foreign currency translation	136
Balance at September 30, 2012	$	406

Valuation of the Intangible Assets Acquired

	Useful life	Fair value
Technology-based intangibles	8.5 years	$	3,733
Customer contracts and relationships	8-10 years	1,474
Non-compete arrangements	4 years	239
Trade name	10 years	614
Total intangible assets		$	6,060

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Credit facilities (Details) In Millions, unless otherwise specified	12 Months Ended		12 Months Ended			12 Months Ended
	Sep. 30, 2012 Credit Facility USD ($) item	Jan. 25, 2008 Credit Facility USD ($)	Sep. 30, 2012 Credit Facility Federal Funds rate	Jan. 25, 2008 Swingline loans USD ($)	Jan. 25, 2008 Letters of credit USD ($)	Sep. 30, 2012 Letters of credit held by a customer USD ($) item	Sep. 30, 2012 Letters of credit issued in relation to the Company's insurance policies USD ($) item	Sep. 30, 2012 Letter of credit (Other than Revolving Credit Agreement) USD ($) item	Sep. 30, 2012 Atlantic Innovation Fund of Canada USD ($) item	Sep. 30, 2012 Atlantic Innovation Fund of Canada CAD item	Sep. 30, 2012 Performance Bonds USD ($)	Sep. 30, 2011 Performance Bonds USD ($)
Credit facilities
Amount outstanding									$ 1.7	1.7
Maximum borrowing capacity under loan										1.8
Maximum borrowing capacity		35.0		5.0	25.0
Optional expanded maximum borrowing capacity		75.0
Variable interest rate base			federal funds effective rate
Percentage points added to the reference rate			0.50%
Number of letters of credit issued	5					3	2	2
Amount outstanding	15.5					15.2	0.3	3.0
Current borrowing capacity	19.5
Number of quarterly installments									40	40
Performance bond commitments											$ 48.0	$ 16.9

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Stock-based compensation

12 Months Ended

Sep. 30, 2012

Stock-based compensation

Stock-based compensation

15. Stock-based compensation

In March 2012, the Company’s shareholders approved the 2011 Equity Incentive Plan which superseded the Company’s 1997 Equity Incentive Plan. Under these plans, the Company is authorized to grant stock options, restricted stock units (“RSUs”) and other forms of equity awards to officers, employees and directors of the Company. At September 30, 2012, 1,647,669 million shares remained available for grants under the Company’s stock plans. The Company typically issues new shares in satisfying its obligations under its stock plans.

In recent years, the Company has granted equity awards to officers, employees and directors in the form of RSUs. Generally, RSUs issued before 2009 vest ratably over six years. RSUs issued since then vest ratably over five years. The fair value of the RSUs, based on the Company’s stock price at the grant date, is expensed in equal installments over the vesting period. For the fiscal years ended September 30, 2012, 2011 and 2010, compensation expense recognized related to RSUs was $12.1 million, $9.4 million and $7.1 million, respectively. Employees who are granted RSUs also receive dividend-equivalent payments in the form of additional RSUs. However, until the shares are issued, they have no voting rights and employees may not buy or sell these RSUs. In the event that an award is forfeited, the dividend-equivalent payments received by the holder with respect to that award are also forfeited.

A summary of the Company’s RSU activity for the year ended September 30, 2012, is as follows:

	Shares		Weighted- Average Grant-Date Fair Value
Non-vested shares outstanding at September 30, 2011	1,527,686		$	22.64
Granted	414,894		42.01
Vested	(452,804	)	24.32
Forfeited	(43,706	)	21.35
Non-vested shares outstanding at September 30, 2012	1,446,070		27.71

The weighted-average grant-date fair value of RSUs granted in the years ended September 30, 2011 and 2010 was $31.80 and $23.58, respectively. The total fair value of RSUs vesting during the year was $25.0 million, $14.5 million and $9.9 million in the years ended September 30, 2012, 2011 and 2010, respectively. As of September 30, 2012, the total remaining unrecognized compensation cost related to unvested RSUs was $28.1 million. This charge is expected to be realized over 4 years, with a weighted average life of 1.6 years.

The Company previously granted stock options to certain employees. These were granted at exercise prices equal to the fair market value of the Company’s common stock at the date of grant and generally vest ratably over a period of four years. Options issued prior to fiscal 2005 expire ten years after date of grant; those issued since expire after six years. The Company has transitioned towards providing RSUs rather than options and, accordingly, no options have been granted since 2008. Compensation expenses related to stock options was less than $100,000 in the year ended September 30, 2012 and no future charges relating to stock options are anticipated. For the fiscal years ended September 30, 2011 and 2010, compensation expense related to stock options was $0.1 million and $0.8 million, respectively.

A summary of the Company’s stock option activity for the year ended September 30, 2012, is as follows:

	Options		Weighted Average Exercise Price
Outstanding at September 30, 2011	765,676		$	16.18
Exercised	(404,563	)	15.92
Forfeited or expired	(934	)	15.37
Outstanding and exercisable at September 30, 2012	360,179		16.52

The intrinsic value of outstanding and exercisable stock options at September 30, 2012, was $15.6 million with a weighted average remaining life of 2.5 years.

The following table summarizes information pertaining to the stock options vested and exercised for the years presented (in thousands):

	Year ended September 30,
	2012		2011		2010
Aggregate intrinsic value of all stock options exercised	$	10,920	$	15,102	$	4,730
Net cash proceeds from exercise of stock options	6,441		12,482		5,948

The total income tax benefit recognized in the income statement for share-based compensation arrangements was $4.3 million, $3.7 million and $3.1 million for the fiscal years ended September 30, 2012, 2011 and 2010, respectively.

Employees are permitted to forfeit a certain number of shares to cover their personal tax liability. Amounts paid to cover this liability by the Company were $4.5 million, $3.5 million and $3.2 million in the years ended September 30, 2012, 2011 and 2010.

Cash flows resulting from the tax benefits generated from tax deductions in excess of the compensation costs recognized for those options and RSUs (excess tax benefits) are classified as financing cash flows.

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Accounts receivable reserve (Tables)

12 Months Ended

Sep. 30, 2012

Accounts receivable reserve

Schedule of accounts receivable reserve

	Year ended September 30,
	2012			2011			2010
Balance at beginning of year	$	3,265		$	1,845		$	5,249
Additions to reserve	2,061			3,063			1,594
Deductions	(1,351		)	(1,643		)	(4,998		)
Balance at end of year	$	3,975		$	3,265		$	1,845

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Legal and settlement expense (recovery), net

12 Months Ended

Sep. 30, 2012

Legal and settlement expense (recovery), net

Legal and settlement expense (recovery), net

17. Legal and settlement expense (recovery), net

Legal and settlement expense (recovery), net consists of costs, net of reimbursed insurance claims, related to significant legal settlements and non-routine legal matters, including future probable legal costs estimated to be incurred in connection with those matters. Legal expenses incurred in the ordinary course of business are included in selling, general and administrative expense.  Expenses for the three years ended September 30, 2012 are shown below (in thousands):

	Year ended September 30,
	2012			2011			2010
Insurance recoveries	$	(1,180	)	$	—		$	(7,500	)
Employee lawsuit	600			—			—
Client indemnification	490			—			—
Other	180			(808		)	1,895
Total	$	90		$	(808	)	$	(5,605	)

The insurance recoveries in fiscal 2012 and 2010 relate to a litigation settlement in fiscal 2008.

During the fourth quarter of fiscal year 2012, the company agreed to settle a lawsuit brought by a former employee, and the company accrued $600,000 consisting of settlement and legal costs related to that matter. Also, the company has accrued $490,000 relating to client indemnification of funds misapprapriated by a former employee.

During the 2011 fiscal year, the Company reversed a legal expense previously recognized in fiscal 2010 for a matter which concluded without liability to the Company.

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Employee benefit plans and deferred compensation (Details) (USD $)	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Employee benefit plans and deferred compensation
Employer contribution to 401(k) plans	$ 3,000,000	$ 3,000,000	$ 3,200,000
Deferred compensation plan assets, cash and cash equivalents	1,500,000
Asset related to life insurance assets, which are held at cash surrender value	9,220,000	8,004,000
Deferred compensation plan liabilities	$ 12,400,000

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (USD $) In Thousands, except Share data, unless otherwise specified	Total	Common Stock	Treasury Stock	Accumulated Other Comprehensive Income	Retained Earnings
Balance at Sep. 30, 2009	$ 297,128	$ 338,739	$ (319,149)	$ 8,268	$ 269,270
Balance (in shares) at Sep. 30, 2009		35,198,000
Increase (Decrease) in Shareholders' Equity
Net income	70,409				70,409
Foreign currency translation	6,262			6,262
Cash dividends	(8,375)				(8,375)
Dividends on RSUs		375			(375)
Repurchases of common stock	(40,217)		(40,217)
Repurchases of common stock (in shares)	(1,501,528)	(1,502,000)
Employee stock transactions	2,763	2,763
Employee stock transactions (in shares)		652,000
Non-cash equity based compensation	7,918	7,918
Tax benefit due to option exercises	2,901	2,901
Balance at Sep. 30, 2010	338,789	352,696	(359,366)	14,530	330,929
Balance (in shares) at Sep. 30, 2010		34,348,000
Increase (Decrease) in Shareholders' Equity
Net income	81,168				81,168
Foreign currency translation	(2,050)			(2,050)
Cash dividends	(10,327)				(10,327)
Dividends on RSUs		522			(522)
Repurchases of common stock	(57,484)		(57,484)
Repurchases of common stock (in shares)	(1,597,458)	(1,597,000)
Employee stock transactions	7,880	7,880
Employee stock transactions (in shares)		1,042,000
Non-cash equity based compensation	9,485	9,485
Tax benefit due to option exercises	6,996	6,996
Balance at Sep. 30, 2011	374,457	377,579	(416,850)	12,480	401,248
Balance (in shares) at Sep. 30, 2011	33,793,000	33,793,000
Increase (Decrease) in Shareholders' Equity
Net income	76,133				76,133
Foreign currency translation	7,760			7,760
Cash dividends	(12,180)				(12,180)
Dividends on RSUs		656			(656)
Repurchases of common stock	(12,796)		(12,796)
Repurchases of common stock (in shares)	(306,000)	(306,000)
Employee stock transactions	(1,613)	(1,613)
Employee stock transactions (in shares)		498,000
Non-cash equity based compensation	12,077	12,077
Tax benefit due to option exercises	7,268	7,268
Balance at Sep. 30, 2012	$ 451,106	$ 395,967	$ (429,646)	$ 20,240	$ 464,545
Balance (in shares) at Sep. 30, 2012	33,985,000	33,985,000

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Net income	$ 76,133	$ 81,168	$ 70,409
Foreign currency translation adjustments	7,760	(2,050)	6,262
Comprehensive income	$ 83,893	$ 79,118	$ 76,671

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Deferred contract costs

12 Months Ended

Sep. 30, 2012

Deferred contract costs

Deferred contract costs

10. Deferred contract costs

Deferred contract costs consist of contractually recoverable direct set-up costs relating to long-term service contracts in progress. These costs include direct and incremental costs incurred prior to the commencement of us providing contracted services to our customers. Deferred contract costs consist of the following (in thousands):

	As of September 30,
	2012			2011
Deferred contract costs	$	16,147		$	12,826
Less: accumulated amortization	(6,863		)	(4,806		)
Total deferred contract costs, net	$	9,284		$	8,020

Deferred contract cost amortization expense for the years ended September 30, 2012, 2011 and 2010 was $2.0 million, $1.7 million and $1.7 million respectively.

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Document and Entity Information (USD $)	12 Months Ended
	Sep. 30, 2012	Nov. 01, 2012	Mar. 31, 2012
Document and Entity Information
Entity Registrant Name	MAXIMUS INC
Entity Central Index Key	0001032220
Document Type	10-K
Document Period End Date	Sep. 30, 2012
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 1,354,461,804
Entity Common Stock, Shares Outstanding		34,088,737
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	FY

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Credit facilities

12 Months Ended

Sep. 30, 2012

Credit facilities

Credit facilities

11. Credit facilities

On January 25, 2008, the Company entered into a Revolving Credit Agreement providing for a senior secured revolving credit facility, with SunTrust Bank as administrative agent, issuing bank and swingline lender, and a syndicate of other lenders (the “Credit Facility”). The Credit Facility provides for a $35.0 million revolving line of credit commitment, which may be used (i) for revolving loans, (ii) for swingline loans, subject to a sublimit of $5.0 million, and (iii) to request the issuance of letters of credit on the Company’s behalf, subject to a sublimit of $25.0 million. The Company may request an increase in the commitment under the Credit Facility, such that the aggregate commitments under the Credit Facility shall at no time exceed $75.0 million. The credit available under the Credit Facility may be used, among other purposes, to refinance the Company’s current indebtedness, to repurchase shares of the Company’s capital stock and to finance the ongoing working capital, capital expenditure and general corporate needs of the Company.

Subject to applicable conditions, the Company may elect interest rates on its revolving borrowings calculated by reference to (i) the prime lending rate as announced by SunTrust Bank (or, if higher, the federal funds effective rate plus 0.50%) (a “Base Rate Borrowing”), or (ii) the reserve adjusted rate per annum equal to the offered rate for deposits in U.S. dollars for a one (1), two (2), three (3) or six (6) month period in the London Inter-Bank Market (a “LIBOR Borrowing”), and, in each case, plus an applicable margin that is determined by reference to the Company’s then-current leverage ratio. For swingline borrowings, the Company will pay interest at the rate of interest for a one (1) month LIBOR Borrowing, plus the applicable margin, or at a rate to be separately agreed upon by the Company and the administrative agent.

At September 30, 2012, the Credit Facility had issued five letters of credit totaling $15.5 million on behalf of the Company. Three letters of credit totaling $15.2 million may be called by a customer in the event that the Company defaults under the terms of a contract, the probability of which we believe is remote. Two letters of credit totaling $0.3 million have been issued in relation to the Company’s insurance policies. These letters of credit are typically held over the life of the arrangement to which they related. At September 30, 2012, the Company has capacity to borrow, subject to covenant constraints, of up to $19.5 million under this agreement. In addition, two letters of credit for $3.0 million have been issued on behalf of the Company by another financial institution.

The Credit Facility matures on January 25, 2013, at which time all outstanding borrowings must be repaid and all outstanding letters of credit must be terminated or cash collateralized.

The Credit Facility provides for the payment of specified fees and expenses, including an up-front fee and commitment and letter of credit fees, and contains customary financial and other covenants that require the maintenance of certain ratios including a maximum leverage ratio and a minimum fixed charge coverage ratio. The Company was in compliance with all covenants in the amended Credit Facility as of September 30, 2012. The Company’s obligations under the Credit Facility are guaranteed by certain of the Company’s direct and indirect subsidiaries (collectively, the “Guarantors”) and are secured by substantially all of MAXIMUS’ and the Guarantors’ present and future tangible and intangible assets, including the capital stock of subsidiaries and other investment property.

In addition to this credit facility, the Company has a loan agreement with the Atlantic Innovation Fund of Canada. This provides for a loan of up to 1.8 million Canadian Dollars, which must be used for specific technology-based research and development. The loan has no interest charge. This balance is repayable in forty quarterly installments with the first payment being made in July 2012. At September 30, 2012, $1.7 million (1.7 million Canadian Dollars) was outstanding under this agreement.

Certain contracts require us to provide a surety bond as a guarantee of performance. At September 30, 2012 and September 30, 2011, the Company had performance bond commitments totaling $48.0 million and $16.9 million, respectively. These bonds are typically renewed annually and remain in place until the contractual obligations have been satisfied. Although the triggering events vary from contract to contract, in general, we would only be liable for the amount of these guarantees in the event of default in our performance of our obligations under each contract, the probability of which we believe is remote.

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Sep. 30, 2011
Current assets:
Cash and cash equivalents	$ 189,312	$ 172,950
Restricted cash	11,593	4,839
Accounts receivable-billed, net	172,705	146,900
Accounts receivable-unbilled	10,539	7,170
Prepaid income taxes	3,800	12,959
Deferred income taxes	22,207	19,256
Prepaid expenses and other current assets	38,528	27,202
Total current assets	448,684	391,276
Property and equipment, net	58,798	51,740
Capitalized software, net	27,390	26,616
Goodwill	112,032	71,323
Intangible assets, net	25,330	5,651
Deferred contract costs, net	9,284	8,020
Deferred income taxes	1,369	732
Deferred compensation plan assets	9,220	8,004
Other assets	3,186	1,917
Total assets	695,293	565,279
Current liabilities:
Accounts payable and accrued liabilities	71,314	55,470
Accrued compensation and benefits	56,105	47,748
Deferred revenue	61,840	47,902
Current portion of long-term debt	178	42
Acquisition-related contingent consideration		1,840
Income taxes payable	3,100	5,104
Other liabilities	6,599	5,787
Total current liabilities	199,136	163,893
Deferred revenue, less current portion	19,550	2,575
Long-term debt	1,558	1,654
Acquisition-related contingent consideration, less current portion	406	388
Income taxes payable, less current portion	1,412	1,484
Deferred income taxes	10,384	11,945
Deferred compensation plan liabilities, less current portion	11,741	8,883
Total liabilities	244,187	190,822
Commitments and contingencies (Notes 12 and 13)
Shareholders' equity:
Common stock, no par value; 60,000 shares authorized; 56,516 and 56,018 shares issued and 33,985 and 33,793 outstanding at September 30, 2012 and September 30, 2011, at stated amount, respectively	395,967	377,579
Treasury stock, at cost; 22,531 and 22,225 shares at September 30, 2012 and September 30, 2011, respectively	(429,646)	(416,850)
Accumulated other comprehensive income	20,240	12,480
Retained earnings	464,545	401,248
Total shareholders' equity	451,106	374,457
Total liabilities and shareholders' equity	$ 695,293	$ 565,279

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Acquisitions

12 Months Ended

Sep. 30, 2012

Acquisitions

Acquisitions

5. Acquisitions

PSI

On April 30, 2012 (the acquisition date), the Company acquired 100% of the share capital of PSI Services Holding, Inc. and its wholly-owned subsidiary, Policy Studies, Inc. (PSI). The final cash consideration will be based upon a mutually-agreed assessment of the balance sheet at the acquisition date and is currently estimated to be $63.2 million.

PSI supports clients in the administration of a number of health and human services programs exclusively within the United States. MAXIMUS acquired PSI, among other reasons, to strengthen its leadership in the administration of public health and human services programs. The acquired assets and business have been integrated into the Company’s Health Services and Human Services segments.

The assets and liabilities of PSI are recorded in the Company’s financial statements at their fair values as of the date of the acquisition. An initial valuation was performed at June 30, 2012 and this valuation has been updated through September 30, 2012 (below, in thousands)

	Preliminary Purchase Price Allocation
	As ofJune 30, 2012		Adjustments			As ofSeptember 30, 2012
Accounts receivable and unbilled receivables	$	22,875	$	142		$	23,017
Other current assets	9,527		—			9,527
Deferred income taxes	2,629		(698		)	1,931
Property and equipment	6,411		—			6,411
Other assets	1,332		—			1,332
Intangible assets	22,883		(700		)	22,183
Total identifiable assets acquired	65,657		(1,256		)	64,401
Accounts payable and other liabilities	20,845		(179		)	20,666
Deferred revenue	5,752		13,944			19,696
Deferred taxation	7,537		(7,537		)	—
Total liabilities assumed	34,134		6,228			40,362
Net identifiable assets acquired	31,523		(7,484		)	24,039
Goodwill	32,705		6,456			39,161
Net assets acquired	$	64,228	$	(1,028	)	$	63,200

In the fourth quarter 2012, a net increase of $6.5 million was made to goodwill as the Company finalized the allocation of the purchase price. This position is still subject to change as the final consideration balance is agreed with the former owners of PSI. The principal driver of this increase was an increase in the future obligations related to a loss-making system-integration contract acquired with PSI. This obligation, net of future cash flows, was valued at $15.1 million and will be treated as deferred revenue. This valuation was based upon our understanding of the contract terms and conditions, our estimates of the future costs of completing the contract and the likely profit margin that a participant providing a similar service would most likely charge to cover their overhead costs and their required rate of return. This valuation also affected the related intangible assets and deferred taxation.

The Company is still completing its evaluation of the valuation of the assets and liabilities acquired. In particular, the Company continues to evaluate the closing tax position of PSI within all of the jurisdictions in which it operates. The identifiable assets acquired and liabilities assumed were recognized and measured as of the acquisition date based upon their estimated fair values. The excess of the acquisition date fair value of consideration over the estimated fair value of the net assets acquired was recorded as goodwill and allocated to the Company’s two segments, Health Services and Human Services, based upon the respective valuations of the businesses. The Company considers the goodwill to represent a number of potential strategic and financial benefits that are expected to be realized as a result of the acquisition, including, but not limited to bringing new capabilities to MAXIMUS and the assembled workforce. Goodwill is not expected to be deductible for tax purposes.

Included in the purchase price allocation are deferred taxes related to a net operating loss carryforward of $10.5 million.

The valuation of the intangible assets acquired is summarized below (in thousands).

	Useful life	Fair value
Customer relationships	7-8 years	$	16,600
Tradename	5 years	3,800
Technology-based intangible assets	1-5 years	1,783
Total intangible assets		$	22,183

The total weighted average amortization period is 6.8 years.

Our consolidated statement of operations includes $60.1 million of revenue for the year ended September 30, 2012 generated by the acquired PSI business. The integration of PSI into the Company’s operating and administrative infrastructure does not allow us to identify a meaningful measure of operating income for the acquired PSI business.

During the year ended September 30, 2012, the Company incurred $2.9 million of costs directly related to the acquisition of PSI. These costs include legal fees, valuation costs, severance and costs related to the termination of redundant service contracts.

The following table presents the results for the Company for the year ended September 30, 2012 as though the acquisition of PSI had occurred on October 1, 2010. The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of the results of the Company if the acquisition had taken place at this time. The pro forma results presented include acquisition related costs, amortization charges for acquired intangible assets, adjustments to lease expenses, elimination of intercompany transactions, adjustments to interest and other expenses and related tax effects. The pro forma results in 2011 include costs directly related to the acquisition, including severance costs, which were incurred by the Company after the acquisition date (in thousands).

	Unaudited pro forma results for the year ended September 30,
	2012		2011
Revenue	$	1,132,177	$	1,065,345
Income from continuing operations	75,252		82,993

DeltaWare

On February 10, 2010 (the DeltaWare acquisition date), the Company acquired 100% of the share capital of DeltaWare, Inc. (DeltaWare). DeltaWare is a Canadian company specializing in health administration management systems. MAXIMUS acquired DeltaWare, among other reasons, to broaden its core health services offerings and strengthen its position in the administration of public health programs. The acquired assets and business have been integrated into the Company’s Health Services segment.

The estimated DeltaWare acquisition date fair value of consideration transferred, assets acquired and liabilities are presented below (in thousands).

	Purchase price allocation
Cash, net of cash acquired	$	10,385
Contingent consideration obligations	3,015
Total fair value of consideration	$	13,400
Accounts receivable	$	2,010
Other tangible assets	1,571
Intangible assets	6,060
Total identifiable assets acquired	9,641
Accounts payable and other liabilities	2,125
Loans payable	870
Deferred revenue	723
Total liabilities assumed	3,718
Net identifiable assets acquired	5,923
Goodwill	7,477
Net assets acquired	$	13,400

The acquisition consideration comprised an initial cash payment, followed by additional payments (contingent consideration) totaling up to seven million Canadian Dollars. During fiscal years 2012 and 2011, the Company paid $2.1million and $1.0 million, respectively, of contingent consideration. These payments were made based upon the achievement of profitability targets. The Company must also pay the former owners of DeltaWare up to four million Canadian Dollars ($4.0 million) based upon the Company making sales of DeltaWare’s products in particular geographic markets prior to December 2016. The Company has recorded a long-term liability of $0.4 million which represents the payment that management assesses will likely be paid. In the event that such sales are anticipated by the Company, this could result in an increase to this liability based upon the size and location of the sales. No such sales have been made to date and the likelihood of future sales between this time and December 2016 is considered low. Management reviews the likelihood of future sales on a quarterly basis and, to the extent that sales opportunities are identified, proposals submitted or contracts won, the Company updates its probability weighted assessment of payment. Changes in this assessment will result in an expense or credit to earnings. The contingent consideration payable for any single contract signed would be based upon the population of the area served but would be capped at one million Canadian Dollars per sale.

The Financial Accounting Standards Board (“FASB”) requires the classification of all assets and liabilities subject to fair value measurement based upon the inputs required for their valuation. Based upon these assessments, the Company recorded charges of $0.1 million and $0.2 million in fiscal 2012 and 2011, respectively, reflecting increases in the estimated payment of consideration. As the inputs required for the valuation of contingent consideration liabilities require significant judgment, they are considered to be Level 3 inputs under the FASB classification.

The effect on the financial statements is summarized below (in thousands):

	Contingent consideration
Balance at September 30, 2011	$	2,228
Additional estimated consideration	101
Payment of consideration	(2,059		)
Foreign currency translation	136
Balance at September 30, 2012	$	406

The identifiable assets acquired and liabilities assumed were recognized and measured as of the acquisition date based upon their estimated fair values. The excess of the acquisition date fair value of consideration over the estimated fair value of the net assets acquired was recorded as goodwill. The Company considers the goodwill to represent a number of potential strategic and financial benefits that are expected to be realized as a result of the acquisition, including, but not limited to bringing new capabilities to MAXIMUS in the adjacent markets and opportunities to expand its geographic reach.

The valuation of the intangible assets acquired is summarized below (in thousands).

	Useful life	Fair value
Technology-based intangibles	8.5 years	$	3,733
Customer contracts and relationships	8-10 years	1,474
Non-compete arrangements	4 years	239
Trade name	10 years	614
Total intangible assets		$	6,060

The total weighted average amortization period was 8.6 years.

Of the total fair value of consideration, $7.5 million was allocated to goodwill. Goodwill is not expected to be deductible for income tax purposes.

The results of DeltaWare were not material for any periods shown.

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Earnings per share

12 Months Ended

Sep. 30, 2012

Earnings per share

Earnings per share

4. Earnings per share

The following table sets forth the components of basic and diluted earnings per share (in thousands):

	Year ended September 30,
	2012		2011			2010
Numerator:
Income from continuing operations	$	76,099	$	82,142		$	69,397
Income (loss) from discontinued operations	34		(974		)	1,012
Net income	$	76,133	$	81,168		$	70,409
Denominator:
Weighted average shares outstanding	33,867		34,417			34,827
Effect of dilutive securities:
Employee stock options and unvested restricted stock awards	939		1,114			1,103
Denominator for diluted earnings per share	34,806		35,531			35,930

For the year ended September 30, 2011, 15,000 unvested restricted stock units were excluded from the calculation of diluted earnings per share as the effect of including them would be anti-dilutive. No shares were excluded from the computation in computing earnings per share in the years ended September 30, 2012 or 2010.

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Stock repurchase programs

12 Months Ended

Sep. 30, 2012

Stock repurchase programs

Stock repurchase programs

16. Stock repurchase programs

Under resolutions adopted in July 2008 and September 2010, the Board of Directors authorized the repurchase, at management’s discretion, of up to an aggregate of $175.0 million of the Company’s common stock. In November 2011, this plan was replaced with a new program which authorized up to $125.0 million of repurchases. These resolutions also authorized the use of option exercise proceeds for the repurchase of the Company’s common stock. During the years ended September 30, 2012, 2011 and 2010, the Company has repurchased 306,000, 1,597,458 and 1,501,528 common shares at a cost of $12.8 million, $57.5 million, and $40.2 million respectively. At September 30, 2012, $127.4 million remained available for future stock repurchases.

As of November 16, 2012, the Company had repurchased an additional 168,500 shares at a cost of $9.7 million during the first quarter of fiscal 2013.

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Commitments and contingencies

12 Months Ended

Sep. 30, 2012

Commitments and contingencies

Commitments and contingencies

12. Commitments and contingencies

Litigation

The Company is involved in various legal proceedings, including the matters described below, in the ordinary course of its business.

In March 2009, a state Medicaid agency asserted a claim against MAXIMUS, related to a discontinued business line, in the amount of $2.3 million in connection with a contract MAXIMUS had through February 1, 2009 to provide Medicaid administrative claiming services to school districts in the state. MAXIMUS entered into separate agreements with the school districts under which MAXIMUS helped the districts prepare and submit claims to the state Medicaid agency which, in turn, submitted claims for reimbursement to the federal government. No legal action has been initiated. The state has asserted that its agreement with MAXIMUS requires the Company to reimburse the state for the amounts owed to the federal government. However, the Company’s agreements with the school districts require them to reimburse MAXIMUS for such payments and therefore MAXIMUS believes the school districts are responsible for any amounts disallowed by the state Medicaid agency or the federal government. Accordingly, the Company believes its exposure in this matter is limited to its fees associated with this work and that the school districts will be responsible for the remainder. MAXIMUS has exited the federal healthcare claiming business and no longer provides the services at issue in this matter.

In 2008 MAXIMUS sold the SchoolMAX student information system business line as part of the divestiture of the MAXIMUS Education Systems division. In 2011, a school district which was a SchoolMAX client initiated the dispute resolution process under their contract. The client raised a number of issues pertaining to services and products delivered under the contract. The parties participated in various mediation sessions during 2011, but they did not reach a resolution. In April 2012, the client filed a formal arbitration notice alleging that MAXIMUS and the buyer failed to (i) use best practices in developing the software and (ii) deliver and test product releases as required by the contract. The client contends that those failures resulted in damages of at least $10 million. MAXIMUS and the buyer are contesting the client’s claims. We cannot at this time reasonably estimate the possible loss that could be incurred if the plaintiff were to prevail but we believe that we have substantial defenses. In addition, we believe that we are entitled to indemnification from the buyer of the business for the claims asserted in the arbitration notice. Recently, the client has asserted that MAXIMUS defrauded the client in 2007 or 2008 by misrepresenting its intentions regarding the sale of the Education Systems division. That allegation is not part of the arbitration, and no formal claim or lawsuit has been filed. The company believes it has a number of defenses to that allegation and would contest it vigorously.

Flexible New Deal contract liabilities and contingent gains

In August 2009, the Company commenced work for the United Kingdom government as a provider of services under the “Flexible New Deal,” a welfare-to-work initiative. The work was performed in the Company’s Human Services Segment. This initiative was terminated for all contract providers during the 2011 fiscal year and replaced with the “Work Programme,” under which MAXIMUS also performs services. As a consequence of the termination of the Flexible New Deal, MAXIMUS incurred certain costs related to the termination of leases, including property leases for offices which are no longer occupied by the Company but for which the Company then retained responsibility for future lease payments. For properties which were exited, the Company recognized a liability for future lease rentals, service charges and property taxes for which it was liable, offset by anticipated future sublease rentals. The Company initially recorded a reserve of $0.5million at September 30, 2011 to cover these liabilities, which reserve has been fully utilized at September30, 2012.

As part of the Flexible New Deal contract, MAXIMUS was entitled to reimbursement for costs incurred as a consequence of early termination, as well as a contract settlement for payments the Company would have received for realizing certain long-term goals under the contract. During the year ended September 30, 2012, MAXIMUS received a payment of $2.7million for revenue foregone and $1.7million of cost recoveries, net of subcontractor expenses.

Contracts

During the year ended September30, 2012, the Company recorded a gain of $6.8million on a fixed price contract owing to changes in our estimate to complete the work and the execution of a change order. During the year ended September 30, 2011, the Company recorded a charge of $7.3million on the same contract. The Company has no further liabilities relating to anticipated losses on this contract.

During the year ended September30, 2012, the Company signed an amendment on a significant Health Services contract. As a consequence, the Company recognized additional revenue in the period of $10.2million.

Employment agreements

The Company has an employment agreement with its chief executive officer with a term ending in fiscal 2014.

Collective bargaining agreements

Approximately 15% of our employees are covered by collective bargaining agreements or similar arrangements. These agreements are typically renewed annually.

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Property and equipment

12 Months Ended

Sep. 30, 2012

Property and equipment

Property and equipment

8. Property and equipment

Property and equipment, at cost, consist of the following (in thousands):

	As of September 30,
	2012			2011
Land	$	1,800		$	1,800
Building and improvements	11,588			11,485
Office furniture and equipment	107,859			94,558
Leasehold improvements	20,263			9,798
	141,510			117,641
Less: Accumulated depreciation and amortization	(82,712		)	(65,901		)
Total property and equipment, net	$	58,798		$	51,740

Fixed asset depreciation expense for the years ended September 30, 2012, 2011 and 2010 was $18.8 million, $15.1 million and $12.9 million respectively.

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Goodwill and intangible assets (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Changes in goodwill
Balance at the beginning of the period	$ 71,323	$ 71,251
Acquisition of PSI	39,161
Foreign currency translation	1,548	72
Balance at the end of the period	112,032	71,323
Health Services
Changes in goodwill
Balance at the beginning of the period	43,242	43,270
Acquisition of PSI	19,898
Foreign currency translation	377	(28)
Balance at the end of the period	63,517	43,242
Human Services
Changes in goodwill
Balance at the beginning of the period	28,081	27,981
Acquisition of PSI	19,263
Foreign currency translation	1,171	100
Balance at the end of the period	$ 48,515	$ 28,081

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Accounts receivable reserve

12 Months Ended

Sep. 30, 2012

Accounts receivable reserve

Accounts receivable reserve

6. Accounts receivable reserve

In evaluating the net realizable value of accounts receivable, the Company considers such factors as current economic trends, customer credit-worthiness, and changes in the customer payment terms and collection trends. Changes in the assumptions used in analyzing a specific account receivable may result in a reserve being recognized in the period in which the change occurs.

Changes in the reserves against current billed accounts receivable were as follows (in thousands):

	Year ended September 30,
	2012			2011			2010
Balance at beginning of year	$	3,265		$	1,845		$	5,249
Additions to reserve	2,061			3,063			1,594
Deductions	(1,351		)	(1,643		)	(4,998		)
Balance at end of year	$	3,975		$	3,265		$	1,845

At September 30, 2012 and 2011, $3.2 million and $4.2 million of our billed receivables related to amounts pursuant to contractual retainage provisions. We anticipate that the majority of the fiscal 2012 balance will be collected during the 2013 fiscal year.

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Goodwill and intangible assets

12 Months Ended

Sep. 30, 2012

Goodwill and intangible assets

Goodwill and intangible assets

7. Goodwill and intangible assets

Changes in goodwill for the years ended September 30, 2012 and 2011 are as follows (in thousands):

	Health Services			Human Services		Total
Balance as of September 30, 2010	$	43,270		$	27,981	$	71,251
Foreign currency translation	(28		)	100		72
Balance as of September 30, 2011	43,242			28,081		71,323
Goodwill acquired with PSI (Note 5)	19,898			19,263		39,161
Foreign currency translation	377			1,171		1,548
Balance as of September 30, 2012	$	63,517		$	48,515	$	112,032

During the year ended September 30, 2012, the Company acquired PSI, resulting in additional goodwill of $39.2 million.

There have been no impairment charges in our goodwill related to continuing operations.

The following table sets forth the components of intangible assets (in thousands):

	As of September 30, 2012						As of September 30, 2011
	Cost		Accumulated Amortization		Intangible Assets, net		Cost		Accumulated Amortization		Intangible Assets, net
Technology-based intangible assets	$	9,114	$	4,909	$	4,205	$	7,146	$	4,097	$	3,049
Customer relationships	20,167		3,082		17,085		3,454		1,513		1,941
Trademarks	4,450		497		3,953		620		102		518
Non-compete arrangements	254		167		87		242		99		143
Total	$	33,985	$	8,655	$	25,330	$	11,462	$	5,811	$	5,651

The intangible assets include $3.4 million of fully-amortized technology-based assets still in use by the Company. The Company’s intangible assets have a weighted average remaining life of 6.3 years, comprising 4.7 years for technology-based intangible assets, 7.1 years for customer contracts and relationships, 4.9 years for the trademarks and 1.3 years for non-compete arrangements. Amortization expense for the years ended September 30, 2012, 2011 and 2010 was $2.7 million, $2.2 million and $2.1 million, respectively. Future amortization expense is estimated as follows (in thousands):

	Future amortization expense
Year ending September 30, 2013	$	4,921
Year ending September 30, 2014	3,816
Year ending September 30, 2015	3,795
Year ending September 30, 2016	3,795
Year ending September 30, 2017	3,412
Thereafter	5,591
Total	$	25,330

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Software development costs

12 Months Ended

Sep. 30, 2012

Software development costs

Software development costs

9. Software development costs

Software development costs consist of the following (in thousands):

	As of September 30,
	2012			2011
Capitalized software development costs	$	46,767		$	40,798
Less: Accumulated amortization	(19,377		)	(14,182		)
Total Software development costs, net	$	27,390		$	26,616

Capitalized software amortization expense for the years ended September 30, 2012, 2011 and 2010 was $4.9 million, $5.5 million and $3.4 million respectively.

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Deferred contract costs (Details) (USD $)	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Deferred contract costs
Deferred contract costs	$ 16,147,000	$ 12,826,000
Less: accumulated amortization	(6,863,000)	(4,806,000)
Total deferred contract costs, net	9,284,000	8,020,000
Deferred contract cost amortization expense	$ 2,000,000	$ 1,700,000	$ 1,700,000

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Commitments and contingencies (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended	1 Months Ended		12 Months Ended		12 Months Ended
	Sep. 30, 2012	Mar. 31, 2009 Medicaid Agency	Apr. 30, 2012 School MAX Customers More than	Sep. 30, 2012 Flexible New Deal contract	Sep. 30, 2011 Flexible New Deal contract	Sep. 30, 2012 Contracts	Sep. 30, 2011 Contracts
Commitments and Contingencies
Amount of claim		$ 2.3	$ 10.0
Reserve recorded to cover the liabilities					0.5
Claim received for revenue foregone				2.7
Cost recoveries, net of subcontractor expenses				1.7
Charge on a fixed price contract						6.8	7.3
Additional revenue recognized from significant contract						$ 10.2
Collective bargaining agreements
Percentage of employees covered by collective bargaining agreements	15.00%

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Software development costs (Details) (USD $)	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Software development costs
Capitalized software development costs	$ 46,767,000	$ 40,798,000
Less: Accumulated amortization	(19,377,000)	(14,182,000)
Total Software development costs, net	27,390,000	26,616,000
Capitalized software amortization expense	$ 4,900,000	$ 5,500,000	$ 3,400,000

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Earnings per share (Tables)

12 Months Ended

Sep. 30, 2012

Earnings per share

Schedule of the components of basic and diluted earnings (loss) per share

	Year ended September 30,
	2012		2011			2010
Numerator:
Income from continuing operations	$	76,099	$	82,142		$	69,397
Income (loss) from discontinued operations	34		(974		)	1,012
Net income	$	76,133	$	81,168		$	70,409
Denominator:
Weighted average shares outstanding	33,867		34,417			34,827
Effect of dilutive securities:
Employee stock options and unvested restricted stock awards	939		1,114			1,103
Denominator for diluted earnings per share	34,806		35,531			35,930

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Business segments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Revenue:
Revenue	$ 300,736	$ 266,353	$ 243,452	$ 239,603	$ 250,107	$ 238,296	$ 227,116	$ 214,114	$ 1,050,145	$ 929,633	$ 831,749
Gross Profit:
Gross profit	84,629	78,701	64,766	59,847	68,227	66,399	63,066	55,959	287,943	253,651	220,833
Selling, general, and administrative expense:
Selling, general and administrative expense	42,810	43,877	37,959	32,756	34,560	35,259	33,572	28,667	157,402	132,058	118,778
Operating income from continuing operations (before income taxes):
Acquisition-related expenses and legal and settlement expense, net									(2,966)	808	5,351
Operating income (loss) from continuing operations (before income taxes)	39,973	33,299	27,398	26,905	34,836	30,779	29,494	27,292	127,575	122,401	107,406
Depreciation and amortization									26,460	22,845	18,340
Identifiable assets:	695,293				565,279				695,293	565,279
Health Services
Revenue:
Revenue	181,564	170,403	161,170	158,043	156,303	141,788	137,779	130,011	671,181	565,881	514,258
Gross Profit:
Gross profit									172,456	147,239	130,276
Selling, general, and administrative expense:
Selling, general and administrative expense									91,837	72,524	65,551
Operating income from continuing operations (before income taxes):
Operating income (loss) from continuing operations (before income taxes)	19,982	25,652	18,202	16,783	20,617	15,923	19,352	18,823	80,619	74,715	64,725
Depreciation and amortization									14,257	12,120	9,055
Identifiable assets:	266,017				224,400				266,017	224,400
Human Services
Revenue:
Revenue	119,172	95,950	82,282	81,560	93,804	96,508	89,337	84,103	378,964	363,752	317,491
Gross Profit:
Gross profit									115,487	106,412	90,557
Selling, general, and administrative expense:
Selling, general and administrative expense									65,565	59,590	51,067
Operating income from continuing operations (before income taxes):
Operating income (loss) from continuing operations (before income taxes)	21,822	9,187	8,605	10,308	13,288	14,908	10,123	8,503	49,922	46,822	39,490
Depreciation and amortization									8,790	7,842	6,623
Identifiable assets:	305,376				212,791				305,376	212,791
Corporate/Other
Selling, general, and administrative expense:
Selling, general and administrative expense										(56)	2,160
Operating income from continuing operations (before income taxes):
Operating income (loss) from continuing operations (before income taxes)	15	(15)			(238)	309	19	(34)		56	(2,160)
Depreciation and amortization									3,413	2,883	2,662
Identifiable assets:	$ 123,900				$ 128,088				$ 123,900	$ 128,088

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Employee benefit plans and deferred compensation

12 Months Ended

Sep. 30, 2012

Employee benefit plans and deferred compensation

Employee benefit plans and deferred compensation

14. Employee benefit plans and deferred compensation

The Company has 401(k) plans for the benefit of all employees who meet certain eligibility requirements. The plans provide for Company match, specified Company contributions, and/or discretionary Company contributions. During the years ended September 30, 2012, 2011 and 2010, the Company contributed $3.0 million, $3.0 million and $3.2 million to the 401(k) plans, respectively.

The Company also has a deferred compensation plan, which is a non-qualified plan available to a restricted number of highly compensated employees. The plan enables participants to defer compensation for tax purposes. These deferred employee contributions are held within a rabbi trust with investments directed by the respective employees. The assets of the rabbi trust are available to satisfy the claims of general creditors in the event of bankruptcy of the Company. The balance sheet at September 30, 2012 includes $1.5 million of cash and cash equivalents; an asset of $9.2 million related to life insurance assets, which are held at cash surrender value; and liabilities totaling $12.4 million related to the deferred compensation plan liabilities.

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Quarterly information (unaudited)

12 Months Ended

Sep. 30, 2012

Quarterly information (unaudited)

Quarterly information (unaudited)

19. Quarterly information (unaudited)

Set forth below are selected quarterly income statement data for the fiscal years ended September 30, 2012 and 2011. The Company derived this information from unaudited quarterly financial statements that include, in the opinion of Company’s management, all adjustments necessary for a fair presentation of the information for such periods. Results of operations for any fiscal quarter are not necessarily indicative of results for any future period.

Earnings per share amounts are computed independently each quarter. As a result, the sum of each quarter’s earnings per share amount may not equal the total earnings per share amount for the respective year.

	Quarter Ended
	Dec. 31, 2011		March 31, 2012			June 30, 2012			Sept. 30, 2012
	(In thousands, except per share data)
Fiscal Year 2012
Revenue:
Health Services	$	158,043	$	161,170		$	170,403		$	181,564
Human Services	81,560		82,282			95,950			119,172
Total revenue	239,603		243,452			266,353			300,736
Gross profit	59,847		64,766			78,701			84,629
Selling, general and administrative expenses	32,756		37,959			43,877			42,810
Operating income from continuing operations:
Health Services	16,783		18,202			25,652			19,982
Human Services	10,308		8,605			9,187			21,822
Consolidating adjustments	—		—			(15		)	15
Acquisition-related expenses	—		233			1,877			766
Legal and settlement expenses (recovery), net	186		(824		)	(352		)	1,080
Operating income from continuing operations	26,905		27,398			33,299			39,973
Discontinued operations, net of income taxes
Income/(loss) from discontinued operations	—		—			—			—
Loss on disposal	46		62			9			(83		)
Loss from discontinued operations	46		62			9			(83		)
Net income	$	17,704	$	14,273		$	20,485		$	23,671
Basic earnings per share:
Income from continuing operations	$	0.52	$	0.42		$	0.60		$	0.70
Loss from discontinued operations	0.01		—			—			—
Basic earnings per share	$	0.53	$	0.42		$	0.60		$	0.70
Diluted earnings per share:
Income from continuing operations	$	0.51	$	0.41		$	0.59		$	0.68
Loss from discontinued operations	—		—			—			—
Diluted earnings per share	$	0.51	$	0.41		$	0.59		$	0.68

	Quarter Ended
	Dec. 31, 2010			March 31, 2011			June 30, 2011			Sept. 30, 2011
	(In thousands, except per share data)
Fiscal Year 2011
Revenue:
Health Services	$	130,011		$	137,779		$	141,788		$	156,303
Human Services	84,103			89,337			96,508			93,804
Total revenue	214,114			227,116			238,296			250,107
Gross profit	55,959			63,066			66,399			68,227
Selling, general and administrative expenses	28,667			33,572			35,259			34,560
Operating income from continuing operations:
Health Services	18,823			19,352			15,923			20,617
Human Services	8,503			10,123			14,908			13,288
Consolidating adjustments	(34		)	19			309			(238		)
Legal and settlement expense (recovery), net	—			—			361			(1,169		)
Operating income from continuing operations	27,292			29,494			30,779			34,836
Discontinued operations, net of income taxes
Income/(loss) from discontinued operations	—			(265		)	(65		)	197
Loss on disposal	(105		)	(554		)	(3		)	(179		)
Loss from discontinued operations	(105		)	(819		)	(68		)	18
Net income	$	17,482		$	18,219		$	19,892		$	25,575
Basic earnings per share:
Income from continuing operations	$	0.51		$	0.55		$	0.58		$	0.75
Loss from discontinued operations	—			(0.02		)	(0.01		)	—
Basic earnings per share	$	0.51		$	0.53		$	0.57		$	0.75
Diluted earnings per share:
Income from continuing operations	$	0.50		$	0.54		$	0.56		$	0.73
Loss from discontinued operations	(0.01		)	(0.03		)	—			—
Diluted earnings per share	$	0.49		$	0.51		$	0.56		$	0.73

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Business and summary of significant accounting policies (Details 3)	12 Months Ended
	Sep. 30, 2012
Buildings
Property and Equipment
Estimated useful lives	39 years 6 months
Office furniture and equipment. | Minimum
Property and Equipment
Estimated useful lives	3 years
Office furniture and equipment. | Maximum
Property and Equipment
Estimated useful lives	7 years
Software development costs. | Minimum
Property and Equipment
Estimated useful lives	3 years
Software development costs. | Maximum
Property and Equipment
Estimated useful lives	8 years

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Leases (Tables)

12 Months Ended

Sep. 30, 2012

Leases

Schedule of minimum future payments under leases

	Operating Leases
Year ended September 30,
2013	$	36,395
2014	28,048
2015	21,459
2016	10,081
2017	8,473
Thereafter	9,302
Total minimum lease payments	$	113,758

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CONSOLIDATED BALANCE SHEETS (Parenthetical) In Thousands, unless otherwise specified	Sep. 30, 2012	Sep. 30, 2011
CONSOLIDATED BALANCE SHEETS
Common stock, shares authorized	60,000	60,000
Common stock, shares issued	56,516	56,018
Common stock, shares outstanding	33,985	33,793
Treasury stock, shares	22,531	22,225

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Concentrations of Credit Risk and Major Customers

12 Months Ended

Sep. 30, 2012

Concentrations of Credit Risk and Major Customers

Concentrations of Credit Risk and Major Customers

3. Concentrations of Credit Risk and Major Customers

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of accounts receivable, billed and unbilled.

The Company operates predominantly in the United States. Revenue from foreign-based projects and offices was 26%, 32%, and 27% of total revenue for the years ended September 30, 2012, 2011 and 2010, respectively.

In fiscal 2012, approximately 61% of our total revenue was derived from state and local government agencies whose programs received significant federal funding; 26% from foreign customers; 9% from federal government agencies; and 4% from other sources, such as commercial customers.

The Company has three customers who each provide over 10% of the Company’s annual revenues; the government of the Commonwealth of Australia and the governments of the States of California and Texas. Revenue from Australia is exclusively within the Human Services segment and revenue from Texas and California is principally recorded by the Human Services segment. The proportion of revenue recognized from each of these customers is as follows:

	Year ended September 30,
	2012		2011		2010
Texas	18	%	16	%	16	%
Australia	16	%	19	%	16	%
California	10	%	11	%	12	%

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Acquisitions (Details 4) (DeltaWare)	12 Months Ended				12 Months Ended
	Sep. 30, 2012 USD ($)	Sep. 30, 2011 USD ($)	Sep. 30, 2012 CAD	Feb. 10, 2010 USD ($)	Sep. 30, 2012 Profitability targets USD ($)	Sep. 30, 2011 Profitability targets USD ($)	Sep. 30, 2012 Sales targets USD ($)	Sep. 30, 2012 Sales targets CAD	Feb. 10, 2010 Profitability and Sales Targets CAD
Acquisition Disclosures
Future additional payments									7,000,000
Contingent consideration payment made					2,100,000	1,000,000
Contingent consideration, fair value as of acquisition date				3,015,000
Contingent consideration arrangements related to sale of acquiree products							4,000,000	4,000,000
Additional estimated consideration, long-term portion	400,000
Contingent consideration payable based upon sales of acquiree products			1,000,000
Acquisition-related contingent consideration
Balance at the beginning of the period	2,228,000
Additional estimated consideration	101,000	200,000
Payment of consideration	(2,059,000)
Foreign currency translation	136,000
Balance at the end of the period	$ 406,000	$ 2,228,000

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Stock-based compensation (Details) (USD $)	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Stock-Based Compensation
Shares available for grants (in shares)	1,647,669,000,000
Information pertaining to stock options vested and exercised
Total income tax benefit recognized	$ 4,300,000	$ 3,700,000	$ 3,100,000
RSUs
Stock-Based Compensation
Compensation expense recognized	12,100,000	9,400,000	7,100,000
Summary of RSU activity
Non-vested shares outstanding at the beginning of the period (in shares)	1,527,686
Granted (in shares)	414,894
Vested (in shares)	(452,804)
Forfeited (in shares)	(43,706)
Non-vested shares outstanding at the end of the period (in shares)	1,446,070	1,527,686
Weighted-Average Grant-Date Fair value
Non-vested shares outstanding at the beginning of the period (in dollars per share)	$ 22.64
Granted (in dollars per share)	$ 42.01	$ 31.80	$ 23.58
Vested (in dollars per share)	$ 24.32
Forfeited (in dollars per share)	$ 21.35
Non-vested shares outstanding at the end of the period (in dollars per share)	$ 27.71	$ 22.64
Total fair value	25,000,000	14,500,000	9,900,000
Total unrecognized compensation cost related to unvested RSUs	28,100,000
Unrecognized compensation cost period expected to be realize	4 years
Weighted Average Disclosure
Weighted average remaining life	1 year 7 months 6 days
Information pertaining to stock options vested and exercised
Cash paid to satisfy employees personal tax liability	4,500,000	3,500,000	3,200,000
RSUs awarded before 2009
Stock-Based Compensation
Award vesting period	6 years
RSUs awarded in 2009 and after
Stock-Based Compensation
Award vesting period	5 years
Stock options
Stock-Based Compensation
Award vesting period	4 years
Compensation expense recognized		100,000	800,000
Summary of stock option activity
Outstanding at the beginning of the period (in shares)	765,676
Exercised (in shares)	(404,563)
Forfeited or expired (in shares)	(934)
Outstanding at the end of the period (in shares)	360,179	765,676
Weighted Average Disclosure
Outstanding at the beginning of the period (in dollars per share)	$ 16.18
Exercised (in dollars per share)	$ 15.92
Forfeited or expired (in dollars per share)	$ 15.37
Outstanding at the end of the period (in dollars per share)	$ 16.52	$ 16.18
Intrinsic value of outstanding and exercisable stock options at the end of the period	15,600,000
Weighted average remaining life	2 years 6 months
Information pertaining to stock options vested and exercised
Aggregate intrinsic value of all stock options exercised	10,920,000	15,102,000	4,730,000
Net cash proceeds from exercise of stock options	6,441,000	12,482,000	5,948,000
Stock options | Maximum
Stock-Based Compensation
Compensation expense recognized	$ 100,000
Stock options issued prior to fiscal 2005
Stock-Based Compensation
Award vesting period	10 years
Stock options issued in fiscal 2005 and after
Stock-Based Compensation
Award vesting period	6 years

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Recent accounting pronouncements

12 Months Ended

Sep. 30, 2012

Recent accounting pronouncements

Recent accounting pronouncements

20. Recent accounting pronouncements

In May 2011, the FASB issued new guidance on fair value disclosure. The guidance changes certain fair value measurement principles and enhances the disclosure requirements, particularly for assets or liabilities which require valuation based upon a Company’s own information and assumptions. This guidance is effective for this year and has resulted in additional disclosures related to our acquisition related contingent consideration.

In 2011, the FASB issued new disclosure guidance related to the presentation of the Statement of Comprehensive Income. This guidance eliminates the current option to report other comprehensive income and its components in the consolidated statement of stockholders’ equity. The requirement to present reclassification adjustments out of accumulated other comprehensive income on the face of the consolidated statement of income has been deferred. We have adopted this accounting policy in this period. This adoption will not have any impact on our financial position or results of operations, but will impact our financial statement presentation.

In 2011, the FASB issued new accounting guidance that simplifies goodwill impairment tests. The new guidance states that a “qualitative” assessment may be performed to determine whether further impairment testing is necessary. We will adopt this accounting standard upon its effective date, which will be periods beginning after October 1, 2012. We do not anticipate that this adoption will have a significant impact on our financial position or results of operations.

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Quarterly information (unaudited) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Revenue:
Total revenue	$ 300,736	$ 266,353	$ 243,452	$ 239,603	$ 250,107	$ 238,296	$ 227,116	$ 214,114	$ 1,050,145	$ 929,633	$ 831,749
Gross Profit	84,629	78,701	64,766	59,847	68,227	66,399	63,066	55,959	287,943	253,651	220,833
Selling, general and administrative expenses	42,810	43,877	37,959	32,756	34,560	35,259	33,572	28,667	157,402	132,058	118,778
Operating income from continuing operations:
Acquisition-related expenses	766	1,877	233						2,876		254
Legal and settlement expenses (recovery), net	1,080	(352)	(824)	186	(1,169)	361			(90)	808	5,605
Operating income (loss) from continuing operations (before income taxes)	39,973	33,299	27,398	26,905	34,836	30,779	29,494	27,292	127,575	122,401	107,406
Discontinued operations, net of income taxes:
Income (loss) from discontinued operations					197	(65)	(265)			(133)	1,040
Gain (loss) on disposal	(83)	9	62	46	(179)	(3)	(554)	(105)	34	(841)	(28)
Income (loss) from discontinued operations	(83)	9	62	46	18	(68)	(819)	(105)	34	(974)	1,012
Net income	23,671	20,485	14,273	17,704	25,575	19,892	18,219	17,482	76,133	81,168	70,409
Basic earnings per share:
Income from continuing operations (in dollars per share)	$ 0.70	$ 0.60	$ 0.42	$ 0.52	$ 0.75	$ 0.58	$ 0.55	$ 0.51	$ 2.25	$ 2.39	$ 1.99
Income (loss) from discontinued operations (in dollars per share)				$ 0.01		$ (0.01)	$ (0.02)			$ (0.03)	$ 0.03
Basic earnings per share (in dollars per share)	$ 0.70	$ 0.60	$ 0.42	$ 0.53	$ 0.75	$ 0.57	$ 0.53	$ 0.51	$ 2.25	$ 2.36	$ 2.02
Diluted earnings per share:
Income from continuing operations (in dollars per share)	$ 0.68	$ 0.59	$ 0.41	$ 0.51	$ 0.73	$ 0.56	$ 0.54	$ 0.50	$ 2.19	$ 2.31	$ 1.93
Income (loss) from discontinued operations (in dollars per share)							$ (0.03)	$ (0.01)		$ (0.03)	$ 0.03
Diluted earnings per share (in dollars per share)	$ 0.68	$ 0.59	$ 0.41	$ 0.51	$ 0.73	$ 0.56	$ 0.51	$ 0.49	$ 2.19	$ 2.28	$ 1.96
Health Services
Revenue:
Total revenue	181,564	170,403	161,170	158,043	156,303	141,788	137,779	130,011	671,181	565,881	514,258
Gross Profit									172,456	147,239	130,276
Selling, general and administrative expenses									91,837	72,524	65,551
Operating income from continuing operations:
Operating income (loss) from continuing operations (before income taxes)	19,982	25,652	18,202	16,783	20,617	15,923	19,352	18,823	80,619	74,715	64,725
Human Services
Revenue:
Total revenue	119,172	95,950	82,282	81,560	93,804	96,508	89,337	84,103	378,964	363,752	317,491
Gross Profit									115,487	106,412	90,557
Selling, general and administrative expenses									65,565	59,590	51,067
Operating income from continuing operations:
Operating income (loss) from continuing operations (before income taxes)	21,822	9,187	8,605	10,308	13,288	14,908	10,123	8,503	49,922	46,822	39,490
Consolidating adjustments
Revenue:
Selling, general and administrative expenses										(56)	2,160
Operating income from continuing operations:
Operating income (loss) from continuing operations (before income taxes)	$ 15	$ (15)			$ (238)	$ 309	$ 19	$ (34)		$ 56	$ (2,160)

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Property and equipment (Tables)

12 Months Ended

Sep. 30, 2012

Property and equipment

Schedule of property, plant and equipment

	As of September 30,
	2012			2011
Land	$	1,800		$	1,800
Building and improvements	11,588			11,485
Office furniture and equipment	107,859			94,558
Leasehold improvements	20,263			9,798
	141,510			117,641
Less: Accumulated depreciation and amortization	(82,712		)	(65,901		)
Total property and equipment, net	$	58,798		$	51,740

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Leases

12 Months Ended

Sep. 30, 2012

Leases

Leases

13. Leases

The Company leases office space under various operating leases. The terms of leases typically provide for certain minimum payments as well as increases in lease payments based upon the operating cost of the facility and the consumer price index. Rent expense for the years ended September 30, 2012, 2011 and 2010 was $37.6 million, $32.0 million and $30.2 million respectively. Contingent lease rental expense, caused by CPI escalators in lease agreements, represented less than $0.2 million of this cost in any year.

Minimum future payments under leases in effect as of September 30, 2012 are as follows (in thousands):

	Operating Leases
Year ended September 30,
2013	$	36,395
2014	28,048
2015	21,459
2016	10,081
2017	8,473
Thereafter	9,302
Total minimum lease payments	$	113,758