The calculation is the task finish date - task baseline finish date.
There is a bug with the NSQL query for the Late Tasks and Milestones. The query is looking at the baseline finish date from the prtask table, instead of the prj_baseline_details table.
Fixed in PMO 1.3
Upgrade to PMO version 1.3. If you cannot upgrade at this time you can XOG in the attached file to fix the NSQL query.
Keywords: CLARITYKB, PMO-278, Late Tasks and Milestones, Days Late, Portlet, pmo11open, pmo12open.