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The Chief Financial Officers (CFO) Act of 1990 (HR 5607) requires Executive Branch agencies to produce audited financial statements for all trust funds, revolving funds, and accounts having substantial commercial activity starting as of the end of fiscal year 1991. Included in the CFO Act is a provision, section 3515(e) (3), that allows the Director of the Office of Management and Budget (OMB) to waive the requirement for preparation and/or audit of fiscal year 1991 financial statements.

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Our Department has made an assessment of all accounts, programs and activities that fall within the scope of the legislation. is attached at Enclosure A and requires coverage of 60 accounts which represent 80% of our outlays. We are making an early effort to aggressively engage in the preparation and audit of financial statements for those activities covered by the CFO Act. Our desire was to begin the process in FY 1991. Towards this end, we and our Inspector General have jointly developed a plan. However, the Administration's request for 1991 funding of this effort did not materialize.

Our present strategy takes into consideration major variables that affect early implementation of the legislation. The first is the absence of funding. The President's FY 1992 budget includes funding that will allow us to make major progress. A second variable involves the size and complexity of program activities.

We are now pursuing a phase-in strategy that will, by necessity, require some deferment in implementation. Accordingly, we must request OMB waiver for some of the CFO Act's requirements. Our revised plan is as follows:

1.

For FY 1991 we will continue the preparation and audit of all seven program activities of the Social Security Administration which account for $253 billion. These include:

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Payments to Social Security Trust Funds,

Supplemental Security Income Program,

Special Benefits for Disabled Coal Miners,

2.

3.

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Payments for Credits against Social Security
Contributions,

Federal Old-Age and Survivors Insurance Trust
Fund,

Federal Disability Insurance Trust Fund and

Limitation on Administrative Expense: (SSA).

In addition, we will prepare and audit statements for the Office of the Secretary Working Capital Fund.

For FY 1991 we will begin in FY 1991 to phase-in
preparation and audit of financial statements in the
Public Health Service. Initially, this will involve
selected accounts (e.g., FDA Revolving Fund for
Certification and Service, NIH Management Fund, NIH
Service and Supply Fund and OASH Service and Supply
Fund) and the balance of the accounts will be limited,
both in number and in scope, because of limited
existing resources. It will, therefore, be necessary
to obtain waivers for most of the 44 appropriation
accounts of the PHS. In addition, we will be forced to
delay and request waiver for FSA and HCFA programs. Be
assured we will do as much as we can with what we have
but, as has been made manifest to you, funding and
other resource constraints greatly limit our capacity.

As new resources arrive in FY 1992, they will allow us to produce FY 1992 financial statements that will be audited for all HHS accounts (60) falling within the purview of the CFO Act.

It should be noted that for FY 1991, HHS will have audited financial statements incorporating a minimum of 56% of HHS outlays and in excess of $250 billion dollars. For FY 1992 over 50% of HHS accounts will be included in audited financial statements. That will incorporate approximately 80% of the Department's outlays, the remainder of which falls outside the scope established by the CFO Act.

Based upon the aforementioned plan, and in accordance with the waiver provision of the CFO Act, I am requesting a waiver of the preparation and audit of the FY 1991 financial statements as described above and as itemized in Enclosure B.

If there are questions regarding our phase-in plan or waiver request, your staff should feel free to contact Dennis Fischer, Deputy Assistant Secretary for Finance (202-245-2084).

Sincerely yours,

M

Kevin Moley

Assistant Sedetary for
Management and Budget

Enclosures

Enclosure A

ANALYSIS OF HHS ACCOUNTS UNDER THE CHIEF FINANCIAL OFFICER LEGISLATION

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ANALYSIS OF HHS ACCOUNTS UNDER THE CHIEF FINANCIAL OFFICER LEGISLATION

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ANALYSIS OF HHS ACCOUNTS UNDER THE CHIEF FINANCIAL OFFICER LEGISLATION

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