HHS Lacks Accountability and Control Over accounting systems operated by HHS' operating divisions do not effectively account for and control the resources entrusted to the Department. We found the following: HHS' operating divisions lack effective accountability for and control over billions of dollars in appropriation fund balances. Advances to grant recipients are not being properly accounted for. SSA's accounting for receivables due from benefit overpayments is The Department cannot accurately account for hundreds of millions of The Department must have effective systems of accounting and internal control with which to monitor these funds and ensure that assets of the federal government are adequately safeguarded. Appendix II contains a detailed discussion of the internal control and accounting systems problems we found at the HHS operating divisions, and these matters are highlighted below. The Department's operating divisions lack effective accountability and internal control over billions of dollars in appropriation fund balances. We found unexpended fund balance differences of over $3 billion between their accounting records and the financial reports submitted to Treasury. The operating divisions did not know why these large differences existed because they had not periodically reconciled them. Consequently, they did not know the amount of funds they had available in various accounts. Likewise, the operating divisions did not reconcile large differences between the unobligated funds reported in their records and the reports forwarded to Treasury and, therefore, were not providing adequate fund control. For example, as of September 30, 1986, the last fiscal year for which data was available at the time of our review, we found that the Health Resources and Services Administration's general ledger unexpended fund balance was $3.1 billion more than the amount shown on the Year "The term "unexpended funds" generally refers to the obligated but not disbursed portion of an appropriation. In this context, the term also includes the unobligated portion of the appropriation. HHS Lacks Accountability and Control Over End Closing Statement (TFS Form 2108) submitted to Treasury. (See page 50 for an explanation of the Year-End Closing Statement.) The differences were not reconciled. This problem has existed since the current accounting system was implemented approximately 10 years ago. In addition, the Office of the Secretary's general ledger showed an unobligated fund balance of about $111 million for the Human Development Services appropriations, whereas about $18 million was reported as unobligated on the Year-End Closing Statement. Federal agencies are required to reconcile their unexpended fund balances with the amounts reported by Treasury to determine the correct amounts; HHS' operating divisions, however, did not adhere to this requirement. Instead, they reported back to Treasury the unexpended fund balances shown on the Year-End Closing Statements from Treasury. Therefore, to compensate for unexpended fund balance differences and to make their financial reports-Report on Financial Position (TFS Form 220) and Year-End Closing Statement—agree with Treasury's unexpended fund balances, the operating divisions made unsupported adjustments to accounts receivable, accounts payable, and advance amounts on these reports. For example, the Health Resources and Services Administration arbitrarily increased advances by $600 million in one appropriation and increased accounts payable by $200 million and $400 million, respectively, in two other appropriations on the Report on Financial Position and the Year-End Closing Statement in order for its unexpended fund balance to agree with that of Treasury. The operating divisions stated that they did not reconcile their fund balance differences for a variety of reasons. For example, the Acting Director of the Division of Accounting in the Office of the Secretary told us that reconciliations were not performed because they did not have sufficient staff. On the other hand, the Director of Fiscal Services at the Health Resources and Services Administration advised us that they lacked a monitoring system to ensure that this function was performed. Failure to reconcile differences and to identify the causes of these differences promotes the making of unsupported adjustments so that agency and Treasury records are forced into balance. This in turn leads to inadequate accountability for and control over appropriated funds and a distortion of financial data on obligations, receivables, restoration and withdrawals reported to Treasury. The problems we noted have plagued the Department for many years. In our report entitled Improvements Needed in Recording and Reporting HHS Lacks Accountability and Control Over Grant Are Not Accounted for Appropriation Data at Fiscal Year End (FGMSD-76-63, February 17, 1977), we identified $190 million in differences between the Health Services Administration's10 unexpended appropriation fund balance and Treasury's records, and we noted that these differences had not been reconciled. In addition, we noted that there was not adequate fund control, with millions of dollars of unsupported adjustments made to the accounting records so that they would balance with Treasury's records. The Department also lacked adequate accountability over advances to grant recipients. Although the advance balances in the operating divisions' general ledger systems and the Payment Management System— HHS' grant payment system—should agree, our analysis showed that they were substantially different. Consequently, program managers did not have accurate data to effectively monitor the billions of dollars in cash advances made to grant recipients annually. For example, the Health Resources and Services Administration's gen- f Audit The Office of the Secretary is not aggressively pursuing the collection of about $31 million in audit disallowances. Our review disclosed that its collection efforts were hampered by (1) inadequate documentation of the audit disallowance, (2) delays in recording the accounts receivable, and (3) the lack of written procedures for collecting audit disallowances. As a result, millions of dollars owed to the government may no longer be collectible. September 30, 1986, information—the most recent information available at the time of our review-showed that the Office of the Secretary accounting system contained 82 audit disallowance accounts. These audit disallowances totaled about $31 million and accounted for about 51 percent of the Office of the Secretary's total receivables. The Office 10 The Health Services Administration is now a part of the Health Resources and Services HHS Lacks Accountability and Control Over of the Secretary was only able to locate the case files for 73 audit disallowances valued at $26 million. The nine missing case files had a value of $5 million. We reviewed the 73 case files and found that collection action on these receivables consisted primarily of sending the debtor three letters requesting repayment. Collection efforts generally ceased after the letters were issued. Part of the difficulty in collecting these amounts stemmed from the lack of written debt collection procedures describing the actions to be followed in these cases. Office of the Secretary officials stated that an attempt was made in 1984 to write the procedures, but the person assigned this responsibility was reassigned to another job. The Department's problems in accounting for and collecting audit disal- In commenting on our report, the Department recognized the need to A's Subsidiary Accounts ceivable Systems Are adequate Over the years, the HHS Inspector General has identified serious system weaknesses in SSA's subsidiary accounts receivable systems, which accounted for more than $2.3 billion in benefit overpayments as of September 30, 1986. The weaknesses identified included (1) discrepancies between the collections recorded in SSA's Recovery of Overpayment, Accounting, and Reporting System and that reported by the SSA program service centers, and (2) weak procedural controls over the Old-Age and Survivors Insurance program and Disability Insurance program overpayments. As a result, SSA did not promptly account for and collect over $200 million in benefit overpayments owed the government. (See appendix II for a detailed explanation of these overpayments.) HHS Lacks Accountability and Control Over equate Control Over perty We followed up on the status of the accounting system weaknesses iden- In commenting upon our draft report, HHS stated that a redrafted plan to The Department did not operate accurate and reliable accounting sys- For example, we noted that the balance in the Health Resources and Ser- |