Comments From the Department of Health
and Human Services

audit, and a reconciliation of HCFA's records occurred on November 13, 1986.

SSA is working to correct its property management efforts, and the Finance Office is obtaining disposal information. More important is the fact that the implementation of an efficient automated mechanism for accomplishing this activity is part of the contract awarded by SSA on March 31, 1988.

P. 27. GAO states ". . . the balance in the Health Resources and Services Administration's general ledger property account was greater than that shown in its property records by over $400 million as of September 30, 1986." HHS Comment HRSA has instituted a program in coordination with its field organizations, to reconcile and adjust its property accounts appropriately. HRSA believes that its existing guidelines are adequate for use in this effort, and expects that a greatly improved property management program will result. The reconciliation is expected to be completed by September 30, 1988.

19. P. 29. GAO states

The Health Resources and Services Administration's accounts payable balance on its Report on Financial Position was about $32 million greater than the amount in accounts payable balance from the general ledger. [HRSA] officials were unable to explain the reason for the difference." HHS Comment - HRSA advised GAO that this was the result of HRSA's delay in recording new obligations in their general ledger a condition which will be corrected when its new system is installed.

20. P. 46. SSA's costs are $12.3 for the contract recently awarded instead of the $9.4 million shown in Table 3.2.

13

Comments From the Department of Health
and Human Services

age 51.

ment 23.

age 51.

ent 24.

-ge 52.

ent 25.

Je 53.

ent 26.

le 56.

nt 27.

"

The Office of the

21. P. 64. GAO states
Secretary/Human Development Services' general ledger
unexpended fund balance was about $269 million less than
that reported by Treasury." HHS Comment Until the Phoenix
Project systems are fully implemented, OS has designed and
is now phasing into operation an automated process to
facilitate the needed reconciliations.

22. P. 64. GAO states "

-

The Food and Drug

Administration's general ledger unexpended fund balance was
approximately $39 million more than what Treasury reported
as available." HHS Comment · The number was constructed by
GAO from some documents not used by FDA for fund control
purposes. The balances reported by the FDA to Treasury were
correct. GAO comments fail to recognize the fund control
mechanisms used effectively by the FDA.

23. P. 65. GAO states "The Health Resources and Services
Administration, on the other hand, arbitrarily increased
advances by $600 million in one appropriation and increased
accounts payable by $200 million and $400 million
respectively in two other appropriations . . . in order for
the reports to balance." HHS Comment - The statement is not
accurate. These changes were not made "arbitrarily," but
were thoughtfully initiated and valid changes made by HRSA
to its financial reports to correct erroneous entries in its
records revealed through its own review. HHS components
will continue to need to manually reconcile many entries
until the necessary automated systems are implemented as
part of the Phoenix Project.

24.

25.

P. 72. GAO states ". . . at our request, the Department identified 2,037 open grants for which the performance period expired between January 1, 1984, and December 31, 1986." HHS Comment Each operating component involved is now provided monthly with a list of inactive grants so that they may initiate the actions to close such grants. The Department is also developing grant closeout procedures for situations where no final report of expenses is available. These procedures will be completed and coordinated with the HHS operating components by the end of August 1988. It should be noted, however, that many of the grants GAO cites involve little or no funds.

14

59.

t 16.

s 29 and 43.

27.

= 29.

30.

= 29.

38.

43.

41.

t 28.

Comments From the Department of Health
and Human Services

26. P. 77. GAO states . . the Inspector General reported that during the period January 1978 through December 1984, SSA did not collect approximately $54 million in accounts receivable due to employees' errors and failure to record overpayment data in its Recovery of Overpayment, Accounting, and Reporting System." HHS Comment SSA acknowledges its

need to resolve this problem and has been negotiating its work priorities with the OIG. SSA expects to reach agreement with the OIG on an implementation strategy before the end of FY 1988.

ps. 36 & 47.
The GAO report is internally inconsistent.
For example, page 36 states that "It is essential that the
Department's Financial Integrity Act report fully disclose
all of its accounting system weaknesses," while page 38
advises HHS to "Disclose all serious accounting system
weaknesses," and page 37 requests "full disclosure."

Also, page 47 directs HHS to "integrate programmatic system
enhancement efforts with the Phoenix Project Plan,"
while page 54 advises HHS that its "programmatic systems be
coordinated with the system efforts under the Phoenix Plan.
..," and page 51 advises HHS to ". . move closer to
developing a single integrated system which would serve its
financial management needs and its managers." However, see
our comment to recommendation 7.

Comments From the Department of Health
and Human Services

The following are GAO's comments on the Department of Health and
Human Services' letter dated June 16, 1988.

O Comments

1. No change to the report is needed. We believe that an overview of t Department's financial management problems is needed (chapter 2) before the reader can appreciate the Department's current efforts to improve its financial management operations under the Phoenix Proje Plan (chapter 3).

2. Discussed in agency comments sections of executive summary and chapter 2.

3. Discussed in agency comments sections of executive summary and chapter 3.

4. Discussed in agency comments section of chapter 2.

5. Discussed in agency comments section of chapter 3.

6. The recommendation was revised to refer to the reporting of materi weaknesses under the Financial Integrity Act.

7. In light of the Department's previously unsuccessful system enhand ment efforts, it is vitally important that the Secretary actively partici pate at key decision points throughout the development and implementation of the Phoenix Project Plan.

8. The report has been amended to state that many of the Department reports are unreliable. As indicated in chapter 2, much of the informa tion included in the operating divisions' Year-End Closing Statements and Reports on Financial Position could not be traced back to their appropriate general ledger accounts. These key reports should give m agement an accurate assessment of the results of program and admini trative operations and be derived directly from data in the general ledger, as required by the Comptroller General's accounting principles and standards. We stated that the Department's reports must be supported by the general ledger, not that they must be from an automate system. We did, however, note that while past system enhancement efforts were unsuccessful, corrective actions are underway. Chapter 3 the report discusses the Department's current initiatives to improve it accounting systems.

Comments From the Department of Health and Human Services

9. Based upon the dollar differences we identified in appropriation fund balances and in advances to grant recipients and the recurring nature of some of these problems, we believe that the report accurately reflects the status of the Department's accounting systems in these areas. We do not agree with the Department's contention that the property problems are merely the result of a change in capitalization criteria. For example, at the Health Care Financing Administration, the accounting and property systems used different information to record the dollar value of property acquired, and property acquisitions and dispositions noted during the taking of physical inventories were recorded in the property system but not in the accounting system. Furthermore, in other sections of its comments (see comments 16 and 18 on pages 77 and 78) the Department agreed that problems in its accountability over property exist and stated that corrective actions were underway to correct the problems.

10. Report revised to reflect the SSA Statistics provided by the Department.

11. Report changed to indicate that SSA has appointed a Chief Financial Officer and has centralized all finance activities within the Office of the Chief Financial Officer. See also note d on page 38 of the report.

12. SSA statistics reflecting actual recoveries for 1984 were added to the report. The report has also been amended to reflect the need for SSA and the Internal Revenue Service to work together in reconciling the differences in employees' earning records.

13. Report changed to indicate that SSA has developed and is implementing an action plan to correct these deficiencies.

14. No change to the report is needed. Efforts to enhance the Health Resources and Services Administration's debt collection system are discussed on page 35.

15. We do not agree with the Department's contention that the $3.1 billion difference in the unexpended fund balance was due merely to a failure to post an account in a timely manner. During our review, we provided Health Resources and Services Administration officials with schedules that identified the differences between the general ledger and the Year-End Closing Statement by fiscal year and appropriation. Our schedules showed that 28 appropriation accounts are involved. Health Resources and Services Administration officials were unable to explain