B-159797, APR. 3, 1968
Highlights
UNTIL FORTY-FIVE DAYS AFTER THE COMPTROLLER GENERAL OF THE UNITED STATES (AFTER CONSULTATION WITH THE DIRECTOR OF THE BUREAU OF THE BUDGET) HAS REPORTED TO THE CONGRESS THAT IN HIS OPINION SUCH SYSTEM OR SYSTEMS ARE DESIGNED TO: (1) MEET THE REQUIREMENTS OF ALL APPLICABLE LAWS GOVERNING BUDGETING. WE HAVE CONCLUDED THAT THE COST ACCOUNTING SYSTEM FOR DEPARTMENT OF DEFENSE HOSPITALS CONSTITUTES A "NEW" SYSTEM UNDER THE PROVISIONS OF SECTION 640 (B). WHILE THESE INSTRUCTIONS WERE ISSUED PRIOR TO ENACTMENT OF SECTION 640 (B). THEY WERE NOT FULLY IMPLEMENTED AND. IT WAS THE PROPOSED IMPLEMENTATION OF THESE INSTRUCTIONS WHICH PROMPTED THE ENACTMENT OF SECTION 640 (B). 2. EXPENSES OF DOD HOSPITALS ARE PROPOSED TO BE AGGREGATED BY PROGRAM ELEMENT.
B-159797, APR. 3, 1968
TO MR. SECRETARY:
IN VARIOUS DISCUSSIONS BETWEEN REPRESENTATIVES OF YOUR DEPARTMENT AND THE GENERAL ACCOUNTING OFFICE AND MORE RECENTLY BY THE ASSISTANT SECRETARY OF DEFENSE (COMPTROLLER) IN HIS LETTER OF FEBRUARY 16, 1968, A QUESTION HAS ARISEN AS TO WHETHER THE COST ACCOUNTING SYSTEM FOR DEPARTMENT OF DEFENSE HOSPITALS CONSTITUTES A "NEW -COST-BASED- OR EXPENSE-BASED- SYSTEM OR SYSTEMS OF ACCOUNTING" WITHIN THE MEANING OF THAT TERM AS USED IN SECTION 640 (B) OF THE DEPARTMENT OF DEFENSE APPROPRIATION ACT, 1968, PUBLIC LAW 90-96, 81 STAT. 249.
SECTION 640 (B) OF THE DEPARTMENT OF DEFENSE APPROPRIATION ACT, 1968, PROVIDES AS FOLLOWS:
"DURING THE CURRENT FISCAL YEAR NONE OF THE FUNDS AVAILABLE TO THE DEPARTMENT OF DEFENSE MAY BE USED TO INSTALL OR UTILIZE ANY NEW -COST BASED- OR -EXPENSE-BASED- SYSTEM OR SYSTEMS FOR ACCOUNTING, INCLUDING ACCOUNTING RESULTS FOR THE PURPOSES PRESCRIBED BY SECTION 113 (A) (4) OF THE BUDGET AND ACCOUNTING PROCEDURES ACT OF 1950 (31 U.S.C. 66A (A) (4) (, UNTIL FORTY-FIVE DAYS AFTER THE COMPTROLLER GENERAL OF THE UNITED STATES (AFTER CONSULTATION WITH THE DIRECTOR OF THE BUREAU OF THE BUDGET) HAS REPORTED TO THE CONGRESS THAT IN HIS OPINION SUCH SYSTEM OR SYSTEMS ARE DESIGNED TO: (1) MEET THE REQUIREMENTS OF ALL APPLICABLE LAWS GOVERNING BUDGETING, ACCOUNTING, AND THE ADMINISTRATION OF PUBLIC FUNDS AND THE STANDARDS AND PROCEDURES ESTABLISHED PURSUANT THERETO; (2) PROVIDE FOR UNIFORM APPLICATION TO THE EXTENT PRACTICABLE THROUGHOUT THE DEPARTMENT OF DEFENSE; AND (3) PREVENT VIOLATIONS OF THE ANTI-DEFICIENCY STATUTE (R.S. 3679; 31 U.S.C. 665).'
ON THE BASIS OF INFORMATION AVAILABLE TO US, WE HAVE CONCLUDED THAT THE COST ACCOUNTING SYSTEM FOR DEPARTMENT OF DEFENSE HOSPITALS CONSTITUTES A "NEW" SYSTEM UNDER THE PROVISIONS OF SECTION 640 (B). WE GAVE CONSIDERATION TO THE FOLLOWING PRIMARY FACTORS IN DRAWING OUR CONCLUSION:
1. THE DEPARTMENT OF DEFENSE INSTRUCTION NO. 7220.23, DATED FEBRUARY 15, 1968, ENTITLED "COST ACCOUNTING FOR DEPARTMENT OF DEFENSE HOSPITALS" INCORPORATES BY REFERENCE DOD INSTRUCTIONS 0.20,"EXPENSE DATA REQUIREMENTS" , DECEMBER 20, 1966; 7040.5,"DEFINITIONS OF EXPENSES AND INVESTMENT COSTS," SEPTEMBER 1, 1966; AND 7220.22,"ACCOUNTING SYSTEM FOR OPERATIONS," JANUARY 10, 1967. THESE INSTRUCTIONS ALSO REFERENCE OTHERS; FOR EXAMPLE, DOD INSTRUCTION 7220.15,"BUDGETING AND ACCOUNTING FOR THE COST OF MILITARY PERSONNEL SERVICES," JUNE 1, 1966. WHILE THESE INSTRUCTIONS WERE ISSUED PRIOR TO ENACTMENT OF SECTION 640 (B), THEY WERE NOT FULLY IMPLEMENTED AND, IN FACT, IT WAS THE PROPOSED IMPLEMENTATION OF THESE INSTRUCTIONS WHICH PROMPTED THE ENACTMENT OF SECTION 640 (B).
2. WHILE THE DEPARTMENTS OF THE ARMY AND NAVY DID USE COST ACCOUNTS IN THEIR HOSPITALS PRIOR TO THE ENACTMENT OF SECTION 640 (B), NONE OF THE HOSPITALS IN DOD HAD ACCOUNTING SYSTEMS WHICH INCLUDED ALL OF THE FEATURES NOW CONTEMPLATED. FOR EXAMPLE, EXPENSES OF DOD HOSPITALS ARE PROPOSED TO BE AGGREGATED BY PROGRAM ELEMENT, FUNCTIONAL CATEGORY, AND ELEMENT OF EXPENSE WHICH IS THE BASIC FORMAT PRESCRIBED IN THE OVERALL ACCOUNTING SYSTEM FOR OPERATIONS.
3. THE OPERATIONS OF HOSPITALS WHICH ARE EITHER UNDER THE COMMAND OF THE SURGEON GENERAL OF EACH OF THE SERVICES OR UNDER THE COMMAND OF THE INSTALLATION BASE COMMANDER ARE FINANCED BY OPERATION AND MAINTENANCE APPROPRIATIONS AND THE COST ACCOUNTING SYSTEM PRESCRIBED THEREFOR IS IN FACT AN INTEGRAL PART OF THE OVERALL ACCOUNTING SYSTEM FOR OPERATIONS WHICH UNDOUBTEDLY IS A "NEW" COST-BASED SYSTEM FOR ACCOUNTING UNDER THE PROVISIONS OF SECTION 640 (B). THE ACCOUNTING SYSTEM FOR OPERATIONS WILL COVER ALL FUNDS UNDER BOTH THE OPERATION AND MAINTENANCE AND MILITARY PERSONNEL APPROPRIATIONS.
IN VIEW OF THE FOREGOING, WE BELIEVE THAT THE COST ACCOUNTING SYSTEM FOR DOD HOSPITALS DOES INVOLVE THE INSTALLATION OR UTILIZATION OF A "NEW" COST -BASED OR EXPENSE-BASED SYSTEM FOR ACCOUNTING. THE ACCOUNTING SYSTEM FOR OPERATIONS IS PRESENTLY UNDER CONSIDERATION BY OUR OFFICE REGARDING ITS CONFORMANCE TO THE PROVISIONS OF SECTION 640 (B). ANY OPINION THAT WE RENDER IN REGARD TO THAT SYSTEM WOULD APPLY ALSO TO THE HOSPITAL COST ACCOUNTING SYSTEM.
COPIES OF THIS LETTER ARE BEING SENT TO THE CHAIRMAN OF THE HOUSE AND SENATE COMMITTEES ON APPROPRIATIONS.