Financial Management:

Continued Top Management Support Needed to Improve HHS' Accounting Systems

AFMD-88-37: Published: Sep 29, 1988. Publicly Released: Sep 29, 1988.

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GAO reviewed the Department of Health and Human Service's (HHS) financial management environment and its effectiveness in accounting for and controlling funds and other resources and reporting on its operations.

GAO found that the current HHS accounting systems did not effectively account for and control its resources, since: (1) there were unexpended fund balance differences of over $3 billion between the HHS accounting records and its financial reports; (2) HHS did not know the amount of funds it had available, advances made to grant recipients, and property it was responsible for controlling; and (3) HHS did not adequately identify all material accounting system weaknesses in its 1987 Financial Integrity Act (FMFIA) report. GAO also found that HHS did not aggressively pursue the collection of about $31 million in audit allowances because of: (1) inadequate documentation of the audit disallowance; (2) untimely recording of accounts receivable; and (3) the lack of written debt collection procedures. In addition, GAO found that: (1) since 1978, HHS has initiated two major departmentwide accounting system enhancement efforts, but neither was successful, partially because HHS operating divisions were not supportive; (2) HHS has developed a financial management plan, called the Phoenix Project Plan, which should improve the efficiency of its accounting systems and which has the support of the operating divisions; and (3) the Phoenix Project Plan did not clearly delineate how or if HHS will integrate its accounting system enhancement efforts with its efforts to improve its programmatic systems.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Assistant Secretary for Management (ASMB), through meetings with the Secretary, routinely highlights management issues, including financial management and budgetary updates. HHS felt that progress reports are more appropriately addressed to ASMB.

    Recommendation: The Secretary of Health and Human Services should closely monitor the accounting system enhancement efforts under the Phoenix Project Plan to ensure that known accounting system problems are corrected and improvements to the financial management environment are occurring. This can be accomplished through periodic briefings and progress reports from the Assistant Secretary for Management and Budget, the Department's Chief Financial Officer, on the operating divisions' system enhancement efforts, including information on slippages in costs and milestones.

    Agency Affected: Department of Health and Human Services

  2. Status: Closed - Implemented

    Comments: HHS reported five material nonconformances in its 1988 FMFIA report. Of these five nonconformances, two were identified by GAO and related to deficiencies in the area of reconciliation of general ledger balances with external reports and/or subsidiary systems.

    Recommendation: In order to help strengthen department accounting and internal control systems, the Secretary of Health and Human Services should identify all material accounting system weaknesses and the actions to be taken to correct the weaknesses in the annual HHS FMFIA report.

    Agency Affected: Department of Health and Human Services

  3. Status: Closed - Implemented

    Comments: Coopers and Lybrand completed a financial statement audit of the Office of the Secretary's Working Capital Fund as of September 30, 1988. HHS plans to have the financial statements of its other operating divisions audited in the future.

    Recommendation: In order to help strengthen the department accounting and internal control systems, the Secretary of Health and Human Services should build upon the Social Security Administration's efforts to have its financial statements prepared and audited by an independent party by expanding this effort to the other operating divisions.

    Agency Affected: Department of Health and Human Services

  4. Status: Closed - Implemented

    Comments: HHS has issued a formal change to the Accounting Manual, chapter 10-41, relating to the collection of audit disallowances.

    Recommendation: In order to help strengthen department accounting and internal control systems, the Secretary of Health and Human Services should develop written procedures for the collection of audit disallowances to ensure compliance with debt collection laws and regulations.

    Agency Affected: Department of Health and Human Services

  5. Status: Closed - Implemented

    Comments: HHS, as part of its FMFIA guidance, has directed the operating divisions to perform periodic reconciliations between their accounting records and internal and external financial reports.

    Recommendation: In order to help strengthen department accounting and internal control systems, the Secretary of Health and Human Services should direct the operating divisions to adhere to established accounting policies and procedures for performing periodic reconciliations between their accounting records and internal and external financial reports to determine the causes of differences and the correct amounts for fund balances, advances, receivables, and property.

    Agency Affected: Department of Health and Human Services

  6. Status: Closed - Implemented

    Comments: HHS believes that its system efforts are already being coordinated to avoid unnecessary development cost and to ensure system compatibility. The DHHS Standard Accounting Transaction Record will be used for all interface transactions between the accounting systems and departmental systems.

    Recommendation: The Secretary should direct the Assistant Secretary for Management and Budget to ensure that the system enhancement efforts under the Phoenix Project Plan are integrated with the programmatic system enhancement efforts to avoid unnecessary developmental cost and to provide for systems compatibility.

    Agency Affected: Department of Health and Human Services

 

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