Managerial Cost Accounting Practices: Department of Health and Human Services and Social Security Administration

GAO-06-599R Published: Apr 18, 2006. Publicly Released: Apr 18, 2006.
Jump To:
Skip to Highlights
Highlights

Authoritative bodies have promulgated laws, accounting standards, information system requirements, and related guidance to emphasize the need for cost information and cost management in the federal government. For example, the Chief Financial Officers (CFO) Act of 1990, contains several provisions related to managerial cost accounting, one of which states that an agency's CFO should develop and maintain an integrated accounting and financial management system that provides for the development and reporting of cost information. Statement of Federal Financial Accounting Standards No. 4, Managerial Cost Accounting Concepts and Standards for the Federal Government, and the Joint Financial Management Improvement Program's (JFMIP) Framework for Federal Financial Management Systems established accounting standards and system requirements for managerial cost accounting (MCA) information at federal agencies. The Federal Financial Management Improvement Act of 1996 built on this foundation and required, among other things, CFO Act agencies to comply substantially with federal accounting standards and federal financial management systems requirements. In light of the requirements for federal agencies to prepare MCA information, Congress asked us to determine the extent to which federal agencies develop cost information and use it for managerial decision making. The objectives of our review were to determine how federal agencies generate MCA information as well as how governmental managers use cost information to support managerial decision making and provide accountability. This report summarizes information provided during our briefing to Congressional staff concerning our review of MCA practices at the Department of Health and Human Services (HHS) and the Social Security Administration (SSA). This was our third in a series of briefings concerning the status of MCA activities at large government agencies. Our first briefing covered the status of MCA activities at the Department of Veterans Affairs and the Department of Labor. Our second briefing covered the status of MCA activities at the Departments of Education, Transportation, and the Treasury.

Skip to Recommendations

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Health and Human Services To help ensure that HHS and its OPDIVS and Program Support Center (PSC) implement and use reliable MCA methodologies, the Secretary of HHS should take an active leadership role to promote the benefits and uses of MCA.
Closed - Implemented
In September 2014, HHS had provided a status update for this recommendation. Specifically, the update stated that OPDIVs and PSC are directed to use reliable MCA methodologies through HHS policy. This policy provides OPDIVs with the latitude to implement procedures based upon the OPDIV operating environment to ensure sound business decisions. HHS considers this recommendation to be implemented and closed.
Department of Health and Human Services To help ensure that HHS and its OPDIVS and PSC implement and use reliable MCA methodologies, the Secretary of HHS should direct appropriate department-level officials to develop procedures to monitor the implementation of its MCA policy at its OPDIVs and PSC.
Closed - Implemented
In September 2014, HHS provided a status update for this recommendation. The update specified that the HHS policy on Managerial Cost Accounting directs OPDIVs to develop procedures to monitor, track and report cost information for management decisions. This policy, in accordance with FASAB Statement of Federal Financial Standards 4: Managerial Cost Accounting Standards and Concepts, provides latitude to agencies to accumulate and report the costs of its activities for management information purposes either through the use of cost accounting systems or through the use of cost finding techniques.
Department of Health and Human Services To help ensure that HHS and its OPDIVS and PSC implement and use reliable MCA methodologies, the Secretary of HHS should direct appropriate officials to evaluate whether the Oracle Projects module will provide MCA information to support decision making at HHS, its OPDIVs, and PSC.
Closed - Implemented
In September 2014, HHS had provided a status update for this recommendation. The update stated that, as part of the UFMS implementation, HHS had evaluated and implemented Oracle Projects. In accordance with SFFAS No. 4 and HHS policy, OPDIVs use either the Oracle Projects module, or alternative cost methodologies to support decision making at HHS, its OPDIVs, and PSC. In addition to routine reports for management decision-making within an OPDIV, HHS annually reports the net cost of its programs by OPDIV, and also provides supplementary information for the net cost of its top 10 programs.
Social Security Administration To better understand the relationship of costs and revenues related to fees SSA collects for administering state SSI supplementation programs, the Commissioner of SSA should direct appropriate officials to study those costs to determine the full cost, including the cost of services provided by other entities for the benefit of SSA.
Closed - Implemented
SSA stated that it completed cost studies in fiscal year 2012 and a decision was made by SSA to update the Standard Time Values (STVs) used for costing out the full cost SSA incurs for processing state Social Security Insurance claims. SSA placed the new STVs into its Cost Analysis System for use in fiscal year 2013. According to SSA, this update allows SSA to more accurately capture the full cost of this work for the agency. SSA completed the roll out of the Employee Office Sampler (EOS) to the Disability State Agency offices and once SSA receives additional funding it will roll out EOS to the remaining operational components. SSA's actions addressed the intent of our recommendation.

Full Report