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Performance and Accountability Report
|
|
2002 |
2001 |
|
Intragovernmental: |
|
|
|
Fund balance with Treasury |
$5 |
$45 |
|
Accounts receivable |
3 |
122 |
|
Other |
- |
- |
|
Total Intragovernmental |
$8 |
$167 |
|
|
|||
Accounts receivable |
$377 |
$34 |
|
Cash and other monetary assets |
- |
- |
|
Other |
- |
- |
|
Total non-entity assets |
$385 |
$201 |
|
Total entity assets |
377,523 |
344,980 |
|
Total Assets |
$377,908 |
$345,181 |
HHS' undisbursed account balances at September 30, 2002 and 2001 are listed below by fund type. Other Funds include balances in deposit, suspense, clearing and related non-spending accounts.
Fund Balances: |
|
|
|
2002 |
2001 |
Trust Funds |
$3,201 |
$508 |
Revolving Funds |
803 |
752 |
Appropriated Funds |
80,208 |
79,358 |
Other Fund Types |
560 |
331 |
Total |
$ 84,772 |
$ 80,949 |
|
||
Status of Fund Balance with Treasury |
|
|
|
2002 |
2001 |
Unobligated Balance |
|
|
Available |
$ 5,537 |
$ 1,336 |
Unavailable |
3,242 |
8,282 |
Obligated Balance not yet Disbursed |
75,993 |
71,331 |
Total |
$ 84,772 |
$ 80,949 |
Cash and Other Monetary Assets are the total amount of time account balances at the Medicare contractors' commercial banks. The Checks Paid Letter-of-Credit method is used for reimbursing Medicare contractors for the payment of covered Medicare services. Medicare contractors issue checks against a Medicare Benefits account maintained at commercial banks. In order to compensate commercial banks for handling the Medicare Benefits accounts, Medicare funds are deposited into non-interest bearing time accounts. The earnings allowances on the time accounts are used to reimburse the commercial banks. The account balance in FY 2002 was $375 million and in FY 2001 the balance was $137 million.
HHS invests trust fund cash in excess of current needs in U.S. Treasury securities. The U.S. Treasury Department is HHS' agent and advisor for investing. The majority of HHS' investments in securities are held to maturity and no provision is made for unrealized gains or losses. Investments at September 30, 2002 and 2001 are summarized below. All investments are considered entity assets.
As of September 30, 2002
|
Cost |
Unamortized (Premium) Discount |
Investments, Net |
Other Adjustments |
Market Value Disclosure |
Intragovernmental Securities |
|
|
|
|
|
Marketable |
$ 27 |
$ - |
$ 27 |
$ - |
$ 27 |
Non-Marketable: Par Value |
267,711 |
- |
267,711 |
- |
267,711 |
Non-Marketable: Market-based |
1,853 |
44 |
1,897 |
- |
1,897 |
Subtotal |
$269,591 |
$ 44 |
$269,635 |
$ - |
$269,635 |
Accrued Interest |
4,232 |
- |
4,232 |
- |
4,232 |
Total, Intragovernmental |
$273,823 |
$ 44 |
$273,867 |
$ - |
$273,867 |
As of September 30, 2001
|
Cost |
Unamortized (Premium) Discount |
Investments, Net |
Other Adjustments |
Market Value Disclosure |
Intragovernmental Securities |
|
|
|
|
|
Marketable |
$ 22 |
$ - |
$ 22 |
$ - |
$ 22 |
Non-Marketable: Par Value |
239,115 |
- |
239,115 |
(1) |
239,114 |
Non-Marketable: Market-based |
1,762 |
56 |
1,818 |
- |
1,818 |
Subtotal |
$240,899 |
$ 56 |
$240,955 |
$ (1) |
$240,954 |
Accrued Interest |
3,977 |
- |
3,977 |
- |
3,977 |
Total, Intragovernmental |
$ 244,876 |
$ 56 |
$244,932 |
$ (1) |
$244,931 |
CMS invests in U.S. Treasury Special Issues that are special public obligations for exclusive purchase by the Medicare trust funds. Special issues are always purchased and redeemed at face value. Certificates are short term and pay 4 3/8 percent. The bond interest rates range from 5 � percent to 8 � percent. The accrued interest receivable as of September 30, 2002 and 2001 was $4,232 million and $3,977 million, respectively.
HRSA's Vaccine Injury Compensation Trust Fund (VICP) and Ricky Ray Hemophelia Relief funds are invested in market-based(MK) special securities and One-Day Certificates. These non-marketable MK securities are Treasury securities that are not traded on any securities exchange but mirror the prices of marketable securities with similar terms. Currently, securities held by the VICP will mature in fiscal years 2003, 2004, 2006, and 2008.
NIH invests trust fund cash that is in excess of current needs in U.S. Treasury securities.
See Note 1 "Significant Accounting Policies" for information on amortization methods used.
HHS' accounts receivable at September 30, 2002 and 2001 are summarized below.
As of September 30, 2002
|
Accounts Receivable Principal |
Interest Receivable |
Accounts Receivable, Gross |
Allowance |
Net OPDIV Receivables Combined |
Intra-OPDIV Eliminations |
Net OPDIV Receivables Consolidated |
Inter-OPDIV Eliminations |
Net HHS Receivables Consol. |
Intragovernmental |
|
|
|
|
|
|
|
|
|
Entity |
$ 2,841 |
$ - |
$ 2,841 |
$ - |
$2,841 |
$(1,876) |
$ 965 |
$ (125) |
$ 840 |
Non-Entity |
3 |
- |
3 |
- |
3 |
- |
3 |
- |
3 |
Total, Intragovernmental |
$2,844 |
$ - |
$2,844 |
$ - |
$2,844 |
$(1,876) |
$ 968 |
$ (125) |
$ 843 |
|
|||||||||
With the Public |
|
|
|
|
|
|
|
|
|
Entity |
|
|
|
|
|
|
|
|
|
Medicare |
2,273 |
- |
2,273 |
(1,169) |
1,104 |
- |
1,104 |
- |
1,104 |
Other |
2,273 |
- |
2,273 |
(1,169) |
1,104 |
- |
1,104 |
- |
1,104 |
Non-Entity |
383 |
7 |
390 |
(13) |
377 |
- |
377 |
- |
377 |
Total, With the Public |
$ 8,992 |
$ 7 |
$ 8,999 |
$ (4,849) |
$ 4,150 |
$ - |
$ 4,150 |
$ - |
$ 4,150 |
As of September 30, 2001
|
Accounts Receivable Principal |
Interest Receivable |
Accounts Receivable, Gross |
Allowance |
Net OPDIV Receivables Combined |
Intra-OPDIV Eliminations |
Net OPDIV Receivables Consolidated |
Inter-OPDIV Eliminations |
Net HHS Receivables Consol. |
Intragovernmental |
|
|
|
|
|
|
|
|
|
Entity |
$ 5,123 |
$ 10 |
$ 5,133 |
$ - |
$ 5,133 |
$ (4,270) |
$ 863 |
$ (78) |
$ 785 |
Non-Entity |
122 |
- |
122 |
- |
122 |
- |
122 |
- |
122 |
Total, Intragovernmental |
$5,245 |
$ 10 |
$5,255 |
$ - |
$5,255 |
$(4,270) |
$ 985 |
$ (78) |
$ 907 |
|
|||||||||
With the Public |
|
|
|
|
|
|
|
|
|
Entity |
|
|
|
|
|
|
|
|
|
Medicare |
$ 7,522 |
$ - |
$ 7,522 |
$ (4,428) |
$ 3,094 |
$ - |
$ 3,094 |
$ - |
$ 3,094 |
Other |
1,267 |
- |
1,267 |
(230) |
1,037 |
- |
1,037 |
- |
1,037 |
Non-Entity |
6 |
568 |
574 |
(540) |
34 |
- |
34 |
- |
34 |
Total, With the Public |
$ 8,795 |
$ 568 |
$ 9,363 |
$ (5,198) |
$ 4,165 |
$ - |
$ 4,165 |
$ - |
$ 4,165 |
CMS' Medicare receivables are primarily due to overpayments to providers, beneficiaries, physicians and suppliers, and to claims where Medicare should be the secondary payer.
HHS non-entity receivable balances represent amounts that cannot be used by HHS once collected. Such receipts are transferred to the General Fund of the Department of the Treasury.
The allowance for loss on accounts receivable is based upon analytical procedures on both individual and group bases. Individual analysis considers the debtor's ability and willingness to pay, payment record, and probable recovery of amounts from secondary sources (i.e., liens, and garnishments). To estimate allowance for loss by groups, HHS stratifies receivables into groups exhibiting similar characteristics. Estimated losses are projected based upon statistical sampling or historical loss experience. The allowance is periodically reviewed and adjusted.
Medicaid - Beginning in FY 1996, CMS has accrued an expense and liability for Medicaid claims Incurred But Not Reported (IBNR) as of September 30th. In FY 2002, the IBNR expense exceeded the available unexpended Medicaid appropriations in the amount of $10,399 million. A review of the appropriation language by CMS' Office of General Counsel has resulted in a determination that the Medicaid appropriation's indefinite authority provision allows for the entire IBNR amount to be reported as a funded liability. Consequently, CMS has recorded a $10,399 million anticipated appropriation in FY 2002 for IBNR claims that exceeded the available appropriation. The amount of Anticipated Congressional Appropriation recorded as of September 30, 2001 was $11,166 million.
HRSA operates guaranteed loan programs for the Health Center and Health Education Assistance Loans (HEAL) programs. For HEAL, the Administration guarantees payment of principal and interest made by private lenders to medical students, in various approved fields of practice, in the event of default, death or permanent disability. Health Center Program (Post-1991) guarantees the loans to HRSA grantees, made by non-Federal lenders.
Total loans guaranteed under these programs, as of September 30, 2002 and 2001 are summarized as follows.
|
2002 |
2001 |
||||
HEAL Loan Guarantees: |
No. of Loans |
Amount |
No. of Loans |
Amount |
||
Pre-1992 loans |
63,403 |
$ 483 |
87,000 |
$ 730 |
||
&nbap; &nbap; Post-1991 loans |
94,238 |
2,254 |
108,000 |
2,444 |
||
Health Centers Loan Guarantees |
1 |
4 |
1 |
4 |
||
Total |
157,642 |
$ 2,741 |
195,001 |
$ 3,178 |
The receivable amount reported in the Balance Sheet represents defaulted loans, which have been paid to lenders under the guarantee. The lenders are required to perform certain procedures in an effort to collect amounts due prior to submitting the loan for payment under the guarantee. An allowance has been established for estimated uncollectible amounts on the loans. The allowance is based on management's assessment of the future collectibility analysis of these aged loans based on the last date of collection.
HHS' loans receivable at September 30, 2002 and 2001 are summarized below.
September 30, 2002:
Defaulted Guaranteed Loans: | Loans, Receivable, Principal | Interest Receivable | Loans Receivable, Gross | Allowance | Loans, Receivable, Net |
HEAL Loans (HRSA) |
|
|
|
|
|
Pre-1992 Loans |
$ 492 |
$ 12 |
$ 504 |
$ (201) |
$ 303 |
Post-1991 Loans |
87 |
2 |
89 |
(22) |
67 |
Subtotal |
$ 579 |
$ 14 |
$ 593 |
$ (223) |
$ 370 |
Other |
|
|
|
|
|
Pre-1992 Loans |
- |
- |
- |
- |
- |
Post-1991 Loans |
4 |
- |
4 |
(4) |
- |
Total |
$ 583 |
$ 14 |
$ 597 |
$ (227) |
$ 370 |
September 30, 2001:
Defaulted Guaranteed Loans: | Loans, Receivable, Principal | Interest Receivable | Loans Receivable, Gross | Allowance | Loans, Receivable, Net |
HEAL Loans (HRSA) |
|
|
|
|
|
Pre-1992 Loans |
$ 496 |
$ 13 |
$ 509 |
$ (134) |
$ 375 |
Post-1991 Loans |
65 |
2 |
67 |
(15) |
52 |
Subtotal |
$ 561 |
$ 15 |
$ 576 |
$ (149) |
$ 427 |
Other |
|
|
|
|
|
Post-1991 Loans |
4 |
- |
4 |
(4) |
- |
Total |
$ 565 |
$ 15 |
$ 580 |
$ (153) |
$ 427 |
The liability amount reported in the Balance Sheet represents future estimated payouts on defaulted loans under the loan guarantee program. The post-1991 loan guarantee liability is established based on criteria set forth in accordance to Credit Reform. This Act requires that the present value of cash outflows, associated with the estimated amount to be paid out under loan guarantees for each fiscal year, be calculated to determine the liability. The calculation is performed using a computer model established by OMB, utilizing assumptions made by the HEAL program based on historical data, such as default rates and interest rates. The liability is adjusted and accounted for independently each year based on loans issued annually under the guarantee. The pre-1992 loan guarantee liability for losses is established based upon an average default rate of approximately 3.95 percent in 2002 and 4.3 percent in 2001. The liability is adjusted each year for the change in default rates.
The loan guarantee liability is summarized as follows:
2002 | Restated 2001 | |
Loan Guarantee Liabilities: |
|
|
HEAL Loans (HRSA) |
|
|
Pre-1992 Loans |
$ 17 |
$ 30 |
Post-1991 Loans |
256 |
282 |
Subtotal |
$ 273 |
$ 312 |
Other |
|
|
Post-1991 Loans |
3 |
- |
Total Loan Guarantee Liabilities |
$ 276 |
$ 312 |
Loan guarantee subsidy expense:
Current year post-1991 HEAL subsidy methodology, using the credit subsidy model, was revised in fiscal year 2001, to account for historical interest rates versus applying current interest rates to the prior year Cohorts. Loan guarantee subsidy expense for the year ended September 2002 and 2001 is summarized as follows:
2002 | 2001 | |
Loan Defaults (Net of Recoveries) |
$ 9 |
$ 10 |
Interest cohort |
(24) |
(33) |
Other write-offs |
(20) |
3 |
Total current year subsidy |
$ (35) |
$ (20) |
Re-estimates |
(32) |
(39) |
Total Loan Guarantee Subsidy Expense |
$ (67) |
$ (59) |
HHS' inventory and related property, net at September 30, 2002 and 2001 are summarized below.
2002 | 2001 | |
Inventory Held for Sale: |
|
|
Inventory Held for Current Sale |
$ 29 |
$ 27 |
Total Inventory Held for Sale |
$ 29 |
$ 27 |
|
||
Operating Materials and Supplies: |
|
|
Operating Materials and Supplies Held for Use |
$ 10 |
$ 10 |
Operating Materials and Supplies Reserved for Future Use |
- |
8 |
Total Operating Materials and Supplies |
$ 10 |
$ 18 |
Stockpile Materials: |
|
|
Stockpile Materials Held for Emergency or Contingency |
$ 126 |
$ 22 |
Total Stockpile Materials |
$ 126 |
$ 22 |
Inventory and Related Property, Gross |
$ 165 |
$ 67 |
Less: Allowance for Loss/Obsolescence/Spoilage |
- |
- |
Inventory and Related Property, Net |
$ 165 |
$ 67 |
HHS inventories are comprised of inventory held for sale, operating materials and supplies used in general operations, and stockpile materials. Inventories are valued at historical cost.
NIH has an inventory of materials to support their day-to-day activities. The NIH inventory is valued using the moving average method and stated at cost. CDC is mandated by law to maintain vaccine stockpiles to meet unanticipated needs for the vaccines, and for use in national emergencies. Vaccine stockpiles are maintained by the vaccine manufacturers and consist of several types of vaccines. The PSC, through its Perry Point Supply Services Center, maintains an inventory of pharmaceutical items for sale to HHS components and other Federal agencies.
In FY 2002, CDC changed its accounting practice from reporting biological products inventory as an asset to expensing them as acquired.
Major categories of HHS Property, Plant and Equipment at September 30, 2002 and 2001 are listed below.
2002 | 2001 | |||||
|
Depreciation Method |
Estimated Useful Lives |
Acquisition Cost |
Accumulated Depreciation |
Net Book Value |
Net Book Value |
Land & Land Rights |
|
|
$ 48 |
$ - |
$ 48 |
$ 48 |
Improvements to Land |
Straight Line |
5-20 Yrs |
- |
- |
- |
- |
Construction in Progress |
|
|
890 |
- |
890 |
649 |
Buildings, Facilities & Other Structures |
Straight Line |
5-50 Yrs |
1,556 |
(785) |
771 |
1,206 |
Equipment |
Straight Line |
3-20 Yrs |
804 |
(388) |
416 |
392 |
Internal Use Software |
Straight Line |
Various |
70 |
(16) |
54 |
11 |
Assets Under Capital Lease |
Straight Line |
Life of |
60 |
(9) |
51 |
25 |
Leasehold Improvements |
Straight Line |
*Life of |
893 |
(367) |
526 |
- |
Totals |
|
|
$ 4,321 |
$ (1,565) |
$2,756 |
$ 2,331 |
*7 to 15 years or life of lease.
See Note 1. Significant Accounting Policies for capitalization criteria and thresholds. See the disclosure Deferred Maintenance in the Required Supplementary Information section for information on deferred maintenance for General PP&E.
Other Assets at September 30, 2002 and 2001 are comprised of the following, all of which are considered entity assets.
2002 | 2001 | |
Intragovernmental |
|
|
Advances to Other Federal Entities |
$ 430 |
$ 272 |
Other |
- |
13 |
OPDIV Combined, Intragovernmental |
430 |
285 |
Less: Intra-OPDIV Eliminations |
(277) |
(187) |
OPDIV Consolidated, Intragovernmental |
153 |
98 |
Less: Inter-OPDIV Eliminations |
(3) |
(4) |
HHS Consolidated, Intragovernmental |
$ 150 |
$ 94 |
With the Public |
|
|
Prepayments and Deferred Charges |
$ 3 |
$ 5 |
Travel Advances and Emergency Employee Salary Advances |
4 |
2 |
Other |
54 |
- |
HHS Consolidated, With the Public |
$ 61 |
$ 7 |
2002 | 2001 | |
Intragovernmental: |
|
|
Accounts Payable |
$ - |
$ - |
Accrued Payroll and Benefits |
16 |
17 |
Other |
702 |
367 |
Total Intragovernmental |
$ 718 |
$ 384 |
Entitlement Benefits Due and Payable |
$ 11,291 |
$ 7,779 |
Environmental and Disposal Costs |
14 |
15 |
Federal Employees and Veterans' Benefits |
8,174 |
7,501 |
Accrued Payroll and Benefits |
370 |
335 |
Other |
364 |
407 |
Total Liabilities Not Covered by Budgetary Resources |
$ 20,931 |
$ 16,421 |
Total Liabilities Covered by Budgetary Resources |
39,332 |
38,178 |
Total Liabilities |
$ 60,263 |
$ 54,599 |
Entitlement Benefits Due and Payable represents benefits due and payable to the public at year-end from entitlement programs enacted by law. In HHS the largest entitlement programs, which comprise the bulk of HHS entitlement spending, are the Medicare and Medicaid, which are managed by CMS.
Following is a summary of Entitlement Benefits Due and Payable at September 30, 2002 and 2001.
2002 | 2001 | |||||
|
Liabilities Covered by Budgetary Resources |
Liabilities Not Covered by Budgetary Resources |
Total |
Liabilities Covered by Budgetary Resources |
Liabilities Not Covered by Budgetary Resources |
Total |
Medicare |
$ 28,236 |
$ - |
$ 28,236 |
$ 27,081 |
$ - |
$ 27,081 |
Medicaid |
5,049 |
11,291 |
16,340 |
5,581 |
7,779 |
13,360 |
Totals |
$ 33,285 |
$ 11,291 |
$ 44,576 |
$ 32,662 |
$ 7,779 |
$ 40,441 |
HHS' Federal Employee and Veterans' Benefits at September 30, 2002 and 2001 are summarized below. These liabilities are not covered by budgetary resources.
2002 | 2001 | |
With the Public |
|
|
Liabilities Not Covered by Budgetary Resources |
|
|
PHS Commissioned Corp Pension Liability |
$ 5,913 |
$ 5,664 |
PHS Commissioned Corp Post-retirement Health Benefits |
1,984 |
1,545 |
Workers' Compensation Benefits (Actuarial FECA Liability) |
277 |
292 |
Total, Federal Employee and Veterans' Benefits |
$ 8,174 |
$ 7,501 |
PHS Commissioned Corps: HHS administers the Public Health Service (PHS) Commissioned Corps Retirement System for approximately 5,672 active duty officers and 4,605 retiree annuitants or survivors. Authorized by Public Law 78-410, it is a defined benefit plan and is noncontributory. The plan does not have accumulated assets; funding is provided entirely on a pay as you go basis by Congressional appropriations. Administrative costs are borne by the plan. The plan provides pension payments and medical benefits to eligible retirees. At September 30, 2002, the actuarial present value of accumulated plan pension benefits was $5,913 billion of which $536 million was not vested, and the liability for medical benefits was actuarially determined to be $1,984 million.
Significant assumptions used by the actuary in its reports on the pension and medical programs as of September 30, 2002, were as follows: interest on Federal securities of 6.25 percent, annual basic pay scale increase of 3.5 percent, and annual inflation of 3.0 percent. Withdrawal and retirement rates are based on the historical trends of officers in the PHS retirement system. The aggregate entry age normal actuarial cost method is used for both programs in the determination of their liabilities.
Workers' Compensation Benefits: The actuarial liability for future workers' compensation benefits includes the expected liability for death, disability, medical and miscellaneous costs for approved compensation cases.
FY 2002 | FY 2001 |
5.20% in Year 1 |
5.21% in Year 1 |
5.20% in Year 2 and thereafter |
5.21% in Year 2 and thereafter |
The liability is determined using a method that utilizes historical benefit payment patterns related to a specific incurred period to predict the ultimate payment related to that period. Consistent with past practice, these projected annual benefit payments have been discounted to present value using the OMB's economic assumptions for 10-year Treasury notes and bonds. Interest rate assumptions utilized for discounting in FY 2002 and 2001 appear above.
To provide more specifically for the effects of inflation on the liability for future workers' compensation benefits, wage inflation factors (cost of living adjustments or COLAs) and medical inflation factors (consumer price index medical or CPIMs) are applied to the calculation of projected future benefits. These factors are also used to adjust the methodology's historical payments to current year dollars. The compensation COLAs and CPIMs used in projections are displayed below as follows:
FY | COLA | CPIM |
2003 |
1.80% |
4.31% |
2004 |
2.67% |
4.01% |
2005 |
2.40% |
4.01% |
2006+ |
2.40% |
4.01% |
Environmental and Disposal Costs are the costs of removing, containing, and/or disposing of (1) hazardous waste from property, or (2) material and or property that consists of hazardous waste at a permanent or temporary closure or shutdown of associated PP&E.
Following is a summary of HHS' Environmental and Disposal Costs at September 30, 2002 and 2001. Based on guidance from the U.S. Department of Treasury , Intragovernmental costs of $3 million reported by FDA in FY 2001 have been reclassified as With The Public.
At September 30, 2002: |
|
|
|
|
With The Public |
||
|
Liabilities Covered by Budgetary Resources |
Liabilities Not Covered by Budgetary Resources |
Total |
CDC |
$ - |
$ 3 |
$ 3 |
FDA |
1 |
3 |
4 |
NIH |
- |
8 |
8 |
Consolidated HHS Totals |
$ 1 |
$ 14 |
$ 15 |
At September 30, 2001: |
|
|
|
|
|||
CDC |
$ - |
$ - |
$ - |
FDA |
1 |
4 |
5 |
NIH |
- |
11 |
11 |
Consolidated HHS Totals |
$ 1 |
$ 15 |
$ 16 |
Grant advances are liquidated upon the grantee's reporting of expenditures on the quarterly SF-272 Report (Federal Cash Transaction Report). In many cases, these reports are received several months after the grantee actually incurs the expense, resulting in an understated grant expense in the financial statements. To mitigate this, HHS developed Department wide procedures to estimate and accrue amounts due grantees for their expenses, both realized and accrued, through September 30, 2002 and 2001.
At fiscal year-end when OPDIVs record the estimated accrual for amounts due to grantees for their expenses, if the amount of outstanding advances exceeds the amount of the accrual, the OPDIV reports an asset for "Advances to Grantees." Otherwise, the OPDIV reports a liability called "Accrued Grant Liability", equal to the amount that the accrual exceeds the outstanding advances. For additional information on this subject see Note 1 under "Advances to Grantees/Accrued Grant Liability".
2002 | 2001 | |
Grant Advances Outstanding (before year-end grant accrual) |
$ 14,860 |
$ 12,609 |
Less: Estimated Accrual for Amounts Due to Grantees |
(18,340) |
(15,684) |
Net Grant Advances (Liability) |
$ (3,480) |
$ (3,075) |
All advances other than grant advances are reported in Note 11, "Other Assets."
At September 30, 2002:
Intragovernmental | With the Public | |||||
|
Liabilities Covered by Budgetary Resources |
Liabilities Not Covered by Budgetary Resources |
Total |
Liabilities Covered by Budgetary Resources |
Liabilities Not Covered by Budgetary Resources |
Total |
Advances from Others |
$ 1 |
$ - |
$ 1 |
$ - |
$ - |
$ - |
Deferred Revenue |
535 |
- |
535 |
384 |
- |
384 |
Liabilities for Deposit Funds, Clearing Accounts and Undeposited Collections |
2 |
- |
2 |
18 |
- |
18 |
Contingent Liabilities |
- |
269 |
269 |
- |
103 |
103 |
Capital Lease Liability |
- |
49 |
49 |
- |
6 |
6 |
Custodial Liabilities |
- |
383 |
383 |
- |
- |
- |
Vaccine Injury Compensation Program |
- |
- |
- |
- |
251 |
251 |
Other |
58 |
1 |
59 |
96 |
4 |
100 |
Combined OPDIV Totals |
$ 596 |
$ 702 |
$1,298 |
$ 498 |
$ 364 |
$ 862 |
Less: Intra-OPDIV Eliminations |
(277) |
- |
( 277) |
- |
- |
- |
Connsolidated OPDIV Totals |
$ 319 |
$ 702 |
$1,021 |
$ 498 |
$ 364 |
$ 862 |
Less: Inter-OPDIV Eliminations |
(54) |
- |
(54) |
- |
- |
- |
Consolidated HHS Totals |
$ 265 |
$ 702 |
$ 967 |
$ 498 |
$364 |
$ 862 |
At September 30, 2001:
Intragovernmental | With the Public | |||||
|
Liabilities Covered by Budgetary Resources |
Liabilities Not Covered by Budgetary Resources |
Total |
Liabilities Covered by Budgetary Resources |
Liabilities Not Covered by Budgetary Resources |
Total |
Deferred Revenue |
$ 205 |
$ 187 |
$ 392 |
$ 226 |
$ 29 |
$ 255 |
Liabilities for Deposit Funds, Clearing Accounts and Undeposited Collections |
15 |
- |
15 |
38 |
- |
38 |
Contingent Liabilities |
- |
- |
- |
6 |
- |
6 |
Capital Lease Liability |
- |
22 |
22 |
6 |
1 |
7 |
Custodial Liabilities |
- |
345 |
345 |
- |
50 |
50 |
Vaccine Injury Compensation Program |
- |
- |
- |
- |
327 |
327 |
Other |
4,714 |
- |
4,714 |
92 |
- |
92 |
Combined OPDIV Totals |
$4,934 |
$ 554 |
$5,488 |
$ 368 |
$ 407 |
$ 775 |
Less: Intra-OPDIV Eliminations |
(4,222) |
(187) |
(4,409) |
- |
- |
- |
Consolidated OPDIV Totals |
$ 712 |
$ 367 |
$1,079 |
$ 368 |
$ 407 |
$ 775 |
Less: Inter-OPDIV Eliminations |
(53) |
- |
(53) |
- |
- |
- |
Consolidated HHS Totals |
$ 659 |
$ 367 |
$1,026 |
$ 368 |
$ 407 |
$ 775 |
Deferred Revenue of $535 million is for the provision of goods and services. The Vaccine Injury Compensation Program (VICP), administered by HRSA, provides compensation for vaccine-related injury or death. The VICP liability of $251 million represents the estimated future payment value of injury claims outstanding for VICP as of September 30, 2002.
Through the issuance of grants, HRSA supports the operation of certain health centers under the Health Centers Consolidation Act of 1996. These grantees, and many of their health professionals, are provided malpractice insurance under the Federally Supported Health Centers Assistance Act. Settlement and awards are paid from a separate Fund in the Treasury (Appropriation 75x0365). Accordingly, there are numerous malpractice legal actions pending against these grantees, which, if settled, will be paid by HRSA. For FY2002, a preliminary contingent liability by HRSA's actuarial contractor is estimated to be $101 million. No loss accrual had been made for these cases outstanding at September 30, 2001.
Capital Leases: HHS and it's OPDIVS have entered into various capital leases with Indian tribes and the General Services Administrations (GSA) for office and warehouse space. Lease terms vary from one to twenty years. Capitalized assets acquired under capital lease agreements and the related liabilities are reported at the present value of the minimum lease payments.
Operating Leases: HHS and its components also have commitments under various operating leases with private entities and GSA for office, laboratory spaces, and land. Leases with private entities have initial or remaining noncancelable lease terms from one to twenty years. GSA leases in general are cancelable within 120 days notice.
Following is a Summary of Net Assets under Capital Lease and Future Minimum Lease Payments at September 30, 2002 and 2001.
Table 1. Summary of Assets Under Capital Lease | 2002 | 2001 |
Land and Building |
$ 58 |
$ 31 |
Machinery and Equipment |
1 |
1 |
Other |
1 |
- |
Subtotal |
$ 60 |
$ 32 |
Less: Accumulated Amortization |
(9) |
(7) |
Assets Under Capital Lease |
$ 51 |
$ 25 |
Table 2. Future Minimum Lease Payments | 2002 | 2001 | ||
|
Capital Leases |
Operating Lease |
Capital Leases |
Operating Lease |
Year 1 |
$ 5 |
$ 214 |
$ 3 |
$ 186 |
Year 2 |
5 |
231 |
3 |
191 |
Year 3 |
5 |
244 |
3 |
196 |
Year 4 |
5 |
256 |
3 |
192 |
Year 5 |
5 |
270 |
3 |
194 |
Later Years |
81 |
629 |
40 |
339 |
Total Minimum Lease Payments |
$ 106 |
$ 1,844 |
$ 55 |
$ 1,298 |
Less: Imputed Interest |
(51) |
|
(26) |
|
Total Capital Lease Liability |
$ 55 |
|
$ 29 |
|
HHS' consolidated gross cost and exchange revenue by budget functional classification for the fiscal year ended September 30, 2002 and 2001 are summarized below.
2002 | 2001 | |||||||||
|
Education Training and Social Services |
Health |
Medicare |
Income Security |
Admin. of Justice |
Natural Resources/ Environment |
OPDIV Combined Totals |
Intra-HHS Eliminations |
HHS Consolidated Totals |
HHS Consolidated Totals |
Intragovernmental |
|
|
|
|
|
|
|
|
|
|
Gross Cost |
$ 96 |
$ 4,217 |
$ 254 |
$ 24 |
$ - |
$ 1 |
$ 4,592 |
$ (970) |
$ 3,623 |
$ 1,910 |
Less: Exchange Revenue |
(9) |
(1,058) |
- |
- |
- |
- |
(1,067) |
590 |
( 478) |
(448) |
Net Cost, Intragovernmental |
$ 87 |
$ 3,159 |
$ 254 |
$ 24 |
$ - |
$ 1 |
$ 3,525 |
$ ( 380) |
$ 3,145 |
$ 1,462 |
|
||||||||||
With the Public |
|
|
|
|
|
|
|
|
|
|
Gross Cost |
$ 17,156 |
$192,218 |
$256,837 |
$29,768 |
$ 28 |
$ 10 |
$496,016 |
$ - |
$ 496,016 |
$ 456,258 |
Less: Exchange Revenue |
- |
(1,129) |
(25,959) |
- |
- |
- |
(27,087) |
- |
(27,087) |
(24,812) |
Net Cost, With the Public |
$ 17,156 |
$191,089 |
$230,878 |
$29,768 |
$ 28 |
$ 10 |
$468,929 |
- |
$ 468,929 |
$ 431,446 |
|
||||||||||
Totals |
|
|
|
|
|
|
|
|
|
|
Gross Cost |
$ 17,252 |
$196,435 |
$257,090 |
$29,792 |
$ 28 |
$ 11 |
$500,608 |
$ ( 969) |
$ 499,639 |
$ 458,168 |
Less: Exchange Revenue |
( 9) |
(2,187) |
(25,958) |
- |
- |
- |
(28,154) |
589 |
(27,565) |
(25,260) |
Net Cost of Operations |
$ 17,243 |
$194,248 |
$231,132 |
$29,792 |
$ 28 |
$ 11 |
$472,454 |
$ ( 380) |
$ 472,074 |
$ 432,908 |
Prior period adjustments are included in the calculation of the net change in cumulative results of operations to correct errors and accounting changes with retroactive effect. Following is a summary of the prior period adjustments as of September 30, 2002 and 2001.
Increases (Decreases) to Equity | 2002 | 2001 |
Correction of Errors |
$ (33) |
$ (32) |
Change in Accounting Principles |
(2) |
6 |
Departmental Adjustments to Beginning Net Position |
(72) |
(458) |
Total |
$ (107) |
$ ( 484) |
Departmental Adjustments to Beginning Net Position represent audit adjustments booked by OPDIVs after the HHS audit deadlines, as well as an additional net position adjustment related to prior year intra-HHS eliminations. These adjustments are not included in the OPDIV statement figures used to compile the department-wide figures. Therefore, the Department must enter an adjustment to Beginning Net Position to reflect the Department's true beginning net position balance.
ACF receives monies from the Internal Revenue Service for outlay to the states for Child Support. These monies represent delinquent child support payments withheld from Internal Revenue tax refunds. Receipts are transferred to appropriation 75X6234 to cover outlays. During FY 2002, receipts amounted to $1,466 million and outlays amounted to $1,494 million.
FDA's custodial activity involves collections for civil monetary penalties (CMP) assessed by the Department of Justice on behalf of FDA. Penalties are assessed for violations in areas such as illegally manufactured, marketed, and distributed animal feeds and drug products. Total CMP collections in FY 2002 were $373.7 million ($61.6 million for FY 2001). CMP collections are immediately forwarded to the Department of the Treasury and cannot be used for FDA operation.
Medicare Claims Estimated Improper Payments Federal government audits require the review of programs for compliance with federal laws and regulations. Accordingly, the OIG reviewed a statistically valid sample of CMS' Medicare claims to determine that claims were paid properly by Medicare contractors, and that services were actually performed and were medically necessary. Medicare, like other insurers, makes payments based on a standard claims form. The internal claims process involves reviewing claims as billed and paying the correct amount for the services rendered. Based on the OIG statistical sample, the point estimate of improper Medicare benefit payments made during FY 2002 was $13.3 billion or about 6.3 percent of the $212.7 billion in processed fee-for-service payments reported by CMS. The estimated range of the improper payments at 95 percent confidence level is $8.2 billion to $18.4 billion, or about four percent to nine percent. The majority of the errors fell into four broad categories: lack of medical necessity; insufficient or no documentation; incorrect coding; and noncovered/unallowable services.
Cost Report Settlement Process The cost report settlement process represents the value of final outlays to providers based on fiscal intermediary (FI) audits, reviews and final settlements of Medicare cost reports. Institutional providers are required to file Medicare cost reports. For providers paid under the Prospective Payment System (PPS), the cost report includes costs that are not covered under PPS, such as disproportionate share hospital payments, indirect medical education payments, and other indirect costs. For providers paid on a cost basis, the cost report represents the total costs incurred by the provider for medical services to patients and reflects the final distribution of these costs to the Medicare program.
In FY 2002, 30,430 cost reports totaling $88.5 billion were reviewed. Approximately $72.4 billion represented inpatient claims to PPS providers. The cost report settlements, therefore, focused on the remaining non-PPS balance of about $16.1 billion.
Following is a summary of cost reports reviewed and the amount of costs claimed and disallowed as of September 30, 2002 and 2001.
Cost Report Summary | ||||||
|
2002 |
2001 |
||||
|
Desk Reviews & Other |
Audits |
Total |
Desk Reviews & Other |
Audits |
Total |
Cost Reports Reviewed |
27,098 |
3,332 |
30,430 |
30,393 |
3,725 |
34,118 |
Costs Claimed |
$ 35,469 |
$53,076 |
$ 88,545 |
$36,810 |
$ 55,891 |
$92,701 |
Costs Disallowed |
$ 119 |
$ (141) |
$ (22) |
$ 407 |
$ 350 |
$ 757 |
In FY 2002, the cost report audits did not result in cost savings (which would have shown a positive number, as was the case in FY 2001). Instead, the audits determined that in relation to the costs claimed on the cost reports, providers were due $141 million. When the amount due to providers (a negative balance of $141 million) is combined with the disallowed costs determined by the desk reviews of $119 million, a net of $22 million is due to providers.
Potential Liability The CMS routinely processes and settles cost reports and payment issues for institutional providers and healthcare insurers. As part of this process, some providers/insurers have filed suits challenging the amount of reimbursement to which they claim entitlement. The CMS cannot reasonably estimate the probability of the providers successfully winning their suits or the exact amount of the potential loss to the Medicare trust funds. In the opinion of management, the resolution of these matters will not potentially have a material impact on the results of operations and financial condition.
Supplemental Medical Insurance program (SMI) benefits and administrative expenses are financed by monthly premiums paid by Medicare beneficiaries and are matched by the federal government through the general fund appropriation, Payments to the Health Care Trust Funds. Section 1844 of the Social Security Act authorizes appropriated funds to match SMI premiums collected, and outlines the ratio for the match as well as the method to make the trust funds whole if insufficient funds are available in the appropriation to match all premiums received in the fiscal year. The monthly SMI premium per beneficiary was $50 from October 2001 through December 2001 and $54 from January 2002 through September 2002. Premiums collected from beneficiaries totaled $24.4 billion in FY 2002 and were matched by a $76.7 billion contribution from the Federal government.
The Department and its components are parties to various administrative proceedings, legal actions, and claims brought by or against it. These contingencies arise in the normal course of operations and their ultimate disposition is unknown. Management, in consultation with legal counsel, has determined that it is reasonably possible that certain claims may result in an adverse outcome to the Department. However, an estimate of the range of possible liability cannot be determined. Based on information currently available, it is management's opinion that the expected outcome of these matters, individually or in the aggregate, will not have a material adverse effect on the financial statements of the Department.
Obligations Related to Cancelled Appropriations Payments may be required of up to one percent of current year appropriations for valid obligations incurred against prior year appropriations that have been cancelled. The total payments related to cancelled appropriations are estimated at $983 million and $1,197 million as of September 30, 2002 and 2001, respectively. Note 25. Apportionment Categories of Obligations Incurred
Obligations incurred by apportionment categories are as follows:
Direct | Reimbursable | Totals | |
Category A |
$ 100,490 |
$ 2,831 |
$ 103,321 |
Category B |
495,257 |
122 |
495,379 |
Exempt from apportionment |
3,895 |
- |
3,895 |
Total Obligations Incurred |
$ 599,642 |
$ 2,953 |
$ 602,595 |
Unobligated balances consist of appropriated funds, revolving fund, Management Fund, trust funds, NIH's Cooperative Research and Development Agreement (CRADA) fund and royalty's fund. Annual appropriations are available for new obligations in the year of appropriation and for adjustments to valid obligations for five subsequent years. Revolving funds are no year funds without any time limit. The NIH Management fund is available for two fiscal years. The trust funds are also no year funds without time limits. NIH's CRADA funds are available for the performance of the contractual agreement.
FDA has a Contingency Fund that was established in FY 1983 whereby funds are to be used for unusual direct costs of product emergencies (i.e., Tylenol incident, Breast Plant Hotline, etc.). Two rules were set for this fund: (1) only for emergency costs exceeding $100 thousand over the normal budget and (2) any use has to be specifically apportioned and approved by OMB. During FY 2002, FDA had funds of $1.1 million temporarily not available for national public health emergencies. FDA received $151.1 million in funding in FY 2002, to remain available until expended, to support Counter Terrorism projects.
The pricing policy for exchange revenue at HHS is to establish prices at full cost and to incur no profit or loss. Most OPDIVs either charge full cost, or are implementing procedures to do so. Several Operating Divisions at HHS collect revenue related to reimbursable agreements and recognize the revenue when expenses are incurred. In addition to reimbursable agreements, OPDIVs recognize exchange revenue related to collection of various user fees and recognize the exchange revenue when expenses are incurred.
Statement of Federal Financial Accounting Standard (SFFAS) No. 7, "Accounting for Revenue and Other Financing Sources" calls for disclosure of "explanations of any material differences between the information required by paragraph 77 [of SFFAS 7] and the amounts described as 'actual' in the "Budget of the United States Government" (also called the "President's Budget"). Paragraph 77 of SFFAS 7 calls for presentation of total budgetary resources available to a reporting entity, the status of those resources, and outlays of the reporting entity. This information is provided in the Department's SBR (see page III.6).
The President's Budget with actual numbers for FY 2002 has not yet been published, and therefore no comparisons can be made between FY 2002 amounts presented in the SBR with amounts reported in the 'actual' column of the President's Budget. The President's Budget is expected to be released on February 3, 2003, and may be obtained from the Office of Management and Budget or the U.S. Government Printing Office at that time.
The Balance Sheet uses proprietary accounts to disclose liabilities combining funded by budgetary resources and not funded by budgetary resources on the same line. The covered and not covered liabilities use budgetary accounts for the footnote disclosure in the financial statements.
The Statement of Financing reconciles the budgetary accounts with the proprietary accounts. The future funding of transactions included in net costs for the period, and the budgetary resources from future periods used for the obligations, are reconciling items. The reconciling items include liabilities and other transactions such as increases in exchange revenue from the public.
The differences between the liabilities not covered by budgetary resources and components requiring or generating resources in future periods are created by the budgetary basis of accounting required for reporting requirements and the proprietary basis of accounting required to prepare the Balance Sheet and FACTS I reporting.
The HHS permanent and indefinite accounts have both budget authority available without current action by Congress and indefinite authority meaning there is no specific sum at the time the authority is granted. The list below includes the Treasury Fund Symbols, the availability (fiscal year or no year), and the titles of the accounts.
75 0340 - (fiscal year) Health Education Assistance Loans Program
75X0513 - (no year) Payments for Credits Against Health Care Contributions
75X0585 - (no year) Taxation on OASDI Benefits
75 1552 - (fiscal year) Temporary Assistance for Needy Families
75X1553 - (no year) Children's Research and Technical Assistance
75X4305 - (no year) Health Professions Graduate Student Loan Insurance Fund, Liquidating Account
75X8250 - (no year) Gifts and Donations
7520X8004 - (no year) Federal Supplementary Medical Insurance Trust Fund
7520X8005 - (no year) Federal Hospital Insurance Trust Fund
August 2, 2004
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