Message From the Chief Financial Officer  As the Chief Financial Officer of the Department of Health and Human Services (HHS), I recognize that our Department is accountable to our ultimate stakeholders -- the American Public. We are vigilant to use taxpayer resources wisely to carry out the Department’s mission to enhance the health and well-being of Americans. With net outlays in excess of $650 billion in fiscal year (FY) 2007, we are one of the largest, most complex financial organizations in the world. Incorporating the tenets of the President’s Management Agenda (PMA) into our daily routines is central to our continued success in accomplishing ambitious goals and delivering on the promise of the PMA.
This year, we have chosen to participate in the FY 2007 Office of Management and Budget’s (OMB) pilot approach to improving performance and accountability reporting. Pursuant to OMB Circular A-136, Financial Reporting Requirements, this Agency Financial Report represents the accountability report for FY 2007. The FY 2007 Performance Report and FY 2009 Performance Plan will be included as part of our Congressional Budget Justification due to the Congress on February 4, 2008. As part of this pilot approach, we will also produce a “Highlights” document, which will be available at www.hhs.gov on February 4, 2008. HHS anticipates that this approach will make information more transparent and useful to the President, Congress and American people. This report also contains our audited annual financial statements. For the ninth year in a row, I am pleased to report that our independent auditors have issued an unqualified or “clean” opinion. During FY 2007, the Department successfully sustained its standards for reporting and management controls. We have improved our reporting processes and successfully performed our second internal control assessment as required by OMB Circular A-123, Management’s Responsibility for Internal Control. The Secretary’s annual Statement of Assurance reflecting the results of our assessment is presented in Section I of this report. With respect to our financial reporting capabilities, the Department successfully executed the next stage implementing our Unified Financial Management System (UFMS). In this phase of the system implementation, we now have all but one operating division reporting from UFMS. The last operating division was successfully converted to UFMS during the month of October 2007, and we will be completing our efforts with the implementation of the consolidated reporting solution at the end of fiscal year 2008. Key to this year’s accomplishment was the full deployment of Federally mandated Treasury Reporting. The independent auditors’ report identifies material weaknesses that must be corrected relating to: (1) financial reporting systems and processes, (2) budgetary accounting, (3) financial management information systems, and (4) Medicare claims processing controls. The primary catalyst for addressing our financial reporting systems and processes, and budgetary accounting deficiencies is the full implementation of UFMS, most of which has been completed. We still have significant financial reporting and budgetary accounting process improvements necessary to resolve the noted weaknesses. In addition, Financial Management Information System and Medicare claims process weaknesses were identified as material weaknesses relating to electronic data processing vulnerabilities identified in the Department and contractors. In addition to implementing UFMS, the Department continues a program to implement FFMIA-compliant systems at Medicare contractors by 2010. The Department recognizes the importance of effective internal control and is committed to resolving these material weaknesses promptly. Finally, I want to thank our employees and partners – who work each day to achieve our Nation’s noblest human aspirations for safety, compassion, and trust. This report -- and the accomplishments it describes -- is a reflection of their extraordinary dedication to our mission. Together we look forward to tackling our ambitious agenda for the future in 2008. /Charles E. Johnson/ November 15, 2007
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