Financial Statements & Accounting Data DHA Business Support Directorate Financial Integrity Division…

Financial Statements &Accounting Data

DHA Business Support DirectorateFinancial Integrity Division

““Medically Ready Force…Ready Medical Force”Medically Ready Force…Ready Medical Force” 1

Briefing Outline

∎ Financial Statement Reporting Requirements

∎ Legacy Accounting Systems

∎ Medical Accounts Receivable (A/R)


Financial Management Requirements

∎ CFO Act of 1990: Integrated Financial Management (FM) systems supporting DoD accounting needs are key to effective financial management

∎ Federal Financial Management Improvement Act (FFMIA) of 1996: ALL Federal agencies to comply Implement/maintain systems that meet Federal FM system

requirements (Joint Financial Management Improvement Program (JFMIP))

Support Federal accounting standards (Federal Accounting Standards Advisory Board (FASAB))

Apply US Standard General Ledger (USSGL) at the transaction level


Congressional Deadline

∎ Since passage of CFO Act of 1990, DoD has expressed its intentions to achieve auditable financial statements

∎ Twenty three of 24 government agencies covered by the CFO Act received Unmodified (“clean”) Audit Opinions for FY 2014DoD is the only government agency still with a Disclaimer

Audit Opinion∎ Congress became impatient with DoD progress and mandated

a 30 September 2017 deadline for DoD’s financial statements to be validated as ready for auditNational Defense Authorization Act (NDAA) for FY 2010

(Public Law 111-84), Section 1003, describes the mandated requirements


Section 1003 – Audit Readiness of Financial Statements of DoD

∎ Development and maintenance of the Financial Improvement and Audit Readiness (FIAR) Planhttp://comptroller.defense.gov/fiar/plan.aspx

∎ Ensure the financial statements of the DoD are validated as ready for audit NLT 30 September 2017

∎ Semi-annually submit a report to Congress (NLT 15 May and 15 November) to the Congressional Defense Committeeshttp://comptroller.defense.gov/fiar/plan.aspx


SecDef Call to Action


“I’ve directed the Department to cut in half the time it will take to achieve audit readiness for the Statement of Budgetary Resources so that by 2014 we will have the ability to conduct a full-budget audit.”

Secretary Leon E. Panetta, 13 October 2011Testimony before the House Armed Services Committee

SecDef Directive

∎ Within 60 days, the USD(C) was required to submit a revised plan to:Achieve audit readiness of the Statement of Budgetary

Resources (SBR) by the end of FY 2014Increase emphasis on accountability of assetsReview all financial controls over the next two yearsEstablish course-based certification program for financial

managers (i.e., DoD Financial Management Certification Program)

Resource efforts to meet these goalsAchieve full audit readiness by end of FY 2017


SBR Congressional Mandate

∎ NDAA for FY 2012 signed into law 31 December 2011. Section 1003 – Additional Requirements Relating to the

Development of the Financial Improvement and Audit Readiness Plan. “…to support the goal established by the Secretary of Defense that the statement of budgetary resources is validated to audit not later than September 30, 2014.”


Important Dates

∎ Important Dates for CY 201431 March: Components assert SBR audit readiness30 September: USD(C) validates audit readiness of

Component SBRs for FY 2013By 31 December: Begin Auditing SBRs

∎ DHP Schedule of Budgetary Accounts (SBA) Examination began April 2015Covers financial period of 1 October 2014 to 31 March 2015

∎ Full audit of DHP to begin in FY 2016


FY 2016 Full Audit of DHP

∎ FY 2016 Audit of DHP will cover four financial statementsBalance SheetStatement of Net CostStatement of Net PositionStatement of Budgetary Resources

∎ Opinion for FY 2016 financial statements will be issued NLT 15 November 2015 (45 days after close of fiscal year)


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Financial StatementsDHP Financial Statement Reporting Entities (FSREs)

““Medically Ready Force…Ready Medical Force”Medically Ready Force…Ready Medical Force”For Official Use Only

DHP

DHA Consolidated

Comptroller CRM USUHS

SMA Consolidated

SMAArmy

SMANavy

SMAAir Force

NCRMD

97-0130 O&M

97-0130 PROC

97-0130 RDT&E

97-0130 O&M

97-0130 O&M

97-0130 PROC

97-0130 RDT&E

97-0130 Operations & Maintenance (O&M)

97-0130 Procurement (PROC)

97-0130 Research Dvlpmt Test & Eval. (RDT&E) (except NCR-MD)

97-0500 MILCON (except NCR-MD)

97-0501 Recovery Act – MILCON (except SMA-AF, NCR-MD)

97-0150 Recovery Act – FSRM (except SMA-AF, NCR-MD)

DHP: Defense Health Agency – SMA: Service Medical ActivityMERHCF: Medicare-Eligible Retiree Health Care FundCRM: Contract Resource ManagementUSUHS: Uniformed Services University of the Health SciencesNCR-MD: National Capital Region-Medical Directorate97-0130: Defense Health Program Appropriation

MERHCF

*MERHCF and CRM are currently under a standalone full financial statement audit.

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Financial & Accounting Data

FSRE Legacy Enterprise Business Rules Command & Control

DHA-Comptroller WAAS DAI DHA-Comptroller DHAUSUHS CUFS DAI USUHS USUHSArmy STANFINS GFEBS Army ArmyNavy STARS-FL Navy ERP Navy NavyAir Force GAFS-R DEAMS Air Force Air Force


Accounting System Acronyms


CUFS – College and University Financial SystemDAI – Defense Agencies InitiativeDEAMS – Defense Enterprise Accounting and Management System DHA – Defense Health Agency FSRE – Financial Statement Reporting EntitiesGAFS-R – General Accounting Financial System – RehostGFEBS – General Fund Enterprise Business SystemSTANFINS – Standard Army Finance Information SystemSTARS-FL – Standard Accounting and Reporting System - Field LevelUSUHS – Uniformed Services University of the Health SciencesWAAS – Washington Headquarters Services (WHS) Allotment Accounting System

Fiscal Management Requirements

∎ Office of Management & Budget (OMB)Use commercial off-the-shelf (COTS) JFMIP-certified software

for replacement of core FM systems (OMB Circular A-127)∎ New Service FM COTS are JFMIP-certified

Army – General Fund Enterprise Business System (GFEBS) SAP COTS (fully deployed)

Navy – Navy Enterprise Resource Planning (ERP) SAP COTS (partial deployment)

Air Force – Defense Enterprise Accounting and Management System (DEAMS) Oracle COTS


What is SFIS?

∎ Standard Financial Information Structure (SFIS)A comprehensive, standard “business language” that

defines financial information that supports all DoD-wide budget, cost/performance management, and external reporting requirements

SFIS is NOT an IT systemhttp://dcmo.defense.gov/products-and-services/standard-

financial-information-structure/


Financial Statements

∎ FSRE Structure ChallengesDHA has a clear chain of command and organizational

structureMERHCF has actuarial and accounting informationSMA components have two lines of authority (command

and control, and finance business rules) vs. dollar flow. Face issues related to MILDEP priorities vs. fund flow priorities: financial impact, accounting system, financial business rules


Financial Statement (Con’t)

∎ FSRE Structure Challenges (continued)Solution: single accounting system with common business

rules and chain of command simplifies, streamlines the financial statement, financial reporting, and financial performance reporting

∎ Conversion of Walter Reed National Military Medical Center (WRNMMC) in FY 2015 from Navy STAR-FL to Army GFEBS was an example of DHA moving to increased standardization


Accounts Receivable (A/R)

∎ Two types of A/R in governmental accountingIntra-governmental (e.g., Coast Guard, VA)

Expect to get paid 100% of Billed Amount Disputes regarding claims against other federal

agencies (e.g., Coast Guard, VA) are to be resolved per Code of Federal Regulations 4 CFR 101

Public (civilian emergencies, Third Party Collections) Need to establish an allowance for bad debt


DoD References

∎ DoD Financial Management Regulation (FMR), Volume 4, Chapter 3, “Receivables” dated June 2014

∎ DoD Financial Management Regulation (FMR), Volume 6B, Chapter 10, “Notes to the Financial Statements” dated April 2013

∎ Located at OSD (Comptroller) Web site:http://comptroller.defense.gov/fmr.aspx


Service Financial Statements

∎ A/R are reported on the annual audited financial statements∎ Service Financial Statements located at OSD(Comptroller) Web

site:http://comptroller.defense.gov/FinancialManagement/

reports/cfs2014.aspx∎ Medical A/R previously was NOT being reported by the SMA

activities


MHS Accounts Receivable Policy

∎ Accounts Receivable Policy Memorandum (with attachment)Policy signed on 8 May 2008

∎ PurposeEstablish policy for the recognition (“as rendered”),

classification, recording, aging, collection, disposition and reporting of accounts receivable in order to improve the accuracy of financial statements

Compliance with DoD’s Financial Management Regulation (FMR) and Generally Accepted Accounting Principles (GAAP)


Third Party Collections (TPC)

∎ Total Third Party Collections (TPC) Billings in FY 2014 were $307.4 million

∎ Total TPC Collections from insurers in FY 2014 were $135.3 million

∎ On average, from FY12-FY14, 46% of total MHS TPCP charges billed was attributed to acceptable third party payer denials (co-pay, deductibles, out of network, non-covered benefits.

∎ How much is really being written off as uncollectible, and how much is still on the books as Medical A/R?


Medical Services Account (MSA)

∎ Combination of both Intra-governmental A/R (e.g., Coast Guard, VA) and Public A/R (e.g., civilian emergencies)

∎ Total MSA amount collected for medical care provided in MTFs for FY 2014 was $289.8 million


Medical Affirmative Claims (MAC)

∎ Medical Affirmative Claims (MAC) A/R is all Public A/R (e.g., insurance companies, liable individuals)

∎ Total amount collected for medical care provided in MTFs for FY 2014 was $12.9 million


Financial Metrics

∎ FY 2014 (as of 30 Sep 2014) Nonfederal Receivables from the Public, Net (reduced by Allowance for Estimated Uncollectibles)SMA-Army $149.5 Million)SMA-Navy ($23.0 Million)SMA-Air Force ($64.0 Million)SMA-NCR Medical Directorate ($517,000)


Write Off of Aged A/R Due from the Public

∎ On 22 December 2011, TMA issued to the Services a memorandum with the subject “Write Off of Aged Accounts Receivable Due From the Public”

∎ Requires Services to write off delinquent public A/R over 2 years old IAW OMB Circular A-129

∎ Write off of delinquent public A/R must be completed by the Services within 90 days of the issuance of the memorandum

∎ Waiver of requirement can be requested if collection efforts are still continuing on the delinquent public A/R

∎ Waived public A/R accounts over 2 years old will be reclassified as Currently not Collectible (CNC)


Questions?


Documents

Financial Statements & Accounting Data DHA Business Support Directorate Financial Integrity Division…