Note 1. Summary of Significant Accounting Policies
Reporting Entity
The Department of Health and Human Services (HHS) is a cabinet-level agency of the executive
branch of the federal government. Its predecessor, the Department of Health, Education and
Welfare (HEW) officially came into existence on April 11, 1953. In 1979, the Department of
Education Organization Act was signed into law, providing for a separate Department of
Education. HEW officially became the Department of Health and Human Services, on May 4,
1980.
Organization and Structure of HHS
As of September 30, 2003, the Department was comprised of eleven Operating Divisions
(OPDIVs) with diverse missions and programs. Each OPDIV is considered a responsibility
segment for purposes of preparing the HHS-wide Statement of Net Cost. A responsibility
segment is a component of a reporting entity that is responsible for carrying out a mission,
conducting a major line of activity, or producing one or a group of related products or services.
The managers of the responsibility segments report to the entity’s top management directly and
their resources and results of operations can be clearly distinguished from those of other
responsibility segments of the entity. In FY 2003 there was a change in the number of OPDIVs
from twelve to eleven. The Program Support Center is now under the Office of the Secretary,
but due to their business activities offering services to other OPDIVs and federal agencies PSC
reports on their activity separately. The twelve responsibility segments are:
1. Administration for Children and Families (ACF)
2. Administration on Aging (AoA)
3. Agency for Healthcare Research and Quality (AHRQ)
4. Centers for Disease Control and Prevention (CDC)/Agency for Toxic Substances and
Disease Registry (ATSDR)
5. Centers for Medicare & Medicaid Services (CMS)
6. Food and Drug Administration (FDA)
7. Health Resources and Services Administration (HRSA)
8. Indian Health Service (IHS)
9. National Institutes of Health (NIH)
10. Office of the Secretary (OS) - excluding PSC
11. Program Support Center (PSC)
12. Substance Abuse and Mental Health Services Administration (SAMHSA)
The Agency for Toxic Substances and Disease Registry is combined with the Centers for Disease
Control and Prevention for financial reporting purposes; therefore, these footnotes will refer to
them as one OPDIV.
Homeland Security Act of 2002
This Act created changes to the structure of HHS. The Office of Emergency Preparedness and
some smaller programs were transferred to the Department of Homeland Security (DHS) as of
March 1, 2003. Budget authority of $567 million was transferred to DHS. OS transferred
Stockpile Materials held for emergencies to the DHS in the amount of $648 million. One
program was transferred to HHS’s ACF from the Immigration and Naturalization Service. This
program, the Unaccompanied Alien Children Program, transferred in $20.1 million.
Basis of Accounting and Presentation
The financial statements have been prepared to report the financial position and results of
operations of HHS, pursuant to the requirements of 31 U.S.C. 351 (b), the Chief Financial
Officers Act of 1990 (P.L. 101-576), as amended by the Reports Consolidation Act of 2000 (P.L.
106-531). They have been prepared from Departmental records in accordance with the form and
content guidance of the Office of Management and Budget (OMB) Bulletin 01-09 and
accounting principles generally accepted in the United States (GAAP) for the federal government
as prescribed by the Federal Accounting Standards Advisory Board (FASAB) and recognized by
the American Institute of Certified Public Accountants (AICPA) as Federal GAAP. These
statements are therefore different from financial reports prepared pursuant to other OMB
directives that are primarily used to monitor and control HHS’s use of budgetary resources.
The financial statements consolidate the balances of about one hundred and forty appropriations
and fund accounts, and a number of accounts used for suspense, collection of receipts and
general government functions. The effects of intra-entity transactions are eliminated in the
presentation of the Consolidated Balance Sheet, Consolidated Statement of Net Cost,
Consolidated Statement of Changes in Net Position and the Consolidated Statement of
Financing. The Statement of Budgetary Resources is presented on a combined basis.
Supplemental information is accumulated from the OPDIV reports, regulatory reports and other
sources within HHS.
The accounting structure of federal agencies is designed to reflect both accrual and budgetary
accounting transactions. Under the accrual method of accounting, revenues are recognized when
earned, and expenses are recognized when incurred, without regard to receipt or payment of
cash. The budgetary accounting principles, on the other hand, are designed to recognize the
obligation of funds according to legal requirements, which in many cases is prior to the
occurrence of an accrual-based transaction. The recognition of budgetary accounting
transactions is essential for compliance with legal constraints and controls over the use of federal
funds. CMS uses the cash basis of accounting in the Medicare program to record benefit
payments disbursed during the fiscal year, supplemented by the accrual method to estimate the
value of benefit payments incurred but not yet paid as of the fiscal year-end. A number of other
OPDIVs also use the cash basis of accounting for some programs with an accrual adjustment
made by recording year-end estimates of unpaid liabilities.
Entity and Non-Entity Assets
Entity assets are assets that the reporting entity has authority to use in its operations. The
authority to use funds in an entity’s operations means entity management has the authority to
decide how funds are used, or management is legally obligated to use funds to meet entity
obligations.
Non-entity assets are held by the entity but are not available to the entity. An example of nonentity assets is Child Support Enforcement collections. ACF collects funds for the U.S.
Government but does not have the authority to spend these funds.
The HHS financial statements do not report entity and non-entity assets separately on the face of the statement, but instead present entity/non-entity detail in Note 2, Non-Entity Assets.
Fund Balance with Treasury
The Department maintains its available funds with the U.S. Department of the Treasury
(Treasury) except for imprest fund accounts. "Fund Balance with Treasury" includes
appropriated, revolving and trust funds available to pay current liabilities and finance authorized
purchases. Cash receipts and disbursements are processed by Treasury, and HHS’s records are
reconciled with those of Treasury on a regular basis.
Note 3 provides additional information.
Investments
Trust fund balances are investments (plus the accrued interest on investments) held by Treasury.
Federal law requires that trust fund investments that are not necessary to meet current
expenditures be invested in "interest-bearing obligations of the United States or in obligations
guaranteed as to both principal and interest by the United States." These investments are carried
at face value as determined by Treasury. Interest income is compounded semiannually.
Note 5 provides additional information on Investments.
Accounts Receivable, Net
Accounts Receivable consists of amounts owed to HHS by other federal agencies and by the
public. Intragovernmental accounts receivable arise generally from the provision of goods and
services to other federal agencies and are considered to be fully collectible. Amounts due from
the public are presented net of an allowance for doubtful accounts. The allowance for loss is
established based on past collection experience and/or an analysis of the outstanding balances.
Accounts receivable also includes interest due to HHS that is directly attributable to delinquent
accounts receivable.
Note 6 provides additional information on Accounts Receivable.
Loans Receivable
Loans are accounted for as receivables after funds are disbursed. In accordance with the Credit
Reform Act of 1990, loans obligated prior to October 1, 1991, the loan principal, interest, and
other costs are reduced by an allowance for loss based on historical data and current market
factors. For loans obligated on or after October 1, 1991, an allowance equal to the present value
of the subsidy costs reduces the amount of gross loans receivable. Loans receivable also include
interest due to HHS for direct loans and/or defaulted loan guarantees.
Note 8 provides additional information on Loans.
Advances to Grantees/Accrued Grant Liability
Advances to Grantees are cash outlays made by HHS to its grantees. An accrued grant liability
occurs when the year-end grant accrual for the HHS exceeds advances to grantees outstanding at
year-end. Progress payments on work in process are not included in grants. HHS grants
programs are classified into two categories: "Programs Not Subject to the Expense Accrual" and
"Programs Subject to the Expense Accrual."
Programs Not Subject to the Expense Accrual: These programs are formula grants (also referred
to as "block grants") under which states provide a variety of services or payments to individuals
and local agencies. Expenses are recorded as the grantees draw funds. These programs operate
on an allocation basis as opposed to a reimbursable basis. Therefore, they are not subject to an
expense accrual.
Programs Subject to the Expense Accrual: For programs subject to the accrual, grantees draw
funds (recorded as Advances to Grantees in HHS’s accounting systems) as bills or salary
payments come due. The grantees report actual disbursements quarterly and the amounts are
recorded as an expense and a reduction to the advance balance in the accounting systems. At
year-end, the OPDIVs use actual grant payments when this data is available. When the data is
not available, HHS employs a process to estimate the year-end grant accrual based on historical
spending patterns to predict unreported grantee expenditures. The year-end accrual for these
non-block grants equals the estimate of fourth quarter disbursements, plus an average of two
weeks annual expenditures for expenses incurred prior to cash drawdowns. (Refer to Note 16
"Accrued Grant Liability.")
Although the Temporary Assistance for Needy Families program and the Child Care
Development Fund Program are referred to as block grants, they are treated as non-block grants
for purposes of the expense accrual, since they do report their expenditures back to HHS unlike
other block grant programs. Grant expenses should not equal cash draws. Grantees can only
draw for immediate cash needs, thus, if payment (e.g. salaries paid every 2 weeks) is due 5 days
from now, they cannot be drawn down until cash is expected to be disbursed.
HHS reports advances other than grant advances in Note 11 "Other Assets."
Inventory and Related Property
Inventory and Related Property includes Inventory Held for Sale, Operating Materials and
Supplies and Stockpile Materials. Inventory Held for Sale consists of small equipment and
supplies held by PSC and NIH Service and Supply Funds for sale to HHS components and other
federal entities. Operating Materials and Supplies consists of pharmaceuticals and other medical
supplies used in providing medical services and conducting medical research.
All inventories are recorded as assets when purchased and are expensed when they are consumed
or sold. Inventories are recorded at either: (1) historical cost (or a method which reasonably
approximates historical cost), or (2) the lower of cost (using a weighted-average cost method) or
market.
Note 9 provides additional information on Inventory.
General Property, Plant and Equipment, net
General Property, Plant and Equipment (PP&E) consists of buildings, structures and facilities
used for general operations; land acquired for general operating purposes; vehicles and
equipment; and construction-in-progress. Other property consists of internal use software. The
basis for recording purchased PP&E is full cost, which includes all costs incurred to bring the
PP&E to a form and location suitable for its intended use. The cost of PP&E acquired under a
capital lease is the amount recognized as a liability for the capital lease at its inception. The cost
of PP&E acquired through donation is the estimated fair value when acquired. The cost of
PP&E transferred from other federal entities is the net book value of the transferring entity. All
PP&E with an initial acquisition cost of $25,000 or more and an estimated useful life of two (2)
years or greater are capitalized.
PP&E are depreciated using the straight-line method over the estimated useful life of the asset.
Land and land rights, including permanent improvements, are not depreciated. Normal
maintenance and repair costs are expensed as incurred.
The capitalization threshold for internal use software costs for appropriated fund accounts is
$1,000,000 or above. The internal use software capitalization threshold for revolving funds is
$500,000. Costs below the threshold levels are expensed. The software is depreciated for a
period of time consistent with the estimated useful life used for planning and acquisition
purposes.
Note 10 provides additional information on general purpose property, plant and equipment.
Liabilities
Liabilities are recognized for amounts of probable future outflows or other sacrifices of resources
as a result of past transactions or events. Since HHS is a component of the U.S. Government, a
sovereign entity, its liabilities cannot be liquidated without legislation that provides resources to
do so. Payments of all liabilities other than contracts can be abrogated by the sovereign entity.
In accordance with Public Law and existing federal accounting standards, no liability is
recognized for future payments to be made on behalf of current workers contributing to the
Medicare Hospital Insurance Trust Fund, since future Medicare benefits are not tied to prior
Medicare contributions.
Liabilities Covered by Budgetary Resources are those liabilities funded by available budgetary
resources including: (1) new budget authority, (2) spending authority from offsetting collections,
(3) recoveries of unexpired budget authority, (4) unobligated balances of budgetary resources at
the beginning of the year, and (5) permanent indefinite appropriation or borrowing authority.
Liabilities Not Covered by Budgetary Resources are incurred when funding has not yet been
made available through Congressional appropriations or current earnings. HHS recognizes
liabilities for employee annual leave earned but not taken, and amounts billed by the Department
of Labor for Federal Employees Compensation Act (FECA) disability payments. Also included
in this category is the actuarial FECA liability determined by Labor but not yet billed. For HHS
revolving funds, all liabilities are funded as they occur.
Liabilities Covered by Budgetary Resources and Liabilities Not Covered by Budgetary
Resources are combined on the balance sheet. The breakout of these resources is presented in
Note 12 "Liabilities Not Covered by Budgetary Resources", Note 13 "Entitlement Benefits Due
and Payable", Note 14 "Federal Employee and Veterans’ Benefits", Note 15 "Environmental and
Disposal Costs" and Note 17 "Other Liabilities".
Accounts Payable
Accounts Payable consists of amounts due for goods and services received, progress in contract
performance, interest due on accounts payable, and other miscellaneous payables.
Accrued Payroll and Benefits
Annual leave is accrued as it is earned by employees and is included in personnel compensation
and benefit costs. An unfunded liability is recognized for earned but unused annual leave, since
from a budgetary standpoint this annual leave will be paid from future appropriations when the
leave is used by employees. Rather than from amounts which had been appropriated to HHS as
of the date of the financial statements. The amount accrued is based upon current pay of the
employees. Sick leave and other types of leave are expensed when used and no future liability is
recognized for these amounts.
Entitlement Benefits Due and Payable
Entitlement Benefits Due and Payable represent benefits due and payable to the public from
entitlement programs enacted by law. For HHS, this includes benefit payments due from CMS’s
Medicare and Medicaid programs for the costs of medical services incurred but not paid as of
September 30. The Medicare estimate is developed by the Office of the Actuary (OACT) and is
based on historical trends of completeness that take into consideration estimated deductible and
coinsurance amounts. The estimate represents (1) claims incurred that may or may not have
been submitted to the Medicare contractors and were not yet approved for payment, (2) claims
that have been approved for payment by the Medicare contractors for which checks have not yet
been issued, (3) checks that have been issued by the Medicare contractors in payment of a claim
and that have not yet been cashed by payees, (4) periodic interim payments, and (5) retroactive
settlements of cost reports.
The Medicaid estimate represents the net of unreported expenses incurred by the States less
amounts owed to the States for overpayment of Medicaid funds to providers, anticipated rebates
from drug manufacturers, and settlements of probate and fraud and abuse cases. The FY 2003
estimate was developed based on historical relationships between prior Medicaid net payables
and current Medicaid activity. The FY 2002 estimate is based on information provided by the
States.
Note 13 provides additional information on Entitlement Benefits Due and Payable.
Federal Employee and Veterans’ Benefits
Federal Employee and Veterans’ Benefits consist of the actuarial portions of future benefits
earned by federal employees and veterans, but not yet due and payable. These costs include
pensions, other retirement benefits, and other post-employment benefits. These benefits are
normally administered by the Office of Personnel Management (OPM) and not by the
Department of Health and Human Services, or any of the individual operating divisions of the
Department. Therefore, HHS does not recognize any liability in the balance sheet for pensions,
other retirement benefits, and other post-employment benefits. HHS does, however, recognize
the imputed cost and imputed financing related to these benefits in the Consolidated Statement of
Net Cost and the Consolidated Statement of Changes in Net Position.
Most HHS employees participate in either the Civil Service Retirement System (CSRS) or the
Federal Employee Retirement System (FERS). Under CSRS, each OPDIV makes matching
contributions equal to 7 percent of basic pay. For FERS employees, the DHHS contributes the
employer’s matching share for Social Security and contributes an amount equal to one percent of
employee pay to a savings plan and matches up to an additional 4 percent of pay. Most
employees hired after December 31, 1983 are covered by FERS. The U.S. Office of Personnel
Management (OPM) reports on CSRS and FERS assets, accumulated plan benefits, and
unfunded liabilities, if any, applicable to Federal employees.
The lone exception to this policy is the Public Health Service (PHS) Commissioned Corps
Retirement System. This HHS-administered system is discussed in Note 14 "Federal Employee
and Veterans’ Benefits."
Note 14 provides additional information on Federal Employee and Veterans’ Benefits.
Revenue and Financing Sources
The United States Constitution prescribes that no money may be expended by a federal agency
unless and until funds have been made available by congressional appropriation. Thus, the
existence of all financing sources is dependent upon congressional appropriation.
Appropriations. The vast majority of the Department’s operating funds are appropriated by the
Congress to the Department from the general receipts of the Treasury. These funds are made
available to HHS for a specified time period, one fiscal year, multiple fiscal years, or
indefinitely, depending upon the intended use of the funds. For example, funds for general
operations are generally made available for one fiscal year; funds for long-term projects such as
major construction will be available to the Department for the expected life of the project; and
funds used to establish revolving fund operations are generally available indefinitely (i.e., no
year funds). The Statement of Budgetary Resources presents information about the resources
appropriated to the Department.
Exchange and Non-Exchange Revenue. HHS classifies revenues as either exchange revenue or
non-exchange revenue. Exchange revenues are those that derive from transactions in which both
the government and the other party receive value, including reimbursements for services
performed for other federal agencies and the public and other sales of goods and services. These
revenues are presented on the HHS Consolidated Statement of Net Cost and reduce the cost of
operations borne by the taxpayer. Non-exchange revenues result from donations to the
government and from the government’s sovereign right to demand payment, including taxes.
Non-exchange revenues are not considered to reduce the cost of the Department’s operations and
are reported on the Consolidated Statement of Changes in Net Position.
With minor exceptions, all receipts of revenues by federal agencies are processed through
Treasury’s central accounting system. Regardless of whether they derive from exchange or nonexchange
transactions, all receipts that are not earmarked by congressional appropriation for
immediate departmental use are deposited in the general or special funds of the Treasury.
Amounts not retained for use by the Department are reported as transfers to other government
agencies on the HHS Statement of Changes in Net Position.
In certain cases, the prices charged by HHS are set by law or regulation, which for program and
other reasons may not represent full cost. Prices set for products and services offered through
working capital funds are intended to recover the full costs incurred by these activities.
Imputed Financing Sources. In certain instances, operating costs of HHS are paid out of funds
appropriated to other federal agencies. For example, by law the Office of Personnel
Management pays certain costs of retirement programs, and certain legal judgments against HHS
are paid from the Judgment Fund maintained by Treasury. When costs that are identifiable to
HHS and directly attributable to the Department’s operations are paid by other agencies, the
Department recognizes these amounts as operating expenses of HHS. In addition, HHS
recognizes an imputed financing source on the Consolidated Statement of Changes in Net
Position to indicate the funding of Department operations by other federal agencies.
Other Financing Sources.
Medicare’s Hospital Insurance program, or Medicare Part A, is financed through the Hospital Insurance Trust Fund, whose revenues come primarily through the
Medicare portion of payroll and self-employment taxes collected under the Federal Insurance
Contribution Act (FICA) and Self-Employment Contribution Act (SECA). The Medicare payroll tax rate is 2.9 percent of annual wages. Employees and employers are each required to
contribute 1.45 percent of employees’ wages, with no limitation, to the Hospital Insurance Trust
Fund. Self-employed individuals pay the full 2.9 percent themselves.
Medicare’s Supplemental Medical Insurance program, or Medicare Part B, is financed primarily
by general fund appropriations (Payments to the Health Care Trust Funds) provided by Congress
and by monthly premiums paid by beneficiaries. Premium payments from Medicare
beneficiaries are matched approximately 3 to 1 by Congressional appropriations.
Contingencies
A contingency is an existing condition, situation or set of circumstances involving uncertainty as
to possible gain or loss to the Department. The uncertainty will ultimately be resolved when one
or more future events occur or fail to occur. With the exception of pending, threatened or
potential litigation, a contingent liability is recognized when a past transaction or event has
occurred, a future outflow or other sacrifice of resources is more likely than not, and the related
future outflow or sacrifice of resources is measurable. For pending, threatened or potential
litigation, a liability is recognized when a past transaction or event has occurred, a future outflow
or other sacrifice of resources is likely, and the related future outflow or sacrifice of resources is
measurable.
Note 24 provides additional information on Contingencies.
Use of Estimates in Preparing Financial Statements
Preparation of financial statements in accordance with federal accounting standards requires
HHS to make estimates and assumptions that affect the reported amounts of assets and liabilities,
and disclosure of contingent liabilities, as of the date of the financial statements.
Estimates and assumptions also affect the revenues and expenses accrued and reported in the
financial statements. Actual results may differ from those estimates.
Reclassifications
Certain reclassifications were made to the presentation of the FY 2002 financial statements to
improve their comparability with FY 2003 statements. In particular, the reclassification of a
$1,957 million reappropriation in the contingency fund in the Administration for Children and
Families contributed to the restatement of the FY 2002 Statements of Budgetary Resources and
Changes in Net Position.
Reconciliation of FACTS II to the Statement of Budgetary Resources
Management recognizes that the FACTS II submission of budgetary data does not agree with the
Statement of Budgetary Resources as presented in the audited financial statements. There are
many known recurring differences that contribute to this condition that are properly reported on
the Statement of Budgetary Resources and are appropriately not included in the FACTS II
submission. Some of these reconciling items include: accounts payable adjustments, estimated
grantee expenditure reports (SF 272s) not yet received for the 4th quarter, estimated grantee expenses incurred but not reported, and certain intra departmental transactions (Intra
Departmental Delegations of Authority - IDDAs).
Intragovernmental Relationships and Transactions
In the course of its operations, HHS has relationships and financial transactions with numerous
federal agencies. The more prominent of these are the Social Security Administration (SSA) and
the Department of the Treasury. The SSA determines eligibility for Medicare programs, and also
allocates a portion of Social Security benefit payments to the Medicare Part B Trust Fund for
Social Security beneficiaries who elect to enroll in the Medicare Part B program. The Treasury
receives the cumulative excess of Medicare receipts and other financing over outlays, and issues
interest-bearing securities in exchange for the use of those monies. At the government-wide
level, the assets related to the trust funds on HHS’s financial statements and the corresponding
liabilities on the Treasury’s financial statements would be eliminated.
Medicare Hospital Insurance (HI) Trust Fund
Medicare contractors are paid by CMS to process Medicare claims for hospital inpatient services,
hospice, and certain skilled nursing and home health services. Benefit payments made by the
Medicare contractors for these services, as well as administrative costs, are charged to the HI
trust fund. The CMS payments to managed care plans are also charged to this fund. The
financial statements include HI trust fund activities administered by the Department of the
Treasury (Treasury). This trust fund has permanent indefinite authority.
Medicare Supplementary Medical Insurance (SMI) Trust Fund
Medicare contractors are paid by CMS to process Medicare claims for physicians, medical
suppliers, hospital outpatient services and rehabilitation, end stage renal disease (ESRD), rural
health clinics, and certain skilled nursing and home health services. Benefit payments made by
the Medicare contractors for these services, as well as administrative costs, are charged to the
SMI trust fund. The CMS payments to managed care plans are also charged to this fund. The
financial statements include SMI trust fund activities administered by Treasury. This trust fund
has permanent indefinite authority.
Medicare Integrity Program (MIP)
The Health Insurance Portability and Accountability Act, Public Law 104-191, established the
MIP and codified the program integrity activities previously known as "payment safeguards."
This account is also called the Health Care Fraud and Abuse Control (HCFAC) Program, or
simply "Fraud and Abuse." The CMS contracts with eligible entities to perform such activities
as medical and utilization reviews, fraud reviews, cost report audits, and the education of
providers and beneficiaries with respect to payment integrity and benefit quality assurance
issues. The MIP is funded by the HI trust fund.
Note 2. Non-Entity Assets
| 2003
| Restated
2002 |
Intragovernmental: |
|
|
Fund balance with Treasury |
$ 5 |
$ 5 |
Accounts receivable |
- |
3 |
Other |
- |
- |
Total Intragovernmental |
$ 5 |
$ 8 |
Accounts receivable |
$ 90 |
$ 428 |
Cash and other monetary assets |
- |
- |
Other |
- |
- |
Total non-entity assets |
$ 95 |
$ 436 |
Total entity assets |
389,097 |
377,561 |
Total Assets |
$ 389,192 |
$ 377,997 |
Note 3. Fund Balance with Treasury
HHS’s undisbursed account balances at September 30, 2003 and 2002 are listed below by fund type. Other Funds include balances in deposit, suspense, clearing and related non-spending accounts.
Fund Balance with Treasury:
| 2003
| Restated
2002 |
Trust Funds |
$ (162) |
$ 3,201 |
|
Revolving Funds |
761 |
803 |
Appropriated Funds |
85,151 |
80,208 |
Other Funds |
539 |
562 |
Total |
$ 86,289 |
$ 84,774 |
Status of Fund Balance with Treasury
| 2003
| Restated
2002 |
Unobligated Balance |
|
|
Available |
$ 2,773 |
$ 5,642 |
Unavailable |
2,336 |
3,338 |
Obligated Balance not yet Disbursed |
81,180 |
75,794 |
Total |
$ 86,289 |
$ 84,774 |
CMS provides daily estimates for the benefit payments in the trust funds. At the end of the month the draws made from the trust fund are based on estimated benefit payments. When
actual benefit payments for the month are higher than the estimate, a negative balance occurs. The adjustments to bring the estimate to match actuals are done in the following month. The estimate was too low at September 30 for both the HI and SMI trust funds this year. In past years, CMS has had a negative balance in one trust fund and a positive in the other trust fund, but this year both have negative balances, hence creating a negative balance in the trust fund for the department.
Note 4. Cash and Other Monetary Assets
Cash and Other Monetary Assets consist primarily of the amount of time account balances at the Medicare contractors’ commercial banks. CMS uses the Checks Paid Letter-of-Credit method 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 interest foregone by the federal government on these time accounts is used to reimburse the commercial banks. The account balance in FY 2003 was $ 843 million and in FY 2002 the balance was $375 million.
Note 5. Investments, net
HHS invests trust fund cash in excess of current needs in U.S. Treasury securities. The U.S. Treasury Department is HHS’s agent and advisor for investing. The majority of HHS’s
investments in securities are held to maturity and no provision is made for unrealized gains or losses. They are purchased and reported at amortized cost on a straight-line basis, but redeemed at face value. Since these investments are expected to be held to maturity, no provision for unrealized gain or loss on these securities is made. All investments are considered entity assets.
As of September 30, 2003
| |
Cost |
Unamortized (Premium) Discount |
Investments, Net |
Other Adjustments |
Market Value Disclosure |
Intragovernmental Securities |
|
|
|
|
|
Marketable |
$ 20 |
$ - |
$ 20 |
$ - |
$ 20 |
Non-Marketable: Par Value |
276,244 |
- |
276,244 |
- |
276,244 |
Non-Marketable: Market-based |
1,989 |
31 |
2,020 |
- |
2,020 |
Subtotal |
$ 278,253 |
$ 31 |
$ 278,284 |
$ - |
$ 278,284 |
Accrued Interest |
4,066 |
- |
4,066 |
- |
4,066 |
Total, Intragovernmental |
$ 282,319 |
$ 31 |
$ 282,350 |
$ - |
$ 282,350 |
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 |
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 ½ percent (4 3/8 FY 2002). The bond interest rates range from 3 ½ percent to 8 ¾ percent (5 ¼ to 8 ¾ FY 2002). The accrued interest receivable as of September 30, 2003 and 2002 was $ 4,066 million and $ 4,232 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 2004, 2005, 2006, and 2008.
NIH invests trust fund cash that is in excess of current needs in U.S. Treasury securities.
Note 6. Accounts Receivable, net
HHS's accounts receivable as of September 30, 2003 and 2002 are summarized below.
As of September 30, 2003
| |
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 |
$ 7,140 |
$ - |
$ 7,140 |
$ - |
$ 7,140 |
$ (6,128) |
$ 1,012 |
$ (113) |
$ 899 |
|
Non-Entity |
- |
- |
- |
- |
- |
- |
- |
- |
- |
| Total, Intragovernmental |
$ 7,140 |
$ - |
$ 7,140 |
$ - |
$ 7,140 |
$ (6,128) |
$ 1,012 |
$ (113) |
$ 899 |
|
With the Public
|
|
|
|
|
|
|
|
|
|
| Entity |
|
|
|
|
|
|
|
|
|
| Medicare
|
$ 5,322 |
$ - |
$ 5,322 |
$ (3,273) |
$ 2,049 |
$ - |
$ 2,049 |
$ - |
$ 2,049 |
|
Other |
1,343 |
- |
1,343 |
(665) |
678 |
- |
678 |
- |
678 |
| Non-Entity |
74 |
502 |
576 |
(486) |
90 |
- |
90 |
- |
90 |
| Total,
With the Public |
$ 6,739 |
$ 502 |
$ 7,241 |
$ (4,424) |
$ 2,817 |
$ - |
$ 2,817 |
$ - |
$ 2,817 |
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