Statement by John Dyer,
Acting Principal Deputy Commissioner, Social Security Administration
before the House Committee on Government Reform and Oversight
Subcommittee on Government Management, Information and Technology

April 17, 1998

Thank you Mr. Chairman and Members of the Subcommittee for this opportunity to testify about the Social Security Administration's (SSA) audited financial statement as contained in SSA's Accountability Report for Fiscal Year (FY) 1997.

Let me briefly review SSA's financial position at the end of Fiscal Year 1997. For FY 1997, the Statement of Financial Position reflects total assets of $649 billion, a 14 percent increase over the previous year. This increase is attributable to the steady growth of the Old Age, Survivors, and Disability Insurance (OASDI) Trust Fund reserves which were invested to generate $42 billion of interest income, an increase of $5 billion compared to FY 1996. The OASDI Trust Funds own 99 percent of SSA's assets of which $631 billion are investments that are only converted to cash when needed to pay benefits and other expenses. Revenues and other financing sources increased by 7 percent to $481 billion. In FY 1997, administrative expenses for all SSA programs only used 1.4 percent of our total revenue and financing sources. SSA is committed to efficiency and has been successful in directing most revenues to current and future beneficiaries.

Now, let me provide some background and history on SSA's audited financial statements and the Accountability Report. On April 1, 1995, this Subcommittee held a hearing on the Consolidated financial statements of the federal government for Fiscal Year 1997 which was prepared by the Depanment of the Treasury. This was the first such government-wide financial statement ever prepared. In perspective, the Social Security Administration, as an agency, has been preparing audited financial statements on an annual basis since Fiscal Year 1987. Fiscal Year 1997 represents the fourth consecutive year that SSA's financial statements have received an unqualified, or clean, audit opinion. Our financial statements were prepared consistent with requirements of the Federal Accounting Standards Advisory Board, the Office of Management and Budget, the Chief Financial Officers' Act and other relevant Federal statutes.

The Social Security Administration has also demonstrated its leadership in external reporting by participating as an Accountability Report pilot agency since Fiscal Year 1995. In addition to audited financial statements, an Accountability Report consolidates the mandatory reporting requirements of the Chief Financial Officers' Act, Prompt Payment Act, Debt Collection Act, Federal Managers' Financial Integrity Act and reports on a number of financial and program performance measures (in advance of Government Performance and Results Act (GPRA) statutory deadlines) which help assess SSA's ability to achieve its strategic goals.

In cooperation with our Office of Inspector General and beginning in Fiscal Year 1996, the Accountability Report incorporated the Inspector General's Semiannual Report to the Congress. In addition to the complete discussion of management's activities for the year, the Accountability Report also provides a summary of the significant audit and investigative work accomplished by the Inspector General. We are currently the only Federal agency to incorporate this reporting requirement into the Accountability Report.

Not only are SSA's financial statements and Accountability Report financially sound and comprehensive; they are also timely, SSA's FY 1997 Accountability Report was issued on November 21, 1997, only 52 days following the close of the fiscal year. In issuing the report so timely. SSA's report was the only one issued early enough to be considered in developing the FY 1999 President's Budget.

The Accountability Report serves many customers both outside and within SSA. We view this document as an important vehicle to share information with taxpayers and beneficiaries which in turn helps build confidence in the Social Security program by assuring the public that taxpayer dollars are managed wisely. We proudly post this report on the Internet and have also distributed nearly 2,000 hard copies to date. However, the information contained in the Accountability Report is not just compiled at year end for reporting purposes. To make use, on a day-to-day basis, of the information gathered for the Accountability Report. SSA has developed a powerful tool to disseminate information to executives and managers, the Executive and Management Information System or EMIS.

While the information contained in the Accountability Report can be viewed as the top of the information pyramid, EMIS contains the raw baseline data, broken into more manageable pieces, used to make daily decisions. EMIS is available to SSA executives on our Intranet and is updated monthly. This system tracks current year workload processing against both stated current year goals and prior year processing for many common workloads, for example the number of disability claims processed in total and by region. So if the number of claims processed in a region deviated significantly from the prior year, management can ask the questions necessary to uncover the reasons and, if necessary, quickly take appropriate action. This type of performance measurement system is vital in the shift from managing resources to managing for results as the Results Act and other legislation requires.

The key performance measures from SSA's Annual Performance Plan which support our strategic goals are closely monitored through the EMIS. In fact, our executives meet monthly to review the Agency's key initiatives, goals and objectives using the performance information disseminated through EMIS. This constant monitoring is necessary to ensure management is aware of any performance trends before compilation of the Accountability Report.

We at SSA recognize the importance of the Social Security program to every American, and we strive not only to meet legislative requirements but exceed them. In our continuing effort to improve our operations and build public confidence, working with the Congress, we have increased Inspector General resources thus helping ensure that every dollar entering the trust funds is used to pay the correct benefit amount and administer the program as efficiently as possible.

Building on the success of previous audits conducted by the Office of Inspector General, we expanded the scope of our Fiscal Year 1997 financial statement audit by contracting to have Price Waterhouse, under Inspector General oversight, audit our financial statements, system of internal controls and compliance with laws and regulations. This expanded effort gives greater assurance that SSA is being managed both efficiently and effectively. In addition to the clean opinion we received on our Fiscal Year 1997 financial statements, Price Waterhouse also determined that SSA's systems of accounting and internal controls were in compliance with internal control objectives in Office of Management and Budget Bulletin 93-06 in all material respects.

Price Waterhouse's expanded scope resulted in suggestions to improve SSA's internal control structure in areas such as protecting information, continuity of operations, software development, separation of duties and quality control. We have already taken corrective action on many recommendations and are continuing an open and honest dialog with Price Waterhouse and the Inspector General to discuss additional actions to further strengthen our internal control structure.

Mr. Chairman, SSA wants to make it clear that nothing is more important in operating our programs than ensuring that the public has confidence in us when it comes to information that is placed in our trust, We will do whatever is necessary to assure th is Subcommittee and the American people that SSA's stewardship over their personal information and financial assets is beyond reproach. As you can see we are working with the auditors to address their recommendations. I expect to have most implemented by July 31. But we do not view this as a completed product. As history shows, we are continuing to improve our operations and are fully prepared to meet any new challenges which may arise. We appreciate the support provided by your Subcommittee in particular and Congress in general. I would be happy to answer any of your questions.