OFFICE OF
THE INSPECTOR GENERAL
SOCIAL SECURITY ADMINISTRATION
ADMINISTRATIVE COSTS
CLAIMED BY THE
MASSACHUSETTS DISABILITY
DETERMINATION SERVICES
August 2009 A-01-09-19035
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Mission
By conducting independent and objective audits, evaluations and investigations, we inspire public confidence in the integrity and security of SSA’s programs and operations and protect them against fraud, waste and abuse. We provide timely, useful and reliable information and advice to Administration officials, Congress and the public.
Authority
The Inspector General Act created independent audit and investigative units, called the Office of Inspector General (OIG). The mission of the OIG, as spelled out in the Act, is to:
m Conduct and supervise independent and objective audits and investigations relating to agency programs and operations.
m Promote economy, effectiveness, and efficiency within the agency.
m Prevent and detect fraud, waste, and abuse in agency programs and operations.
m Review and make recommendations regarding existing and proposed legislation and regulations relating to agency programs and operations.
m Keep the agency head and the Congress fully and currently informed of problems in agency programs and operations.
To ensure objectivity, the IG Act empowers the IG with:
m Independence to determine what reviews to perform.
m Access to all information necessary for the reviews.
m Authority to publish findings and recommendations based on the reviews.
Vision
We strive for continual improvement in SSA’s programs, operations and management by proactively seeking new ways to prevent and deter fraud, waste and abuse. We commit to integrity and excellence by supporting an environment that provides a valuable public service while encouraging employee development and retention and fostering diversity and innovation.
Date: August 26, 2009 Refer To:
To: Manuel J. Vaz
Regional Commissioner
Boston
From: Inspector General
Subject: Administrative Costs Claimed by the Massachusetts Disability Determination Services
(A-01-09-19035)
OBJECTIVE
For our audit of Fiscal Year (FY) 2006 and 2007 administrative costs claimed by the Massachusetts Disability Determination Services (MA-DDS), our objectives were to
BACKGROUND
Disability determinations under the Social Security Administration’s (SSA) Disability Insurance and Supplemental Security Income programs are performed by disability determination services (DDS) in each State or other responsible jurisdiction. Such determinations are required to be performed in accordance with Federal law and underlying regulations. Each DDS is responsible for determining claimants’ disabilities and ensuring adequate evidence is available to support its determinations.
To make proper disability determinations, each DDS is authorized to purchase consultative medical examinations and medical evidence of record from the claimants’ physicians or other treating sources. SSA reimburses the DDS for 100 percent of allowable reported expenditures up to its approved funding authorization, based on a State Agency Report of Obligations for SSA Disability Programs (Form SSA-4513). (For additional background information, see Appendix B of this report.)
RESULTS OF REVIEW
Except for the items discussed in the following sections, we determined that costs claimed on Forms SSA‑4513 for the period October 1, 2005 through September 30, 2007 were allowable and properly allocated, and the system of internal controls over the accounting and reporting of administrative costs was effective. Also, cumulative draw downs did not exceed cumulative disbursements during our audit period. Finally, our limited review of MA-DDS’ controls over its physical security and personally identifiable information showed that controls were in place. (See Appendix C for costs reported on Forms SSA-4513.)
INDIRECT COST ALLOCATION
We calculated variances on indirect costs of $148,275 in FY 2006 and $162,217 in FY 2007. The variances were due to MA-DDS’ use of an indirect cost rate lower than the approved rate. Therefore, MA-DDS underreported the amount of indirect charges on Form SSA-4513 for FYs 2006 and 2007.
We also calculated the indirect costs for FY 2008 to determine whether the variances were corrected in the subsequent year. As shown in Table 1, the variances for the 3‑year period netted an underreported indirect cost amount of $146,919.
As of June 2009, MA-DDS had planned to post an adjusting entry to Form SSA-4513 for FY 2008 to correctly reflect the actual indirect costs incurred by MA-DDS for FYs 2006 through 2008.
Table 1: Reconciliation of Indirect Costs |
|||
FY |
Auditor’s |
SSA-4513 |
Variance |
2006 |
$839,473 |
$691,198 |
$148,275 |
2007 |
1,008,061 |
845,844 |
162,217 |
2008 |
1,566,452 |
1,730,025 |
(163,573) |
|
|
|
|
Total |
$3,267,067 |
$146,919 |
|
EXPENDITURE CLASSIFICATION
Based on our samples, we found that some expenditures were misclassified during the period audited. For example, we found eight invoices totaling $9,780 for the same vendor were classified as Applicant Travel; however, they should have been coded as Contracted Costs. Also, we found a $5,450 invoice that was classified as Equipment Rental, yet it was related to Equipment Purchase.
EXPENDITURE ACCURACY
We identified an expense item related to Applicant Travel in which a vendor was overpaid $178 in FY 2006. When we notified MA-DDS of this discrepancy, it contacted the vendor and obtained a refund for the $178 overage. MA‑DDS implemented a new procedure on April 29, 2009 in which the supervisor will ensure that the payment amount entered into the procurement system matches the invoice amount before the payment is issued.
Also, when we recalculated the bi-weekly payroll amount for a medical consultant in FY 2007, we found that the individual was overpaid for 1 hour of work, at a contracted rate of $68 per hour.
Both of these issues were immaterial in amount and rare in occurrence based on the sample items we analyzed.
INFORMATION CHARGEBACKS
During our review, SSA’s Boston Regional Office expressed concern about specific Miscellaneous expenses designated as Information Chargebacks. This type of expense is comprised of costs associated with the operation and maintenance of a centralized accounting system. The expense is paid by all State agencies in the Commonwealth of Massachusetts on a proportionally allocated basis. These charges were recorded in FYs 2006 and 2007 in the amounts of approximately $776,000 and $691,000, respectively.
We contacted personnel and/or reviewed documents from the MA-DDS, Boston Regional Office, Office of the Comptroller of the Commonwealth of Massachusetts, and Massachusetts Rehabilitation Commission (the parent agency of MA-DDS). We found that these charges dated back to FY 2005. Since that time, the United States Department of Health and Human Services has approved the charges annually.
CONCLUSION AND RECOMMENDATIONS
Overall, MA-DDS had effective internal controls over the accounting and reporting of administrative costs for FYs 2006 and 2007. Also, the controls in place for general security and personally identifiable information at MA-DDS were satisfactory. MA-DDS took immediate corrective action on the overpayment we identified from the Applicant Travel expenditure group, and it added a control to its payment procedures to verify the dollar amount of the invoice to the payment amount before a check is issued.
However, based on our findings, we recommend that SSA instruct MA-DDS to:
AGENCY COMMENTS
SSA agreed with the recommendations. (See Appendix D for SSA’s comments and Appendix E for the State Agency comments.)
/s/
Patrick P. O’Carroll, Jr.
Appendices
APPENDIX A – Acronyms
APPENDIX B – Background, Scope, and Methodology
APPENDIX C – Schedule of Total Costs Reported on Forms SSA-4513—State Agency Reports of Obligations for SSA Disability Programs
APPENDIX E – State Agency Comments
APPENDIX F – OIG Contacts and Staff Acknowledgments
Acronyms
Act |
Social Security Act |
C.F.R. |
Code of Federal Regulations |
DDS |
Disability Determination Services |
DI |
Disability Insurance |
EDP |
Electronic Data Processing |
FY |
Fiscal Year |
Form SSA-4513 |
State Agency Report of Obligations for SSA Disability Programs |
MA-DDS |
Massachusetts Disability Determination Services |
OIG |
Office of the Inspector General |
Pub. L. No. |
Public Law Number |
SSA |
Social Security Administration |
SSI |
Supplemental Security Income |
U.S.C. |
United States Code |
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Background, Scope, and Methodology
BACKGROUND
The Disability Insurance (DI) program, established under Title II of the Social Security Act (Act), provides benefits to wage earners and their families in the event the wage earner becomes disabled. The Supplemental Security Income (SSI) program, established under Title XVI of the Act, provides benefits to financially needy individuals who are aged, blind, and/or disabled.
The Social Security Administration (SSA) is responsible for implementing policies for the development of disability claims under the DI and SSI programs. Disability determinations under both the DI and SSI programs are performed by disability determination services (DDS) in each State, Puerto Rico and the District of Columbia. Such determinations are required to be performed in accordance with Federal law and underlying regulations. In carrying out its obligation, each DDS is responsible for determining claimants’ disabilities and ensuring that adequate evidence is available to support its determinations. To assist in making proper disability determinations, each DDS is authorized to purchase medical examinations, X rays, and laboratory tests on a consultative basis to supplement evidence obtained from the claimants’ physicians or other treating sources.
SSA reimburses the DDS for 100 percent of allowable reported expenditures up to its approved funding authorization. The DDS withdraws Federal funds through the Department of the Treasury’s Automated Standard Application for Payments System to pay for program expenditures. Funds drawn down must comply with Federal regulations and intergovernmental agreements entered into by the Department of the Treasury and States under the Cash Management Improvement Act of 1990. An advance or reimbursement for costs under the program must comply with Office of Management and Budget (OMB) Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments. At the end of each quarter of the Fiscal Year (FY), each DDS submits a State Agency Report of Obligations for SSA Disability Programs (Form SSA-4513) to account for program disbursements and unliquidated obligations.
SCOPE
To accomplish our objectives, we reviewed the administrative costs the Massachusetts Disability Determination Services (MA-DDS) reported on its Forms SSA-4513 for FYs 2006 and 2007. For the periods reviewed, we obtained evidence to evaluate recorded financial transactions and determine whether they were allowable and appropriate under OMB Circular A-87 and SSA’s Program Operations Manual System.
We also:
The electronic data used in our audit were sufficiently reliable to achieve our audit objectives. We assessed the reliability of the electronic data by reconciling it with the costs claimed on the Forms SSA-4513. We also conducted detailed audit testing on selected data elements in the electronic data files.
We performed our audit at the MA-DDS and the Office of Audit in Boston, Massachusetts, from March through June 2009. We conducted our audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.
METHODOLOGY
Our sampling methodology encompassed the three general areas of costs as reported on Form SSA-4513: (1) Personnel, (2) Medical, and (3) All Other Non‑personnel costs. We obtained computerized data from MA-DDS for FYs 2006 and 2007 for use in statistical sampling.
Personnel Costs
We sampled 50 employee salary items from 1 randomly selected pay period in FY 2007. We tested payroll and hours for each individual selected. We verified that approved time records were maintained and supported the hours worked. We tested payroll records to ensure the MA-DDS correctly paid employees and adequately documented these payments.
We also sampled 50 medical consultant costs from 1 randomly selected pay period in FY 2007. We determined whether sampled costs were reimbursed properly and ensured the selected medical consultants were licensed.
Medical Costs
We sampled 100 medical evidence and consultative examination records (50 items from each FY) using a proportional random sample. We determined whether sampled costs were properly reimbursed.
All Other Non-Personnel Costs
We stratified All Other Non-personnel costs into 10 categories: (1) Occupancy, (2) Contracted Costs, (3) Electronic Data Processing (EDP) Maintenance, (4) New EDP Equipment/Upgrades (5) Equipment Purchase & Rental, (6) Communications, (7) Applicant Travel, (8) DDS Travel, (9) Supplies, and (10) Miscellaneous. We selected a stratified random sample of 50 items from each FY based on the percentage of costs in each category to total costs. We also performed a 100-percent review of the rent portion of Occupancy and the Cooperative Disability Investigations portion of Miscellaneous. Additionally, we gained an understanding of the Information Chargeback portion of Miscellaneous.
Personally Identifiable Information
We reviewed a random sample of various mailed documents MA-DDS produced and found that personally identifiable information was referenced only on those deemed necessary, such as notices addressed to doctors, hospitals, medical providers, etc.
Schedule of Total Costs Reported on Forms SSA-4513—State Agency Reports of Obligations for SSA Disability Programs
Massachusetts Disability Determination Services |
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|
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FISCAL YEARS (FY) 2006 and 2007 COMBINED |
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REPORTING ITEMS |
DISBURSEMENTS |
UNLIQUIDATED OBLIGATIONS |
TOTAL OBLIGATIONS |
Personnel |
$46,981,458 |
$0 |
$46,981,458 |
Medical |
$11,655,263 |
$0 |
$11,655,263 |
Indirect |
$1,537,042 |
$0 |
$1,537,042 |
All Other |
$13,156,151 |
$0 |
$13,156,151 |
TOTAL |
$73,329,914 |
$0 |
$73,329,914 |
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|
|
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FY 2006 |
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REPORTING ITEMS |
DISBURSEMENTS |
UNLIQUIDATED OBLIGATIONS |
TOTAL OBLIGATIONS |
Personnel |
$22,917,208 |
$0 |
$22,917,208 |
Medical |
$5,684,475 |
$0 |
$5,684,475 |
Indirect |
$691,198 |
$0 |
$691,198 |
All Other |
$6,933,748 |
$0 |
$6,933,748 |
TOTAL |
$36,226,629 |
$0 |
$36,226,629 |
FY 2007 |
|||
REPORTING ITEMS |
DISBURSEMENTS |
UNLIQUIDATED OBLIGATIONS |
TOTAL OBLIGATIONS |
Personnel |
$24,064,250 |
$0 |
$24,064,250 |
Medical |
$5,970,788 |
$0 |
$5,970,788 |
Indirect |
$845,844 |
$0 |
$845,844 |
All Other |
$6,222,403 |
$0 |
$6,222,403 |
TOTAL |
$37,103,285 |
$0 |
$37,103,285 |
Agency Comments
MEMORANDUM |
Date: |
July 27, 2009 Refer |
Refer To: S2D1G5/DI-16/ORC-2009-11702 |
To: |
Patrick P. O’Carroll, Jr. |
From: |
Manuel J. Vaz /s/ |
Subject: |
Administrative Costs Claimed by the Massachusetts Disability Determination Services (A-01-09-19035) – Reply (Your Memo, July 15, 2009) |
We have reviewed the draft report for the administrative audit on the Massachusetts Disability Determination Services (MA DDS) (A-01-09-19035) and concur with both recommendations. In fact, the MA DDS plans to take action to reconcile the amounts for indirect cost allocations, when they submit their quarterly SSA-4513 reports for the quarter ending 6/30/09.
We thank you for the opportunity to provide these comments to the draft report. We have always enjoyed a collegial and professional rapport with our OIG auditors, and have the utmost respect and appreciation for their communication efforts and dedication to the audit process.
State Agency Comments
OIG Contacts and Staff Acknowledgments
Judith Oliveira, Director, Boston Audit Division
David Mazzola, Audit Manager
Acknowledgments
In addition to those named above:
Chad Burns, Auditor
Frank Salamone, Senior Auditor
For additional copies of this report, please visit our web site at www.socialsecurity.gov/oig or contact the Office of the Inspector General’s Public Affairs Staff Assistant at (410) 965-4518. Refer to Common Identification Number A‑01‑09‑19035.
DISTRIBUTION SCHEDULE
Commissioner of Social Security
Office of Management and Budget, Income Maintenance Branch
Chairman and Ranking Member, Committee on Ways and Means
Chief of Staff, Committee on Ways and Means
Chairman and Ranking Minority Member, Subcommittee on Social Security
Majority and Minority Staff Director, Subcommittee on Social Security
Chairman and Ranking Minority Member, Committee on the Budget, House of Representatives
Chairman and Ranking Minority Member, Committee on Oversight and Government Reform
Chairman and Ranking Minority Member, Committee on Appropriations, House of Representatives
Chairman and Ranking Minority, Subcommittee on Labor, Health and Human Services, Education and Related Agencies, Committee on Appropriations,
House of Representatives
Chairman and Ranking Minority Member, Committee on Appropriations, U.S. Senate
Chairman and Ranking Minority Member, Subcommittee on Labor, Health and Human Services, Education and Related Agencies, Committee on Appropriations, U.S. Senate
Chairman and Ranking Minority Member, Committee on Finance
Chairman and Ranking Minority Member, Subcommittee on Social Security Pensions and Family Policy
Chairman and Ranking Minority Member, Senate Special Committee on Aging
Social Security Advisory Board
Overview of the Office of the Inspector General
The Office of the Inspector General (OIG) is comprised of an Office of Audit (OA), Office of Investigations (OI), Office of the Counsel to the Inspector General (OCIG), Office of External Relations (OER), and Office of Technology and Resource Management (OTRM). To ensure compliance with policies and procedures, internal controls, and professional standards, the OIG also has a comprehensive Professional Responsibility and Quality Assurance program.
Office of Audit
OA conducts financial and performance audits of the Social Security Administration’s (SSA) programs and operations and makes recommendations to ensure program objectives are achieved effectively and efficiently. Financial audits assess whether SSA’s financial statements fairly present SSA’s financial position, results of operations, and cash flow. Performance audits review the economy, efficiency, and effectiveness of SSA’s programs and operations. OA also conducts short-term management reviews and program evaluations on issues of concern to SSA, Congress, and the general public.
Office of Investigations
OI conducts investigations related to fraud, waste, abuse, and mismanagement in SSA programs and operations. This includes wrongdoing by applicants, beneficiaries, contractors, third parties, or SSA employees performing their official duties. This office serves as liaison to the Department of Justice on all matters relating to the investigation of SSA programs and personnel. OI also conducts joint investigations with other Federal, State, and local law enforcement agencies.
Office of the Counsel to the Inspector General
OCIG provides independent legal advice and counsel to the IG on various matters, including statutes, regulations, legislation, and policy directives. OCIG also advises the IG on investigative procedures and techniques, as well as on legal implications and conclusions to be drawn from audit and investigative material. Also, OCIG administers the Civil Monetary Penalty program.
Office of External Relations
OER manages OIG’s external and public affairs programs, and serves as the principal advisor on news releases and in providing information to the various news reporting services. OER develops OIG’s media and public information policies, directs OIG’s external and public affairs programs, and serves as the primary contact for those seeking information about OIG. OER prepares OIG publications, speeches, and presentations to internal and external organizations, and responds to Congressional correspondence.
Office of Technology and Resource Management
OTRM supports OIG by providing information management and systems security. OTRM also coordinates OIG’s budget, procurement, telecommunications, facilities, and human resources. In addition, OTRM is the focal point for OIG’s strategic planning function, and the development and monitoring of performance measures. In addition, OTRM receives and assigns for action allegations of criminal and administrative violations of Social Security laws, identifies fugitives receiving benefit payments from SSA, and provides technological assistance to investigations.
For FYs 2006 and 2007, total administrative expenses for MA-DDS were approximately $36 million and $37 million, respectively.
The Information Chargebacks are based on a State agency’s share of usage of the accounting system, determined by actual transaction lines posted to the general ledger.
We also examined the indirect costs and corresponding Indirect Cost Rate Agreements for FY 2008, although it was outside the scope of our audit.