A-02-07-27077 - Alternate Format

OFFICE OF
THE INSPECTOR GENERAL

SOCIAL SECURITY ADMINISTRATION

THE HENRY ITTLESON CENTER, AN
ORGANIZATIONAL REPRESENTATIVE
PAYEE FOR THE SOCIAL SECURITY
ADMINISTRATION

March 2008

A-02-07-27077

AUDIT REPORT

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:

Conduct and supervise independent and objective audits and investigations relating to agency programs and operations.
Promote economy, effectiveness, and efficiency within the agency.
Prevent and detect fraud, waste, and abuse in agency programs and operations.
Review and make recommendations regarding existing and proposed legislation and regulations relating to agency programs and operations.
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:

Independence to determine what reviews to perform.
Access to all information necessary for the reviews.
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.

MEMORANDUM

Date: March 27, 2008

To: Beatrice M. Disman
Regional Commissioner New York

From: Inspector General

Subject: The Henry Ittleson Center - An Organizational Representative Payee for the Social Security Administration (A-02-07-27077)

OBJECTIVE

Our objectives were to determine whether the Henry Ittleson Center (Ittleson Center), as an organizational representative payee for the Social Security Administration (SSA), (1) had effective controls over the receipt and disbursement of Supplemental Security Income (SSI) payments and (2) used and accounted for SSI payments in accordance with applicable regulations and SSA's policies and procedures.

BACKGROUND

Congress granted SSA the authority to appoint representative payees to receive and manage payments for some individuals. Federal regulation indicates that SSA will appoint representative payees if it determines that the beneficiary is not able to manage or direct the management of benefit payments in his or her own interest. SSA will pay benefits to a representative payee if the beneficiary is legally incompetent or mentally incapable of managing benefit payments or physically incapable of managing or directing the management of benefit payments, or eligible for benefits solely on the basis of disability and drug addition or alcoholism is a contributing factor material to the determination of disability.

Generally, if a beneficiary is under age 18, SSA will also pay benefits to a representative payee. Representative payees are responsible for managing payments in the best interest of the beneficiary. A representative payee may be an individual or an organization. Refer to Appendix B for additional Representative Payee responsibilities.

The Ittleson Center is operated under the Jewish Board of Family and Children's Services, Inc. (JBFCS). JBFCS is a nonprofit, nonsectarian social services agency in New York City with approximately 185 in- and out-patient facilities offering mental health and social services to individuals. The Ittleson Center is a 32-bed, inpatient residential treatment facility in the Bronx, New York, that provides rehabilitative and special education services for severely emotionally disturbed children ages 5 to 13.

In March 2006, JBFCS terminated for cause an Ittleson Center office manager. JBFCS had found irregularities in the office manager's accounting of petty cash funds. Upon terminating the office manager, JBFCS conducted an internal audit and determined that SSI payments sent to the Ittleson Center on behalf of recipients who were living there were not properly allocated for the recipient's use and benefit. JBFCS reported its findings to SSA at that time. As a result, SSA's New York Regional Office requested we perform an audit of the Ittleson Center. After this request was made, the office manager was indicted on charges related to the misuse of SSA funds.

We obtained copies of negotiated SSI checks from JBFCS for individuals who resided in the Ittleson Center. We then reconciled those checks with other Ittleson Center, JBFCS and SSA Representative Payee System (RPS) records to determine the total number of SSI payments sent to, and managed by, the Ittleson Center from January 1, 2001 through March 31, 2006. Refer to Appendix C for our Scope and Methodology.

RESULTS OF REVIEW

We found the Ittleson Center did not have effective controls over the receipt and disbursement of SSI payments. Additionally, we found SSI payments were not accounted for in accordance with regulatory requirements and SSA's policies and procedures. Specifically, the Ittleson Center did not

establish adequate internal controls, that is, separation of duties and/or compensating controls for its employees receiving and managing SSI
payments and

maintain financial records in accordance with applicable regulations and SSA guidance to show how SSI payments were used to pay for recipients' current and foreseeable needs.

Because of the lack of financial records, we were unable to determine how the SSI funds received by the Ittleson Center were used. Still, as a result of the lack of internal controls and financial records, we found 468 payments totaling approximately $33,000 for 39 SSI recipients from January 1, 2001 through March 31, 2006 were not properly safeguarded or accounted for in accordance with Federal regulations and SSA's policies and procedures.

INTERNAL CONTROLS

We identified weaknesses in the internal controls over SSI payments received by the Ittleson Center. Specifically, the Ittleson Center did not have adequate separation of duties and/or compensating controls for the receipt and disbursement of SSI payments.

The office manager at the Ittleson Center received recipients' monthly SSI checks. The office manager bundled all of the checks received and sent them to JBFCS' Accounts Payable department along with a form detailing each check's number, payee and dollar amount. This was done by the office manager primarily on a monthly basis. The Accounts Payable department reconciled the checks with the form, deposited the checks, and prepared and sent a consolidated check payable to the office manager. In turn, the office manager was to cash the consolidated check and use the money to meet the monthly needs of SSI recipients the Ittleson Center represented. However, there were no records to show how the office manager used the SSI monies from the consolidated checks, and JBFCS did not routinely monitor how the office manager handled the funds.

The lack of separation of duties created an environment where theft was possible and recipients' funds were at-risk of misuse. When establishing or reevaluating internal control procedures, organizational representative payees should consider the best way to separate employee duties. Ideally, a different person should be assigned to perform each of the following basic duties regarding paper checks: (1) receive checks from mail delivery; (2) record checks received in the financial records; (3) sign checks for approved disbursements; and (4) maintain and document the use of the accounts for the recipient's benefit. When it is not possible to assign a different person for each duty, compensating controls should be put in place to ensure that a recipient's benefit is properly managed by the representative payee in accordance with SSA's policies. Also, management should perform routine reviews of the use of SSI payments to ensure they are being used according to SSA policies.

FINANCIAL RECORDS

We requested from JBFCS the financial records detailing how the Ittleson Center used and accounted for payments received on behalf of SSI recipients who were inpatient residents at the facility from January 1, 2001 through March 31, 2006. Through its attorney, JBFCS provided some of the documentation we requested. Specifically, it provided photocopies of SSI checks it received and the forms the office manager completed before forwarding the bundled SSI checks to JBFCS' Accounts Payable department. JBFCS also provided us with photocopies of the consolidated checks it forwarded back to the Ittleson Center office manager. These documents were primarily recorded on a monthly basis.

The documentation provided by JBFCS did not include records that detailed how the SSI payments were used and accounted for by the office manager to meet the needs of the SSI recipients. Also, JBFCS did not provide us with records of conserved funds or annual accounting reports of how SSI payments were used for each recipient. Additionally, we did not receive any records that indicated SSI recipients' beginning and ending SSI account balances as they entered and left the Ittleson Center.

Federal regulations require that representative payees keep accurate and complete records to show the amount of SSI and Title II benefit payments received and how the money was used. These regulations also require that, upon becoming a representative payee, payees keep accurate and complete records for beginning account balances, and, upon relinquishing their representative payee responsibilities, return/transfer any remaining account balances to SSA. SSA's policy requires that expenses be supported and the supporting documentation maintained for 2 years. Lastly, SSA policy indicates that SSA should be provided an annual accounting for the use of accounts.

Since JBFCS did not provide us with financial records detailing the status of SSI payments, we were unable to determine how the payments were used. However, we determined the number and dollar amount of SSI payments received by the Ittleson Center as a representative payee by reconciling checks made out to, and/or negotiated (cashed) by, the Ittleson Center with SSA's Representative Payee System data extracts. Per our reconciliation, the Ittleson Center received 468 payments totaling $32,699.75 for 39 SSI recipients from January 1, 2001 through March 31, 2006.

Through its attorney, we provided JBFCS all of the records we used to determine the amount of SSI payments the Ittleson Center received. Upon review of our evidence, JBFCS verified it received 433 of the 468 payments we identified, for a total of $20,778.75.

Although Ittleson did not confirm the remaining 35 payments, SSA's New York Regional Office determined through the Treasury Check Information System that checks for the 35 payments we identified, totaling $11,921, were, in fact, made out to the Ittleson Center. Refer to Appendix D for further details of SSI payments made to the Ittleson Center.

CONCLUSIONS AND RECOMMENDATIONS

We concluded JBFCS and the Ittleson Center did not have effective controls over the receipt and disbursement of SSI payments, and that SSI payments were not accounted for in accordance with applicable regulations and SSA policies and procedures. The Ittleson Center's inability to properly account for the SSI payments in question inherently limits its ability to protect such assets from misuse and/or misappropriation. Although we could not determine from the accounting records provided whether misuse occurred for the 468 payments in question, the control environment in place at the Ittleson Center rendered the nearly $33,000 in SSI accounts at-risk for misuse. To that end, it is imperative that SSA determine whether misuse occurred so appropriate corrective action may be taken. We recommend that SSA:

1. Determine whether the SSI payments received by the Ittleson Center as a representative payee were misused and, if misuse occurred, take the appropriate actions.

2. Work with JBFCS and Ittleson Center, for as long as they are a payee, to establish effective internal controls over the receipt and management of SSI payments and to ensure that complete financial records supporting the receipt, recording, disbursement and maintenance of SSI payments are maintained.

3. Determine whether any of the other 185 JBFCS facilities are serving as a representative payee, and, if so, ensure the facilities are properly accounting for and managing all SSI payments they receive in accordance with applicable regulations and SSA policies and procedures.

AGENCY AND REPRESENTATIVE PAYEE COMMENTS

SSA and JBFCS agreed with our recommendations. We note that JBFCS lists all of its facilities that currently serve as a representative payee in its comments on this report. (Please see Appendix E for the full text of SSA's comments and Appendix F for the full text of JBFCS' comments).

Patrick P. O'Carroll, Jr.

Appendices
APPENDIX A - Acronyms
APPENDIX B - Representative Payee Responsibilities
APPENDIX C - Scope and Methodology
APPENDIX D - Payments to Henry Ittleson Center for Supplemental Security Income Recipients
APPENDIX E - Agency Comments
APPENDIX F - Representative Payee's Comments
APPENDIX G - OIG Contacts and Staff Acknowledgments

Appendix A
Acronyms
C.F.R. Code of Federal Regulations
Ittleson Center Henry Ittleson Center
JBFCS Jewish Board of Family and Children's Services, Inc.
OIG Office of the Inspector General
POMS Program Operations Manual System
RPS Representative Payee System
SSA Social Security Administration
SSI Supplemental Security Income
Treasury Department of the Treasury
U.S.C. United States Code

Appendix B
Representative Payee Responsibilities

Representative payees are responsible for using payments to serve the recipient's best interests. The responsibilities include:

Determine the recipient's current needs for day-to-day living, and use his or her payments to meet those needs.

Conserve and invest payments not needed to meet the recipient's current needs.

Maintain accounting records of how the payments are received and used.

Report events to the Social Security Administration (SSA) that may affect the individual's entitlement or payment amount.

Report any changes in circumstances that would affect their performance as a representative payee.

Provide SSA an annual Representative Payee Report to account for payments spent and invested.

Return any payments to SSA to which the recipient is not entitled.

Return conserved funds to SSA when no longer the representative payee for the recipient.

Ensure Supplemental Security Income recipients do not exceed their resource limits, be aware of any other income they may have and monitor their conserved funds.

Appendix C
Scope and Methodology

Our objectives were to determine whether the Henry Ittleson Center (Ittleson Center), as an organizational representative payee for the Social Security Administration (SSA),
(1) had effective controls over the receipt and disbursement of Supplemental Security Income (SSI) payments and (2) used and accounted for SSI payments in accordance with applicable regulations and SSA policies and procedures. To accomplish our objectives, we:

Reviewed applicable laws, Federal regulations and SSA policies and procedures pertaining to representative payees.

Obtained background information about the Ittleson Center and its parent organization, the Jewish Board of Family and Children's Services, Inc. (JBFCS).

Determined whether the Ittleson Center complied with SSA's Guide for Organizational Representative Payees, which corresponds to Code of Federal Regulations 20, Section 404, subpart U and Section 416, subpart F. Per the Guide, a representative payee must establish some form of a payee accounting system that will track the following for each recipient:

how much SSI funds were received,
how much of the funds were spent,
how funds were spent, and
the balance saved for each recipient.

Obtained copies of negotiated SSI checks from JBFCS for residents who resided in the Ittleson Center. We then reconciled the checks with other Ittleson, JBFCS and SSA Representative Payee System (RPS) records to determine the total number of SSI payments sent to, and managed by, the Ittleson Center from January 1, 2001 through March 31, 2006, the tenure of the former office manager.

Reviewed Ittleson Center internal controls over the receipt, maintenance and disbursement of SSI payments.

Had discussions with representative personnel from JBFCS, SSA's New York Regional Office, and the New York Office of Investigations.

We determined SSA's RPS computer-processed data and data recorded on SSI paper checks to be reliable for our intended use. We tested certain data elements of data extracts generated from the SSA's RPS. We completed the test to determine the completeness, accuracy and validity of the data. These tests allowed us to assess the reliability of the data and achieve our audit objectives.

We performed our work at the New York Audit Division, New York, New York, from July through October 2007. We conducted our audit in accordance with generally accepted government auditing standards.

Appendix D
Payments to Henry Ittleson Center for Supplemental Security Income Recipients

We have excluded Henry Ittleson Center resident names, dates of residency and specific check payment amounts in the table below to protect their privacy. We have provided this detailed information to the Social Security Administration in a separate letter.

Recipient Number of Payments Total Dollar Amount
1 22 $690.00
2 26 $3,845.00
3 3 $645.00
4 5 $150.00
5 15 $450.00
6 23 $690.00
7 11 $330.00
8 6 $180.00
9 4 $120.00
10 1 $90.00
11 20 $4,245.00
12 8 $1,314.00
13 5 $180.00
14 4 $195.00
15 1 $178.95
16 14 $420.00
17 20 $600.00
18 6 $180.00
19 1 $30.00
20 7 $210.00
21 7 $5,472.00
22 25 $755.00
23 1 $824.00
24 24 $720.00
25 16 $480.00
26 20 $605.00
27 6 $240.00
28 17 $540.00
29 10 $1,254.00
30 2 $210.00
31 8 $240.00
32 29 $1,351.80
33 13 $390.00
34 25 $2,010.00
35 3 $90.00
36 27 $810.00
37 24 $725.00
38 5 $1,100.00
39 4 $140.00
Total 468 $32,699.75

Appendix E
Agency Comments

March 5, 2008

To: Inspector General

From: Regional Commissioner New York

Subject: The Henry Ittleson Center - An Organizational Representative Payee for the Social Security Administration (A-02-07-27077)

We have reviewed the draft report and offer the following comments on each of the recommendations:

1. Determine whether the SSI payments received by the Ittleson Center as a representative payee were misused and, if misuse occurred, take the appropriate actions.

We will pursue whether misuse occurred and take appropriate action as necessary.

As recommended, we will work with the aforementioned agencies to establish more effective controls to insure they adhere to payee guidelines.

We researched the JBFCS and found that there were 19 organizations in RPS and only 15 of the 19 are currently active payees, 2 of them being the Ittleson locations. The JBFCS website only contained a list of approximately 130 organizations, many of whom were listed more than once as they sponsored multiple programs. We would appreciate if OIG could provide their list of the 185 facilities to insure that we can identify all that are currently representative payee for any beneficiaries/recipients.

We, again, want to express our appreciation for your office's assistance in conducting the audit of the Henry Ittleson Center on our behalf. Should your staff have any questions, they may contact Dennis Mass, Director, Center for Programs Support at
212 264-4004.

Beatrice M. Disman
Appendix F
Representative Payee's Comments

Appendix G
OIG Contacts and Staff Acknowledgments
OIG Contacts
Tim Nee, Director, (212) 264-5295
Vicki Abril, Audit Manager, (212) 264-0504

Acknowledgments
In addition to those named above:
Abraham Pierre, Auditor

For additional copies of this report, please visit our web site at www.ssa.gov/oig or contact the Office of the Inspector General's Public Affairs Specialist at (410) 965-3218. Refer to Common Identification Number A-02-07-27077.

Overview of the Office of the Inspector General
The Office of the Inspector General (OIG) is comprised of our Office of Investigations (OI), Office of Audit (OA), Office of the Chief Counsel to the Inspector General (OCCIG), and Office of Resource Management (ORM). To ensure compliance with policies and procedures, internal controls, and professional standards, we also have a comprehensive Professional Responsibility and Quality Assurance program.

Office of Audit
OA conducts and/or supervises 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 and program evaluations and projects on issues of concern to SSA, Congress, and the general public.

Office of Investigations
OI conducts and coordinates investigative activity 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 OIG liaison to the Department of Justice on all matters relating to the investigations of SSA programs and personnel. OI also conducts joint investigations with other Federal, State, and local law enforcement agencies.

Office of the Chief Counsel to the Inspector General
OCCIG provides independent legal advice and counsel to the IG on various matters, including statutes, regulations, legislation, and policy directives. OCCIG 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. Finally, OCCIG administers the Civil Monetary Penalty program.

Office of Resource Management
ORM supports OIG by providing information resource management and systems security. ORM also coordinates OIG's budget, procurement, telecommunications, facilities, and human resources. In addition, ORM is the focal point for OIG's strategic planning function and the development and implementation of performance measures required by the Government Performance and Results Act of 1993.