SOCIAL SECURITY

MEMORANDUM

The attached final report presents the results of our audit. Our objective was to evaluate the adequacy of internal controls over the Social Security Administration’s process for issuing and offsetting Supplemental Security Income immediate payments.

Please comment within 60 days from the date of this memorandum on corrective action taken or planned on each recommendation. If you wish to discuss the final report, please call me or have your staff contact Steven L. Schaeffer, Assistant Inspector General for Audit, at (410) 965-9700.

Executive Summary

Our objective was to evaluate the adequacy of the Social Security Administration's (SSA) internal controls over Supplemental Security Income (SSI) immediate payments (IP) and to determine whether payments are recorded on the Supplemental Security Records (SSR) and subsequently offset.

BACKGROUND

SSI recipients who claim delay, interruption or nonreceipt of their monthly SSI payments can receive IPs based on the existence of a financial emergency. Claimants with emergencies who have not started receiving monthly benefits may receive emergency advance payments (EAP). As a result, EAPs are not subject to the 30-day interval requirement applied to IPs and SSA uses a different methodology for establishing the maximum payment amount. If a field office (FO) confirms a financial emergency exists that is an immediate threat to a recipient’s health or safety, the FO will issue an IP. The IP is issued instead of requiring the recipient to wait 7 to 10 days to process a replacement check through the Treasury Department. IPs are issued if: (1) the recipient is eligible for SSI benefits; (2) no other IP was made to the recipient within the past 30 days; and (3) a financial emergency exists.

If the above conditions are met, a claims representative (CR) will prepare a SSI Payment Authorization Voucher. A supervisor will review the voucher, along with supporting documentation, and authorize the payment. The voucher is then presented to the cashier who types a check from the third-party payment system (TPPS) and the check is issued to the recipient. The cashier records the IP on the TPPS and later transmits to Headquarters a daily record of TPPS checks issued by the FO. The CR records the IP on the SSR after the recipient receives it, and the cashier maintains a copy of the updated SSR. However, the SSR system also generates an automated payment later, resulting in excess payments. If the IP is properly input, the SSR system will automatically offset excess amounts paid from subsequent monthly payments. FOs are required to monitor TPPS operations by performing monthly accountability reviews and annual managers’ audits.

SSA needs to improve its controls for issuing and recovering IPs. SSA guidelines provide that:  (1) no more than one IP may be made to a recipient within a 30-day period; (2) IPs cannot exceed a designated ceiling amount; and (3) once issued, the IPs must be recorded on the SSR. We selected five FOs that issued large amounts of IPs that did not satisfy the above guidelines during the 2-year audit period ended December 31, 1999. We then randomly sampled 30 noncompliant IPs from each of the 5 offices for review. Within our sampled results, we found documented approvals for the IPs and noted no significant adverse impact from payments issued either in under 30 days to the same recipient or above the ceiling amount. However, 19 of the sampled IPs involved excess payments that were not collected. The uncollected amount for the 19 IPs totaled $6,400, or 11.1 percent of the total amount of IPs in the sample.

We concluded that SSA needs to improve its controls for issuing and recovering SSI IPs. A lack of integration and compensating controls permit human error to go undetected and IPs to remain unrecovered. We are recommending system enhancements and procedural improvements to assist FO staff in monitoring and collecting IPs. To ensure that the system is used appropriately, we recommend that SSA:

• Evaluate existing policy to determine if revisions should be made to allow for waivers of the 30-day interval requirement for disbursing IPs.

SSA generally agreed with our recommendations. Regarding the interim recommendation to perform computerized analyses to identify IPs on the SSR, SSA believes recently implemented procedures provide adequate controls. (See Appendix C for SSA’s comments.)

We acknowledge the Agency’s responsiveness and will continue to monitor the effectiveness of its corrective action.

Table of Contents

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Acronyms

Introduction

Our objective was to evaluate the adequacy of the Social Security Administration's (SSA) internal controls over Supplemental Security Income (SSI) immediate payments (IP) and to determine whether payments are recorded on the Supplemental Security Records (SSR) and subsequently offset.

The SSI program provides a minimum level of income to financially needy individuals who are aged, blind or disabled. The program allows immediate payments (IP) to be issued at local field offices (FO) for SSI recipients who are in financial emergencies. An emergency advance payment (EAP) is used to provide funds for financial emergencies that occur before a claimant has started receiving monthly SSI benefits. As a result, EAPs are not subject to the 30-day interval requirement applied to IPs and SSA uses a different methodology for establishing the maximum payment amount. SSI recipients who claim the delay, interruption or nonreceipt of monthly benefit checks can have the missing funds replaced by an IP. FOs will issue an IP based on an immediate financial emergency rather than require the recipient to wait 7 to 10 days for the Treasury Department to process a replacement check.

An IP can be issued to a SSI recipient who has an established SSR and is receiving monthly benefits. SSI recipients can receive one IP for an amount not to exceed $999 within a 30-day period. The ceiling was raised from $400 on August 23, 1999. The IP represents an advance of an SSI payment due to the recipient. However, the SSR system will generate an automated payment later, resulting in an excess amount being paid to the recipient. FOs must record IPs in the SSR system to ensure the payments are accounted for and recipients’ excess payments are offset from future benefit payments.

If an IP is to be issued, a claims representative (CR) will prepare a SSI Payment Authorization Voucher. A supervisor will review the voucher, along with supporting documentation, and authorize the payment. The voucher is then presented to the cashier who types a check from the third-party payment system (TPPS) and the check is issued to the recipient. The cashier records the IP on the TPPS and later transmits to Headquarters a daily record of TPPS checks issued by the FO. The CR records the IP on the SSR after the recipient receives it and the cashier maintains a copy of the updated SSR. The SSR system also processes an automated SSI payment later, requiring that the excess amount be offset from subsequent SSI payments due the recipient.

FO managers are responsible for ensuring that the TPPS is functioning properly to support the offices’ mission, provide adequate controls, and account for all payments. This responsibility is satisfied by two types of onsite assessments. First, managers are responsible for monthly accountability reviews to verify that TPPS checks are accounted for and supporting documentation exists. Second, managers are responsible for annual TPPS audits to ensure that IPs are authorized and recorded timely on both financial and programmatic records. In addition, regional security officers provide audit coverage of the TPPS as part of periodic Onsite Security Control and Audit Reviews.

We obtained 144,531 SSI IPs recorded on the TPPS between January 1, 1998 and December 31, 1999. These IPs totaled $55.2 million. These numbers were overstated because the TPPS included erroneous IPs that SSA voided. We analyzed the IPs to determine whether: (1) the payments matched IPs recorded on the SSR system; (2) more than one payment was made to any recipient within a 30-day period; and (3) payments were issued in excess of the maximum payment amount.

We identified 25,133 IPs that did not match SSR records, were multiple payments to the same recipient within a 30-day period, or were payments in excess of the dollar limit. The noncompliant IPs were sorted by FO to identify offices with the highest amount of payments. We selected five offices to visit from three SSA regions. The 3 regions included all 15 FOs with the highest amount of noncompliant IPs. We selected 30 IPs from each of the 5 offices using a stratified random sample. The number of sample items in each stratum was based on the relative number of IPs in each of the three categories discussed above. Details of the data analyses are provided in Appendix A.

To complete our review, we:

We performed audit work in Chicago, Illinois; Baltimore, Maryland; Albuquerque, New Mexico; Las Vegas, Nevada; San Francisco, California; Sacramento, California; and Colorado Springs, Colorado. Our fieldwork was conducted from June 2000 through June 2001. The audited issue was within the Office of the Deputy Commissioner for Operations. We conducted our audit in accordance with generally accepted government auditing standards. We did not rely solely on computer processed data from the SSR to perform our analysis. Instead, we used TPPS disbursement records to identify IPs and examined FO documentation based on a statistical sample to form our conclusions. Besides reviewing written procedures, we interviewed FO staff to obtain detailed procedures for the issuing of and accounting for IPs.

Results of Review

We found that, despite significant increases in the numbers of IPs issued in recent years, SSA has not improved its controls over the process. A previous audit issued in February 1993 noted insufficient controls and system limitations, resulting in SSA not recovering 10.3 percent of IPs included in a sample analysis. During our audit period, we identified 4,059 IPs issued prior to the required 30-day interval for payments to the same individual and 625 IPs that were issued in an amount above the allowable maximum dollar amount.

More importantly, we were unable to match 20,449 IPs totaling $8,025,805 with the Supplemental Security Record (SSR) of the recipients. This lack of controls and accountability can result in recipients receiving excessive numbers of IPs and failing to make repayments.

We reviewed a sample of 150 IPs issued at 5 FOs that issued a high volume of payments during the audit period. The sample was taken from IPs that we identified as: (1) not matching the SSR, (2) within a 30-day interval, or (3) above the dollar ceiling. The sampled offices adequately documented the bases for issuing the IPs. The IPs issued under the 30-day interval were generally within 3 days of the requirement and were recovered. We also noted few IPs issued above the $999 ceiling. However, we determined that 19 of the sampled IPs were not recovered. The loss to SSA was $6,400, or 11.1 percent of the total sampled payments. It is important that FO staff input IPs onto the SSR to enable the system to recover the payments. We attribute the noncompliant and nonrecovered IPs to the lack of both automated and manual processing controls.

We believe the need to improve controls over the IP process has increased as the result of significant increases in the volume of IPs. SSA issued 71,778 IPs for the Fiscal Year ended September 30, 1999. In comparison, the audit report referenced above disclosed that SSA issued only 20,389 EAPs and IPs during the 1-year period ended August 31, 1991. We found that from 1995 to 1999 SSA increased the number of IPs issued by 46.9 percent. This represents an increase of $9,255,711 (or 53.3 percent) in the amount of IPs issued. These increases are shown in the following table.

We obtained 144,531 payments from the TPPS data base. By matching IPs with the SSR data base and deleting voided IPs, we identified 20,449 payments from the TPPS that did not match IP data on the recipients’ SSR. The unmatched IPs totaled $8,025,805. However, the accounting for cumulative IPs issued to the same recipients on the SSR sometimes prevented us from matching the IPs from the TPPS data base with IP data on the SSR. The FO staff is responsible for recording IPs on the appropriate SSR records because there is no automated interface with the SSR to record those payments on the recipients’ SSI records. We determined that there is no reconciliation between IPs recorded on the TPPS data base (cash disbursements) with the SSR (SSI program records).

We used the population of 144,531 IPs to test overall compliance with the requirements that payments not exceed a dollar ceiling (currently $999) and not be issued to the same recipient at an interval of less than 30 days. There were 625 IPs totaling $372,215 issued during the 2-year audit period that exceeded the dollar ceiling. However, we identified only 25 excessive IPs issued during the period August through December 1999 and 17 of those payments were $1 or less above the ceiling. There were also 4,059 IPs totaling $1,442,230 that SSA issued less than 30 days after making another IP to the same recipient.

We found that 15 offices accounted for 4,696 IPs totaling $1,872,296 that were unmatched with the SSR, above the dollar ceiling, or issued less than 30 days apart to the same recipient. This represents about18.7 percent of the total IPs issued during the 2-year audit period that did not satisfy these requirements. Detailed information for the 15 FOs is shown in Appendix B. We found that all of these offices were located in three SSA regions located in the western and southwestern United States.

We selected five FOs for on-site reviews. These offices were selected from the 15 offices identified with the largest amount of IPs either unmatched with the SSR or not in compliance with the dollar ceiling or frequency of payment requirements. We selected at least 1 FO from each of the 3 SSA regions where the 15 offices are located.

The reviews consisted of interviewing staff to determine how IPs are processed and reviewing available documentation for 30 randomly selected noncompliant IPs from each office. The numbers of cases selected for each category at the five offices is shown in Appendix A.

In general, the selected offices provided documentation of the justification and evidence of supervisory approval for the sampled IPs. We did not perform additional tests to determine the validity of the evidence. Although detailed verification of financial emergencies was often missing, we found no basis to question the financial need. We also found that, while a number of the payments were in noncompliance, the violations were insignificant. For example, the 39 multiple IPs to the same recipients were often issued within 3 days of the 30-day required interval. Nonetheless, current policy does not allow for these exceptions to the requirement.

We sampled 109 IPs that we were unable to match with the recipients’ SSR. There were 6 voided IPs, resulting in 103 actual payments. Although we noted a lack of accountability on the SSR, the basis for the payments was documented and they received supervisory approval.

We reviewed two sample payments involving IPs above the dollar ceiling. The payments were for $650 and $624. Neither of these payments was otherwise questionable as the financial emergencies were documented and the IPs were approved. We also found that the number of IPs exceeding the maximum payment amount became insignificant after the ceiling was raised from $400 to $999 in August 1999.

However, we identified 19 IPs totaling $6,400 that SSA did not recover. The 19 IPs consisted of 17 payments that did not match with the SSR and 2 payments that were issued less than 30 days after previous payments to the same recipients. The amount that was not recovered totaled $6,400, or 11.1 percent of the total sampled dollars. This occurred because of systems limitations and inadequate compensating controls.

There is no automated interface to allow a FO to use one input to record IP data on both the TPPS data base used to record disbursements and the SSR used to account for SSI payments and eligibility. Moreover, SSA has not established compensating controls for FOs to ensure that IPs are properly recorded and recovered from the recipients.

The prior audit report also noted the lack of an interface between TPPS payments and the SSR. At that time, SSA indicated that it was developing systems requirements for an integrated front-end process that would allow one input to update both the TPPS and SSR systems. Despite the significant increases in the volume of IPs since the prior report was issued in 1993, SSA has not implemented this systems enhancement. SSA also has not implemented the recommendation in the prior report that the SSR should distinguish between IPs and EAPs.

Pending implementation of an automated interface between TPPS payments and the SSR, interim controls are needed to improve SSA’s accounting for IPs. We believe that two suggestions made in the prior audit report are still relevant and would improve the IP process.

Conclusions and Recommendations

We concluded that SSA needs to improve its controls for issuing and recovering SSI IPs. A lack of system integration and compensating controls permit human error to go undetected and IPs to remain unrecovered. We are recommending systems enhancements and procedural improvements to assist FO staff in monitoring and collecting IPs. To ensure that the system is used appropriately, we recommend that SSA:

• Emphasize the need to verify that IPs are promptly recorded on the SSR and recovery actions are taken as part of FO monthly TPPS accountability reports and managers’ annual audits.

SSA agreed with our recommendations and provided timeframes for implementation actions taken and planned. With respect to the recommendation for performing computerized analyses, SSA agrees with the intent of the recommendation, but not the proposed action. Instead, SSA believes recent changes to TPPS provide appropriate control for the interim period.

We acknowledge SSA’s responsiveness to the recommendations we made. The Agency’s proposed strategy for addressing our recommendations appears reasonable. We will continue to follow-up on the status of corrective action to determine its effectiveness in improving the monitoring and collection of immediate payments.

Appendices

We obtained a data base from the third-party payment system (TPPS) of Immediate Payments (IP) issued from January 1, 1998 through December 31, 1999. During this 2-year review period, there were 144,531 IPs issued totaling $55,218,164. The TPPSs are the source cash disbursement records for IPs.

We used the data base for three analyses:

1. We matched the IP data base with the Supplemental Security Record file (SSR) to identify IPs from the TPPS that did not match the SSR. We found 20,449 payments totaling $8,025,805 that we were not able to match with the SSR.
   
   
2. We identified 4,059 payments totaling $1,442,230 that were issued within 30 days of a prior IP to the same recipient.
   
   
3. We identified 625 IPs totaling $372,215 that were issued in an amount above the allowable limit.

We sorted the results of these three analyses by FOs to identify those offices with the highest amounts of IPs. See Attachment B for the results of this ranking. We selected 5 of the 15 offices with the highest amounts of payments. We ensured geographic dispersion by including at least one office from each of the three regions where the offices were located. All of the 15 offices were located in the western and southwestern United States.

We then randomly selected 30 sample IPs from each of the 5 selected offices. The sampled items were selected from the three categories of noncompliant IPs identified by our analyses as discussed above. The number of sampled items in each category was based on the relative number of IPs by category. The selections are shown in the following table.

*Note: This office was included in our sample review.

Agency Comments

We appreciate OIG’s efforts in conducting this review. Our comments on the report content and recommendations are attached. Staff questions can be referred to Odessa J. Woods on extension 50378.

OIG Contacts and Staff Acknowledgments

In addition to those named above: