A-07-02-22003 - Alternative Format

SOCIAL SECURITY

MEMORANDUM

Date: October 23, 2002

To: Michael W. Grochowski
Regional Commissioner

From: Assistant Inspector General for Audit

Subject: Audit of the Administrative Costs Claimed by the Kansas Disability Determination Services (A-07-02-22003)

The attached final report presents the results of our audit. Our objectives were to evaluate the Kansas Disability Determination Services' internal controls over the accounting and reporting of administrative costs, determine whether costs claimed were allowable and properly allocated and funds were properly drawn, and assess the electronic data processing general controls environment.

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 at (410) 965-9700.

Steven L. Schaeffer

OFFICE OF

THE INSPECTOR GENERAL

SOCIAL SECURITY ADMINISTRATION

AUDIT OF THE ADMINISTRATIVE

COSTS CLAIMED BY THE

KANSAS DISABILITY

DETERMINATION SERVICES

October 2002

A-07-02-22003

AUDIT REPORT

Mission

We improve SSA programs and operations and protect them against fraud, waste, and abuse by conducting independent and objective audits, evaluations, and investigations. We provide timely, useful, and reliable information and advice to Administration officials, the 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

By conducting independent and objective audits, investigations, and evaluations, we are agents of positive change striving for continuous improvement in the Social Security Administration's programs, operations, and management and in our own office.

Executive Summary
OBJECTIVES

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 according to Federal 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 consultative medical examinations to supplement evidence obtained from the claimants' physicians or other treating sources. SSA pays the DDS for 100 percent of allowable expenditures.

RESULTS OF REVIEW

Our review of administrative costs claimed by KS-DDS disclosed that obligations reported to SSA were overstated by $5,674,737. The overstated obligations were caused by (1) incorrect indirect cost allocations, (2) excessive consultative examination (CE) payments, (3) inappropriate non-SSA work cost charges, and (4) inaccurate other nonpersonnel costs. In addition, we identified $1,106,542 in costs that KS-DDS claimed for reimbursement in the incorrect fiscal year.

We estimate that SSA will realize about $6.1 million in savings over the next 5 years as a result of resolving the indirect cost findings disclosed in this report. Our review also disclosed that internal control improvements were needed in the areas of cash management, segregation of duties, and computer access.

RECOMMENDATIONS AND AGENCY COMMENTS

We recommend that SSA recover the $5,674,737 in unallowable costs resulting from the overstated obligations and instruct KS-DDS to improve internal controls over the reporting of fiscal year payments, cash management, segregation of duties, and computer access. In response to our draft report, SSA agreed with most of our recommendations. However, SSA did not fully agree with our recommendations related to incorrect reporting of fiscal year expenditures and excess CE costs. See Appendix E for the full text of SSA's comments to our report, including the KS-DDS' response.

Table of Contents

Page

INTRODUCTION 1

RESULTS OF REVIEW 4

Indirect Costs 4

Incorrect Fiscal Year Payments 8

Consultative Examination Costs 9

Non-SSA Work 10

All Other Nonpersonnel Costs 11

Cash Management 12

Segregation of Duties 13

Access Controls 14

CONCLUSIONS AND RECOMMENDATIONS 16

APPENDICES

APPENDIX A - Sampling Methodology

APPENDIX B - Kansas Disability Determination Services Reported Versus Allowed Obligations

APPENDIX C - Kansas Disability Determination Services Indirect Costs

APPENDIX D - Kansas Disability Determination Services Consultative Examination Costs

APPENDIX E - Agency Comments

APPENDIX F - OIG Contacts and Staff Acknowledgments

Acronyms

Act Social Security Act
ASAP Automated Standard Application for Payments
CAP Cost Allocation Plan
CE Consultative Examination
CFR Code of Federal Regulations
CMIA Cash Management Improvement Act
DDS Disability Determination Services
DI Disability Insurance
Form SSA-4513 State Agency Report of Obligations for SSA Disability Programs
FTE Full-Time Equivalents
FY Fiscal Year
GAO General Accounting Office
HHS Department of Health and Human Services
IT Information Technology
IWS/LAN Intelligent Workstation/Local Area Network
KRS Kansas Rehabilitation Services
KS-DDS Kansas Disability Determination Services Administration
KS-SRS Kansas Department of Social and Rehabilitation Services
MOU Memorandum of Understanding
OMB Office of Management and Budget
POMS Program Operations Manual System
SSA Social Security Administration
SSH Systems Security Handbook
SSI Supplemental Security Income
Treasury Department of the Treasury

Introduction
OBJECTIVES

The objectives of our audit were to (1) evaluate the Kansas Disability Determination Services' (KS-DDS) internal controls over the accounting and reporting of administrative costs, (2) determine whether costs claimed were allowable and properly allocated and funds were properly drawn, and (3) assess the electronic data processing general controls environment.

BACKGROUND

The Disability Insurance (DI) program was established in 1954 under title II of the Social Security Act (Act). The program provides a benefit to wage earners and their families in the event the wage earner becomes disabled. The Supplemental Security Income (SSI) program was created as a result of the Social Security Amendments of 1972 with an effective date of January 1, 1974. SSI (title XVI of the Act) provides a nationally uniform program of income to financially needy individuals who are aged, blind, and/or disabled.

The Social Security Administration (SSA) is primarily responsible for implementing policies governing the development of disability claims under the DI and SSI programs. Disability determinations under both DI and SSI are performed by Disability Determination Services (DDS) in each State according to Federal 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 such consultative medical examinations as x-rays and laboratory tests to supplement evidence obtained from the claimants' physicians or other treating sources.

SSA pays the DDS for 100 percent of allowable expenditures. Each year, SSA approves a DDS budget. Once approved, the DDS withdraws Federal funds through the Department of the Treasury's (Treasury) Automated Standard Application for Payments (ASAP) system. Cash drawn from the Treasury to pay for program expenditures is to be drawn according to Federal regulations and in accordance with intergovernmental agreements entered into by Treasury and the States under the authority of the Cash Management Improvement Act (CMIA). , At the end of each fiscal quarter, each DDS submits to SSA a State Agency Report of Obligations for SSA Disability Programs (Form SSA-4513) to account for program disbursements and unliquidated obligations.

KS-DDS is a component of the Kansas Department of Social and Rehabilitation Services (KS-SRS), Kansas Rehabilitation Services (KRS). Indirect costs are allocated according to the KS-SRS Cost Allocation Plan, which is approved by Department of Health and Human Services (HHS) on behalf of the Federal Government.

SCOPE AND METHODOLOGY

We reviewed the administrative costs KS-DDS reported on its Form SSA 4513 for FYs 1998 through 2000. However, one of our findings (indirect costs) affected the costs claimed in FYs 2001 and 2002. Therefore, we expanded the audit period to fully develop this finding. For the periods reviewed, we obtained evidence to evaluate recorded financial transactions in terms of their allowability under Office of Management and Budget (OMB) Circular A-87, Cost Principles for State, Local and Indian Tribal Governments, and appropriateness, as defined by SSA's Program Operations Manual System (POMS).

We also:

Reviewed applicable Federal regulations, pertinent parts of the POMS, DI 39500, DDS Fiscal and Administrative Management, and other instructions pertaining to administrative costs incurred by KS-DDS and the draw down of SSA funds covered by the CMIA.

Reviewed work performed by Deloitte and Touche, Certified Public Accountants, as part of the Kansas single audit. Because of the limited scope of the single audit work performed at KS-DDS, we did not rely on the single audit work.

Interviewed staff at KS-DDS, KS-SRS, KRS, and SSA Region VII Center for Disability.

Reviewed State policies and procedures related to personnel, medical services, and all other nonpersonnel costs.

Reviewed the Memorandum of Understanding (MOU) between SSA and the KS SRS for non-SSA work.

Evaluated and tested internal controls regarding accounting and financial reporting and cash management activities.

Reviewed the reconciliation of official State accounting records to the administrative costs reported by KS-DDS on the Form SSA-4513 for Fiscal Years (FY) 1998 through 2000.

Examined the administrative expenditures (personnel, medical service, and all other nonpersonnel costs) incurred and claimed by KS-DDS for FYs 1998 through 2000 on the Form SSA-4513. We used statistical sampling to select documents to test for support of the medical service and all other nonpersonnel costs (see Appendix A).

Examined the indirect costs claimed by KS-DDS for FYs 1998 through 2002 (first 2 quarters) and the corresponding KS-SRS Cost Allocation Plans (CAP).

Compared the amount of SSA funds drawn for support of program operations to the allowable expenditures reported on the Form SSA-4513.

Discussed indirect costs issues with the HHS Division of Cost Allocation, Kansas City, Missouri.

We performed work in Topeka, Kansas, at the KS-DDS, KS-SRS, and KRS offices and the SSA Regional Office in Kansas City, Missouri. We conducted field work from October 2001 through May 2002. The audit was conducted in accordance with generally accepted government auditing standards.

Results of Review
Our review of administrative costs claimed by KS-DDS disclosed that obligations reported to SSA were overstated by $3,499,969 for the period October 1998 through September 2000 because of (1) incorrect indirect cost allocations, (2) excessive consultative examination (CE) payments, (3) inappropriate non-SSA work cost charges, and (4) inaccurate other nonpersonnel costs. We also found $2,174,768 was overstated during the period October 2000 through March 2002 because the DDS continued to use incorrect indirect cost allocations. In addition, we identified payments of $1,106,542 reported on the Form SSA-4513 in the incorrect FY. Furthermore, funds were not drawn in accordance with Federal regulations, duties were not segregated in the timekeeping function, and access controls needed to be strengthened.

We estimate that SSA will realize about $6.1 million in savings over the next 5 years as a result of resolving the indirect cost findings disclosed in this report. The total costs claimed, recommended audit adjustments, and allowable obligations are presented in
Appendix B.

INDIRECT COSTS

For the period October 1997 through March 2002, KS-DDS claimed $4,923,606 in unallowable indirect costs. The unallowable costs occurred because KS-SRS did not allocate KRS Central Office and Administration Division costs to all benefiting components. In addition, we were unable to determine whether $435,052 in information technology (IT) costs were acceptable because KS-DDS did not allocate IT costs according to the approved CAPs. A summary of the audit issues and cost adjustments is presented in Appendix C.

FY Unallowable Indirect Costs
1998 $896,907
1999 887,422
2000 964,509
2001 1,227,645
2002 (Through March) 947,123
Total $4,923,606

Indirect costs are charged to KS-DDS based on the KS-SRS CAP. Annually, HHS reviews, negotiates, and approves the KS-SRS CAP. For FY 2001, SSA's Office of Disability reported that KS-DDS had the second highest indirect cost rate in the Nation.

FY KS-DDS INDIRECT
COSTS RATE NATIONAL DDS AVERAGE
INDIRECT COSTS RATE
2001 27.5 Percent 12.2 Percent

KRS CENTRAL OFFICE COSTS

KRS has six divisions in Topeka, Kansas: (1) Rehabilitation Services Administration Office, (2) Services for the Blind and Visually Impaired, (3) Commission for the Deaf and Hard of Hearing, (4) Client Assistance Program, (5) Career Development Centers, and (6) KS-DDS. KRS also has field offices in counties throughout Kansas that perform rehabilitation services.

KRS's Rehabilitation Services Administration Office (referred to as Central Office) provides the following services: (1) policy review and oversight; (2) general management assistance; (3) supervision of program administrators; (4) budgeting and fiscal management and assistance; (5) contract development, review, and processing; (6) position management review and processing; and (7) human resource management, review and oversight. According to KS-SRS staff, these services are provided to the five KRS operating divisions listed above.

Our audit disclosed that the allocation of KRS Central Office costs violated OMB Circular A-87 because it excluded Full-Time Equivalents (FTE) of benefiting divisions, specifically the Client Assistance Program and KRS field offices. According to KS-SRS, the Client Assistance Program was excluded from the indirect cost allocation because its budget would not support indirect cost charges. OMB Circular A-87 states that costs should be treated consistently among the various Federal awards and between Federal and non-Federal awards/activities. Therefore, the Client Assistance Program should receive an allocation of the KRS Central Office costs.

According to KS-SRS staff, the KRS field offices were excluded from the indirect cost allocation because the field offices did not receive the same level of services from the KRS Central Office as the divisions that were allocated costs and did not report to the KRS Central Office. We found that the KRS field offices should be included in the allocation of KRS Central Office costs for the following reasons.

KRS field offices received services from the KRS Central Office, including policy review and oversight.

The KRS Central Office reported field office activities to the U.S. Department of Education, Rehabilitation Services Administration. To fulfill this reporting responsibility, the KRS Central Office must be involved in KRS field office activities.

KRS' mission is to work with State residents with disabilities to achieve their goals for employment and independence. With the exception of KS-DDS, all KRS divisions, including the field offices, work together to achieve this mission. KRS' mission is further indication that the KRS Central Office provides services to the divisions achieving its mission, including the KRS field offices.

The FTE count KS-SRS used to allocate KRS Central Office costs resulted in KS DDS receiving an inequitable allocation of indirect costs. Specifically, the allocation methodology violates OMB Circular A-87 because it does not allocate costs to the KRS field offices and the Client Assistance Program even though both activities benefit from the Central Office. OMB Circular A-87 states "…there needs to be a process whereby central service costs can be identified and assigned to benefited activities on a reasonable and consistent basis. The central service cost allocation plan provides that process…."

We calculated the KRS Central Office costs chargeable to the KS-DDS based on the inclusion of all divisions that received services from KRS Central Office, including the Client Assistance Program and the KRS field offices. For consistency, we used management FTEs within each division for our calculation. This calculation disclosed that KS-DDS was allocated $4,302,318 in excessive costs for the period October 1, 1997 through March 31, 2002.

KS-SRS ADMINISTRATION DIVISION

KS-SRS' Administration Division provides leadership and support to KS-SRS. The Administration Division consists of the following components: Office of the Secretary, Human Resources, Legal Services, and Operations. KS-SRS allocates Administration Division costs based on FTE count, time study, or expenditure. We identified an inaccurate allocation of Administration Division costs related to State medical institutions and could not express an opinion on the allocation of costs related to IT.

State Medical Institutions

The Administration Division costs include those related to executive services, human resources, and budgeting. The KS-SRS CAP states that these costs should be allocated based on FTEs. We found that KS-SRS allocated these costs to 4,022 of its 6,521 FTEs and excluded 2,499 FTEs assigned to the KS-SRS State medical institutions (Kansas Neurological Institute, Larned State Hospital, Osawatomie State Hospital, Parsons State Hospital, and Rainbow Mental Health Facility).

According to KS-SRS staff, Administration Division costs are not allocated to the State medical institutions because the institutions do not receive the same level of service from the Administration Division as the components that were allocated these costs. However, we found that the Administration Division is directly involved in the activities of the State medical institutions. For example, the Administration Division's executive services staff makes decisions regarding the operations of the institutions, such as capital improvements, staffing, and salary levels. The human resources staff also provides services to the State medical institutions to include staffing-related assistance. Therefore, we concluded that the 2,499 FTEs assigned to the State medical institutions should be included in the allocation of the Administration Division's costs.

The exclusion of the State medical institutions' FTEs when allocating the Administration Division's costs violates OMB Circular A 87 because it does not result in an equitable allocation of costs to all benefiting activities. Furthermore, it does not treat the costs consistently between the SSA disability programs and other benefiting components within KS-SRS.

We recalculated the Administration Division's costs that should have been charged to the KS-DDS based on 6,521 KS-SRS FTEs. Based on this recalculation, KS DDS was allocated $621,288 in excessive costs from October 1, 1997 through March 31, 2002.

Information Technology

The IT unit within the Administration Division provides the following services to all KS-SRS staff: computer support, data management and collection, programming, telecommunication, network connections, and mainframe computer operations.

According to the approved CAP, IT costs are to be allocated based on a 100-percent time study of IT activities. However, we found that KS-SRS allocated IT costs based on a time study of some IT programmer staff. The programmer staff accounted for only 13 to 22 percent of the total IT staff during our audit period. A time study of programmer staff may not provide an accurate accounting of IT staff activities.

KS-SRS violated OMB Circular A-87 because it did not allocate IT costs in accordance with the approved CAP. We could not calculate the IT costs that should have been allocated to KS-DDS because the 100-percent time study information did not exist. Therefore, we cannot express an opinion on the acceptability of $435,052 in IT expenses allocated to KS-DDS from October 1997 through March 2002.

INCORRECT FISCAL YEAR PAYMENTS

We identified payments of $1,106,542 reported on the Form SSA-4513 in the wrong FYs, although the costs were otherwise acceptable for reimbursement by SSA. The incorrect reporting of FY payments occurred because KS-SRS (1) finalized the Form SSA-4513 before all obligations were liquidated, (2) incorrectly allocated rental space costs, and (3) did not always perform necessary manual adjustments. Section 1502(a) of Title 31, United States Code, provides, in part, that "…the balance of an appropriation or fund limited for obligation to a definite period is available only for payment of expenses properly incurred during the period of availability…. However, the appropriation or fund is not available for expenditure for a period beyond the period otherwise authorized by law."

Improperly shifting funds between FYs prevents SSA from accurately monitoring the status of States' expenditures and unexpended appropriations. The effect is to reduce the Agency's ability to manage the allocation and use of budgeted funds among States.

Premature Finalizing of the Form SSA-4513

KS-SRS finalized the Form SSA-4513 before all FY obligations had been liquidated. When the obligations were liquidated, the payment was recorded as an expenditure in the subsequent FY. Prematurely finalizing the Form SSA-4513 resulted in medical costs of at least $41,542 being recorded in the wrong FY.

Contractual Payments

The lease agreement for the KS-DDS' office space requires that 12 months of rent be paid on July 1 of each year. In July 1998, the DDS made one annual payment to prepay rent for the period July 1, 1998 through June 30, 1999. The DDS claimed these costs on the Form SSA-4513 for FY 1998, although $303,173 was FY 1999 expenses (rent for October 1998 through June 1999). The same condition existed in subsequent periods, resulting in FY 2000 rent expenses of $308,598 being claimed for FY 1999, and FY 2001 rent expenses of $307,789 being claimed for FY 2000. This condition will continue throughout the period of the lease agreement and will result in an inaccurate reporting of FY expenses on the Form SSA-4513 every FY.
KS-DDS enters into service agreements and purchases software licenses that cover a 1-year period. However, the period does not coincide with the FY, resulting in costs being claimed for the incorrect FY, as follows.

Year Claimed Correct Year Costs
1998 1997 $1,099
1999 1998 $10,352
2000 2001 $76,245

Manual Adjustment

In some cases, a manual adjustment is necessary to report costs in the correct FY. These manual adjustments were not always made, resulting in costs being claimed for the incorrect FY, as follows.

Year Claimed Correct Year Costs
1998 1997 $41,404
1999 1998 $8,884
2000 1999 $7,456

CONSULTATIVE EXAMINATION COSTS

From October 1998 through September 2000, KS-DDS claimed $591,340 in unallowable CE costs (see Appendix D). This occurred because KS-DDS reimbursed certain hospitals, clinics, and individual physicians for CEs at rates of payment that exceeded the highest rate paid by Federal (Medicare) or other agencies in the State (Workers' Compensation). According to 20 CFR §§ 404.1624 and 416.1024, "The rates may not exceed the highest rate paid by Federal or other agencies in the State for the same or similar type of service."

Most of the unallowable CE costs resulted from KS-DDS paying hospitals and clinics for CEs at rates equal to the medical providers' usual and customary charges, less 10 percent. KS-DDS considers the payment of usual and customary charges to hospitals and clinics to be allowable since the policy was created by its parent agency, KS-SRS. In determining whether KS-DDS complied with 20 CFR §§ 404.1624 and 416.1024, we consider KS-SRS and KS-DDS to be part of the same agency. Our research of the Kansas statutes did not show the KS-DDS having separate authority from KS-SRS. In fact, our review of various KS-SRS budget and organizational documents show that KS-DDS is a subdivision of KS-SRS, not a separate agency. Moreover, Federal or other State agencies do not use these rates. While KS-SRS does pay at these rates for similar type services, it was unable to provide us with documentation showing the extent to which these services were purchased. However, we were informed that the volume of services purchased by KS-SRS was considerably less than that of the KS-DDS. Regardless, where the DDS parent agency sets rates higher than paid by Federal or other State agencies, we believe this violates the regulations adopted by SSA and results in improperly inflated CE costs.

Payment of usual and customary charges less 10 percent to hospitals and clinics continued after our audit period. Therefore, SSA should instruct KS-DDS to determine the extent to which CE costs incurred after our audit period exceeded the highest Federal or State agency rates allowable in the State of Kansas. The excessive amounts identified by KS-DDS should be used to reduce CE obligations reported for FYs 2001 and 2002.

NON-SSA WORK

SSA was charged $142,140 in unallowable costs for non-SSA work-related costs for the period October 1997 through September 2000. This occurred because KS-SRS did not calculate non-SSA work costs in accordance with the terms agreed upon by KS SRS and SSA in the MOU for non-SSA work.

Unallowable Non-SSA Work Costs Charged to SSA
FY Non-SSA Work Costs Per
MOU Non-SSA Work Costs Credited to SSA Non-SSA Work
Costs Charged to SSA
1998 $127,415 $147,124 $(19,709)
1999 162,714 90,039 72,675
2000 115,796 26,622 89,174
Total $405,925 $263,785 $142,140

An MOU, dated August 1974 and signed by the Secretary of KS-SRS and the SSA Regional Commissioner, outlines the arrangements for the non-SSA workload. The non-SSA workload consists of disability determinations for State Medical Assistance claims. The MOU states that KS-DDS will be given credit quarterly for the non-SSA work determined on a cost per case basis. Case costs will be determined by dividing the total obligations (personnel, medical, indirect costs, and all other nonpersonnel costs) by the total Federal and non-Federal claims processed. The MOU includes a statement to the effect that the assumption of the non-SSA program workload would not interfere with the prompt and effective completion of SSA-related claims. The MOU was to remain in effect until terminated by either party or revised by mutual consent of both parties.

The method KS-SRS used to calculate non-SSA costs was not consistent with the terms of the MOU, resulting in KS-SRS charging non-SSA work costs to SSA. KS-SRS used the following method to calculate non-SSA costs during our audit period.

For the period October 1997 through March 1999, KS-SRS recorded medical expenses for non-SSA work costs separately from the SSA medical expenses and did not charge these costs to SSA. The KS-SRS also calculated the costs of non SSA work based on a percentage of non-SSA medical expenses to total medical expenditures. This percentage was then applied to the KS-DDS' personnel and all other non-personnel expenditures to arrive at the non-SSA work costs. The cost of the non-SSA work was then deducted from the expenditures reported to SSA for reimbursement.

KS-SRS stated that indirect costs reported to SSA for reimbursement were also reduced using the aforementioned percentage. While we could confirm that SSA was given credit in the areas of medical and all other non-personnel costs for the non-SSA work, we could not identify a credit for indirect costs. Our reconciliation of indirect costs claimed to KS-SRS' accounting records did not identify any reductions in the indirect costs reported to SSA for non SSA work.

After March 1999, KS-SRS continued to record medical expenses for non-SSA work costs separately from the SSA medical expenses and did not charge these costs to SSA. However, KS-SRS no longer calculated a percentage to apply to KS DDS' personnel and all other nonpersonnel expenditures to arrive at the non SSA work costs. As previously discussed, our reconciliation of indirect costs claimed to KS SRS' accounting records did not identify any reductions in the indirect costs reported to SSA for non SSA work.

ALL OTHER NONPERSONNEL COSTS

We identified $17,651 in unallowable costs in the all other non-personnel costs categories of communications and rental costs. OMB Circular A-87 states "To be allowable under Federal awards, costs must meet the following general criteria…be necessary and reasonable for proper and efficient performance and administration of Federal awards…be adequately documented."

Communication

Communication costs include cellular telephone and pager services, local and long distance communication services paid directly to a commercial vendor, and reimbursement to the State Division of Information Systems and Communications for local and long distance telephone services and data communication services. We identified unallowable communication costs of $15,134.

KS-DDS was charged $6,401, $4,049, and $1,541 during FYs 1998, 1999, and 2000, respectively, for telephone service and data connects that were not located in its office space. This occurred because the State Division of Information Systems and Communications continued to charge KS-DDS the costs of telephone service and data connects that were located at KS-DDS' previous office location (Docking State Office Building) after KS-DDS moved to new office space.

SSA reimbursed KS-DDS for $155 in personal cellular telephone charges in FY 2000. KS-DDS allows personal calls on State-owned cellular telephones, but the user is required to reimburse the KS-DDS for the costs of personal calls. KS-DDS has procedures in place to review cellular telephone bills to ensure that personal telephone calls are not charged to SSA. However, the procedures were not followed in this case.

In FYs 1998 and 1999, KS-DDS paid $19 and $439, respectively, for long distance telephone calls placed from telephones not located in the DDS. KS-DDS has procedures to review long distance charges to determine whether calls were placed from DDS telephones. These procedures identified calls that should not have been billed to the DDS. However, procedures are lacking to ensure that KS-DDS receives credit for the calls.

KS-DDS paid Federal, State and local Excise taxes and Federal taxes in FYs 1998 and 2000 on telephone bills totaling $812 and $5, respectively. KS-DDS has procedures to review telephone bills and exclude the taxes but failed to identify the taxes in these cases.

Our sample identified late fees of $59 and $147 paid in FYs 1998 and 2000, respectively. DDS procedures were not sufficient to ensure that bills were paid timely to avoid late fees.

Documentation did not exist to support a $1,507 telephone bill for FY 1998. We could not determine why there was no documentation.

Office Utility Costs

In FY 1998, the DDS paid $2,517 in excessive utility costs. KS-DDS occupies 30 percent of the 102,167 square feet in office space covered by gas, electric, and water meters. Therefore, KS-DDS is responsible for paying the lessor for 30 percent of the gas, electric, and water. However, from September 1997 through February 1998, KS-DDS paid approximately 37 percent of the utility costs because a portion of the square footage covered by the meters was vacant. Thus, KS-DDS paid utility costs allocated for office space it did not occupy.

CASH MANAGEMENT

Funds to cover State DDS expenditures are drawn from the ASAP system. For each FY, State DDSs are assigned an Account Identification number in the ASAP system. SSA is responsible for establishing, maintaining and funding DDS accounts in the ASAP system to control the flow of funds to the State. Cash draws made from the Account Identification number are to reimburse KS-DDS for expenditures incurred during the same period as the Account Identification number's FY reporting period.

31 USC §1502 (a) provides, in part that, "The balance of an appropriation or fund limited for obligation to a definite period is available only for payment of expenses properly incurred during the period of availability…. However, the appropriation or fund is not available for expenditure for a period beyond the period otherwise authorized by law."

The State determines daily whether a cash draw is needed by reviewing the State FY total revenue and expenditure amounts for KS-DDS. However, the State does not identify the revenue and expenditure amounts by FY, and expenditures may encompass more than one FY reporting period. If total expenditures exceed total revenue, a cash draw is made. The draw is generally made from the oldest FY reporting period that has funds still available, even though it has not been determined whether the expenditures relate to that or a subsequent period. Therefore, the State's records did not reflect the actual beginning or ending cash balances of Federal funds for each FY reporting period, nor did the records accurately show when Federal funds authorized for a FY reporting period were fully expended.

We reviewed cash draws reported in ASAP for FY reporting periods 1998 through 2000 and found the State drew funds in excess of expenditures during FYs 1998 and 2000 in the amounts of $674,469 and $317,490, respectively. This occurred because the State did not have procedures for determining and accounting for cash draws by FY reporting period. To correct the excess draws, the State adjusts the cash draw amounts within the ASAP system and the State's accounting records at the close of each FY reporting period. At the time of our audit, the State had adjusted the ASAP system and its accounting records to correct the excess cash draws made during FYs 1998 and 2000. However, the State's procedures do not comply with Federal regulations and provide no assurance that SSA's appropriations are being properly used.

SEGREGATION OF DUTIES

The KS-DDS' timekeeper maintains her own time and attendance records, and there is no policy to prohibit this practice. Our review did not disclose any improprieties resulting from the lack of segregation of duties in the timekeeping function. However, this lack of controls results in an environment susceptible to fraud and abuse. The General Accounting Office (GAO) Standards for Internal Controls in the Federal Government state that "No one individual should control all key aspects of a transaction or event." The GAO standards further state that adequate separation of duties should "…include separating the responsibilities for authorizing transactions, processing and recording them, reviewing the transactions, and handling any related assets."

ACCESS CONTROLS

KS-DDS uses a WANG mini-computer system for case processing activities to include processing consultative and medical examination work loads, travel authorizations, and purchase orders using software developed by a contractor. KS-DDS accesses the WANG computer system using computer workstations connected to SSA's Intelligent Workstation/Local Area Network (IWS/LAN). KS DDS relies heavily on the personal data of the disability claimants contained within the WANG computer system.

SSA's Systems Security Handbook (SSH) and the DDS Security Document address the access controls for computer systems. These documents state that DDS employees are authorized access to only those functions needed to perform their jobs. The documents also state that management should (1) control access to all manual and automated claimant records, (2) ensure that only personnel requiring access to claimant data on DDS systems receive that access, and (3) monitor personnel activity so misconduct can be deterred and/or detected.

We reviewed KS-DDS' access controls and identified the following weaknesses.

Procedures for deactivating terminated employee's computer access privileges were not always followed. We identified 5 SSA IWS/LAN user accounts and 15 DDS WANG user accounts for terminated employees that were not deleted. We also identified a DDS employee who had inappropriate access to one of the terminated employee's IWS/LAN account. SSA policy requires the terminated employees' computer accounts be immediately deactivated.

DDS employees are not required to change their passwords every 30 days. SSA policy requires passwords to be changed at least every 30 days.

Six DDS employees had system administrator privileges beyond those required to perform their duties, and 18 were granted excessive IWS/LAN access privileges. SSA's policy restricts user access to the minimum necessary to perform his or her job duties.

Weak access controls increase the risk that unauthorized users, or authorized users making unauthorized transactions, can obtain access to the system. This, in turn, increases the risk that data and/or programs could be altered, deleted, replaced, or overwritten. Therefore, by improving the KS-DDS access controls, it would better protect the confidentiality and integrity of disability claimant's personal information.

Conclusions and Recommendations
We concluded that costs claimed by the KS-DDS were overstated by $3,499,969 for the period October 1998 through September 2000 because of (1) incorrect indirect cost allocations, (2) excessive CE payments, (3) inappropriate non SSA work cost charges, and (4) inaccurate other nonpersonnel costs. We also found $2,174,768 was overstated during the period October 2000 through March 2002 because of incorrect indirect cost allocations. In addition, we identified payments of $1,106,542 reported on the Form SSA-4513 in the incorrect FY. Furthermore, funds were not drawn in accordance with Federal regulations, duties were not segregated in the timekeeping function, and access controls needed to be strengthened.

We recommend that SSA instruct KS-DDS and KS-SRS to:

1. Refund $4,923,606 for indirect costs inappropriately charged to SSA from FYs 1998 through March 31, 2002.

2. Determine the proper amount of allocable IT costs in accordance with the CAP.

3. Amend the KS-SRS cost allocation plans for FYs 2001, 2002, and future years to reflect an equitable distribution of indirect costs to SSA.

4. Reclassify $1,106,542 of expenditures incorrectly reported on the Form SSA-4513s in the wrong FY.

5. Determine whether expenditures reported on the Form SSA-4513s for FYs 1998 through 2002 were claimed in the proper FY and reclassify expenditures, as appropriate.

6. Establish procedures for reporting expenditures in the correct FY.

7. Refund $591,340 for CE costs that exceed the highest rate allowable by Federal or other agencies in the State of Kansas.

8. Determine the extent to which CE costs reported on the Form SSA-4513s for FYs 2001 and 2002 exceed the highest rate allowable by Federal or other agencies in the State of Kansas and reduce the reported obligations as appropriate.

9. Limit future CE payments to the highest rate allowable by Federal or other agencies in the State of Kansas, clarifying on a national level, by regulation or otherwise, that 20 CFR 404.1624 and 416.1024 do not permit a State DDS parent agency to set DDS CE fees in excess of the highest rate allowable by Federal or other agencies in the State.

10. Refund $142,140 for non-SSA costs inappropriately charged to SSA.

11. Calculate non-SSA costs for FYs 2001 and 2002 in accordance with the MOU and adjust the obligations reported on the Form SSA-4513s for any non-SSA costs charged to SSA.

12. Calculate future non-SSA costs in accordance with the terms of the MOU.

13. Refund $15,134 for unallowable communications costs charged to SSA during FYs 1998 through 2000.

14. Review the propriety of all FY 1998 through 2000 communication-related payments and refund any unallowable costs to SSA.

15. Develop procedures to review the propriety of communication costs charged to the KS-DDS by other State agencies and private communication companies and ensure that unallowable costs are not claimed for SSA-reimbursement.

16. Refund $2,517 for the unallowable utility costs charged to SSA during FY 1998.

17. Limit payments for utility costs to the costs associated with KS-DDS' office space.

18. Establish cash draw procedures that associate FY reporting period cash draws with the same FY expenditures.

19. Establish an alternate timekeeper to ensure that the primary timekeeper does not maintain her own time and leave records.

20. Improve computer access controls by (1) immediately deactivating computer access privileges for terminated employees, (2) requiring employees to change passwords every 30 days, and (3) limiting employees' system access to the minimum necessary to perform his or her job duties.

AGENCY COMMENTS

In commenting on the draft report, SSA did not fully agree with our recommendations related to the incorrect reporting FY expenditures. SSA believes the State correctly reported the payment of rent and other service agreements and purchases based on the terms of the contract/agreement.

In addition, SSA did not agree with our recommendations related to CE costs that exceeded the highest rate allowable by Federal or other agencies in the State of Kansas. SSA believes that KS-DDS and KS-SRS are separate agencies, and the KS-DDS' use of the KS-SRS fee schedule for CE payment is in accordance with Federal regulations. However, SSA stated the KS-DDS changed its policy and no longer uses the KS-SRS fee schedule for CE payment.

See Appendix E for the full text of SSA's comments to our report, including the State's response.

OIG RESPONSE

The KS-DDS's policy of paying rent and other contractual expenditures at the beginning of the State FY instead of the beginning of the Federal FY results in some costs related to one fiscal year being claimed for reimbursement in another FY. This policy violates section 1502(a) of Title 31, United States Code, which provides, in part, that "…the balance of an appropriation or fund limited for obligation to a definite period is available only for payment of expenses properly incurred during the period of availability…. However, the appropriation or fund is not available for expenditure for a period beyond the period otherwise authorized by law." Unless the KS-DDS establishes procedures that allow for reporting expenditures in the correct FY, as recommended in our report, it will continue to violate this Federal regulation.

We do not agree with SSA's position that KS-SRS and KS-DDS are separate agencies for the purpose of establishing CE rates of payment. As stated in our report, our research of the Kansas statutes did not show the KS-DDS as having separate authority from KS-SRS. In fact, our review of various KS-SRS budget and organizational documents shows that KS-DDS is a subdivision of KS-SRS, not a separate agency. We continue to believe that regulations adopted by SSA are violated when a DDS parent agency sets rates higher than rates paid by Federal or other State agencies. We reaffirm our position that 20 CFR 404.1624 and 416.1024 do not permit a State DDS parent agency to set DDS CE fees in excess of the highest rate paid by Federal or other agencies in the State. As noted in our report, the rates established by KS-SRS are used primarily by the KS-DDS. We leave to the Agency's discretion the waiver of overpayments related to the excessive CE fees.

Appendices

Appendix A

SAMPLING METHODOLOGY

Our sampling methodology encompassed the four general areas of costs as reported on Form SSA-4513: (1) personnel, (2) medical, (3) indirect, and (4) all other non-personnel costs. We obtained computerized data from Kansas Department of Social and Rehabilitation Services (KS-SRS) and Kansas Disability Determination Services (KS-DDS) for Fiscal Years (FY) 1998 through 2000 for use in statistical sampling. In addition, we obtained the electronic files SRS used to calculate indirect costs claimed for FY 1998 through the second quarter of FY 2002. After selecting and reviewing randomly selected samples, we did not identify errors we felt warranted audit projection.

Personnel Costs

We judgmentally sampled 15 employees and contractors from 2 randomly selected pay periods in FY 2000. We tested the payroll records to ensure individuals were paid correctly and payroll was adequately documented.

Medical Costs

We sampled 300 items (100 items from each FY) using a stratified random sample. We stratified medical costs into Medical Evidence of Record and Consultative Examinations (CE), selecting more CE invoices because CE costs represented 76 percent of all medical costs. Our review identified CEs purchased for more than the allowable amount. As a result, we expanded our sample to include a 100-percent review of CEs and reported the actual amount KS-DDS paid for CEs above the allowable amount.

Indirect Costs

We conducted a 100-percent review of indirect cost categories and methods used to allocate those costs for reimbursement purposes. Our objective was to ensure the Social Security Administration reimbursed KS-DDS in compliance with the State Cost Allocation Plan (CAP). In each FY, we judgmentally sampled various expenditure items used to allocate the indirect costs. We identified noncompliance with the CAP and reported the actual indirect costs determined to be unallowable.

All Other Non-personnel Costs

We selected a stratified random sample of 312 items (104 expenditures from each FY) of All Other Non-personnel costs. We stratified All Other Non-personnel costs into eight cost categories: (1) Applicant Travel, (2) Staff Travel, (3) Communications, (4) Equipment, (5) Electronic Data Processing/Word Processing, (6) Contracting Out, (7) Miscellaneous, and (8) Occupancy. We selected a stratified random sample of 100 items from each FY based on the percentage of costs in each category (excluding occupancy) to total costs. We also selected a judgmental sample of four occupancy expenditures from each FY for the Occupancy category. Our review of Occupancy identified excessive utility costs being charged to KS-DDS. As a result, we expanded our review to include all utility costs through March 1998. We identified unallowable Communication costs, and we reported the actual amount of unallowable costs identified.

Appendix B

KANSAS DISABILITY DETERMINATION SERVICES REPORTED VERSUS ALLOWED OBLIGATIONS

Federal Fiscal Year (FY) 1998

Disbursements
Personnel Medical Indirect All Other Total

As Reported by the Kansas Disability Determination Services (KS-DDS) $5,398,590 $2,821,459 $1,490,069 $2,210,899 $11,921,017

Audit Adjustments:
Unallowable Cost (167,043) (896,907) (11,315) (1,075,265)
Non-Social Security Administration (SSA) Work 7,285 16,266 (6,875) 3,033 19,709

Total Adjustments 7,285 (150,777) (903,782) (8,282) (1,055,556)

Allowed as a Result of Audit $5,405,875 $2,670,682 $586,287 $2,202,617 $10,865,461

FY 1999

Disbursements
Personnel Medical Indirect All Other Total

As Reported by the KS-DDS $5,858,877 $3,473,740 $1,524,981 $1,850,369 $12,707,967

Audit Adjustments:
Unallowable Cost (250,493) (887,422) (4,488) ($1,142,403)
Non-SSA Work (56,908) 13,210 (8,900) (20,077) (72,675)

Total Adjustments (56,908) (237,283) (896,322) (24,565) (1,215,078)

Allowed as a Result of Audit $5,801,969 $3,236,457 $628,659 $1,825,804 $11,492,889

FY 2000

Disbursements
Personnel Medical Indirect All Other Total

As Reported by the KS-DDS $5,714,508 $3,341,961 $1,457,011 $1,809,193 $12,322,673

Audit Adjustments:
Unallowable Cost (173,804) (964,509) (1,848) (1,140,161)
Non-SSA Work (59,034) (6,381) (5,088) (18,671) (89,174)

Total Adjustments (59,034) (180,185) (969,597) (20,519) (1,229,335)

Allowed as a Result of Audit $5,655,474 $3,161,776 $487,414 $1,788,674 $11,093,338

Appendix C

KANSAS DISABILITY DETERMINATION SERVICES INDIRECT COSTS

Kansas Rehabilitation Services (KRS) Central Office Costs

KRS Central Office costs are allocated based on Full-Time Equivalents (FTE). However, we found that KRS field offices and the Client Assistance Program were excluded from the allocation. We recalculated the allocation of the KRS Central Office costs including KRS field office and Client Assistance Program FTEs as summarized below.

Fiscal Year (FY)
1998 1999 2000 2001 2002 Total
Original Allocation
$1,091,729
$1,050,679
$1,137,692
$1,361,515
$1,035,582
$5,677,197
New Allocation 296,679 294,483 302,719 300,804 180,194 $1,374,879
Unallowable Cost charged to Kansas Disability Determination Services (KS-DDS)

$795,050

$756,196

$834,973

$1,060,711

$855,388

$4,302,318

State Medical Institutions

The Cost Allocation Plan (CAP) states that Administrative Division costs should be allocated based on FTEs. We found that the Kansas Department of Social and Rehabilitation Services allocated the Administrative Division Costs based on all FTEs except for the 2,499 FTEs assigned to the State medical institutions. We recalculated the allocation of the Administrative Division costs including the FTEs assigned to the State medical institutions. The results are summarized below.

FY
1998 1999 2000 2001 2002 Total
Original Allocation
$244,747
$313,153
$303,382
$381,366
$212,059
$1,454,707
New Allocation 142,890 181,927 173,846 214,432 120,324 833,419
Unallowable Cost charged to KS-DDS

$101,857

$131,226

$129,536

$166,934

$91,735

$621,288

Information Technology

According to the approved CAP, Information Technology (IT) costs were to be allocated based on a 100-percent time study. The following details the IT expenses that were allocated to KRS Central Office costs, which in turn were allocated in part to the KS-DDS. We could not calculate the IT costs that should have been allocated to KS-DDS because 100 percent time study information did not exist. Therefore, we cannot express an opinion on the acceptability of $435,052 in IT expenses allocated to KS-DDS from FY 1998 through 2 quarters of FY 2002, or October 1997 through March 2002.

Fiscal Year
1998 1999 2000 2001 2002 Total
IT Costs Allocated to KS-DDS
$54,300
$114,339
$114,769
$93,651
$57,993
$435,052

Appendix D

KANSAS DISABILITY DETERMINATION SERVICES CONSULTATIVE EXAMINATION COSTS

Fiscal Year 1998

CPT Code Highest Allowable Fee Schedule Highest Allowable Fee Number of Exams Amount Allowable Amount KS-DDS Paid Unallowable Costs
94010 Workers' Compensation $61.00 892 $54,412.00 $107,574.93 $53,162.93
72100 Workers' Compensation 74.00 447 33,078.00 58,612.79 25,534.79
73560 Workers' Compensation 54.00 379 20,466.00 39,554.12 19,088.12
71010 Workers' Compensation 43.00 248 10,664.00 21,353.63 10,689.63
95851 Workers' Compensation 41.00 192 7,872.00 14,162.74 6,290.74
92507 Workers' Compensation 33.00 91 3,003.00 9,218.70 6,215.70
80054 Medicare Rate 12.48 86 1,073.28 5,701.15 4,627.87
73510 Workers' Compensation 70.00 111 7,770.00 12,100.42 4,330.42
92082 Workers' Compensation 55.00 205 11,275.00 15,272.40 3,997.40
71020 Workers' Compensation 55.00 82 4,510.00 8,318.51 3,808.51
73600 Workers' Compensation 50.00 84 4,200.00 7,821.93 3,621.93
73030 Workers' Compensation 59.00 72 4,248.00 7,615.70 3,367.70
94720 Workers' Compensation 61.00 59 3,599.00 6,356.58 2,757.58
82803 Workers' Compensation 53.00 49 2,597.00 4,992.79 2,395.79
73120 Workers' Compensation 45.00 24 1,080.00 2,761.23 1,681.23
80012 Workers' Compensation 25.00 35 875.00 2,510.03 1,635.03
93000 Workers' Compensation 52.00 39 2,028.00 3,590.33 1,562.33
73620 Workers' Compensation 50.00 38 1,900.00 3,164.35 1,264.35
92004 Workers' Compensation 75.00 95 7,125.00 8,363.25 1,238.25
93922 Workers' Compensation 128.00 7 896.00 1,953.78 1,057.78
72110 Workers' Compensation 101.00 27 2,727.00 3,625.06 898.06
72040 Workers' Compensation 65.00 21 1,365.00 2,143.53 778.53
80019 Workers' Compensation 41.00 17 697.00 1,466.94 769.94
73100 Workers' Compensation 48.00 20 960.00 1,430.06 470.06
73070 Workers' Compensation 48.00 7 336.00 699.95 363.95
76062 Workers' Compensation 130.00 1 130.00 468.00 338.00
72070 Workers' Compensation 73.00 5 365.00 679.98 314.98
73590 Workers' Compensation 57.00 11 627.00 915.88 288.88
73564 Workers' Compensation 100.00 1 100.00 370.80 270.80
85031 Workers' Compensation 19.00 11 209.00 477.54 268.54
36415 Workers' Compensation 10.00 41 410.00 675.48 265.48
80016 Workers' Compensation 37.00 2 74.00 318.60 244.60
85651 Workers' Compensation 13.00 19 247.00 479.52 232.52
80164 Workers' Compensation 49.00 11 539.00 740.58 201.58
80156 Workers' Compensation 42.00 13 546.00 740.42 $194.42
80185 Workers' Compensation $42.00 9 $378.00 $562.57 $184.57
90830 Medicare Rate 411.66 1 411.66 588.60 176.94
86038 Workers' Compensation 40.00 5 200.00 355.67 155.67
85014 Workers' Compensation 10.00 18 180.00 332.22 152.22
92585 Workers' Compensation 166.00 1 166.00 315.00 149.00
72052 Workers' Compensation 103.00 4 412.00 559.80 147.80
72170 Workers' Compensation 56.00 4 224.00 370.84 146.84
92557 Workers' Compensation 72.00 1 72.00 217.80 145.80
80058 Workers' Compensation 36.00 2 72.00 216.14 144.14
80299 Medicare Rate 18.92 3 56.76 179.20 122.44
73110 Workers' Compensation 57.00 3 171.00 285.41 114.41
94375 Workers' Compensation 58.00 3 174.00 287.42 113.42
71100 Workers' Compensation 62.00 1 62.00 158.40 96.40
73562 Workers' Compensation 66.00 3 198.00 290.24 92.24
72090 Workers' Compensation 88.00 3 264.00 350.55 86.55
97750 Workers' Compensation 33.00 1 33.00 115.20 82.20
86430 Workers' Compensation 21.00 5 105.00 182.76 77.76
73630 Workers' Compensation 59.00 2 118.00 195.07 77.07
80184 Workers' Compensation 47.00 4 188.00 256.37 68.37
82250 Workers' Compensation 15.00 5 75.00 130.52 55.52
72200 Workers' Compensation 61.00 1 61.00 115.20 54.20
85021 Workers' Compensation 15.00 4 60.00 107.05 47.05
80061 Workers' Compensation 51.00 1 51.00 94.94 43.94
76020 Workers' Compensation 63.00 1 63.00 103.50 40.50
73060 Workers' Compensation 55.00 1 55.00 91.75 36.75
82565 Workers' Compensation 15.00 5 75.00 105.75 30.75
83690 Workers' Compensation 27.00 1 27.00 46.75 19.75
86140 Workers' Compensation 22.00 1 22.00 40.81 18.81
82150 Workers' Compensation 22.00 1 22.00 40.54 18.54
81000 Workers' Compensation 12.00 1 12.00 29.70 17.70
82977 Workers' Compensation 27.00 1 27.00 43.28 16.28
80168 Workers' Compensation 39.00 1 39.00 54.94 15.94
49400 Workers' Compensation 264.00 1 264.00 279.00 15.00
84478 Workers' Compensation 16.00 1 16.00 28.94 12.94
85610 Workers' Compensation 16.00 1 16.00 27.00 11.00
93015 Workers' Compensation 206.00 1 206.00 214.18 8.18
86255 Workers' Compensation 51.00 1 51.00 57.60 6.60
82947 Workers' Compensation 13.00 1 13.00 17.46 4.46
93010 Workers' Compensation 24.00 1 24.00 27.90 3.90
82550 Workers' Compensation 22.00 1 22.00 24.72 2.72
Total $167,042.79

KANSAS DISABILITY DETERMINATION SERVICES CONSULTATIVE EXAMINATION COSTS

Fiscal Year 1999

CPT Code Highest Allowable Fee Schedule Highest Allowable Fee Number of Exams Amount Allowable Amount KS-DDS Paid Unallowable Costs
94010 Workers' Compensation $61.00 991 $60,451.00 $123,808.74 $63,357.74
72100 Workers' Compensation 74.00 556 41,144.00 77,388.36 36,244.36
73560 Workers' Compensation 54.00 434 23,436.00 47,922.78 24,486.78
97750 Workers' Compensation 33.00 120 3,960.00 25,442.61 21,482.61
95851 Workers' Compensation 41.00 327 13,407.00 31,038.34 17,631.34
71010 Workers' Compensation 43.00 411 17,673.00 33,798.89 16,125.89
92507 Medicare Rate 36.28 195 7,074.97 19,311.72 12,236.75
73510 Workers' Compensation 70.00 153 10,710.00 17,737.80 7,027.80
80054 Medicare Rate 14.61 166 2,425.26 9,431.84 7,006.58
92082 Workers' Compensation 55.00 218 11,990.00 16,930.24 4,940.24
73030 Workers' Compensation 59.00 87 5,133.00 9,827.93 4,694.93
73600 Workers' Compensation 50.00 78 3,900.00 7,600.59 3,700.59
73120 Workers' Compensation 45.00 52 2,340.00 5,784.91 3,444.91
94720 Workers' Compensation 61.00 68 4,148.00 7,500.55 3,352.55
71020 Workers' Compensation 55.00 85 4,675.00 7,740.14 3,065.14
92004 Workers' Compensation 75.00 133 9,975.00 12,329.75 2,354.75
82803 Workers' Compensation 53.00 35 1,855.00 3,622.58 1,767.58
72040 Workers' Compensation 65.00 28 1,820.00 3,292.41 1,472.41
73100 Workers' Compensation 48.00 27 1,296.00 2,730.92 1,434.92
93922 Workers' Compensation 128.00 17 2,176.00 3,598.99 1,422.99
73620 Workers' Compensation 50.00 36 1,800.00 3,152.42 1,352.42
93000 Workers' Compensation 52.00 23 1,196.00 2,428.29 1,232.29
72110 Workers' Compensation 101.00 17 1,717.00 2,940.30 1,223.30
92557 Workers' Compensation 72.00 5 360.00 1,125.00 765.00
73070 Workers' Compensation 48.00 14 672.00 1,371.16 699.16
85651 Workers' Compensation 13.00 50 650.00 1,338.86 688.86
72070 Workers' Compensation 73.00 9 657.00 1,282.10 625.10
95904 Workers' Compensation 58.00 3 174.00 751.05 577.05
72090 Workers' Compensation 88.00 6 528.00 990.18 462.18
72170 Workers' Compensation 56.00 11 616.00 993.78 377.78
93307 Workers' Compensation 402.00 1 402.00 771.96 369.96
73630 Workers' Compensation 59.00 5 295.00 642.15 347.15
73562 Workers' Compensation 66.00 4 264.00 580.78 316.78
73110 Workers' Compensation 57.00 8 456.00 770.22 314.22
72052 Workers' Compensation 103.00 4 412.00 715.50 303.50
36415 Workers' Compensation 10.00 55 550.00 846.25 296.25
80185 Workers' Compensation 42.00 14 588.00 873.21 285.21
95819 Workers' Compensation $162.00 2 $324.00 $568.80 $244.80
93925 Workers' Compensation 309.00 1 309.00 552.60 243.60
85031 Workers' Compensation 19.00 10 190.00 413.66 223.66
80156 Workers' Compensation 42.00 8 336.00 532.59 196.59
80299 Medicare Rate 18.92 4 75.68 261.45 185.77
86430 Workers' Compensation 21.00 12 252.00 416.76 164.76
92568 Workers' Compensation 30.00 4 120.00 270.00 150.00
73550 Workers' Compensation 61.00 2 122.00 271.80 149.80
82250 Workers' Compensation 15.00 8 120.00 262.51 142.51
94375 Workers' Compensation 58.00 4 232.00 363.69 131.69
95860 Workers' Compensation 127.00 2 254.00 381.60 127.60
95903 Medicare Rate 43.97 1 43.97 165.60 121.63
92555 Workers' Compensation 25.00 4 100.00 216.00 116.00
92567 Workers' Compensation 30.00 9 270.00 380.70 110.70
80164 Workers' Compensation 49.00 2 98.00 188.43 90.43
92582 Workers' Compensation 32.00 2 64.00 152.70 88.70
86038 Workers' Compensation 40.00 4 160.00 241.01 81.01
93015 Workers' Compensation 206.00 2 412.00 480.15 68.15
92552 Workers' Compensation 32.00 1 32.00 90.00 58.00
82565 Workers' Compensation 15.00 2 30.00 87.79 57.79
92543 Workers' Compensation 89.00 1 89.00 136.80 47.80
92579 Medicare Rate 27.16 1 27.16 71.10 43.94
85014 Workers' Compensation 10.00 8 80.00 112.16 32.16
92556 Workers' Compensation 54.00 1 54.00 81.00 27.00
73060 Workers' Compensation 55.00 1 55.00 81.45 26.45
82947 Workers' Compensation 13.00 3 39.00 64.26 25.26
82043 Workers' Compensation 20.00 1 20.00 36.00 16.00
92587 Workers' Compensation 107.00 3 321.00 332.10 11.10
85610 Workers' Compensation 16.00 1 16.00 25.02 9.02
76020 Workers' Compensation 63.00 1 63.00 71.10 8.10
80184 Workers' Compensation 47.00 1 47.00 49.95 2.95
82040 Workers' Compensation 18.00 1 18.00 20.47 2.47
94760 Workers' Compensation 20.00 1 20.00 20.25 0.25
Total $250,492.76

KANSAS DISABILITY DETERMINATION SERVICES CONSULTATIVE EXAMINATION COSTS

Fiscal Year 2000

CPT Code Highest Allowable Fee Schedule Highest Allowable Fee Number of Exams Amount Allowable Amount KS-DDS Paid Unallowable Costs
94010 Workers' Compensation $59.25 821 $48,644.25 $103,975.78 $55,331.53
97750 Workers' Compensation 33.00 116 3,828.00 27,289.98 23,461.98
72100 Workers' Compensation 73.00 337 24,601.00 46,091.84 21,490.84
71010 Workers' Compensation 43.00 1008 43,344.00 56,909.01 13,565.01
73560 Workers' Compensation 54.00 244 13,176.00 26,655.70 13,479.70
95851 Workers' Compensation 27.75 101 2,802.75 7,849.65 5,046.90
73510 Workers' Compensation 65.00 95 6,175.00 10,855.87 4,680.87
94720 Workers' Compensation 60.75 82 4,981.50 9,403.72 4,422.22
80054 Workers' Compensation 29.00 102 2,958.00 6,941.98 3,983.98
92082 Workers' Compensation 54.75 179 9,800.25 13,511.72 3,711.47
73030 Workers' Compensation 59.00 57 3,363.00 6,014.31 2,651.31
71020 Workers' Compensation 55.00 181 9,955.00 12,497.81 2,542.81
93922 Workers' Compensation 127.50 56 7,140.00 9,653.78 2,513.78
73600 Workers' Compensation 50.00 49 2,450.00 4,770.84 2,320.84
73120 Workers' Compensation 45.00 40 1,800.00 3,883.47 2,083.47
82803 Workers' Compensation 53.00 20 1,060.00 2,325.11 1,265.11
72040 Workers' Compensation 65.00 22 1,430.00 2,684.02 1,254.02
92004 Workers' Compensation 84.00 218 18,312.00 19,303.00 911.00
93000 Workers' Compensation 51.75 20 1,035.00 1,982.53 947.53
73620 Workers' Compensation 50.00 19 950.00 1,887.88 937.88
95819 Workers' Compensation 162.00 4 648.00 1,292.61 644.61
95900 Workers' Compensation 65.25 5 326.25 960.68 634.43
92557 Workers' Compensation 72.00 6 432.00 948.90 516.90
73100 Workers' Compensation 48.00 13 624.00 1,116.66 492.66
95860 Workers' Compensation 126.75 3 380.25 822.20 441.95
95904 Workers' Compensation 58.50 5 292.50 734.28 441.78
36415 Workers' Compensation 10.00 46 460.00 746.10 286.10
85031 Workers' Compensation 19.00 11 209.00 473.00 264.00
73070 Workers' Compensation 48.00 6 288.00 545.91 257.91
95930 Workers' Compensation 74.25 1 74.25 276.30 202.05
85651 Workers' Compensation 12.00 16 192.00 381.48 189.48
80185 Workers' Compensation 42.00 8 336.00 510.80 174.80
73550 Workers' Compensation 61.00 3 183.00 354.72 171.72
92507 Medicare Rate 46.25 8 369.96 536.00 166.04
94375 Workers' Compensation 58.50 2 117.00 268.00 151.00
73590 Workers' Compensation 57.00 7 399.00 549.20 150.20
72090 Workers' Compensation 88.00 3 264.00 397.30 133.30
76020 Workers' Compensation $63.00 3 $189.00 $318.27 $129.27
73630 Workers' Compensation 58.00 2 116.00 245.00 129.00
92568 Workers' Compensation 29.25 3 87.75 216.00 128.25
92543 Workers' Compensation 21.75 1 21.75 147.74 $125.99
80156 Workers' Compensation 42.00 6 252.00 377.68 125.68
72070 Workers' Compensation 72.00 3 216.00 341.64 125.64
73562 Workers' Compensation 63.00 2 126.00 244.80 118.80
80299 Medicare Rate 18.92 3 56.76 173.25 116.49
72110 Workers' Compensation 101.00 1 101.00 201.55 100.55
92582 Workers' Compensation 32.25 1 32.25 118.80 86.55
73060 Workers' Compensation 55.00 2 110.00 178.65 68.65
73110 Workers' Compensation 57.00 2 114.00 174.42 60.42
92567 Workers' Compensation 30.00 4 120.00 180.00 60.00
80164 Workers' Compensation 49.00 5 245.00 302.35 57.35
84132 Workers' Compensation 14.00 1 14.00 49.95 35.95
86430 Workers' Compensation 19.00 2 38.00 71.46 33.46
92555 Workers' Compensation 24.75 1 24.75 57.60 32.85
85014 Workers' Compensation 8.00 7 56.00 87.87 31.87
93350 Workers' Compensation 154.50 1 154.50 184.23 29.73
72170 Workers' Compensation 56.00 2 112.00 141.48 29.48
86038 Workers' Compensation 40.00 2 80.00 108.18 28.18
82247 Medicare Rate 6.94 6 41.64 68.00 26.36
73610 Workers' Compensation 58.00 1 58.00 81.90 23.90
82565 Workers' Compensation 15.00 2 30.00 50.65 20.65
80184 Workers' Compensation 47.00 2 94.00 109.30 15.30
81000 Workers' Compensation 10.00 1 10.00 25.20 15.20
85018 Workers' Compensation 8.00 1 8.00 21.50 13.50
92587 Workers' Compensation 107.25 1 107.25 118.80 11.55
82040 Workers' Compensation 18.00 1 18.00 28.80 10.80
82947 Workers' Compensation 13.00 2 26.00 30.60 4.60
72052 Workers' Compensation 103.00 1 103.00 106.38 3.38
82150 Workers' Compensation 22.00 1 22.00 23.85 1.85
92579 Medicare Rate 28.36 1 28.36 30.00 1.64
Total $173,804.06

Appendix E

AGENCY COMMENTS

Appendix F

OIG Contacts and Staff Acknowledgments

OIG Contacts

William Fernandez, Director, Western Audit Division, (510) 970-1739
Mark Bailey, Deputy Director, (816) 936-5591

Acknowledgments

In addition to those named above:

Shannon Agee, Senior Auditor
Kenneth Bennett, Senior Auditor
Sherry Colwell, Senior Auditor
Richard Reed, Auditor
Kim Beauchamp, Writer-Editor

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 Specialist at (410) 966-1375. Refer to Common Identification Number A-07-02-22003.

Overview of the Office of the Inspector General

Office of Audit

The Office of Audit (OA) conducts comprehensive financial and performance audits of the Social Security Administration's (SSA) programs and makes recommendations to ensure that program objectives are achieved effectively and efficiently. Financial audits, required by the Chief Financial Officers' Act of 1990, assess whether SSA's financial statements fairly present the Agency's financial position, results of operations and cash flow. Performance audits review the economy, efficiency and effectiveness of SSA's programs. OA also conducts short-term management and program evaluations focused on issues of concern to SSA, Congress and the general public. Evaluations often focus on identifying and recommending ways to prevent and minimize program fraud and inefficiency, rather than detecting problems after they occur.

Office of Executive Operations

OEO supports the OIG by providing information resource management; systems security; and the coordination of budget, procurement, telecommunications, facilities and equipment, and human resources. In addition, this office is the focal point for the OIG's strategic planning function and the development and implementation of performance measures required by the Government Performance and Results Act. OEO is also responsible for performing internal reviews to ensure that OIG offices nationwide hold themselves to the same rigorous standards that we expect from SSA, as well as conducting investigations of OIG employees, when necessary. Finally, OEO administers OIG's public affairs, media, and interagency activities, coordinates responses to Congressional requests for information, and also communicates OIG's planned and current activities and their results to the Commissioner and Congress.

Office of Investigations

The Office of Investigations (OI) conducts and coordinates investigative activity related to fraud, waste, abuse, and mismanagement of SSA programs and operations. This includes wrongdoing by applicants, beneficiaries, contractors, physicians, interpreters, representative payees, third parties, and by SSA employees in the performance of their duties. OI also conducts joint investigations with other Federal, State, and local law enforcement agencies.

Counsel to the Inspector General

The Counsel to the Inspector General provides legal advice and counsel to the Inspector General on various matters, including: 1) statutes, regulations, legislation, and policy directives governing the administration of SSA's programs; 2) investigative procedures and techniques; and 3) legal implications and conclusions to be drawn from audit and investigative material produced by the OIG. The Counsel's office also administers the civil monetary penalty program.