JUNE 30, 2002

March 2004




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.


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.


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.


Date: March 25, 2004

To: Candace Skurnik
Director Audit Management and Liaison Staff

From: Assistant Inspector General for Audit

Subject: Management Advisory Report: Single Audit of the State of West Virginia for the Fiscal Year Ended June 30, 2002 (A-77-04-00011)

This report presents the Social Security Administration's (SSA) portion of the single audit of the State of West Virginia for the Fiscal Year ended June 30, 2002. Our objective was to report internal control weaknesses, noncompliance issues, and unallowable costs identified in the single audit to SSA for resolution action.

Ernst & Young LLP performed the audit. The Department of Health and Human Services (HHS) desk review concluded that the audit met Federal requirements. In reporting the results of the single audit, we relied entirely on the internal control and compliance work performed by Ernst & Young LLP and the reviews performed by HHS.

For single audit purposes, the Office of Management and Budget assigns Federal programs a Catalog of Federal Domestic Assistance (CFDA) number. SSA's Disability Insurance (DI) and Supplemental Security Income (SSI) programs are identified by CFDA number 96. SSA is responsible for resolving single audit findings reported under this CFDA number.

The West Virginia Disability Determination Services (DDS) performs disability determinations under SSA's DI and SSI programs in accordance with Federal regulations. The DDS is reimbursed for 100 percent of allowable costs. The West Virginia Division of Rehabilitation Services (DRS), Department of Education, is the West Virginia DDS' parent agency.

The single audit reported that funding techniques used for determining cash draws were not consistent with actual cash flow activity resulting in an inaccurate calculation of interest liability. The corrective action plan indicates that the State Treasurer's Office has worked with all agencies to identify funding methods and incorporate them into the Treasury State Agreement (Attachment A, pages 1, 2, and 5).

We recommend that SSA ensure the proper funding technique is used to determine cash draws for the West Virginia DDS.

The single audit also reported the following findings related to the West Virginia DDS's indirect costs. However, these findings were addressed in our OIG indirect cost audit of the West Virginia DDS and corrective actions were recommended as appropriate. Accordingly, we are not making recommendations related to these findings.

1. DRS did not adequately maintain records to support that the approved indirect cost rate was applied to the proper base amount. Therefore, the auditors were not able to determine if the indirect cost rate was applied to the correct indirect cost base. The corrective action plan indicates that DRS is in the process of hiring an accountant to develop a system to track and identify indirect costs (Attachment A, pages 3 and 6). Our OIG audit determined that DRS' failure to use an accounting code in the State's accounting system to identify indirect cost items did not result in unallowable indirect costs being charged to SSA.

2. DRS used an incorrect indirect cost rate to charge indirect costs to the disability program, resulting in questioned costs of $67,137. The corrective action plan indicates that the Chief Fiscal Officer will review the quarterly DDS cost report to ensure the correct indirect cost rate is being used (Attachment A, pages 4 and 6). Our OIG audit determined that the correct approved indirect rate was being used.

The single audit also disclosed the following findings that may impact DDS operations, although they were not specifically identified to SSA. I am bringing these matters to your attention, as they represent potentially serious service delivery and financial control problems for the Agency.

Changes to the electronic payroll system were not developed and tested in a segregated environment (Attachment B, page 1).

Duties over the program receipts process were not properly segregated (Attachment B, page 2).

Procedures were not in place to identify, verify and report uncashed checks within the required 180 day period (Attachment B, page 3).

Procedures were not adequate to ensure salaries were appropriately charged to Federal programs (Attachment B, page 4).

Funds were not requested in accordance with authorized funding techniques (Attachment B, pages 5 through 7).

Please send copies of the final Audit Clearance Document to Shannon Agee and Rona Rustigian. If you have questions contact Shannon Agee at (816) 936 5590.

Steven L. Schaeffer

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

The Office of Executive Operations (OEO) supports the Office of the Inspector General (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.