SINGLE AUDIT OF THE
STATE OF WASHINGTON
FOR THE FISCAL YEAR ENDED
JUNE 30, 2005

January 2007 A-77-07-00006

MANAGEMENT ADVISORY 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.

MEMORANDUM

Date: January 18, 2007 Refer To:

To: Candace Skurnik
Director
Audit Management and Liaison Staff

From: Inspector General

Subject: Management Advisory Report: Single Audit of the State of Washington for the Fiscal Year Ended June 30, 2005 (A-77-07-00006)

This report presents the Social Security Administration’s (SSA) portion of the single audit of the State of Washington for the Fiscal Year ended June 30, 2005. Our objective was to report internal control weaknesses, noncompliance issues, and unallowable costs identified in the single audit to SSA for resolution action.

The Washington State Auditor 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 the State Auditor and the reviews performed by HHS. We conducted our review in accordance with the Quality Standards for Inspections issued by the President’s Council on Integrity and Efficiency.

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 Washington 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 Washington Department of Social and Health Services (DSHS) is the Washington DDS’ parent agency.

The single audit reported that:

The DDS did not comply with State and Federal contract procurement regulations when purchasing consultative evaluations (CE). (Attachment A, pages 1 through 5). The corrective action plan indicated that CE services will be competitively procured in the future. (Attachment A, page 6).

DDS expenditures were not accurately reported on the Schedule of Expenditures of Federal Awards and the quarterly report of obligations. (Attachment A, pages 7 through 9). The corrective action plan indicated that a reconciliation method will be implemented to ensure that the disbursement amounts reported to SSA reconcile to the State accounting system. (Attachment A, page 10).

Unallowable indirect costs totaling $19,555 were charged to SSA for the Cooperative Disability Investigations Unit (CDIU). The Memorandum of Understanding, which identified specific costs allowed for reimbursement, did not include a provision for indirect costs. The unallowable costs could be even higher if this condition occurred in the other quarters. (Attachment A, pages 11, 12, and 13). The corrective action plan indicated that the DDS is working with SSA to revise the Memorandum of Understanding to include a provision for indirect costs. (Attachment A, page 14).

The DDS claimed reimbursement for $56,466 for costs that were not supported by documentation. The unallowable costs could be even higher if this condition occurred in the other quarters. (Attachment A, pages 11, 12, and 13). The DDS has implemented internal controls to ensure expenditures are supported by adequate documentation prior to payment. (Attachment A, page 14).

We recommend SSA:

Work with the DDS to ensure CE services are purchased in accordance with State and Federal regulations.

Verify that controls are in place to ensure that expenditures are accurately reported on all Federal and State reports.

Determine the total indirect costs that have been charged to SSA for the CDIU since its inception and collect the unallowable costs.

Determine if the $56,466 that was not supported by documentation are allowable charges and collect any unallowable costs.

Ensure the DDS has procedures in place to maintain documentation to support expenditures charged to its program.

The single audit also disclosed that computer access controls were not in place to ensure there is adequate separation of duties for personnel in the accounting department (Attachment B, pages 1, 2 and 3). Although this finding was not specifically identified to SSA it may have an impact on DDS operations. I am bringing this matter to your attention as it represents a potential serious service delivery and financial control problem for the Agency.

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

Patrick P. O’Carroll, Jr.

Attachments

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Overview of the Office of the Inspector General

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

Office of Audit

OA conducts and/or supervises financial and performance audits of the Social Security Administration's (SSA) programs and operations and makes recommendations to ensure program objectives are achieved effectively and efficiently. Financial audits assess whether SSA's financial statements fairly present SSA's financial position, results of operations, and cash flow. Performance audits review the economy, efficiency, and effectiveness of SSA's programs and operations. OA also conducts short-term management and program evaluations and projects on issues of concern to SSA, Congress, and the general public.

Office of Investigations

OI conducts and coordinates investigative activity related to fraud, waste, abuse, and mismanagement in SSA programs and operations. This includes wrongdoing by applicants, beneficiaries, contractors, third parties, or SSA employees performing their official duties. This office serves as OIG liaison to the Department of Justice on all matters relating to the investigations of SSA programs and personnel. OI also conducts joint investigations with other Federal, State, and local law enforcement agencies.

Office of the Chief Counsel to the Inspector General

OCCIG provides independent legal advice and counsel to the IG on various matters, including statutes, regulations, legislation, and policy directives. OCCIG also advises the IG on investigative procedures and techniques, as well as on legal implications and conclusions to be drawn from audit and investigative material. Finally, OCCIG administers the Civil Monetary Penalty program.

Office of Resource Management

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

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