THE INSPECTOR GENERAL
SOCIAL SECURITY ADMINISTRATION
KANSAS DEPARTMENT OF SOCIAL AND
REPRESENTATIVE PAYEE FOR THE
SOCIAL SECURITY ADMINISTRATION
By conducting independent and objective audits, evaluations and investigations, we inspire public confidence in the integrity and security of SSA's programs and operations and protect them against fraud, waste and abuse. We provide timely, useful and reliable information and advice to Administration officials, Congress and the public.
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.
We strive for continual improvement in SSA's programs, operations and management by proactively seeking new ways to prevent and deter fraud, waste and abuse. We commit to integrity and excellence by supporting an environment that provides a valuable public service while encouraging employee development and retention and fostering diversity and innovation.
Date: March 23, 2007
To: Michael W. Grochowski
Regional Commissioner Kansas City
From: Inspector General
Subject: Kansas Department of Social and Rehabilitation Services, an Organizational Representative Payee for the Social Security Administration (A-07-07-17045)
Our objectives were to determine whether the Kansas Department of Social and Rehabilitation Services (SRS) (1) had effective safeguards over the receipt and disbursement of Social Security benefits and (2) ensured Social Security benefits were used and accounted for in accordance with the Social Security Administration's (SSA) policies and procedures.
Some individuals cannot manage or direct the management of their finances because
of their youth or mental and/or physical impairments. Congress granted SSA the
authority to appoint representative payees to receive and manage these beneficiaries'
payments. , A representative payee may be an individual or an organization.
SSA selects representative payees for Old-Age, Survivors and Disability Insurance
(OASDI) beneficiaries or Supplemental Security Income (SSI) recipients when
representative payments would serve the individuals' interests. Representative
payees are responsible for managing benefits in the best interest of the beneficiary.
Refer to Appendix B for additional Representative Payee responsibilities.
SRS is a State government foster care agency that operates as an organizational representative payee for children who received payments under SSA's OASDI and SSI programs. SRS contracts with third parties to provide its foster care services. For our audit period, April 1, 2005 to March 31, 2006, SRS served as representative payee for 1,044 beneficiaries. SSA's Kansas City Regional Office (KCRO) requested that we perform an audit of SRS based on issues identified in previous reviews. Refer to Appendix C for our Scope and Methodology.
RESULTS OF REVIEW
We found SRS could improve its safeguards for the receipt and disbursement of Social Security benefits. Specifically, SRS needs to improve its internal controls for:
segregation of duties, and
receipt of SSA benefit payments.
We also found SRS generally used and accounted for benefits according to SSA's policies and procedures. SRS typically used the benefits to offset the State's cost of providing for the beneficiaries' basic needs such as food, clothing, and shelter through its contracted foster care program. However, we found SRS could improve its process for monitoring beneficiary account balances to ensure balances do not exceed resource limitations.
SAFEGUARDS FOR THE RECEIPT AND DISBURSEMENT OF BENEFITS
We found SRS needs to improve its internal controls for the segregation of duties and the receipt of benefit payments. Internal controls are a major part of managing an organization. Internal controls serve as the first line of defense in safeguarding assets and preventing and detecting errors and fraud. The Government Accountability Office's (GAO) standards define the minimum level of internal control in government and provide the basis against which internal controls are to be evaluated.
Segregation of Duties
SRS did not have adequate segregation of duties for the disbursement of SSA
benefits. Specifically, one SRS employee had sole responsibility for writing
checks, signing checks, recording transactions, and maintaining custody of blank
checks. Furthermore, SRS did not have any compensating controls in place to
monitor this employee's activities, such as a supervisory review. Although we
found no indications of wrongdoing, inadequate internal controls create an opportunity
for fraud, waste and abuse of beneficiary funds.
Adequate segregation of duties ensures that key duties and responsibilities are divided or segregated among different people to reduce the risk of error or fraud. This should include separating the responsibilities for authorizing, processing and recording, reviewing transactions, and handling any related assets. No one individual should control all key aspects of a transaction or event.
Receipt of SSA Benefit Payments
SRS did not have a process in place to properly monitor the amount of benefit payments it should receive from SSA on the behalf of beneficiaries in its care. During our review, we identified two SSA beneficiaries under the care of SRS whose benefit payments continued to be sent to the previous payee. This occurred because the bank account information was not changed in SSA's system to reflect SRS as payee. Specifically,
About $9,000 in SSI payments, for one beneficiary, was deposited into the bank account of the prior payee during the period of October 2005 to July 2006. SSA found that the benefit payments were used for purposes not related to the beneficiary's care and referred the case to the Office of the Inspector General (OIG). Following an investigation by the OIG, the prior payee agreed to make full restitution.
Approximately $4,000 in disability insurance payments for the second beneficiary was deposited into the bank account of the prior payee during the period of November 2005 to July 2006. SSA found that the prior payee used the benefits for the beneficiary. No further action was taken because the beneficiary was returned to the prior payee's care.
Since SRS did not have a process in place to properly monitor the amount of benefit payments it should receive from SSA, neither SSA nor SRS were aware the benefits were being deposited into the wrong bank accounts until it was discovered during our audit. SSA relies on representative payees to provide timely notification when benefits are not received. When SSA is notified of nonreceipt of benefit payments, SSA verifies the bank account information and takes corrective action, if necessary. Therefore, SRS should have a system in place to ensure it receives the correct amount of benefit payments from SSA on behalf of the beneficiaries under its care. In addition, SRS should timely notify SSA when it does not receive benefit payments. However, SSA should also remind its field office employees to update the direct deposit bank information in its representative payee system when a change in payee occurs.
MONITORING SSI RECIPIENT ACCOUNT BALANCES
SRS allowed beneficiaries' account balances to exceed the $2,000 maximum allowed by law. Specifically, we found 17 SSI beneficiaries in 66 separate instances had balances over the $2,000 limit for at least 1 month during our audit period. This occurred because SRS field office employees did not apply foster care expenses to the beneficiaries' accounts timely, which allowed balances to accumulate and exceed the limit and/or SRS field office employees did not monitor the account balances and take appropriate actions to spend down the funds when the balances approached the $2,000 limit. SSA suggests that beneficiary accounts be monitored so that when balances approach the allowable resource limit, the representative payee can assess the personal needs, such as clothing, educational, or entertainment needs, of the beneficiaries. Assessing and meeting personal needs will help the representative payee maintain resources below the $2,000 limit and could improve the quality of life of the beneficiaries.
As representative payee, SRS is responsible for using benefits in the best interest of the beneficiaries and for reporting when the beneficiaries' resources exceed the $2,000 limit. If SRS does not closely monitor the account balances and ensure the benefits are used in the beneficiaries' best interests, beneficiaries could be overpaid and could eventually lose their SSI eligibility. In fact, we found one case where SSA terminated a severely disabled SSI recipient's eligibility because his account balance was over $2,000 for more than 12 months. The beneficiary reapplied and is currently receiving SSI payments. However, SSA is withholding a portion of those payments to repay an overpayment that was created because SRS allowed the beneficiary's account balance to remain above the limit.
CONCLUSION AND RECOMMENDATIONS
SRS could improve internal controls for the receipt and disbursement of Social Security benefits. Specifically, SRS needs to improve controls relating to segregation of duties for the disbursement of benefits and monitoring the receipt of benefits to ensure payments are received when expected. SRS generally used benefits to meet the needs of the beneficiaries. However, we found that SRS could improve its process for the accounting and use of benefits by implementing controls to prevent beneficiary account balances from exceeding resource limits.
We recommend SSA instruct SRS to implement controls to:
1. Ensure adequate segregation of duties are in place for the disbursement of benefits or implement appropriate compensating controls to monitor the disbursement of beneficiary funds.
2. Monitor the receipt of benefit payments and provide SSA with immediate notification of nonreceipt.
3. Monitor beneficiary account balances as they approach the $2,000 SSI resource limit and determine if the beneficiary has personal needs that should be met.
In addition, we recommend SSA:
4. Remind its field office employees to update bank account information when a change in representative payee occurs.
AGENCY AND REPRESENTATIVE PAYEE COMMENTS
SSA and SRS agreed with our recommendations. See Appendix D for the full text of SSA's comments and Appendix E for the full text of SRS's comments.
Patrick P. O'Carroll, Jr.
APPENDIX A - Acronyms
APPENDIX B - Representative Payee Responsibilities
APPENDIX C - Scope and Methodology
APPENDIX D - Agency Comments
APPENDIX E - Representative Payee Comments
APPENDIX F - OIG Contacts and Acknowledgments
C.F.R. Code of Federal Regulations
GAO Government Accountability Office
KCRO Kansas City Regional Office
OASDI Old-Age, Survivor and Disability Insurance
OIG Office of the Inspector General
POMS Program Operations Manual System
RPS Representative Payee System
SRS Kansas Department of Social and Rehabilitation Services
SSA Social Security Administration
SSI Supplemental Security Income
U.S.C. United States Code
Representative Payee Responsibilities
Representative payees are responsible for using benefits to serve the beneficiary's best interests. The responsibilities include:
Determine the beneficiary's current needs for day-to-day living and use his or her payments to meet those needs;
Conserve and invest benefits not needed to meet the beneficiary's current needs;
Maintain accounting records of how the benefits are received and used;
Report events to the Social Security Administration (SSA) that may affect the individual's entitlement or benefit payment amount;
Report any changes in circumstances that would affect their performance as a representative payee;
Provide SSA an annual Representative Payee Accounting Report to account for benefits spent and invested;
Return any payments to SSA for which the beneficiary is not entitled;
Return conserved funds to SSA when no longer serving as the representative payee for the beneficiary; and
Be aware of any other income Supplemental Security Income recipients may have and monitor their conserved funds to ensure they do not exceed resource limits.
Scope and Methodology
Our audit covered the period April 1, 2005 through March 31, 2006. To accomplish our objectives, we:
Reviewed the Social Security Act, applicable Federal regulations, and Social Security Administration (SSA) policies and procedures pertaining to representative payees.
Contacted SSA regional office and field office staffs to obtain background information about the Kansas Department of Social and Rehabilitation Services' (SRS) performance as a representative payee.
Obtained from SSA's Representative Payee System (RPS) a list of individuals
who were in SRS's care as of March 31, 2006 or who left SRS's care after
April 1, 2005.
Obtained from SRS a list of individuals who were in its care and had received SSA funds as of March 31, 2006 or who left its care after April 1, 2005.
Compared and reconciled the RPS list to SRS's list to identify the population
of SSA beneficiaries who were in the SRS's care from April 1, 2005 through
March 31, 2006.
Reviewed SRS's internal controls over the receipt and disbursement of Social Security benefits.
Randomly selected a sample of 50 beneficiaries from a population of 1,044 beneficiaries in SRS's care from April 1, 2005 through March 31, 2006.
Performed the following tests for the 50 randomly selected beneficiaries:
Compared and reconciled benefit amounts received according to SRS's records to benefit amounts paid according to SSA's records.
Reviewed SRS's accounting records to determine whether benefits were properly spent or conserved on the individual's behalf.
Traced a sample of recorded expenses to source documents and examined the underlying documentation for reasonableness and authenticity.
Interviewed a non-random sample of 10 beneficiaries to determine whether their basic needs were being met.
Reviewed the Representative Payee Accounting Reports for 20 of the 50 beneficiaries in our sample to determine whether SRS properly reported to SSA how benefits were used.
Reviewed a non-random sample of five Representative Payee Applications (Form SSA-11-BK) to evaluate the completeness and appropriateness of the information provided.
We determined computer-processed data to be reliable for our intended use. We tested certain data elements of data extracts generated from the Agency's RPS. We completed tests to determine the completeness, accuracy and validity of the data. These tests allowed us to assess the reliability of the data and achieve our audit objectives.
We performed our audit in Kansas City, Missouri and Topeka, Kansas between
July and December 2006. We conducted our audit in accordance with generally
accepted government auditing standards.
Sent: Friday, March 02, 2007 10:50 AM
To: Inspector General
From: Regional Commissioner Kansas City
Subject: Kansas Department of Social and Rehabilitation Services, an Organizational Representative Payee for the Social Security Administration (A-07-07-17045)--Response
Thank you and your staff for conducting the audit of the Kansas Department of Social and Rehabilitation Services (SRS). We agree with the recommendations outlined in the formal draft report. We will work closely with the servicing field office and the representative payee to ensure they understand and follow these recommendations.
If you have questions, please contact me at 816-936-5700. If your staff needs additional assistance or information they may contact Kathy Kazee, Center for Programs Support, at 816 936-5643.
Michael W. Grochowski
Representative Payee Comments
OIG Contacts and Staff Acknowledgments
Mark Bailey, Director, Kansas City Audit Division (816) 936-5591
Ron Bussell, Audit Manager, Kansas City, Missouri (816) 936-5577
In addition to those named above:
Deb Taylor, Auditor-in-Charge
Nick Moore, Auditor
Ken Bennett, IT Specialist
For additional copies of this report, please visit our web site at www.ssa.gov/oig or contact the Office of the Inspector General's Public Affairs Specialist at (410) 965-3218. Refer to Common Identification Number A-07-07-17045.
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.