THE INSPECTOR GENERAL
SOCIAL SECURITY ADMINISTRATION
ADMINISTRATIVE COSTS CLAIMED
BY THE FLORIDA DIVISION OF
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: June 28, 2010 Refer To:
To: Paul D. Barnes
From: Inspector General
Subject: Administrative Costs Claimed by the Florida Division of Disability Determinations
The objectives of our audit were to evaluate the Florida Division of Disability Determinations’ (FL-DDD) 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 general controls environment for the claims processing system. Our audit included the administrative costs claimed by the FL-DDD during Federal Fiscal Years (FY) 2008 and 2009.
The Disability Insurance (DI) program, established under Title II of the Social Security Act (Act), provides benefits to wage earners and their families in the event the wage earner becomes disabled. The Supplemental Security Income (SSI) program, established under Title XVI of the Act, provides benefits to financially needy individuals who are aged, blind, and/or disabled.
The Social Security Administration (SSA) is responsible for implementing policies for 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 or other responsible jurisdiction in accordance with Federal regulations. Such determinations must be performed in accordance with Federal law and underlying regulations. In carrying out its obligation, each DDS is responsible for determining claimants’ disabilities and ensuring adequate evidence is available to support its determinations. To assist in making proper disability
determinations, each DDS is authorized to purchase medical examinations, X rays, and laboratory tests on a consultative basis to supplement evidence obtained from the claimants’ physicians or other treating sources.
SSA reimburses the DDS for 100 percent of allowable reported expenditures up to its approved funding authorization. The DDS withdraws Federal funds through the Department of the Treasury’s (Treasury) Automated Standard Application for Payments system to pay for program expenditures. Funds drawn down must comply with Federal regulations and intergovernmental agreements entered into by Treasury and States under the Cash Management Improvement Act of 1990. As of September 30, 2009 for FYs 2008 and 2009, the FL-DDD received authorized funding of $99,804,199 and $111,905,108, respectively.
An advance or reimbursement for costs under the program must comply with Office of Management and Budget Circular A 87, Cost Principles for State, Local, and Indian Tribal Governments. At the end of each quarter of the FY, each DDS submits a State Agency Report of Obligations for SSA Disability Programs (SSA-4513) to account for program disbursements and unliquidated obligations. The SSA-4513 reports expenditures and unliquidated obligations for Personnel Service Costs, Medical Costs, Indirect Costs, and All Other Non-personnel Costs.
The Florida Department of Health (FL-DOH) is the FL-DDD’s parent agency. The FL-DOH and FL-DDD central office are located in Tallahassee, Florida. The FL-DDD also has branch offices in Jacksonville, Miami, Orlando, Pensacola, and Tampa, Florida.
RESULTS OF REVIEW
Generally, the FL-DDD had effective controls over the accounting and reporting of administrative costs; costs claimed by the FL-DDD were allowable and properly allocated; and funds were properly drawn. Also, during our assessment of the FL-DDD general security controls environment, nothing came to our attention to suggest deficiencies in these controls. We did find an instance where occupancy costs for five FL-DDD leased buildings in Tallahassee, Florida were overcharged in FY 2009 by $20,551. We found the error occurred because of a transposition in the rate calculation. As a result of the overcharge, the FL-DDD sought and received a repayment of the amount from the landlord in the form of reduced lease payments for April 1 through October 31, 2010. Since the FL-DDD will be paying its Tallahassee landlord a reduced lease amount for 7 months, the FL-DDD will be drawing down less money from SSA; therefore, SSA will have effectively received its complete overpayment refund by October 31, 2010. After reviewing this matter with the FL-DDD staff, we do not believe this is a systemic problem. FL-DDD staff has shown sufficient evidence that this was a one-time occurrence. We verified future lease payment amounts for FYs 2010 and 2011 and found they were being computed as stated in the lease agreement. We are not making a recommendation on this issue, since we believe the problem has been adequately addressed.
Our review of administrative costs generally found the FL-DDD had effective controls over the FY 2008 and 2009 accounting and reporting of administrative costs. Further, we found costs claimed by the FL-DDD were allowable and properly allocated and funds were properly drawn with the exception of an error in calculation of lease payments resulting in a $20,551 overpayment in FY 2009. We found the conditions of the overcharge and repayment have been adequately addressed. We therefore are not making any recommendation on that issue. Also, during our assessment of the FL-DDD general security controls environment, nothing came to our attention to suggest deficiencies in these controls.
Patrick P. O’Carroll, Jr.
APPENDIX A – Acronyms
APPENDIX B – Scope and Methodology
APPENDIX C – Florida Division of Disability Determinations Reported Costs
APPENDIX D – OIG Contacts and Staff Acknowledgments
Act Social Security Act
CE Consultative Examination
C.F.R. Code of Federal Regulations
DDS Disability Determination Services
DI Disability Insurance
FL-DDD Florida Division of Disability Determinations
FL-DOH Florida Department of Health
FY Fiscal Year
OIG Office of the Inspector General
SSA Social Security Administration
SSI Supplemental Security Income
Treasury Department of the Treasury
Scope and Methodology
To achieve our objectives, we:
• Reviewed applicable Federal laws and regulations, pertinent parts of the Social Security Administration’s (SSA) Program Operations Manual System, and other criteria relevant to administrative costs claimed by the Florida Division of Disability Determinations (FL-DDD) and the draw down of SSA funds.
• Interviewed staff and officials at the FL-DDD, Florida Department of Health, SSA’s Atlanta Regional Office, and Headquarters Finance Office.
• Evaluated and tested internal controls regarding accounting, financial reporting, and cash management activities.
• Reconciled State accounting records to the administrative costs reported by the FL DDD on the State Agency Report of Obligations for SSA Disability Programs (SSA-4513) for Federal Fiscal Years (FY) 2008 and 2009.
• Examined specific administrative expenditures (Personnel, Medical Services, and All Other Non-personnel Costs) incurred and claimed by the FL-DDD for FYs 2008 and 2009 on the SSA-4513. We used statistical sampling to select expenditures to test for documentation of the Medical Services, Personnel, and All Other Non-personnel Costs.
• Examined and recalculated indirect costs claimed by the FL-DDD for FYs 2008 and 2009.
• Compared the amount of SSA funds drawn to support FL-DDD operations to the cost records as reported on SSA-4513.
We determined the data provided by FL-DDD used in our audit were sufficiently reliable given the audit objectives and intended use of the data. As part of our assessment of the reliability of the data, we reconciled it to the costs claimed on the SSA-4513. We also conducted detailed audit testing on selected data elements in the electronic data files. We performed our audit work at the FL-DDD central office in Tallahassee, Florida, along with limited work in the Tampa, Florida, branch office. We also conducted work in our Office of Audit at SSA Headquarters. We conducted fieldwork from October 2009 through May 2010. Our audit was conducted in accordance with generally accepted government auditing standards.
Our sampling methodology encompassed the four general areas of costs reported on the SSA-4513 as follows: (1) Personnel, (2) Medical, (3) Indirect, and (4) All Other Non-personnel Costs. We obtained electronic records that supported the Personnel, Medical, and All Other Non-personnel costs for FYs 2008 and 2009 for use in sampling. These records were obtained from the Florida Accounting Information Resource system used by the State of Florida and the FL-DDD for the preparation of the SSA 4513. Analytical work was conducted for the indirect costs (see the Indirect Cost section below).
We randomly selected 1 pay period in the most recent year under review. We then selected a random sample of 50 regular employees. We tested FL-DDD payroll records to ensure FL-DDD correctly paid employees and adequately documented these payments.
For medical consultant costs, we selected 1 pay period in the most recent year under review. We then selected a random sample of 50 consultants. We verified that the medical consultants were paid in accordance with the approved contract.
We sampled 100 items (50 items from each FY) using a stratified random sample of Medical costs based on the proportion of medical evidence of record and consultative examination (CE) costs to total medical costs claimed. Additionally, we conducted analytical work to determine whether the FL-DDD CE rates exceeded the highest rate paid by Federal or other agencies in the State for the same or similar types of service.
We calculated the FL-DDD indirect costs for FYs 2008 and 2009 by applying the federally approved rates to the payroll cost bases (direct salaries and wages including all fringe benefits). For FY 2008, a provisional rate of 5.1 percent was used from October 2007 to May 2008; starting in June 2008 a final rate was assigned at
6.6 percent. For FY 2009, we calculated indirect cost using the 6.6-percent rate. The Indirect Cost agreement indicated the final rate of 6.6 percent was to be followed as a provisional rate after June 30, 2008.
All Other Non-personnel Costs
We selected a stratified random sample of 100 items (50 items for each FY) from the All Other Non-personnel Costs category (except for occupancy). Before selecting the sample items, we stratified the transactions in the nine cost categories. We then distributed the 50 sample items for each year between categories based on the proportional distribution of the costs. We conducted a 100-percent review of the FL-DDD occupancy costs for 1 randomly selected month in FYs 2008 and 2009. Also, we reviewed the occupancy costs for the final month contained in our electronic data files for FY 2008.
Florida Division of Disability Determinations Reported Costs
OIG Contacts and Staff Acknowledgments
Victoria Vetter, Director, Financial Audit Division
Deborah Kinsey, Audit Manager
In addition to those named above:
Sig Wisowaty, Senior Auditor
Lori Lee, Auditor
Upeksha Peramune, Auditor
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 Staff Assistant at (410) 965-4518. Refer to Common Identification Number
Commissioner of Social Security
Office of Management and Budget, Income Maintenance Branch
Chairman and Ranking Member, Committee on Ways and Means
Chief of Staff, Committee on Ways and Means
Chairman and Ranking Minority Member, Subcommittee on Social Security
Majority and Minority Staff Director, Subcommittee on Social Security
Chairman and Ranking Minority Member, Committee on the Budget, House of Representatives
Chairman and Ranking Minority Member, Committee on Oversight and Government Reform
Chairman and Ranking Minority Member, Committee on Appropriations, House of Representatives
Chairman and Ranking Minority, Subcommittee on Labor, Health and Human Services, Education and Related Agencies, Committee on Appropriations,
House of Representatives
Chairman and Ranking Minority Member, Committee on Appropriations, U.S. Senate
Chairman and Ranking Minority Member, Subcommittee on Labor, Health and Human Services, Education and Related Agencies, Committee on Appropriations, U.S. Senate
Chairman and Ranking Minority Member, Committee on Finance
Chairman and Ranking Minority Member, Subcommittee on Social Security Pensions and Family Policy
Chairman and Ranking Minority Member, Senate Special Committee on Aging
Social Security Advisory Board
Overview of the Office of the Inspector General
The Office of the Inspector General (OIG) is comprised of an Office of Audit (OA), Office of Investigations (OI), Office of the Counsel to the Inspector General (OCIG), Office of External Relations (OER), and Office of Technology and Resource Management (OTRM). To ensure compliance with policies and procedures, internal controls, and professional standards, the OIG also has a comprehensive Professional Responsibility and Quality Assurance program.
Office of Audit
OA conducts 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 reviews and program evaluations on issues of concern to SSA, Congress, and the general public.
Office of Investigations
OI conducts investigations 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 liaison to the Department of Justice on all matters relating to the investigation of SSA programs and personnel. OI also conducts joint investigations with other Federal, State, and local law enforcement agencies.
Office of the Counsel to the Inspector General
OCIG provides independent legal advice and counsel to the IG on various matters, including statutes, regulations, legislation, and policy directives. OCIG 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. Also, OCIG administers the Civil Monetary Penalty program.
Office of External Relations
OER manages OIG’s external and public affairs programs, and serves as the principal advisor on news releases and in providing information to the various news reporting services. OER develops OIG’s media and public information policies, directs OIG’s external and public affairs programs, and serves as the primary contact for those seeking information about OIG. OER prepares OIG publications, speeches, and presentations to internal and external organizations, and responds to Congressional correspondence.
Office of Technology and Resource Management
OTRM supports OIG by providing information management and systems security. OTRM also coordinates OIG’s budget, procurement, telecommunications, facilities, and human resources. In addition, OTRM is the focal point for OIG’s strategic planning function, and the development and monitoring of performance measures. In addition, OTRM receives and assigns for action allegations of criminal and administrative violations of Social Security laws, identifies fugitives receiving benefit payments from SSA, and provides technological assistance to investigations.