THE INSPECTOR GENERAL
SOCIAL SECURITY ADMINISTRATION
SINGLE AUDIT OF THE
STATE OF ARIZONA
FOR THE FISCAL YEAR ENDED
JUNE 30, 2003
MANAGEMENT ADVISORY REPORT
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: November 16, 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 Arizona for the Fiscal Year Ended June 30, 2003 (A-77-05-00001)
This report presents the Social Security Administration's (SSA) portion of the single audit of the State of Arizona for the Fiscal Year ended June 30, 2003. Our objective was to report internal control weaknesses, noncompliance issues, and unallowable costs identified in the single audit to SSA for resolution action.
The Arizona Auditor General 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 Arizona Auditor General 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 Arizona 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 Arizona Department of Economic Security (DES) is the Arizona DDS' parent agency.
The single audit reported that internal controls over payments for services were not followed. Specifically, (1) documentation was not maintained to support payments to five doctors totaling $4,744, (2) a vendor was underpaid for transportation service, and (3) an incorrect warrant was not properly cancelled and then reissued for the correct amount. The corrective action plan indicated that DES will enforce established procedures for payment, including matching invoices to payment vouchers and voiding incorrect warrants (Attachment A, pages 1 through 3).
In addition, the single audit reported that eight medical consultants, contracted by DES to review medical files, petitioned the Internal Revenue Service (IRS) for a determination of their employment status with DES for Federal employment tax purposes. In Fiscal Year (FY) 2001, the IRS determined that the medical consultants should have been paid as employees rather than contractors and DES was responsible for paying employer's taxes retroactive to 1997, which may include interest and penalties. As of FY 2004, DES had not reimbursed the IRS for the employer's taxes.
The corrective action plan indicated that DES is working with the Arizona Attorney General's Office to resolve this issue (Attachment A, pages 2 through 4). During our review of the single audit we contacted DES to determine the status of this finding. DES indicated that they are currently working on solicitations for new contracts. Contract agreements will be modified to ensure the language in the contract supports independent contractor status.
We recommend that SSA:
1. Remind the DDS to maintain adequate documentation to support all expenditures.
2. Determine if the $4,744 paid to doctors was for valid services and instruct the DDS to return any unallowable costs.
3. Ensure contract language supports the status of medical consultants as independent contractors.
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
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 Executive Operations (OEO). 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 Executive Operations
OEO supports OIG by providing information resource management and systems security. OEO also coordinates OIG's budget, procurement, telecommunications, facilities, and human resources. In addition, OEO 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.