THE INSPECTOR GENERAL
SOCIAL SECURITY ADMINISTRATION
AUDIT OF THE
MICHIGAN DEPARTMENT OF
FOR THE 2-YEAR PERIOD ENDED
SEPTEMBER 30, 2004
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: March 27, 2006
To: Candace Skurnik
Director Audit Management and Liaison Staff
From: Inspector General
Subject: Management Advisory Report: Single Audit of the Michigan Department of Human Services for the 2-Year Period Ended September 30, 2004 (A-77-06-00010)
This report presents the Social Security Administration's (SSA) portion of the single audit of the Michigan Department of Human Services (DHS), for the 2-year period ended September 30, 2004. Our objective was to report internal control weaknesses, noncompliance issues, and unallowable costs identified in the single audit to SSA for resolution action.
The Michigan Auditor General performed the audit. Results of the desk review conducted by the Department of Health and Human Services (HHS) have not been received. We will notify you when the results are received if HHS determines the audit did not meet Federal requirements. In reporting the results of the single audit, we relied entirely on the internal control and compliance work performed by the Auditor General. 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 Michigan 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. DHS is the Michigan DDS' parent agency.
The single audit reported:
DHS did not follow State laws, policies, and procedures for procuring goods or services for the administration of Federal awards. Specifically, DHS did not maintain documentation to support the opportunity to review and comment on contracts when applicable (Attachment A, Page 4, item e). Further, DHS did not maintain documentation that direct human and medical services procurement procedures received proper approval (Attachment A, page 5, item f). The corrective action plan indicated that DHS is in the process of reengineering the contracting process to improve efficiency and address contract training issues (Attachment A, page 20).
DHS's internal controls over financial reporting were not sufficient to ensure the Schedule of Expenditures of Federal Awards (SEFA) was reliable, complete, and accurate (Attachment A, pages 10 through 12). The corrective action indicated that DHS is developing a new tracking/payment system that will automate the reconciliation of expenditures with the Michigan Administrative Information Network (Attachment A, page 19).
DHS did not ensure a formal contingency plan for several of its critical automated information systems was established and implemented. As a result, DHS could not ensure business would not be interrupted or critical financial and client data would not be lost in the event of a disaster (Attachment A, pages 16 through 18). The corrective action plan indicated that the Department of Information Technology and DHS will coordinate their efforts to comply with disaster recovery plan requirements (Attachment A, pages 19 and 20).
We recommend that SSA:
1. Ensure that DHS establishes sufficient procedures to obtain and document the review of DDS-related contracts and procurements.
2. Verify that the State took appropriate actions to ensure the SEFA is accurately prepared.
3. Ensure DHS establishes and implements a formal disaster recovery plan to follow in the event of a disaster that impacts DDS operations.
The single audit also identified that internal controls were not in place to ensure that cash draws for Federal programs were made in accordance with the Cash Management Improvement Act (CMIA) agreement, and that complete and accurate information was submitted in the annual CMIA report (Attachment B, pages 1 through 4). 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 potentially 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 questions contact Shannon Agee at (816) 936 5590.
S Patrick P. O'Carroll, Jr.
1 According to the auditor, although the review of the contracts was not properly
documented, the costs of consultative examination services provided through
the contract were allowable. Therefore, the $2,990 in questioned costs identified
in the finding do not need to be returned to SSA.
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.