THE INSPECTOR GENERAL
SOCIAL SECURITY ADMINISTRATION
AUDIT OF THE
COMMONWEALTH OF PUERTO RICO
DEPARTMENT OF THE FAMILY
FOR THE FISCAL YEAR ENDED
JUNE 30, 2003
MANAGEMENT ADVISORY REPORT
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 30, 2007
To: Candace Skurnik
Director Audit Management and Liaison Staff
From: Inspector General
Subject: Management Advisory Report: Single Audit of the Commonwealth of Puerto Rico, Department of the Family, for the Fiscal Year Ended June 30, 2003 (A-77-07-00010)
This report presents the Social Security Administration's (SSA) portion of the single audit of the Commonwealth of Puerto Rico, Department of the Family (DoF), 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.
Ernst & Young LLP 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 Ernst & Young 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 Commonwealth of Puerto Rico 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.
Puerto Rico DoF is the Puerto Rico DDS' parent agency.
The single audit reported that:
1. Accurate inventory records for acquisitions and physical location of property purchased with Federal funds were not maintained (Attachment A, pages 1 and 2). The corrective action plan indicated that an inventory control software program has been acquired and two employees have been assigned responsibility for inventory control (Attachment A, page 2).
The Office of the Inspector General (OIG) conducted an audit of Administrative Costs Claimed by the Puerto Rico DDS that covered the same time period as this single audit. The OIG audit identified that the maintenance of inventory did not comply with SSA's Program Operations Manual System and recommended corrective action. Therefore, we are not making a recommendation related to this single audit finding.
2. Documentation to support disbursements for the DI program totaling $207,302 was not maintained (Attachment A, pages 3 and 4). The corrective action plan indicated that the Finance Director issued instructions regarding document retention (Attachment A, page 4).
The OIG's audit reviewed disbursements based on a statistician's approved plan and found them to be supported by documentation. However, we believe a recommendation on this finding is warranted since the disbursements reviewed as part of this single audit are most likely different than the disbursements reviewed by the OIG.
3. Documentation to support payroll expenditures could not be located for four employees. In addition, payroll costs were charged to the incorrect account for two employees (Attachment A, pages 5 and 6). The corrective action plan indicated that a plan was developed by the Human Resources Department to address this finding (Attachment A, page 6).
The OIG's audit reviewed payroll costs claimed by the Puerto Rico DDS based on a statistician's approved plan and found the expenditures to be allowable and adequately supported. However, we believe a recommendation on this finding is warranted since the payroll expenditures reviewed as part of this single audit are most likely different than those reviewed by the OIG.
4. Information reported on the State Agency Report of Obligations for SSA Disability Programs (SSA-4513) did not reconcile with the DoF's records. Specifically, amounts reported on 11 SSA-4513 reports differed from DoF's accounting records. In addition, for 1 quarter, an incorrect indirect cost rate was included in the report, resulting in questioned cost of $662,771 (Attachment A, pages 7 and 8). The DoF did not agree with this finding and stated that the reports were prepared accurately and timely (Attachment A, page 8).
The OIG's Administrative Cost Audit included SSA-4513 reconciliations of costs claimed by the Puerto Rico DDS and did not identify any problems. Furthermore, the OIG audit determined that the indirect costs claimed by the Puerto Rico DDS were allowable. Therefore, we are not making a recommendation related to this single audit finding.
We recommend SSA:
1. Determine if the $207,302 charged to SSA was for allowable expenditures and collect any unallowable costs.
2. Remind the DDS to maintain adequate documentation to support expenditures and payroll costs charged to SSA programs.
3. Determine if unallowable payroll costs were charged to SSA and collect any unallowable costs.
The single audit also disclosed the following findings that may impact DDS operations although they were not specifically identified to SSA. Some of these findings were reported for several DoF programs indicating pervasive problems within DoF. If the finding was reported in more than one DoF program, we identify the number of times the finding was reported in parenthesis and only attached one finding as an example. I am bringing these matters to your attention as they represent potentially serious service delivery and financial control problems for the Agency.
DoF has significant deficiencies (4) in its internal control structure, accounting and financial management systems, budgetary controls and financial reporting practices (Attachment B, pages 1 through 5).
The lack of an overall control system resulted in inadequate controls over record retention and the filing of required documents (Attachment B, pages 6 and 7).
DoF did not submit Federal reports (5) timely and accurately (Attachment B, pages 8 and 9).
Payment vouchers were incomplete (7) (Attachment B, pages 10 and 11).
Supporting documentation for employee files (6) was not retained for expenditures charged to Federal funds (Attachment B, pages 12, 13 and 14).
Property and equipment management procedures (6) were not adequate (Attachment B, pages 15 and 16).
DoF paid for obligations (2) after the allowed time period (Attachment B, pages 17 and 18).
Documents to support compliance with procurement, suspension and debarment requirements (3) were not located (Attachment B, pages 19 and 20).
DoF made Federal disbursements (2) for unallowed activities (Attachment B, pages 21 and 22).
Effective controls were lacking (8) over the cash management area (Attachment B, page 23).
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.
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.