Date: August 31, 2005
To: Laurie Watkins
Regional Commissioner Philadelphia
From: Inspector General
Subject: Administrative Costs Claimed by the Pennsylvania Bureau of Disability Determination (A-15-04-14080)
The attached final report presents the results of our audit. The objectives of our audit of the Pennsylvania Bureau of Disability Determination were to (1) evaluate internal controls over the accounting and reporting of administrative costs, (2) determine if costs claimed were allowable and properly allocated, (3) reconcile funds drawn down with claimed costs, and (4) assess limited areas of the general security controls environment.
Please provide within 60 days a corrective action plan that addresses each
recommendation. If you wish to discuss the final report, please call me or have
your staff contact Steven L. Schaeffer, Assistant Inspector General for Audit,
Patrick P. O'Carroll, Jr.
THE INSPECTOR GENERAL
SOCIAL SECURITY ADMINISTRATION
BY THE PENNSYLVANIA BUREAU
OF DISABILITY DETERMINATION
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.
The objectives of our audit of the Pennsylvania Bureau of Disability Determination (PA-BDD) were to (1) evaluate internal controls over the accounting and reporting of administrative costs, (2) determine if costs claimed were allowable and properly allocated, (3) reconcile funds drawn down with claimed costs, and (4) assess limited areas of the general security controls environment.
Disability determinations under the Social Security Administration's (SSA) Disability Insurance and Supplemental Security Income programs are performed by disability determination services (DDS) in each State in accordance with Federal regulations. Each DDS is responsible for determining claimants' disabilities and ensuring adequate evidence is available to support its determinations. SSA reimburses the DDS for 100 percent of allowable expenditures. The expenditures include both direct and indirect costs. The Commonwealth of Pennsylvania Department of Labor and Industry (PA-L&I) is the parent agency of the PA-BDD.
RESULTS OF REVIEW
Generally, PA-L&I had adequate controls over the $144 million in administrative costs claimed during the 2-year audit period ended September 30, 2003; however, we could not substantiate about 2 percent of these costs. PA-L&I charged $49,418 for unallowable costs that did not benefit PA BDD. Also, we found insufficient documentation for PA-L&I charges of $730,162 for All Other Nonpersonnel costs and $11,948 for Multifund costs. We identified invalid unliquidated obligations amounting to $2.2 million. Additionally, we found expenditures amounting to $132,493 charged to incorrect Federal fiscal years (FFY). We conducted a limited evaluation of general security controls of the PA-BDD's locations and identified several areas where improvements can be made.
We recommend that the SSA Regional Office (RO) work with the PA-L&I staff to improve the documentation of the costs claimed and validate the unsupported costs. We also recommend the RO instruct the PA-L&I to reimburse SSA $49,418 for disallowed costs, and deobligate $2.2 million of invalid unliquidated obligations. PA-L&I needs to improve internal controls to prevent costs from being charged to incorrect FFYs and make correcting entries for costs charged to the wrong FFYs. Finally, the PA-BDD needs to improve the security over its buildings.
SSA agreed with our recommendations. See Appendix D for the text of SSA's comments.
COMMONWEALTH OF PENNSYLVANIA COMMENTS
In its response to our eight recommendations, PA-L&I generally agreed to implement or had already implemented five recommendations. For the three recommendations with which PA-L&I disagreed, it believed that it had charged costs appropriately and provided the Office of the Inspector General with sufficient documentation.
We appreciate the comments from SSA and PA-L&I. We reaffirm our conclusions
and recommendations. The PA-L&I was unable to provide adequate documentation
showing the PA-BDD was allocated central services bureau costs in proportion
to the benefits received. Central services bureau employees used various methods
to allocate portions of their workday rather than actual time worked as required
by Office of Management and Budget Circular A 87 Cost Principles for State,
Local, and Indian Tribal Governments. As a result, we could not determine the
validity of central service Direct Labor costs and Multifund costs charged to
Table of Contents
RESULTS OF REVIEW 3
Unsupported All Other Nonpersonnel Costs 3
Insufficiently Supported Direct Labor Costs 3
Unsupported Multifund Cost Allocations 4
Unallowable Allocation of Parking 5
Unsupported Unliquidated Obligations 5
Expenses Charged to the Wrong Federal Fiscal Year 6
General Security Deficiencies 7
CONCLUSIONS AND RECOMMENDATIONS 8
Appendix A - Acronyms
Appendix B - Scope and Methodology
Appendix C - Schedules of Obligations Reported, Questioned and Allowed
Appendix D - Agency Comments
Appendix E - State Agency Comments
Appendix F - OIG Contacts and Staff Acknowledgments
The objectives of our audit of the Pennsylvania Bureau Disability Determination (PA BDD) were to (1) evaluate internal controls over the accounting and reporting of administrative costs, (2) determine if costs claimed were allowable and properly allocated, (3) reconcile funds drawn down with claimed costs, and (4) assess limited areas of the general security controls environment.
The Disability Insurance (DI) program was established in 1956 under Title II of the Social Security Act (Act). The DI program provides benefits to wage earners and their families in the event the wage earner becomes disabled. In 1972, Congress enacted the Supplemental Security Income (SSI) program under Title XVI of the Act. The SSI program 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 in accordance with Federal regulations. In carrying out its obligation, each DDS is responsible for determining claimants' disabilities and ensuring that 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 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. An advance or reimbursement for costs under the program must comply with the Office of Management and Budget's (OMB) Circular A 87, Cost Principles for State, Local, and Indian Tribal Governments. For each Federal fiscal year (FFY), the DDS submits a quarterly State Agency Report of Obligations for SSA Disability Programs (Form SSA-4513) to account for program disbursements and unliquidated obligations.
PA BDD is a component within the Pennsylvania Department of Labor and Industry (PA L&I). For FFYs 2002 through 2003, PA-BDD had about 617 employees who were located in three cities in the Commonwealth: Greensburg, Wilkes-Barre, and the central office in Harrisburg, Pennsylvania. SSA provided an authorized budget of $144.5 million for FFY 2002 and 2003 administrative costs. As of September 30, 2003, PA-L&I reported total disbursements for the PA-BDD of approximately $133 million and unliquidated obligations of $11 million, which equals $144 million of obligations. The obligated costs by category for the 2-year period were:
PA-L&I maintains a process for charging Direct Labor costs for those staff who work on other programs. The staff maintains time sheets to indicate time spent on each program. On a monthly basis the time sheet data are input into a direct cost report and the programs are charged.
PA-L&I also maintains a form of cost distribution know as Multifund allocations.
These costs represent services and other purchases for the PA-L&I, but are
not part of the Indirect cost process. The PA-BDD routinely is charged a percentage
of these costs, which are recorded as All Other Nonpersonnel Costs.
Results of Review
Generally, PA-L&I had adequate controls over the $144 million in administrative costs claimed for reimbursement and unliquidated obligations during the 2 year audit period ended September 30, 2003; however, we could not substantiate about 2 percent of these costs. We identified four areas of control weakness: unsupported costs, unsupported unliquidated obligations, expenses recorded in the wrong FFYs and general security deficiencies.
UNSUPPORTED ALL OTHER NONPERSONNEL COSTS
PA-L&I charged the PA-BDD $49,418 in All Other Nonpersonnel Costs that did not benefit SSA's programs. The unallowable costs of $49,418 included 1) employee breaks of $6,594, 2) lobbying costs of $32,995, and 3) parking costs of $9,829. Further, we question $730,162 in All Other Nonpersonnel direct costs over the 2-year period because of insufficient supporting documentation. We also question $11,948 in unsupported Multifund costs. We could not determine if the PA-BDD benefited from these charges.
INSUFFICIENTLY SUPPORTED DIRECT LABOR COSTS
It is the practice of PA-L&I staff who conduct work for the various PA-L&I components to allocate costs to the PA-BDD as an All Other Nonpersonnel cost. We were unable to determine the basis for Direct Labor allocations and whether the PA-BDD received a benefit from such services.
At our request, PA-L&I contacted 13 employees selected from a group of 169 to determine the basis for charging time to the PA-BDD. Using the information provided by PA-L&I and our analysis of the timesheets, we determined that 10 of the 13 employees had allocated their time based on various methods. Three of the 13 employees had charged actual time to the PA-BDD. The various allocation methods reported to us included splitting time equally among all of the programs, or charging the bulk of time to one agency and allocating the remainder equally to the other agencies. One of the 13 employees routinely charged his breaks to the PA-BDD and all of productive time to other components. We estimate that during the 2-year period of our audit this employee improperly charged $6,594 to the PA-BDD. OMB Circular A-87, Cost Principles for State, Local and Indian Tribal Governments, requires employees to record actual time spent on the activity charged.
One of the 13 employees worked in the Legislative Affairs Office (LAO). PA L&I was unable to provide supporting records to demonstrate a benefit of LAO to the PA-BDD. The PA-L&I's cost allocation plan describes the objective of the LAO as " attends legislative sessions to monitor and influence the progress and substance of legislation affecting the Department." Costs relating to influencing State legislatures or a legislative body are not allowed under Federal Acquisition Regulations. During FFYs 2002 and 2003 the PA-BDD was charged $32,995 by the LAO.
We analyzed 1 month of Direct Labor costs charged to the PA-BDD, valued at $36,198. PA-L&I provided us with 98 staff timesheets in support of the sample transaction. Our analysis showed 62 of the 98 timesheets contained various methodologies to allocate time to the PA-BDD. We were advised by PA-L&I management that employee time sheets were to be prepared using actual time worked, and not based on an allocation.
Because of insufficient supporting documentation over PA-L&I labor costs we question the costs included in our 2-year audit period. PA-L&I labor costs and offsets amounted to $730,162 after excluding the unallowed costs of breaks and LAO. The SSA Regional Office (RO) will need to work with the PA-L&I to determine the validity of these labor costs. The SSA RO should direct PA-L&I to refund to SSA the $6,594 paid for employee breaks and the $32,995 paid for LAO's expenses.
UNSUPPORTED MULTIFUND COST ALLOCATIONS
PA-L&I distributed miscellaneous costs known as Multifund allocations to the PA BDD. The Multifund allocations were reported as part of the All Other Nonpersonnel costs. There was insufficient documentation to support how the amounts were calculated, and whether the PA-BDD received a benefit from the Multifund services. With the implementation of the Systems Analysis and Program system in July 2003, Multifund allocation transfers became automated. Since being automated it was found that problems had arisen in the system coding, which prevented detailed information from being provided. This was not identified as a problem for the period prior to July 2003. OMB Circular A-87 requires, "Factors affecting allowability of costs be adequately documented." The PA-L&I needs to improve accounting information to provide assurance that allocated costs are reasonable and necessary for the PA-BDD. Our review of expenditure information for July through September FFY 2003 identified 198 Multifund allocation transactions amounting to $11,948 that did not have sufficient supporting documentation.
Because of insufficient supporting documentation for PA-L&I Multifund costs,
we question the costs included in our 2-year audit period. The SSA RO needs
to work with the PA-L&I to determine the validity of the $11,948 in Multifund
UNALLOWABLE ALLOCATION OF PARKING
The PA-BDD paid expenses of $4,289 and $5,540 for FFYs 2002 and 2003, respectively, for parking at the PA-L&I building. However, PA-BDD had no assigned parking places in the garages. An allocation of parking costs was charged to the PA BDD because it is part of PA-L&I. The PA-BDD was located in other parts of the city and/or Commonwealth and provided its own parking for employees.
We believe these charges to be unreasonable considering the lack of benefit
derived. OMB Circular A-87 states, "
and reasonable for proper and efficient performance and administration of Federal
awards." OMB A-87 also states, "
a cost is allocable to a particular
in accordance with relative benefits received." SSA's
RO should direct PA L&I to reimburse SSA for the $9,829 parking expenses
charged for the 2-year period and discontinue the allocation of parking costs
to PA BDD.
UNSUPPORTED UNLIQUIDATED OBLIGATIONS
The PA-BDD reported $2,151,869 of unliquidated obligations that were not supported. Starting in FFY 2002, SSA made funds available for planned moves of the Greensburg and Wilkes-Barre offices and an expansion of the Harrisburg location. SSA provided $770,775 in FFY 2002 funds and $1,381,094 in FFY 2003 funds for the moves and expansion.
During our field work we determined as late as January 12, 2005, no specific move date or expansion start date had been finalized. We also noted that no purchase orders or contracts had been issued. SSA's Program Operations Manual System (POMS) states, "Obligations for supplies, equipment, and other contractual services should be supported by a valid purchase order or other binding agreement to pay for goods or services." POMS also requires that for obligations to be valid there must be a bona fide need. Further, this need must exist within the year of funding, but the purchase order or contract can be finalized up to 6 months after the FFY end.
The RO should direct PA L&I to deobligate the obligations relating to the FFYs 2002 and 2003 move/expansion efforts.
EXPENSES CHARGED TO THE WRONG FEDERAL FISCAL YEAR
We identified expense transactions totaling $132,493 that were charged to the wrong FFY. Improper recording of expense transactions prevents SSA from accurately monitoring the status of PA BDD's expended and unexpended appropriations. The incorrect reporting of obligations also affects SSA's ability to manage the allocation and use of budgeted funds to the various States. The improper recording of FFY expenses also prevents PA BDD from managing its funds. POMS requires obligations be based on a bona fide need for goods or services that exist within the FFY.
Additional information on the type of cost and amounts follows:
Rental costs - costs amounting to $110,876 for FFY 2004 were charged to FFY
2003 funds. The expenditures were identified as part of our review of unliquidated
obligations. We identified four payment amounts: $33,923 (November 2003), $37,505
(January 2004), $33,923 (March 2004), and
$5,525 (March 2004) recorded in the wrong FFY.
Prepaid supplies - PA-BDD bought $3,769 in supplies in June 2001, and later charged the cost to FFY 2002 funds.
Telecommunication usage - a FFY 2003 Wilkes-Barre PA-BDD bill for the service
period July 1st through July 31st 2003, for $2,704 was charged to
FFY 2002 funds.
Payroll costs - payroll transactions that totaled $15,144 for FFY 2003 pay
periods ended September 5, 2003 and September 9, 2003, were charged to
PA L&I's internal controls to detect transactions recorded in the wrong
FFY were not effective. Internal controls were sufficient over expenditure processes,
but weaker over which SSA fund years would be charged. SSA's RO should instruct
the PA-L&I to adjust the expenses to the proper FFYs and revise its Form
SSA 4513 accordingly. Additionally, the RO should instruct PA-L&I to improve
internal controls to prevent costs from being charged to incorrect FFYs.
GENERAL SECURITY DEFICIENCIES
We conducted a limited evaluation of the general security controls environment of the PA-BDD Greensburg, Harrisburg, and Wilkes-Barre locations. To complete this work we applied a check list based on the SSA Disability Determination Services Security Document (DSD), September 2003 version. We identified three control weaknesses:
For all three locations, we found the walls of the computer rooms were not slab to slab construction, but contained an open area above the drop ceiling. There was no intrusion detection system (IDS) in these open areas, nor any type of barrier to prevent intrusion through the ceiling opening. SSA's DSD states:
The walls of the computer room should have slab-to-slab construction to prevent unauthorized entry or the computer room must be made secure by installing chain link fences, heavy wire mesh, or motion sensor devices in the space between the false ceiling and the true ceiling of the facility.
The PA BDD should improve the security of its computer rooms.
In the work areas in the Harrisburg, and Wilkes-Barre PA-BDD, we noted a number of terminals were logged on to the case processing system, but were unattended. The SSA DSD states, "A DDS system user must log off or lock the system when they leave their workstation." PA-BDD management should reinforce good security habits to ensure all staff log off when work stations are unattended.
The work areas in the Wilkes-Barre PA-BDD lacked IDS devices. The Wilkes Barre
location is a single level building with perimeter, ground level windows. An
IDS covered internal hallways but not the perimeter rooms where case files were
stored. Our assessment of the work space found the windows were not wired with
alarms, and the work area had no motion detectors. The SSA DSD states, "An
intrusion detection system is required in all facilities unless determined unnecessary."
We believe the situation warrants increased security. Management should enhance
security by installation of IDS devices within the work areas to deter intrusions.
Conclusions and Recommendations
Generally, the parent agency of the PA-BDD, the PA-L&I, had adequate controls over the $144 million in administrative costs claimed during the 2 year audit period ended September 30, 2003; however, we could not substantiate about 2 percent of these costs. PA L&I did not maintain sufficient documentation for us to verify the accuracy of certain claimed expenses or to determine if PA BDD benefited from the costs incurred. We question $730,162 of Direct Labor costs charged by the PA-L&I because of inadequate supporting documentation. Similarly, we question Multifund costs of $11,948 because of insufficient supporting documentation. We could not determine whether the costs the PA-BDD charged were an accurate share of the cost and whether PA BDD benefited from the services. We have determined specific costs claimed for the allocation of an employee's breaks of $6,594 and LAO of $32,995, as unallowable costs.
Additionally, the $9,829 in parking costs at the PA-L&I building charged to PA BDD were not allowable. Also, we found unliquidated obligations of $2.2 million were not supported by purchase orders or contracts, and expenditures of $132,493 were charged to incorrect FFYs. Finally, in our limited evaluation of general security controls, we identified several areas that could be improved.
We recommend SSA's RO:
1. Work with the PA-L&I to determine the validity of the charges of $433,291 in FFY 2002, and $296,871 in FFY 2003 in unsupported PA L&I Direct Labor, as well as $11,948 in FFY 2003 Multifund costs, which would allow a reviewer to understand why costs were charged to the PA BDD and the purpose of the services.
Also, we recommend SSA's RO instruct the PA-L&I and PA-BDD to:
2. Reimburse SSA for $21,285 in FFY 2002, and $11,710 in FFY 2003 for unallowable
costs of the LAO, and $3,297 in FFY 2002 and $3,297 in
FFY 2003 for the allocation of an employee's breaks charged to PA-BDD.
3. Discontinue the practice of charging PA-BDD for parking costs at the PA
L&I and reimburse SSA the parking costs of $4,289 for FFY 2002 and $5,540
for FFY 2003.
4. Improve internal controls over the obligation process to ensure only properly supported obligations are recorded and deobligate the invalid move/expansion unliquidated obligations of $770,775 for FFY 2002 and $1,381,094 for FFY 2003.
5. Improve internal controls to prevent costs from being charged to incorrect FFYs and make correction entries to adjust $132,493 of costs charged to the wrong FFYs:
$110,876 of rental costs from FFY 2003 to FFY 2004.
$3,769 for supplies charged from FFY 2002 to FFY 2001.
$2,704 for telecommunication usage from FFY 2002 to FFY 2003.
$15,144 in payroll costs from FFY 2002 to FFY 2003.
6. Improve security in the PA-BDD computer rooms by restricting possible access through the open ceiling.
7. Reinforce good security habits to ensure all staff log off their computers when stations are unattended.
8. Increase the security of the Wilkes-Barre location through installation of an IDS in staff work areas where windows and rooms have no sensors.
SSA agreed with our recommendations. The full text of SSA's comments may be found in Appendix D.
STATE AGENCY COMMENTS
In its response to our Recommendations, PA-L&I generally agreed to implement or had already implemented Recommendations 4 through 8. For the recommendations with which PA-L&I disagreed, it believed it had charged costs appropriately and provided the Office of the Inspector General (OIG) with sufficient documentation.
PA-L&I disagreed with Recommendations 1, 2 and 3 because it allocated Direct Labor and Multifund costs charges using the same percentages as in the approved Indirect Cost Allocation Plan. It also believed that it had provided sufficient documentation to the OIG to support the Direct Labor and Multifund costs expenses.
While PA-L&I did not believe improvements in internal controls were necessary, it corrected the deficiencies discussed in Recommendations 4 and 5. Specifically, the PA-L&I stated that the balances of the unliquidated obligations were being deobligated and the charges to the wrong FYs were corrected, respectively.
PA-L&I agreed with Recommendations 6, 7 and 8 to increase its security controls relating to computer room security, to ensure unattended computers are logged off and to have greater coverage by IDSs in the new Wilkes-Barre office.
Because of the length of PA-L&I's comments, we did not include the full text as an appendix. A complete copy of PA-L&I's comments may be obtained by written request to the OIG contacts mentioned in Appendix F.
We appreciate the comments from SSA and PA-L&I. We reaffirm our conclusions and recommendations. We are pleased that PA-L&I will take action to strengthen its security controls relating to the computer rooms, unattended but logged on computers and the IDS in the Wilkes-Barre Office as stated in Recommendations 6, 7, and 8, respectively. We are also pleased that PA-L&I has deobligated the invalid move/expansion unliquidated obligations and corrected the charges, as stated in Recommendations 4 and 5.
PA-L&I disagreed with Recommendations 1, 2, and 3, but was unable to provide adequate documentation showing that PA-BDD was allocated central services Direct Labor and Multifund costs in proportion to the benefits received.
With respect to PA-L&I's comments on Recommendation 1, we discussed our findings with the U.S. Department of Labor indirect cost negotiator and he agreed with our assessment. As to the adequacy of the support provided, PA-L&I did not provide us with source documentation linking the Direct Labor costs and Multifund costs to the PA BDD. Without the actual hours of work directly benefiting PA-BDD, PA-L&I lacks the necessary data to calculate the amount of costs to be allocated.
C.F.R. Code of Federal Regulations
DDS Disability Determination Services
DI Disability Insurance
DSD Disability Determination Service Security Document
FFY Federal Fiscal Year
IDS Intrusion Detection System
LAO Legislative Affairs Office
OIG Office of the Inspector General
OMB Office of Management and Budget
PA-BDD Pennsylvania Bureau of Disability Determination
PA-L&I Pennsylvania Department of Labor and Industry
POMS Program Operations Manual System
RO Regional Office
SSA Social Security Administration
SSA-4513 State Agency Report of Obligations for SSA Disability Programs
SSI Supplemental Security Income
Treasury Department of the Treasury
U.S.C. United States Code
Scope and Methodology
We reviewed the administrative costs reported by Pennsylvania Bureau of Disability Determination (PA-BDD) on its State Agency Report of Obligations for the Social Security Administration's (SSA) Disability Programs (SSA 4513) for Federal Fiscal Years (FFY) 2002 and 2003.
To accomplish our objectives, we:
Reviewed Office of Management and Budget Circular A 87 Cost Principles for State, Local, and Indian Tribal Governments, and appropriate sections of the Code of Federal Regulations, the United States Code, SSA's Program Operations Manual System, and the Commonwealth of Pennsylvania Department of Labor and Industry's (PA-L&I) Cost Allocation Plan.
Reviewed PA-L&I / PA-BDD policies and procedures related to personnel, medical, Indirect, and Nonpersonnel costs.
Interviewed employees from SSA, U.S. Department of Labor, PA-BDD, PA-L&I, and single audit certified public accountants.
Evaluated and tested internal controls regarding accounting, financial reporting and cash management activities.
Reviewed single audit work performed by certified public accountants to assess the internal controls and validity of payroll costs reported by the Commonwealth of Pennsylvania for FFYs 2002 and 2003. We were able to rely on the payroll work performed by the auditors and limit the extent of our payroll tests at the PA BDD.
Conducted a limited review of the general security of the Harrisburg, Greensburg, and Wilkes-Barre PA-BDD locations.
Reconciled the amount of Federal funds drawn for support of program operations to the allowable expenditures. We also tested timing of payroll draw downs to Cash Management Improvement Act agreement requirements.
Examined the administrative costs incurred and claimed by PA-BDD for Personnel, Medical, Indirect, and all other Nonpersonnel costs during FFYs 2002 and 2003.
Selected samples of payroll, medical evidence and all other nonpersonnel costs as described in the sampling methodology section on the following page.
Analyzed Indirect costs by applying the payroll cost base to agreed negotiated rates.
Reconciled the accounting records to the costs reported by PA-BDD on its Forms SSA 4513 for FFYs 2002 and 2003.
To meet the objectives of our review, we assessed the reliability of computer processed data produced by the PA-L&I accounting system. We tested the data reliability including tracing individual transactions to the source documents, recalculating totals and other tests deemed necessary. We determined that the data was sufficiently reliable.
We performed audit work at PA-L&I and PA-BDD in Harrisburg, Greensburg and Wilkes Barre, Pennsylvania between May 2004 and December 2004. The entity audited was the Office of Disability Determinations within the Office of the Deputy Commissioner for Disability and Income Security Programs. We conducted our audit in accordance with generally accepted government auditing standards.
Our sampling methodology included the three general areas of costs as reported on Form SSA 4513: (1) personnel, (2) medical, and (3) all other nonpersonnel costs. We obtained data extracts from PA-BDD for FFYs 2002 and 2003 to use in statistical sampling. Indirect cost was not sampled but we reviewed the indirect cost calculations for FFYs 2002 and 2003 to ensure the correct rate was applied. After selecting and reviewing the randomly selected samples, we did not identify errors that we felt warranted statistical projection.
We reviewed 10 employees' transactions from 1 pay period in FFY 2003. We tested payroll records to ensure PA-BDD accurately paid its employees and adequately supported these payments. In addition, payroll costs recorded in the PA-L&I accounting system were verified to payroll registers provided by the Bureau of Commonwealth Payroll Operations for 5 pay periods. We reviewed contracts and tested the validity of invoices for seven medical consultants who were paid in FFYs 2002 and 2003.
We reviewed 200 medical cost items (100 items from each FFY) using a simple random sample. We evenly distributed the sample items between medical evidence of records and consultative examinations.
All Other Nonpersonnel Costs
We reviewed 100 all other nonpersonnel cost items (50 items from each FFY) using a stratified random sample. Before our sample selection, we sorted the transactions into the following categories: (1) Non-DDS Personnel, (2) Telecommunications/EDP, (3) Specialized Services, (4) Travel, and (5) All Other Object Codes. We also selected nine FFY 2002 records (two records classified as pre-payments, three systems analysis and program accounting records charged to FFY 2002, but processed in FFY 2003, and four rental records) and four FFY 2003 records (four rental records).
Schedules of Obligations Reported, Questioned and Allowed
Pennsylvania Bureau of Disability Determination Reported and Allowable Costs
Table 1 - Administrative Costs for Federal Fiscal Year 2002
As of September 30, 2003
*1 Adjustment - payroll costs incurred in FFY 2003, but charged to FFY 2002, see section "Expenses Charged to the Wrong Federal Fiscal Year."
*2 Adjustment - $433,291 in unsupported documentation labor costs and offset costs, $21,285 unallowed Legislative Affairs Office and $3,297 unallowed allocated breaks
$4,289 in unallowable parking costs, $3,769 of prepaid supplies charged to the wrong year, and $2,704 telecommunication usage charged to the wrong year.
*3 Adjustment of $770,775 unliquidated obligations unsupported by authorized contracts or purchase orders.
Pennsylvania Bureau of Disability Determination Reported and Allowable Costs
Table 2 - Administrative Costs for Federal Fiscal Year 2003
As of September 30, 2003
*1 Adjustment - payroll costs charged to FFY 2002 corrected to FFY 2003, see
section "Expenses Charged to the Wrong Year."
*2 Adjustment - $296,871 in unsupported Labor costs and offsets, $11,948 in unsupported Multifund costs, $11,710 unallowed Legislative Affairs Office, $3,297 unallowed breaks,
$5,540 unallowable parking lot costs, ($2,704) telecommunication usage charged to the wrong year.
*3 Adjustment - $1,381,094 unliquidated obligations unsupported by authorized contracts or purchase orders, and $110,876 subsequent rental costs incurred in FFY 2004, but charged to FFY 2003.
August 09, 2005
Administrative Costs Claimed by the Pennsylvania Bureau of Disability Determination (A-15-04-1080)--Philadelphia Region Response
Our comments on the SSA OIG Audit of Administrative Costs Claimed by the Pennsylvania Bureau of Disability Determination (BDD) (A-15-04-14080) for Fiscal Years ending 2002 and 2003 are presented below. We have reviewed and taken into account the Pennsylvania Department of Labor & Industry's (PA L&I) response to the draft report which was provided directly to you.
Work with the PA-L&I to determine the validity of the charges of $433,291 in Federal Fiscal Year (FFY) 2002 and $296,871 in FFY 2003 in unsupported PA-L&I direct labor, as well as $11,948 in FFY 2003 Multifund costs, which would allow a reviewer to understand why costs were charged to the PA-BDD and the purpose of the services.
We will work with the PA-L&I to determine the validity of the direct labor
charges. While the documentation provided by the PA-L&I does not support
the stated charges in accordance with regulations, it does provide information
on how these costs were charged and the purpose of the services. We will work
with PA-L&I so that future direct labor charges reflect actual effort provided
to the PA-BDD.
We will work with the PA-L&I to determine the validity of the FFY 2003 multi-fund costs. The system deficiency that created this one time event has been corrected to ensure this will not occur in the future.
Instruct the PA-L&I and PA-BDD to reimburse SSA for $21,285 in FFY 2002, and $11,710 in FFY 2003 for unallowable costs of the Legislative Affairs Office (LAO), and $3,297 in FFY 2002 and $3,297 in FFY 2003 for the allocation of an employee's breaks charged to PA-BDD.
We agree that PA-L&I costs allocated to PA-BDD for the Legislative Affairs Office (LAO) are unallowable costs and will instruct the PA-L&I to reimburse SSA for these charges in the amount of $21,285 for FFY 2002 and $11,710 for FFY 2003.
We agree that the PA-L&I should reimburse the charges of $3,297 for FY 2002 and $3,297 for FFY 2003. The allocation of an employee's breaks was acknowledged by the PA-L&I as an anomalous occurrence and corrective action has been taken by PA-L&I to discontinue this practice.
Instruct the PA-L&I and PA-BDD to discontinue the practice of charging PA-BDD for parking costs at the PA-L&I and reimburse SSA the parking costs of $4,289 for FFY 2002 and $5,540 for FFY 2003.
We agree with the recommendation and will instruct PA-L&I to reimburse SSA in the amounts of $4,289 and $5,540 respectively for FFYs 2002 and 2003.
Improve internal controls over the obligation process to ensure only properly supported obligations are recorded and deobligate the invalid move/expansion unliquidated obligations of $770,775 for FFY 2002 and $1,381,094 for FFY 2003
We agree with the recommendation in the draft report. The PA L&I response to this recommendation shows that unliquidated obligations in FFY 2002 have already been deobligated from FFY 2002, and the balance of unliquidated obligations in FFY 2003 are in the process of being deobligated.
Improve internal controls to prevent costs from being charged to incorrect FFYs and make correction entries to adjust $132,493 of costs charged to the wrong FFYs.
We agree with the recommendation in the draft report. The PA L&I response to this recommendation shows that the items listed in the audit report have been transferred to the correct FFY.
Improve security in the PA BDD computer rooms by restricting possible access through the open ceiling.
We agree with the recommendation in the draft report. The PA L&I response shows that corrective action has been taken or is underway.
Reinforce good security habits to ensure all staff log off their computers when stations are unattended.
We agree with the recommendation in the draft report. The PA L&I response indicates that corrective action has been taken.
Increase the security of the Wilkes-Barre location through installation of IDS in staff work areas where windows and rooms have no sensors.
We agree with the recommendation in the draft report. The PA L&I response states that this recommendation will be met when the Wilkes-Barre office relocates in October 2005.
We appreciate the opportunity to comment. If you have any questions, please
contact Betty Martin in the Center for Disability Programs at 215-597-2047.
State Agency Comments
OIG Contacts and Staff Acknowledgments
Victoria Vetter, Director (410) 966-9081
Lance Chilcoat, Audit Manager (410) 965-9743
In addition to those named above:
Sigmund Wisowaty, Auditor-in-Charge
Jackie Patel, Senior Auditor
Richard Wilson, Senior Auditor
Ronald Anderson, Auditor
Brennan Kraje, Statistician
Annette DeRito, Writer/Editor
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 Specialist at
(410) 965-3218. Refer to Common Identification Number
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.