THE INSPECTOR GENERAL
SOCIAL SECURITY ADMINISTRATION
AUDIT OF THE
STATE OF MAINE
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 17, 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 Maine for the Fiscal Year Ended June 30, 2003 (A-77-05-00002)
This report presents the Social Security Administration's (SSA) portion of the single audit of the State of Maine 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 Maine State Auditor 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 Maine State Auditor 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 Maine 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 Department of Human Services (DHS) is the Maine DDS' parent agency.
The single audit reported that SSA was charged a disproportionate share of indirect costs associated with the State's accounting system. This occurred because DHS allocated costs to its various bureaus, including the Maine DDS, using a provisional indirect cost rate that was based on the number of checks written to vendors. Since a significantly greater number of vendor checks were written for SSA program expenditures, SSA received an inequitable distribution of costs totaling $633,282.
The provisional indirect cost rate was effective retroactively to fiscal years beginning July 2001 and is effective until amended. Accordingly, SSA may have also received an inequitable distribution of indirect costs from July 2001 through June 2002 and July 2003 to date.
The corrective action plan stated that the cognizant Federal agency, HHS, approved the provisional indirect rate. However, it did not identify actions DHS planned to resolve the finding (Attachment A, pages 1 and 2).
We recommend that SSA:
1. Instruct the DDS to refund the unallowable indirect costs of $633,282.
2. Work with DHS and HHS to ensure that indirect costs charged to its programs are based on an equitable allocation methodology.
3. Determine if it received an inequitable distribution of indirect costs from July 2001 through June 2002, and July 2003 to the current date, and collect any unallowable costs from the DDS.
The single audit also disclosed the following findings that may impact DDS operations, although they were not specifically identified to SSA. I am bringing these matters to your attention as they represent potentially serious service delivery and financial control problems for the Agency.
DHS did not have the necessary procedures or systems in place to properly account for Federal funds (Attachment B, pages 1 through 3).
Vouchers did not have adequate supporting documentation (Attachment B, page 4).
The Department of Administrative and Financial Services had excess reserves reported in the cost allocation plan that was submitted to HHS (Attachment B, page 5 and 6).
Controls were inadequate to prevent or detect errors on Federal reports (Attachment B, pages 7 and 8).
Quarterly financial reports were inaccurate, were not reconciled to the State's accounting system, and procedures were not in place to ensure that program expenditures were accurately reported (Attachment B, pages 9 through 12).
DHS did not comply with the Cash Management Improvement Act or have proper cash controls (Attachment B, pages 13 through 16).
Cash management procedures were inadequate to disburse Federal funds (Attachment B, pages 17 and 18).
Procedures were not in place to ensure that contractors receiving awards of $100,000 or more were not suspended or debarred (Attachment B, page 19).
DHS temporarily charged the Federal Program for the State's share of program expenses (Attachment B, page 20).
Internal controls were not in place to ensure Automated Data Processing risk
analysis and systems security reviews are conducted (Attachment B,
pages 21 and 22).
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.