OFFICE OF
THE INSPECTOR GENERAL
SOCIAL SECURITY ADMINISTRATION
ADMINISTRATIVE COSTS
CLAIMED BY THE
MASSACHUSETTS DISABILITY
DETERMINATION SERVICES
July 2004 A-01-04-14032
AUDIT REPORT
Mission
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.
Authority
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.
Vision
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.
SOCIAL SECURITY
MEMORANDUM
Date: July 13, 2004 Refer To:
To: Manuel J. Vaz
Regional Commissioner
Boston
From: Assistant Inspector General
for Audit
Subject: Administrative Costs Claimed by the Massachusetts Disability Determination Services (A-01-04-14032)
The objectives of our audit of the Fiscal Years (FY) 2001 and 2002 administrative
costs claimed by the Massachusetts Disability Determination Services (MA DDS)
were to:
evaluate the MA-DDS’ internal controls over the accounting and reporting
of administrative costs,
determine whether costs claimed by the MA-DDS were allowable and funds were
properly drawn, and
assess limited areas of the general security controls environment.
BACKGROUND
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 or other responsible
jurisdiction, according to Federal regulations. Each DDS is responsible for
determining claimants’ disabilities and assuring that adequate evidence
is available to support its determinations. To make proper disability determinations,
each State agency is authorized to purchase consultative medical examinations
and medical evidence of record from the claimants’ physicians or other
treating sources. SSA pays the State agency for 100 percent of allowable expenditures
using Forms SSA-4513. (For additional background information, see Appendix
B of this report.)
RESULTS OF REVIEW
The MA-DDS had adequate internal controls over accounting and reporting of administrative costs and draw downs. Our tests of the amounts MA-DDS reported on Forms SSA-4513 provided reasonable assurance the DDS had accurately reported the administrative costs—totaling $61,984,550—it incurred for disability determination activities during our audit period (see Table 1 below). Our tests of MA-DDS’ claimed costs showed the sampled expenditures were allowable and allocable and Federal funds were properly drawn. However, we found that the MA-DDS leased more office space than SSA’s policy allowed in FYs 2001 and 2002—but both DDS and SSA staff informed us the policy was outdated and needed revisions. Finally, our limited review of the MA-DDS’ security controls environment showed that controls were in place, and SSA and the DDS were taking steps to address outstanding security issues.
TABLE 1: FY 2001 AND 2002 ADMINISTRATIVE COSTS CLAIMED
Cost Categories Total Obligations Total Disbursements Unliquidated Obligations
Personnel $37,584,370 $37,584,370 $0
Medical $12,548,546 $12,548,546 $0
Indirect $851,061 $851,061 $0
All Other $11,000,573 $10,922,173 $78,400
Total $61,984,550 $61,906,150 $78,400
(For a more detailed analysis of the FY 2001 and 2002 administrative costs claimed, see Appendix C.)
DDS OFFICE SPACE
SSA’s policy (effective August 1996) limits DDS offices to a “…maximum total allowable space… [of] 150 square feet…” per full time equivalent (FTE). However, our review of the MA-DDS’ lease documentation showed the DDS leased over 180 square feet of office space for 388 FTEs. Specifically, the MA-DDS leased more than 13,000 square feet in office space (at a combined cost of over $500,000 for FYs 2001 and 2002) than was specified in SSA’s policy manual.
Boston and Worcester Offices
The MA-DDS commercially leased office space in the two most populated cities in the State of Massachusetts to perform its disability determination mission. The larger office was located in Boston and the smaller office was located in Worcester. According to its leases, the Boston office allocated 52,141 square feet to 281 FTEs, while the Worcester office allocated 19,375 square feet to 107 FTEs. On average, each FTE in the Boston office was allocated 186 square feet, and each FTE in the Worcester office was allocated 181 square feet of office space. Tables 2 and 3 below show the amount of office space leased (above the amount specified in SSA’s policy manual) in FYs 2001 and 2002, respectively. (See Appendix D for the leases and the lease amendment.)
TABLE 2: FY 2001 EXCESS OFFICE SPACE ANALYSIS
MA-DDS Facility
FTEs Maximum Allowable Sq. Ft. for Office Space per SSA Policy Manual Actual
Amount of Leased Office Space Square Footage Leased above SSA’s Policy
Manual Guidelines
Boston 281 42,150 52,141 9,991
Worcester
(Oct. 2000–Feb. 14, 2001) 107 16,050 18,975 2,925
Worcester
(Feb. 15, 2001–Sept. 2001) 107 16,050 19,375 3,325
Totals 388 58,200 71,516 13,166
TABLE 3: FY 2002 EXCESS OFFICE SPACE ANALYSIS
MA-DDS Facility
FTEs Maximum Allowable Sq. Ft. for Office Space per SSA Policy Manual Actual
Amount of Leased Office Space Square Footage Leased above SSA’s Policy
Manual Guidelines
Boston 281 42,150 52,141 9,991
Worcester 107 16,050 19,375 3,325
Totals 388 58,200 71,516 13,316
SSA Policy on Office Space
According to staff at the MA-DDS, SSA Regional Office (RO) in Boston, and
SSA’s Office of Disability Determinations in Baltimore, the current policy
of 150 square feet per FTE is outdated and needs revisions.
The MA-DDS staff believe the additional space is needed for equipment storage
(e.g., computer systems), providing handicapped accessibility, and adequate
training facilities.
SSA’s RO staff indicated additional office space was needed for computer
systems, as well as for training. Also, the RO staff did not believe the MA-DDS
was leasing excess office space. Specifically, the FY 2002 Regional DDS Spending
Plan showed that the MA-DDS requested, and the Region approved, funding for
the leasing of 71,516 square feet of office space. Further, the Region believes
the leasing rates for the two office locations were probably lower than what
was typically charged for similar commercial office space. Finally, the RO
mentioned the cost of moving DDS staff to smaller office space would be costly
and would not allow for future expansion.
SSA’s Office of Disability Determinations—which has overall oversight
over DDS operations—indicated that the space computation worksheet in
SSA’s policy manual was outdated and the DDSs are not held to its requirements.
The Office of Disability Determinations staff was uncertain as to what is adequate
DDS space and they are currently working on a space plan to be followed by
DDSs in the future. However, this plan is in its initial stages.
CONCLUSIONS AND RECOMMENDATION
MA-DDS generally complied with laws, regulations, policies and procedures governing expenditures and obligations incurred for SSA’s disability program for FYs 2001 and 2002. Also, the DDS had internal controls and security controls in place. However, the MA-DDS leased more office space than SSA’s policy allowed in FYs 2001 and 2002—but both DDS and SSA staff indicated the policy was outdated and needed revisions. Without a firm policy in place, the potential exists for DDSs to charge SSA for unreasonable office space costs. Therefore, we recommend that the RO work with the Office of Disability Determinations staff to ensure the DDS office space policy is updated timely.
AGENCY COMMENTS
The RO agreed that the MA-DDS leased more office space than SSA’s policy allowed, but that the amount of space in use was not unreasonable or excessive. Further the RO acknowledged that the current policy guidelines (written in 1996) do not represent the spacing needs of today’s DDS.
Additionally, the RO requested that we review the $364,278 in funds allocated for the operation of the Cooperative Disability Investigations (CDI) unit in FY 2002—since these funds were not specifically addressed in our audit of the DDS’ administrative costs. (See Appendix E for the RO’s comments. MA-DDS did not provide comments to the report.)
OIG RESPONSE
Although our report did not specifically address the CDI unit, our review of the State Agency Obligational Authorization For SSA Disability Programs (Form SSA-872) showed that the DDS appropriately reported the $364,278 in CDI costs separately for FY 2002. Additionally, our review of the DDS’ FY 2002 costs included $182,744 of the $364,278 CDI unit costs. Specifically, our review included the costs for the DDS employees who worked in the CDI unit, as well as the indirect costs. Since our review found that the DDS had adequate controls over the accounting and reporting of administrative costs, we did not include the remaining $181,534 in CDI costs—which represent less than 1 percent of the $31 million in total DDS costs for FY 2002—in our review. The $181,534 in costs that were not included in our review were for personnel costs associated with State Attorney General staff working in the CDI unit, as well as non-personnel costs, such as two car leases.
S for
Steven L. Schaeffer
Appendices
APPENDIX A – Acronyms
APPENDIX B – Background, Scope and Methodology
APPENDIX C – Schedule of Total Costs Reported on the Forms SSA-4513—State
Agency Reports of Obligations for SSA Disability Programs
APPENDIX D – Massachusetts Disability Determination Services’ Leases
for its Boston
and Worcester Facilities
APPENDIX E – Agency Comments
APPENDIX F – OIG Contacts and Staff Acknowledgments
Appendix A
Acronyms
Act Social Security Act
CDI Cooperative Disability Investigations
C.F.R. Code of Federal Regulations
DDS Disability Determination Services
DI Disability Insurance
FTE Full-Time Equivalents
FY Fiscal Year
MA-DDS Massachusetts Disability Determination Services
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 Treasury
Appendix B
Background, Scope and Methodology
BACKGROUND
The Disability Insurance (DI) program was established in 1954 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, 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 the DI and SSI programs are performed by disability determination services (DDS) in each State or other responsible jurisdiction, 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 Circular A-87, Cost Principles for State,
Local, and Indian Tribal Governments. At the end of each quarter of the Fiscal
Year (FY), each DDS submits a State Agency Report of Obligations for SSA Disability
Programs (Form SSA-4513) to account for program disbursements and unliquidated
obligations.
SCOPE
To accomplish our objectives, we reviewed the administrative costs Massachusetts Disability Determination Services (MA-DDS) reported on its Forms SSA-4513 for FYs 2001 and 2002. For the periods reviewed, we obtained evidence to evaluate recorded financial transactions and determine whether they were allowable under Circular A-87 and appropriate, as defined by SSA’s Program Operations Manual System.
We also:
Reviewed applicable Federal regulations and pertinent parts of Program Operations
Manual System DI 39500, DDS Fiscal and Administrative Management, and other
instructions pertaining to administrative costs incurred by MA-DDS and draw
down of SSA funds covered by the Cash Management Improvement Act.
Interviewed staff at MA-DDS and the SSA Regional Office.
Reviewed State policies and procedures related to personnel, medical services,
and all other non-personnel costs.
Evaluated and tested internal controls regarding accounting and financial
reporting and cash management activities.
Verified the reconciliation of official State accounting records to the administrative
costs reported by MA-DDS on Forms SSA-4513 for FYs 2001 and 2002.
Examined the administrative expenditures (personnel, medical service, and
all other non-personnel costs) incurred and claimed by MA-DDS for FYs 2001
and 2002 on Forms SSA-4513.
Examined the indirect costs claimed by MA-DDS for FYs 2001 and 2002 and the
corresponding Cost Allocation Plans.
Compared the amount of SSA funds drawn to support program operations to the
allowable expenditures reported on Forms SSA-4513.
Reviewed the State of Massachusetts Single Audit reports issued in 2000 through
2002.
Conducted limited general control testing—which encompassed reviewing
the physical access security and security plan within the DDS. We also reviewed
the (1) April 2003 DDS Self-Review (Security Review Checklist) - Boston and
Worcester facilities, (2) SSA – Boston Region’s 5-Year Security
Review of the MA-DDS, and (3) “Disability Determination Services Security
Document” (Administrators’ Letter No. 644). We also toured each
floor of the Boston facility to further measure the MA-DDS’ security
controls.
The electronic data used in our audit was sufficiently reliable to achieve our audit objectives. We assessed the reliability of the electronic data by reconciling it with the costs claimed on the Forms SSA-4513. We also conducted detailed audit testing on selected data elements in the electronic data files.
We performed our audit in Boston, Massachusetts at the Office of the Inspector General/Office of Audit and the MA-DDS between September 2003 and March 2004. We conducted our audit in accordance with generally accepted government auditing standards.
METHODOLOGY
Our sampling methodology encompassed the four general areas of costs as reported on Forms SSA-4513: (1) personnel, (2) medical, (3) indirect, and (4) all other non-personnel costs. We obtained computerized data from MA-DDS for FYs 2001 and 2002 for use in statistical sampling.
Personnel Costs
We sampled 50 employee salary items from one randomly selected pay period in FY 2002. We tested regular and overtime payroll and hours for each individual selected. We verified that approved time records were maintained and supported the hours worked. We tested payroll records to ensure the MA-DDS correctly paid employees and adequately documented these payments.
We also sampled 50 randomly selected medical consultant costs from FY 2002. We determined if sampled costs were reimbursed properly and ensured the selected medical consultants were licensed.
Medical Costs
We sampled a total of 100 medical evidence of records and consultative examination records (50 items from each FY) using a proportional random sample. We determined whether sampled costs were properly reimbursed.
Indirect Costs
We reviewed the indirect cost base and computations used to determine those
costs for reimbursement purposes. Our objective was to ensure SSA reimbursed
MA-DDS in compliance with the State Cost Allocation Plan. We analyzed the approved
rate used for each quarter, ensuring the indirect cost rate changed when the
Indirect Cost Rate Agreement was modified. We reviewed the documentation and
traced the base amounts back to Forms SSA-4513 for the indirect cost computation
components. We determined whether the approved rate utilized was a provisional,
predetermined, or final rate.
All Other Non-Personnel Costs
We stratified all other non-personnel costs into ten categories: (1) Occupancy,
(2) Contracted Costs, (3) EDP Maintenance, (4) New EDP Equipment/Upgrades,
(5) Equipment Purchases and Rental, (6) Communications, (7) Applicant Travel,
(8) DDS Travel, (9) Supplies, and (10) Miscellaneous. We selected a stratified
random sample of 50 items from each FY based on the percentage of costs in
each category (excluding Occupancy) to total costs. We also performed a 100
percent review of Occupancy expenditures.
Appendix C
Schedule of Total Costs Reported on Forms SSA-4513—State Agency Reports
of Obligations For Social Security Administration Disability Programs
Massachusetts Disability Determination Services
FISCAL YEAR (FY) 2001 AND FY 2002 COMBINED
REPORTING ITEMS DISBURSEMENTS UNLIQUIDATED OBLIGATIONS TOTAL OBLIGATIONS
Personnel $37,584,370 $0 $37,584,370
Medical $12,548,546 $0 $12,548,546
Indirect $851,061 $0 $851,061
All Other $10,922,173 $78,400 $11,000,573
TOTAL $61,906,150 $78,400 $61,984,550
FY 2002
REPORTING ITEMS DISBURSEMENTS UNLIQUIDATED OBLIGATIONS TOTAL OBLIGATIONS
Personnel $19,630,811 $0 $19,630,811
Medical $6,233,405 $0 $6,233,405
Indirect $462,384 $0 $462,384
All Other $5,175,839 $78,400 $5,254,239
TOTAL $31,502,439 $78,400 $31,580,839
FY 2001
REPORTING ITEMS DISBURSEMENTS UNLIQUIDATED OBLIGATIONS TOTAL OBLIGATIONS
Personnel $17,953,559 $0 $17,953,559
Medical $6,315,141 $0 $6,315,141
Indirect $388,677 $0 $388,677
All Other $5,746,334 $0 $5,746,334
TOTAL $30,403,711 $0 $30,403,711
Appendix D
Massachusetts Disability Determination Services’ Leases for its Boston
and Worcester Facilities
BOSTON, MASSACHUSETTS LEASE
WORCESTER, MASSACHUSETTS LEASE
WORCESTER, MASSACHUSETTS LEASE AMENDMENT
Appendix E
Agency Comments
SOCIAL SECURITY
MEMORANDUM
Date: June 15, 2004 Refer Refer To:
S2D1G5-3065 /DI-16/ORC-2004-5665
To: Steven L. Schaeffer
Assistant Inspector General for Audit
From: Manuel J. Vaz /s/
Regional Commissioner
Boston
Subject: Administrative Costs Claimed by the Massachusetts Disability Determination Services (A-01-04-14032), (Your Memo Dated May 7, 2004) - REPLY
We have reviewed your draft report on the audit of the administrative costs claimed by the Massachusetts Disability Determination Services (MA DDS) for Fiscal Years (FYs) 2001 and 2002. We are pleased that the MA DDS had adequate internal controls over accounting and reporting of administrative costs and draw downs. Further, your review showed that the MA DDS’s security controls were in place, and we and the DDS are taking steps to address outstanding security issues.
The only finding identified was that the MA DDS leased more office space than SSA’s policy allowed in FYs 2001 and 2002. This finding is based on a POMS instruction dated in 1996. Since the time of this POMS issuance, the DDS has automated and installed a LAN, added personal computers, printers, peripheral computer equipment and built a computer room to support this, and has established an IVT training room. Also, the DDS built hearings offices with private interviewing space. These needs are not addressed in the 1996 POMS guidelines for space. Further, the Boston MA DDS space spans seven floors of a commercial building, resulting in the need for additional space to accommodate handicapped access, stairwells and elevators. These issues must be considered in assessing the space needs to operate a DDS in today’s operating environment, as well as a consideration of the cost benefit assessment of moving to a new facility, incurring the high costs of moving and retrofitting space to install the necessary cabling, wiring and security for SSA’s systems requirements. When we plan budgets and review leases, we have concurred with the MA DDS’s requests, based on their operating needs and costs justifications. Based on these issues, we do not feel the DDS space is unreasonable or excessive.
We are disappointed, however, that the audit did not include an assessment of the Cooperative Disability Investigations (CDI) unit funds that were allocated to the MA DDS. In FY02, the DDS budget included $364,278 for the CDI unit. This funding supported salaries and indirect costs for 2.2 state Attorney General (AG) investigators and 3 DDS staff, as well as the costs for car leases, insurance, fuel, tolls and maintenance of two cars used by state investigators. We feel this audit is incomplete without an assessment of this aspect of the administrative costs claimed by the DDS and request it be included as an addendum to this audit.
If you have any further questions, please do not hesitate to contact me or
your staff may contact Roni Brown of the Center for Disability staff at (617)565-2390.
cc: Lenore Carlson
Appendix F
OIG Contacts and Staff Acknowledgments
OIG CONTACTS
Judith Oliveira, Director, (617) 565-1765
ACKNOWLEDGMENTS
In addition to those named above:
David Mazzola, Audit Manager
Joseph LoVecchio, Auditor
Alexander Rosania, Program Analyst
For additional copies of this report, please visit our web site at www.ssa.gov/oig
or contact the Office of the Inspector General’s Public Affairs Specialist
at (410) 966-1375. Refer to Common Identification Number A-01-04-14032.
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.