MEMORANDUM

Please comment within 60 days from the date of this memorandum on corrective action taken or planned on 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, at (410) 965-9700.

James G. Huse, Jr.

Executive Summary

Our objectives were to determine whether the A. Holly Patterson Extended Care Facility (AHP) (1) had effective safeguards over the receipt and disbursement of Social Security benefits and (2) ensured that Social Security benefits were used and accounted for in accordance with the Social Security Administration’s (SSA) policies and procedures.

Some individuals cannot manage or direct the management of their finances because of their age or mental and/or physical impairments. Congress granted SSA the authority to appoint representative payees (Rep Payee) to receive and manage these beneficiaries’ payments. A Rep Payee may be an individual or an organization. SSA selects Rep Payees for Old-Age, Survivors and Disability Insurance beneficiaries or Supplemental Security Income (SSI) recipients when representative payments would serve the individual’s interests.

Rep Payees are responsible for using benefits to serve the best interests of the beneficiary or recipient. Their duties include:

• Using benefits to meet the beneficiary or recipient’s current and foreseeable needs;

• Conserving and investing benefits not needed to meet the individual's current needs;

• Maintaining accounting records of how the benefits are received and used;

• Reporting events to SSA that may affect the individual's entitlement or benefit payment amount;

• Reporting any changes in circumstances that would affect their performance as a Rep Payee; and

• Providing SSA annual Representative Payee Reports (RPR) accounting for how benefits were spent and invested.

AHP (formerly A. Holly Patterson Geriatric Center) is a nonprofit, 889-bed skilled nursing facility in Uniondale, New York. During our audit period, AHP was the Rep Payee for 313 beneficiaries who received Social Security benefits.

AHP generally (1) had effective safeguards over the receipt and disbursement of Social Security benefits and (2) ensured Social Security benefits were used and accounted for in accordance with SSA’s policies and procedures. However, we identified several areas where AHP could improve its performance as a Rep Payee. Specifically, in five cases, SSI recipients were overpaid $1,890 because AHP did not report to SSA that the recipients had exceeded SSI resource limits. Based on the results of our statistical analysis, we estimate that SSA overpaid AHP at least $3,901 for at least 13 beneficiaries during our audit period. Also, in three cases, AHP reported incorrect expense information on RPRs.

Generally, the Rep Payee met its responsibilities. However, we found a few areas where AHP could improve its performance as a Rep Payee. We recommend that SSA:

• Ensure the Rep Payee reviews all SSI cases with conserved fund balances over $2,000, quantifies the overpayments, and returns the overpaid funds to SSA.

• Re-emphasize procedures with the Rep Payee for notifying SSA when events occur that affect the eligibility of individuals in its care.

• Clarify procedures with the Rep Payee for preparing the RPRs.

In response to our draft report, SSA agreed with our recommendations. (See Appendix B for SSA’s comments.)

In response to our draft report, the Rep Payee reported that it strengthened its procedures and will be working with SSA to improve its performance as a Rep Payee. (See Appendix C for the Rep Payee’s comments.)

Table of Contents

APPENDIX A – Sampling Methodology and Results

APPENDIX B – Agency Comments

APPENDIX C – Rep Payee’s Comments

APPENDIX D – OIG Contacts and Staff Acknowledgments

Acronyms

AHP A. Holly Patterson Extended Care Facility
NHCC Nassau Health Care Corporation
OASDI Old-Age, Survivors and Disability Insurance
OIG Office of the Inspector General
Rep Payee Representative Payee
RPS Representative Payee System
RPR Representative Payee Report
SSA Social Security Administration
SSI Supplemental Security Income

Introduction

Our objectives were to determine whether the A. Holly Patterson Extended Care Facility (AHP) (1) had effective safeguards over the receipt and disbursement of Social Security benefits and (2) ensured that Social Security benefits were used and accounted for in accordance with the Social Security Administration’s (SSA) policies and procedures.

Some individuals cannot manage or direct the management of their finances because of their age or mental and/or physical impairments. Congress granted SSA the authority to appoint representative payees (Rep Payee) to receive and manage these beneficiaries and recipients’ payments. A Rep Payee may be an individual or an organization. SSA selects Rep Payees for Old-Age, Survivors and Disability Insurance (OASDI) beneficiaries or Supplemental Security Income (SSI) recipients when representative payments would serve the individual’s interests.

Rep Payees are responsible for using benefits to serve the best interests of the beneficiary or recipient. Their duties include:

• Using benefits to meet the beneficiary or recipient’s current and foreseeable needs;

• Conserving and investing benefits not needed to meet the individual's current needs;

• Maintaining accounting records of how the benefits are received and used;

• Reporting events to SSA that may affect the individual's entitlement or benefit payment amount;

• Reporting any changes in circumstances that would affect their performance as a Rep Payee; and

• Providing SSA annual Representative Payee Reports (RPR) accounting for how benefits were spent and invested.

About 7 million individuals have Rep Payees—approximately 4.4 million are OASDI beneficiaries, 2 million are SSI recipients, and 600,000 are entitled to both OASDI and SSI. The following chart reflects the types of Rep Payees and the number of individuals they served as of November 2001.

AHP (formerly A. Holly Patterson Geriatric Center) is a nonprofit, 889-bed skilled nursing facility in Uniondale, New York. AHP opened in 1961 as a skilled nursing facility for the elderly residents of Nassau County. AHP became a subsidiary of the Nassau Health Care Corporation (NHCC) on September 29, 1999. NHCC—a public benefit corporation—was created to acquire and operate the health facilities of Nassau County, New York. During our audit period, AHP was the Rep Payee for 313 individuals who were receiving Social Security benefits.

AHP provides residents receiving OASDI benefits $50 per month from their benefits for their personal expenses. SSI recipients receive only $35 per month in payments from SSA, and AHP provides this entire amount to the residents for their personal expenses. The $35 payment comprises a $30 Federal payment and a $5 State supplement. According to SSA’s procedures, SSI recipients who reside in AHP only receive $35 per month for personal expenses since they are in a facility that is certified to receive Medicaid payments. Medicaid per diem payments cover the SSI recipient’s housing and food costs. SSI recipients receive an additional $20 per month from the New York Department of Social Services for their personal expenses.

Our audit covered the period May 1, 2000 through April 30, 2001. During this period, AHP served as Rep Payee for 313 individuals. From this population, we selected a random sample of 50 individuals for substantive testing. To accomplish our objectives, we:

• Reviewed the Social Security Act, SSA regulations, rules, policies and procedures pertaining to Rep Payees.

• Contacted SSA regional and field office staff to obtain background information about the Rep Payee’s performance.

• Obtained from SSA’s Representative Payee System (RPS) and the Rep Payee a listing of individuals who were in the Rep Payee’s care and received SSA funds any time during May 1, 2000 through April 30, 2001.

• Compared and reconciled the RPS and the Rep Payee’s listings to identify the population of SSA individuals who were in the Rep Payee’s care from May 1, 2000 through April 30, 2001.

• Reviewed and tested the Rep Payee’s internal controls over the receipt and disbursement of OASDI benefits and SSI payments.

• Performed the following tests for each of the 50 individuals in our random sample.

• Compared and reconciled benefit amounts paid according to the Rep Payee’s records to benefit amounts paid according to SSA’s records.

• Reviewed the Rep Payee’s accounting records to determine whether benefits were properly spent or conserved on the individual’s behalf. We also determined whether SSA was due a refund of any overpaid benefits.

• Traced a sample of recorded expenses to source documents and examined the underlying documentation for reasonableness and authenticity.

• Projected the results of our sample to the population (see Appendix A for details of our sampling methodology).

• Interviewed three beneficiaries, personal guardians, or caregivers to determine whether their basic needs were being met.

• Requested a sample of 30 RPRs from SSA to determine whether income and expenses were correctly reported.

• Reviewed 28 RPRs provided by the Rep Payee to determine whether the Rep Payee properly reported to SSA how benefits were used.

• Reviewed a sample of 10 Rep Payee applications (Form SSA-11) to evaluate the completeness and appropriateness of the information provided on the applications.

We performed our audit in Uniondale, New York, and the Office of the Inspector General’s New York field office between August and December 2001. We conducted our audit in accordance with generally accepted government auditing standards.

Results of Review

AHP generally (1) had effective safeguards over the receipt and disbursement of Social Security benefits and (2) ensured Social Security benefits were used and accounted for in accordance with SSA’s policies and procedures. However, we identified a few areas where AHP could improve its performance as a Rep Payee. Specifically, in five cases, SSI recipients were overpaid $1,890 because AHP did not report to SSA that the recipients had exceeded SSI resource limits. Based on the results of our statistical analysis, we estimate that SSA overpaid AHP at least $3,901 for at least 13 beneficiaries during our audit period. Also, in three cases, AHP reported incorrect expense information on RPRs.

We determined that, for the 50 beneficiaries who received $284,769 in SSA funds during our audit period, AHP accurately recorded benefits SSA paid it as well as expenses incurred on behalf of the individuals under its care. Our tests concluded that AHP maintained source documents for the sample items, which allowed us to determine the expenses were reasonable and valid.

Under the SSI program, a recipient is limited to $2,000 in resources to remain eligible for payment. If a recipient exceeds this resource limit, SSA suspends his or her payments. Such payments resume when the recipient’s resources fall below the limit. The Rep Payee must notify SSA (1) of any event that affects the recipient’s entitlement to benefits and (2) if a recipient’s resources exceed $2,000 in any month.

During our audit period, 5 of the 50 cases we reviewed had conserved funds over the $2,000 SSI resource limit. As a result, these individuals received $1,890 in overpayments from May 1, 2000 through April 30, 2001. The following table provides detailed information for our sample cases.

Of the five cases overpaid, three individuals’ conserved fund balances exceeded $2,000 for the 12-month audit period; while two only had excess balances for a portion of our audit period. For example, the balance for one individual ranged from $3,553 to $4,202. As a result, the individual was ineligible for SSI payments. AHP did not report the excess resources to SSA and therefore received $420 in SSI payments for which the individual was not eligible. AHP agreed with our findings and informed us that corrective actions had been or would be taken in all five cases.

We examined 28 RPRs obtained from AHP and found that most were accurate with regard to accounting for benefits. However, three of the reports incorrectly reported amounts as spent for the beneficiaries’ food and housing. Rep Payees are required to classify expenditures on the RPRs based on how the funds were spent. For the three cases, funds spent for personal items were classified as having been spent for food and housing. All three RPRs were for SSI recipients. Since SSI recipients receive only $35 per month in benefits, the entire amount is placed in an account for personal expenses. Since Medicaid paid all food and housing costs for all three cases, none of the SSI payments should have been reported on the RPRs as being spent on food and housing.

We requested 30 RPRs from SSA, but SSA could not locate all of the RPRs we requested. Therefore, we were unable to determine whether AHP actually reported to SSA how benefits were accounted for in all cases. (See the Other Matters section of this report for a further discussion on RPRs.)

Conclusions andRecommendations

Generally, the Rep Payee met its responsibilities. However, we found a few areas where AHP could improve its performance as a Rep Payee.

We recommend that SSA:

1. Ensure the Rep Payee reviews all SSI cases with conserved fund balances over $2,000, quantifies the overpayments, and returns the overpaid funds to SSA.
2. Re-emphasize procedures with the Rep Payee for notifying SSA when events occur that affect the eligibility of individuals in its care.
3. Clarify procedures with the Rep Payee for preparing the RPRs.

In response to our draft report, SSA agreed with our recommendations. Specifically, SSA has initiated a training process with the staff at AHP regarding timely reporting of SSI events, appropriate maintenance of SSI accounts and accurate completion of RPRs. (See Appendix B for SSA’s comments.)

In response to our draft report, the Rep Payee reported that it strengthened its procedures and will be working with SSA to improve its performance as a Rep Payee. (See Appendix C for the Rep Payee’s comments.)

Other Matters

Rep Payees are responsible for reporting how beneficiaries’ payments are used by completing RPRs. Each year, the Rep Payee is required to submit these RPRs to SSA. To determine whether the Rep Payee properly completed and submitted RPRs, we requested the most recently completed RPRs from SSA for 30 of the Rep Payee’s beneficiaries. SSA provided only 16 of the RPRs, while AHP provided 28 of the RPRs. Because SSA did not provide all the RPRs requested, we could not independently confirm the Rep Payee met its reporting responsibilities. Also, for the 14 RPRs SSA did not provide, we could not determine whether the Rep Payee properly submitted the reports. In addition, we were unable to determine whether the reason some RPRs were not provided was because they were unable to be located or because they were never submitted.

Appendices

Appendix A

Sampling Methodology and Results

To complete our objective, we obtained a list from A. Holly Patterson Extended Care Facility (AHP) of all individuals for whom AHP was serving as a representative payee at any time between May 1, 2000 and April 30, 2001. From this list of 313 beneficiaries, we selected a random sample of 50 cases for detailed review. The results of our review of the sample cases are shown in the table below.

Agency Comments

SOCIAL SECURITY

This is in response to the draft report on the financial audit conducted by your staff at the A. Holly Patterson Extended Care Center, in Uniondale, New York.

OIG Contacts and Staff Acknowledgments

In addition to the persons named above: