MEMORANDUM

Attached is a copy of our final report. Our objectives were to determine whether the Denver Department of Human Services Representative :(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 policies and procedures.

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.

AN ORGANIZATIONAL

REPRESENTATIVE PAYEE FOR THE

Executive Summary

Our objectives were to determine whether the Denver Department of Human Services (DDHS) (1) reviewed individual Rhad 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 beneficiaries under the Old-Age, Survivors and Disability Insurance (OASDI) and recipients under Supplemental Security Income (SSI) cannot manage or direct the management of their finances because of their youth 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 when representative payments would serve the individuals’ interests.

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

DDHS is an agency under the City and County of Denver. The human services program is County-administered and State-supervised. DDHS employs approximately 1,200 employees and serves as an organizational Rep Payee for SSA. During our audit period, DDHS served as Rep Payee for 474 SSA beneficiaries. DDHS also serves as the court-appointed legal custodian for children and guardian for adults who have no one else to care for them.

Although our audit disclosed accounting deficiencies, we concluded that DDHS generally had effective safeguards over the receipt and disbursement of SSA funds and ensured that Social Security benefits were used and accounted for in accordance with SSA’s polices and procedures. With 1 exception, our review of 50 randomly selected beneficiaries disclosed that DDHS adequately monitored and reported to SSA changes in beneficiaries’ circumstances that could have affected their eligibility. One case of unreported income (foster care under title IV-E) resulted in a $5,835 overpayment because DDHS failed to properly monitor the recipient’s income. Since this was an isolated error and SSA is requesting DDHS to return the funds, we have no recommendation.

Despite vulnerabilities involving DDHS’ accounting controls and procedures, we concluded DDHS was able to account for Social Security benefits received. The specific accounting deficiencies were that DDHS did not:

• maintain adequate documentation supporting the personal needs allowance of institutionalized beneficiaries;

• ensure that recorded disbursements for children were always identified as SSA funds. In addition, controls were not adequate to ensure that disbursements for children were reflected on their monthly financial records; and

• use actual expenditure information to report expenses for children on the RPR.

We could not determine whether DDHS properly reported to SSA how benefits were used because SSA was unable to provide 18 of the 29 RPRs we requested. SSA was also unable to provide 6 of the 10 applications to become Rep Payee we requested. We also found that SSA did not record in its Representative Payee System five beneficiaries in DDHS’ care. We provided SSA the names of the affected beneficiaries so it could take corrective action. We also reported to SSA 13 instances where the Rep Payee’s name was listed inaccurately on the Supplemental Security Record.

CONCLUSIONS AND RECOMMENDATIONS

Generally, we found that DDHS met its responsibilities as Rep Payee for individuals receiving OASDI and SSI payments. Nevertheless, DDHS needs to strengthen its controls and procedures to improve the completeness and accuracy of its accounting records. We recommend that SSA ensure that DDHS:

In response to our draft report, SSA agreed with our recommendations. See Appendix A for the full text of SSA’s comments.

DHHS did not provide comments.

Table of Contents

Page

APPENDIX A – Agency Comments

APPENDIX B - OIG Contacts and Staff Acknowledgments

Acronyms

DDHS Denver Department of Human Services
OIG Office of the Inspector General
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 Denver Department of Human Services (DDHS) R(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.

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

• using benefits to meet the beneficiary’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;

• providing SSA an annual Representative Payee Report (RPR) accounting for how benefits were spent and invested.

About 7 million individuals have Rep Payees—approximately 4.4 million are Old-Age, Survivors and Disability Insurance (OASDI) beneficiaries, 2 million are Supplemental Security Income (SSI) recipients, and 600,000 are entitled to both OASDI and SSI. The following chart below reflects the types of Rep Payees and the number of individuals they serve.

DDHS is an agency under the City and County of Denver. The human services program is County-administered and State-supervised. DDHS employs approximately 1,200 employees and serves as an Organizational Rep Payee for SSA. During our audit period, DDHS served as Rep Payee for 474 SSA beneficiaries. DDHS also serves as the court-appointed legal custodian for children and guardian for adults who have no one else to care for them. As custodian and guardian, DDHS is responsible for the individuals’ living conditions and medical treatment. DDHS conducts periodic site visits to the institutions and private residences that house the individuals in its care, including SSA beneficiaries. During the site visits, DDHS ensures that beneficiaries are residing in acceptable living conditions and that their needs are being met.

As shown in the table below, SSA paid $262,670 to DDHS on behalf of the 50 beneficiaries we reviewed from May 1, 2000 through April 30, 2001.

Our audit covered the period May 1, 2000 through April 30, 2001. To accomplish our objectives, we:

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

• Contacted the Denver, Colorado, SSA Regional Office and the Denver, Colorado (Downtown), district office staff to obtain background information about the Rep Payee’s performance.

• Obtained from SSA’s Representative Payee System (RPS) a list of beneficiaries who were in the Rep Payee’s care during our audit period (May 1, 2000 through April 30, 2001).

• Obtained from the Rep Payee a list of beneficiaries who were in its care some time during our audit period.

• Compared and reconciled the RPS and the Rep Payee’s listings to identify a population of 474 SSA beneficiaries who were in the Rep Payee’s care during our audit period.

• 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 the 50 randomly selected beneficiaries included in our review.

• 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 for any overpaid benefits.

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

• Calculated the total SSA benefits received by DDHS for the SSA beneficiaries during our audit period.

• Interviewed a sample of the Rep Payee’s beneficiaries, personal guardians, or caregivers to determine whether their basic needs were being met.

• Reviewed 11 RPRs to determine whether the Rep Payee properly reported to SSA how benefits were used.

• Reviewed four SSA-11 (Request to Be Selected As Payee) forms submitted to SSA by DDHS to ensure proper signature by the Rep Payee.

• Obtained from DDHS a list of SSA beneficiaries who resided in institutions some time during the period May 2000 through April 2001. Calculated the total SSA benefits paid to those individuals during our audit period.

We performed our audit at DDHS in Denver, Colorado, and Chicago, Illinois, between July 2001 and May  2002. We conducted our audit in accordance with generally accepted government auditing standards.

Results of Review

Although we found accounting deficiencies, DDHS generally met its responsibilities as Rep Payee for individuals receiving OASDI and SSI payments. Although DDHS did not record disbursements of Social Security funds at the individual child beneficiary level, we were able to account for the disbursements. In addition, DDHS provided adequate services to these individuals and properly disbursed Social Security benefits. With 1 exception, our review of 50 randomly selected beneficiaries disclosed that DDHS adequately monitored and reported to SSA changes in beneficiaries’ circumstances that could have affected their eligibility. One case of unreported income (foster care under title IV-E) led to an overpayment. Specifically, we found that DDHS did not identify an SSI recipient who was collecting both title IV-E and SSI payments. Concurrent benefits were paid from April 2000 through April 2001, resulting in a $5,835 overpayment. This occurred because DDHS failed to properly monitor the recipient’s income. Since this was an isolated error, and SSA is requesting DDHS to return the funds, we have no recommendation.

We determined that DDHS could account for the use of Social Security benefits. However, we found that DDHS did not:

• maintain adequate documentation supporting the personal needs allowance of institutionalized beneficiaries;

• ensure that recorded disbursements for children were always identified as SSA funds. In addition, controls were not adequate to ensure that disbursements for children were reflected on their monthly fiscal histories; and

• use actual expenditure information to report expenses for children on the RPR.

A Rep Payee’s duties include ensuring that SSA beneficiaries’ needs are met. SSA’s policy states that the Rep Payee of all institutionalized beneficiaries should provide at least $30 each month for the beneficiaries’ personal needs. Furthermore, the Rep Payee should keep written records of all payments received from SSA and how those payments are spent and/or saved.

The 474 beneficiaries in DDHS’ care included 20 individuals who had been institutionalized (for example, nursing home). The 20 beneficiaries received a total of $4,380 in Social Security payments for the period May 2000 through April 2001. DDHS provided the institutions a $30 monthly personal needs allowance. DDHS allowed institutions to determine how to spend the personal needs allowance. However, DDHS did not require the institutions to provide periodic reports detailing expenditures to DDHS. DDHS should have a system in place to account for beneficiaries’ $30 personal needs allowance. At a minimum, DDHS should require the institutions to maintain a ledger with the beneficiary’s signature for cash disbursements and receipts for all noncash distributions.

In 24 of the 30 child cases included in our review of 50 beneficiaries, DDHS either did not record or improperly classified the disbursement of Social Security benefits. Although we were unable to verify that DDHS accounted for the use of benefits paid to each individual, we were able to account for the use of benefits received. We did this by accounting for total income received and costs paid on behalf of each individual. We therefore were able to conclude that DDHS properly used Social Security benefits paid for these individuals. Nonetheless, DDHS should implement controls to ensure that the disbursement of benefits is properly recorded and classified in the financial records for each individual.

We reviewed 11 original RPRs obtained from SSA and RPRs found in DDHS’ case files. We found that DDHS completed RPRs for adult beneficiaries based on actual expenditures. However, fixed percentages were used to allocate expenditures for child beneficiaries into cost categories. Thus, DDHS estimated the total spent on food and shelter and other expenses. In our opinion, SSA cannot adequately assess DDHS’ effectiveness as a Rep Payee based on expenditure estimates. DDHS should be required to use actual expenditure information when reporting how much was spent for food, housing and other things such as clothing, education, medical and dental expenses, and recreation or personal

SSA did not accurately record all beneficiaries in the RPS who were under DDHS’ care. We found two beneficiaries in DDHS’ care who were recorded in RPS under another Rep Payee. Another three beneficiaries were receiving Social Security payments but were not recorded on RPS. We provided the names to SSA so the RPS could be amended to show the individuals are under DDHS’ care. Consequently, we are not recommending any further action.

Conclusions and Recommendations

We believe DDHS met its responsibilities as Rep Payee for individuals receiving OASDI and SSI payments. Nevertheless, DDHS needs to strengthen its controls and procedures to improve the completeness and accuracy of its accounting records. We recommend that SSA ensure that DDHS:

1. Document how it spent and/or saved individuals’ monthly personal needs allowances.
   
   
2. Record and identify funds paid from SSI and OASDI benefits on behalf of child beneficiaries.
   
   
3. Complete RPRs for child beneficiaries using actual expenditure information.

AGENCY COMMENTS

SSA agreed with our recommendations and stated that the Denver District Office will monitor DDHS and focus on the accounting errors disclosed by the audit. See Appendix A for the full text of SSA’s comments to our draft report.

DDHS did not provide comments to our draft report.

Other Matters

To determine whether DDHS properly reported to SSA how benefits were used, we requested from SSA the most recently completed RPRs for 29 of DDHS’ beneficiaries. While DDHS staff members stated that they submitted RPRs to SSA for all their beneficiaries, SSA was unable to provide 18 of the 29 RPRs requested. Because SSA did not provide all the RPRs requested, we could not independently confirm that DDHS met its reporting responsibilities. For the 18 RPRs SSA did not provided by SSA,, we do not know whether the DDHS actually submitted RPRs were actually submitted to SSA by the Rep Payee, or ifwhether the DDHS provided them to SSA, and SSA could not locate them.

Prior audits of institutional rep payees have consistently disclosed this deficiency. The Office of the Inspector General roll-up management advisory report for 6 months of rep payee activities done for the 1-year period ended August 31, 2000, disclosed that SSA was able to provide only 67 of 167 RPRs requested. The report recommended that SSA pilot the use of stored value cards as an alternative to the RPRs.

To ensure proper signatures were obtained from DDHS, we requested from SSA the applications to be selected Rep Payee for 10 beneficiaries. SSA was unable to provide 6 of the 10 applications we requested. As a result, we could not determine for all applications requested, whether the signature requesting Rep Payee status and other information was provided.

We found the name of DDHS was inaccurately entered on the Supplemental Security Record records of 13 beneficiaries who were in its care. We provided SSA the names of the affected beneficiaries so it could take corrective action.

Appendices

-----Original Message-----

From: ||DEN ORC

Sent: Wednesday, September 18, 2002 11:33 AM

To: Schaeffer, Steve

Cc: Clement, Lorrie; ||DEN ARC MOS; ||DEN ORC

Subject: OIG DRAFT REPORT FOR AUDIT NO. 22001051 ON REP PAYEE IN DENVER REGION--RESPONSE

Importance: High

-----Original Message-----
From: ||DEN ORC
Sent: Wednesday, September 11, 2002 10:36 AM
To: ||DCO OPSOS; ^DCO Controls
Cc: Holman, Jackie; Everett, James; Townsend, Mary Ann; ||DEN ORC EXO; ||DEN ARC MOS; ||DEN ORC
Subject: OIG DRAFT REPORT FOR AUDIT NO. 22001051 ON REP PAYEE IN DENVER REGION--RESPONSE
Importance: High

Jackie,

Please let me know if you need any additional information. Your staff may contact Phyllis Henderson of the RSI Team at (303) 844-4268.

James

OIG Contacts and Staff Acknowledgements

In addition to those named above:

Overview of the Office of the Inspector General