MEMORANDUM
Date: September 23, 2002
To: James C. Everett Regional Commissioner
From: Inspector General
Subject: Financial-Related Audit of Denver Department of Human Services – An Organizational Representative Payee for the Social Security Administration (A-05-02-12024)
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.
OFFICE OF
THE INSPECTOR GENERAL
SOCIAL SECURITY ADMINISTRATION
FINANCIAL-RELATED AUDIT OF
THE DENVER DEPARTMENT OF
HUMAN SERVICES
AN
ORGANIZATIONAL
REPRESENTATIVE PAYEE FOR THE
SOCIAL
SECURITY ADMINISTRATION
September 2002
A-05-02-12024
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.
Executive Summary
OBJECTIVE
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.
BACKGROUND
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.
RESULTS OF REVIEW
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:
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:
AGENCY COMMENTS
In response to our draft report, SSA agreed with our recommendations. See Appendix A for the full text of SSA’s comments.
REP PAYEE COMMENTS
DHHS did not provide comments.
Table of Contents
Page
INTRODUCTION 1
RESULTS OF REVIEW 5
Monthly Personal Needs Allowance 5
SSA Disbursements for Children 6
Estimation of Expenditures on Rep Payee Reports 6
Rep Payee System Inaccuracies 6
CONCLUSIONS AND RECOMMENDATIONS 7
OTHER MATTERS 8
Rep Payee Reports 8
Request to be Selected as a Rep Payee 8
Supplemental Security Record 8
APPENDICES
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
OBJECTIVE
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.
BACKGROUND
Some individuals 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.1 A Rep Payee may be an individual or an organization. SSA selects Rep Payees for beneficiaries when representative payments would serve the individual’s interest.
Representative Payee Responsibilities
Rep Payees are responsible for using benefits to serve the best interests of the beneficiary. Their duties include:
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.
Type of Rep Payee |
Number of Rep Payees |
Number of Individuals Served |
Individual Payees: Parents, Spouses, Adult Children, Relatives, and Others |
4,949,000 |
6,160,000 |
Organizational Payees: State Institutions, Local Governments, and Others |
44.150 |
759,000 |
Organizational Payees: Fee-for-Service |
850 |
81,000 |
Total |
4,994,000 |
7,000,000 |
DDHS
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.
|
Number of Cases |
Benefits Received |
Total SSA Funds |
|
SSI |
OASDI |
|||
SSI Only |
29 |
$150,939 |
$0 |
$150,939 |
OASDI Only |
15 |
0 |
80,248 |
80,248 |
Concurrent |
6 |
11,904 |
19,579 |
31,483 |
Total |
50 |
$162,843 |
$99,827 |
$262,670 |
SCOPE AND METHODOLOGY
Our audit covered the period May 1, 2000 through April 30, 2001. To accomplish our objectives, we:
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.
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:
Monthly Personal Needs Allowance
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.
SSA Disbursements for Children
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.
ESTIMATION OF EXPENDITURES ON REP PAYEE REPORTS
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
REP PAYEE SYSTEM INACCURACIES
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:
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.
REP PAYEE COMMENTS
DDHS did not provide comments to our draft report.
REP PAYEE REPORTS
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.
Request To Be Selected As A REP Payee
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.
SUPPLEMENTAL SECURITY RECORD
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
Appendix A
Agency Comments-----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,
Thank you for the opportunity to review the draft report, "Financial-Related Audit of the Denver Department of Human Services - an Organizational Representative Payee for the Social Security Administration." The recommendations are identical to those presented at the close-out interview conducted by OIG via teleconference. We agree with all recommendations. The Denver District Office will monitor the payee, Denver Department of Human Services, and focus on the few accounting errors discovered during the audit. Overall, the payee is doing a good job of monitoring benefits and reporting changes to the Social Security Administration.
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
Appendix B
OIG Contacts and Staff Acknowledgements
William
Fernandez, Director, Western Audit Division, (510) 970-1739
Teresa
S. Williams, Deputy Director, (312) 353-0331
Acknowledgments
In addition to those named above:
Lorrie
A. Clement, Senior Auditor
Sherman
Doss, Auditor
Kimberly
Beauchamp, 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) 965-1375. Refer to Common Identification Number A-05-02-12024.
Overview of the Office of the Inspector General
Office of Audit
The Office of Audit (OA) conducts comprehensive financial and performance audits of the Social Security Administration’s (SSA) programs and makes recommendations to ensure that program objectives are achieved effectively and efficiently. Financial audits, required by the Chief Financial Officers' Act of 1990, assess whether SSA’s financial statements fairly present the Agency’s financial position, results of operations and cash flow. Performance audits review the economy, efficiency and effectiveness of SSA’s programs. OA also conducts short-term management and program evaluations focused on issues of concern to SSA, Congress and the general public. Evaluations often focus on identifying and recommending ways to prevent and minimize program fraud and inefficiency, rather than detecting problems after they occur.
Office of Executive Operations
OEO supports the OIG by providing information resource management; systems security; and the coordination of budget, procurement, telecommunications, facilities and equipment, and human resources. In addition, this office is the focal point for the OIG’s strategic planning function and the development and implementation of performance measures required by the Government Performance and Results Act. OEO is also responsible for performing internal reviews to ensure that OIG offices nationwide hold themselves to the same rigorous standards that we expect from SSA, as well as conducting investigations of OIG employees, when necessary. Finally, OEO administers OIG’s public affairs, media, and interagency activities, coordinates responses to Congressional requests for information, and also communicates OIG’s planned and current activities and their results to the Commissioner and Congress.
Office of Investigations
The Office of Investigations (OI) conducts and coordinates investigative activity related to fraud, waste, abuse, and mismanagement of SSA programs and operations. This includes wrongdoing by applicants, beneficiaries, contractors, physicians, interpreters, representative payees, third parties, and by SSA employees in the performance of their duties. OI also conducts joint investigations with other Federal, State, and local law enforcement agencies.
Counsel to the Inspector General
The Counsel to the Inspector General provides legal advice and counsel to the Inspector General on various matters, including: 1) statutes, regulations, legislation, and policy directives governing the administration of SSA’s programs; 2) investigative procedures and techniques; and 3) legal implications and conclusions to be drawn from audit and investigative material produced by the OIG. The Counsel’s office also administers the civil monetary penalty program.