oversight

Social Security Administration's Procedures for Allocating Administrative Costs to the Supplemental Security Income Program

Published by the Government Accountability Office on 1977-11-17.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                       DCCU    ENT    RESUME

04236    -     B3254493]

Social Security Admini;tration's   rocedures  or Allocating
Administrative Costs to the Supplemental Security Income
Proqram. HRD--76 12; B-16{1031(4). ovemker 17, 1977. 13 rF.                                  + 5
appendices (7 pp.).

Report       to Rep.   Charles A.         aniK;      by Elmer     B.   Staat.,     Comptroller
General.

Issue Area: Income Security Programs: Erogram             cnitcring      and
    Admini: tration  (1303).
Contact: Human Resources Div.
Budget Function: Income Security:     Putlic    ssistance           and Other
    Income Supplements (604) ; Income 5ectri;y:           General
    Retirement and Disability     Insurance   601).
Orqanization Concerned: Social Security      AdziniEtratior.
Congressional Relevance: Rep. Charles A. V&nik.
Authority: Social Scurity     Act, as amenied. Sccial             Sezurity
    Amendments of   956. Social Se"urity     Ardments             or 19t6.

           The Social Securit Administration    SSA) has   igtlA
integrated   units with cmmcn management and support duties      which
administer programs such as the   upplemental Security Income for
the Aged, Blind, and Disabled. Since the adinistr-tive       costs of
the various programs are paid from different     sources, SSa
aistriDutes these costs throug                    a cost alle..dicn system.                SSA
method of allocating                administrative           costs      to the     upplemental
Security Income program is                      reasonable, but could be improved.
Findings/Conclusions: In fiscal                        year 1976 SSL's administrative
costs were $2.3 billion.                    The Supplemental Security InccEe
proqram was allocated                 $484 million of thiE, about 21*. Social
Security has over 1,300 field                      offices      nationwide tc carry cut
its     responsib'lities.             In      ew York State,          some field     offi ces
spent as mu               's 67% of their          time on the Supplemental Security
Income poq                    ile   other offices          sent       very   ittle     tiae   in the
proqram. Tht                  -    '~ r la:ge        units      ithir     SSA whicb spent
,little      or no                          Supolemental Security Inccoe                   rcgam.
SSA allocates             -                 costs    on the basis         of benefitE paid.
Recommendations:              .            retary of Health, Education, and Welfare
should direct             the            .ioner      of Social Scurity             tc review and
revise       as approF                   .e methcd for allocating               shared costs
between the trust               i_    . and the Supplemental Security Inccme
program to recognize the relative cost of dcing a particular
unit     of worA ratane  than allocating     costs  on the basis    of
benefits     paid. The Commissioner should also rview          any changes
in the various       ork measurement systeas to insure that          they
continue to provide reliable          data needed to allocate    costs.
 (Author SC)
 Sr6   REPORT OF THE
       COMPTROLLER GENERAL
utS'   OF THE UNITED STATES



       Social Security Administration's
       Procedures For Allocating
       Administrative Costs To
       The Supplemental Security Income
       Program
       The Social Security Administration has highly
       integrated units, with common management
       and support duties, which administer pro-
       grams such as Supplemental Security Income
       for the Aged, Blind, and Disabled. Since the
       administrative costs of the various programs
       are paid from different sources, Social Securi-
       ty distributes these costs through a cost allo-
       cation system. In fiscal year 1976 Social Secu-
       rity's administrative costs were $2.3 billion.
       The Supplemental Security Income Program
       was allocated $484 million.
       Social Security's method of allocating amin-
       istrative costs to the Supplemental Security
       Income program is reasonable but could he
       improved. Social Security Administration
       should review, end revise as appropriate, its
       method of allocating the $87 million of
       costs shared among different programs and
       any changes made in the various work
       measurement systems to make sure they
       continue to provide reliable data needed to
       allocate costs.
       HRD-7812                                          NOVEMBER 17, 1977
                  COMrROIER CGNAERAL OF THE UNIXL9   FAT
                           WASHINGTON. D.C 0D4




 B-164031(4)

The Honorable ChL-les A. Vanik
House of Representatives

Dear Mr. Vanik:

      While Chairnan of the Subcommittee on Oversight, you
requested that we determine if the Social Security Adminis-
 tration's procedures are adequate for properly allocating
administrative costs to the Supplemental Security Income
program. Specifically, you stated that you believed "that
several hundred million dollars may have been used and gone
unreimbursed from the trust funds to administer the Supple-
mental Security Income" program. This statement was based
in part on the results of a poll taken by your staff showing
that most workers t the Miami and Cleveland inner city Social
Security offices felt that they spent more time on Supple-
mental Security Income cases than any other type of case.
You were concerned that only 20.6 percent of Social Security's
total administrative costs for fiscal year 1976 ere allocated
to the Supplemental Security ncome program when the results
of the poll indicated that the figure should have been higher.
The cost of administering the Supplemental Security Income
program is required by law to be paid from general revenues
and not from the trust funds.

     You also requested that we determine the adequacy of
Social Security's procedures for allocating administrative
costs to other nontrust fund programs, such as the Black Lung
benefit program.

     On June 23, 1976, your staff requested that we obtain
additional information on the nature and allocation of
costs in certain bureaus. This information is presented in
appendixes I through IV.

BACKGROUND INFORMATION AND SCOPE OF REVIEW

     The Federal Old-Age and Survivors Insurance trust fund
was established on January 1, 1940, to hold the amounts ac-
cumulated under this program.   ne Social Security Amendments
of 1956, which became law August 1, 1956, provided for the
creation of the Federal DisaLAlity Insurance trust fund to
B-164031(4)


hold the amounts accumulated under this program. There are
two other Social Secur.ty trust funds--the Federal Hospital
Insurance trust fund and the Federal Supplementary Medical
Insurance trust fund--to hold amounts accumulated for health
insurance benefits pursuant to the Medicare provisions of the
Social Security Act.
     The major sources of receipts for the first three funds
are contributions paid b workers and their employers,  and
by individuals with self-employment income, for employment
covered by Social Secrtirty. The Supplementary Medical In-
surance trust fund is financed throLgh (1) premiums paid by
each person who enrolls and (2) contributions from Federal
general revenues which are authorized to be at least equal
to the amount of premiums paid by beneficiaries. Trust
money not needed for current benefits and administrative fund
penses is invested in interest-bearing Federal securities.ex-

     Social Security also administers nontrust fund progiams
for which the dministrative costs are to be paid or reim-
bursed from general revenues. Those programs are Supple-
mental Security Income for the Aged, Blind, and Disabled;
Black Lung benefits program; 1/ Hospital Insurance for the
Uninsured; 2/ and Special Benefits for the Aged 3/.

1/Social Security and the Department of Labor jointly adminis-
  ter the Black Lung benefits program. Social Security is
  responsible for processing and paying benefits for miners'
  claims filed before July 1, 1973, initial survivors claims
  filed before January 1, 1974, and certain other survivor
  claims. The Department of Labor is responsible for other
  claims.
2/The Social Security Act, as amended, extends Hospital In-
  surance coverage to ersons attaining age 65 before 1968.
  Quarters of coverage on a sliding scale are required for
  entitlement for men attaining age 65 after 1967 and before
  1975 (before 1974 for women).
3/The Social Security Amendments of 1966 afforded some protec-
  tion for certain persons who retired before the enactment
  of Social Security legislation or before their occupations
  were covered by Social Security. To be eligible, an in-
  dividual must have attained age 72 before 1968, or meet
  certain minimal insured status requirements if he attained
  age 72 in 1968 or later.


                             2
B-164031f4)



     The following schedule shows the relative size of the
programs by the number of beneficiaries served and/or the
amount of the benefits paid for fiscal yar 1976.

                                  Number of          Amount of
         Program                beneficiaries      benefits paid

                                          (000 omitted)
Old-Age and Survivors
  Insurance                         27,500          $62,582,313
Disability Insurance                 4,400            9,382,185
Hospital Insurance
  (Insured Beneficiaries)            5,700           12,257,554
Supplementary Medical
  Insurance                         14,000            4,683,028
Supplementary Security
  Income                             4,308            5,834,769
Black Lung                             500              977,164
Hospital Insurance for
  Uninsured                                               610,430
Special Benefits for the
  Aged                                -                   268,317
     A major reorganization of the Department of Health,
FJucation, and Welfare, effective March 8, 1977, gave Social
Security responsibility for administering the Aid to Families
With Dependent Children and other maintenance assistant pro-
grams and transferred administrative responsibility for the
Medicare programs from the agency to the newly created Health
Care Financing Aministratiov.

     The primary responsibility of the Social Security A.dmin-
istration is to make correct and timely benefit payments to
individuals entitled to various b.enefits under the programs
it administers.    Although the administrative costs of the
various programs are paid from different sources, Social
Security administers them by highly integrated organizationial
units with cmmon management and support functions. As of
March 1977, the agency employed about 80,500 permanent, full-
time personnel in its Baltimore, Maryland, headquarterst
6 program service centers and 10 regional offices located in
various parts of the country; and over 1,300 district and
branch offices nationwide to carry out its responsibilities.

     The following illustrates the highly integrated relation-
ships for some of the organizational units in Social Security.


                               3
B-164031(4)


     An individual applying for benefits under any of the
programs discussed above, except for the Ad to Families with
Dependent Children program, visits a Social Security district
office or a branch office and meets with a claims representa-
tive who takes the application. If the application is based
on disability (including blindness), th4 claims representa-
tive obtains a medical history and disability report. The
district office is responsible for determining whether the
applicant meets all eligibility requirements except for the
disability determination.
     De.ermirntions of disability for Disability Insurance
End Supplemental Security Income benefits are made in the
State where the applicant resides by an agency under contract
with Social Security called the State Disability Determina-
tion Services. The district office sends the medical istory
and disability report to the State Disability Determination
Services to aid it in making the determination on tha basis
of Social Security's standards and guides. The State Dis-
ability Determination Services is reimbursed by Social Secur-
ity Administration for its work in making the determination.
      Individuals whose claims for benefits are denied may
appeal. Social Security's Bureau of Hearings and Appeals
employs administrative law judges to hold hearings and decide
appealed cases. The judges may hear cases relating to appli-
cants' claims for Old-Age and Survivors, Disability, or
Health Insurance benefits, or for benefits under the Supple-
mental Security Income or Black Lung benefit programs.
     Program operations generate a huge recordkeeping work-
load, centralized at agency headquarters. The agency proc-
esses much of this workload on electronic data processing
systems, most of which are located at agency headquarters
with the remainder in the program service centers. The
operations 1/ performed by these systems include establish-
ing new Social Security numbers, computing program benefits,
maintaining program "'neficiary rolls, maintaining and up-
dating individual lifetime earnings records for over

I/Does not include operations supporting Aid to Families
  with Dependent Children, which may eventually be performed
  on these systems.




                             4
B-164031(4)


175 million living workers, and providing data processing
support for the entire Health Insurance process. 1/
     In conjunction with these systems, the agency maintains
a nationwide telecommunications network to permit rapid data
exchange between district offices, regional offices, program
service centt:rs, and agency headquarters. This network
speeds the pcessing of claims as well as the updating of
benefit records.
     During the period covered by our review, Social Secur-
ity's Bureau of Health Insurance administered the Medicare
program. To help administer the Medicare benefits, he
Department of Health, Education, and Welfare has cor.eracted
with public and private rganizations which make payments
under Part A 2/ and Part B 3/ of Medicare. Social Security
reimburses these organizations for administrative costs n-
curred in performing the various Medicare functions.
     We reviewed Social Security's method for allocating
administrative costs to the Supplemental Security Income
program, and discussed the process with officials in Social
Security eadquarters. We inspected selected cost alloca-
tion data from iscal years 1974 through 1976. We tetd
the inplementation of the procedures in the three Social
Security units which comprised 82 percent of the adminis-
trative costs allocated to the Supplemental Security Income
program for fiscal year 1976. These units are the District
Office Operations (field offices), State Disability Determi-
nation Services, ad Office of Management and Administration.

1/As of October 1977, Social Security was expecting to con-
  tinue providing support functions, inclhding data process-
  ing services, for the Health Insurance program.
2/Part A--gospital Insurance Benefits for the Aged and
  Disabled--covers inpatient hospital services and post-
  hospital care in a skilled nursing facility or in a
  patient's home.
3/Part B--Supplementary Medical Insurance Benefits for the
  Aged and Disabled--generally covers 80 percent of the
  reasonable costs of physician services, outpatient hos-
  pital services, home health services, and various other
  medical and health services, subject to an annual $0
  deductible. Enrollment in Part B is voluntary.


                              5
  B-164031(4)


        We also reviewed the two largest
  systems used by Social Security           work measurement
                                    as the basis for allocating
  cost. These systems are used to
                                     measure the work i the
  field offices and the State Disability
  ices. We visited two district              Determination Serv-
                                  offices
  evaluated the work measurement system and observed and
  with headquarters officials responsiblein operation, We met
  systems and officials in three field        for both of these
                                          offices.
       Since the same procedures used for
 Security Income program are used             the Supplemental
                                     for the Black Lung benefit
 program, the results of our work
 Incomo cost allocation process alsoon the Supplemental Security
 benefit program. We did not look        apply to the Black Lung
 grams because they were minor or     at  other nontrust fund pro-
 Security during the time of our    not   administered by Social
                                   review.
 WORK MEASUREMENT SYSTEMS
      The Secretary of ealth, Education,
                                           and Welfare is re-
quired by the Social Security Act
year the portion of administrative to  determine each fiscal
                                     costs
year which should have been bne            incurred during the
                                    by the general revenue fund
in the Treasury and the portion
                                 of
have been borne by the trust funds. such costs which should
      Therefore, each operating unit
                                      in Social Security has
adopted a work measurement system
staff-years worked on each program.to identify the number of
from the work measurement system       The information derived
allocating costs.                 is  used as a basis for

     In fiscal year 1976 the following
curred 75 percent of the administrative operating units in-
the Supplemental Security Income         costs allocated to
                                 program.
     -- District Office Operations which
        and branch offices ($268 million, includes district
                                           55 percent) and
     ---State Disability Deter;       nation Services ($95 million,
        20 percent).
We reviewed the work measurok,:it
to determine if the basis fcr the systems of these two units
                                   Supplemental Security In-
come charges was reasonable.




                                  6
B-164031(4)



Field Oerations System

     The field office work measurement system is composed of
two subsystems--work reporting and work sampling.

     The field office work reporting system shows the amount
of work received and processed during the week and the total
staff-hours worked. The work received and processed is re-
ported in 53 categories which encompass all the types of work
a field office handles. For example, one category reports
all the Supplemental !;ecurity Income applications received
from blind or disabled persons. Another category reports
all Supplemental Security Income applications received from
aged persons.

     The field office work sampling system, using statistical
sampling methods, determines the time required to perform the
various categories of work (workloads). The over 1,300 offices
were divided into 12 groups with any one group approximately
equal to any other. During a given month, the offices in a
selected group record the activities of each employee at
four random times each day as well as during overtime. Each
month a different group of offices was work sampled, so that
at the end of a year all offices were covered. 1/

     By using the data from the work reporting system and the
work sampling system, Social Security statistically deter-
mines the number of staff-years worked on a given workload.

     During our :eview, we visited two field offices and
observed the recording of work and activities. We found that
the offices were recording work and activities according to
the procedures with a few minor exceptions.

     In our opinion the field office work measurement system
conforms to generally accepted principles of sample design
and develops representative and reliable estimates of staff-
years required to do work under the various workloads. These
estimates are used to allocate costs as discussed on pp. 9,
10, and 11.


1/A new sampling system was started July 1, 1976, in which
  all employees in each office are sampled once each week.
  The Social Security Administration stated that this system
  is less costly to operate and will provide more accurate
  results.


                              7
B-164031(4)


     The results of a poll taken by your staff at Social
Security field offices in Cleveland, Ohio; Washington, D.C.;
and Miami, Florida, indicated that most workers at the Miami
and Cleveland inner city offices felt hat they spent more
time on Supplemental Security Income cases than any other
type of case.
     We also found that some field offices were spending much
of their time on the Supplemental Security Income program,
However, other field offices were spending very little. For
example, in New York State the amount of time spent or. Supple-
mental Security Income work in the 82 offices averaged 38 per-
cent and ranged from 6.5 percent to 67.1 percent as ollows:

                                                Percent
    Jamaica (Queens Tele Service Center)          6.5
    Cheektowaga (Buffalo) branch office          14.4
    Kings Plaza (Fla,bush) branch office         15.3
    West Farms (Bronx) branch office             64.3
    South Bronx district office                  64.5
    TompLins Park (Bronx) branch office          67.1
     Therefore, although employees at the Bronx (inner city)
district offices would correctly feel that they spend much
of their time working on the Supplemental security Income
program, when all the other N1ew York State district and
branch offices are combined, the average time spent on the
program is much less.
     Similarly, when all Social Security field offices in
the Nation are combined, the national average of time spent
on the Supplemental Security Income rogram is 38 percent.
     In addition, when organizational units which do little
or no Supplemental Security Income work are dded (as dis-
cussed on pp. 9, 10, and 11), the percentage of Supplemental
Security Income adinistrative costs to total administrative
costs is about 21 percent.
State Disability Determination Services
     Initially, the State Disability Determination Serviues'
work measurement system only counted the types of work. The
time spent to do each type of work was estimated by Social
Security through interviews with he States' aency officials
and brief studie.

                              8
B-164031(4)



      In December 1975, Social Security implemented a new work
measurement system for the State Disability Determination
Services composed of two subsystems--work reporting and work
sampling. This is similar to the system used at the field
offices. The work reporting system consists of 19 categories.
The number cf categories is less than in the field offices'
system because the State Disability Determination Services
do not have the variety of work that the field offices haven
The work sampling system, using statistical sampling methods,
determines the average time to perform the work. Similar to
the field office system, employees in States which are in
the sampling, record their activities at five andom times
a day as well as during overtime. Using the wurk sampling
system with the work reporting system, Social Security should
be able to obtain the data needed to make reliable estimates
for allocating costs.

     Since we looked at the reasonableness of the system
during fiscal year 1976, we compared the estimate of time
spent to determine a disability case for the Supplemental
Security Income and Disability Insurance programs before
and after the new system started. We found that the ratio
of the Supplemental Security Income to Disability Insurance
estimates of processing time were about the same. Therefore,
we believe that the estimates produced by the old system were
reasonable for cost allocation purposes.

DESCRIPTION OF COT ALLOCATION PROCESS

     In general, the cost allocation process begins with data
from each operating unit, such as the District Office Opera-
tions.  Information from their work measurement systems,
together with costs of salaries and expenses, and mscella-
neous data from other sources, such a= training records, is
used to allocate costs of each unit separately. This allo-
cation is done in several steps:

     1. The measurement systems identify the staff-years
        directly related to processing each of the unit's
        principal workloads (e.g., processing Supplemental
        Security Income claims or changing beneficiaries'
        addresses) and staff-years for indirect production
        functions such as supervision and training.

    2. Stati-years for workloads related to a single pro-
       gram (e.g., processing Supplemental Security Income
       claims) are assigned to that program.


                             9
B-164031(4)


     3. In the measurement systems some workload categories
        combine the staff-years for similar actions for two
        or more programs. There staff-years are divided
        among the programs in proportion to the number of
        actions performed for each program--such as changes
        of address for the Retirement and Survivors Insurance
        program versus changes for the Disability Insurance
        program.
     4. Some workload categories include work elements which
        are performed for more than one program, such as
        processing a disability decision for a person apply-
        ing for benefits under both the trust fund programs
        (Disability nsurance and Medicare) and Supplemental
        Security Income. Related staff-years are divided
        among the several programs affected in proportion o
        the average benefit payable under each program to
        such individuals (shared-costs).
     5. Indirect production staff-years (e.g., supervision,
        training) are distributed among the programs in pro-
        portion to the unit's direct staff-years assigned to
        each program (as determined in steps 2, 3, and 4)
        unless special studies (e.g., studies of training
        time by program) indicate another allocation.
     6. The staff-years for each workload and indirect func-
        tion are converted to dollars by multiplying them by
        the average salary cost of the workload as determined
        in the measurement system. Dollars are allocated to
        programs along with staff-years. Salary costs include
        compensation and benefits.
     7. Other expenses such as rent, supplies, utilities,
        etc., are allocated among programs in proportion to
        staff-years, or by other appropriate formulas, such
        as use of computer time to distribute computer costs.
After the program costs in all the operating units are deter-
mine' the costs by program are summarized.
     Cost allocation is done in a similar manner in the sup-
port offices, that i, staff-years and costs for functions
specializing in one or anther program are assigned to that
program (e.g., within the Office of Management and Adminis-
tration the quality assurance staff orked only on the Supple-
mental Security Income program, therefore, all of the quality


                             10
 B-164031(4)


 assurance costs were allocated to the Supplemental Security
 Income program); other support officer,' staff-years and costs
 are allocated tc prograas in proportion to  the allocaton of
 staff-years for the operating units served.
 Shared-cost allocation procedures
      As pointed out in step 4 above, a work element will
sometimes benefit more than one program. The costs associated
with that work element are shared among the programs bene-
fited. FPu example, shared costs are incurred when a person
applies for both the Supplemental Security Income program
                                                           and
the Disability Insurance program. The shared costs in this
situation refer principally to the costs incurred for develop-
ing proof of age and determining disability. In fiscal year
1976, Social Security accumulated about $87 million of shared
direct and related indirect costs which benefited the Supple-
mental Security Income program and trust fund programs. This
is less than 4 percent of the total administrative costs of
the Social Security Administration.
     Social Security distributes these shared costs based on
the ratio of average benefits paid by each program to total
benefits paid to recipients of the programs which share
work. For example, recipients of both the Supplemental the
                                                        Secur-
ity Income and the Disability Insurance program receive on
the average 28 percent of their money from the Supplemental
Security Income program and 72 percent from the Disability
Insurance, Retirement and Survivors Insurance, Health Insur-
ance, and Supplemental Medical Insurance programs. Therefore,
Social Security allocates 28 percent of the shared costs to
the Supplemental Security Income program and the remaining
costs (72 percent) are allocated to the trust fund programs.
     We believe this allocation method is not reasonable
because the costs incurred are not necessarily proportionate
to benefits paid.
PERCENTAGE OF SOCIAL SECURITY'S
ADMINISTRATIVE COSTS ALLOCATED TO
THE SUPPLEMENTAL SECURITY INCOME PROGRAM

     In regard to the concern that only 20.6 percent of the
administrative costs were allocated to the Supplemental
Security ncome program, it should be noted that the Supple-
mental Security Income percentage appears low because some     <
administrative costs were incurred in units which did little


                             11
B-164031(4)


or no Supplemental Security Income work. For example, in
fiscal year 1976, two Bureaus--Bureau of Bealth Insurance
and Bureau of Retirement and Survivors Insurance--accounted
for 33.8 percent of the total administrative costs but only
0.3 percent of the Supplemental Security Income administra-
tive costs because these units did little or no Supplemental
Security Income work. When all Social Security units are
combined, the percentage of Supplemental Security Income
administrative costs to total administrative costs is about
21 percent.
     Appendix IV provides more information on the source of
the Supplemental Security Income administrative costs.
CONCLUSION-

     Social Security has over 1,300 field offices nationwide
to carry out its responsibilities. In New York State some
field offices spent as much as 67 percent of their time on
the Supplemental Security Income program (especially offices
in urban areas), while other offices spent very little time
on this program. There are other large units within Social
Security which spent little or no time on the Supplemental
Securicy Income program. When all the organizational units
are combined, the percentage of Supplemental Security Income
administrative costs to total administrative costs in fiscal
year 1976 is about 21 percent.
     In our opinion, Social Security's method of allocating
administrative costs to the Supplemental Secuirity Income
program is reasonable but could be improved.
     Social Security allocates its shared-costs on the basis
of benefits paid. We believe that a more equitable procedure
for distributing shared-costs would be to give consideration
to the relative cost of doing a particular unit of work if it
were not being processed concurrently. For example, if two
programs' applications were involved and it costs $12 to do
the work (wich could be shared by both programs) for pro-
gram A individually, $10 to do the work for program B individ-
ually, and   7.60 to do the work (which also could be shared
by both pruorams) concurrently; A should be charged $9.60
(i.e., 12/22 of $17.63) and B should be charged $8.00.




                             12
B-164031(4)


RECOMMENDATION
     We recommend that the Secretary of Health, Education,
and Welfare direct the Commissioner of Social Security to
review and revise as appropriate the method for allocating
shared costs between the trust funds and the Supplemental
Security Income program to recognize the relative cost of
doing a particular unit of work rather than allocating costs
on the basis of benefits paid. The Commissioner should also
review any changes in the various work measurement systems
to insure that they continue to provide reliable data needed
to allocate costs.
     We provided the Department of Health, Education, and
Welfare and the Social Security Administration with a copy
of this report for their review and comment. They generally
agreed with our recommendations. (See app. V.)
     As arranged with your office, we are sending copies of
this report to the Chairman, Subcommittee on Oversight, and
the Secretary of Health, Education, and Welfare. Copies
will also be made available to other interested part s.

                                     y your




                             Comptroller General
                             of the United States




                            13
APPENDIX I                                                            APPENDIX I



              ALLOCATION OF PROGRAMERS' COST IN THE

                     BUREAU OF DATA PROCESSING

     In fiscal year l1S76 the Bureau of Data Prr-...ssing
allocated $27.6 million of the $214.6 million administrative
costs to the Supplemental Security Income program. About
9.5 percent of the staff-years in the Bureau of Data Process-
ing were engaged in the process of programing computers in
fiscal year 1976.
     The programers in the Bureau are organized in sections.
Each section has responsibility for writing its own programs.
The staff costs are accumulated in the work measurement system
by codes. Each code has a predetermined percentage of the
costs to be allocated to the Social Security programs. For
example, all costs accumulated under a Supplemen' tl Security
Income code are charged to the Supplemental Secu ty Income
program. If a code benefits more than one program, the costs
are charged based on the percentage of workload volume of each
program.
     The following table shows the relative allocation of the
programers' costs in fiscal year 1976.
                                                               Percent
                       Program                                 of costs

      Supplemental Security Income                                 31.1
      Reimbursement                                                 1.3
      Supplemental Medical Insurance                               10.2
      Health Insurance                                              6.7
      Disability Insurance                                          7.)
      Retirement and Survivor Insurance                            43.;'

             Total                                                 100.0




                                      1~~~~~~~~~~~~~~~~~~~~~~~~~
APPENDIX II                                           APPENDIX II




         ALLOCATION OF SUPPLEMEl AL SECURITY INCOME

              COSTS IN THE BUREAU OF RETIREMENT AND

                       SURVIVORS INSURANCE

     The Bureau of Retirement and Survivors Insurance spent
$259.1 million in administrative costs in fiscal year 1976.
The Supplemental Security Income program was allocated
0.7 percent ($1.8 million) of these costs.

     The Bureau is composed of a headquarters unit and
six program service centers. The Supplemental Security
Income work is done in the program service centers and
primarily involves filing the Supplemental Security Income
progtam's material received from the field offices.




                                2
APPENDIX III                                       APPENDIX III



               ALLOCATION OF BUILDING RENTAL AND
                       MAINTENANCE CSTS
     Social Security's gross charge from General Services
Administration for rent and maintenance in fiscal year 1976
was $100.7 million. The Supplemental Security Income pro-
gram was allocated $21.2 million or about 21 percent of this
charge.
     The headquarters bh4ilding rental and maintenance charges
are accumulated in the Centralized Common Expense Account.
In fiscal year 1976, these charges were $22.7 million. The
Supplemental Security Income program was allocated $2.4 mil-
lion (or about 11 percent). This allocation is based on the
ratio of staff-years in headquarters spent working on the
Supplemental Security Income program to staff-years n head-
quarters spent working on all programs.
     The field building rental and maintenance charges art;
accumulated in the organizational units which have field per-
sonnel. These costs are allocated using the same method used
for other indirect costs. In fiscal year 1976 the total cost
for field building rental and maintenance was $78.0 million.
The Supplemental Security Income program was allocated
$18.8 million or about 24 percent.
     Social Security's total charge for building rental and
maintenance was reduced by two credits, (1) a Government-wide
credit for all programs, and (2) a further adjustment for
trust fund programs to actual cost of space. Social Secur-
ity's adjusted expense was $82.4 million. The Supplemental
Security Income program was allocated $18.7 million or about
23 percent. The Supplemental Security Income program's share
increased over the 21 percent calculated above because this
program did not participate in the special credit for trust
fund programs.




                              3
APPENDIX Iv                                         APPENDIX IV



              COMPARISON OF SUPPLEMENTAL SECURITY
                  INCOME ADMINISTRATIVE COSTS
     The following table shows the administrative costs as
recorded by Social Security for the agency and for the Supple-
mental Security Income program in each organizational unit
for fiscal years 1974 through 1976. The Supplemental Secur-
ity Income program costs are also presented as a percentage
of the total administrative costs in each unit for each year.
     The administrative costs include such costs as salaries,
leave, travel, printing, building rent and maintenance, tili-
ties, and supplies.  Because the upplemental Secur.ity Income
program began in the middle of fiscal year 1974 (January 1,
1974), these amounts (1) include "make ready costs" and costs
for converting the State recipient to the Supplemental Secur-
ity Income program which did not occur in subsequent years
and (2) exclude costs for redetermining the eligibility and
payment amounts which occur in subsequent years. Therefore,
the fiscal year 1974 costs are not comparable to the other
2 years and are provided only for reference purposes.




                              4
APPENDIX IV
                                                                                                                                                                                                              APPENDIX IV

                  Comparison   of Supplemental Security Income (SSI
                                -~-nistrative Cost-or-
                           Fiscal Years 1974, 19-i, and 1976

                                                                                                                                       Fsayer17-iscal--
                                                                                                                                        j      year 1975 __Fiscal
                                                                     Fiscal        19744ear                                                                                                     year 1976 (note a)
                                                                                                                                                          trative costs                                   trative costs
   Organizational unit                        SSI adminis-       Total adminis-
                         Orntal                                                                                                                           trative costs                                   trative costs
                 ~(nI~~~~ot_       (rg~   ~~ nitadminis
                                             ~trativecosts
                                                ~~ ~ ~ ~
                                               trative           ~Totaldis
                                                                     ~ costs
                                                                 trative ~ ~          costs
                                                                                      ~asbce~ expressed
                                                                                                ~ ate
                                                                                                    ~      ~      SSI adminis- Total adminis-
                                                                                                                ~~~~~~rt     eeb)~ trative
                                                                                                                trative ot costs
                                                                                                                            ___o______              costs
                                                                                                                                                          expressed as
                                                                                                                                                           Percentage
                                                                                                                                                                           SSI adminis-
                                                                                                                                                                          trative coss
                                                                                                                                                                                  costs
                                                                                                                                                                                          Total adminis- expressed as
                                                                                                                                                             ____ss__                     trative costs       erce
                                                                                                                                                                                                              ~ercentage
                                             (000 omitted)       (000 omitted)                                  (000 omitted)      (000 omitted)                          (090 omitted)   (000 omitted)
Office of the Commissioner                     $            93   $            60                16.7              $         122    $          537
Office of Advanced Systems                                                                                                                                   22.7          $        104   $       44             23
                                                   C/-                 c/-                    c/-                     C/-                                                           478         2032
Office of Manaaement and Aminist-                                                                                                                                                                                23.3
                                                                                                                      -                   -                 /-                      478         2,032            23.5
  tion                                                 5,694           3b,592                   15.6                  36,319
Office of Program Policy n    P-                       3,089           22,103                   14.0                                     82,792             36.6               33,928          97,137            34.9
                                                                                                                       4,664             24,615             18.9                3,358          25,314            13.3
Office of External Affeir                              3843            22,267                   17.3                   1,710               ,633             22.8                2,605           9,829            26.5
Office of Program Operations:
    Immediate Office
    Bureau of Pctzrement and Sur-
                                                                                                                                                                                     73        21,628              .3
       vivors Insurance                           5,163             207,427                  2.5                       2,257
    Bureau of Disability Insurance:                                                                                                     229,311              1.0                  1,842       259,059              .7
                                               d/67,102           d/232,496               d/28.                       10,067             95,403             10.6                  8,674
         State Disability Determine -                                                                                                                                                         109,587             7.9
                                                                                                                                                                                                                  7.9
           tion Service                           (e)                   (e)                    (e)                 101,391
    District ffice Operations                                                                                                           206,764             49.0             95,361           229,449            41.6
                                                138,147               471,493                  29.3                240,407              626,025             38.4
    Bu:eau of Supplemental Security6,5                                                                                                                                      267588            710                37
                                                                                                                                                                                                                 3.
       Income                                      48,786            48,786                   100.0                   32,541             32,541            100.0               21,192          21,192           100.0
    Bureau of Data Processing                      18,757           193,611                     9.7                   25,817
Bureau of Hearings and Appeals                                                                                                          212,152             12.2               27,642         214,570            12.9
                                                    3,007            46,632                     6.4                    9,653             61,883
Bureau of Health Insurance:                                       f/430,735                                                                                 15.6               24,300          96,541            25.2
                                                                                                                                         72,064                                                77,100
    Part A Contractors
                Part A Contractors                 /
    Part B Contractors                                                  /-                     /-          -                              20
                                                                                                                                        151,190                                                7,0
                                                                                                                                                                                              163,843
                                                       /-                                       -                                       258,726
Centralized Common Expense Account                                                                                                                                                            290,587
  (note h)                                                                                                                                                                                    290,587
                                                   2,254              23,804                   9.5                    2,356              32,922              7.2
Adjustments:                                                                                                                                                                      (120         1337
    Payroll (prorated) (note j)                                                                                                                              7.2                  (120)        19,337
                                                   2,537               7,865                  32.3                        257             1,063             24.2            1/-                  /-
    Unobligated commitments
       (note k)                                    1/-/                                       1/-                     /-1/-                               1/--1/-_             (2,392)        10,559            (22.7)
    Total                                      $298,472          $1,744,371                    17.1              $461,591          $2,095,621               22.0           $484,633       $2,337,036             20.7

a/Does not include the transition quarter.
                                                                                                               h/This account is       maintaided   for costs not readily identifiable with any other organiza-
b/The costs are identified by the organizational units hich existed in fiscal year                             - tional unit.
                                                                                                       1976.
  Former units are summarized under the 1976 title which has a similar function.
                                                                                                               i/In fiscal year 1976, the Supplemental Security '-.ome pogram was allocated a negative
c/Indicates that there was no unit with similar functions                                                        amount because of a Standard Level Users Charge credit received from the General
                                                                     in that year.                               ices Administration.                                                             Serv-

d/The amounts include costs of the State Disability Determination Services.
                                                                                                               I/At the end of the year, the actual payroll expense was compared to the allocated payroll
                                 the State Disability
e/Although the State Disability Determination  Services
                                                      Determination
                                                        existed                                                  costs.  Any difference was prorated among the organizational units.  Since the 1976
                                               Services existed   n fiscal year 1974,                            transition quarter had not ended, the payroll adjustment had not been determined.
  the costs were included in the Bureau of Disability   nsurance.
                         f/The amount  i; ludscostsfPrtAandBMedicrecontractorsk/Fiscal years 1974 and 1975 show obligated
    f/The
      amount i   ludes costs  f Part A and B Medicae contractors.      -          made in fiscal year 1976 to show obligated expenses only, therefore, tis
                                                                                                                              expenses only.
                                                                                                                                                                                                          adjustment was
2/Although Part A and B Medicare contractors existed in fiscal            year 1974,   the costs were          1/Adjustments were not made.
  included in the Bureau of Health Insurance.




                                                                                                                                                         '~~~~~~~
APPENDIX V                                                  APPENDIX V




4.*~            DEPARTMENT OF HEALTH, EDUCATION. AND WELFARE
                            OFFICE OF THE SCRETARY
                              WAlNINGTON. D.C.   1




                                                       OCT 20 1977




    Mr. Gregory J. Ahart
    Dir,ctor, Human Resources
      Division
    United States General
      Accounting Office
    Washington, D.C. 20548

    Dear Mr. Ahart:

    As requested by Mr. Lee of your staff, thu Department's
    comments on your draft report, "An Evaluation of Social
    Security Administration's Procedures for  llocating
    Administrative Costs to the Supplemental Security Income
    Program" are enclosed.

                                        Sincerely yours,




                                             s D. Morris
                                       -Inspector General
    Enclosure




                                  6
                             COPY
 APPENDIX V                                      APPENDIX V


COMMENTS OF THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE
ON THE GAO RAFT REPORT ENTITLED--"AN EVALUATION OF SOCIAL
SECURITYADMNISTRATION's PROCEDURES FOR ALLOCATING ADMNIS-
TRATIVE COSTS TO THE SUPPLEMENTAL SECURITY INCOME PROGRAM"

GAO Recommendation

That the Secretary of Health, Education. and Welfare direct
the Commissioner of Social Security to review and revise, as
appropriate, the method for allocating shared-costs between
the trust funds and the Supplemental Security Income program
to recognize the relative cost of doing a particular unit of
work rather than allocating costs on the basis of benefits
paid. The Commissioner should also continue to review the
various work measurement systems to insure that they continue
to provide reliable data needed to allocate costs.

Department Comment

We believe that GAO's stucy confirms that the accounting
policies and formulas used y the Social Security Administra-
tion result in the proper allocation of administrative ex-
penses so that the trust funds are not charged costs that
are applicable to the administration of the Supplemental
Security Income program. The vast majority of indirct costs
are allocated to the various programs on the basis c work
performed for those programs. It is only a relatively small
portion of shared costs that are allocated on a "benefits
paid" basis. Although our analyses had shown that this
method provides an equitable and administratively efficient
means of allocating these shared costs, SSA will, as GAO
suggests, carefully review the method and make whatever
changes or refinements are needed.

We agree that the various work measurement systems should
be continually reviewed. SSA is refining and upgrading its
work measurement systems to-improve their support of many
management and accounting functions, including program cost
allocations.




(105005)                    Cori


                             7