oversight

Administrative Costs Claimed by the District of Columbia Disability Determination Services

Published by the Social Security Administration, Office of Inspector General on 2019-08-05.

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

             Audit Report



Administrative Costs Claimed by the
  District of Columbia Disability
     Determination Division




      A-15-18-50628 | August 2019
MEMORANDUM


Date:      August 5, 2019                                                     Refer To:

To:        Terry M. Stradtman
           Regional Commissioner
            Philadelphia
From:      Assistant Inspector General for Audit
Subject:   Administrative Costs Claimed by the District of Columbia Disability Determination Division
           (A-15-18-50628)

           The attached final report presents the results of our review. Our objectives were to evaluate
           internal controls over the accounting and reporting of administrative costs and determine whether
           administrative costs claimed by the District of Columbia Disability Determination Division for
           Fiscal Years 2016 and 2017 were allowable and properly allocated.

           If you wish to discuss the final report, please call me or have your staff contact Victoria Vetter,
           Director, Financial Audit Division, at (410) 966-9081.




                                                           Rona Lawson

           Attachment

           cc:
           Trae Sommer, Acting Director for Audit Liaison Staff
           Andrew Reese, Director, District of Columbia Department on Disability Services
           Darryl Evans, Division Director, Disability Determination Division
Administrative Costs Claimed by the District of Columbia
Disability Determination Division
A-15-18-50628
August 2019                                                                Office of Audit Report Summary

Objectives                                 Findings

To evaluate internal controls over the     Generally, the Parent Agency and DC-DDD had adequate internal
accounting and reporting of                controls to ensure administrative costs claimed were allowable and
administrative costs and determine         properly allocated. However, we identified deficiencies in the
whether the administrative costs           Parent Agency’s development of final indirect costs and the Parent
claimed by the District of Columbia        Agency and DC-DDD’s internal controls over classifying
Disability Determination Division          administrative costs.
(DC-DDD) for Fiscal Years (FY) 2016
and 2017 were allowable and properly       We questioned $1,668,715 in indirect costs reimbursed to DC-
allocated.                                 DDD. In addition, we found the Parent Agency charged $15,039 in
                                           unallowable costs for unused leave when employees retired or
Background                                 terminated employment, did not have supporting documentation for
                                           $7,596 in communications costs, and reported $43,372 in direct
Disability determination services          costs in the incorrect FY and cost category.
(DDS) perform disability
determinations under the Social            Recommendations
Security Administration’s (SSA)
Disability Insurance (DI) and              We recommend the SSA Regional Commissioner instruct the
Supplemental Security Income (SSI)         Parent Agency and DC-DDD to:
programs in accordance with Federal
regulations. Each DDS is responsible       1. Refund $1,668,715 to SSA associated with the FYs 2016 and
for determining claimants’ disabilities       2017 indirect costs.
and ensuring adequate evidence is
                                           2. Establish a separate DC-DDD FY 2016 and 2017 indirect cost
available to support its determinations.
                                              rate to properly assign indirect costs to the DC-DDD.
SSA reimburses the DDS for
                                           3. Provide the FY 2018 and future year indirect cost proposals to
100 percent of allowable expenditures
                                              SSA to ensure these DC-DDD indirect costs are reasonable.
up to its approved funding
authorization. Allowable expenditures      4. Refund $15,039 of direct costs for unused leave for employees
include both direct and indirect costs.       who retired or terminated employment.
The District of Columbia Department        5. Determine the validity of the unsupported communications
on Disability Services (Parent Agency)        costs of $7,596 and require a refund of any unsupported
provides information, oversight, and          disbursements.
coordination of services for people
with disabilities. The Parent Agency       6. Modify its procedures to properly allocate all costs to the
supports the DC-DDD, which makes              correct FY and cost category.
Social Security disability claim
determinations.                            SSA agreed with our recommendations.
TABLE OF CONTENTS
Objectives ........................................................................................................................................1
Background ......................................................................................................................................1
Results of Review ............................................................................................................................2
     Questioned Indirect Costs ..........................................................................................................2
     Unallowable Personnel Service Costs .......................................................................................4
     Unsupported Costs .....................................................................................................................4
     Misclassified Costs ....................................................................................................................4
           Incorrect FY .........................................................................................................................5
           Incorrect Cost Category .......................................................................................................5
Conclusions ......................................................................................................................................5
Recommendations ............................................................................................................................6
Agency Comments ...........................................................................................................................6
Office of the Inspector General Response .......................................................................................6
                   – Scope and Methodology ..................................................................................... A-1
                   – Agency Comments .............................................................................................. B-1




Administrative Costs Claimed by the DC-DDD (A-15-18-50628)
ABBREVIATIONS
C.F.R.              Code of Federal Regulations

DC-DDD              District of Columbia Disability Determination Division

DDS                 Disability Determination Services

DI                  Disability Insurance

Form SSA-4513       State Agency Report of Obligations for SSA Disability Programs

FY                  Fiscal Year

HHS                 Department of Health and Human Services

OIG                 Office of the Inspector General

Parent Agency       District of Columbia Department on Disability Services

POMS                Program Operations Manual System

SSA                 Social Security Administration

SSI                 Supplemental Security Income




Administrative Costs Claimed by the DC-DDD (A-15-18-50628)
OBJECTIVES
Our objectives were to evaluate internal controls over the accounting and reporting of
administrative costs and determine whether the administrative costs claimed by the District of
Columbia Disability Determination Division (DC-DDD) for Fiscal Years (FY) 2016 and 2017
were allowable and properly allocated.

BACKGROUND
Disability determination services (DDS) perform disability determinations under the Social
Security Administration’s (SSA) Disability Insurance (DI) 1 and Supplemental Security Income
(SSI) 2 programs in accordance with Federal regulations. 3 Each DDS is responsible for
determining claimants’ disabilities and ensuring adequate evidence is available to support its
determinations.

SSA reimburses the DDS for allowable direct and indirect costs. Direct costs can be identified
specifically with a particular cost objective. For example, to assist in making proper disability
determinations, each DDS is authorized to purchase medical examinations, x rays, and laboratory
tests on a consultative basis to supplement evidence obtained from the claimants’ physicians or
other treating sources. 4 Indirect costs arise from activities that benefit multiple programs but are
not readily assignable to these programs without effort disproportionate to the results achieved.
SSA reimburses each DDS for 100 percent of allowable expenditures up to its approved funding
authorization 5 for costs reported on a Form SSA-4513, State Agency Report of Obligations for
SSA Disability Programs. 6




1
 The DI program provides benefits to wage earners and their families who meet certain criteria in the event the
wage earner becomes disabled or dies. See 20 C.F.R. §§ 404.315, 404.330, and 404.335 (govinfo.gov 2018).
2
 The SSI program provides a minimum level of income for people who are age 65 or over or who are blind or
disabled and who do not have sufficient income and resources to maintain a standard of living at the established
Federal minimum income level. See 20 C.F.R. § 416.110 (govinfo.gov 2018).
3
    20 C.F.R. §§ 404.1601, et seq. and 416.1001, et seq. (govinfo.gov 2018).
4
    SSA, POMS, DI 39545.120, A (June 5, 2017).
5
 Each quarter, SSA provides funds to States for the Federal FY (October 1 to September 30). Notification to the
States of the cumulative amount of funds that may be obligated for approved necessary expenses and the dates
covered by the funding is included in Form SSA-872 (State Agency Obligational Authorization for SSA Disability
Programs). SSA, POMS, DI 39506.100, A (March 12, 2002).
6
 SSA, POMS, DI 39501.020, B.1 (February 28, 2002). SSA, POMS, DI 39506.001, B.1 (March 12, 2002). SSA,
POMS, DI 39506.202, A (February 20, 2015).



Administrative Costs Claimed by the DC-DDD (A-15-18-50628)                                                         1
The District of Columbia Department on Disability Services (Parent Agency) 7 provides
information, oversight, and coordination of services for people with disabilities. The Parent
Agency supports the DC-DDD, which makes Social Security disability claim determinations.

For FYs 2016 and 2017, the Parent Agency’s Form SSA-4513 (dated January 31, 2018) claimed
costs of $11.1 and $12.2 million, respectively. We determined whether these costs were
allowable and properly allocated. In addition, we reviewed the internal controls over cost
accounting and reporting of those costs. See Appendix A for more information on our scope and
methodology.

RESULTS OF REVIEW
Generally, the Parent Agency and DC-DDD had adequate internal controls to ensure
administrative costs claimed were allowable and properly allocated. However, we identified
deficiencies in the Parent Agency’s development of final indirect costs and the Parent Agency
and DC-DDD’s internal controls in the classification of administrative costs. We questioned
$1,668,715 in indirect costs reimbursed to DC-DDD for FYs 2016 and 2017 combined. In
addition, we found the Parent Agency

   charged $15,039 in unallowable costs for unused leave when employees retired or terminated
    employment,
   did not have supporting documentation for $7,596 in communications costs, and
   reported $43,372 in direct costs in the incorrect FY and cost category.

Questioned Indirect Costs
We questioned $1,668,715 in indirect costs 8 as shown in Table 1.

                               Table 1: FYs 2016 and 2017 Indirect Costs
                                      Form SSA-4513                                            Questioned
          Indirect Costs                                            Per OIG Audit
                                      Disbursements                                              Costs
       FY 2016                          $2,104,830                     $1,351,117               $753,713
       FY 2017                          $2,252,676                     $1,337,674               $915,002
       Total                              $4,357,506                   $2,688,791               $1,668,715




7
  The Parent Agency is immediately above the DDS in the State hierarchy and participates in management decisions
that affect the DDS.
8
 Indirect costs arise from activities that benefit multiple programs but are not readily assignable to those programs
without effort disproportionate to the results achieved.



Administrative Costs Claimed by the DC-DDD (A-15-18-50628)                                                              2
The Parent Agency calculated indirect costs using a 50-percent provisional indirect rate for
FYs 2016 and 2017. A provisional rate is a temporary indirect cost rate used for funding, interim
reimbursement, and reporting indirect costs on Federal awards, before a final rate 9 for a specific
time period is established. The provisional indirect rate was included in the Indirect Cost Rate
Agreement 10 between the Parent Agency and Department of Health and Human Services (HHS)
and specified the reimbursable indirect cost rate allowable to the Parent Agency. The Parent
Agency allocated indirect costs of $2,104,830 and $2,252,676 to the DC-DDD for FYs 2016 and
2017, respectively.

The Parent Agency must submit a final indirect cost rate proposal to HHS within 6 months of the
close of the State FY (September 30). 11 The Parent Agency developed two indirect cost rate
proposals 12 to determine its final FY 2016 and 2017 indirect cost rates. These proposals included
the Parent Agency’s methodology to allocate all costs to each of its public assistance programs,
including DC-DDD. The Parent Agency’s proposals allocated $1,351,117 and $1,337,674 in
final indirect costs to the DC-DDD in FYs 2016 and 2017, respectively. Although we
determined the Parent Agency’s allocation methodology was acceptable, we questioned the
difference between DC-DDD’s provisional and final indirect costs: $753,713 in FY 2016 and
$915,002 in FY 2017. Our total questioned indirect costs of $1,668,715 is the difference
between the amount reimbursed to DC-DDD, using the provisional rate, and its final indirect
costs for each FY.

The Parent Agency’s final rate proposals included a single indirect cost rate 13 for the Parent
Agency. However, the single final indirect rate was developed based on the total allocated
indirect costs of all public assistance programs in the Parent Agency. Although the allocation
methodology used to develop the rate is acceptable, a single final indirect rate improperly assigns
additional indirect costs to DC-DDD. These additional indirect costs are included in the
$753,713 and $915,002 questioned costs in FY 2016 and 2017, respectively. The Parent Agency
should develop a separate DC-DDD final indirect cost rate, based on its allocated indirect costs,
instead of an overall single final indirect rate across all programs for FYs 2016 and 2017.




9
 The final rate is an indirect cost rate applicable to a specified past period that is based on the period’s actual
allowable costs. A final audit rate is not subject to adjustments.
10
     SSA reimburses the Parent Agency for DC-DDD’s indirect costs at the HHS approved reimbursable rate.
11
     2 C.F.R. § 225 app. E, p. 180 (govinfo.gov 2012).
12
   The indirect cost rate proposal is the documentation prepared by a governmental unit, or subdivision thereof, to
substantiate its request to establish an indirect cost rate.
13
   The indirect cost rate is used to reasonably determine the proportion of indirect costs each program should bear. It
is the ratio (expressed as a percentage) of the indirect costs to a direct cost base.



Administrative Costs Claimed by the DC-DDD (A-15-18-50628)                                                            3
Finally, the Parent Agency is not required to, and did not, provide SSA its final indirect cost
proposals. However, the Parent Agency should provide its indirect cost proposal to SSA before
it sends the proposal to HHS because the indirect costs allocated to the DC-DDD require a
separate indirect cost rate. This communication between SSA and the Parent Agency should
ensure the propriety of the reimbursable indirect cost rate before HHS approves the proposal for
FY 2018 and future years. If SSA believes special operating factors affect the DC-DDD indirect
cost rate, SSA should notify HHS before it negotiates the rate to ensure the indirect costs are
reasonable.

Unallowable Personnel Service Costs
In FY 2016, the Parent Agency inappropriately recorded $15,039 for unused leave when an
employee retired or terminated employment, as direct personnel service costs for DC-DDD. 14
Federal regulations state 15 unused leave when an employee retires or terminates employment is
allowable as an indirect cost in the year of payment. Since terminal leave costs are included in
indirect costs, they are not allowable as direct charges to the Government.

Unsupported Costs16
In FY 2017, the Parent Agency and DC-DDD could not support $7,596 in communications costs
claimed. Our random sample of 100 non-personnel costs selected a $24,960 communications
expenditure for testing; however, the Parent Agency and DC-DDD could only provide
documentation to support $17,364.

Misclassified Costs
Our review of sampled items identified reporting errors of $43,372 in administrative costs
claimed in the incorrect FY and cost category. These costs were allowable, so we are not
recommending DC-DDD reimburse SSA. See Appendix A for our sampling methodology.




14
  The DC-DDD personnel service cost includes salaries, terminal leave, life insurance, health benefits, retirement
contributions, optical plan, dental plan, prepaid legal, Medicare contributions, retirement, metro benefits, health
benefit fees, severance pay, and contracted medical consultants.
15
  2 C.F.R. § 200.431(b)(3)(i) (govinfo.gov 2018). OMB, Frequently Asked Questions For The Office of
Management and Budget’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for
Federal Awards at 2 C.F.R. 200, p. 34 (July 2017).
16
     Unsupported costs are questioned because they lack sufficient documentation.


Administrative Costs Claimed by the DC-DDD (A-15-18-50628)                                                            4
Incorrect FY
We identified $24,668 in medical and contracted cost that were recorded and reported in the
incorrect FY. We identified 111 consultative examinations, totaling $13,621, that DC-DDD
performed in FY 2014; however, DC-DDD allocated these costs to FY 2016 medical costs.
Although the consultative examinations were performed in FY 2014, the contractor billed
DC-DDD for them in FY 2016. DC-DDD’s procedures for ensuring costs from prior FYs were
identified and properly allocated to the correct FY were insufficient. Specifically, it should
strengthen its procedures to ensure costs are recorded for the year incurred. In addition, we
identified a contracted cost of $11,047 performed in FY 2016 that was improperly allocated to
FY 2017.

Incorrect Cost Category
DC-DDD did not properly classify certain non-personnel costs on its Form SSA-4513.
Specifically, DC-DDD improperly classified $18,704 in the non-personnel cost categories in
FYs 2016 and 2017. For example, according to SSA policy, 17 non-personnel costs, such as
postage and delivery service fees, are communications costs. However, DC-DDD mistakenly
classified these as contracted costs. As another example, equipment purchased with an
acquisition cost of $5,000 or less should be classified as supplies; 18 however, DC-DDD
mistakenly recorded these costs as equipment.

CONCLUSIONS
Generally, the Parent Agency and DC-DDD had adequate internal controls to ensure
administrative costs claimed were allowable and properly allocated. However, we identified
deficiencies in the Parent Agency’s development of final indirect costs and the Parent Agency
and DC-DDD’s internal controls in the classification of administrative costs. We questioned
$1,668,715 in indirect costs reimbursed to DC-DDD. In addition, we found the Parent Agency

      charged $15,039 in unallowable costs for unused leave when employees retired or terminated
       employment,
      did not have supporting documentation for $7,596 in communications costs, and
      reported $43,372 in direct costs in the incorrect FY and cost category.




17
     SSA, POMS, DI 39506.210, D.4 (March 12, 2002).
18
     See Footnote 17.


Administrative Costs Claimed by the DC-DDD (A-15-18-50628)                                       5
RECOMMENDATIONS
We recommend the SSA Regional Commissioner instruct the Parent Agency and DC-DDD to:

1. Refund $1,668,715 to SSA associated with the FYs 2016 and 2017 indirect costs.

2. Establish a separate DC-DDD FY 2016 and 2017 indirect cost rate to properly assign indirect
   costs to the DC-DDD.

3. Provide the FY 2018 and future year indirect cost proposals to SSA to ensure these DC-DDD
   indirect costs are reasonable.

4. Refund $15,039 of direct costs for unused leave for employees who retired or terminated
   employment.

5. Determine the validity of the unsupported communications costs of $7,596 and require a
   refund of any unsupported disbursements.

6. Modify its procedures to properly allocate all costs to the correct FY and cost category.

AGENCY COMMENTS
SSA agreed with all our recommendations but had additional comments on Recommendations 1
and 2, stating, “While the DC DDD Parent Agency, the Department on Disability Services
(DDS), may provide an indirect cost rate proposal, it is the cognizant agency, in this case [HHS],
who is ultimately responsible for establishing and assigning indirect cost rates. Therefore, we
cannot instruct the DC DDD or the parent agency to provide a refund or establish an indirect cost
rate. This would require negotiations directly with HHS.” See Appendix B for the full text of
SSA’s comments.

OFFICE OF THE INSPECTOR GENERAL RESPONSE
In response to the Agency’s comments on Recommendation 1, SSA can request a refund.
Federal regulations 19 state

           Refunds shall be made if proposals are later found to have included costs that are
           unallowable as specified by law or regulation, as identified in Appendix B to this part,
           or by the terms and conditions of Federal awards, or are unallowable because they are
           clearly not allocable to Federal awards. These adjustments or refunds will be made
           regardless of the type of rate negotiated (predetermined, final, fixed, or provisional).




19
     2 C.F.R. part 225, app. E (govinfo.gov 2012).



Administrative Costs Claimed by the DC-DDD (A-15-18-50628)                                            6
In this case, the Parent Agency’s single final indirect rate improperly assigns additional
unallocable indirect costs to DC-DDD.

In response to the Agency’s comments on Recommendation 2, SSA can notify HHS of the need
for a special indirect cost rate. Specifically, Federal regulations 20 state, “Where a Federal
funding agency [that is, SSA] has reason to believe that special operating factors affecting its
awards necessitate special indirect cost rates, the funding agency [that is, SSA] will, prior to the
time the rates are negotiated, notify the cognizant Federal agency.” Therefore, SSA can instruct
the DC-DDD or the Parent Agency via the cognizant Federal agency to establish a separate
indirect rate.

OIG agrees HHS is responsible for final approval of indirect cost rates, and we will assist SSA
and/or provide additional guidance as it implements our recommendations.




                                                     Rona Lawson
                                                     Assistant Inspector General for Audit




20
     2 C.F.R. part 225, app. E (govinfo.gov 2012).


Administrative Costs Claimed by the DC-DDD (A-15-18-50628)                                             7
                                      APPENDICES




Administrative Costs Claimed by the DC-DDD (A-15-18-50628)
                    – SCOPE AND METHODOLOGY
Scope
To achieve our objective, we:
   Reviewed applicable Federal laws and regulations, the Social Security Administration’s
    (SSA) Program Operations Manual System, and other criteria relevant to administrative costs
    claimed by the District of Columbia Disability Determination Division (DC-DDD) and the
    drawdown of SSA program appropriations.
   Reviewed prior Office of the Inspector General DC-DDD reports.
   Interviewed staff at the Philadelphia Regional Office, District of Columbia Department on
    Disability Services (Parent Agency) and DC-DDD.
   Reconciled State accounting records to the administrative costs DC-DDD reported on the
    Form SSA-4513, State Agency Report of Obligations for SSA Disability Programs, for
    Federal Fiscal Years (FY) 2016 and 2017.
   Examined specific administrative expenditures (Personnel, Medical, and All Other Non-
    personnel costs) incurred and claimed by DC-DDD for FYs 2016 and 2017 on the Form
    SSA-4513. We used statistical sampling to select expenditures to test to support the
    Personnel, Medical, and All Other Non-personnel costs, as discussed in the Methodology
    section.
   Examined the DC-DDD indirect costs claimed for FYs 2016 and 2017.
   Compared the amount of SSA funds drawn to support program operations to the expenditures
    reported on the Form SSA-4513.
   Determined whether unliquidated obligations were properly supported.
   Reviewed DC-DDD’s equipment and inventory records.
   Reviewed policies and procedures related to protecting personally identifiable information.

We determined the data provided by the Parent Agency and DC-DDD and used in our audit were
sufficiently reliable to achieve our audit objectives. We assessed the reliability of the data by
reconciling to the costs claimed on the Form SSA-4513. We also conducted detailed audit
testing on selected data elements in the electronic data files.

We conducted our review at SSA Headquarters in Baltimore, Maryland, as well as the Parent
Agency and DC-DDD offices in Washington, DC, between August 2018 and February 2019.
We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe the evidence obtained provides a reasonable basis for
our findings and conclusions based on our audit objectives.




Administrative Costs Claimed by the DC-DDD (A-15-18-50628)                                      A-1
Methodology
Indirect Costs
DC-DDD’s indirect costs are computed by applying a federally approved rate to a cost base.
This methodology was approved by the U.S. Department of Health and Human Services, which
is the Federal agency designated to negotiate and approve the indirect cost rate. We re-
performed the calculation to ensure its propriety. On the final Form SSA-4513, DC-DDD
claimed indirect costs of $2,104,830 and $2,252,676 for FYs 2016 and 2017, respectively.
Sampling Methodology
The sampling methodology encompassed the three general areas of costs reported on the
Form SSA-4513: (1) Personnel, (2) Medical, and (3) All Other Non-personnel costs. We
obtained a data extract of all costs for FYs 2016 and 2017 for use in statistical sampling. We
obtained this from DC-DDD and its accounting systems used in preparing the Form SSA-4513.
Personnel Costs
We reconciled DC-DDD’s personnel costs to the Form SSA-4513. We randomly selected one
pay period, ended June 10, 2017, for further review. We reviewed the payroll records of all
47 DDD employees in this pay period. For Medical Consultants, we randomly selected 50 items
from January 2017 for review. We did not identify any exceptions in our sample of DDD
employee and Medical Consultant personnel costs.
Medical Costs
We selected 200 items (100 items each from FYs 2016 and 2017) using a random sample. We
randomly selected medical evidence of record and consultative examination invoice packets for
review, followed by a random sample of the medical costs within each invoice packet. We
identified 111 consultative examinations totaling $13,621 that were performed in FY 2014 and
improperly allocated to FY 2016. 1
All Other Non-Personnel Costs
We selected 100 items (50 items each from FYs 2016 and 2017) using weighted average random
sampling. 2 The random sample was based on the proportion of costs in each of the cost
categories to the total costs claimed. We identified 17 non-personnel test items totaling $18,704
that were classified in the wrong cost category on the Form SSA-4513, 1 item totaling
$11,047 allocated to the wrong FY, and 1 item totaling $7,596 that was not adequately
supported.




1
 Of 200 medical cost test items, 4 were FY 2014 medical costs allocated to FY 2016. Upon further review of the
FY 2016 invoice packet in which we selected our items, we identified 107 additional FY 2014 medical costs.
2
 In our prior review of The District of Columbia’s Disability Determination Division's Internal Controls over the
Accounting and Reporting of Administrative Costs (A-15-08-18019), we reviewed DC-DDD’s non-personnel
occupancy costs. In FYs 2016 and 2017, DC-DDD operated in a space under an SSA lease agreement and did not
claim occupancy costs.


Administrative Costs Claimed by the DC-DDD (A-15-18-50628)                                                     A-2
                    – AGENCY COMMENTS
From: ||PHI ARC MOS <PHI.ARC.MOS@ssa.gov>
Sent: Thursday, July 11, 2019
Subject: Signed Draft Report (A-15-18-50628) - PHILADELPHIA RESPONSE

As requested, we have reviewed the draft report of the “Administrative Costs Claimed by the
District of Columbia Disability Determination Division” audit. Overall, we agree with the
findings, however, have concerns with recommendations one and two that relate to indirect cost.
While the DC DDD Parent Agency, the Department on Disability Services (DDS), may provide
an indirect cost rate proposal, it is the cognizant agency, in this case Health and Human Services
(HHS), who is ultimately responsible for establishing and assigning indirect cost rates.
Therefore, we cannot instruct the DC DDD or the parent agency to provide a refund or establish
an indirect cost rate. This would require negotiations directly with HHS.

We would like to submit the following comments regarding the specific recommendations for
your review and consideration:

   1. Refund $1,668,715 to SSA associated with the FYs 2016 and 2017 indirect costs. – We
      agree with this recommendation, however, the method and time frame of recouping the
      funds will have to be negotiated with HHS within subsequent years’ indirect cost
      agreements. The DC DDD would like to request additional information regarding the
      formula OIG used to calculate the indirect cost over charge.

   2. Establish a separate DC-DDD FY 2016 and 2017 indirect cost rate to properly assign
      indirect costs to the DC-DDD. – We agree with this recommendation, and recommend
      that separate indirect cost rates are assigned to the DDD for each year, beginning with
      FY2017, however, this will also have to be negotiated directly with HHS.

   3. Provide the FY 2018 and future year indirect cost proposals to SSA to ensure these
      DC-DDD indirect costs are reasonable. – We agree with this recommendation, however,
      regulations do not require the DDD to provide a copy of the indirect cost proposal to SSA.

   4. Refund $15,039 of direct costs for unused leave for employees who retired or
      terminated employment. – We agree with this finding and recommend that the DDD
      develop procedures to ensure that this does not occur in the future. The DC DDD
      questioned this finding with OIG stating that the DDD had addressed the terminal leave
      costs in August 2017. Note: OIG responded that while the FY2017 terminal leave costs
      were reversed, they also identified $15,039 in FY 2016.

   5. Determine the validity of the unsupported communications costs of $7,596 and
      require a refund of any unsupported disbursements. – We agree with this
      recommendation. Further, if the DDD is unable to provide documentation to support these
      costs, we agree that the $7,596 be refunded to SSA.




Administrative Costs Claimed by the DC-DDD (A-15-18-50628)                                     B-1
   6. Modify its procedures to properly allocate all costs to the correct FY and cost
      category. – We agree with this recommendation. The DDD, however, questioned the
      findings that items were allocated under incorrect cost categories, and reported that the
      DDD was following SSA reporting instructions.

Staff may direct questions to the Center for Disability and Program Support (CDPS).

Van Roland
ARC MOS for
Terry M. Stradtman
Regional Commissioner




Administrative Costs Claimed by the DC-DDD (A-15-18-50628)                                 B-2
                                           MISSION
By conducting independent and objective audits, evaluations, and investigations, the Office of
the Inspector General (OIG) inspires public confidence in the integrity and security of the Social
Security Administration’s (SSA) programs and operations and protects them against fraud,
waste, and abuse. We provide timely, useful, and reliable information and advice to
Administration officials, Congress, and the public.

                                   CONNECT WITH US
The OIG Website (https://oig.ssa.gov/) gives you access to a wealth of information about OIG.
On our Website, you can report fraud as well as find the following.
   •   OIG news                                  In addition, we provide these avenues of
   •   audit reports
                                                 communication through our social media
                                                 channels.
   •   investigative summaries
   •   Semiannual Reports to Congress                Watch us on YouTube
   •   fraud advisories                              Like us on Facebook
   •   press releases
                                                     Follow us on Twitter
   •   congressional testimony
   •   an interactive blog, “Beyond The              Subscribe to our RSS feeds or email updates
       Numbers” where we welcome your
       comments


                          OBTAIN COPIES OF AUDIT REPORTS
To obtain copies of our reports, visit our Website at https://oig.ssa.gov/audits-and-
investigations/audit-reports/all. For notification of newly released reports, sign up for e-updates
at https://oig.ssa.gov/e-updates.

                          REPORT FRAUD, WASTE, AND ABUSE
To report fraud, waste, and abuse, contact the Office of the Inspector General via
   Website:        https://oig.ssa.gov/report-fraud-waste-or-abuse
   Mail:           Social Security Fraud Hotline
                   P.O. Box 17785
                   Baltimore, Maryland 21235
   FAX:            410-597-0118
   Telephone:      1-800-269-0271 from 10:00 a.m. to 4:00 p.m. Eastern Standard Time
   TTY:            1-866-501-2101 for the deaf or hard of hearing