Grant Thornton LLP recently completed an audit of the Social Security Administration's system to determine the administrative expenses to be reimbursed from the four trust funds it oversees.
The Social Security Administration’s system for assessing the administrative costs of the four trust funds it oversees could be risking errors because it has not been updated, according to a new audit.
The SSA provides support for trust funds covering insurance for retirement and survivors, disability insurance, and Medicare Parts A and B. The Cost Analysis System began operating in 1976 to estimate reimbursements due from each trust fund to cover SSA’s administrative costs.
Although the cost analysis system has been operating on stable, legacy information systems and most customers indicate they are satisfied, there are potential vulnerabilities and gaps that should be fixed, according to the April 20 audit by Grant Thornton LLP.
The cost methodology has not been updated to reflect changes in business processes, system technology, federal accounting standards or increased complexity in the workloads.
Also, the SSA may be putting its continuity of operations at risk because of “incomplete, outdated and/or unclear Cost Analysis System documentation and insufficient workforce planning,” the report said.
In addition, the SSA has not implemented changes to the cost allocation methodology that were recommended in 1997 based on recommendations from Pricewaterhouse Coopers LLP, the report added. Although some modernization of the cost analysis information system is underway, with a current plan to fully replace the mainframe with an Oracle-based system by 2013, those improvements do not address the recommendations of the Pricewaterhouse study, the audit stated.
The audit concluded that the cost analysis method needs to be improved to remain operating satisfactorily. “We concluded that the SSA Cost Analysis System is viable for calculating administrative costs if the risks identified during this audit are addressed,” the audit stated.
Grant Thornton recommended updates to the cost allocation methodology along with the administrative instructions manual. The audit also said the cost analysis methodology needs to be clearly documented, and a staffing plan needs to be developed to ensure continuity of operations and protect against loss of knowledge through attrition.
SSA officials did not comment on the report, saying that they were awaiting the results of additional audits being performed on the trust fund cost reimbursement methodologies.