The Majority of Reported Costs Incurred Using MMA Funds Consisted Of Personnel-Related and Contractor Expenses, and Indirect Costs

SSA reported spending the $500 million MMA funds from December 2003  through January 2006 on activities to implement the provisions specified  in MMA. More than half of the funds were spent on  personnel-related expenses for staff hours used on MMA activities at SSA’s  headquarters and field offices. Once the $500 million was spent, MMA  costs were funded by SSA’s LAE appropriation. As of February 2007, SSA reported it had completed 16 of the 22 tasks for  implementing six provisions of MMA. SSA is continuing its implementation  of the remaining six tasks using LAE funding. SSA Had Policies and Procedures for Tracking MMA Funds but They Were Not Complied with Consistently

SSA had agencywide policies and procedures in place over its cost  tracking and allocation, asset accountability, and invoice review and  approval processes. SSA also established specific guidance to charge and  allocate its costs to implement MMA. However, those policies and  procedures were not always complied with consistently. We found that  SSA did not effectively communicate the specific MMA-related guidance to  all relevant staff. Although purchase card transactions  and accountable asset purchases represented a small percentage of the  total MMA administrative costs that were paid with MMA funds, having  effective controls in place to ensure the proper approval, support, and  accountability for these transactions is essential to reduce the risk of  improper purchases and improperly accounted for assets. Recommendations for Executive Action

To enhance SSA’s (1) ability to track the costs of program activities  including MMA administrative costs, (2) controls over its review and  approval processes for purchase card payments, and (3) tracking of its  accountable assets, we recommend that the Commissioner of Social  Security    establish procedures to ensure better dissemination of policies and  procedures to all relevant offices and staff;    establish additional detailed procedures for a purchase card supporting  documentation review and approval process to help ensure that  purchase card payments are properly supported, allowable, and  allocated; and  reinforce existing policies and procedures for the purchase of  accountable assets to ensure that accountable assets are bar coded,  recorded in SSA’s asset inventory system, and inventoried periodically. Appendix I: Objectives, Scope, and Methodology

To review the costs of the Social Security Administration’s (SSA)  implementation of MMA activities, we reviewed the Medicare Prescription  Drug, Improvement, and Modernization Act of 2003 and discussed its  impact with SSA to obtain an understanding of SSA’s responsibilities  under the act. As a result, we focused our testing  of transactions on contractor and vendor payments. Also, the summary page and pages 3, 12 and 13 of the report state that “SSA subsequently  identified and corrected at least $4.6 million of amounts  misallocated between MMA  and other SSA program activities, but had not corrected approximately $313,000 misallocated  credit card purchase transactions.”  The fact is that $4.6 million was initially not correctly  allocated to MMA.
Why GAO Did This Study

The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) created a voluntary outpatient prescription drug benefit as part of the Medicare program, and appropriated up to $500 million for the Social Security Administration (SSA) to fund the start-up administrative costs in meeting its responsibilities to implement MMA. SSA was given a great deal of discretion in how to use the funds and the act provided little detail on how the funds were to be spent. You asked us to review SSA's costs for implementing MMA to determine (1) how the MMA funds were expended, (2) what procedures SSA has in place over the use of those funds, and (3) how SSA complied with those procedures related to contractor and vendor payments.

What GAO Found

SSA spent the $500 million in MMA funds from December 2003 through January 2006 to implement activities outlined in MMA. The majority of costs paid with MMA funds consisted of personnel-related expenses, contractors, and indirect costs. More than half of the funds were spent on payroll for staff hours used on MMA activities in SSA headquarters and field offices. Once the $500 million was spent, SSA began to use its general appropriation to fund the remaining costs of implementing MMA activities. SSA used its cost analysis system to track the total costs of its implementation of MMA activities. As of February 20, 2007, SSA had completed implementation of 16 of the 22 tasks for the six provisions under the act. SSA had agencywide policies and procedures in place for its cost tracking and allocation, asset accountability, and invoice review processes. It also established specific guidance to assign and better allocate SSA's costs in implementing MMA. There were some instances though where SSA did not comply with these policies and procedures. SSA did not effectively communicate the specific MMA-related guidance to all affected staff. SSA subsequently identified and corrected at least $4.6 million of costs that initially were incorrectly allocated to MMA, but had not corrected approximately $313,000 misallocated credit card purchase transactions. In addition, GAO found instances where accountable assets purchased with MMA funds, such as electronic and computer equipment, were not being properly tracked by SSA in accordance with its policies and instances where purchase card transactions were not properly supported. Although purchase card transactions and accountable asset purchases represented a small percentage of total MMA costs, proper approval and support for these types of transactions is essential to reduce the risk of improper payments.