Social Security Trust Funds Actuarial Estimates
Internal Control over Projection Process Needs Improvement Gao ID: GAO-03-246R March 4, 2003The combined Federal Old-Age, Survivors and Disability Insurance (OASDI) programs, commonly referred to as Social Security, provide protection against loss of earnings due to retirement, death, or disability. During calendar year 2001, the most recent year for which complete data were available at the time of our review, about 46 million people, including 91 percent of Americans age 65 or older, received $432 billion in benefits from the trust funds maintained for these programs. The Board of Trustees of the trust funds is required to report annually on the current and projected financial status of the Social Security programs to the Congress and the American people. The Social Security Administration's (SSA) Office of the Chief Actuary (OACT) provides estimates to the board to assist them in setting demographic, economic, and programmatic assumptions about OASDI's future performance that are needed to prepare long-range and short-range projections of the financial status of the trust funds for the trustees' reports. Based on the board's assumptions, OACT then prepares the projections and the trustees' report for the board. In its 2002 annual report, the Board of Trustees estimated that, under current rules, OASDI expenditures would begin to exceed revenue in calendar year 2017, causing the trust fund to be exhausted in 2041. Our specific objectives were to identify and evaluate the adequacy of OACT's (1) control activities over the projection process, (2) human capital practices related to workforce planning, and (3) tracking and resolution process to address recommendations from technical panels and other reviewers.
SSA's OACT has implemented some control activities to help provide assurance over OASDI trust fund projections, including informal reviews of data, calculations of projection components, and final projections. However, we found that documentation of OACT's long-range projection model, work processes, and work performed, including supervisory reviews, was insufficient. For example, there was no comprehensive description of the procedures necessary to prepare the long-range OASDI trust fund projections for the Trustees' reports, and documentation of the work performed by OACT while preparing projections was limited. Without explicit documentation of OACT's work processes and work performed, reviewers' opportunity for oversight was reduced, and the risk that errors in the projection process would go undetected was increased. While no major errors were identified in reviews of OACT's actuarial assumptions and methodologies, reviewers have pointed out the need for increased documentation. According to OACT officials, resource constraints were a key reason limiting the extent to which documentation was prepared. However, in light of potential near-term retirement of over 30 percent of OACT staff, documenting the projection process is becoming increasingly important to efficiently transition the work to new staff. We also found that OACT lacked a workforce plan to help ensure the availability of skills needed to achieve its mission. Such planning would typically include analyzing current and future workloads, identifying likely staff turnover and possible retention strategies, establishing skills sets for all key positions. and training staff to ensure that appropriate skill needs are met. Our recently issued tool for agency leaders, A Model of Strategic Human Capital Management, provides a framework for helping agency leaders plan and achieve effective use of their human capital. The lack of an adequate workforce plan coupled with insufficient policies and documentation, could negatively affect OACT's ability to achieve its mission in the future. OACT also lacks a monitoring policy and process for ensuring that recommendations from technical panels and other reviewers are tracked and addressed by OACT, leaving open the possibility that important initiatives and issues may not be completed in a timely manner. While OACT has taken steps to address some of the recommendations, it has not implemented a policy and associated procedures to (1) track recommendations it has received, (2) decide which recommendations should be implemented, (3) determine the order of priority, and (4) document the resolution of each recommendation. Without an established tracking and resolution process, OACT lacks a mechanism to help ensure that it addresses identified deficiencies and continues to improve its operations.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-03-246R, Social Security Trust Funds Actuarial Estimates: Internal Control over Projection Process Needs Improvement
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United States General Accounting Office:
Washington, DC 20548:
The Honorable Jo Anne B. Barnhart:
Commissioner:
Social Security Administration:
Subject: Social Security Trust Funds Actuarial Estimates: Internal
Control over Projection Process Needs Improvement:
Dear Ms. Barnhart:
The combined Federal Old-Age, Survivors and Disability Insurance (OASDI)
programs, commonly referred to as Social Security, provide protection
against loss of earnings due to retirement, death, or disability.
During calendar year 2001, the most recent year for which complete data
were available at the time of our review, about 46 million people,
including 91 percent of Americans age 65 or older, received $432
billion in benefits from the trust funds maintained for these programs.
The Board of Trustees [Footnote 1] of the trust funds is required to
report annually on the current and projected financial status of the
Social Security programs to the Congress and the American people.
[Footnote 2] The Social Security Administration‘s (SSA) Office of the
Chief Actuary (OACT) provides estimates to the board to assist them in
setting demographic, economic, and programmatic assumptions about
OASDI‘s future performance that are needed to prepare long-range and
short-range projections of the financial status of the trust funds for
the trustees‘ reports. Based on the board‘s assumptions, OACT then
prepares the projections and the trustees‘ report for the board. In its
2002 annual report, the Board of Trustees estimated that, under current
rules, OASDI expenditures would begin to exceed revenue in calendar
year 2017, causing the trust fund to be exhausted in 2041.
A wide spectrum of users relies on these projections for a variety of
purposes. These include the Congress, which needs reliable information
about the Social Security trust funds to make informed decisions about
the future funding and benefits of the OASDI programs. Providing
decision makers with reasonable assurance about the reliability of
financial reporting is one of the specific objectives of the Standards
for Internal Control in the Federal Government [Footnote 3] issued by
the Comptroller General. The Standards, which consider an entity‘s
internal control in terms of its control environment, risk assessment,
control activities, information and communication, and monitoring,
apply to all aspects of an agency‘s operations: programmatic,
financial, and compliance. Strong internal control is particularly
important in the OACT, where making reliable projections is intensively
people and process oriented. Control activities”the policies,
procedures, techniques, and mechanisms that enforce management‘s
directives”are a key aspect of an effective system of internal control
and include proper reviews, approvals, and documentation that help
ensure work processes are carried out according to management‘s
directives. For example, control activities include checks and balances
that provide reasonable assurance that data are entered correctly and
calculated results are reported properly. Control activities also
include effective management of an organization‘s workforce”its human
capital”which is essential to achieving results. Monitoring activities,
another key aspect of internal control, help track the effectiveness of
control activities, including those to ensure that findings of audits
and other reviews are promptly resolved.
We selected these activities for review because of their importance in
the preparation of long-range financial projections for the OASDI trust
funds. Our specific objectives were to identify and evaluate the
adequacy of OACT‘s (1) control activities over the projection process,
(2) human capital practices related to workforce planning, and (3)
tracking and resolution process to address recommendations from
technical panels and other reviewers. To achieve these objectives, we
reviewed our prior reports and reports by other reviewers, interviewed
OACT management and staff and certain other SSA officials, and obtained
and reviewed available documentation concerning the projection process.
We used as a guide the Standards for Internal Control in the Federal
Government [Footnote 4] with a focus on OACT control activities over the
long-range projection process used for the 2002 Trustees‘ report. We
conducted our work in Washington, D.C., and Baltimore, Md., from
October 2001 through November 2002 in accordance with generally
accepted government auditing standards. We did not evaluate the
actuarial assumptions and methodology because they are subject to
periodic reviews by technical panels and others. We received written
comments on a draft of our report from the Commissioner, SSA, and have
reprinted their comments in enclosure II. Further details of our scope
and methodology are provided in enclosure I.
Results in Brief:
SSA‘s OACT has implemented some control activities to help provide
assurance over OASDI trust fund projections, including informal reviews
of data, calculations of projection components, and final projections.
However, we found that documentation of OACT‘s long-range projection
model, work processes, and work performed, including supervisory
reviews, was insufficient. For example, there was no comprehensive
description of the procedures necessary to prepare the long-range
OASDI trust fund projections for the Trustees‘ reports, and
documentation of the work performed by OACT while preparing projections
was limited. Without explicit documentation of OACT‘s work processes
and work performed, reviewers‘ opportunity for oversight was reduced,
and the risk that errors in the projection process would go undetected
was increased. While no major errors were identified in reviews of
OACT‘s actuarial assumptions and methodologies, reviewers have pointed
out the need for increased documentation. [Footnote 5] According to
OACT officials, resource constraints were a key reason limiting the
extent to which documentation was prepared. However, in light of
potential near-term retirement of over 30 percent of OACT staff,
documenting the projection process is becoming increasingly important
to efficiently transition the work to new staff.
We also found that OACT lacked a workforce plan to help ensure the
availability of skills needed to achieve its mission. Such planning
would typically include analyzing current and future workloads,
identifying likely staff turnover and possible retention strategies,
establishing skills sets for all key positions, and training staff to
ensure that appropriate skill needs are met. Our recently issued tool
for agency leaders, A Model of Strategic Human Capital Management,
[Footnote 6] provides a framework for helping agency leaders plan and
achieve effective use of their human capital. The lack of an adequate
workforce plan, coupled with insufficient policies and documentation,
could negatively affect OACT‘s ability to achieve its mission in the
future. [Footnote 7]
OACT also lacks a monitoring policy and process for ensuring that
recommendations from technical panels and other reviewers are tracked
and addressed by OACT, leaving open the possibility that important
initiatives and issues may not be completed in a timely manner. While
OACT has taken steps to address some of the recommendations, it has not
implemented a policy and associated procedures to (1) track
recommendations it has received, (2) decide which recommendations
should be implemented, (3) determine the order of priority, and (4)
document the resolution of each recommendation. Without an established
tracking and resolution process, OACT lacks a mechanism to help ensure
that it addresses identified deficiencies and continues to improve its
operations.
We are making recommendations aimed at strengthening OACT‘s internal
control over documenting key procedures, establishing a workforce plan,
and addressing recommendations from reviews. In commenting on a draft
of this report, SSA generally agreed with most of our recommendations
but raised concerns about several areas. Most significantly, SSA agreed
with the need to continue to better document OACT‘s internal controls,
but believed that OACT has a strong internal control process and
culture. SSA specifically disagreed with our conclusion that the lack
of documentation increased the risk of errors. While their practices
might be sound, without explicit documentation of the work that is
planned and performed, the opportunity for supervisors to identify
errors or inconsistencies in the work is greatly impeded. This in turn
increases the risk that errors in the projection process could go
undetected.
Background:
The Social Security program was developed to provide income security to
citizens and permanent residents of the United States under specific
circumstances as a responsibility of the government. SSA is responsible
for administering the nation‘s Old-Age and Survivors Insurance (OASI),
Disability Insurance (DI), and other income security programs. OASI
provides benefits to retired workers and their families and to
survivors of deceased workers. DI pays benefits to disabled workers and
their families. The OASDI programs are funded by payroll taxes, taxes
on self-employment income, and income from the taxation of benefits.
Income in excess of expenditures is held in the OASDI trust funds and
invested in federal government securities.
OACT‘s mission involves reviewing the balance between future benefit
payments and future income of the OASDI programs. Further, evaluating
the cost of proposals to change the programs is an important task of
OACT. One of the recurring reports prepared by OACT is the annual
report of the Board of Trustees on the OASDI trust funds and the
current and projected financial condition of the funds based on
assumptions set by the Trustees. Although preparing the Trustees‘
report is only one of OACT‘s activities, of the 51 full-time equivalent
(FTE) staff on board, approximately 20 participate directly in
preparing the long-range projections of OASDI for the reports, which,
for the most part, takes place between September and March. OACT has
organized its staff into three teams that focus on specialized areas
for the long-range estimates. The demographics team estimates the
social security population. The economics team estimates the covered-
worker population, as well as future income to the trust funds. The
program team estimates future benefits, cost projections, and the long-
range trust fund financial status.
The Trustees‘ reports present both short-range (10-year) and long-range
(75-year) projections of the OASDI trust funds‘ future financial
condition. The estimates are made based on current law and board-
approved assumptions about factors that affect the income and
expenditures of the trust funds. The long-range projections are
generated using a complex, computerized model consisting of many
interrelated programs. Some of the data that are used in the long-range
projections come from external sources such as the Census Bureau,
National Center for Health Statistics, Bureau of Economic Analysis, and
Bureau of Labor Statistics.
The Board of Trustees‘ projection assumptions and OACT‘s actuarial
projection methodology are subject to periodic review by independent
experts to help ensure their validity and reasonableness. The Social
Security Advisory Board periodically convenes technical panels
consisting of expert actuaries, economists, and demographers to review
the assumptions and methods underlying the projections included in the
Trustees‘ reports. [Footnote 8] The Technical Panel reports typically
include recommendations primarily relating to actuarial methodologies
and assumptions. [Footnote 9] In addition, in January 2000, we reported
on an evaluation of actuarial methods, techniques, and assumptions used
in preparing the actuarial projections of the Social Security trust
funds contained in the 1999 Trustees‘ report. [Footnote 10] To make
these determinations, we contracted with PricewaterhouseCoopers, an
independent accounting and consulting firm, to evaluate the actuarial
methodologies and assumptions. While OACT has been subjected to reviews
by technical panels and others, internal control over its projection
processes had not been independently reviewed previously.
Although projections are inherently uncertain because they depend on
assumptions about the occurrence of future events, an effective system
of internal control can help provide reasonable assurance that
projections included in financial reports are reliable. The Comptroller
General issues standards for internal control in the federal government
[Footnote 11] that provide the overall framework for management to
establish and maintain internal control and to identify and address
major performance and management challenges. According to these
standards, internal control, also referred to as ’management control,“
comprises the plans, methods, and procedures used to meet the missions,
goals, and objectives of an organization. One of its objectives is the
reliability of financial reporting, including financial statements and
other reports for internal and external use.
The Federal Accounting Standards Advisory Board [Footnote 12] (FASAB)
promulgates federal accounting standards, which form the foundation for
preparing consistent and meaningful financial statements both for
individual agencies and the government as a whole. FASAB is currently
reviewing the accounting and financial reporting requirements for
social insurance trust funds. The provisions of Statement of Federal
Financial Accounting Standards No. 17 currently require reporting
certain social insurance information as Required Supplementary
Stewardship Information, [Footnote 13] resulting in limited audit
coverage. Reclassifying the required information as basic financial
information, as currently discussed by FASAB, would subject the
information to more extensive audit scrutiny. While specific procedures
to audit social insurance projections have not been developed, typical
audit procedures would likely include obtaining an understanding of
policies and procedures, assessing the adequacy of internal control,
and analyzing key projections.
Limited Documentation Reduced Effectiveness of Control Activities:
Although the Standards for Internal Control in the Federal Government
[Footnote 14] call for clear documentation of policies, procedures, and
actions, we found that OACT has not fully implemented these key control
activities. While OACT has documented some portions of the complex
model used to generate long-range projections for the OASDI trust
funds, OACT has not fully documented the model. Also, the procedures
needed to prepare the projections for the Trustees‘ reports have not
been fully documented, although descriptions of some portions have been
drafted. Further, when preparing the projections, staff did not
adequately document the work they performed, including adjustments and
changes to data or results, nor did management or supervisors document
their reviews of various phases of the process. OACT management cited
resource constraints as a key reason for not performing these tasks.
The lack of documented planned procedures, work performed, and reviews
increases the risk that errors in the projection process could go
undetected and impedes efforts by those who evaluate the projections.
According to the Standards for Internal Control in the Federal
Government, management is responsible for developing the detailed
policies, procedures, and practices to fit their agency‘s operations
and ensuring that internal control is built into and is an integral
part of operations. The Standards also provide that procedures need to
be clearly documented, documentation should be readily available for
examination, and documentation should be properly managed and
maintained. Furthermore, actuarial standards of practice [Footnote 15]
state that actuaries should identify the data, assumptions, and methods
they use with sufficient clarity so that another actuary qualified in
the same practice area could evaluate the reasonableness of the work.
[Footnote 16] These standards also stipulate that this documentation be
retained for a reasonable period of time.
OACT has not developed a comprehensive flow chart or description of the
model used to produce the long-range projection. OACT has documented
portions of their actuarial methodology in actuarial studies, such as
the social security population projection used in preparing the 1997
Trustees' report, [Footnote 17] but an overall description of the long-
range projection model has not been fully documented. Furthermore,
although one supervisory actuary required his staff to document the
procedures they used after they had prepared certain portions of the
2002 Trustees‘ report projection, a complete procedural description of
the process in standardized form and content has not been prepared.
We also found that OACT had not documented acceptable ranges for
fluctuation in ratios and trends between reporting periods to provide
guidance for consistently judging reasonableness from year to year.
Establishing and documenting acceptable ranges for reasonableness tests
of ratios and trends is important because SSA actuaries use these tests
to judge the reasonableness of results from the overall model as well
as discrete portions of the model.
In addition to limited documentation of the overall long-range
projection model and planned procedures to follow in preparing the
projection, OACT could provide little documented evidence of the
procedures performed by staff during the projection process. According
to OACT staff, some of the steps performed during preparation of the
Trustees‘ report include reasonableness reviews of source data, the
entry of data into the model, reasonableness tests of component
calculations of the projection, and adjustments made to preliminary
results. OACT could not provide documented evidence of adjustments made
to data or component calculations based on reasonableness reviews and
tests performed by staff. For example, an OACT staff member told us
that immigration source data were recognized as problematic, that
adjustments to that data were required regularly, and that most of the
time devoted to processing that portion of the population model was
spent analyzing the data. However, no documentation of related
adjustments was available. Proper documentation of these types of
changes would allow effective review, showing why a problem occurred,
what was done to address the problem, who addressed it, and who
approved the action taken.
We found that evidence documenting supervisory actuaries‘ reviews of
the work done by staff and of projection results was lacking, although
demographics team actuaries told us that they meet weekly to discuss
work performed and problems encountered during the preparation of the
long-range projection. Also, there was limited documented evidence of
product reviews and reasonableness checks performed at the management
level. According to the actuaries in OACT, reasonableness checks of
data and projection results are done at many levels, including those
done by supervisory actuaries and OACT management. As an example,
another OACT staff member told us that he reviewed the numbers and
graphs presented in the 2002 Trustees‘ report to determine that they
agreed with the projection calculations prepared by OACT for that
report. He presented a copy of the report containing markings that
indicated work had been done but explanation of the markings, the
procedures performed, and the conclusions were not documented.
Supervisory actuaries told us that one type of reasonableness check is
a reconciliation performed between the first 10 years of the long-range
projection and the 10-year short-range projection to compare results
and identify differences. The effect of this reconciliation is to
smooth the differences between the two projection models. OACT could
not provide documentation showing that the reconciliation had been
performed.
According to OACT staff, resource constraints have prevented completion
of documentation of the projection model and the work plan, although
numerous attempts have been made. Staff also attributed the lack of
documentation of work performed and supervisory reviews to resource
constraints. According to OACT management, while demands placed on the
office in recent years have stretched existing resources, the knowledge
and experience of OACT staff provide assurance of projection
reliability. Accordingly, OACT management has not developed policy
guidance concerning documentation requirements.
Similarly, the 1999 Technical Panel recognized the extraordinary
demands placed on OACT for analysis of legislative proposals and the
difficulty of adequately addressing the need for thorough documentation
of all areas involved in making financial projections given OACT‘s
current resources. [Footnote 18] The 1999 Technical Panel also reported
that OACT‘s work was outstanding and the projection methodology
reasonable as a whole, but recommended that adequate resources be
provided to help document the current projection system. Further, the
panel identified no major errors. Also, our January 2000 report
[Footnote 19] stated that comprehensive documentation would benefit
those who evaluate or assist in the development of the financial
projections. While we reported that the actuarial methods and
techniques used in preparing the long-range projection were sound and
the assumptions were reasonable, our report specifically noted that,
’although not explicitly within the specific scope of this project, we
observed that there are a number of gaps in the documentation of
current practice.“
Collectively, the lack of complete and current documentation of the (1)
entire model, (2) projection work plan, (3) work completed during the
projection process including adjustment of data and component
calculation results, and (4) reviews by supervisors and managers,
increases the risk that errors could occur in future projections and not
be detected. In addition, these documentation deficiencies limit:
* guidance available to staff regarding projection preparation;
* evidence that proper practices are consistently followed from year to
year, as planned;
* assurance to OACT‘s management regarding projection reliability;
* opportunities to provide staff, especially new staff, with an
overview of the entire projection process; and;
* the effectiveness and efficiency of reviews within and outside of
OACT, such as OACT‘s ability to effectively and efficiently communicate
its projection procedures.
In addition, increased audit scrutiny that could result from FASAB‘s
current consideration of changes to social insurance reporting
requirements would magnify the need for documentation of the long-range
projection work plan and steps performed. Furthermore, as discussed in
the next section, retirement eligibility will seriously impact OACT in
the next 5 years. When experienced actuaries retire and less
experienced actuaries replace them, the documentation needed to bridge
the knowledge gap becomes more critical. In consideration of potential
near-term retirements and associated staff changes, documenting the
projection process is critical for an efficient transition of the
workload.
Inadequate Workforce Plan Could Negatively Affect OACT‘s Ability to
Achieve Its Mission:
While OACT currently has qualified, experienced staff, it is aware that
the potential retirement of more than 30 percent of its staff,
including key management and professional personnel, over the next 5
years will expose the office to a loss of institutional knowledge that
is vital to its operations. In response to this potential loss of
experience and knowledge, OACT has stepped up recruiting efforts and is
encouraging staff to sit for actuarial exams. OACT has not, however,
developed a workforce plan for hiring and training future staff and
management based on an assessment of current skill levels and future
skill needs. Lack of an adequate workforce plan could impede OACT‘s
ability to achieve its mission in the future.
According to the Standards for Internal Control in the Federal
Government, effective management of an organization‘s workforce”its
human capital”is essential to achieving results and an important part
of internal control. Management should ensure that skill needs are
continually assessed and that the organization is able to obtain a
workforce that has the required skills that match those necessary to
achieve organizational goals. According to our recently issued tool for
agency leaders, A Model of Strategic Human Capital Management,
[Footnote 20] high-performing organizations identify their current and
future human capital needs, including the appropriate number of
employees, the key competencies and skills mix for mission
accomplishment, and the appropriate deployment of staff across the
organization, and then create strategies for identifying and filling
gaps. According to the International Personnel Management Association‘s
workforce planning guide, [Footnote 21] a good workforce plan would
include:
* analyzing present workload, workforce, and competencies;
* identifying workload, workforce, and competencies needed for the
future;
* comparing the present workload, workforce, and competencies to future
needs to identify gaps and surpluses;
* preparing and implementing plans to build the workforce needed for
the future; and;
* evaluating the success of the workforce planning model to ensure it
remains valid and objectives are being met.
OACT, however, has not performed an in-depth analysis to identify
issues such as workloads, skill gaps, and succession plans as outlined
in SSA‘s Future Workforce Transition Plan. [Footnote 22] As of November
15, 2002, OACT had a staff of 51 FTEs, 16 of whom have been part of
OACT for fewer than 5 years. Moreover, OACT does not have a succession
plan to address the potential retirement of its managers and staff.
With over 30 percent of its staff eligible to retire in the next 5
years, including 7 management and 7 professional staff, OACT has
accelerated its recruiting efforts, but the lack of a well-considered
workforce analysis increases the potential for vital knowledge to be
lost when experienced actuaries retire or otherwise leave the agency.
Our January 2000 report noted that OACT has hired qualified staff. To
develop staff, OACT provides some cross-training and conducts on-the-
job training. OACT also provides training opportunities by allowing
staff to use work time to study for exams given by the Society of
Actuaries [Footnote 23] and, if funds are available, by paying for the
exam fees, books, and other study material to help staff successfully
complete the exams. However, OACT does not have a formal plan for staff
training and development and has no requirements for continuing
professional education.
A Model of Strategic Human Capital Management [Footnote 24] recognizes
that people are assets whose value can be enhanced through investment.
In addition, our analysis of training programs at federal agencies
[Footnote 25] emphasized that to design and implement effective
training programs, agencies must (1) identify the competencies needed to
achieve their specific mission and goals and measure the extent to
which their employees exhibit those competencies, (2) identify training
and development needs to be addressed, and (3) evaluate the extent to
which their training programs are actually increasing employees‘
individual competencies and individual and overall organization
performance levels. Our analyses found that effective training programs
(1) include training curricula for developing employee skills in
selected occupations, (2) require or recommend that employees complete
training on specific topics or meet a minimum number of training hours,
and (3) make training slots available each year on the basis of
estimated needs, priorities, and available resources.
Effective human capital strategies can enable an organization to have
the right people, with the right skills, doing the right jobs, in the
right place, at the right time. [Footnote 26]
Without a workforce plan that is predicated on an analysis that
integrates with SSA‘s overall workforce analysis and planning efforts,
OACT lacks a strategic focus on its human resource issues, which
impedes its ability to align those resources with completion of
critical tasks now and in the future.
Lack of a Formal Policy and Process to Track and Address
Recommendations Could Reduce Opportunity for Improvements:
Technical panels and other reviewers have provided recommendations to
OACT management about technical issues and documentation concerning the
projection system. While OACT management has taken action on some of
those recommendations, it has not developed a monitoring policy and
process to respond to individual recommendations and track steps taken
to address those requiring action. Accordingly, OACT could not readily
provide us with the status of actions taken to respond to
recommendations from technical panels and our January 2000 report.
Although there is no requirement to respond to recommendations made by
technical panels, without a tracking process, important improvements to
the projection process may be overlooked or may not be completed in a
timely manner.
According to the Standards for Internal Control in the Federal
Government, monitoring of internal control should include policies and
procedures for ensuring that the findings of audits and other reviews
are promptly resolved. The standards further state that the resolution
process begins when audit or other review results are reported to
management, and is completed only after action has been taken that (1)
corrects identified deficiencies, (2) produces improvements, or (3)
demonstrates that the findings and recommendations do not warrant
management action. The Office of Management and Budget (OMB) Circular A-
50, Audit Followup, provides policies for executive branch agencies to
use when following up on our reports and reports issued by the
Inspectors General (IG) and others, and emphasizes the importance of
establishing a system to provide a complete record of action taken on
recommendations. In accordance with OMB Circular A-50, SSA has
implemented an agencywide system to monitor our and IG engagements and
facilitate follow-up by components, such as OACT, on recommendations
resulting from these engagements. [Footnote 27] This system relies on
periodic updates from components on the status of recommendations and
does not include recommendations from technical panels.
OACT has not developed a process to track steps taken to address
recommendations made in technical panel reports and other reviews.
Therefore, OACT cannot readily supply updates to the agencywide system
on our report and similar reports, nor provide the status of updates on
technical panel recommendations efficiently and effectively. Such a
tracking process would typically include documenting management‘s
position on recommendations, establishing a timetable for resolving the
recommendations, and designating a management official to oversee the
resolution of corrective action, issues which are discussed in OMB
Circular A-50 as applying to audits.
Three technical panels have been convened since 1991 by the Social
Security Advisory Board or its predecessor, the Social Security
Advisory Council, to review the assumptions and methodology used to
project the future financial status of the OASDI trust funds. As
previously discussed, both the 1991 and the 1999 technical panels urged
further documentation of the current projection system and made
several recommendations relating to technical issues surrounding it.
[Footnote 28]
In response to our request for an update on the status of
recommendations from our January 2000 report, [Footnote 29] which
included recommendations for improving documentation, developing
assumptions, and performing additional sensitivity testing, it was
necessary for OACT management to research each of the recommendations
to determine if and how they had been resolved. In addition, OACT could
not readily describe actions taken on recommendations of the 1999
Technical Panel. Management cannot remain informed of the status and
resolution of recommendations nor can they respond to recommendation
resolution status requests efficiently and effectively unless a
tracking system that provides information on decisions and actions for
each recommendation is implemented and maintained.
OACT officials told us there is no requirement for OACT to respond,
either formally or informally, to recommendations made by the technical
panels and that limited resources restrict OACT‘s ability to formally
track recommendation resolution. However, management cannot be assured
that all technical panel recommendations were considered and that those
providing for improved or corrected results have been implemented
unless actions to address recommendations, particularly those bearing
on the projection methodology, are documented as provided for in OMB
Circular A-50 regarding audit follow-up. [Footnote 30] Also, without
tracking and documenting action taken in response to recommendations,
responding to follow-up inquiries concerning recommendations will
remain a labor-intensive and inefficient exercise. Further, unless OACT
management develops and implements a tracking and resolution process to
address recommendations, it leaves open the possibility that important
initiatives will not be completed in a timely manner or will go
uncompleted, thus effectively wasting the resources expended by
technical panels and other reviewers.
Conclusion:
The Congress and other decision makers rely on SSA‘s OACT to provide
reliable estimates of future OASDI expenditures and income. While OACT
has indicated that many informal control activities are taking place,
internal control over OACT‘s long-range projection processes regarding
documentation, workforce planning, and its policies for resolving
recommendations are inadequate. Incomplete documentation of the
projection model and procedures, work completed during the projection
process, and the reviews of projection work and products by supervisors
and managers, increases the risk that errors could occur in future
projections and not be detected. Documenting all tasks is important to
the efficient transfer of knowledge concerning policies, procedures,
and processes to new staff. While resource constraints might have
impeded OACT‘s efforts to properly document policies and projection
procedures, the lack of a workforce plan has prevented systematic
analysis of OACT‘s workload, identification of the skill mix needed to
accomplish that work, identification of the skill levels of current
staff, and the identification of supporting resources needed to perform
these and other critical OACT functions. Moreover, OACT management has
not documented the priority and status of actions planned and taken to
address recommendations from auditors, including GAO, technical panels,
and other reviewers, increasing the risk that significant
recommendations might not be addressed in a timely manner.
Recommendations for Executive Action:
To address the internal control weaknesses we identified related to
policy development, documentation, workforce management planning, and
monitoring follow-up of external review recommendations, we recommend
that the Commissioner of SSA direct the Chief Actuary to:
* develop and implement policies regarding documentation of the work
performed by OACT;
* document the:
- projection model;
- procedures needed to generate the projections, including acceptable
ranges for reasonableness tests;
- work performed by staff to prepare projections, and;
- supervisory and management reviews;
* develop and implement a workforce plan that integrates with SSA‘s
Future Workforce Transition Plan and includes the following elements:
- analyzing present workload, workforce, and competencies;
- identifying workload, workforce, and competencies needed for the
future;
- comparing the present workload, workforce, and competencies to future
needs to identify gaps and surpluses;
- preparing and implementing plans to build the workforce needed for
the future, and;
- evaluating the success of the workforce planning model to ensure it
remains valid and objectives are being met; and;
* develop and implement a formal policy to track, follow up, and
resolve findings and recommendations of external audits and reviews.
In addition, to overcome the challenge of limited resources, we
recommend that the Commissioner of SSA, in consultation with the Chief
Actuary, consider using alternative approaches, such as contractor
assistance, to address the above recommendations.
Agency Comments and Our Evaluation:
In written comments (reprinted in enclosure II) on a draft of this
report, SSA generally agreed with most of our recommendations but
raised concerns about several areas.
Concerning our conclusion and recommendations related to OACT‘s limited
documentation of procedures and processes, SSA commented that, while it
agreed that more formal documentation of internal control could be of
value, it disagreed with the conclusion that current OACT procedures
increase the risk of errors. While OACT‘s current procedures might be
sound, without explicit documentation of the work that is planned and
performed, the opportunity for supervisors to identify errors or
inconsistencies in the work is greatly impeded. This in turn increases
the risk that errors in the projection process could go undetected.
SSA agreed that written documentation of reviews would assist in
assuring auditors that the reviews were done and discussed the
additional documentation of reviews that they have begun. However, SSA
also stated that documentation of reviews, perhaps in the form of
"check-off lists," would not necessarily reduce the risk of errors and
that overdependence on sequential check-off lists could pose a risk by
implying that work checked off was not subject to subsequent necessary
revision. We disagree. Documentation, whether in a checklist or another
form, provides a degree of assurance to management, as well as
auditors, that planned procedures have been properly completed. It is
not a substitute for technical expertise or professional judgment but
complements those integral components of competent performance that are
especially critical in OACT.
In its comments, SSA stated that it does not believe the limited focus
of our review allowed us to understand the extent of OACT‘s present
documentation of the projection model. Our review focused exclusively
on OACT‘s controls over the projection process and provided a
sufficient basis to identify shortfalls in OACT‘s documentation. Our
report points out that, while portions of the model and their
procedures have been partially documented, neither an overall summary
of the model for OACT‘s long-range projection nor a work plan to
prepare the projection exists. These basic documents are needed to
provide (1) an overview of the entire projection process and detailed
guidance about projection preparation for new OACT staff, (2)
additional assurance that proper practices are consistently followed
from year to year, and (3) a means for OACT to effectively and
efficiently communicate its procedures to reviewers within and outside
of OACT. Further, in its technical comments, SSA suggested that we
revise our recommendations to essentially eliminate our recommendation
to document the projection model. Because of its importance, we are
retaining the recommendation to document the projection model and
encourage SSA to complete this essential documentation.
Regarding our recommendation that OACT document acceptable ranges for
reasonableness tests, SSA stated that because outputs of the projection
involve yearly changes in input data, assumptions, and methodology,
absolute standards cannot be set for such reasonableness tests. We did
not recommend establishing absolute standards but instead call for
acceptable ranges to provide guidance for consistently making
reasonableness judgments from year to year. We understand that elements
of the model change each year. Because of these changes, it is
especially important to provide guidance to ensure that differences
that exceed a predetermined range or criteria are uniformly identified
and questioned by staff, especially junior staff, and reviewers. The
intent of our recommendation is to help ensure that appropriate
attention is focused on changes in data and results that exceed the
criteria.
In response to our recommendations concerning development and
implementation of a workforce plan and a policy to track, follow up,
and resolve audit and review findings and recommendations, SSA
described actions it has planned. In both areas, we believe additional
steps are needed to obtain the greatest benefit. SSA described how its
training and development process is focused on on-the-job training.
However, as discussed in the report, our analysis of training programs
at federal agencies emphasized the importance of formal training in
addition to on-the-job training to help ensure staff skills are fully
developed. Regarding follow-up of audit and review recommendations, SSA
noted that there is a tracking system in place for audits. However, as
we reported, SSA‘s system depends on timely periodic updates from
components such as OACT. Neither SSA nor OACT could readily provide us
with the status of actions to respond to recommendations from our
January 2000 report. SSA also outlined its plans for OACT to implement
a tracking system for technical panels and other reviews. SSA‘s stated
plan is a good start as described, but is missing a key step to enhance
accountability for completing corrective actions by assigning
responsibility to individuals. This step would be consistent with the
provisions of OMB Circular A-50 and provide a mechanism of
accountability and assurance to management that corrective actions are
completed. We believe it would benefit OACT to consolidate its process
to follow up on recommendations from all reviews and audits so that
they can be efficiently tracked and resolved.
SSA did not comment on our recommendation to consider alternative
approaches, such as contractor assistance, to address our other
recommendations. However, during a subsequent conversation with an SSA
official, we were advised that OACT management is discussing
alternative approaches such as contractor assistance.
This report contains recommendations to you. The head of a federal
agency is required by 31 U.S.C. 720 to submit a written statement on
actions taken on these recommendations to the Senate Committee on
Governmental Affairs and the House Committee on Government Reform and
Oversight within 60 days of the date of this report. You must also send
a written statement to the House and Senate Committees on
Appropriations with the agency‘s first request for appropriations more
than 60 days after the date of this report.
We are sending copies of this report to the Chairman and Ranking
Minority Member, Senate Committee on Governmental Affairs; the Chairman
and Ranking Minority Member, Senate Committee on Finance; the Chairman
and Ranking Minority Member, House Committee on Government Reform; the
Chairman and Ranking Minority Member, House Committee on Ways and
Means; the Chairman and Ranking Minority Member, Subcommittee on Social
Security, House Committee on Ways and Means; and other interested
congressional committees. In addition, this report is available at no
charge on our Internet home page at [hyperlink, http://www.gao.gov]. If
you have any questions about this report, please contact me at (202)
512-9508 or Kay L. Daly, Assistant Director, at (202) 512-9312. You may
also reach us by e-mail at calboml@gao.gov or dalykl@gao.gov. Key
contributors to this assignment were Joseph Applebaum, Lisa Crye, Marie
Novak, Taya Tasse, Jack Warner, and Brooke Whittaker.
Sincerely yours,
Signed by:
Linda Calbom:
Director, Financial Management and Assurance:
Enclosures:
[End of correspondence]
Enclosure I:
Scope and Methodology:
Because of the importance of long-range projections, their inclusion in
agency and governmentwide financial reports, and the potential for
their being subjected to increased audit scrutiny as basic financial
information, we focused on internal control over the procedures used by
OACT to prepare the 2002 long-range projection. Throughout our work, we
used as a guide the Standards of Internal Control in the Federal
Government. [Footnote 31] Because of the technical nature of OACT‘s
work, we focused on assessing control activities, including human
capital management, and monitoring activities, including recommendation
follow-up.
To achieve our overall objectives, we obtained and reviewed past
Trustees‘ reports, technical panel reports, and GAO work to gain an
understanding of the assumptions and methods used by OACT. We also
reviewed pertinent documentation provided by OACT and actuarial
standards of practice promulgated by the Actuarial Standards Board.
To identify and evaluate OACT‘s control activities over documentation
of the projection process, we interviewed OACT managers and staff to
identify policies and procedures, including reviews made by supervisors
and managers of interim and final results. We also reviewed available
paper and electronic documentation from OACT, including descriptions of
steps needed to complete the projections, computer spreadsheets, trend
analyses, graphs, and other printouts used to conduct reasonableness
reviews, and actuarial standards of practice relating to actuarial
communications and documentation.
To identify and evaluate OACT‘s human capital control activities, we
made inquiries of managers in OACT to assess their approach to human
capital management, including skill needs assessments, training,
supervision, and succession planning. We also discussed training and
supervision practices with OACT staff. Further, we interviewed
officials from SSA‘s Office of Personnel to identify agency and OACT
human capital practices and reviewed SSA‘s Future Workforce Transition
Plan to identify overall agency human capital initiatives.
To assess OACT‘s tracking and resolution process to address
recommendations, we interviewed OACT management and officials from
SSA‘s Offices of the Inspector General and Management Analysis and
Audit Program Support about policies and procedures for ensuring that
the findings of audits and other reviews are promptly resolved. We also
obtained documentation of OACT‘s response to recommendations included
in our January 2000 report on an evaluation of actuarial methods,
techniques, and assumptions used in preparing the actuarial projections
of the Social Security trust funds contained in the 1999 Trustees‘
report.
When controls were identified, we evaluated whether the controls as
designed and implemented would provide management with reasonable
assurance that the control objectives were achieved. We confirmed our
understanding of the internal control system currently in place through
discussions with OACT officials. We did not evaluate the assumptions
and methods used by OACT or the accuracy of the data and information
they used. Our work was not designed to assess the effect of control
weaknesses that we identified on the reliability of previous
projections prepared by OACT. We conducted our work from October 2001
through November 2002, in Washington, D.C., and Baltimore, Md., in
accordance with generally accepted government auditing standards. We
requested and obtained written comments on a draft of this report from
the Commissioner of SSA. Those comments are reprinted in enclosure II.
[End of enclosure]
Enclosure II:
Comments from the Social Security Administration:
Social Security:
The Commissioner:
Social Security Administration:
Baltimore, MD 21235-0001:
February 5, 2003:
Ms. Linda M. Calbom:
Director:
Financial Management and Assurance:
U.S. General Accounting Office:
Washington, DC 20548:
Dear Ms. Calbom:
Thank you for the opportunity to review and comment on the preliminary
draft report "Social Security Trust Funds Actuarial Estimates: Internal
Control Over Projection Process Needs Improvement (GAO-03-246R)." I
recognize the critical importance of the work performed in the Office
of the Chief Actuary (OACT) and of effective internal controls. The
work of the OACT has been reviewed on a regular basis by outside panels
of experts. These experts have found the work of the office to be sound
and the staff to be highly competent. Although we agree with the need
to continue to better document OACT's internal controls, we believe
that OACT has a strong internal control process and culture.
Our comments on your report are enclosed. Staff questions may be
directed to Alice Wade, Deputy Chief Actuary for Long-Range Estimates.
Ms. Wade can be reached by phone at 410-965-3002 or by email at
Alice.H.Wade@ssa.gov.
Sincerely,
Signed by:
Jo Anne B. Barnhart:
Enclosure:
Comments On The General Accounting Office (GAO) Report "Social Security
Trust Funds Actuarial Estimates: Internal Control Over Projection
Process Needs Improvement" (GAO-03-246R):
We appreciate the opportunity to review the subject report. The
Commissioner of Social Security recognizes the critical importance of
the work performed in the Office of the Chief Actuary (OACT) and of
effective internal controls. For over 65 years, OACT has made financial
evaluations of the Social Security program and proposals to change the
program. These evaluations are considered authoritative and serve as
the basis for analyzing the financial status of the Social Security
program. Over the years, data, assumptions, and methodologies used in
these financial evaluations have been provided to experts both inside
and outside government for their use and their review. Experts outside
the government include faculty of universities specializing in
demographic and economic research. In addition, the work of OACT has
been reviewed on a regular basis by outside panels. These experts and
panels have found the work of the office to be sound and the staff to
be highly competent. Moreover, the competence of the OACT staff,
combined with the review of Trustees' staff, has resulted in
projections for the Annual Reports of the Board of Trustees that have
been virtually free of significant errors starting with the first
report, issued in 1940.
For this report, GAO did not review the technical accuracy of the
evaluations made by OACT but rather focused on the documentation of
internal controls over the projection process. Although we agree with
the need to continue to better document OACT's internal controls, we
believe that OACT has a strong internal control process and culture.
General Comments:
Section 1-Limited Documentation Reduced Effectiveness of Control
Activities:
The Office of the Chief Actuary performs many checks on its work
throughout the process of producing the annual Trustees Reports. GAO
suggests a more formal documentation process for these checks. We agree
that more formal documentation of internal checks could be of value.
However, we disagree with the conclusion that current OACT procedures
increase the risk of errors. In fact, inputs and results of each stage
of the process of developing assumptions and projections are reviewed
as a matter of course for every projection. Because the projections are
performed, of necessity, in a linear fashion, there is no risk that any
stage of development will escape the attention of supervisors and
managers because of contemporaneous developments. Reviews are performed
in detail by supervisors and team leaders, and higher level managers
perform a secondary review for reasonableness. These reviews are
performed routinely at every stage before the results are accepted and
"locked" into subsequent stages of the projection process.
While we agree that written documentation of the performance of these
reviews, perhaps in the form of "check-off lists," would assist in
assuring auditors that the reviews have been done, we do not believe
that this documentation will necessarily reduce the risk of errors in
the process. In practice, the effects of changes in one stage of the
projection process often do not manifest themselves in. a significant
way until the results of later stages are reviewed. Over dependence on
a sequential check-off list for reviews at each stage could, in fact,
pose a potential risk of missing the implications of earlier changes,
because it might be assumed that each earlier stage was correct as
checked off.
In its report GAO states, "there was no comprehensive description of
the procedures necessary to prepare the long-range OASDI trust fund
projections for the Trustees' reports, and documentation of the work
preformed by OACT while preparing projections was limited." The long-
range Office of the Chief Actuary is comprised of different areas
(population, economics, disability, fully insured, beneficiaries, and
costs) with staff in each area maintaining their own programming code
for producing projections. The input assumptions are identified within
this code, and values for the assumptions are recommended, developed,
and/or obtained by staff in the area. Each area also maintains its
detailed procedures for preparing and executing program code. For OACT
staff trained and experienced in these specific methodologies, the
programming code is largely self-documenting. Only the code itself can
convey the full detail of the procedure, and a working knowledge of the
code is necessary and largely sufficient for OACT staff documentation.
Section 2-Inadequate Workforce Plan Could Negatively Affect OACT's
Ability to Achieve Its Mission:
The OACT is now in the process of working with the Office of Human
Resources (SSA) in developing a formal plan for future staffing needs.
However, it should be noted that since OACT's organizational status was
clarified in 1996 as reporting directly to the SSA Commissioner,
staffing has been part of each budget submission. OACT has been
supported in its efforts to plan for expected retirements and has been
able to carry out the recruitment efforts mentioned in GAO's report. As
noted in the report, this recruitment effort has resulted in 16 of the
51 staff members being a part of OACT for fewer than five years. During
this period, three experienced actuaries, one Fellow and two Associates
of the Society of Actuaries have been hired. In addition, we have hired
one Ph.D. economist and 3 Ph.D.'s in mathematics who are now
successfully progressing in the actuarial exam series. Thus, over 40
percent of the recent hires have been highly qualified, experienced
individuals.
OACT has an active staff training and development process although we
agree that it could be better documented. OACT's staff development is
rooted in learning by doing and mentoring. Newly hired individuals are
assigned areas of work under a supervisor or team leader, and often in
association with one or more experienced actuaries. These individuals
are developed through on-the job training. After some time, individuals
are often rotated to other areas in the office in order to broaden
their knowledge and experience with OACT projection procedures.
OACT also encourages professional actuarial and economic training and
involvement with the relevant professional organizations and academic
institutions. OACT's professional staff consists of 41 actuaries and 4
economists. The 2 most recently hired economist are Ph.D's. Of the 41
actuaries 22 are members of the Society of Actuaries, i.e., are
Associates or Fellows of the Society, and 16 are actively taking exams
and pursuing professional status. OACT offers full support and
encouragement to all employees studying to attain professional
actuarial status.
GAO Recommendation 1:
1. The Commissioner of Social Security direct the Chief Actuary to:
* Develop and implement policies regarding documentation of the work
performed by OACT.
* Document the:
- Projection model,
- Procedures needed to generate the projections, including acceptable
ranges for reasonableness tests,
- Work performed by staff to prepare projections, and;
- Supervisory and management reviews.
SSA Response:
We agree with first bullet. Based on discussions with GAO staff, a more
formal documentation of the review process for developing projections
for the Trustees Reports has already begun. Beginning with the work
done for the 2003 Trustees Reports, everyone working on the long-range
projection model will complete a sheet detailing the checks that they
perform. Managers will be required to sign off on these sheets as well
as perform their own checks. These sheets, and all supporting papers,
will be retained for subsequent review. It will be emphasized that sign
off on work in any area will not change the fact that the work product
is still considered preliminary and subject to further review at
subsequent stages of the projection process. With this emphasis we hope
to avoid introducing the risk that "signed off" work might be
considered to be final and absolutely correct.
We agree only partially with the second bullet. We do not believe the
limited focus of the review (which excluded review of assumptions,
formulas, or methods used in the projection models) allowed GAO to
understand the extent of OACT's present documentation of the projection
model. The Office of the Chief Actuary has significantly enhanced
documentation of the assumptions, formulas, and methods during the last
few years. First, revisions to the Trustees Report in 2001 included
enhanced documentation of the projection methodology. This report
provided fuller descriptions and presentations of the economic and
demographic assumptions and potential outcomes under those assumptions.
For one specific example, cohort life expectancies were included with
period life expectancies for the first time in this report. Second,
much more detail has been provided through OACT's Internet site. Third,
additional studies and notes have been written. A list of these
released studies can also be found on OACT's web site. Lastly, we have
made significant progress in the documentation within our program code.
We have worked to make the program code more readable by (1) making the
code more efficient, compartmentalized, and compact (2) adding more
documentation within the code and (3) making variables and indices more
descriptive.
We do not believe that acceptable ranges for reasonableness testing can
be determined as an absolute standard. The output results depend on (1)
changes in input data, (2) changes in assumptions, and (3) changes in
methodology. As these components change every year, they need to be
considered when determining if particular output is reasonable and, in
fact, reasonability determinations are being done presently.
Reasonableness assessments, considering changes in the components given
above, will be documented more formally in the review process.
We do recognize the need for a substantial summary of OACT procedures
for experts and panels that review the work. We will compile
substantial descriptions of these procedures and include a flow chart
showing how the areas interact. The end product will be a comprehensive
description of the work flow (input, procedures, output) necessary to
prepare the long-range OASDI trust fund projections for the Trustees'
reports, and to document the work preformed by OACT while preparing
projections.
GAO Recommendation 2:
2. The Commissioner of Social Security direct the Chief Actuary to
develop and implement a workforce plan that integrates with SSA's
Future Workforce Transition Plan and includes the following elements:
* Analyzing present workload, workforce, and competencies;
* Identifying workload, workforce, and competencies needed for the
future;
* Comparing the present workload, workforce, and competencies to future
needs to identify gaps and surpluses;
* Preparing and implementing plans to build the workforce needed for
the future; and;
* Evaluating the success of the workforce planning model to ensure it
remains valid and objectives are being met.
SSA Response:
We agree. As stated in the general comments on Section 2, OACT has
worked effectively for many years to acquire and develop a highly
qualified, professional staff that do an outstanding job. However, as
GAO has recommended, OACT will work with staff in the Office of the
Deputy Commissioner for Human Resources to develop and implement an
OACT workforce plan that is integrated with SSA's plan.
GAO Recommendation 3:
3. The Commissioner of Social Security direct the Chief Actuary to
develop and implement a formal policy to track, follow-up, and resolve
findings and recommendations of external audits and reviews.
SSA Response:
Agree for reviews, but we note that there is already a tracking system
in place for audits. SSA has a computerized tracking system, the
Automated Audit Management System (AAMS), for all audits, including
recommendations, received by the General Accounting Office (GAO) and
the Office of the Inspector General (OIG).
Recommendation from technical panels are specific to the Office of the
Chief Actuary and are not included in the Agency-wide AAMS. Thus, the
Office of the Chief Actuary will initiate a formal process for tracking
and resolving recommendations from technical panels and other reviews
of this nature. For each set of recommendations, the process will
include:
1. A list of all recommendation.
2. Determinations of what actions, if any, are to be taken in response
to each recommendation. (If no action is to be taken then skip to the
last step)
3. An assignment of a priority to each recommendation and a date to
review the actions determined in step 2.
4. On the review date, a documentation of the steps taken to date will
be made. Steps 2 and 3 are repeated until a resolution is complete.
When a resolution is complete, go to the last step.
5. Documentation of resolution of recommendation.
Technical Comments:
We suggest the bullets for the first recommendation be changed to:
* Develop and implement a formal process of documenting internal
reviews and approvals to help demonstrate that work processes are
carried out correctly.
* Develop a comprehensive description of the work flow (input,
procedure, output) necessary to prepare the long-range OASDI trust fund
projections for the Trustee's reports, and document the work performed
by the Office of the Chief Actuary while preparing projections.
[End of enclosure]
Footnotes:
[1] The Social Security Board of Trustees was established under the
Social Security Act, as amended, to oversee the financial operation of
the Old-Age and Survivors Insurance and Disability Insurance trust
funds. The Board of Trustees is composed of the Commissioner of Social
Security, the Secretary of the Treasury, the Secretary of Labor, the
Secretary of Health and Human Services, and two members of the public,
who are nominated by the President and confirmed by the Senate.
[2] 42 U.S.C. 401(c).
[3] U.S. General Accounting Office, Standards for Internal Control in
the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: November
1999). 31 U.S.C. 3512(c),(d) (The Federal Managers‘ Financial Integrity
Act of 1982 (FMFIA) requires GAO to issue standards for internal control
in the federal government.
[4] GAO/AIMD-00-21.3.1.
[5] The Social Security Technical Panel Report to the 1991 Advisory
Council on Social Security, (Washington, D.C.: August 1990) and The
1999 Technical Panel on Assumptions and Methods, Report to the Social
Security Advisory Board (November 1999).
[6] U.S. General Accounting Office, A Model of Strategic Human Capital
Management, GAO-02-373SP (Washington, D.C.: Mar. 15, 2002).
[7] OACT‘s workforce plan should be performed in coordination with
SSA‘s agencywide human capital plan, which, as we reported in U.S.
General Accounting Office, Performance and Accountability Series, Major
Management Challenges and Program Risks: Social Security
Administration, GAO-01-261 (Washington, D.C.: January 2001), needs
further attention.
[8] The Social Security Advisory Board was created by the Social
Security Independence and Program Improvements Act of 1994. The Social
Security Advisory Board appoints technical panels to advise on the
assumptions and methods used in the Trustees‘ reports. In 1999, the
Social Security Advisory Board convened its first technical panel.
Similar technical panels have been convened periodically since 1971 by
other advisory authorities.
[9] The most recent technical panel reports are available on SSA‘s Web
site: [hyperlink, http://www.ssa.gov].
[10] U.S. General Accounting Office, Social Security: Actuarial
Projections of the Trust Funds, GAO/AIMD-00-53R (Washington, D.C.: Jan.
14, 2000).
[11] GAO/AIMD-00-21.3.1.
[12] In October 1990, the Secretary of the Treasury, the Director of
the Office of Management and Budget, and the Comptroller General
(Principals) established FASAB to develop a set of generally accepted
accounting standards for the federal government. Effective July 1,
2002, FASAB is comprised of six nonfederal or public members and
representatives of the three Principals.
[13] Federal Accounting Standards Advisory Board (FASAB), Statement of
Federal Financial Accounting Standards No. 17, Accounting for Social
Insurance, August 1999.
[14] GAO/AIMD-00-21.3.1.
[15] Actuarial standards of practice are promulgated by the Actuarial
Standards Board. These standards are designed to provide practicing
actuaries with a basis for assuring that their work will conform to
generally accepted principles and practices and to assure the public
that actuaries are professionally accountable.
[16] Actuarial Standard of Practice Number 41, Actuarial Communications
(Washington, D.C.: March 2002).
[17] Actuarial Study Number 112, Social Security Area Population
Projections: 1997 (Baltimore, Md.: August 1997).
[18] The 1999 Technical Panel on Assumptions and Methods, Report to the
Social Security Advisory Board (November 1999).
[19] GAO/AIMD-00-53R.
[20] GAO-02-373SP.
[21] International Personnel Management Association, Workforce Planning
Resource Guide for Public Sector Human Resource Professionals
(Alexandria, Va.: 2002).
[22] SSA issued its Future Workforce Transition Plan in June 2000,
which encompasses strategies that address workforce planning/analysis
(including retirement analysis), recruitment and retention, and
training. Since 1993, we have reported a number of concerns with SSA‘s
overall human capital planning efforts that the agency is taking steps
to address such as by developing the Future Workforce Transition Plan.
However, to be more useful in making workforce and information
technology decisions, we have stressed that a more detailed service
delivery plan is needed that spells out who will provide what type of
services in the future.
[23] The Society of Actuaries (SOA) is an educational, research, and
professional membership organization with the purpose of advancing
actuarial knowledge and enhancing the ability of actuaries. To become a
member of SOA, one must successfully complete a series of SOA
examinations.
[24] GAO-02-373SP.
[25] U.S. General Accounting Office, Design, Implementation and
Evaluation of Training at Selected Agencies, GAO/T-GGD-00-131
(Washington, D.C.: May 18, 2000).
[26] GAO-02-373SP.
[27] When we contacted agency officials who maintain this system, we
found that recommendations contained in our January 2000 report were
not in the system, because the recommendations were included in our
consultants‘ report, which was an enclosure to our report.
[28] The Social Security Technical Panel Report to the 1991 Advisory
Council on Social Security (Washington, D.C.: August 1990) and The 1999
Technical Panel on Assumptions and Methods, Report to the Social
Security Advisory Board (November 1999).
[29] GAO/AIMD-00-53R, 100-101.
[30] While the policies outlined in OMB Circular A-50 are applicable to
audit follow-up, and the review by the Technical Panel would not appear
to be considered an audit for purposes of the Circular, we view these
policies as critical in providing assurance to OACT management that the
resolution process has been properly completed. Documentation under the
Circular would include outlining a course of action for implementing
recommendations that management agrees with and providing reasons for
taking no course of action for those that management disagrees with.
[31] GAO/AIMD-00-21.3.1.
[End of section]
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