Consultant's Review of the Social Security Administration's Cost Assignment Methodology

AIMD-98-3R: Published: Oct 1, 1997. Publicly Released: Oct 1, 1997.

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Robert W. Gramling
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GAO provided information on the performance of a study conducted by Price Waterhouse LLP of the Social Security Administration's (SSA) cost assignment methodology used to charge costs to the Medicare Trust Funds. GAO's review was not intended to enable it to express, and it does not express, an opinion on SSA's cost accounting system.

GAO noted that: (1) Price Waterhouse reports that, although SSA's cost practices are consistent with a cost assignment methodology developed in the early 1970s for assigning SSA's administrative costs for the programs it supported, including the Medicare programs--which are now administered by the Health Care Financing Administration--and while this methodology may have satisfied costing needs at the time, changes in federal activities, requirements, technologies, and assumptions over the last several years indicate that many of SSA's cost assignment bases need to be revisited and updated; (2) the report includes a number of recommendations to significantly change SSA's cost assignment methodology to more accurately allocate costs among programs; (3) these recommendations also will provide cost information to support performance measurement and reporting requirements of the Government Performance and Results Act and the Chief Financial Officers Act; and (4) the results of GAO's review disclosed no instances where Price Waterhouse LLP did not comply, in all material respects, with applicable professional standards.

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