Social Security Trust Funds Actuarial Estimates:

Internal Control over Projection Process Needs Improvement

GAO-03-246R: Published: Mar 4, 2003. Publicly Released: Mar 4, 2003.

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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 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.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Office of the Chief Actuary (OCACT) has developed several policies regarding documentation, including detailed instructions for producing the Trustees' report. In addition, OCACT has established a standard "work flow process" form, which describes the work flow for each computer program and has developed written instructions for employees to use when completing work flow forms.

    Recommendation: To address the internal control weaknesses GAO identified related to policy development, documentation, workforce managment planning, and monitoring follow-up of external review recommendations, the Commissioner of SSA should direct the Chief Actuary to develop and implement policies regarding documentation of the work performed by OACT.

    Agency Affected: Social Security Administration

  2. Status: Closed - Implemented

    Comments: OCACT has documented its long-range projection model by (1) creating a flowchart/overview of the four processes involved in the model and (2) developing papers related to each of the processes, including overviews of inputs and outputs and equations used for the projections.

    Recommendation: To address the internal control weaknesses GAO identified related to policy development, documentation, workforce management planning, and monitoring follow-up of external review recommendations, the Commissioner of SSA should direct the Chief Actuary to document the projection model.

    Agency Affected: Social Security Administration

  3. Status: Closed - Implemented

    Comments: OCACT has established a standard "work flow process." Procedures to generate projections are documented in the work flow process instructions. In addition, each change in method proposed internally by OCACT staff is written up and submitted for approval.

    Recommendation: To address the internal control weaknesses GAO identified related to policy development, documentation, workforce management planning, and monitoring follow-up of external review recommendations, the Commissioner of SSA should direct the Chief Actuary to document the procedures needed to generate the projections, including acceptable ranges for reasonableness tests.

    Agency Affected: Social Security Administration

  4. Status: Closed - Implemented

    Comments: OCACT has established a standard "work flow process" form which describes the work flow for each computer program (identifying input, procedures, and output). This form requires initials of employees at various steps in the process. In addition, OCACT is maintaining a master checklist for each section of the Trustees' Report. This master checklist, which includes initials and dates, indicates when material is given to the Trustees' Report editor and who has revised the material up to that point.

    Recommendation: To address the internal control weaknesses GAO identified related to policy development, documentation, workforce management planning, and monitoring follow-up of external review recommendations, the LCommissioner of SSA should direct the Chief Actuary to document the work performed by staff to prepare projections.

    Agency Affected: Social Security Administration

  5. Status: Closed - Implemented

    Comments: OCACT has established a standard "work flow process" form which describes the work flow for each computer program (identifying input, procedures, and output). The supervisor is required to review, initial, and date the form. In addition, OCACT is maintaining a master checklist for each section of the Trustees' Report to indicate when material is given to the Trustees' Report editor and who has revised the material up to that point. This master checklist also requires supervisory and management review.

    Recommendation: To address the internal control weaknesses GAO identified related to policy development, documentation, workforce management planning, and monitoring follow-up of external review recommendations, the Commissioner of SSA should direct the Chief Actuary to document the supervisory and management reviews.

    Agency Affected: Social Security Administration

  6. Status: Closed - Implemented

    Comments: OCACT developed and implemented a workforce plan. This plan describes the current staff mix (identifying staff by age, occupation group, and grade) and also identifies several technical and leadership competencies needed for OCACT staff. As part of this plan, OCACT has met with staff to identify training needs.

    Recommendation: To address the internal control weaknesses GAO identified related to policy development, documentation, workforce management planning, and monitoring follow-up of external review recommendations, the Commissioner of SSA should direct the Chief Actuary to develop and implement a workforce plan that integrates with SSA's Future Workforce Transition Plan and includes analyzing present workload, workforce, and competencies.

    Agency Affected: Social Security Administration

  7. Status: Closed - Implemented

    Comments: OCACT has developed and implemented a workforce plan. As part of this plan, OCACT developed a list of technical and leadership competencies needed for staffing now and in the future. OCACT also projected vacancies for the next year, 2 years, and 5 years. In addition, OCACT developed a workload matrix, listing its work products including, for example, the President's Budget and Trustees' Report. At the beginning of each fiscal year, OCACT senior staff will meet to identify any upcoming workload changes and update the matrix.

    Recommendation: To address the internal control weaknesses GAO identified related to policy development, documentation, workforce management planning, and monitoring follow-up of external review recommendations, the Commissioner of SSA should direct the Chief Actuary to develop and implement a workforce plan that integrates with SSA's Future Workforce Transition Plan and includes identifying workload, workforce, and competencies needed for the future.

    Agency Affected: Social Security Administration

  8. Status: Closed - Implemented

    Comments: OCACT has developed and implemented a workforce plan. As part of this plan, OCACT projected vacancies for the next year, 2 years, and 5 years. OCACT determined that, at the end of fiscal year 2003, nine staff members were eligible to retire. However, based on an informal survey, OCACT believes only two of these employees plan to retire over the next 5 years. As a result, OCACT does not expect either a surplus or gap in its staffing level for the future.

    Recommendation: To address the internal conrol weaknesses GAO identified related to policy develpment, documentation, workforce management planning, and monitoring follow-up of external review recommendations, the Commissioner of SSA should direct the Chief Actuary to develop and implement a workforce plan that integrates with SSA's Future Workforce Transition Plan and includes comparing the present workload, workforce, and competencies to future needs to identify gaps and surpluses.

    Agency Affected: Social Security Administration

  9. Status: Closed - Implemented

    Comments: OCACT has developed and implemented a workforce plan. As part of this plan, OCACT developed a list of technical and leadership competencies needed for staffing now and in the future, assessed current and future training needs based on the competencies, and discussed training needs with staff.

    Recommendation: To address the internal control weaknesses GAO identified related to policy development, documentation, workforce management planning, and monitoring follow-up of external review recommendations, the Commissioner of SSA should direct the Chief Accuracy to develop and implement a workforce plan that integrates with SSA's Future Workforce Transition Plan and includes preparing and implementing plans to build the workforce needed for the future.

    Agency Affected: Social Security Administration

  10. Status: Closed - Implemented

    Comments: OCACT has developed and implemented a workforce plan. As part of this plan, OCACT will assess workload changes at the beginning of each fiscal year. In addition, OCACT will document its staff mix, assess its competencies and related training needs, and project vacancies (for next year, 2 years, and 5 years) on an annual basis.

    Recommendation: To address the internal control weaknesses we identified related to policy development, documentation, workforce management planning, and monitoring follow-up of external review recommendations, the Commissioner of SSA should direct the Chief Actuary to develop and implement a workforce plan that integrates with SSA's Future Workforce Transition Plan and includes evaluating the success of the workforce planning model to ensure it remains valid and objectives are being met.

    Agency Affected: Social Security Administration

  11. Status: Closed - Implemented

    Comments: OCACT has implemented a formal tracking process beginning with the May 2003 Advisory Technical Panel recommendations. This process includes 1) a list of all recommendations, 2) determinations of what actions, if any, are to be taken in response to each recommendation, 3) an assignment of a priority to each recommendation and a date to review the actions determined in step 2, and 4) on the review date, documentation of the steps taken to date. In addition, SSA's AAMS tracking system now includes recommendations from GAO-03-256. Although it does not include recommendations from GAO/AIMD-00-53R, SSA considers all recommendations from this report to be completed.

    Recommendation: To address the internal control weaknesses GAO identified related to policy development, documentation, workforce management planning, and monitoring follow-up of external review recommendations, the Commissioner of SSA should 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.

    Agency Affected: Social Security Administration

  12. Status: Closed - Implemented

    Comments: The Chief Actuary discussed with the Commissioner the possibility of using contractors and it was decided the most effective and efficient way to accomplish the work of the office was with OCACT's own staff. Therefore, no contractors have been hired.

    Recommendation: In addition, to overcome the challenge of limited resources, the Commissioner of SSA, in consultation with the Chief Actuary, should consider using alternative approaches, such as contractor assistance, to address the above recommendations.

    Agency Affected: Social Security Administration

 

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