Indirect Costs of the Social Security Administration's Disability Programs Are Excessive and Should Be Reduced

HRD-80-23: Published: Nov 19, 1979. Publicly Released: Nov 19, 1979.

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The Department of Health, Education, and Welfare (HEW) reimburses states for costs they incur in making disability decisions under the Social Security Disability Insurance and Supplemental Security Income programs. HEW negotiators are responsible for approving plans for almost all indirect costs affecting the disability programs. GAO visited six states which together accounted for about 55 percent of the program's total indirect cost in fiscal year 1978. GAO also looked at the extent of the Social Security Administration's (SSA) participation in the examination of indirect costs.

HEW pays more than its appropriate share of the indirect costs and reduction of the costs has not been pursued effectively. Between fiscal years 1974 and 1978, indirect disability program costs increased from $9 million to $19.5 million annually. In four of the six states, disability programs were overcharged at least $645,000 for services that did not benefit them. Disability programs in the other two states were also charged indirect costs which exceeded benefits received from state services. HEW negotiators do not adequately analyze the propriety of indirect costs and HEW headquarters has no adequate mechanism to ensure that the regional negotiation procedures are applied effectively and uniformly. SSA officials generally are not knowledgeable of indirect cost principles and do not aid HEW in identifying improper charges.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HEW should eliminate inappropriate charges to the disability programs by: (1) ensuring that HEW negotiators verify that services being paid for actually are benefiting the programs; (2) ensuring that HEW negotiators consider the most equitable method of allocating indirect costs; and (3) monitoring the effectiveness of the procedures under which HEW negotiators approve indirect costs. The Secretary should also direct the Commissioner of Social Security to assure that SSA regional offices have a capability in the area of indirect cost principles so that they can effectively participate in the negotiation process.

    Agency Affected:


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