The Social Security Administration (SSA) is responsible for disability determinations under the Disability Insurance (DI) and the Supplemental Security Income (SSI) programs. The DI program was established in 1954 under title II of the Social Security Act and provides benefits to disabled wage earners and their families in the event a family wage earner became disabled. In 1974, Congress enacted the title XVI, SSI program, which provides benefits to financially needy individuals who are disabled.


The disability process begins when a person, referred to as a claimant, completes a claim for DI or SSI benefits. SSA field office staff verifies the claimant's non-medical eligibility. The claim is then forwarded to the cognizant State Disability Determination Service (DDS) for a medical determination of disability. To assist in making proper disability determinations, the DDS is authorized to purchase medical examinations, x-rays and laboratory tests on a consultative basis to supplement evidence obtained from the claimants' physicians or other treating sources.

SSA pays 100 percent of the costs incurred by DDSs in making disability determinations. Each year the State DDS submits a budget request to SSA for review and approval. The DDS is notified of budget approval by Form SSA-872. Once approved, the DDS is allowed to withdraw Federal funds through the Federal Payment Management System (PMS) to meet immediate program expenses. At the end of each quarter of each fiscal year, the DDS submits a SSA-4513 (State Agency Report of Obligations for SSA Disability Programs) to account for program disbursements and obligations.

As of May 1998, all DDSs are withdrawing Federal funds through the Department of the Treasury's Automated Standard Application for Payment (ASAP) System.


In developing the audit procedures to test compliance with the requirements for a Federal program, the auditor should first look to Part 2, Matrix of Compliance Requirements, to identify which of the 14 types of compliance requirements described in Part 3 are applicable and then look to Parts 3 and 4 for the details of the requirements.

A. Activities Allowed or Unallowed

Each State making disability determinations is entitled to receive from the Trust funds reimbursement for the cost of making those disability determinations for SSA. Activities shall be in accordance with the budget request approved by SSA. Purchased medical services, such as medical evidence of record (MER) and consultative examinations (CE), must be in accordance with the DDS's fee schedule for purchased medical services. Activities allowable under the disability programs include personnel services, purchased medical services, and other non-personnel costs (42 USC 421 (e) and (f)), 20 CFR 404.1626).

B. Allowable Costs/Cost Principles

1. Direct Costs

The SSA Program Operations Manual System (POMS) contains guidance on direct costs. Personnel services (POMS DI 39518) include personnel costs and employee benefits. Purchased medical services (POMS DI 39545) include MER and CE. Other non-personnel costs include travel (POMS DI 39524), space (POMS DI 39527), equipment (POMS DI 39530), and contracted services (POMS DI 39542).

2. Indirect Costs

Indirect costs which may be charged to the disability program generally arise from three sources: (a) administrative costs of the parent agency related to DDS; (b) business costs associated with the accounting, billing, and procurement services provided by the parent agency for the DDS; and, (c) automated services provided to the DDS that are operated by the parent agency.

3. Non-SSA Work

Non-SSA work may be performed by the DDS. However, SSA shall not be charged for the direct or indirect costs of non-SSA work performed by the DDS.

L. Reporting

1. Financial Reporting

a. SF-269, Financial Status Report - Applicable

b. SF-270, Request for Advance or Reimbursement - Applicable

c. SF-271, Outlay Report and Request for Reimbursement for Construction Program - Not Applicable

d. SF-272, Federal Cash Transactions Report - Not Applicable

e. SSA-4513, State Agency Report on Obligations for SSA Disability Programs (OMB No. 0960-0421) - This report is due quarterly to account for program disbursements and unliquidated obligations (20 CFR 404.1625(a)).

2. Performance Reporting - Not Applicable

3. Special Reporting - Not Applicable

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