Auditing the Statement of Social Insurance - SOP 04-1

This Statement of Position (SOP) provides guidance to auditors in auditing the statement of social insurance for the following social insurance programs:

• Old-Age Survivors and Disability Insurance (OASDI or Social Security)
• Medicare (Hospital Insurance [HI] and Medicare Supplementary Medical Insurance [SMI])
• Railroad Retirement benefits
• Black Lung benefits

As permitted by Statement on Auditing Standards (SAS) No. 1, Codification of Auditing Standards and Procedures (AICPA, Professional Standards, vol. 1, AU sec. 543, "Part of Audit Performed by Other Independent Auditors"), as amended, a principal auditor may fulfill the requirements of this SOP by using work that other independent auditors have performed in conformity with the provisions of this SOP.

Auditing the Statement of Social Insurance

Introduction

1. The Federal Accounting Standards Advisory Board (FASAB) establishes accounting standards for reporting in- formation about the following social insurance programs:
   1. Old-Age Survivors and Disability Insurance (OASDI or Social Security)
   2. Medicare (Hospital Insurance [HI] and Medicare Supplementary Medical Insurance [SMI]
   3. Railroad Retirement benefits
   4. Black Lung benefits
   5. Unemployment Insurance
2. FASAB standards require the financial statements of the federal agencies responsible for the Social Security, Medicare, Railroad Retirement, and Black Lung programs and the financial statements of the federal government- wide entity to present a statement of social insurance as a basic financial statement. FASAB standards require these agencies and the government-wide entity to report:
   1. The estimated present value of the income to be received from or on behalf of the following groups during a projections period sufficient to illustrate the long-term sustainability of the social insurance programs:
      1. Current participants who have not yet attained retirement age
      2. Current participants who have attained retirement age
      3. Individuals expected to become participants
   2. The estimated present value of the benefit payments to be made during that same period to or on behalf of the groups listed in item a
   3. The estimated net present value of the cash flows during the projection period (the income described in item a over the expenditures described in item b, or the expenditures described in item b over the in- come described in item a)
   4. In notes to the statement of social insurance:
      1. The accumulated excess of all past cash receipts, including interest on investments, over all past cash disbursements within the social insurance program represented by the fund balance at the valuation date
      2. An explanation of how the net present value referred to in item c above is calculated for the closed group (Paragraph 27(3)(i) of Statement of Federal Financial Accounting Standards [SFFAS] No. 17, Accounting for Social Insurance, identifies the information to be included in this explanation.)
      3. Comparative financial information for items a, b, c, and d(1) for the current year and for each of the four preceding years
      4. The significant assumptions used in preparing the estimates