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[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]

           ENSURING THE INTEGRITY OF SOCIAL SECURITY PROGRAMS

=======================================================================

                                HEARING

                               before the

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 10, 2001

                               __________

                           Serial No. 107-30

                               __________

         Printed for the use of the Committee on Ways and Means

                               __________

                   U.S. GOVERNMENT PRINTING OFFICE
74-224                     WASHINGTON : 2001

----------------------------------------------------------------------------
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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida           FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut        ROBERT T. MATSUI, California
AMO HOUGHTON, New York               WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California             SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana               BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan                  JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota               GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa                     JOHN LEWIS, Georgia
SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington            MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia                 WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio                    JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania           XAVIER BECERRA, California
WES WATKINS, Oklahoma                KAREN L. THURMAN, Florida
J. D. HAYWORTH, Arizona              LLOYD DOGGETT, Texas
JERRY WELLER, Illinois               EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin

                     Allison Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                    Subcommittee on Social Security

                    E. CLAY SHAW, Florida, Chairman

SAM JOHNSON, Texas                   ROBERT T. MATSUI, California
MAC COLLINS, Georgia                 LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona               BENJAMIN L. CARDIN, Maryland
KENNY C. HULSHOF, Missouri           EARL POMEROY, North Dakota
RON LEWIS, Kentucky                  XAVIER BECERRA, California
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.

                            C O N T E N T S

                               __________
                                                                   Page
Advisory of May 3, 2001, announcing the hearing..................     2

                               WITNESSES

Social Security Administration:
    Fritz Streckewald, Acting Assistant Deputy Commissioner, 
      Disability and Income Security Programs....................     7
    Hon. James G. Huse, Jr., Inspector General, Office of the 
      Inspector General..........................................    26

                                 ______

Consortium for Citizens with Disabilities, Ethel Zelenske........    43
Essex County, New Jersey, Office of the Sheriff, John D. Dough...    55
Hennepin County, Minnesota, Children, Family and Adult Services 
  Department, Phillip Burnett....................................    49
Vance International, Inc., Eljay Bowron..........................    51

                                 ______

                       SUBMISSIONS FOR THE RECORD

Herger, Hon. Wally, a Representative in Congress from the State 
  of California, statement.......................................     6
Michael Steinberg & Associates, Tampa, FL, Michael A. Steinberg, 
  statement and attachments......................................    68
National Association of Disability Examiners, Salem, OR, Sue 
  Heflin, statement..............................................    70

 
           ENSURING THE INTEGRITY OF SOCIAL SECURITY PROGRAMS

                              ----------                              

                         THURSDAY, MAY 10, 2001

                  House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Social Security,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:07 a.m., in 
room B-318 Rayburn House Office Building, Hon. E. Clay Shaw, 
Jr. (Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS 
SUBCOMMITTEE ON SOCIAL SECURITY

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                                CONTACT: (202) 225-9263
FOR IMMEDIATE RELEASE
May 3, 2001
No. SS-2

                       Shaw Announces Hearing on

               Ensuring the Integrity of Social Security

                                Programs

    Congressman E. Clay Shaw, Jr., (R-FL), Chairman, Subcommittee on 
Social Security of the Committee on Ways and Means, today announced 
that the Subcommittee will hold a hearing on ensuring the integrity of 
Social Security programs. The hearing will take place on Thursday, May 
10, 2001, in room B-318 Rayburn House Office Building, beginning at 
10:00 a.m.
      
    Oral testimony at this hearing will be from invited witnesses only. 
However, any individual or organization not scheduled for an oral 
appearance may submit a written statement for consideration by the 
Committee and for inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    Nearly $430 billion in Social Security and Supplemental Security 
Income (SSI) benefits were paid last year to about 45 million retired 
and disabled workers and their families, and to more than 6 million SSI 
recipients. These benefits represent the largest expenditure in the 
Federal budget today. Moreover, benefit amounts will continue to 
increase during this decade due to increasing workloads caused by the 
aging Baby Boom generation.
      
    Ensuring the integrity of Social Security programs remains an 
important goal of the Social Security Administration (SSA). Agency 
objectives supporting this goal include making accurate benefit 
payments, reducing the backlogs of continuing disability reviews, 
improving accuracy and timeliness in posting earnings, increasing debt 
collections, and aggressively deterring, identifying, and resolving 
fraud.
      
    Yet, despite SSA's efforts, certain Social Security and SSI program 
activities continue to be subject to abuse. Examples include prisoners, 
fugitive felons, and the deceased continuing to receive benefits they 
are not entitled to, along with benefit payments being misused by 
representative payees (individuals or organizations who have been 
designated by SSA to receive benefit payments directly from the agency 
on the recipient's behalf). During the 106th Congress, the 
Administration and SSA's Office of Inspector General submitted draft 
legislation to enhance the agency's ability to address these and other 
program abuses. Many of the provisions submitted were included in H.R. 
4857, the ``Social Security Number Privacy and Identity Theft 
Prevention Act of 2000,'' which was approved by the Committee on Ways 
and Means at the end of last year. However, the bill was not considered 
by the full House of Representatives before the end of the session, due 
to its referral to other committees of jurisdiction that did not take 
action on the bill.
      
    In announcing the hearing, Chairman Shaw stated: ``We must be 
certain Social Security is doing everything it can to protect the 
integrity of Social Security programs--before massive numbers of Baby 
Boomers start to qualify for benefits. Efforts to stop benefits to 
those who are not entitled must increase as must efforts to protect 
Social Security beneficiaries who depend on representative payees to 
handle their affairs. I look forward to hearing more about action being 
taken, how these efforts can be improved, and how proposed legislation 
will help.''
      

FOCUS OF THE HEARING:

      
    The hearing will examine the SSA's efforts to stop benefits from 
being paid to those who are ineligible for benefits and to prevent 
misuse of benefits by representative payees. Witnesses will also 
comment on legislative proposals aimed at improving the agency's 
ability to ensure the integrity of Social Security programs.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch 
diskette in WordPerfect or MS Word format, with their name, address, 
and hearing date noted on a label, by the close of business, Thursday, 
May 24, 2001, to Allison Giles, Chief of Staff, Committee on Ways and 
Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Subcommittee on Social Security office, room B-316 
Rayburn House Office Building, by close of business the day before the 
hearing.
      

FORMATTING REQUIREMENTS:

      
    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.
      
    1. All statements and any accompanying exhibits for printing must 
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect or 
MS Word format, typed in single space and may not exceed a total of 10 
pages including attachments. Witnesses are advised that the Committee 
will rely on electronic submissions for printing the official hearing 
record.

    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. A witness appearing at a public hearing, or submitting a 
statement for the record of a public hearing, or submitting written 
comments in response to a published request for comments by the 
Committee, must include on his statement or submission a list of all 
clients, persons, or organizations on whose behalf the witness appears.
      
    4. A supplemental sheet must accompany each statement listing the 
name, company, address, telephone and fax numbers where the witness or 
the designated representative may be reached. This supplemental sheet 
will not be included in the printed record.
      
    The above restrictions and limitations apply only to material being 
submitted for printing. Statements and exhibits or supplementary 
material submitted solely for distribution to the Members, the press, 
and the public during the course of a public hearing may be submitted 
in other forms.
      

    Note: All Committee advisories and news releases are available on 
the World Wide Web at ``HTTP://WWW.HOUSE.GOV/WAYS__MEANS/''.
      

    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.

                                

    Chairman Shaw. Good morning. Welcome to today's hearing. It 
will be on ensuring the integrity of the Social Security 
programs. This past year, Social Security paid out about $430 
billion in Social Security and supplemental security income 
benefits to nearly 50 million people who are unable to work due 
to age or to disability. We must be certain that Social 
Security is doing everything it can to protect the integrity of 
the Social Security programs before massive numbers of baby 
boomers start to qualify for benefits. Getting those payments 
right is a huge task in and of itself. In addition, we must 
have smart aggressive measures to prevent fraud and recover 
misspent money.
    This Committee has worked closely with the Social Security 
Administration (SSA) to address waste and fraud in the Social 
Security programs. Welfare reform included landmark legislation 
insuring that checks go to the right people, preventing 
prisoners from getting cash benefits, and helping the agency 
better recover overpayments.
    These efforts have saved literally billions of dollars 
boosting taxpayers confidence that their money is being spent 
wisely and as it should be spent. During the 106th Congress, 
the Subcommittee held several hearings on the integrity of the 
Social Security programs. We examined SSA's and the Office of 
Inspector General's policies to combat fraud and abuse in 
Social Security programs, SSA's oversight of representative 
payee programs and proposed changes to the law submitted by the 
agency to address these very issues. Many of the legislative 
proposals considered at these hearings were included as part of 
H.R. 4857, the Social Security Number Privacy and Identity 
Theft Prevention Act of 2000.
    Although this Act was approved by the full Committee, it 
was not considered by the full House before the end of the 
session due to its referral to other committees with 
jurisdiction that did not take action on the bill. Today we 
continue what we started last Congress. We begin with an update 
from SSA and the Inspector General on their efforts to ensure 
program integrity.
    We will also hear their recommendations for legislation 
that they support to improve their effectiveness as stewards of 
the Social Security programs. We will then hear from our final 
panel. They are individuals on the frontline who represent 
claimants and who enforce the law. Their real life experience 
will shed light on the true value of the proposed legislation. 
Soon I intend to reintroduce common sense legislation to combat 
waste and fraud in Social Security programs.
    Like last year, I intend to work closely with my friend and 
colleague, Mr. Matsui, and all of the colleagues on the 
Subcommittee in a very bipartisan way to ensure that this bill 
continues to have the bipartisan support that it enjoyed last 
year.
    Mr. Matsui.
    [The opening statement of Chairman Shaw follows:]

  OPENING STATEMENT OF THE HON. E. CLAY SHAW, JR., M.C., FLORIDA, AND 
               CHAIRMAN, SUBCOMMITTEE ON SOCIAL SECURITY

    Welcome to today's hearing on ensuring the integrity of Social 
Security programs.
    This past year, Social Security paid about $430 billion in Social 
Security and Supplemental Security Income benefits to nearly 50 million 
people who are unable to work due to age or disability.
    We must be certain Social Security is doing everything it can to 
protect the integrity of Social Security programs--before massive 
numbers of Baby Boomers start to qualify for benefits. Getting those 
payments right is a huge task by itself. In addition, we must have 
smart, aggressive measures to prevent fraud and recover misspent money.
    This Committee has worked closely with the Social Security 
Administration (SSA) to address waste and fraud in Social Security 
programs. Welfare reform included landmark legislation ensuring checks 
go to the right people, preventing prisoners from getting cash 
benefits, and helping the agency better recover overpayments. These 
efforts have saved literally billions of dollars, boosting taxpayer 
confidence that their money is being spent as it should.
    During the 106th Congress, the Subcommittee held several 
hearings on the integrity of Social Security programs. We examined 
SSA's and the Office of Inspector General's policies to combat fraud 
and abuse in Social Security programs, SSA's oversight of the 
representative payee program, and proposed changes to the law submitted 
by the agency to address these issues.
    Many of the legislative proposals considered at these hearings were 
included as part of H.R. 4857, the ``Social Security Number Privacy and 
Identity Theft Prevention Act of 2000.''
    Although H.R. 4857 was approved by the full Committee, it was not 
considered by the full House before the end of the session due to its 
referral to other committees of jurisdiction who did not take action on 
the bill.
    Today, we continue what we started last Congress. We begin with an 
update from SSA and the Inspector General on their efforts to ensure 
program integrity. We will also hear their recommendations for 
legislation they support to improve their effectiveness as stewards of 
Social Security programs.
    We will then hear from our final panel. They are individuals on the 
front line who represent claimants and who enforce the law. Their real 
life experiences will shed light on the true value of proposed 
legislation.
    Soon, I intend to reintroduce common sense legislation to combat 
waste and fraud in Social Security programs. Like last year, I intend 
to work with Mr. Matsui and all of my colleagues on the Subcommittee to 
ensure the bill has bipartisan support.

                                

    Mr. Matsui. Thank you very much, Chairman Shaw. I would 
like to thank and acknowledge you for calling the hearing and 
obviously to welcome our witnesses today. One of the most 
important services the Social Security Administration provides 
is the delivery of benefits to the critically ill and severely 
disabled through designated representative payees. The 
representative payee system can be improved to deliver better 
services and obviously to reduce fraud.
    The Social Security Administration needs to speed up 
compensation to beneficiaries who were defrauded by these 
representative payees and the Office of Inspector General (IG) 
needs statutory law enforcement authority, thereby enhancing 
the IG's ability to investigate alleged cases of fraud.
    The Subcommittee must ensure that the Social Security 
Administration is funded at an adequate level to meet future 
workload demands, including continued prevention and deterrence 
of program fraud. The Independent Social Security Advisory 
Board concluded in one of its reports earlier this year, and I 
quote, ``the Social Security Administration's administrative 
budget shortfall, which is undermining its ability to provide 
appropriate level of services to the American people needs to 
be addressed.'' The board further argued that the Congress and 
the administration should provide the agency with a budget that 
fits the needs of Social Security's contributors and 
beneficiaries. I wholly agree with that statement.
    Given the testimony that this Subcommittee has heard about 
the staffing and administrative challenges that Social Security 
Administration faces as part of the aging of the baby boom 
population, this Subcommittee should ensure the Social Security 
Administration has the resources for its needs.
    I am hopeful we will be able to continue to work as we 
have, Mr. Chairman, in a bipartisan fashion and obviously meet 
the needs of Social Security Administration in the coming 
years. Thank you.
    Chairman Shaw. Thank you, Bob. I have a statement that Mr. 
Wally Herger has asked be placed in the record at this time, 
and without objection I will do so.
    [The information follows:]

 STATEMENT OF HON. WALLY HERGER, A REPRESENTATIVE IN CONGRESS FROM THE 
                          STATE OF CALIFORNIA

    I congratulate Chairman Shaw for calling this hearing today on 
ensuring the integrity of Social Security programs. Given the 
importance of Social Security and related benefits to millions of 
families across America, there's hardly a more important topic that 
comes before us.
    I especially would like to commend the Social Security 
Subcommittee, and the Human Resources Subcommittee I now chair, for 
their past efforts to ensure the right benefits go to the right people 
in keeping with the law and just plain common sense.
    That hasn't always been the case. When Republicans became the 
majority party in the House in 1995, one of the first things we did was 
end the eligibility of drug addicts and alcoholics for Supplemental 
Security Income (SSI) cash benefits. Before then, the law provided if 
someone was disabled from working because they drank too much or took 
drugs, they were entitled to a government check.
    It's hard to imagine a more perverse, irresponsible, and anti-work 
policy. Taxpayers perceived it as a waste of their money, it 
perpetuated rather than solved beneficiaries' addictions, and it 
undermined the entire SSI Program. Incredible as it may seem, the 
number one reason drug addicted or alcoholic beneficiaries left the 
program was not because they got treatment and recovered, or went to 
work despite their addictions, but because they died. We were literally 
subsidizing addicts to death. Some even had their government checks 
sent straight to their favorite liquor store or corner bar. That is now 
changed, and today no one qualifies for SSI disability checks only on 
the basis of drug addiction or alcoholism.
    Other important changes involved ending benefits for prisoners. 
Some people were shocked to learn prisoners kept getting means tested 
benefits behind bars. But while the law long provided that those on SSI 
should not receive benefits while in jail, it was left to the 
beneficiary to report his or her incarceration so benefits would end. 
Naturally, few did. But working with Sheriff Mick Grey of Butte County, 
California in my Congressional District and the Social Security 
Inspector General, I drafted legislation that resulted in the 
``bounty'' system that now encourages local jails to report prisoner 
lists for matching against SSI rolls. The result has been tens of 
thousands of inmates no longer getting benefits.
    Still another program integrity step that is working involves 
fugitive felons. The welfare reforms we made in 1996 ended the 
eligibility of fugitive felons and probation and parole violators for 
SSI benefits. According to testimony submitted for today's hearing by 
the Social Security Inspector General, some 28,000 fugitives have been 
identified and removed from the SSI rolls since then. That is a 
tremendous result in itself. However, we also took the step of 
directing the Social Security Commissioner to provide State and local 
law enforcement officials with locator information about fugitives so 
they could be apprehended, starting with the most dangerous ones.
    I understand the Inspector General proposes in his testimony to 
expand the fugitive felon prohibition to include Social Security as 
well as SSI benefits. This is an excellent suggestion that would result 
in additional savings to taxpayers. To their credit, the Social 
Security Administration testifies they are willing to explore this 
change as well. Other improvements, such as Social Security's tapping 
additional sources of fugitive information, may result in even greater 
savings for taxpayers.

                                

    Chairman Shaw. And any of the members that have an opening 
statement they wish to include in the record, I'll be glad to 
include that also.
    Our first witness this morning is Mr. Streckewald, who is 
acting assistant deputy commissioner of the Office of 
Disability Income and Security Programs. Welcome. We have your 
entire--the text of your entire statement, which will be placed 
into record. You may feel free to summarize in any way you feel 
comfortable.

    STATEMENT OF FRITZ STRECKEWALD, ACTING ASSISTANT DEPUTY 
 COMMISSIONER, DISABILITY AND INCOME SECURITY PROGRAMS, SOCIAL 
                    SECURITY ADMINISTRATION

    Mr. Streckewald. Chairman Shaw, Congressman Matsui and 
Members of the Subcommittee, thank you for inviting me to 
discuss SSA's efforts to ensure the integrity of the Social 
Security programs. I welcome the opportunity to talk about our 
efforts to prevent misuse of benefits by representative payees 
and our efforts to stop the payment of benefits to those who 
are ineligible. I also want to discuss legislative proposals 
that, if enacted, would allow the Social Security 
Administration to do a better job of ensuring the integrity of 
our programs.
    As you know, we place great importance on our role as the 
steward for the Old Age Survivors and Disability Insurance 
(OASDI) program and the Supplemental Security Income (SSI) 
program. In fact, $1 out of every $4 in SSA's administrative 
budget is dedicated to program stewardship and program 
integrity. One area to which we have devoted particular 
attention is our representative payee program. We are deeply 
committed to protecting the 6.5 million beneficiaries who are 
paid $30 billion per year through their representative payees. 
Our goal is to select the most qualified individual or 
organization to serve as payee for our most vulnerable 
beneficiaries: those who cannot manage their own funds. We 
investigate all payees before they are selected and we provide 
detailed information to payees as to their responsibilities and 
their duties to the beneficiary.
    SSA requires annual accounting by these representative 
payees of all the benefits received and how they were spent. In 
general, the representative payee program works well. Misuse of 
funds occurs in less than 1/100th of 1 percent of all cases. 
However, when problems occur, the result is almost always 
hardship on the beneficiary. Therefore, we are constantly 
working to strengthen the representative payee program.
    Last year, we described to you our plans for improving the 
administration of our representative payee program, and I would 
like to take just a moment today to update you on some of these 
initiatives. We began a triennial on-site review program of all 
825 fee-for-service payees, all organizational payees who serve 
100 or more beneficiaries, and all individual payees serving 20 
or more beneficiaries. In the past year approximately 540 of 
these reviews have been conducted. I am pleased to report that 
the incidence of misuse found has been minimal.
    Currently, nongovernmental, fee-for-service organizations 
must be either licensed or bonded to serve as representative 
payees. Beginning last June we began a program to 
systematically verify on an annual basis that the bonding or 
licensing requirement continues to be met.
    Beginning with fee-for-service payees newly appointed in 
January 2000, we began site visits 6 months after their initial 
appointment as payee. This visit ensures that they fully 
understand their duties and responsibilities as payees.
    Each year SSA will conduct a random sample of 30 percent of 
volume payees and fee-for-service payees that have not already 
been selected for the triennial review.
    SSA also continues to conduct reviews of payees in response 
to third party reports of misuse, complaints from vendors for 
failure to receive payments and similar reports. While we are 
proud of our progress, we also recognize that administrative 
actions alone are not sufficient to address all the issues and 
concerns that have been identified with our representative 
payee program.
    Last year, the Ways and Means Committee adopted H.R. 4857, 
the bill that would strengthen our recovery of misused funds by 
payees, and more importantly, restore misused funds to our 
beneficiaries. The provision requiring SSA to reissue benefits 
when an organizational payee misuses payments would provide an 
important protection to those most vulnerable beneficiaries, 
beneficiaries who have no family or friends able to serve as 
payee.
    Another stewardship issue you asked me to discuss today 
relates to the reporting of death information. As you know, SSA 
processes over 2 million death reports each year. Our agency 
compiles and maintains a comprehensive data base that contains 
death information. We receive reports from family members, 
funeral homes, all 50 States and many other sources. We 
independently verify reports from third parties such as the 
States and other governmental agencies, for example, the 
Veterans Administration, before we terminate benefits.
    Last year you considered a proposal that would have 
required States to report death information to SSA within 30 
days of when they receive it. Timely reports of death help 
prevent overpayments. We want to continue to work with the 
Subcommittee to explore ways to improve our death termination 
process.
    The last subject I want to discuss today is what we call 
the Fugitive Felon Project. Under current law, it is illegal 
for fugitive felons to collect SSI payments. Working with the 
IG, we identified over 22,000 fugitives receiving SSI during 
fiscal years 1998 to 2000. Using information provided by SSA, 
the IG, and other law enforcement agencies apprehended more 
than 2,800 of these fugitives. In an August 2000 report, the IG 
recommended that SSA pursue legislation prohibiting payment of 
OASDI benefits to fugitive felons. That recommendation is worth 
exploring. There are obvious benefits to law enforcement if the 
prohibition on paying benefits to fugitive felons were extended 
to OASDI beneficiaries, and we would be happy to work with the 
Subcommittee to develop such a proposal.
    In conclusion, let me emphasize that we are committed to 
our roles as vigilant stewards of the OASDI and SSI Programs, 
and we look forward to working with the Subcommittee to 
strengthen our performance.
    My written testimony discusses the issues I have raised 
with you today in greater detail. I would be pleased to answer 
any questions you may have.
    [The prepared statement of Mr. Streckewald follows:]

 STATEMENT OF FRITZ STRECKEWALD, ACTING ASSISTANT DEPUTY COMMISSIONER, 
DISABILITY AND INCOME SECURITY PROGRAMS, SOCIAL SECURITY ADMINISTRATION

    Mr. Chairman, Congressman Matsui, members of the Subcommittee, 
thank you for inviting me here today to talk to you on a variety of 
issues that affect Social Security programs. I want to discuss some 
recent improvements we have made to strengthen our representative payee 
program as well as some legislative changes the subcommittee has 
considered that would improve protections for beneficiaries with 
payees. Additionally, I want to provide our perspective on legislative 
proposals that would:

   Require States to report death information to SSA in a more 
        timely manner; and
   Apply the current Supplemental Security Income (SSI) 
        fugitive felon provisions to the Old Age, Survivors, Disability 
        Insurance (OASDI) program.

    The Social Security Administration places great importance on our 
role as stewards of the OASDI and SSI programs and in ensuring that 
only those who are entitled to benefits receive them for any given 
month. The public's trust in the Social Security program is vitally 
important to us. Because of the importance of this trust, we have 
devoted significant resources and attention to strengthening and 
maintaining the integrity of the Social Security program; $1 out of 
every $4 in SSA's administrative budget is dedicated to program 
stewardship and program integrity.

Representative Payments
    SSA is deeply committed to protecting the 6.5 million Social 
Security and SSI beneficiaries who are paid $30 billion per year 
through representative payees. Our goal is to select the most qualified 
individual or organization to serve as representative payee. All payees 
are investigated before being selected. If an interested family member 
or friend cannot be found (or willing to serve), SSA will ask a 
qualified organization willing to perform the duties of representative 
payee.
    When appointed, all payees receive information on their 
responsibilities and duties as payees. Further, to provide additional 
support for organizational payees, we recently revised a publication 
(Guide for Organizational Payees) that we developed and sent last year 
to all organizational payees. The newly revised version will be 
distributed in June and will also be available on our web site. When a 
suitable payee has been appointed, we also provide the beneficiary with 
information explaining why they have a payee, how we selected their 
payee, what to do if they want to appeal our selection of payee, what 
they should expect of their payee and what they should tell their 
payee.
    Once selected, all payees must maintain records of the 
beneficiary's income and expenses. SSA requires annual accounting of 
all of the benefits received and how they were spent for every 
beneficiary. If this information is not received or is incomplete, we 
follow up with the payee. If SSA has cause to believe that an 
organization is not using benefits properly, we have an additional 
review procedure that focuses on the organization's records and 
includes contact with the beneficiary and staff of the organization, as 
well as vendors.
    We believe this oversight process works well; misuse of funds 
occurs in less than one-hundredth of one percent of all cases. However, 
we are constantly seeking ways to improve the process.

Monitoring Initiatives
    Last year, we described to you our plans for improving safeguards 
for our most vulnerable beneficiaries--those who need assistance from a 
representative payee. We have made great strides towards implementing 
those representative payee program improvements. Let me briefly 
describe our initiatives and then provide you with the status.
Triennial Onsite Reviews of all Fee-for-Service and Volume Payees
    We have begun a review of the approximately 825 fee-for-service 
representative payees on a triennial cycle. We are also performing 
triennial reviews of all organizational payees serving 100 or more 
beneficiaries, which we refer to as ``volume'' payees, and of all 
individual payees serving 20 or more beneficiaries. This review 
includes an assessment of the payee's record keeping, and we interview 
a sample of beneficiaries in order to assess whether their needs are 
being met. Expenses may be corroborated with providers of services. In 
addition, we contact vendors to ensure that beneficiaries' bills are 
being paid. Over the last year, approximately 540 of these reviews have 
been conducted. While the incidence of misuse found has been minimal, 
we have found problems with commingling of funds and incorrect titling 
of accounts. We have taken corrective actions in those cases.

Annual Verification of Bonding or Licensing
    Currently, in order to collect a fee from a beneficiary's check, 
the non-governmental fee-for-service organization must be either 
licensed or bonded to serve as representative payee. This is a 
statutory requirement. Beginning in June 2000, we began an annual re-
certification of these organizations to ensure the bonding or licensing 
requirement continues to be met. To date, we have completed 693 re-
certifications of the 825 fee-for-service payees.
    For those fee-for-service payees that are bonded, there is no 
requirement that specifies the minimum amount of the bond that would be 
paid in the event of misuse (e.g., $600 of coverage for each 
beneficiary). However, we are drafting a regulation that will give 
guidance on the level of bonding needed by fee-for-service 
organizations. We anticipate publishing this regulation in early 2002.

A 6-Month Review for All Newly Appointed Fee-for-Service Payees
    Beginning with fee-for-service payees newly appointed in January 
2000, we began site visits 6 months after their initial appointment as 
payee. This visit ensures that they fully understand their duties and 
responsibilities, and are on the right track with respect to record 
keeping and reporting. We focus on their accounting procedures so that 
they are able to account for beneficiaries' funds as well as comply 
with our requests for review. To date, 17 visits have been made for 
those fee-for-service payees newly appointed since January 2000.

Random Reviews of Volume and Fee-for-Service Payees
    Each year SSA will conduct a random sample of 30 percent of volume 
payees and fee-for-service payees that have not already been selected 
for review. Of the cases selected, we will review a sample of 
beneficiary records for compliance with our policies and procedures. We 
issued instructions needed to implement this initiative in December 
2000, and this program began this Spring.
    In addition, we continue to monitor for ``trigger'' events. That 
is, we conduct reviews of payees in response to third-party reports of 
misuse, complaints from vendors of failure to receive payment, and 
similar reports. Over the last year, we have done 26 reviews due to 
trigger events.
    We believe that our expanded onsite review program will:

   protect vulnerable beneficiaries by quickly reacting to 
        questionable indications;
   deter payee misconduct;
   provide a strong oversight message to payees;
   ensure that fee-for-service payees continue to be qualified 
        under the law; and
   establish good lines of communication and promote good payee 
        practices.

Contracts Relating to Monitoring Initiatives and Background Checks
    We are currently developing a contract proposal for an independent 
audit firm to review the revised monitoring process and offer 
suggestions for improvement. This includes a review of instructional 
materials as well as onsite review processes. The contractor will 
provide a report with any recommendations for corrective changes as 
deemed appropriate. We expect to obtain bids by this Summer and start 
the audit in the Fall of 2001.
    We are also in the process of awarding a contract to obtain the 
assistance of an expert consultant to explore options available for 
criminal and credit background checks for fee-for-service payee 
organizations. This effort is consistent with OIG's suggestion that we 
put more emphasis on the selection of our representative payees. 
Contractor bids were due by April 16 and we expect to award the 
contract by early June. We expect the contractor to complete its work 
in about 6 months and hope to have a final report of recommendations by 
the end of the year.

Demonstration Project
    We have undertaken a demonstration project to obtain expert 
assistance in our onsite reviews in two regions. We have contracted 
with an accounting and management firm to provide support to our review 
teams when they conduct site reviews. This support will continue 
through September 2001. The purpose of this demonstration is to assess 
the value of using contractors with expertise in accounting practices 
to assist the SSA teams in conducting the site reviews. To date, the 
contractor has assisted our field review teams in 35 site reviews in 
our Chicago and Philadelphia Regional Office areas, and is on schedule 
under the terms of the contract. While no misuse of benefits was found 
in these reviews, they revealed record keeping problems and that some 
of the organizational payees have a weak financial position. We will 
continue to monitor these payees.

Recruitment and Education Campaign
    We have new projects either well underway or completed to help our 
field offices recruit and educate new and existing organizational 
payees. As previously noted, we revised our ``Guide for Organizational 
Representative Payees'' and we expect distribution by June. This 
booklet provides guidelines and suggestions to assist organizations in 
understanding the principles of the representative payment program and 
their responsibilities.
    We have produced a training video which can by used by the field 
offices when training organizational payees. Both the video and the 
guide will become part of a ``training kit'' which includes a lesson 
plan for training organizational payees, a power point presentation, 
and CDs. We plan to release this kit to our regions in June. These 
educational products will assist our field offices when providing 
training for organizational payees and also serve as tools for payees 
to refer to when questions arise or when the organizational payee has 
staffing changes.

Changes to Representative Payee System and Related Systems
    The Representative Payee System (RPS) is an integral part of the 
representative payee application process as well as a centralized 
computer file containing information about individuals and 
organizations providing representative payment services and the 
beneficiaries that they serve. While there have been some problems with 
the RPS, especially with regard to the way the RPS interacts with other 
SSA systems, it has been useful for investigating fraud, suitability of 
payee applicants, and identifying trends.
    The RPS contains a number of investigative features, for example, 
the RPS:

   Automatically verifies the representative payee's Social 
        Security number against SSA's Numident file;
   Automatically checks the database for a history of misuse/
        fraud;
   Does not permit the selection of a person convicted of a 
        violation under section 208 or Section 1632 of the Social 
        Security Act (penalties for fraud) to serve as payee.

    The RPS is our most effective investigative tool in assisting our 
field office employees in making appropriate representative payee 
selections. While the RPS provides many benefits, it needs to be 
strengthened. An internal systems workgroup undertook a comprehensive 
review of the RPS and related systems and developed a project that 
includes a number of improvements to the RPS and the accounting 
processes. The project will result in:

   A redesign of the accounting systems,
   Additional systems' support for an expanded monitoring 
        process, and
   A comparison of databases to assure payee suitability.

    We plan to implement improvements for both the RPS and the 
accounting processes in three phases. The improvements will provide 
additional information for use in determining the suitability of the 
payee, additional information for use in monitoring payee performance, 
and additional control and consistency of the Title II and Title XVI 
accounting processes. For the RPS, the first phase, targeted for 
implementation at the end of 2001, will involve database record clean-
ups (including the updating of the RPS to reflect terminated benefit 
records involving prior payees) and the collection of additional data 
for fee-for-service payees (e.g., license or bonding information such 
as the amount of the bond and expiration dates). The next phase, 
targeted to begin towards the end of 2002, will develop and/or improve 
several alert processes and provide additional representative payee 
data. The final phase will be a complete redesign of our current 
accounting process. The timing of that redesign depends on the 
completion of Phases 1 and 2 and the availability of resources.
    By the fall of 2001, we also expect the RPS to contain additional 
information needed to assist the expanded monitoring program. For 
example, we plan to store the date of our site visit, the date and 
reason why an organization is no longer authorized to charge a fee and 
information regarding bonding and licensing of the organization. We 
will have the capability of updating the information and storing it. 
This will provide a historical record on each of the fee-for-service 
organizations.

Legislation
    We recognize that administrative actions alone are not sufficient 
to address all of the issues and concerns that have been identified 
with our representative payee program. Last year the Ways and Means 
Committee adopted H.R. 4857, a bill that would strengthen our recovery 
of misused funds by payees and, more importantly, restore misused funds 
to our beneficiaries.
    Currently, when any payee has been determined to have misused an 
individual's benefits, SSA can reissue the benefits only in cases where 
there has been negligent failure on our part to investigate or monitor 
the payee. In virtually all other cases, the individual loses his or 
her funds unless SSA or the beneficiary can obtain restitution of the 
misused benefits from the payee. Additionally, SSA can seek restitution 
only through a civil action if the representative payee refuses to 
return the misused funds.
    To facilitate restitution of misused funds to beneficiaries, 
provisions contained in H.R. 4857 would require SSA to reissue benefit 
payments (including any respective fees for fee-for-service payees) in 
all cases when an organizational payee is found to have misused a 
beneficiary's funds, without either a finding of negligence on SSA's 
part or restitution from the organizational payee. Requiring re-
issuance of such misused benefit payments, including any fees that were 
deducted from the beneficiary's benefit, would provide important 
protection to the most vulnerable of beneficiaries--those who have no 
family or friends willing or able to be a payee.
    Such authority would enable us to restore benefits that have been 
misused by an organizational representative payee, thereby reducing the 
hardship that can be caused by such a loss. SSA would, through all 
available avenues of legal recourse, continue to seek restitution of 
the misused funds from the former representative payee.
    In addition to this change, provisions such as those found in H.R. 
4857 would provide increased safeguards for beneficiaries with 
representative payees. Although SSA does not have a formal position on 
these provisions, they would:

   Require non-governmental fee-for-service organizational 
    payees to be bonded and licensed, provided that licensing is 
    available under State or local law. (The requirement under current 
    law is bonding or licensing.) State licensing provides some 
    oversight by the State into the organization's business practices, 
    and bonding provides some assurance that a surety company has 
    investigated the organization and approved it for the level of risk 
    associated with the bond. The proceeds from redeemed bonds would 
    reduce the costs to the program when re-issuing benefits in cases 
    of representative payee misuse.
   Require SSA to conduct periodic onsite reviews of all non-
    governmental fee-for-service representative payees, any other 
    organization serving 50 or more beneficiaries, and individual 
    payees serving 15 or more beneficiaries.
   Provide that when an organization has been found to have 
    misused an individual's benefits, the organization shall not 
    qualify for the fee from that individual's benefits for months the 
    payee misused the funds. Requiring payees to return the fees 
    charged for periods of misuse is reasonable because the payee was 
    clearly not properly performing the service for which the fee was 
    paid. Permitting the organization to retain the fees is tantamount 
    to rewarding the payee for violating his or her responsibility to 
    use the benefits for the individual's current and future needs.

   Provide that misused benefits (including any respective 
        representative payee fees) would be treated as an overpayment 
        to the organizational or individual representative payee and, 
        therefore, subject to current SSA overpayment recovery 
        authority. Although SSA has been given expanded authority in 
        the recovery of overpayments (such as tax refund offset, 
        referral to contract collection agencies, notifying credit 
        bureaus, and administrative offset of future federal benefit/
        payments), these tools cannot be used to recoup benefits 
        misused by a representative payee. Providing that benefits 
        misused by any representative payee would be an overpayment to 
        the payee would provide SSA with additional means for recouping 
        the misused payments.
   Extend civil monetary penalty provisions to representative 
        payees that misuse benefits. As it pertains to representative 
        payees, this provision would allow SSA to impose administrative 
        penalties and assessments against representative payees who 
        misuse benefits. This would improve our ability to ensure that 
        individuals who commit this type of fraud against SSA are 
        penalized, even if such individuals are not prosecuted 
        criminally.
   Disqualify an individual from serving as representative 
        payee if he or she has been convicted of an offense resulting 
        in more than one year of imprisonment, unless the Commissioner 
        of Social Security determines such certification to be 
        appropriate not withstanding such conviction.
   Provide authority to redirect Social Security benefits to 
        field offices when the representative payee fails to provide an 
        annual accounting of benefits. Notifying the payee of this 
        possibility, and redirecting benefits to the field office, 
        would provide an extremely effective tool for increasing the 
        number of payees who return the annual accounting form, while 
        providing the field offices the flexibility to take the most 
        appropriate action in a particular case.

    SSA supports the Subcommittee's efforts to provide increased 
safeguards for beneficiaries with representative payees and will work 
with the Subcommittee staff to bolster the other efforts SSA has 
initiated to help prevent misuse by payees.

Status of OIG Recommendations
    In the mid-1990s, SSA requested the OIG to review and make 
recommendations to improve the representative payee program. We 
requested these reviews in order to better meet the needs of the 
changing demographics of our representative payee population.
    OIG made several recommendations--from how to select a 
representative payee to the kind of monitoring program needed. SSA 
evaluated the recommendations within the framework of our competing 
priorities and resource limitations. We have implemented several 
recommendations including:

   Issuing instructions to field offices to screen payees more 
        thoroughly.
   Conduct periodic reviews of selected payees.
   Changing the focus of the current process from accounting to 
        monitoring and compliance.

    In addition, we have the following OIG recommendations in process:

   Develop an accounting form tailored to organizational 
        payees.
   Expand our automated Representative Payment System.
   Improve the ability to retrieve accounting forms when they 
        are needed for subsequent review.

Deceased Beneficiaries
    Another important area I want to discuss is timely termination of 
benefits to deceased beneficiaries. We process over 2 million death 
reports annually. Our agency compiles and maintains a comprehensive 
database, the death master file (DMF), which contains death 
information. We receive reports from family members, funeral homes, all 
50 States, the District of Columbia, some territories, the Department 
of Veterans Affairs, the Health Care Financing Administration, the 
postal authority, financial institutions, and other sources. We 
independently verify reports from third parties (such as other 
government agencies) before we terminate benefits.
    We are always looking for ways to strengthen and improve our death 
termination process and we are interested in ways to improve the 
timeliness with which we receive and process death reports. Last year 
you considered a proposal that would have required States to report 
death information to SSA within 30 days of when they receive it. 
Overpayments may occur when a spouse or a representative payee 
negotiates a check after the Social Security beneficiary has died, or 
when the benefit is electronically deposited into a joint or payee 
account. Timely reports of death help prevent such overpayments. We 
will continue to work with the subcommittee to explore ways to improve 
our death termination process.
    SSA has identified ways to improve its death report processing. 
These improvements will be implemented through system enhancements, 
such as modifying the Death Alert, Control and Update System and, when 
completed, will strengthen the processes we use to terminate deceased 
beneficiaries' benefits.
    Within the next two months, we will pilot a project on Electronic 
Death Registration under an agreement with the State of New Jersey. 
This project will enable us to cooperatively test a process designed to 
provide SSA with more accurate and up-to-date death data.
Fugitive Felons
    Under current law, it is illegal for fugitive felons to collect SSI 
payments. A fugitive felon is an individual who is:

   Fleeing to avoid prosecution for a crime which is a felony 
        under the laws of the place from which a person flees;
   Fleeing to avoid custody or confinement after conviction of 
        a crime which is a felony under the laws of the place from 
        which the person flees; or
   Violating a condition of probation or parole imposed under 
        Federal or State law.

    Working with the IG on what we call the Fugitive Felon Project, we 
have identified over 22,000 fugitives receiving SSI during FY 1998-
2000. Using information provided by SSA, the IG and other law 
enforcement agencies apprehended more than 2,800 of these fugitives. 
While the monetary savings have been significant, just as important, is 
the positive impact on public safety resulting from the apprehension of 
these individuals.
    This Fugitive Felon Project utilizes a multi-faceted approach that 
requires extensive and cooperative efforts of many law enforcement 
agencies throughout the United States. SSA and our IG are actively 
involved in this project by identifying and taking action against 
fugitive felons collecting SSI payments.
    This project identifies individuals who are prohibited under the 
law from receiving SSI benefits by conducting computer matches with 
available sources of warrant information, which include the Federal 
Bureau of Investigation's (FBI) National Crime Information Center 
(NCIC) and the States. The NCIC is a major national repository for 
information on felons and other offenders. We also have signed 
agreements with the U.S. Marshals Service and the FBI, giving us access 
to all federal warrants.
    Unfortunately only about 30 percent of all outstanding warrants are 
reported to the NCIC because the reporting of such information is 
voluntary and selective. Eleven States report all of their warrants to 
the NCIC. These States are Connecticut, Maine, New Hampshire, Alabama, 
Florida, Georgia, North Carolina, Arkansas, New Mexico, Kansas, and 
Missouri. The remaining 39 States report some, but not all warrant 
information to the NCIC.
    In a joint effort to develop comprehensive sources of warrant 
information, SSA and the IG are actively pursuing matching agreements 
with those States that only provide some of their warrants to the NCIC. 
SSA currently has signed matching agreements with Alaska, California, 
Colorado, Delaware, Kentucky, Nebraska, Massachusetts, New Jersey, New 
York, Rhode Island, South Carolina, Tennessee, and Washington to obtain 
the additional warrant information that is not reported to the NCIC. In 
addition, we have agreements with four major metropolitan police 
departments, New York City, Baltimore City, Baltimore County, and 
Philadelphia.
    Negotiating these individual State and local agreements is a major 
undertaking. We need to address State and local variations in records, 
incompatible formatting of data, privacy concerns, and the lack of 
State and local central reporting repositories. Our regional fugitive 
coordinators and field office staff are working to negotiate matching 
agreements with all State and local authorities. We expect to have 
negotiated matching agreements with all outstanding States within the 
year. Every effort is being made to automate the matching operations 
necessary to identify SSI recipients that have outstanding warrants.
    One of the difficulties with such matches is that law enforcement 
agencies frequently do not have accurate identifying information for 
fleeing felons. Felons often use aliases and the law enforcement agency 
may not have an accurate Social Security Number (SSN). Therefore, their 
correct identification may be difficult. Unlike prisoners, fugitive 
felons are not incarcerated and may not have been convicted of a crime. 
For these reasons our matching operations are carefully designed to 
determine that the person being sought by law enforcement is the same 
individual receiving SSI. In order to protect individuals from 
unwarranted invasions of their privacy resulting from collections and 
use of information about them, all of our data matches and exchanges 
are done pursuant to agreements that comply with Privacy Act 
requirements, and we take security measures to limit access to the 
data.
    When we obtain warrant information from the NCIC or from any other 
source, these records are first matched against SSA's files to verify 
identity information, such as name, date of birth, and SSN. Once the 
records are verified then a second match is conducted against our SSI 
recipient files to determine which of the fugitives are receiving SSI 
benefits. The results of the second match are then forwarded to the IG 
for processing. The two-step matching process performed by SSA takes 
four to ten days, from the time the warrant information is obtained 
from a participating federal, State or local agency until the 
information is forwarded to the IG.
    The IG must conduct thorough investigations of the warrant 
information matches to ensure that the fugitive felon warrants are 
valid and that the appropriate individuals are brought to justice. The 
IG works with the FBI Information Technology Center (ITC) to verify 
that the felony, probation or parole violation warrant is active. The 
ITC provides the address information about each SSI recipient to the 
appropriate law enforcement agency so that they can apprehend the 
individual.
    After action by the appropriate law enforcement agency, the IG 
refers their findings to SSA for appropriate action. SSA also provides 
feedback to the IG reflecting the actions taken and any overpayment 
that may have occurred.
    Even though SSA is working to expand the number of matches through 
agreements with local authorities, much of the investigative process 
cannot be automated. Verification of warrant information requires 
direct contact with the local law enforcement personnel who issued the 
warrant. If the felon is no longer in the jurisdiction of the 
originating law enforcement agency, then additional contacts must be 
made with law enforcement personnel in the new jurisdiction in order to 
facilitate the fugitive's apprehension.
    SSA needs to be very careful when reviewing warrants to make sure 
they are accurate, up-to-date, and that it pertains to the correct 
person. To arrest or to suspend benefits of the wrong individual would 
have severe consequences.
    In their report dated August 2000, the IG recommended that SSA 
pursue legislation prohibiting payment of OASDI benefits to fugitive 
felons. That recommendation is worth exploring. We would be happy to 
work with the Subcommittee to develop a fugitive felon provision for 
the OASDI program.
Conclusion
    SSA continues to strive to improve our programs through procedural 
and technology changes and by supporting and proposing legislative 
solutions. We are committed to our role as stewards of the trust funds. 
We look forward to working with this subcommittee to assure public 
confidence in our programs.

                                

    Chairman Shaw. Yes, sir. On the first page of your 
testimony, you point out that you spent $1 out of every 4 in 
SSA's administrative budget that is dedicated to program 
stewardship and program integrity. I am reading from your 
statement. What is the return you are getting for the amount of 
money we are spending to----
    Mr. Streckewald. The return varies by the initiative. For 
some, the return or investment ratio is 3-to-1. For others, 5-
to-1 and some are much higher than that. SSI redeterminations, 
of which we are going to do 2.2 million this year, give us an 
approximate 5-to-1 return on investment, and the Continuing 
Disability Reviews (CDR) project, which we are able to do with 
the funding from support from this Subcommittee, gave us an 11-
to-1 return on this investment in fiscal year 1999.
    Chairman Shaw. What if we spent more money on that? At what 
point would we get a diminishing return?
    Mr. Streckewald. We have charts that show the point of 
diminishing return. What we try to do is fund the initiatives 
just prior to when the diminishing return curve begins. So we 
are looking at them very closely and making sure we get the 
biggest bang for the buck.
    Chairman Shaw. Mr. Matsui.
    Mr. Matsui. Thank you, Mr. Chairman. The testimony of the 
Inspector General, which will come after you indicate that SSA 
paid about $31 million in benefits to 881 deceased 
beneficiaries. You have indicated in the past, and I know that 
others have suggested that you get your information about 
whether a beneficiary is alive or not through various sources, 
obviously through a surviving spouse, through funeral homes, 
and obviously obituary notices and those kind of things. How 
good is that? Do you have any systematic approach on how you 
deal with this $31 million? That may be a lot in terms of the 
overall budget, but it is certainly a lot of in terms of 
beneficiaries.
    Mr. Streckewald. We strive for perfection in this area. We 
receive over 2 million reports of death a year. Most of those, 
90 percent of them, come from family Members and funeral homes. 
GAO reports, and the IG have said that the funeral home and 
family member reports are 99 percent accurate. So we consider 
them primary evidence of death. We immediately input these 
reports into the system to stop the payments.
    The other 10 percent is where most of the problems are. 
These reports come from many sources. The States, as you know, 
give us information. We receive information from other Federal 
benefits from overseas, and those information sources we have 
to verify. It can be somewhat of a lengthy process. But we 
verify it before terminating benefits.
    Mr. Matsui. So you don't do anything then in terms of 
outreach? It is always input coming in?
    Mr. Streckewald. We have relationships with funeral homes 
all over the country. They are usually the first source. There 
is a form they fill out, and they send it directly to Social 
Security. We check to make sure it is the right person by 
verifying that the Social Security number matches the name that 
we have, and then we terminate benefits.
    Mr. Matsui. Is there any thought about how you might be 
able to use a system--I mean, it is obviously kind of a hit-
and-miss approach, but you get a lot of them. We are only 
talking about 881, but on the other hand, it seems to me that 
if a person is deceased people would----
    Mr. Streckewald. Certainly receiving the death reports from 
the States sooner would help. Right now it takes 90 to 120 days 
to get the information from the States.
    Mr. Matsui. Is that what the problem is?
    Mr. Streckewald. It is a timing issue, right. Because we 
normally verify the death with the family to make sure that 
these other sources are correct. So I think primarily it is a 
timing issue.
    Mr. Matsui. You get reimbursement normally.
    Mr. Streckewald. Yes, we do. I don't know the exact figure, 
but we recover a huge percentage of the over payments that 
occur after death. Because those are generally not fraudulently 
obtained, they are simply checks that go out before we are able 
to verify the death and we receive that money back from the 
family.
    Mr. Matsui. Why is it that $31 million has been lost?
    Mr. Streckewald. That is probably the fraction of the total 
payments that go out to these 2 million people that is not 
recovered immediately.
    Mr. Matsui. But you said that you usually get the money 
back.
    Mr. Streckewald. I don't know if the 31 million represents 
an overpayment. Its a snapshot in time, and then if you were to 
track that, we would end up recovering it. I am not sure what 
that number represents.
    Mr. Matsui. So we don't know whether or not it is all 
recovered or not. Maybe----
    Mr. Streckewald. We will be glad to submit that information 
for you if we can get hold of that and show you how much of the 
overpayment after death is recovered. We would be glad to 
submit that for the record.
    [The following was subsequently received:]

    SSA recently conducted a study of payments after death in 1998, 
including a longitudinal study of the resolution of incorrectly paid 
benefits. Preliminary data from the study indicate that, for payments 
made to a deceased individual with their own bank account, the 
collection rate is more than 90 percent and recovery efforts are 
continuing. Although not part of that study, This finding is similar to 
the broader fiscal year-end data which shows SSA data indicate that in 
2000 SSA paid out approximately $84 million after the death of the 
beneficiary to spouses and representative payees. In that same year 
collection of these types of overpayments totaled approximately $74 
million, or about 88 percent.

                                

    Mr. Matsui. OK. In terms of last year we talked a little 
bit about, you know, obviously you have 6-month reviews of 
representative payees and things of that nature to try to make 
sure that they are on the up and up and no fraud is committed. 
But you are also looking at the possibility of background 
checks and criminal background checks, credit and otherwise, 
before a representative payee can be designated as such. How is 
that program coming along and where are you on it, and 
obviously this is only pertaining to the fee-for-service 
payees, it doesn't pertain to those that are relatives and 
others that don't receive these?
    And I would like a comment from you about the latter as 
well as to how you want to deal with background checks on those 
folks.
    Mr. Streckewald. You are right, we feel that the fee-for-
service and large organizational payees represent the most risk 
simply because of the number of beneficiaries that they 
represent. We are awarding a contract to look at the 
feasibility of conducting background checks and credit checks 
for all fee-for-service payees.
    On the individual payees--when a person files to be payee, 
first of all, we have to verify their identity, and we check 
our records to make sure it is the same person that matches 
with that name and number, and then we look in our records to 
see if they have ever been found to have misused benefits for 
anybody else. If that is the case, we do not select them as 
payee.
    We also verify their income source to make sure that they 
have means to support themselves so they wouldn't be tempted to 
use the beneficiary's money. So we do a fairly complete 
questioning and review of the potential applicants before 
appointing them as payeea.
    Mr. Matsui. Is your program on this fully in place now, or 
is there still more work to be done? I was under the impression 
that more had to be done.
    Mr. Streckewald. On the background checks, the actual 
credit checks and criminal history checks, we have not 
implemented that change yet. What we are doing is getting a 
contract together to look at the feasibility of the cost of 
doing that. The other one that I described is already in place. 
It is part of a standing procedure when we identify the person, 
we check to see if they have been found to have misused 
benefits in the past and we ask them their income source.
    Mr. Matsui. When do you think you will have the other part 
of the program in place?
    Mr. Streckewald. We expect to award the contract, I 
believe, this June, and we hope to have the findings from that 
contract later in the year.
    Mr. Matsui. Last, the non fee-for-service, do you have any 
plans on how you might want to deal with that? I know there is 
some fraud involved there as well. But obviously, it is 
probably of less concern because it is usually family members 
or others, but in many cases it is not. There are some that are 
friends, so to speak. And that obviously poses potential 
problems.
    Mr. Streckewald. Most of them are family members. There is 
a list that field office employees are supposed to follow. It 
is a priority list that provides that a family member with 
custody, like a parent, obviously gets highest priority. They 
move through that list that they never get to a remote relative 
or an organization until they have made sure that there isn't a 
family member, or a spouse or a parent with custody that would 
make the best payee.
    So we try to have strict adherence to that prioritization 
list, and that cuts down a lot on any kind of misuse because 
family members generally feel committed to providing for the 
beneficiary more so than a person that does not have a close 
relationship.
    Mr. Matsui. What do you think in terms of your funding? Do 
you need more or what? Obviously you need more, but----
    Mr. Streckewald. Well, additional funds.
    Mr. Matsui. Will you come here and say you have got the 
problem solved?
    Mr. Streckewald. Additional funds can always help us, but I 
think that right now our current budget has us funded to be 
able to take on the initiatives that we have committed to, the 
contracts I have talked about, the increased monitoring and the 
other things we do on the representative payee system. Our 
current budget allows us to do that.
    Mr. Matsui. So you feel it is adequate at this moment.
    Mr. Streckewald. We do.
    Mr. Matsui. Thank you.
    Chairman Shaw. Mr. Doggett.
    Mr. Doggett. Thank you. I think it would be helpful to have 
the response back on $231 million, whether it is a net figure 
after you have collected any payments that were made that were 
not due and whether it is just one snapshot at a point in time 
or reflective necessarily of a longer term experience.
    Could you comment though now--not on the electronic death 
registry that you are getting in place in the State of New 
Jersey and any other initiatives that you have, to try to 
assure that that $31 million, net or gross in most people who 
hear about it, think it is gross in another sense, but to see 
that it is cut as near to zero as possible.
    Mr. Streckewald. The electronic death registration project, 
as you mentioned, has a lot of promise for solving and 
addressing some of the traditional problems in the death 
process. The death process today is a paper-based process. It 
includes coroners, funeral home directors, physicians, family 
members, hospitals, providers. There are a lot of people 
involved in that. And if we can have a process which we are 
piloting in New Jersey next month that would allow every step 
of the process to be input electronically and instantly 
transferred to the next step, we would actually be receiving 
death information, I believe within 7 days. That is a 
significant acceleration of what we currently experience. So 
that has a lot of promise. We hope to test it, get the results 
in by the end of the year, and then if expansion is 
appropriate, that is what we will aim for.
    Mr. Doggett. Thank you very much.
    Chairman Shaw. Mr. Cardin.
    Mr. Cardin. Thank you, Mr. Chairman. I want to follow up on 
Mr. Matsui's point for a moment if I might, and that is on the 
budget support issues. One of the responsibilities of our 
Committee is to work with the Budget Committee and 
Appropriations Committee on appropriate support for your 
mission. And I know that on other hearings that we have had 
before this Committee on Social Security Disability Insurance 
(SSDI) and other issues, the amount of administrative support 
has been at issue in order to be able to do the type of work on 
the integrity of the system that all of us expect.
    Today we are talking about the representative payees and we 
are talking about those people who are not entitled to 
benefits, receiving benefits. But I just want to make it clear, 
at least from your testimony, as to whether Congress is 
providing adequate resources for you to, in a reasonable way, 
carry out the mission that we expect. And I think it is 
important that if you need additional help, that that 
information be made available. We know the realities of the 
budget process, but I think it is important for this Committee 
to know from you whether there are additional resources that 
are needed in order for you to be held accountable to carry out 
your mission.
    Mr. Streckewald. As I said, the additional resources always 
help. We are currently funded for what we are trying to do in 
the representative pay program. If I may, can we get back to 
the Committee and with any type of further suggestions along 
this line.
    [The following was subsequently received:]

 Resources Necessary to Address Program Integrity and Improper Payments

    The Social Security Administration places great importance on our 
role as stewards of the OASDI and SSI programs and in ensuring that 
only those who are entitled to benefits receive them for any given 
month. Improper payments are minimized by having adequate staffing 
levels and providing the staff with the tools and resources necessary 
to avoid making improper payments and to discover and recover 
overpayments and to detect and pay underpayments. For any given level 
of resources, SSA must allocate those resources to provide the best 
balance between the need to provide services, such as the posting of 
wages to a worker's record or making disability determinations for new 
disability applicants, and the need to reduce improper payments, just 
as such allocations must be made for the government as a whole by the 
President and the Congress.
    Currently, SSA devotes $1 out of every $4 of its budget explicitly 
to minimizing improper payments. Given the government-wide budget 
priorities and the balance that must be struck within SSA's own budget, 
SSA believes that the current level and allocation is appropriate.
    One way to conceptualize the utility of devoting a given level of 
resources to minimizing improper payments is to consider the ratio of 
improper payments detected, recovered or avoided for each dollar of 
administrative cost invested. All other things being equal, one would 
want to devote resources first to those efforts that would lead to a 
greater amount of improper payments being detected or recovered for 
each dollar invested. On the other hand, some categories of improper 
payments have larger aggregate dollar amounts than other categories and 
may have a greater effect on overall program integrity and the public 
perception of fairness. Resources could be directed to those categories 
even if the return on investment is lower than other categories.
    For instance, the most powerful tool SSA has to reduce improper 
payments in the SSI program, both underpayments and overpayments, is to 
perform more redeterminations. In FY 2000, SSI redeterminations 
detected $2.1 billion in overpayments and $933 million in 
underpayments. Under the President's budget, redeterminations will 
increase by 10 percent in FY 2002 over the FY 2001 level to 2,255,000. 
There will be an estimated 6.4 million SSI recipients in FY 2002, so 
approximately one of every three SSI recipients will be redetermined 
that year.
    The table below provides SSA's best estimate of the ratio (rounded 
to the nearest whole dollar) of improper payments (both overpayments 
and underpayments) detected, recovered, or avoided for each $1 invested 
for particular activities.

------------------------------------------------------------------------
                 Activity                              Ratio
------------------------------------------------------------------------
SSI Redeterminations                                             7 to 1
------------------------------------------------------------------------
Continuing Disability Reviews                                    7 to 1
------------------------------------------------------------------------
Windfall Elimination/Gov't Pension Offset                        6 to 1
 match with OPM
------------------------------------------------------------------------
Disability Preeffectuation Reviews                              13 to 1
------------------------------------------------------------------------
Tax Refund Offset                                               34 to 1
------------------------------------------------------------------------
OCSE match                                                       3 to 1
------------------------------------------------------------------------

    Savings as a result of Continuing Disability Reviews (CDRs) are 
based on a 10-year life-cycle estimate. In FY 1999, SSA estimated $6.1 
billion in savings from CDRs performed that year. This represents a 
return of $11 to $1 for that year. However, SSA expects the return to 
decline in future years to $7 to $1. SSA has benefited from an 
adjustment to the discretionary budget caps to allow it to become 
current with its CDR workload. The cap adjustment expires at the end of 
FY 2002.
    The determination of the level of resources that should be devoted 
to minimizing improper payments and how to allocate those resources 
among various activities is complex. SSA has, of course, developed a 
plan for using its existing level of resources. Any plans for the use 
of additional resources would depend on the level of those resources, 
when they might be available, and whether Congress directs that the 
resources be used in any specific area, such as was done with the 
discretionary cap adjustment for continuing disability reviews. SSA 
would be happy to work with the Committee on these issues.

                                

    Mr. Cardin. That would be helpful. Thank you, Mr. Chairman.
    Chairman Shaw. Mr. Pomeroy.
    Mr. Pomeroy. No questions.
    Chairman Shaw. I have just a couple others. The witness on 
our final panel, Zelenske, she says in her testimony that in 
some cases an institution is chosen as payee even when there 
are willing family and friends. Could you explain in what 
situations an institution would be chosen over family or 
friends, and could you explain whether the agency is required 
to contact the family or friends before choosing an institution 
as the payee?
    Mr. Streckewald. As I mentioned before, we have a priority 
list that starts off with close family members with custody as 
the highest priority. Our field people work through that list. 
Now, if they happen to come across a family member with custody 
who has been convicted of a felony that we think is material to 
their ability to be a good payee, that person will be passed 
over. If they come across a family member who has misused 
benefits in the past, that person will be passed over.
    So we move down the list. If it turns out that between the 
family members with custody, other family members and friends, 
there is nobody who is suitable because of past convictions or 
misuse, then, yes we might get to an organizational payee. But 
we always start with the family and move down the list to the 
organizational payees.
    Chairman Shaw. And one other question, you have been 
questioned somewhat about reports of death. The States are 
required to make that report, is there anything we can do to--
or anything you think that you should be doing in that area to 
see that the States do live up to that responsibility? They are 
the ones that keep the records.
    Mr. Streckewald. Last year you supported the legislation 
that would have had the States report to us much sooner than 
they currently do. And I think that obtaining State reports 
sooner would serve certainly be helpful.
    Chairman Shaw. Well, anything we can do to make that 
happen? What would you suggest specifically what should we do 
to make that happen?
    Mr. Streckewald. I believe the provisions that were 
proposed last year would be in line with our thinking in terms 
of what would be useful to speed up the process.
    Chairman Shaw. I guess what I am trying to get to is what 
did we propose that hasn't been done and what we can do to see 
that it is done.
    Mr. Streckewald. Right now the States are only required to 
provide the information, but they are not required to provide 
it on time.
    Chairman Shaw. I know within 30 days they have to report 
it. But how can we put teeth into it? Is that a problem we 
should be concerned about?
    Mr. Streckewald. It can be a problem quite honestly, 
because some of the States don't have the ability to report it 
as soon as we like. So they may be looking for funds with which 
they can automate some of their records and put them in an 
electronic format. But right now it takes 90 to 120 days before 
we get it from the States. So if there is legislation to help 
us get it sooner, I think it would help a lot.
    Chairman Shaw. That 30 days, did that pass or did it not 
pass?
    Mr. Streckewald. It didn't pass.
    Chairman Shaw. I see. I was misunderstanding. I know we had 
talked about it. Well, thank you very much, sir. We appreciate 
your testimony.
    [Questions submitted from Chairman Shaw to Mr. Streckewald, 
and his responses follow:]
                             Social Security Administration
                                     Baltimore, Maryland 21235-0001

    1. During your testimony you spoke of several initiatives aimed at 
monitoring organizational fee-for-service payees and institutional 
payees. What percent of beneficiaries with a payee have volume/
institutional payees versus private individual payees? What are your 
plans for improving oversight of representative payees who are 
responsible for one or only a few beneficiaries?
Response
    For those SSA beneficiaries that need a payee, about 12% are served 
by an organizational/institutional payee; about 88% are served by 
individuals. Because of the increasing number of problems in payee 
performance involving volume/institutional payees, we have been 
focusing our efforts in improving the monitoring for these payees. The 
current oversight process for all other payees, including those who are 
responsible for one or only a few beneficiaries, is the annual payee 
reporting process, which is required by the Jordan \1\ court decision 
and by the Social Security Act. If the payee does not respond to SSA's 
request for the annual reporting, or the response indicates improper 
use of benefits, we investigate and take the appropriate action based 
on our review. We continue to seek improvements in the annual process 
by refining the form used to report by payees, and by streamlining the 
handling and tracking of the payee reports when they are received.
---------------------------------------------------------------------------
    \1\ The Jordan court decision (U.S. District Court for the Western 
District of Oklahoma) requires universal annual accounting of all 
payees (except some Federal and State institutions which are subject to 
a different monitoring process), including parents and spouses with 
custody of the beneficiaries they serve. Prior to implementation of the 
court decision, parents with custody of their children, and husbands 
and wives with custody of their spouses were exempt from annual 
accounting and only required to verify custody. The court's decision 
for universal accounting was based on the constitutional standards of 
due process and equal protection. The Omnibus Budget Reconciliation Act 
1990 subsequently codified the Jordan court requirement for universal 
annual accounting except for State and Federal mental institutions 
participating in the onsite review program. Therefore, any change to 
the accounting requirements would require a change in the law.
---------------------------------------------------------------------------
    SSA also investigates and develops completely any allegation or 
indication of misuse immediately, so as to protect the interests of the 
beneficiary.

    2. In your testimony you said beginning in January 2000 you began 
site visits for fee-for-service representative payees 6 months after 
their initial appointment. To date, you said you have conducted 17 
visits to newly appointed fee-for-service payees. How many new fee-for-
service payees have been appointed since January 2000? What percentage 
of the total number of fee-for-service payees does this represent?

Response
    To date our records show 47 fee-for-service organizations were 
newly appointed since January 2000. Thus, the percentage of new fee-
for-service organizations would be approximately 6% (47 of the 824). We 
are making visits to these organizations on schedule. The primary 
purpose of this initial visit is to ensure that the payee understands 
his or her duties and responsibilities. We also want to make sure the 
payee is able to provide us with the information that will be required 
on how benefits are used.

    3. In your testimony you mentioned that the Inspector General made 
several recommendations for improving the representative payee program 
and that the Social Security Administration was either in the process 
of implementing some of these recommendations or planned to implement 
them. Were there any recommendations that you decided not to implement? 
If so, why?

Response
    The following recommendations were not implemented:
    a. SSA should exempt from annual accounting those payees who are 
required to report to other officials, e.g., legal guardians. Because 
the law requires that we obtain accountings from these payees, we have 
not implemented this change.
    b. SSA should conduct suitability checks only for those payee 
applicants that we intend to select. We did not adopt this approach 
because it presupposes the result, and we want to ensure that we select 
the best applicant based on all the evidence presented.
    c. SSA should revise the accounting form to focus on events that 
payees commonly fail to report. The purpose of the forms is to 
determine if the benefits are properly accounted for and if there have 
been any changes in the beneficiary's custody. We believe the forms 
accomplish this. An expansion of the form to collect more information 
could be considered. However, a more complicated form would increase 
not only the burden on the payee but would detract from the forms' 
intent, accounting for the use of benefits. The forms do reinforce 
reporting requirements and we encourage payees to tell us when an event 
that may affect benefits occurs and not to wait for the accounting 
form.

    4. Ms. Zelenske mentioned in her testimony that the Social Security 
Administration does not require State and Federal institutions to 
submit annual representative payee accounting forms. Why is this the 
case, and do you believe there is a need to change this?

Response
    In 1970, SSA implemented the Representative Payee Onsite Review 
Program. This program replaced the yearly individual accounting reports 
for Social Security beneficiaries who reside in State mental 
institutions and for whom the institution is the representative payee. 
Each participating institution in every State is reviewed at least once 
every 3 years. If there are indications of unsatisfactory performance, 
additional reviews are conducted. The Onsite Review Program is intended 
to decrease the burden on State mental institutions by eliminating the 
need to complete the annual accounting paperwork for each beneficiary 
for whom it serves as representative payee.
    The Jordan court decision recognized the onsite review program as 
an exception to annual accounting; this exception was subsequently 
codified by the Omnibus Budget Reconciliation Act 1990. We believe that 
this program continues to be an effective way to assess payee 
performance and, in fact, we have shaped our expanded monitoring 
program after it.

    5. You provided us with examples in your testimony of projects to 
recruit and educate new and existing organizational payees. Have you 
found it difficult to recruit new organizational payees? When you 
recruit an organization what concerns do they have about serving as 
payee? For example, too much oversight, too many reports, unfounded 
complaints by beneficiaries to the Social Security Administration, the 
police, etc.?

Response
    While SSA has not experienced problems in recruiting new 
representative payees, we are undertaking a recruitment program in 
order to ensure that we have a wide range of payees to choose from. At 
present, if new organizational payees have concerns, we are usually 
able to resolve them during the interview. We would caution, however, 
that an increase in due diligence for selecting payees (e.g., requiring 
bonding and licensing, conducting background checks, and so forth.) may 
make payee recruitment more difficult and increase the concerns of 
those organizations considering acting as payee.

    6. You indicated in your testimony that currently no minimum bond 
is required to be maintained by a fee-for-service payee and that you 
are drafting regulations that will provide guidance on the level of 
bonding needed for fee-for-service organizations. Will you require a 
minimum bond? What impact will this have on your ability to recruit 
representative payees?

Response
    We are considering establishing a minimum bond amount of $600 for 
each beneficiary served and the minimum coverage would be based upon 
the number of SSA clients the organization served. For example, minimum 
coverage for 5 beneficiaries would be a $3,000.00 bond, for 100 
beneficiaries--$60,000.00. The average bond in these situations would 
cost approximately 2 percent of the face value of the bond, although 
there are numerous variables that would have a substantial affect on 
the cost. We expect to publish regulations on bonding and licensing 
issues in calendar year 2002.
    Concerning the impact on recruitment, we expect that some 
organizations may not be able to afford the cost of large bonds and we 
could lose payees or preclude new ones from applying.

    7. You mentioned in your testimony the annual reports filed by 
representative payees. Is every representative payee required to file 
an annual report? If not, why not?

Response
    All representative payees, except for Federal and State mental 
institutions participating in an alternative onsite review program, are 
required by law to report annually on the use of benefits by completing 
a Representative Payee Report. For those institutions not required to 
report annually, SSA conducts onsite reviews every 3 years to ensure 
compliance with representative payment polices and procedures.

    8. You mention in your testimony that misuse occurs less than one-
hundredth of 1 percent of all cases. If certain representative payees 
were to have a proven record of effective service, have you given any 
thought to lessening their reporting requirements or reducing the 
number of onsite reviews?

Response
    Yes, we have considered lessening the reporting requirements for 
certain payees. However, the current representative payee monitoring 
process has been shaped to a large extent by the Jordan court decision 
That decision requires universal annual accounting of all payees 
(except some Federal and State institutions which are subject to a 
different monitoring process), including parents and spouses with 
custody of the beneficiaries they serve. Prior to implementation of the 
court decision, parents with custody of their children, and husbands 
and wives with custody of their spouses were exempt from annual 
accounting and only required to verify custody. The court's decision 
for universal accounting was based on the constitutional standards of 
due process and equal protection. The Omnibus Budget Reconciliation Act 
of 1990 subsequently codified the Jordan court decision requirement for 
universal annual accounting except for State and Federal mental 
institutions participating in the onsite review program. (The onsite 
review program for State and Federal mental institutions is a triennial 
review.) Therefore, a change to lessen the accounting requirements or 
the onsite reviews would require a change in the law.

    9. The Inspector General in his testimony suggested 4 legislative 
proposals. While I recognize you are not prepared to take an official 
position on these proposals, I would be interested in hearing your 
agency's perspectives and ask that you provide the pros, cons, and 
issues you believe the Congress should consider regarding each of the 
following proposals.

    (1) Trial Work Provision_As I understand it, an individual may work 
for up to 9 months during a 60 month period and still receive benefits, 
no matter how much the individual earns working. Right now an 
unscrupulous beneficiary who feigned their disability or concealed the 
fact they were working would, when caught, be permitted to keep the 
benefits they received during the Trial Work Period. The Inspector 
General believes this loophole should be closed.

Response
    The Social Security Act provides a trial work period (TWP) as an 
incentive for personal rehabilitation efforts for Social Security 
Disability Insurance beneficiaries who work. The TWP allows them to 
perform services and receive full benefits regardless of how high their 
earnings might be if their impairment does not improve. The duration of 
the TWP is 9 months (not necessarily consecutive) of services performed 
within a rolling 60-consecutive-month period. ``Services'' means any 
activity, although it is not SGA, you do in employment, or self-
employment for pay or profit or of the kind normally done for pay or 
profit. We currently consider work to be services if an individual 
earns more than $530 a month. This $530 criterion exists solely for 
controlling the duration of the trial work period.
    The IG has recommended that this trial work period not be available 
to anyone who fraudulently conceals work activity. In other words, if 
we find that a beneficiary had fraudulently concealed earnings, we 
would, when considering the amount of overpaid benefits, include the 9 
months of the trial work period. He provides a twofold rationale for 
this proposal. First, the IG believes this would result in considerable 
program savings to the trust funds. Secondly, the IG believes that 
there is frustration in the Department of Justice with the current law, 
and that certain U.S. Attorneys' Offices have stated a reluctance to 
prosecute these cases given the current law, which allows beneficiaries 
who have been found to have fraudulently concealed their work activity 
to keep the 9 months' worth of benefits.
    While no one at SSA would want the U.S. Attorneys to be reluctant 
to prosecute fraud cases, there are some concerns about the proposal. 
We need to ensure that in imposing new sanctions on those who conceal 
earnings that we do not discourage the attempts of beneficiaries who 
want to return to work and abide by SSA's rules.
    The IG's proposal could result in lengthy retroactive cessations 
after many months of legitimate entitlement despite only a few months 
of concealed work activity. In the case of someone who fraudulently 
establishes disability, we have always been able to go back and 
overturn that decision and consider all benefits as having been 
overpaid.
    We believe that the current civil monetary penalties and other 
existing requirements and sanctions in the law, which encourage 
reporting of wages, are generally sufficient to defer fraud in this 
area, although we are exploring the possibility of imposing civil 
monetary penalties in cases of fraud by omission.

    (2) Allowing the Inspector General to share information_Right now, 
if a law enforcement officer is trying to determine whether he has the 
right suspect, and there is no allegation that the individual has 
committed a crime against Social Security, the Inspector General cannot 
confirm whether an individual's name and Social Security number match 
SSA records. The Inspector General is proposing that they be allowed to 
share this information with law enforcement, whether there is an 
allegation of a crime against Social Security or not.

Response
    SSA is primarily a social insurance agency and the information the 
Agency collects, including the SSN, is for the purpose of administering 
its programs under the Social Security Act. The Commissioner is 
responsible for establishing the Agency's policy concerning the 
disclosure of SSA program records for law enforcement activities. 
Vesting this authority with the IG through legislation could negatively 
affect SSA's ability to obtain the often highly personal and sensitive 
information needed to administer its programs.
    This is an aggressive law enforcement proposal that goes well 
beyond the core mission of the Agency, removing any nexus between SSA's 
purpose in gathering the information and the disclosure of information. 
There is currently in place a Memorandum of Understanding (MOU) that 
permits IG employees' to verify the names and Social Security number 
(SSN) information to Federal, State, and local law enforcement 
officials. That MOU allows for the disclosure when the individual about 
whom information is sought is suspected of misusing a SSN or of 
committing crime against a Social Security program.
    The proposed changes would allow IG staff to verify SSNs without 
any allegation of fraud on Social Security programs. At times, law 
enforcement officials may be engaging in ``fishing expeditions,'' or 
may be interested in individuals who may only be witnesses to or 
marginally involved with an alleged offense where there is absolutely 
no connection with an SSA program. SSN verification under these 
circumstances could easily result in serious erosion of individuals' 
personal privacy rights and put them in positions of having to defend 
themselves where they have not committed a crime.
    As a result of increasing the access to SSA's information, fields 
offices and the 800 number could be swamped with overflow requests and 
possible complaints from the public diverting valuable and increasing 
scarce resources from the agency's programs. Moreover, SSA has a 
reputation for the vigorous defense of its program records. This 
proposal is not consistent with that reputation.
    Under current law and policy, the IG has full authority to disclose 
information in connection with alleged violations of SSA programs. In 
recent years, the Agency's law enforcement disclosure policy has been 
expanded to allow SSN verifications for Federal, State, and local law 
enforcement agencies where there may be allegations of SSN fraud or 
misuse that could constitute felony violations of the Social Security 
Act, even though the law enforcement agency pursuing an investigation 
may not have the authority to investigate or prosecute a violation 
occurring under the Act. The Commissioner has delegated authority to 
the IG to make these disclosures under such circumstances.
    This is a reasonable and balanced policy that allows SSA to provide 
assistance to the law enforcement community, while at the same time 
protect individuals' privacy rights. Providing SSN verification to 
advance the broader national law enforcement agenda can only be done at 
great risk to SSA's core mission.

    (3) Control by the Office of Inspector General over their own 
investigative files and records_As I understand it, currently, the SSA 
Freedom of Information Officer may determine whether or not an SSA 
record may be released to the public under the Freedom of Information 
Act, this would include the records of the Office of Inspector General. 
The Inspector General would like to be able to make their own decisions 
on whether their information should be released.

Response
    OIG has proposed legislation to give them control over FOIA 
requests for their investigative files and records. To our knowledge, 
the current statutory and regulatory scheme has worked well to manage 
all of the Agency's documents, including those of the Inspector's 
general (IG). We are unaware of any instances in which the Agency has 
impaired the investigative function or the statutory mandate of the IG 
through the administration of its information disclosure program.
    Further, the Commissioner of Social Security can delegate to the IG 
the ability to review and administer Freedom of Information Act 
requests should that become necessary. Also, if SSA wants to establish 
additional FOIA officers, this can be done by regulation. A legislative 
fix to this problem, should there be a problem at all, would be 
unnecessarily time-consuming and complex solution.
    We believe there are compelling reasons for establishing a single 
FOIA Officer for the Agency. To list just a few:
    The processing of requests for records is only one of FOIA's 
requirements. There are also publication and indexing requirements, and 
the EFOIA amendments require agencies to post certain information to 
their web sites. Agencies must also complete an annual report to the 
Attorney General on FOIA activities. A separation of the function for 
OIG will not be workable unless OIG takes on these functions as well.
    FOIA requests often raise conflict of interest issues. It is 
sometimes necessary to release documents that may be embarrassing to a 
component or an individual. A FOIA Officer with no direct interest in 
the matters involved in a request is in a better position to apply the 
law equitably.
    Many requests involve ``crosscutting'' documents--more than one 
component has records responsive to the request or the request involves 
correspondence between components. Often more than one component has 
copies of the same documents. Control by one FOIA Officer helps ensure 
consistency in the processing of the request.

    (4) Title II fugitive felons_We changed the law so that fugitive 
felons would no longer be eligible to receive Supplemental Security 
Income benefits. The Inspector General is suggesting that fugutive 
felons also not be eligible to receive Social Security benefits.

Response
    While we believe this proposal has merit we need to proceed 
carefully. We would be happy to work with the Committee on addressing 
the issues that expanding the provision presents.
    Even though the OASDI program is an entitlement program into which 
beneficiaries have paid, we understand the argument that SSA should not 
pay OASDI benefits to fugitive felons, as these benefit payments may 
finance a potentially dangerous fugitive's flight from justice. The 
expansion of the fugitive non-payment provisions to the OASDI program 
would assist SSA in presenting a consistent policy with respect to 
fugitives. At the same time it will increase public safety resulting 
from the arrests brought about by our cooperation with law enforcement.
    There are obvious benefits to law enforcement if the prohibition on 
paying benefits to fugitive felons included OASDI beneficiaries; 
however, there are issues that expanding the provision presents. As 
with all changes in law, there would be policy, legal and operational 
issues that must be addressed as well as an evaluation of the 
programmatic or administrative costs and savings that would result from 
this proposal.

            Sincerely,
                                  Fritz Streckewald
                       Acting Assistant Deputy Commissioner
                        for Disability and Income Security Programs

                                

    Chairman Shaw. We have a vote on the floor, but Mr. Huse, 
we will get your testimony to begin with and we will come back 
for the questioning. Jim Huse is the Inspector General of the 
Office of the Inspector General. Certainly no stranger to this 
Committee, and we appreciate your testimony and appreciate your 
coming back.

STATEMENT OF HON. JAMES G. HUSE, JR., INSPECTOR GENERAL, OFFICE 
    OF THE INSPECTOR GENERAL, SOCIAL SECURITY ADMINISTRATION

    Mr. Huse. Thank you, Mr. Chairman, members of the 
Subcommittee. I want to thank you for the opportunity to be 
here today to discuss ensuring the integrity of Social Security 
programs and identify some of the challenges we still face and 
some of areas in which legislation could help us in those 
efforts.
    In 1996, Congress enacted legislation prohibiting SSI 
payments to fugitive felons and directed SSA to provide State 
and local law enforcement officials with information needed to 
locate and apprehend these fugitives. Together with SSA, we 
have now identified some 28,000 fugitives saving more than 34 
million in fiscal year 2000 alone. But perhaps even more 
important is the removal of potentially violent criminals from 
the streets. Unfortunately, this 1996 law does not extend to 
those fugitives receiving Social Security benefits under Title 
II.
    An audit report issued by my office found that the trust 
fund would have saved at least $108 million had the 1996 
legislation included both Title 16 and Title II benefits in its 
prohibition. The time has come to turn our attention to these 
government financed fugitives. We also face continuing 
challenges in the representative payee program. It is critical 
that legislation be enacted to enable us to pursue those 
representative payees who steal the benefits they handle. And 
SSA must be authorized to reissue stolen benefits to the 
beneficiary without declaring itself negligent.
    It is grossly unfair to punish the victims of 
representative payee fraud while allowing the perpetrator to 
profit from his or her crime. Payment of benefits to deceased 
beneficiaries also remains a significant problem. A draft 
report prepared by our Office of Audit revealed significant 
error rates in SSA's death master file, and another draft 
report examines the system SSA uses to keep its death records 
up to date and ensure that benefits are terminated as soon as 
possible after a beneficiary's death.
    Both audits indicate that while progress has been made, 
much remains to be done. There are other areas in which 
legislation would help my office in its fight against Social 
Security fraud and I would like to point out just a few of 
these. First and foremost, my office continues to seek 
statutory law enforcement authority, including the authority to 
cross-designate State and local law enforcement officers in 
joint operations.
    Second, the epidemic of identity fraud has resulted in a 
wave of calls to my office by State and local law enforcement 
officers seeking to verify the name and Social Security number 
of those suspected of committing a felony crime. We have a 
restrictive agreement in place with SSA to respond to some of 
these requests, but our authority to thwart identity fraud in 
its earliest stages should be made explicit by statute.
    Third, we must protect the integrity of our sensitive 
investigative documents. Under SSA's regulations, my office 
does not have the authority to respond to the Freedom of 
Information Act (FOIA) requests for our own records. This is in 
conflict with our statutory independence.
    Fourth, we have seen frustration among judges and United 
States attorneys officers with respect to what is known as the 
trial work period. Designed to encourage valid attempts at 
vocational rehabilitation, this program has become a jackpot to 
those who receive disability benefits fraudulently. When caught 
and prosecuted, these unscrupulous individuals are permitted to 
keep thousands of dollars in stolen benefits.
    Fifth, while the Social Security Act provides for 
incarceration and fines for those who commit fraud, it does not 
permit judges to order these criminals to repay the money they 
stole from SSA.
    Finally, our civil monetary penalty program has been highly 
successful, but is in need of legislative attention. Under 
section 1129, we need authority to pursue payees for 
conversion. We also need explicit authority to treat an 
omission of material fact as if it were an affirmative false 
statement. And under section 1140, two fixes are needed. First, 
we need to clarify that any company which provides a fee-for-
service, which SSA provides free of charge, must conspicuously 
state this on their advertisements.
    And second, we must be permitted to continue our successful 
efforts in eliminating misleading advertising using SSA's good 
name through a statutory delegation of authority under section 
1140 to the Inspector General.
    The OIG, the Social Security Administration, and the 
Congress have made enormous progress in combating fraud waste 
and abuse there the few years since SSA's independence. And 
these efforts will continue and endure. Hearings such as this 
are evidence that more work remain to be done, and that we all 
remain committed to this critical mission.
    Thank you and I will be happy to answer any questions.
    [The prepared statement of Mr. Huse follows:]

STATEMENT OF THE HON. JAMES G. HUSE, JR., INSPECTOR GENERAL, OFFICE OF 
         THE INSPECTOR GENERAL, SOCIAL SECURITY ADMINISTRATION

    Good morning, Chairman Shaw and members of the Subcommittee. Let me 
first thank you for the opportunity to appear today and address issues 
related to fraud, waste and abuse in Social Security programs and 
operations. As you know, my office has been working to preserve Social 
Security resources for almost six years now, since our inception in 
1995. In that time, we have made great strides in reducing fraud, but 
there remains much work to be done, and I welcome this Subcommittee's 
help in performing this critical task.
    I'd like to talk very briefly about a few areas in which we have 
been particularly successful, then address a few areas in which fraud 
and waste continue to pose challenges. Finally, I'd like to suggest a 
number of ways in which the Subcommittee can help us in our mission.
Anti-Fraud Efforts and Challenges
    One of the first issues we explored as an organization was the 
payment of benefits to prisoners. In an audit report issued less than a 
year after SSA independence, we estimated that the annual cost to SSA 
in erroneous payments to prisoners was $48.8 million, and we 
recommended that SSA seek legislation to facilitate the exchange of 
information with Federal, state, and local prison authorities. Such 
legislation was enacted in 1999, removing the need for computer 
matching agreements between SSA and prison authorities to be renewed 
every 18 months. The elimination of this time-consuming process had an 
overwhelming effect; according to SSA statistics, payments to more than 
69,000 prisoners were suspended in FY 2000, based on more than 260,000 
prisoner alerts that were received in large part because of that 
legislation. Progress has been promising and the efficiency of this 
program should continue to improve.
    Another area in which we have focused a great deal of our energy, 
and in which we have seen dramatic results, is the fugitive felon 
program. In 1996, Congress enacted legislation making fugitive felons 
ineligible for Supplemental Security Income, or SSI, payments. The 
legislation also directed the Commissioner to provide state and local 
law enforcement officials with locator information about such fugitives 
to facilitate their apprehension. The Commissioner asked my office to 
perform this function, and we began working with SSA immediately. To 
date, we have identified some 28,000 fugitives receiving SSI. We have 
provided law enforcement officials with the necessary information to 
locate and apprehend these individuals, and have ourselves participated 
in more than a thousand of these arrests. Agreements are in place with 
the U.S. Marshals Service, the FBI, the National Crime Information 
Center, twelve states, and three cities to improve the volume and 
accuracy of the information that we act upon. More agreements are 
pending, and we continue to expand and refine the processes by which we 
receive and utilize fugitive information. The primary result is 
savings--more than $34 million in FY 2000 alone. But perhaps even more 
important is the removal of potentially violent criminals from the 
streets, such as the California man we recently arrested, who was 
wanted for assault with a deadly weapon on a police officer. This is a 
program in which everyone wins but the felons, and it's limited only by 
the resources available for this important mission.
    Unfortunately, while the law prohibits felons from receiving title 
XVI payments, it continues to permit fugitives to use title II benefits 
to finance their flight from justice. This is where we turn from 
success stories to areas where more can be done. An audit report issued 
by my office found that the Trust Fund would have saved at least $108 
million dollars had the legislation prohibited payment of both title 
XVI and title II benefits to fugitives from its enactment in 1996 to 
the audit period in August of 2000. In addition, the report estimated 
that as of May, 2000, the Trust Fund was paying at least $39 million a 
year in title II benefits to fugitive felons. As I stated earlier, this 
waste of Federal funds goes to the heart of our mission, and our 
inability to stop these payments is frustrating. What is more 
frustrating to us as a law enforcement organization is that these 
benefits were paid to some 17,300 fugitives, many of whom could have 
been apprehended had my office been able to provide law enforcement 
agencies with felons' addresses. The time has come to turn our 
attention to these government-financed fugitives.
    The representative payee program, the mechanism by which 
individuals or organizations receive benefits on behalf of those 
beneficiaries who cannot manage their own funds, has improved, but 
remains a problem area. A year ago, I testified before this 
Subcommittee and pointed out weaknesses detected by our audit and 
investigative efforts. Those weaknesses covered the full spectrum of 
Agency responsibilities in the representative payee program. We found 
that the Agency's initial selection and screening process was deficient 
because it failed to verify the accuracy of the identification, 
financial, and security information provided by prospective 
representative payees. We found that the Agency's monitoring and 
oversight of representative payees also was deficient in that many 
representative payees failed to submit annual accounting forms and SSA 
failed to retain necessary documentation when such forms were 
submitted. And, we found that when fraud did occur, there was 
insufficient statutory authority to repair the damage already done. I 
told you about a father who was appointed representative payee for his 
disabled minor son in 1996, and how two years later, when the child's 
mother also applied to be the child's representative payee, SSA learned 
that the father never had custody of the boy. I told you that the more 
than $10,000 in benefits that the father received was never used for 
the child's benefit, and that the amount stolen fell below the U.S. 
Attorney's Office's minimum for criminal or civil action. Finally, I 
told you that because the child was entitled to the benefits, we could 
not pursue the father under our existing Civil Monetary Penalty 
authority, as the father's crime was deemed to be against the child, 
not against SSA. Moreover, since the benefits were properly paid on the 
child's account, SSA could not re-issue the stolen benefits, nor could 
it charge the father's account for the stolen funds. So, the father was 
able to keep the money he stole, and the child's only recourse would 
have been to privately sue his own father.
    SSA has made strides in this area in the past year, based in part 
on our recommendations, but much remains to be done, and part of that 
burden rests with Congress. It is critical that legislation be enacted 
to enable us to pursue individuals such as the father I just described. 
Our Civil Monetary Penalty authority must be expanded to include 
conversion of benefits by a representative payee as a covered offense. 
And SSA's ability to recoup such converted benefits, and any penalties 
or assessments, must be expanded to make the representative payee 
liable to SSA for the converted funds. Finally, SSA must be authorized 
to reissue stolen benefits to the beneficiary without declaring itself 
negligent. It is grossly unfair to punish the victims of representative 
payee fraud, while allowing the perpetrator to profit from his crime. 
Most representative payees are honest, and act only in the best 
interests of these most vulnerable beneficiaries, but when this is not 
the case, we must have the tools we need to act.
    We have also identified problems with payment of benefits to 
deceased beneficiaries. In a draft report issued by our Office of 
Audit, we matched all 11.7 million auxiliary beneficiaries against 
SSA's Death Master File and found that SSA had paid an estimated 881 
deceased auxiliary beneficiaries $31 million in OASDI benefits after 
their dates of death. On average, these deceased individuals continued 
to be paid for some 63 months after death. This study also revealed 
significant error rates in SSA's death matching process, and another 
draft report examines the system SSA uses to keep its death records up-
to-date. Both audits indicate that while progress has been made, much 
remains to be done in ensuring that benefits do not continue to be paid 
to the deceased. We are pleased that SSA is proactively addressing 
other systems deficiencies identified by our independent auditor, 
PricewaterhouseCoopers, by doing more than what is minimally required 
under the Federal Financial Management Improvement Act of 1996 and the 
Government Information Security Reform Act. Our recently awarded 
contract for the FY2001 financial statements provides for our 
independent auditor to provide opinion-level assurance on the Agency's 
compliance with FFMIA and GISRA. We believe that providing this opinion 
will assist the Agency to identify and address critical vulnerabilities 
within its systems environment.
    These areas--prisoners, fugitive felons, representative payees, and 
payments to deceased beneficiaries--represent four areas in which the 
OIG and SSA are working together to improve payment accuracy and 
minimize fraud and waste. All but the first are areas in which the 
additional legislation I have already described would prove invaluable. 
But there are other areas in which legislation could be a boon to my 
office in its fight against Social Security fraud, and I'll close by 
pointing out just a few of these areas.

Legislative Needs
    First and foremost, my office has been seeking statutory law 
enforcement authority almost from the moment we were established. For 
six years, we've operated under a discretionary, revocable, and limited 
deputation agreement from the Department of Justice. This tenuous 
authority does not include the authority to cross-designate state and 
local law enforcement officers, and carries with it a time-consuming 
and unnecessary administrative burden. Our Special Agents have 
conducted themselves with the same degree of professionalism and 
devotion to duty as any other Federal law enforcement officers, and the 
time has come to grant them the same legal status.
    In the same vein, our unique status as an independent law 
enforcement organization that is tied to a Federal agency creates 
occasional conflicts in laws and regulations. Two of these conflicts 
concern the treatment of SSA records, which are tightly controlled by 
the Privacy Act and SSA's own privacy statute. While I am adamant that 
my employees observe all applicable laws and regulations and even take 
additional policy steps to protect Americans' private information, my 
office is also charged with waging the war against Identity Theft. When 
a law enforcement official is investigating an individual for the 
commission of a felony, he or she will frequently contact my office to 
determine if the suspect's name and Social Security number match SSA's 
records. SSA agreed with us that it was in everyone's best interests to 
use this early detection tool to prevent Identity Theft, but under 
current law, SSA could only agree to permit us to provide law 
enforcement with this information if the individual in question was 
suspected of committing a crime involving a Social Security number. Our 
authority to assist in the investigation of all felony crimes, while at 
the same time detecting Identity Theft in its earliest stages, should 
be a statutory authority and a statutory obligation.
    Similarly, as an independent law enforcement organization, my 
office must have control over its own investigative files and other 
records. Under regulations promulgated by the Social Security 
Administration, only the SSA Freedom of Information Officer may 
determine whether or not an SSA record is released to the public--that 
includes investigative and other records of my office. While we have 
worked together with SSA to ensure the integrity of our records for the 
past six years without significant incident, we have not been able to 
convince SSA to amend the regulations to give the OIG final control 
over its own records. This is contrary to the OIG's statutory 
independence and at odds with the practices of many Federal departments 
and agencies.
    Turning to the program area, judges and United States Attorneys' 
Offices have expressed frustration with respect to the Trial Work 
Period provision of the Social Security Act. Under existing law, 
disability beneficiaries may return to work and continue to receive 
benefits while working for nine months or more. Designed to encourage 
rehabilitation, and in most cases accomplishing just that, the Trial 
Work Period becomes an unexpected jackpot for those individuals whose 
very receipt of benefits is fraudulent. Under current law, there is no 
way to avoid paying benefits during the Trial Work Period to 
unscrupulous beneficiaries who feigned their disability or concealed 
the fact that they were working. When caught, they are permitted to 
keep thousands of dollars in stolen benefits because of this loophole 
in the law. Prosecutors rightfully regard this with disdain and in some 
instances, refuse to prosecute such cases. That loophole must be 
closed.
    We would also like to see judicial restitution authority added to 
the felony provisions of the Social Security Act. Under existing law, a 
Court may find an individual guilty of stealing Social Security 
benefits, but cannot, as part of that individual's criminal sentence, 
order her to repay the benefits she has stolen.
    Finally, our civil monetary penalty program has been highly 
successful. We have completed 66 successful cases under Section 1129 of 
the Social Security Act for making false statements in connection with 
benefit determinations, imposing over $2 million in penalties and 
assessments. We have penalized 8 companies under Section 1140 for using 
SSA's good name in misleading advertising campaigns, imposing over 
$1.85 million in penalties. Both programs need a legislative boost. 
Under Section 1129, as I discussed earlier, we need authority to pursue 
representative payees for conversion--the current system allows far too 
many of them to fall through the cracks. We also need explicit 
authority to treat an omission of a material fact as if it were an 
affirmative false statement. And under Section 1140, two fixes are 
needed. First, we need to require any company that charges a fee for 
performing a service that SSA provides free of charge to conspicuously 
state this on their advertisements. And second, we would suggest a 
technical change to Section 1140 to ensure that the OIG has the 
critical tools and permanent authority to wipe out deceptive mailers 
who target SSA beneficiaries.
    The Office of the Inspector General, the Social Security 
Administration, and the Congress have made enormous progress in 
combating fraud, waste, and abuse in the few years since SSA 
independence. Hearings such as this are evidence that more work remains 
to be done, and that we all remain committed to this critical mission. 
Thank you, and I'd be happy to address any questions.

                                

    Chairman Shaw. Thank you. We have one vote on the floor. 
The Committee will stand in recess for approximately 15 minutes 
so that the Members can vote, and then we will return for 
questions. Mr. Huse, thank you.
    Mr. Huse. Thank you, Mr. Chairman.
    [Recess.]
    Chairman Shaw. Thank you. Mr. Huse, in your testimony you 
recognize SSA for increasing the number of matching agreements 
they have entered into, which will result in more fugitive 
felonies being identified. In your audit report issued last 
August your findings appeared to be critical of the SSA for not 
moving fast enough. Based upon your understanding of what SSA 
has accomplished since your audit report, are you satisfied 
with the progress that they are making and could you enlarge 
upon what is working and what is not?
    Mr. Huse. I would be glad to, Mr. Chairman. We are 
satisfied with the progress we are making now with respect to 
these matching agreements across the country. As a matter of 
fact, we now have matching agreements with 12 States and three 
cities. It is a very difficult prospect because the Computer 
Matching Act, of course, requires that we have these matching 
agreements before we exchange data. Some of the States have 
different computer systems, incompatible computer systems, so 
there are some technical issues that need to be overcome. And, 
of course, some States and jurisdictions don't even have 
electronic records. But we are getting there. And the 
commitment is there. We are only limited in all of this by the 
amount of resources that we are able to apply to it. And with 
the resources we have now, we are 100 percent behind this 
effort.
    Chairman Shaw. How many States do not have electronic 
reporting equipment? That is a little bit surprising to me.
    Mr. Huse. I am not certain. Off the top of my head, I think 
there are several, but we will be glad to get that for the 
record. About four. We will give you the names of those States.
    Chairman Shaw. Could you supply that for the record?
    Mr. Huse. I would be glad to.
    [The following was subsequently received:]

                 Social Security Administration    
                    Office of the Inspector General
                             Baltimore, Maryland 21235-0001

                                                      June 15, 2001

Hon. E. Clay Shaw, Jr.
Chairman, Subcommittee on Social Security
Committee on Ways and Means
House of Representatives
Washington, D.C. 20515

Dear Chairman Shaw:

    I am responding for the record in reference to a question you asked 
me during my May 10, 2001 testimony before your Committee on the 
subject entitled: ``Ensuring the Integrity of Social Security 
Programs.''
    Your question is repeated as stated and accompanied by the 
following reply:
    Question: How many States do not have electronic reporting 
equipment?
    I answered that approximately 4 States do not have electronic 
reporting equipment. I would like to clarify for the record that all 
states have some type of electronic equipment. However, not all States' 
data systems are compatible or can meet SSA's reporting requirements.
    SSA's Office of Systems requires all reporters to follow a strict 
format. Although several States have tried to comply, we have 
encountered problems with the files received. As an example of these 
problems, the El Paso Sheriffs Department sent us 3 separate files and 
despite the best efforts on the part of our computer specialists, these 
files remain unreadable. El Paso has not been able to revamp their 
computer systems to meet the specifications mandated by SSA. Another 
example is the Baltimore City Sheriffs Department. After several 
unsuccessful attempts to format data to SSA's specifications, this 
jurisdiction continues to furnish our Baltimore office with paper 
reports.
    Jurisdictions at the State level have similar problems. For 
example, according to a report prepared by SSA:

   The State of Vermont indicated that it ``does not have the 
        resources to prepare files to submit remaining parole probation 
        violators'' to SSA.
   The State of Indiana declined to participate in the Fugitive 
        Felon Program because it is unable to separate felony records 
        from misdemeanor records. SSA specifies that records must 
        contain felony warrants only.
   The State of Iowa currently reports quarterly on paper. SSA 
        states (in part) that Iowa finds ``the matching agreement 
        reporting requirements burdensome. . . .'' Again, this clearly 
        indicates problems with electronic reporting equipment.
   The State of Utah declined to participate ``due to resource 
        issues.''

    Prior to SSA agreements with State and local jurisdictions, the OIG 
contacted several law enforcement agencies. Although many agencies 
indicated a willingness to provide data, several indicated that they 
lacked the electronic reporting equipment needed to comply with SSA's 
specifications. Still others indicated that meeting SSA systems 
requirements would not be a problem, but the test files received were 
unusable.
    Should you have any further questions, or if you would like a 
clarification of the above comments, please contact my Special Agent-
in-Charge of External Affairs, Mr. Rich Rohde at (410) 966-1722.

            Sincerely,
                                         James G. Huse, Jr.
                               Inspector General of Social Security

                                

    Chairman Shaw. I suppose one of them is not Florida.
    Mr. Huse. No, Florida has electronic records. All of 
America knows that.
    Chairman Shaw. We are going to vote that way now too, I 
guess. Mr. Pomeroy.
    Mr. Pomeroy. Thank you, Mr. Chairman. Inspector General 
Huse, you indicate two areas with the problem of preventing 
fraud within the representative payee program that SSA has been 
a little deficient in the past relative to the initial 
verification and screening process as well as failing to verify 
the accuracy of information provided by perspective 
representative payees. Also that SSA failed to retain essential 
supporting documentation when payees submitted their annual 
reports. What progress has been made in these areas? Or what is 
the state of resources within the agency to deal with those 
particular issues?
    Mr. Huse. As the agency testified before me, in their view, 
they are adequately funded now to carry out some of these 
responsibilities, but they are essentially in mid passage. For 
example, we still haven't settled on a definitive process yet 
to verify the credentials of a prospective representative payee 
in terms of fiduciary history or criminal history, and which 
one would be subject to that check. That is being developed 
now, so that there is progress there.
    I know the agency is working on regulations and a process 
to take into account the annual review, or the periodic review 
of rep payees around the country in terms of the benefit 
payments and their, you know, viability; are the benefits 
getting to the beneficiaries? That, too, is being worked out. 
We are working with them on that in terms of providing some 
kind of check on the process so that it fulfills our 
responsibilities to report on that, but also giving advice 
where we can in terms of what kind of a--it is not truly an 
audit that can be done, but what type of review would be done 
individually with these rep payees to get us to where we have 
to go so we have a better handle on these people.
    Mr. Pomeroy. So generally are you--resources are there, the 
plans in implementation, things on track?
    Mr. Huse. It is on track with all of what--I have to 
qualify that by saying with all of what is done, of course, 
these resources are balanced against other workloads. So 
while--the theoretical effort is there in terms of the policy 
and the commitment to do it. Any of these other workloads can 
cause this progress to be slower or faster. Right now it is a 
priority. But there are other things that can interfere. So I 
am not saying that it is done, nor am I saying that the speed 
is correct. I am just saying that they are involved in the 
effort. But resources do influence the speed with which they 
are accomplished.
    Chairman Shaw. Mr. Ryan.
    Mr. Ryan. No questions.
    Chairman Shaw. Mr. Brady.
    Mr. Brady. No, sir.
    Chairman Shaw. Mr. Hulshof.
    Mr. Hulshof. Thank you, Mr. Chairman. Mr. Huse, I want to 
focus on some of the things you have suggested on pages three 
and four of your written testimony as far as investigate 
legislative proposals and legislative needs; and, of course, 
that is where we come into play to some degree to a great 
degree. And in your testimony, really two separate areas if I 
have time to get to them.
    You requested tort to have final control over Inspector 
General reports as far as freedom of information requests. I 
guess I am a little bit unclear as to how the process works 
now. You indicate in your testimony, for instance, that this 
is, your situation is contrary or at odds with the practices of 
many Federal departments or Federal agencies. Could you 
elaborate on that for me?
    Mr. Huse. We are a relatively new office of the Inspector 
General. In fact, we are just about 6 years old, from SSA 
Independence Act. And when we came out of Health and Human 
Services, a lot of underpinning that would normally take place 
with respect to an IG was done very quickly, the structure was 
set up. And some things weren't entirely worked through. So in 
this particular context, we actually are subjected to the 
agencies regulations and their final review of FOIA material. 
This is contrary to the practice in most of the government 
where the view of the Inspector General includes all audit 
material generated by the IG.
    Mr. Hulshof. Have you had some discussions with SSA about 
this?
    Mr. Huse. I have.
    Mr. Hulshof. What has been their response?
    Mr. Huse. I would say that the agency's position is they 
see there as an area where they feel that they need to exercise 
their control over what we do. And that is in conflict, we 
believe, with the Inspector General Act. These things happen 
where these conflicts come up. And we are seeking a legislative 
relief because, quite frankly, I think we could go on for some 
length of time without any amending regulatory change inside 
the agency.
    Mr. Hulshof. Mr. Huse, would you care to comment on any 
instance--not asking a specific fact pattern, but has Social 
Security Administration ever released records in a way that may 
have caused interference with the Inspector General's work or 
was contrary to the IG's best interest.
    Mr. Huse. I know we have had high dialogue and difference 
of opinions over release of some records, but I don't know of 
any specific instance where I would sit here and say we have 
had some damage.
    Mr. Hulshof. Let me shift gears a little. I do have a few 
moments left, and I know that the Chairman has been very strong 
about getting to the root of identity theft. We have had a 
series of hearings on that. So I want to focus on your 
testimony regarding that instance which was enlightening to me. 
Again, as I understand it, you are unable to share certain 
information, name, Social Security number with outside law 
enforcements unless there is an allegation of crime against 
Social Security.
    Mr. Huse. That is correct. There is one narrow exception 
that is provided for Presidential threats and acts of 
terrorism; but other than that, the prohibition is pretty 
restrictive.
    Mr. Hulshof. In your testimony, you recommend that the 
Inspector General be authorized to assist outside law 
enforcements in the investigation of all felonies by seeing 
whether their suspect's name and Social Security number match. 
Is that your request?
    Mr. Huse. That is almost the standard request that is made 
to us day in and day out by local, State, county law 
enforcement around the United States; and we believe that is 
something we should be able to do.
    Mr. Hulshof. Again, let me ask. You had conversation with 
the Social Security Administration about this aspect, and what 
was their reaction?
    Mr. Huse. In the last administration, we were able to 
strike a compromise and work out a process where it allowed us 
to provide some latitude here as long as we could identify a 
violation that Social Security has jurisdiction over, and we 
have looked at identity fraud as expanding that a little bit. 
So we are part of the way there with you. We are not all the 
way. We have to be to really, to really participate in this 
identity fraud fight the way we should.
    Mr. Hulshof. I see my time has expired. Thanks, Mr. Huse. 
Thanks, Mr. Chairman.
    Chairman Shaw. Mr. Lewis.
    Mr. Lewis. Mr. Huse you have indicated that you have 
provided the Social Security Administration with the 
recommendation to improve its error rates in their death-
matching process and the time limits of their death records. 
Could you provide us with some examples of those 
recommendations which are being implemented by SSA.
    Mr. Huse. Off the top of my head--if I could, could I 
provide those to you in a written response?
    [The following was subsequently received:]

                             Social Security Administration
                                     Baltimore, Maryland 21235-0001
The Honorable Ron Lewis
House of Representatives
Washington, DC 20515

Dear Mr. Lewis:

    I am writing in response to your question asked during the Social 
Security hearing on ``Ensuring the Integrity of Social Security 
Programs,'' held on May 10, 2001. You asked for examples of 
recommendations issued by the Office of the Inspector General that were 
being implemented by the Social Security Administration (SSA) to 
improve the accuracy and timeliness of its death-matching process.
    During this hearing I cited two reports, one report entitled ``Old-
Age, Survivors and Disability Insurance Benefits Paid to Deceased 
Auxiliary Beneficiaries'' was issued by our Office of Audit June 19, 
2001 (enclosed) and the other report entitled ``Unresolved Death Alerts 
Over 120 Days Old'' is expected to be issued by early September. In 
both reports, we provided SSA with recommendations to improve its 
procedures for (1) detecting unreported and misreported deaths, and (2) 
preventing improper payments to deceased beneficiaries. The first 
report recommended that SSA periodically match its payment records 
against its Death Master File, a repository of death information from 
third-party sources such as Medicare and State vital statistics 
agencies. SSA agreed to conduct the match in July 2001 and evaluate the 
need for subsequent matches. This report also recommended that SSA 
resolve discrepancies for 2,721 beneficiaries identified by the audit. 
SSA agreed to complete its review of these cases by September 2001.
    The second report recommended that SSA improve its controls to 
ensure that discrepant death data identified by its automated system 
are resolved in a timely manner. By June 2001, SSA agreed to develop 
procedures, including timeframes, to take corrective action on all 
cases outstanding for over 120 days. In addition, SSA agreed to monitor 
these cases on a nationwide basis and follow up with its field offices. 
This report also recommended that SSA implement a number of systems 
modifications to enhance its death-matching process. SSA agreed to 
implement such enhancements as resources permit.
    If you have any questions concerning our response, please call me 
or have your staff contact Douglas Cunningham, Special Assistant to the 
Inspector General, at (202) 358-6319.

            Sincerely,
                                         James G. Huse, Jr.
                               Inspector General of Social Security

                                

    Mr. Lewis. Sure that would be fine. In your audit, did you 
find instances of individual payers on the death record, but 
still alive?
    Mr. Huse. Yes we did. We have conducted the audits that I 
have mentioned in my testimony, and we found that we had out of 
the universe of auxiliary beneficiaries, now these are people 
who, after the beneficiary died they were auxiliary 
beneficiaries. There was an original beneficiary, and then they 
have--the benefits went to them. That in that universe, 800 
some-odd beneficiaries were deceased, but we had paid $31 
million in benefits to them nevertheless. Now in the months 
involved, there were anywhere from 19 months to 154 months that 
the payments continued. That averaged out to be about 63 months 
through that particular piece to the debt collected back from 
them, and these are rough figures; and I would ask if we could 
correct them, but basically we only get back about 10 percent 
of what has been paid out. And the rest of it is written off as 
uncollectible. There is a window in there where you get more 
back if you identify the death within the first 20 minutes or 
so or even a lesser period of time. There is more of an 
opportunity, the likelihood there. If it goes beyond that, 
those funds are pretty much difficult to get back.
    Mr. Lewis. Now there is a proposal that was submitted last 
year that requires States to report death information to the 
agency within 30 days from when they receive it. Would that 
help improve the accuracy and the timeliness of terminating the 
benefits for those who have died?
    Mr. Huse. Well timely reporting is the key to this 
particular business process, of course. But we are up against 
the same problem there that we get into with some of these 
other efforts to collect information from other jurisdictions, 
State, local, county, that all of these are not uniform in the 
way they aggregate the data and report it to us. So the ideal 
today with information technology is we reach this place where 
all of this is done electronically and in real time. But we are 
a long way from that. I think that is important to understand. 
That also applies to the fugitive felon issue too. We are not 
there yet. And to glibly state that we are is not correct.
    Mr. Lewis. If we imposed on the States this reporting 
requirement, do you think that would help?
    Mr. Huse. I think if it gave them some bench marks that 
they really ought to strive for, that would certainly help to 
improve the situation now where those don't exist.
    Mr. Lewis. Thank you.
    Chairman Shaw. Mr. Johnson.
    Mr. Johnson. Thank you, Mr. Chairman. I am interested in 
your remarks about not being able to function in a law 
enforcement capacity as easily as you would like to and you 
tell us that we need to change some of the laws but tell me how 
you would propose to do that.
    Mr. Huse. Well, right now the office of the Inspector 
General has its actual police powers, it has law enforcement 
powers provided by a deputation from the United States Marshall 
Service. Our agents are special deputy United States marshals. 
And we do not sneer at that. That is a pretty good status. But 
as an OIG, we lead all of the inspector generals in government 
in terms of arrests, in terms of what we do in our 
investigative activities.
    Ninety-seven percent of the work we do involves external 
crime. That is very different from most inspectors general. We 
are, in fulfilling some of plan dates we have on the street 
with local law enforcement around the country, just as any of 
the other traditional law enforcement agencies are. By being 
special deputies though, we are limited in our ability to 
organize task forces with local county, States' law enforcement 
to accomplish some of these tasks like particularly with 
fugitive felons, which really has great potential.
    Mr. Johnson. Yes, but how would you envision changing that 
relationship with the Justice Department?
    Mr. Huse. It has to be by statutory----
    Mr. Johnson. I understand, but what are you asking for?
    Mr. Huse. We are asking those powers to be included in the 
Social Security Act.
    Mr. Johnson. But are we establishing another separate law 
enforcement agency when we do that?
    Mr. Huse. Well the law enforcement agency already exists. 
It exists as the OIG now, but it doesn't have the full range of 
powers it needs to do the job as well as it can.
    Mr. Johnson. Well part of the problem with our system out 
there is the courts and attorneys won't accept cases for 
something unless it is 10,000 or even $100,000. If it is not a 
big number, they do not want to go to court over that. How do 
you propose to handle that because a lot of yours are smaller 
amounts, aren't they?
    Mr. Huse. They are, but we have some other remedies. We 
have the Social Security Act civil money penalty powers, which 
allow us to find folks that commit fraud against Social 
Security.
    Mr. Johnson. Without going to court?
    Mr. Huse. Without going to court.
    Mr. Johnson. OK.
    Mr. Huse. But those civil money penalty actions depends on 
the work of our investigators. And we have built up some great 
traction the last few years using these tools which I think are 
very good tools that take some of the burden off of the 
Department of Justice folks so that they can concentrate those 
bigger number crimes.
    Mr. Johnson. But specifically, how do you recommend that we 
try to fix it in law?
    Mr. Huse. With your statutory authority in adjusting the 
civil money penalty.
    Mr. Johnson. Or you want to be an independent agent; don't 
you?
    Mr. Huse. We do.
    Mr. Johnson. So you would still be under justice, I 
presume?
    Mr. Huse. We still would be subjected to the Federal rules 
of criminal procedure and the Justice Department's requirement 
enforcement production of quality criminal investigations. But 
we would be subject to the authority of the Commissioner of 
Social Security in terms of law enforcement powers. So we are 
answerable just like any Federal law enforcement agency would 
be answerable to the head of the agency or to the cabinet 
secretary if it is a Treasury agency.
    Mr. Johnson. Right. Are your guys trained as law 
enforcement officials? Do they carry weapons?
    Mr. Huse. They do now, and they are trained exactly the 
same as any other Federal agent with the same requirements and 
maintain the same standards of physical fitness and firearms 
prowess. I would submit that in the past 5 years, we have 
become one of the best and most professional pieces of Federal 
law enforcement there is.
    Mr. Johnson. Thank you, sir.
    Mr. Huse. Thank you, sir.
    Mr. Johnson. Thank you, Mr. Chairman.
    Chairman Shaw. What would be the consequences if you were 
moved to Justice?
    Mr. Huse. Well, I think we belong where we are because of 
the relationship we have with Social Security Administration to 
do this job. When you look at how much----
    Chairman Shaw. You keep talking about independent.
    Mr. Huse. Well, there is no artful answer to the IG 
independence versus the being a part of the agency. I think 
Congress never wanted that to be completely answered as a 
dynamic tension there that is always present. I don't find that 
to be insurmountable, and it is healthy. But we would be 
independent as we are now in the conduct of our investigative 
and audit activities. What we are asking for is to strengthen 
that though, with the ability to be able to do more in terms of 
our law enforcement activities with those partners we have to 
have at the local, State, and county level to get things done.
    Chairman Shaw. OK. Thank you. Mr. Becerra.
    Mr. Becerra. Thank you, Mr. Chairman. Mr. Huse, thank you 
for being here. Let me see if I can ask a couple of questions. 
I followed--you have discussed a little about the process of 
trying to collect information of death, and I know that is 
always a difficult process and sometimes cumbersome and in some 
cases very delayed.
    Is there some way to try to streamline the process that has 
been suggested to you? And has the suggestion ever been 
received to try to perhaps ask the physician who writes, who 
makes note of death on a death certificate been proposed to you 
as an idea of trying to first get information about death to 
the Social Security Administration?
    Mr. Huse. It sounds to me like a reasonable proposition. I 
wouldn't, I don't know that that is under consideration. That 
is a policy area that the agency would probably be better able 
to answer for you. But, I think there would have to be some 
kind of incentive here, but that is certainly a good way.
    Mr. Becerra. But in your investigation no one ever brought 
that out about a way of trying to streamline the process of 
trying to collect death?
    Mr. Huse. I think that is one of the recommendations we 
made. The key is the timeliness. I remember when I was 
responding to the earlier question, same issue, if we can get 
notification timely it is vastly easier to get these benefits 
back. Because in a lot of cases they are just sitting there in 
a stack of checks or in a terms of electronic funds 
transferred, it is easier to catch them before they have been 
withdrawn from an account.
    Mr. Becerra. And right now there is no uniform method of 
checking this information that SSA has.
    Mr. Huse. Pretty much the standard method is to receive 
notification from loved ones or funeral homes. And that works 
pretty well. But this would be an added dimension to cover. My 
colleague from Social Security testified, the 10 percent of 
instances where we do have a problem with the early reporting.
    Mr. Becerra. And the difficulty with receiving notification 
from loved ones or perhaps even a funeral home is that there is 
no legal requirement that those individuals pass on that 
information.
    Mr. Huse. I am not sure I know the answer to that.
    Mr. Becerra. Some of the fraud we do see occurs that some 
people do report individuals dead that aren't. And it would 
seem to me that if a physician signing a death certificate goes 
beyond an enforcement, that is a very formal, official act. And 
you are right, it probably would need some kind of incentive 
for the physicians to want to do that, but if that physician 
has to be receiving Federal funding for some of the services he 
or she provides folks, Medicare, Medicaid, there might be some 
type of way to provide the connection for that physician to 
require to have to do that.
    Mr. Huse. Certainly.
    Mr. Becerra. What of the question of OASDI benefits. I know 
there has been a recommendation that we prohibit felons from 
receiving those benefits as well. In what you have seen, is it 
possible for SSA to take on that task of also trying to 
preclude benefits from going to felons under OASDI without 
additional resources.
    Mr. Huse. Well, we use all of the resources we have right 
now just to do the title 16 fugitive felons. But the issue is 
one of equity here. These, the title two beneficiaries 
certainly, we shouldn't be funding their fugitive status with 
these benefit payments. The issue of resources is difficult.
    Mr. Becerra. You have just mentioned you have used up all 
your resources.
    Mr. Huse. We do. And testify point, we can't even address 
the universe we have completely in title 16. So perhaps some 
other type of a funding mechanism might be appropriate here 
such as scoring giving us our administrative costs back from 
the savings we bring in and thus allowing us to staff up to the 
point where we could really get to the full potential of the 
savings here that Congress intended that we go after.
    Mr. Becerra. And I believe you indicated in your report you 
would probably need about 128 additional full-time employees to 
cover the work of going after or trying to stop benefits from 
being received by fugitive felons.
    Mr. Huse. I think our latest number may even be more than 
120. I think it is about 182.
    Mr. Becerra. So if we would pass legislation to prohibit or 
stop funding from OASDI funding from going to a fugitive felon 
without giving--you have the resources to do the work. We are 
really passing laws that can't be implemented.
    Mr. Huse. Well, I think we would be in the same situation 
we are now where we would have to prioritize and take what we 
could get from that triaging effort to try to make a 
demonstration at least in both violation areas that the law is 
being followed and fulfilled. But, no, the answer is we can't 
go to the universe either way without more resources.
    Mr. Becerra. Mr. Chairman, thank you. Mr. Huse, thank you 
for your testimony.
    Chairman Shaw. Mr. Collins.
    Mr. Collins. Thank you, Mr. Chairman. Mr. Huse, in your 
statement, you make the comment that while we have worked 
together with SSA to ensure the integrity of our record for the 
past 6 years without significant incident, we have not been 
able to convince SSA to amend the relations regulations to give 
the OIG final control over its record. Evidently there have 
been some minor instances or you foresee the possibility of 
problems. What would be some of those problems or a probable?
    Mr. Huse. Well the worst problem would be where a record 
that was released that revealed some of our investigative 
techniques or the identity of someone who had provided us 
information which we are bound to protect by law or statute. 
And that is really what we are talking about is that our final 
review of what should be released should be the final review. 
It shouldn't go to someone else and have them second guess our 
decisions which is the case today. It is needless bureaucracy.
    Mr. Collins. You say without significant incident. What 
have been some of the insignificant instances. Is that an 
example of what has happened in the past?
    Mr. Huse. That is the example of the type of arguments we 
have. That is, quite honestly, what we have disagreements over, 
what is releasable and what isn't. And with law enforcement 
record, there are charges that you protect the identity of 
those citizens who come forward to give us--I mean, that is the 
basis of any good case any way is someone giving an indicator 
that the crime has been committed and who done it.
    Mr. Collins. Another area, we suggest a technical change to 
section 1140 to ensure that the OIG has the critical tools and 
permanent authority to wipe out deceptive mailers who target 
SSA beneficiaries. Inform us of a couple of examples of 
deceptive mailers.
    Mr. Huse. We have had some great cases here. We had a case 
in New York where the literature sent out by this company 
literally was charging citizens for services that Social 
Security provides for free. And we put them down. We 
investigated them and served an injunction on them and put them 
out of business. And that is basically what we have done around 
the country. I am getting a nod from our chief counsel who is 
in charge of this, but we have had great successes.
    Mr. Collins. Well then you have the tools and the 
authority. It must be something somewhere.
    Mr. Huse. What this is all about, and I am going to make 
this straight forward, there is too much bureaucracy. We do 
their work. It was delegated to us by the commissioner. It is 
in the Social Security Act, but because of the little bit of 
ambivalence in the notice legislative language, we have too 
many cooks involved in this process, too many lawyers actually. 
And the agencies office of general counsel gets in--what we are 
trying to do is get do this in a more efficient way. The other 
problem is if you give it, if you delegate something that the 
IG--by statute, we are independent from the agency so that the 
concept of the agency's general counsel directing us is in 
opposition to the IG act. So we are just trying to clean that 
up with a change in the wording of the 1140 piece.
    Mr. Collins. Good. Thank you. That is all I have, Mr. 
Chairman.
    Chairman Shaw. Thank you. Mr. Huse, we are going to get 
more into the question of deceptive mailings at a future 
hearing and perhaps you will come back and visit us.
    Mr. Huse. I would be delighted.
    [Questions submitted from Chairman Shaw to Mr. Huse, and 
his responses follow:]
                     Social Security Administration
                            Office of the Inspector General
                                          Baltimore, Maryland 21235

    1. Both you and the Social Security Administration indicated that 
more agreements are pending to allow you to find more fugitive felon 
warrants. Is your goal to expand agreements to the remainder of the 
states, and will those include agreements with more local law 
enforcement entities?
    The goal of the Social Security Administration (SSA) is to enter 
into agreements with the remainder of the States that do not report all 
felony warrants and persons wanted for violation of Federal or State 
probation and parole to the National Crime Information Center. SSA will 
also enter into agreements with local law enforcement jurisdictions in 
circumstances where they do not report felony warrants to a central 
State repository.

    2. You indicated in your testimony that agreements are in place 
with several Federal law enforcement authorities, 12 States and 3 
cities to improve the volume and accuracy of the information that you 
act upon. What inaccuracies have been found in the information you have 
received?
    Warrant files have been received that contain misdemeanor as well 
as felony warrants. SSA is working very closely with State reporters to 
ensure warrant files include only records of felonies and parole/
probation violators, as specified in the enabling legislation. 
Additionally, SSA continues to work with the States to ensure files are 
received in a format suitable for automated use.

    3. Your office works with Federal, State and local law enforcement 
agencies to apprehend fugitive felons who receive SSI benefits. From 
Chief Dough's testimony, we saw that one of the ways you work with 
these agencies is through joint fugitive felon task forces. Could you 
explain for the Subcommittee how a task force works? Who would be 
involved? What type of information would the Office of Inspector 
General provide to secure the apprehension of fugitive felons? What 
involvement would an Office of Inspector General Special Agent have in 
the arrest of the fugitive?
    A task force is a team that may be comprised of individuals from 
Federal, State, local agencies, the private sector, (i.e., bank, credit 
card, and insurance fraud investigators) or any combination thereof. 
The task forces serve to combine the resources, talents and 
jurisdictional authority of the individual components in a way that 
increases efficiency in pursuing objectives of mutual interest. One 
example of this symbiotic relationship is the pooling of intelligence 
data from various sources that separately have little value, but when 
combined, provide excellent investigative leads.
    OIG would provide information indicating the address where a 
fugitive receives SSI payments or a parole/probation violator receives 
payments or benefits. In those task forces where the OIG is an active 
member, we would participate to the extent of our authority, including 
arrest situations, resources permitting.

    4. You indicated in your testimony that the Social Security 
Administration has made great strides in the representative payee 
program. Could you elaborate as to what the Social Security 
Administration has done in the past year? What, in your view, is left 
to be done by the Social Security Administration? By Congress?
    Last year, SSA established a Representative Payee (Rep Payee) Task 
Force to perform a comprehensive review of the features and 
vulnerabilities of the current Program. The Task Force is comprised of 
three subgroups concentrating on:
   Monitoring Representative Payees
   Systems Support for the Representative Payee Program
   Bonding and Licensing of Representative Payees
    SSA has completed approximately 540 on-site reviews of Rep Payees, 
verified that 693 organizational fee-for-service Rep Payees continue to 
have the required bond or license, and performed 26 random reviews of 
Rep Payees. In addition, SSA has contracted with an accounting firm to 
conduct financial reviews of 60 Rep Payees.
    However, much is left for SSA to do to address the vulnerabilities 
and weaknesses in the Rep Payee Program. This work includes the 
following:
    Selection of Rep Payees--SSA is yet to determine whether and how 
they will stop the selection of those Rep Payees who are most likely to 
commit misuse. Currently, SSA does not perform a background check of 
Rep Payees to determine whether they have financial problems, bad 
credit, have been convicted of a felony, and so forth. However, SSA is 
planning to award a contract for research options concerning criminal 
and financial background checks.
    Bonding and Licensing of Rep Payees--SSA's policy specifies neither 
the amount of bond necessary to adequately protect beneficiaries nor 
the type or nature of licenses that are permitted. To date, SSA has not 
made any revisions to its policy to address these vulnerabilities.
    Rep Payee System--SSA is working to correct a number of systems 
weaknesses we previously identified. Some of the items SSA has not yet 
implemented follow:
   SSA systems do not effectively track Rep Payees who do not 
        respond to and complete the Rep Payee Reports.
   SSA cannot always locate and retrieve completed Rep Payee 
        Reports when needed.
   SSA systems do not include information on all Rep Payees and 
        beneficiaries that have Rep Payees as required by law.
   SSA needs to develop a systems match to identify deceased 
        Rep Payees.
   SSA needs to develop a system to control and monitor the 
        processing of alerts that have identified Rep Payees who have 
        been incarcerated.
    As to congressional action, we support legislative efforts to 
strengthen SSA's oversight of Rep Payees. In particular, the provisions 
in H.R. 4857 provide important safeguards that would protect Social 
Security beneficiaries from unscrupulous Rep Payees. The provisions of 
the legislative proposal we support addressed:
   The re-issuance of Social Security benefits in cases of 
        misuse by individual or organizational Rep Payees;
   Requirements to conduct periodic on-site reviews of certain 
        Rep Payees;
   Disqualification of individuals from serving as Rep Payees 
        who have been convicted of an offense resulting in more than 1 
        year in prison;
   The treatment of misused benefits by a Rep Payee as 
        overpayments to the Rep Payee, subject to current overpayment 
        recovery authorities; and
   The imposition of civil monetary penalties for offenses 
        involving misuse of Social Security benefits received by a Rep 
        Payee on behalf of another individual.

    5. According to both yours and the Agency's testimony, the Social 
Security Administration has added many new procedures to its 
representative payee oversight program, including annual verification 
of bonding or licensing and random reviews of volume and fee-for-
service payees. What is your office's role in this process? What 
audits, reviews, investigations are planned?
    Our role is to provide an independent assessment of SSA's 
stewardship over the Rep Payee Program and to identify vulnerabilities 
to fraud, waste or abuse. In addition, we investigate all allegations 
of Rep Payee fraud and/or misuse. As you know, since 1996, we have made 
several recommendations to improve SSA's Rep Payee Program. These 
recommendations addressed many of the areas SSA is now working to 
correct. For example, we recommended that SSA more thoroughly screen 
potential Rep Payees, change the focus of its Program to increase the 
monitoring of Rep Payees, and determine why Rep Payees do not complete 
and return Rep Payee Reports.
    In FY 2001 we performed six financial-related audits of Rep Payees. 
Our audit results showed that Rep Payees did not always meet their 
responsibilities to the beneficiaries they served. We identified 
deficiencies with the financial management of, and accounting for, 
benefit receipts and disbursements; vulnerabilities in the safeguarding 
of beneficiary payments; poor monitoring and reporting to SSA of 
changes in beneficiary circumstances; and inappropriate handling of 
beneficiary conserved funds.
    We continue to identify problems with SSA's oversight of Rep 
Payees. For example, in March 2001, we alerted SSA to a condition 
whereby individuals were serving as Rep Payees who also had a Rep Payee 
to manage their own Social Security benefits. SSA subsequently 
identified several thousand instances where this had occurred. We also 
recently identified an instance where a Rep Payee continued to serve as 
a Rep Payee while incarcerated.
    In FY 2002, we will conduct an additional six financial-related 
audits of Rep Payees. In addition, we will perform audits/reviews of 
SSA's oversight of the Rep Payee Program. They include audits/reviews 
of Rep Payees who have committed misuse, SSA's on-site reviews of Rep 
Payees, SSA's Rep Payee System, and Rep Payees who are fugitive felons. 
Finally, will continue to investigate allegations of Rep Payee fraud 
and/or misuse.

    6. Both you and Ms. Zelenske mentioned that the Civil Monetary 
Penalty authority should be expanded to include conversion of benefits 
by a representative payee as a covered offense. Would you agree with 
Ms. Zelenske's suggestion that this should be limited to cases of 
``misuse'' of benefits or should it be broader?
    We agree with Ms. Zelenske that expansion of the OIG's civil 
monetary penalty authority to include conversion of benefits by a 
representative payee should be limited to instances of misuse. We also 
agree with Ms. Zelenske that there is a significant distinction to be 
made between ``misuse'' and ``improper use'' of benefits by a 
representative payee. Thus, we do not foresee a need for broader 
authority at this time. We would note, however, that the language in 
section 406 of H.R. 4857 pertaining to representative payee conversion 
is consistent with the definition of misuse contained in section 401.
    Therefore, we do not believe that any change in the language of the 
legislation is necessary to address Ms. Zelenske's concerns. The 
expanded authority proposed in the draft legislation would 
significantly enhance the OIG's efforts to reduce this type of fraud 
against SSA's most vulnerable clients while continuing to recognize 
that representative payees play a vital role in the administration of 
SSA's programs and should not be unnecessarily or unfairly sanctioned.

                           The Honorable James G. Huse, Jr.
                                                  Inspector General

                                

    Chairman Shaw. Thank you very much. We now have a panel. If 
they would come to the witness table. Ms. Ethel Zelenske, who 
is the cochair on the Task Force on Social Security Consortium 
For Citizens With Disabilities; Philip Burnett, who is an 
accountant for Hennepin County Children, Family, and Adult 
Service Department, Minneapolis, Minnesota; Eljay Bowron, who 
is the executive vice president of Vance International, Inc., 
Oakton, Virginia; and, yes, there is a John Dough. John D. 
Dough is the chief of Essex County Sheriff's Department, 
Newark, New Jersey. And I am sure, Mr. Dough, you have some 
wonderful testimony to give us about how hard it is to get a 
credit card if your name is John Dough.
    Mr. Dough. Or to get a pizza delivered.
    Chairman Shaw. When ordering pizza, I would use another 
name. Ms. Zelenske, as always, we have everyone's full 
testimony made part of the record; and you may summarize as you 
see fit.

  STATEMENT OF ETHEL ZELENSKE, CO-CHAIR, TASK FORCE ON SOCIAL 
      SECURITY, CONSORTIUM FOR CITIZENS WITH DISABILITIES

    Ms. Zelenske. Thank you for inviting me to testify this 
morning. One of our task force's key priorities is to ensure 
that SSA's representative payee program adequately protects 
beneficiaries. A recent court decision from Illinois captures 
the problems faced by beneficiaries under the current system. 
In the case Cannon v. Apfel, Ms. Cannon's uncle, her payee, 
spent more than $23,000 of her past due SSI benefits when she 
was a minor.
    SSA determined that the uncle had, in fact, misused nearly 
all of the money. She was able to recover some of the funds 
from him but sought the remainder from SSA alleging that the 
agency was negligent in selecting her uncle as her payee and in 
monitoring him.
    What happened in that case? Well, first of all, the uncle 
claimed that he had never been convicted of a felony. In fact, 
he had been convicted of three felonies, none of them under the 
Social Security Act. The court found that SSA did not have the 
benefit of this information because of its lack of diligence in 
engaging in a thorough investigation of the uncle. The court 
also noted there was nothing in the Social Security Act 
requiring SSA to conduct a criminal background check in this 
case.
    The uncle also failed to promptly respond to the requested 
annual accounting, although he did eventually. The court, in 
response to that issue, said that the tardiness was not so 
unusual, relying on SSA's policy allowing up to 6 months to 
respond before further action is taken. In the court's words, 
SSA came to its own defense in determining that it had not been 
negligent and thus was not liable for restitution to Ms. 
Cannon. Seven years after the misuse occurred, the court 
reluctantly affirmed Social Security's finding of no 
negligence.
    What lessons can be learned from this case? First, there is 
a need to have adequate protections in place to prevent misuse. 
Second, if the misuse occurs, there is a need for viable 
remedies to make the beneficiary whole again.
    The best way to prevent misuse is to hold Social Security 
accountable in carrying out its duties. However over the past 
decade, we have found that Social Security's workers have been 
unable to keep up with hands-on work, like issues involving 
representative payees. The task force is concerned about the 
long-term downsizing of the Social Security work force which we 
feel, in part, has affected the integrity of the Social 
Security and SSI Programs.
    The task force strongly supports efforts to provide SSA 
with adequate resources to meet its responsibilities including 
the required oversight of the representative payee program.
    Regarding specific proposals to prevent misuse, there is a 
need for increased oversight. SSA must be vigorous in its 
oversight of all payees, not just volume providers and fee-for-
service payees but also individuals and governmental agencies. 
In response to what SSA said earlier, there are problems with 
responsible family members being passed over as payees. It is 
not just when they have a criminal background or have been 
found to misuse benefits. There are situations where families 
are pressured into allowing an agency to be the payee. I know 
from my own experience there were cases where tearful elderly 
mothers had been removed as payees because they used benefits 
for clothing or for trips home on the weekends for their adult 
children who were in institutions rather than turning over all 
of the check to the institution.
    Second, there is a need to pay closer attention to the 
background of payee applicants. There needs to be more thorough 
background checks of the criminal record and disqualification 
for conviction and imprisonment for any offense. In the Cannon 
case, you can see how this lack of a background check led to 
problems.
    Third, there is a need for better monitoring through the 
annual accounting process and follow up more promptly when 
accounting forms are not returned. For instance, in the Cannon 
case, 5 to 6 months is simply too long. A lot of mischief can 
ensue in that amount of time. Also, redirecting delivery of 
benefits for failure to provide the form is a good option. 
However, you need to ensure that benefits are not interrupted 
to the beneficiary.
    The other issue I want to address is providing further 
protection when benefits are misused. Last year's bill, H.R. 
4857, did talk about reissuing benefits by SSA in limited 
situations by eliminating the negligent failure requirement for 
certain payees. Also, it designated misused benefits as an 
overpayment which triggers a wider variety of remedies.
    I wanted to focus on the reissuance provision. The case 
that I described, the Cannon case, is a good example of the 
problems that a beneficiary encounters in being made whole 
where the payee misuses benefits. Obtaining restitution from 
SSA is extremely difficult under the existing law because the 
individual must show that SSA engaged in negligent failure.
    As I said, H.R. 4857 would have eliminated this requirement 
for misuse by any payee that is not an individual or an 
individual who serves 15 or more beneficiaries. This would not 
have helped in the case I just described to you. We ask the 
Subcommittee to consider expanding the types of representative 
payees where the negligent failure requirement could be 
eliminated.
    We understand the concerns about fraudulent claims of 
misuse, but the Cannon case is a good example where everyone 
agreed, including the agency, that benefits had been misused. 
In addition, H.R. 4857, as introduced last year, would have 
eliminated the negligent failure requirement for individual 
payees serving a smaller number of beneficiaries. Thank you for 
allowing me to testify this morning.
    [The prepared statement of Ms. Zelenske follows:]

 STATEMENT OF ETHEL ZELENSKE, CO-CHAIR, TASK FORCE ON SOCIAL SECURITY, 
               CONSORTIUM FOR CITIZENS WITH DISABILITIES

    My name is Ethel Zelenske and I want to thank the Subcommittee for 
inviting me to testify at today's hearing on proposals to prevent 
misuse of benefits by representative payees. I am submitting this 
testimony on behalf of the undersigned members of the Consortium for 
Citizens with Disabilities Task Force on Social Security.
    I am the Director of Government Affairs for the National 
Organization of Social Security Claimants' Representatives and serve as 
co-chair of the Consortium for Citizens with Disabilities (CCD) Task 
Force on Social Security. The Consortium for Citizens with Disabilities 
is a coalition of approximately 100 national disability organizations 
working together to advocate for national public policy that ensures 
the self-determination, independence, empowerment, integration and 
inclusion of children and adults with disabilities in all aspects of 
society. The Task Force on Social Security monitors Social Security and 
Supplemental Security Income issues affecting individuals with 
disabilities. One of our key priorities is to ensure that the Social 
Security Administration's representative payee program protects 
beneficiaries who have payees.
    Previously, I spent many years representing hundreds of individuals 
who received disability benefits. A number of my clients, residing both 
in institutions and in the community, had issues regarding 
representative payees, so I am familiar with the problems that exist in 
the program.
    Millions of beneficiaries have payees, with the vast majority 
performing their duties admirably under difficult circumstances. 
However, a small percentage of payees have misused benefits and 
violated their fiduciary duties. Provisions like those included in H.R. 
4857, which was passed by the full Ways and Means Committee in the last 
session with broad bipartisan support, would provide needed protections 
to vulnerable beneficiaries.
    In general, the CCD Task Force on Social Security supports 
provisions that protect beneficiaries. However, these protections, 
while foremost in importance, should not be implemented in such a way 
as to deter responsible individuals and organizations from serving as 
payees. In my experience, it was often extremely difficult to recruit 
payees and this problem has grown worse over the years.
    My testimony will address the provisions that were included in H.R. 
4857, with recommendations for additional protections.

AUTHORITY TO REISSUE BENEFITS MISUSED BY ORGANIZATIONAL PAYEES

A. Reissuance of benefits
    Under the Social Security Act, SSA will provide restitution of 
misused benefits only ``where the negligent failure of the Commissioner 
of Social Security to investigate or monitor a representative payee 
results in misuse of benefits by the representative payee \1/4\.'' 42 
U.S.C. Sec. Sec. 405(j)(5), 1383(a)(2)(E). This standard places an 
onerous burden of proof on the beneficiary which, in practical terms, 
makes it extremely difficult to obtain restitution from the agency. 
First, the beneficiary must prove SSA's ``negligent failure'' to 
investigate. Under SSA's policies, this means that there must be a 
showing that SSA failed to follow established procedures for 
investigating payee applicants and monitoring payees. Second, the 
beneficiary must show a causal connection between SSA's ``negligent 
failure'' and the payee's misuse of benefits.
    Because of the difficulties that the current statute poses 
regarding restitution from SSA, we support legislation similar to 
Section 401 of H.R. 4857 which would eliminate the ``negligent 
failure'' requirement where misuse has occurred by any payee that is 
not an individual or is an individual who serves 15 or more 
beneficiaries.
    While we recognize the problems with SSA providing restitution to 
beneficiaries for misuse by individual payees serving fewer 
individuals, we ask the Subcommittee to further analyze whether there 
is a way to extend this protection while, at the same time, creating 
procedures that would limit fraudulent claims of misuse. For instance, 
H.R. 4857, as introduced last year, included individuals who served as 
payees for at least ten, rather than fifteen, beneficiaries. In 
addition, it should be made clear that restitution from SSA for misuse 
would remain available where ``negligent failure'' exists, regardless 
of the type of payee.

B. ``Misuse'' of benefits defined
    Section 401 of H.R. 4857 defined ``misuse'' by a representative 
payee as converting benefits ``to a use other than for the use and 
benefit of such other person.'' The Committee Report accompanying H.R. 
4857 explained that the Committee did not intend for the definition of 
misuse ``to include a conversion of benefits that is not exclusively 
for the `use and benefit' of the beneficiary.'' The example given is 
where the payee uses the benefits to help pay the rent for an apartment 
shared with the beneficiary. We support this interpretation and urge 
that similar language be included.
    In addition, there should be a distinction between ``misuse'' and 
``improper use'' of benefits. In ``misuse,'' benefits are not used for 
the benefit of the individual. In ``improper use,'' benefits are not 
used in necessarily the wisest manner but are still used for the 
benefit of the individual. ``Improper use'' should not trigger the 
penalties associated with ``misuse.''
    Existing regulations and SSA policies give payees a fair amount of 
discretion in determining the use of benefits so long as it is for 
``the use and benefit'' of the beneficiary. This is defined as using 
the benefits for the individual's ``current maintenance,'' i.e., food, 
clothing, shelter, medical care, and personal comfort items. In order 
to encourage individuals to serve as payees, they should be able to 
enter into that capacity knowing that their judgment will not be 
continually questioned, while understanding that SSA has the duty to 
monitor their actions.

OVERSIGHT OF REPRESENTATIVE PAYEES
    We support changes that would require additional oversight of 
representative payees, similar to those included in Section 402 of H.R. 
4857, such as requiring nongovernmental fee-for-service organizational 
payees to certify that they are both bonded and licensed and requiring 
SSA to conduct periodic onsite reviews of certain payees. The onsite 
review requirement in H.R. 4857 is limited to: (1) any individual who 
serves as payee for 15 or more beneficiaries; (2) a nongovernmental 
fee-for-service agency payee; and (3) any other agency serving as payee 
for 50 or more beneficiaries.
    H.R. 4857 provided no standards for the onsite reviews. However, 
the Committee Report accompanying H.R. 4857 does recommend that 
``appropriate auditing and accounting standards be utilized.'' We also 
suggest that onsite reviews include interviews with beneficiaries, to 
the extent that they are able to participate, or if unable to 
participate, with a family member where possible. Beneficiaries and 
their family members can provide important information about the 
quality of the services provided by the payees. In addition, interviews 
would also allow the auditors/investigators to make their own judgments 
about whether the payees are using benefits for the ``use and benefit'' 
of the beneficiaries, e.g., does the individual have adequate food, 
clothing and shelter? are other needs of the individual being met?

DISQUALIFICATION FOR CONVICTION AND IMPRISONMENT FOR MORE THAN ONE YEAR

    Current law disqualifies an individual from acting as a 
representative payee if convicted of criminal violations of the Social 
Security Act. We support expansion of this provision, similar to 
Section 403 of H.R. 4857, that would disqualify individuals convicted 
of any crime resulting in more than one year of imprisonment. However, 
we also support including an exception that gives the Commissioner 
discretion to allow the individual to be payee where ``appropriate 
notwithstanding such conviction.'' Such an exception, if proper 
protections for the beneficiary are in place, would allow family 
members or friends to be payees where they can otherwise show their 
suitability, e.g., the imprisonment occurred long ago, the offense was 
unrelated to fraud or other financial crimes.

FEE FORFEITURE IN CASE OF BENEFIT MISUSE BY PAYEES

    We support a legislative change, similar to Section 404 of H.R. 
4857, that would require forfeiture of the fee by the payee where 
misuse has occurred. The payee should not be able to benefit further 
from taking advantage of the beneficiary.

LIABILITY OF PAYEES FOR MISUSED BENEFITS

    Section 405 of H.R. 4857 established that, following a 
determination of misuse, the payee would be liable for the misused 
amount and that any amount not repaid would be treated as an 
overpayment by SSA. We support a provision similar to Section 405.
    Over the years, there have been conflicting court decisions 
regarding SSA's ability to recover misused benefits from the 
representative payee's own Social Security benefits. This provision 
would clarify that SSA is authorized to recoup the misused benefits 
from the payee's own benefits. In addition, Congress has expanded SSA's 
debt collection authority over the past few years, providing other 
avenues for recovery of overpayments, e.g., tax refund intercepts, 
offsets from other federal benefits.
    Recovery under this provision would provide the payee with due 
process rights in case of an improper misuse determination. By treating 
the misused amount as an overpayment, the statutory and regulatory 
protections would apply, such as notice of the overpayment, the 
opportunity to contest the overpayment, and to appeal adverse 
determinations.
    We would expect that a provision similar to Section 405 would lead 
to increased restitution for beneficiaries, especially for those still 
required to show ``negligent failure'' to obtain restitution from SSA. 
However, on the other hand, if there was no ability to recover the 
misused benefits from the payee under a provision similar to Section 
405, restitution should still be available from SSA by showing the 
agency's ``negligent failure.''

EXTENSION OF CIVIL MONETARY PENALTY AUTHORITY

    Section 406 of H.R. 4857 would add civil monetary penalty authority 
with respect to payees who misuse benefits. The intent of this 
provision, according to the Committee Report, is to provide SSA with an 
additional way to address misuse by payees. We support this provision 
but recommend that it incorporate the definition of misuse set forth in 
Section 401 to ensure that it is applied consistently with the other 
penalties for misuse. One approach would be to require a determination 
of ``misuse'' before a civil monetary penalty could be triggered.

REDIRECT DELIVERY OF BENEFITS FOR FAILURE TO PROVIDE REQUIRED 
        ACCOUNTING

    Current law requires most payees to submit annual accounting 
reports, or at any time specifically requested, to SSA regarding the 
use of payments they have received. 42 U.S.C. Sec. 405(j)(3). Section 
407 of H.R. 4857 would give SSA the authority to redirect payment of 
benefits to a local Social Security office if the representative payee 
fails to provide the required accounting report. After providing notice 
and an opportunity for hearing to the payee and the beneficiary, the 
payee would be required to collect the payments in person at an SSA 
field office. The intent of this provision is to increase the number of 
payees who return the accounting form.
    The accounting reports are an effective tool in monitoring 
representative payees' use of benefits. While recognizing this need, we 
are concerned that this provision could further harm beneficiaries by 
interrupting receipt of benefits, leading to critical situations such 
as loss of housing and basic utilities, lack of food, and loss of other 
basic necessities. In addition, given the stretched resources in field 
offices, SSA workers might inadvertently delay processing these cases. 
Further, there may be payees who do not promptly appear at a field 
office after benefits have been redirected.
    Proposed legislation should include some protection for 
beneficiaries to ensure that their receipt of benefits is not 
interrupted and that an alternative payment procedure is provided.

ADDITIONAL RECOMMENDATIONS

1. Additional oversight of governmental payees
    Governmental agencies and institutions often act as representative 
payees for children committed to their care and custody and for adults 
with mental impairments. These are some of the most vulnerable 
beneficiaries since many do not have family and friends to act in their 
best interests. Too frequently, a fiduciary/creditor conflict arises in 
these cases. As representative payee, the governmental agency or 
institution has a fiduciary duty to act in the individual's ``best 
interest.'' However, the payee is also a creditor, seeking to reimburse 
itself for the cost of care. Unfortunately, in too many cases, the 
creditor, and not the fiduciary, wins out.
    While payment for shelter and food is a priority use of benefits, 
``current maintenance'' for persons in state institutions includes 
expenditures for items that will aid in the beneficiary's recovery or 
release from the institution or personal needs items to improve the 
individual's conditions while in the institution. 20 C.F.R. 
Sec. 404.2040(b). Based on my personal experience, these needs often 
are not provided, raising questions about whether the benefits are 
being used in the individual's best interest.
    While recognizing that there is no one else to act as payee for 
these individuals, there still is a need to provide closer oversight of 
governmental agencies and institutions. For instance, current law, 42 
U.S.C. Sec. 405(j)(3)(B), does not require State or Federal 
institutions to submit annual accounting reports. While institutions 
are subject to onsite reviews once every three years, we see no reason 
why they should be exempted from submitting annual reports.
    Another problem is that in some cases, a governmental agency or 
institution is selected as representative payee even where family or 
friends are available and willing to serve as payee. In my experience, 
there often would be a ``race'' to the Social Security district office. 
This is inconsistent with SSA's preference list, embodied in its 
regulations, that ranks governmental institutions and agencies after 
family or friends. We believe that this is a serious problem in certain 
jurisdictions and we recommend that the Subcommittee use its oversight 
authority to monitor this problem.

2. Report to Congress
    Because of the large number of beneficiaries who have 
representative payees and the history of problems with the program, 
Congress should play a role in providing oversight. Amendments passed 
in 1990 required SSA to provide, on an annual basis, information 
regarding the representative payee program, including the number of 
cases where payees were changed, the number of cases where benefits 
were misused and how SSA dealt with those cases, and the final 
disposition of those cases. The statutory provision requiring this 
information, 42 U.S.C. Sec. 405(j)(6), states that it be included in 
the annual report submitted to Congress under section 704 of the Social 
Security Act. However, section 704 was substantially revised by Pub. L. 
No. 103-296, the law that made SSA an independent agency, and the 
annual report requirement was eliminated.
    We recommend that an annual reporting requirement be reinstated for 
the information described in 42 U.S.C. Sec. 405(j)(6).
    On behalf of the CCD Task Force on Social Security, thank you for 
the opportunity to testify today.
ON BEHALF OF:
    Adapted Physical Activity Council
    American Association of University Affiliated Programs
    American Association on Mental Retardation
    Brain Injury Association
    Epilepsy Foundation
    International Association of Psychosocial Rehabilitation Services
    NISH
    National Association of Protection and Advocacy Systems
    National Organization of Social Security Claimants' Representatives
    National Senior Citizens Law Center
    Research Institute for Independent Living
    The Arc of the United States
    United Cerebral Palsy Associations, Inc.

                                

    Mr. Johnson. [Presiding.] Thank you. We appreciate your 
testimony. Burnett, you may proceed.
    Mr. Burnett. Chairman and other Subcommittee Members. 
Excuse me while I----
    Mr. Johnson. Pull it over closer if you want to, and then 
you won't have to struggle with it.

   STATEMENT OF PHILLIP BURNETT, ACCOUNTANT, HENNEPIN COUNTY 
 CHILDREN, FAMILY AND ADULT SERVICES DEPARTMENT, MINNEAPOLIS, 
                           MINNESOTA

    Mr. Burnett. I have a visual difficulty so it will take me 
a while to read the testimony. Hennepin County, in the State of 
Minnesota, under the Children, Family and Adult Services serves 
as representative payee to over 2000 recipients of governmental 
benefits. We have provided this service for more than 35 years 
to a population who may be disabled persons, children in out-
of-home placement, or people with chemical or mental health 
behavior difficulties.
    We process an average of 14 thousand transactions per month 
for the purpose of these accounts. The staffing required to 
handle these functions is as follows:
    Three accounting staff, who are responsible for maintaining 
the account transactions and provide service desk coverage; 180 
social financial or case aid workers, who establish case and 
payment plans on. On an average, these workers spend 4 to 6 
hours monthly performing duties for their clients with rep 
payee accounts. Two social security liaisons, these are county-
paid individuals who coordinate a flow of information and 
reporting requirements between Social Security Administration, 
the workers, and the accounting department.
    Fraud and misuse of funds. During my 22 years as supervisor 
of the accounting area, there have been no more than eight 
allegations of fraud or misuse. Once an allegation is received, 
the matter is to be referred to our county attorney's office, 
internal audit division, and the sheriff's departments for 
investigation. Of those reported cases, only three were 
substantiated. In these three cases, action taken was the 
dismissal of the guilty employee.
    County administration dollars, at that time, this was many 
years ago, but county administration dollars were used to 
replace the misused funds to the clients' accounts. An 
additional safeguard is also in place. If satisfaction by the 
claimant is not reached, we have neighboring county agreements 
to conduct independent investigations if necessary. To ensure 
benefits are more properly used and well accounted for, we are 
required by Social Security Administration to complete manual 
reporting. Also there is a periodic audit conducted by Social 
Security Administration on a sample of our accounts. Monthly, 
the county reconciles the total of account books balances 
against the bank balance. These reconciliations are then 
submitted to the internal and external audit annually.
    Relationship with other payee agencies represent payee 
services. When closing a client's social service case at the 
county and if continued representative payee services are 
required, we refer the recipient and or Social Security 
Administration to an agency payee. We refer to local agencies 
which are community based or private fee for the purpose of 
service. These agencies are required in the State of Minnesota 
to have bonding and licensing.
    Relationship with Social Security Administration in 
Hennepin County. With Hennepin County being one of the largest 
providers of payee service in the nation, we have developed a 
very good and close working relationship. Our two liaison staff 
meet with Social Security service staff twice a week to deliver 
repayment and obtain receipts. Also the liaisons have daily 
phone contact with Social Security Administration 
representatives for a variety of reasons.
    A couple of ongoing problems are the following: Repayment 
of funds for deceased clients. Since the benefits are directly 
deposited to our bank account, the Federal Treasury has and 
exercises the right to attach our bank account for the 
reclamation; at the same time, the Social Security 
Administration is requesting the county to return the funds via 
check.
    There needs to be a set procedure so that we are not paying 
twice and having to seek refunds for one of the payments. A 
possible solution may be a better communication link between 
the Social Security Administration and the Federal Treasury. 
Another problem is other payments made directly to Social 
Security. When the county hand-delivers and receives checks for 
conserved funds or overpayments, there is a 3 to 5 week delay 
in the Social Security Administration in cashing the payments. 
The delay locks up our ability to close our accounts from our 
book. It probably costs time, effort, and money to the Social 
Security Administration also.
    Pertaining to H.R. 4857, title four, from the 106th 
Congress. Although the language in these sections does not 
specifically apply to government agencies, we feel the 
amendments put forth are reasonable. There is a trust we accept 
in taking on the role as representative payee or custodian for 
others. And that trust should not be broken. Too often the 
recipients are people with limited resources and many needs and 
to have them deprived of basic needs because of fraud or misuse 
of their funds should be addressed harshly. Thank you very 
much.
    [The prepared statement of Mr. Burnett follows:]

  STATEMENT OF PHILLIP BURNETT, ACCOUNTANT, HENNEPIN COUNTY CHILDREN, 
      FAMILY AND ADULT SERVICES DEPARTMENT, MINNEAPOLIS, MINNESOTA

    Hennepin County, in the State of Minnesota, under the Children, 
Family and Adult Services Department serves as Representative Payee 
(Rep Payee) to over 2,000 recipients of governmental benefits. We have 
provided this service for more than 35 years to a population who may be 
disabled persons, children in out-of-home placement or people with 
chemical or mental health behavioral difficulties. We process an 
average of 14,000 transactions per month for these accounts. The 
staffing required to handle these functions is as follows:

   3 Accounting staff who are responsible for maintaining the 
        account transactions and provides service desk coverage.
   180 Social, Financial or Case Aide Workers who establish 
        case and payment plans. On average these workers spend 4 to 6 
        hours monthly performing duties for their clients with Rep 
        Payee accounts.
   2 Social Security Liaisons (County paid staff) who 
        coordinate a flow of information and reporting requirements 
        between the Social Security Administration (SSA), the workers 
        and the Accounting Department.

Fraud and Misuse of Funds
    During my 22 years of supervising the Accounting area, there have 
been no more than 8 allegations of fraud or misuse of benefits. Once an 
allegation is received the matter is referred to the County's 
Attorney's Office, Internal Audit Division and the Sheriffs Department 
for investigation. Of these reported cases only 3 were substantiated. 
In these 3 cases the resulting action taken was the dismissal of the 
guilty employee. County Administration dollars were used to replace the 
misused funds to the client accounts. An additional safeguard is also 
in place if satisfaction by the claimant is not reached. We have 
neighboring County agreements to conduct independent investigation, if 
necessary.
    To ensure benefits are properly used and accounted for, we are 
required by the (SSA) to complete annual reporting. Also there is a 
periodic audit conducted by the SSA on a sampling of our accounts. 
Monthly the County reconciles the total of account book balances 
against the bank account balance. These reconciliations are then 
submitted to Internal and External Audit annually.

Relationship with Other Agency Representative Payee Services
    When closing a client's social service case at the County and if 
continued Rep Payee services are required, we refer the recipient and/
or SSA to an agency payee. Referrals to local agencies are community 
based or private fee-for-service. These agencies are required to have 
bonding and licensing.

Relationship with Social Security Administration and Hennepin County
    With Hennepin County being one of the largest providers of payee 
services in the nation, we have developed a very close and good working 
relationship. Our 2 liaison staff meet with SSA service staff twice a 
week to deliver repayments and obtain receipts. Also the liaison staff 
have daily phone contact with the SSA representatives for a variety of 
reasons.
    A couple of on-going problems are the following:

   Repayment of funds for deceased clients--Since the benefits 
        are directly deposited to our bank account the Federal Treasury 
        has and exercises the right to attach our bank account for the 
        reclamation. At the same time the SSA is requesting the County 
        to return the funds via a check. There needs to be a set 
        procedure so we are not paying twice and then having to seek 
        refund of one of the payments. A possible solution may be a 
        better communication link between the SSA and the Federal 
        Treasury Department.
   Other Payments made directly to the SSA--When the County 
        hand delivers and receipts checks for conserved funds or 
        overpayments there is a 3 to 5 week delay in the SSA in cashing 
        the payments. This delay locks up our ability to close the 
        accounts from our books. It probably costs time, effort and 
        money for the SSA, too.

Pertaining to H.R. 4857--Title IV from the 106th Congress
    Although the language in these Sections does not specifically apply 
to government agencies, we feel the amendments put forth are 
reasonable. There is a trust we accept in taking on the role as 
representative payee or custodian for others and that trust should not 
be broken. Too often the recipients are people with limited resources 
and many needs and to have them deprived of basic need because of fraud 
or misuse of their funds should be addressed harshly.

                                

    Chairman Shaw. [Presiding.] Mr. Bowron.

  STATEMENT OF ELJAY BOWRON, EXECUTIVE VICE PRESIDENT, VANCE 
             INTERNATIONAL, INC., OAKTON, VIRGINIA

    Mr. Bowron. Good morning, Mr. Chairman, and thank you, 
members of the Subcommittee, for the opportunity to be here 
today to discuss extending statutory law enforcement authority 
to special agents of the Social Security Administration Office 
of Inspector General. I am currently the executive Vice 
President of Vance International, a worldwide security firm, 
but more importantly, for our purposes here today, prior to 
joining Vance, I held several Federal Government positions, 
including Inspector General for the Department of Interior, 
Assistant Comptroller General of the United States for the 
Office of Special Investigations, and I also served as the 
director of the United States Secret Service.
    For a time, a brief time, I served as the Deputy Inspector 
General of the Social Security Administration. These 
responsibilities afford me a perspective of the unique needs 
for criminal investigators of SSA's Office of Inspector 
General, or OIG, as it is called to derive permanent law 
enforcement authority from the Social Security Act rather than 
their present authority, which is a delegation of special 
deputy marshall status granted from the Department of Justice.
    I am familiar with the professional standards that must be 
met and the performance record that must attest to a law 
enforcement agency's standing in order to be granted such 
permanent authority. I am also familiar with the training and 
recruitment issues involved. I believe that this OIG is 
qualified and prepared for that high level of trust. Its 
demonstrated record of success for the past 6 years speaks to 
the quality of this outstanding investigative organization. The 
deputation under which this OIG has operated is burdensome, 
both in the limitations of the authority it imposes and in the 
administrative toll that it takes.
    With respect to the former, while the deputation grants the 
authority to execute warrants and to make arrests and carry a 
weapon, it limits the OIG in failing to provide cross-
designation authority. That is the OIG's ability to cross-
designate State and local law enforcement agencies as special 
agents for the purposes of specific joint operations and task 
forces. This poses a particular hardship to an organization 
that has limited resources and relies so heavily on cooperative 
efforts with other law enforcements agencies.
    With respect to the administrative burden, the agreement 
under which the Department of Justice has deputized the OIG 
special agents must be renewed periodically requiring the 
attention of two organizations. Further, each year the OIG is 
required to make a written report to the criminal division of 
the Justice Department detailing the investigative and 
prosecutive activities of the persons employed by the OIG who 
have received special deputations.
    The report must contain information on the number of 
occasions on which the authority conferred by the deputation 
was used in connection with arrests, searches, execution of 
restraining orders, protection of witnesses, dangerous 
surveillance of investigative subjects, interview under 
hazardous circumstances, temporary custody of Federal 
prisoners, support for undercover operations, the service of 
subpoenas under hazardous circumstances and in assisting in 
electronic surveillance.
    Tracking and reporting every such instance in which the 
delegated enforcement authority is used creates an 
administrative burden on two agencies. The OIG, and its 
management structure in particular, are fully prepared and 
capable of ensuring the professionalism and qualifications of 
its agents without doubling the work involved by requiring a 
second Federal agency to perform essentially the same function. 
Statutory law enforcement for an OIG is not a unique concept. 
The Offices of Inspector General for the Department of 
Agriculture and the Department of Defense and the Treasury 
Inspector General for Tax Administration all have such 
authority, as does the Inspector General for the U.S. Postal 
Service.
    Unsurprisingly, these are the inspectors general with a 
high volume of investigations and a high concentration in 
external investigation. The SSA/OIG is similarly situated. The 
bulk of its considerable investigative activity is external, 
investigating those who perpetrate crimes against Social 
Security programs. Much of this office's law enforcement 
activities involves fugitive felons and other violent 
criminals.
    In fulfilling these missions, the SSA/OIG works with law 
enforcement agencies at the State and local levels and often on 
task forces. Permanent law enforcement authority would enhance 
this cooperative effort. It would reduce the administrative 
burden on the two agencies and would enable the OIG to better 
execute its statutory duties. Proposals have been made in the 
past to grant all offices of Inspector General such authority. 
They should each be considered individually. Some offices 
conduct almost exclusively investigations of Federal employees, 
contract matters and other internal issues. The SSA's Office of 
Inspector General, on the other hand, investigates almost 
exclusively external crimes.
    I would close with a few words as to the qualification of 
this organization for the trust and responsibility that it 
seeks from this Subcommittee. As the director of the Secret 
Service, I supervised many of the managers of this Office of 
Inspector General during their tenure with the Secret Service. 
The men and women in whose hands you would place your trust are 
among the finest law enforcement officials in this country, or 
any other country for that matter. Their integrity and sense of 
duty is unassailable and unmatched. Your trust and faith could 
not be in better hands.
    A Federal law enforcement organization with special agents 
who are highly trained, fully qualified and uniquely skilled 
has grown under their tutelage. Every new special agent 
undergoes rigorous training at the Federal Law Enforcement 
Training Center. The same training required by most Federal 
statutory law enforcement agencies as well as the additional 
training administered by the Inspector General Academy, 
specific and exhaustive training in SSA programs, annual 
training conferences and quarterly firearms qualifications.
    In its 6 years of operation, this OIG has conducted itself 
professionally and with distinction. It is an organization in 
need of permanent law enforcement status and an organization 
that has earned that responsibility.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Bowron follows:]

      STATEMENT OF ELJAY BOWRON, EXECUTIVE VICE PRESIDENT, VANCE 
                 INTERNATIONAL, INC., OAKTON, VIRIGNIA

    Good morning, Mr. Chairman, and thank you for the opportunity to be 
here today to discuss extending statutory law enforcement authority to 
the Special Agents of the Social Security Administration's Office of 
the Inspector General. I am currently the Executive Vice President of 
Vance International, Inc., a worldwide security firm. Prior to joining 
Vance, I held several Federal government positions, including Inspector 
General of the Department of the Interior, Assistant Comptroller 
General of the United States for Investigations, and Director of the 
United States Secret Service. I also served for a time as Deputy 
Inspector General of the Social Security Administration.
    These responsibilities afford me a perspective on the unique need 
for the Criminal Investigators of SSA's Office of the Inspector 
General, or OIG, to derive permanent law enforcement authority from the 
Social Security Act, rather than from their present authority, which is 
a delegation of Special Deputy United States Marshal status from the 
Department of Justice. I am familiar with the professional standards 
that must be met and the performance record that must attest to a law 
enforcement agency's standing in order to be granted such permanent 
authority, and I am also familiar with the training and recruitment 
issues involved. I believe that this OIG is qualified and prepared for 
that high level of trust. Its demonstrated record of success for the 
past six years speaks to the quality of this outstanding investigative 
organization.
    The deputation under which this OIG has operated is burdensome, 
both in the limitations of authority it imposes and in the 
administrative toll that it takes. With respect to the former, while 
the deputation grants the authority to execute warrants, make arrests, 
and carry a weapon, it limits the OIG in failing to provide cross-
designation authority, the ability to designate qualified State and 
local law enforcement officials as Special Agents for the purposes of 
specific joint operations or task forces. This poses a particular 
hardship to an organization with limited resources that relies so 
heavily on cooperative efforts with other law enforcement agencies.
    With respect to the administrative burden, the agreement under 
which the Department of Justice has deputized the OIG's Special Agents 
must be renewed periodically, requiring the attention of two 
organizations. Further, each year, the OIG is required to make a 
written report to the Criminal Division of the Department of Justice 
detailing the investigative and prosecutive activities of the persons 
employed by the OIG who have received special deputations. The report 
must contain information on the number of occasions on which the 
authority conferred by the deputation was used in connection with 
arrests, searches, execution of restraining orders, protection of 
witnesses, dangerous surveillance of investigative subjects, interviews 
under hazardous circumstances, temporary custody of federal prisoners, 
support for undercover operations, service of subpoenas under hazardous 
circumstances, and assisting in electronic surveillance. Tracking and 
reporting of every such instance in which the delegated law enforcement 
authority is used creates an administrative burden on two agencies. The 
OIG, and its management structure in particular, are fully prepared and 
capable of ensuring the professionalism and qualifications of its 
Special Agents without doubling the work involved by requiring a second 
Federal agency to perform essentially the same function.
    Statutory law enforcement for an OIG is not a unique concept. The 
Offices of Inspector General for the Department of Agriculture and the 
Department of Defense, and the Treasury Inspector General for Tax 
Administration all have such authority, as does the Inspector General 
for the U.S. Postal Service. Unsurprisingly, these are the Inspectors 
General with a high volume of investigations and a high concentration 
in external investigations. The SSA's OIG is similarly situated. The 
bulk of its considerable investigative activity is external--
investigating those who perpetrate crimes against Social Security 
programs. Much of this office's law enforcement activity involves 
fugitive felons and other violent criminals. In fulfilling these 
missions, the SSA's OIG works with law enforcement agencies at the 
State and local levels, often on task forces. Permanent law enforcement 
authority would enhance this cooperative effort, reduce the 
administrative burden on two agencies and enable the OIG to better 
execute its statutory duties.
    Proposals have been made in the past to grant all Offices of 
Inspectors General such authority--this is not necessary. Many such 
offices conduct, almost exclusively, investigations of Federal 
employees, contract matters, and other internal issues. The SSA's OIG, 
on the other hand, investigates almost exclusively external crimes.
    I would close with a few words as to the qualification of this 
organization for the trust and responsibility it is seeking from the 
Subcommittee. As the Director of the Secret Service, I supervised many 
of the managers of this OIG during their tenure with the Secret 
Service. The men and women in whose hands you would place your trust 
are among the finest law enforcement officials in this, or any, 
country. Their integrity and sense of duty is unassailable and 
unmatched. Your trust and faith could not be in better hands. A Federal 
law enforcement organization with Special Agents who are highly 
trained, fully qualified, and uniquely skilled, has grown under their 
tutelage. Every new Special Agent undergoes rigorous training at the 
Federal Law Enforcement Training Center--the same training required by 
most Federal statutory law enforcement agencies--as well as the 
additional training administered by the Inspector General academy, 
specific and exhaustive training in SSA programs, annual training 
conferences and quarterly firearms qualifications. In its six years of 
operation, this OIG has conducted itself professionally and with 
distinction. It is an organization in need of permanent law enforcement 
status, and an organization that has earned that responsibility.
    Thank you, and I would be happy answer any questions.

                                

    Chairman Shaw. Chief Dough.

   STATEMENT OF JOHN D. DOUGH, CHIEF, ESSEX COUNTY SHERIFF'S 
                   OFFICE, NEWARK, NEW JERSEY

    Mr. Dough. Chairman Shaw, it is my privilege to address you 
today on behalf of Sheriff Armando B. Fontoura, who is 
currently hosting local police week ceremonies in Newark New 
Jersey. The Essex County Sheriff's Department wholeheartedly 
supports and endorses the efforts of the Social Security 
Administration and its Inspector General in maintaining the 
integrity of Social Security. More specifically, the assistance 
that the IG's Office offers local law enforcement in general, 
and our department, in particular, is invaluable in our efforts 
to identify, locate and arrest fleeing felons. The population 
of Essex County is over 800,000, rising to 1 million daily. The 
State's largest city, Newark, is within the county, and we are 
just 5 miles from New York City.
    Unfortunately, the county has a high level of violent 
crimes. In fact, one out of every four violent crimes in the 
State of New Jersey occurs in Essex County. As successful as 
law enforcement in Essex County has been in arresting violent 
offenders, our criminal justice system is flooded with criminal 
warrants for those who have failed to appear, skipped bail or 
have been indicted and not apprehended.
    Consequently we have over 20,000 warrants still 
outstanding, of which over half are criminal warrants. My 
department receives 1,100 warrants monthly. Felons are 
notorious for not being truthful in their bail information as 
to their address and next of kin. And while the fugitive is 
doing his or her best to keep his or her whereabouts from law 
enforcement, that same fugitive is also doing his or her best 
to maintain contact with Social Security in order that their 
SSI payments continue.
    The Essex County Sheriff's Department is active partner in 
the IG's New York regional task force. Since July of 2000, our 
department has received information from SSA on 185 fugitive 
criminal felons, of which we arrested 97. Most of these cases 
were at a dead end. We had exhausted all local means of finding 
these individuals. Without the vital information supplied by 
SSA, 97 criminal fugitives would still be at large and living 
in Essex County. Two recent arrests have exemplified the 
success of this partnership that has been forged with the IG's 
Office.
    Within the past few weeks SSA information was forwarded to 
the Essex County Sheriff's Department on a suspect wanted by 
our agency for nearly a decade on aggravated arson charges. He 
had previous charges of arson dating back to 1985. Quite 
frankly, gentlemen, our investigation was at a dead end. On a 
recurring basis, this case was frequently reopened only to have 
it reach a standstill due to lack of fresh information. Days 
within receiving information from Social Security, the fugitive 
was found, put in custody and the illegal benefits stopped.
    In another case, a person wanted for shooting was wanted 
since 1992. Through the information provided by Social 
Security, this individual was located in Virginia. Before we 
could even send officers down to extradite, he put himself on a 
bus and surrendered to our officers in Newark. The suspension 
of his SSI benefits was that strong of an encouragement. The 
partnership that Social Security and law enforcement has 
developed has proven to be a tremendous success, both in terms 
of taking hardened criminals off our streets and saving our 
taxpayers' hard-earned money.
    Sheriff Fontoura of the Essex County Sheriff's office and I 
urge you to continue and expand this information partnership 
between law enforcement and Social Security Administration. The 
52 percent clearance rate that our Department has achieved with 
the information supplied by SSA is notable only in that it 
underscores the potential for further success in expanding the 
mandate to use Title II information.
    There are those who would portray horror stories of law 
enforcement that bring wheel-chaired elderly into custody for 
minor infractions using Title II information. Let me assure the 
Committee that this is farthest from the truth. The thrust of 
our efforts is locating the violent offender who is a fugitive 
from justice, not the incarceration of somebody for traffic 
tickets.
    The laws associated with the use of this information, local 
protocols and our professionalism will protect this from 
happening. Expansion of using Title II information will allow 
for a broader base of information to be shared, and the success 
stories that I mentioned before will increase 100-fold. 
Government should not underwrite a legal sanctuary of 
information to protect fleeing felons. The people of Essex 
County, New Jersey and this Nation deserve better. Thank you.
    [The prepared statement of Mr. Dough follows:]

   STATEMENT OF JOHN D. DOUGH, CHIEF, ESSEX COUNTY SHERIFF'S OFFICE, 
                           NEWARK, NEW JERSEY

    Good morning, Chairman Shaw, Ranking Member Matsui and Committee 
members. My name is John D. Dough and I am the Chief of the Essex 
County (New Jersey) Sheriff's Office. It is my privilege to address you 
today on behalf of Sheriff Armando Fontoura who is currently hosting 
``National Police Week'' ceremonies in Newark, New Jersey.
    The Essex County Sheriff's Department wholeheartedly supports and 
endorses the efforts of the Social Security Administration and it's 
Office of the Inspector General in maintaining the integrity of Social 
Security. More specifically, the assistance that the Inspector 
General's Office offers local law enforcement in general, and our 
department in particular, is invaluable in our efforts to identify, 
locate and arrest fleeing felons.
    The population of Essex County is over 800,000 rising to over 
1,000,000 during workdays. The state's largest city--Newark--is within 
the County and we are just 5 miles from New York City. Unfortunately, 
the County has a high level of violent crime; in fact, one out of every 
four violent crimes in the State of New Jersey occurs in Essex County. 
As successful as law enforcement in Essex County has been in arresting 
violent offenders, our criminal justice system is flooded with criminal 
warrants for those who have failed to appear, skipped bail or who have 
been indicted but not apprehended. Consequently, we have over 20,000 
warrants still outstanding of which half are criminal warrants. The 
Department receives over 1,100 warrants monthly from the courts.
    Felons are notorious for not being truthful in their bail 
information as to their addresses and next of kin. And, while the 
fugitive is doing his or her best to keep his or her whereabouts hidden 
from law enforcement, that same fugitive is also doing his or her best 
to remain in contact with Social Security in order that their SSI 
payments continue.
    The Essex County Sheriff's Department is an active partner of the 
Inspector General's New York regional task force. During the first 
quarter of 2001, based upon information provided to us by the Social 
Security Administration, New York/New Jersey metropolitan law 
enforcement agencies made 95 fugitive felon arrests, saving an 
estimated $3 million in illegal SSI payments. Since July of 2000, our 
Department has received information on 185 fugitive criminal felons, 
which led to the arrest of 97 fugitives. Most of these cases were at a 
dead end, we had exhausted all local means of locating these felons. 
Without this vital information 97 fugitives would still be at large and 
still living within Essex County. Where the fugitive was discovered not 
to be living at an address to which an SSI check was delivered, arrests 
have been made for fraudulently cashing the fugitive's SSI check. At 
the very minimum, there was a suspension of benefits.
    During recent months, the Essex County Sheriff's Office and other 
law enforcement agencies have greatly benefited from information 
supplied to us by the Social Security Administration. Two recent 
arrests exemplify the success of this partnership that has been forged 
by the Inspector General's Office of the Social Security 
Administration.
    Within the past few weeks, Social Security Administration 
information was forwarded to the Essex County Sheriff's Office on a 
suspect wanted by our agency for nearly a decade on aggravated arson 
charges. He had previously been convicted of arson in 1985. Quite 
frankly gentlemen, our investigation was at a dead end. On a recurring 
basis this case was frequently re-opened only to have the investigation 
come to a complete standstill, due to a lack of fresh information. Days 
after receiving information from Social Security the fugitive was in 
custody and illegal benefits checks stopped.
    In another case a person was wanted for a shooting that occurred in 
1992. Through the information supplied by Social Security this felon 
was located in Virginia. Before we could send officers down to 
extradite, he put himself on a bus and surrendered to our office in 
Newark. The suspension of his SSI was that strong of an encouragement.
    The partnership that Social Security and law enforcement has 
developed has proven to be a tremendous success both in terms of taking 
hardened criminals off our streets and terms of saving our taxpayers 
hard-earned dollars illegally paid out to fugitives.
    Sheriff Fontoura, the Essex County Sheriff's Office and I urge you 
to continue and expand this information partnership between law 
enforcement and the Social Security Administration. The 52% clearance 
rate our Department has achieved with the information supplied by the 
Social Security Administration is notable only in that it underscores 
the potential for further successes in expanding the mandate to use 
Title II information.
    There are those that will portray horror stories of law enforcement 
agencies bringing the wheelchair elderly into custody for minor 
infractions using Title II information. Let me assure the Committee 
this is farthest from the truth. The thrust of our efforts is in 
locating the violent offender who is a fugitive from justice, not the 
incarceration of someone for traffic tickets. The laws associated with 
the use of this information, local protocols and our professionalism 
will protect this from happening. Expansion of using Title II 
information will allow for a broader base of information to be shared 
and the success stories I mentioned before will increase one hundred 
fold. Government should not underwrite a legal sanctuary of information 
to protect fleeing felons. The people of Essex County, New Jersey and 
this nation desire better.
    Thank you for this opportunity to address you on this very 
important issue. I would be happy to answer any questions the committee 
might have.

                                

    Chairman Shaw. Thank you.
    Mr. Bowron, it appears from your testimony that you are in 
complete agreement with Mr. Huse as to how the law enforcement 
should be expanded in his office.
    Mr. Bowron. Yes, sir I am. Based on the previous discussion 
on this subject, I think I would just want to note that it is 
not uncharted water. There are other offices of Inspector 
General that have had this authority conveyed to them.
    Chairman Shaw. What offices do not?
    Mr. Bowron. I believe the Office of Personnel Management, 
IG does not; the Department of Interior Inspector General does 
not, the Department of Labor, I couldn't name all of them off 
the top of my head, but there are a number that do not.
    Chairman Shaw. All right. Thank you. Mr. Brady.
    Mr. Brady. Thank you Mr. Chairman. All that was excellent 
testimony, and my experience is everything looks perfect on 
paper in Washington, D.C. How it works in real life is a whole 
different matter, and it is very valuable to get that 
perspective, your perspective.
    Chief Dough, I know people ask you this, but there is no 
chance your wife is Jane?
    Mr. Dough. Actually, my sister is Mary Jane.
    Chairman Shaw. Your parents must have one hell of a sense 
of humor.
    Mr. Dough. That is true.
    Mr. Brady. In your testimony, you talked about the 
authority provided by the Office of Inspector General would be 
a positive effect for you, and I talked about the success you 
have had, and the two questions I have for you is based on the 
fugitive felons that you have caught. Do you believe the Social 
Security benefits that they received were a major source of 
income helping them to evade capture? And second, you hope to 
share more information, expand the information-sharing 
partnership between yourself and the Social Security 
Administration. How would you expand that? So did the benefits 
make a big difference? How do you expand the information?
    Mr. Dough. As far as the benefits they were receiving, 
those figures are maintained.
    Mr. Brady. From your experience in dealing with them, did 
you think that was a sole source of income, a major participant 
of their income?
    Mr. Dough. Besides their own criminal endeavors, it is 
probably a major source of income to them, yes. As far as how 
we would efficiently exchange the information, it was testified 
before by Mr. Huse is that we are just getting into the 
electronic age, so consequently, a more efficient way for us to 
submit our warrants that we are looking for in exchange if they 
fit in with the Inspector General's parameters to find out 
their addresses. It is all labor intensive right now. We have 
to manually present them to the Inspector General. They, in 
turn, have to search through the National Crime Information 
Center's (NCIC) database and their own databases, and then 
return it to us.
    Electronically, a more efficient way of moving the data 
back and forth will help immensely. Everything is labor 
intensive. We mentioned I have 20,000 warrants. I only have 30 
investigators. At any one time, four of my investigators are 
somewhere in the United States on extradition, much of it 
coming hopefully from more information from Social Security.
    Mr. Brady. So sharing the information faster and more 
efficiently, you are not thinking that there need to be 
expanding information shared between----
    Mr. Dough. No. All I want--believe it or not, I am just 
looking for another little piece of critical information, where 
the check is going so that I can at least establish the 
validity that the individual may or may not be living there. 
Just give me another lead so I can do better.
    Mr. Brady. Thank you for your testimony.
    Chairman Shaw. Mr. Hulshof.
    Mr. Hulshof. Ms. Zelenske, I have a couple questions. If 
you could pull the mike closer to you. Really, just a couple 
points of clarification. One of the suggestions--first of all, 
thanks for being here on behalf of Consortium, and I want to 
talk a little bit about oversight. First of all, you suggest 
additional oversight of representative payees, and I guess we 
have lumped them into two categories, that is, those 
individuals that pay, the nongovernmental entities and then the 
governmental entities. On your suggestion on the 
nongovernmental entities, you suggest that we include a 
provision that they be both licensed and bonded; is that right? 
Is that for each and every one or is that for just those that 
may represent more than 15 beneficiaries? Do you provide such a 
cutoff?
    Ms. Zelenske. I think it was the provision that was in H.R. 
4857, which I think referred to organizational fee-for-service 
payees, not individuals who served 15 or more. And I think it 
would just be that there would be a requirement that they be 
licensed and bonded. However, I am not familiar with State 
laws. I don't know that individuals who serve as payees for a 
number of beneficiaries (volume providers) can or should be 
bonded as well. It seems like it would probably be a good idea. 
I just don't know enough about State law.
    Mr. Hulshof. Let me ask you about your position on 
additional oversight of rep payees, and especially now the 
institutional rep payees. You have indicated that you have 
support, more SSA oversight for government rep payees, 
especially government institutions. In addition to requiring 
annual reports, what other measures might you recommend for us?
    Ms. Zelenske. In my written statement, I talked about this 
conflict between the government institution acting as a 
fiduciary in the individual's best interest, and then acting as 
a creditor. The financial agents of the institutions are 
looking to be reimbursed. There seems to be a breakdown often, 
even among staff within the institution.
    I know that under SSA's current procedures, they do not 
require annual accounting from State institutions, but they do 
require an onsite review every 3 years. I am not sure what 
really goes on in that review, and whether it is a real quality 
review where they aren't doing anything more than looking at 
the books, which I would suspect in most of these situations 
are handled well. There should be interviews with 
beneficiaries, for instance, actually going and looking at the 
wards where they are living and seeing what kind of conditions 
they are living under, and talking to family members as well.
    Mr. Hulshof. You mention, and started out of our testimony, 
with the one particular case that was recently decided in your 
testimony, you also support the extension of the ability of the 
commissioner to reissue benefits for misuse and thanks for 
making a good strong clarification for misuse and improper use 
in your testimony. Is 15 the correct number?
    Ms. Zelenske. That is the big question. As I said, in last 
year's bill when it was originally introduced, it did have the 
number 10. I don't know what happened, why it ended up 15 at 
the time the Committee passed it. I assume you are talking 
about aggregate amounts and having it just be large enough 
amounts of money. But I don't know what went into that. Again, 
in the Cannon case, even if you reduced it to 10, it wouldn't 
have helped her in that situation where everyone agreed that 
there was misuse.
    Mr. Hulshof. Do you have any other suggestions as to what 
procedures we might employ to limit fraudulent claims?
    Ms. Zelenske. Of misuse?
    Mr. Hulshof. Yes.
    Ms. Zelenske. It would seem if SSA makes a misuse 
determination, it requires them to do an investigation and get 
some kind of supporting documentation for it. I don't know what 
you would need beyond that. Again, you get into the 
administrative issues. You want to make sure if SSA is 
investigating these allegations and if they are going to have 
to reissue benefits, that their own misuse determination is 
supported.
    I don't think they go out of their way to make misuse 
determinations, but I just think that you want to make sure 
they are doing an adequate investigation themselves.
    Mr. Hulshof. My time is about to expire, so let me yield 
back.
    Chairman Shaw. Mr. Becerra.
    Mr. Becerra. Let me see if I can follow along those lines. 
You mentioned your concern in the instance that you mentioned 
the case of the individual who would not have been able to 
collect Social Security payments as a result of the activity of 
the payee, representative payee. And you mentioned bonding and 
licensing, or less than the 15 for an individual who acts as a 
representative payee for 15 or more individuals. You mentioned, 
I think in your testimony, response to Mr. Hulshof's questions 
that perhaps it should be done for individuals who have fewer 
than 15 representatives, or agency's representative for the 
fewer than 15 individuals. I am wondering if that was your 
testimony I want to make sure that is clear on the record.
    Ms. Zelenske. Without looking at the existing legislation, 
I think the requirement is that fee-for-service organizations 
only are required to be either licensed or bonded. I think it 
is just limited to that group.
    Mr. Becerra. Right.
    Ms. Zelenske. I think what I said in response to Mr. 
Hulshof's question was that individuals who are payees for a 
number of individuals should be bonded.
    Mr. Becerra. That is much farther along than just requiring 
fee-for-service?
    Ms. Zelenske. Right.
    Mr. Becerra. Bonded or licensed.
    Ms. Zelenske. And I am only saying that if you are bonded, 
it means there is some guarantee about repaying the individual, 
which is where my focus is. I know, for instance, with 
attorneys who do wrong things with their clients' money, that 
most States have established some way of providing restitution 
to the individual. And I guess that is where my focus is here.
    Mr. Becerra. I think there is a compelling argument to 
make, if someone wishes to act as the representative payee, 
support an individual, that certainly that person wants to look 
after that individual's needs and should be willing, you would 
think, to prepare to be bonded or licensed, if that were the 
case.
    Now chances are there are a lot of individuals who would 
not be able to act as a representative payee if we required a 
bond of that individual or asked them to get licensed, whatever 
the requirements for the license might be. But I am wondering, 
because you speak from the perspective of someone on the ground 
who works with a lot of these individuals, we just get to 
legislate. The numbers we follow are on paper. Whether they 
work or not is something else. And while I think it is clearly 
appropriate under the law to ask for a fee-for-service agency 
to be licensed and bonded, I would love to hear more from folks 
like you who know on the ground how this works, if it would be 
appropriate to consider extending it further, because there is 
fraud, there is abuse. And it is even abuse that occurs within 
a family.
    And as much as it would pain us to think that we may want 
to require a family member to be bonded and licensed, we have 
to do something about this fraud, because otherwise it does 
endanger the entire program. It is like welfare, every time you 
find a welfare cheat, it destroys the opportunities for someone 
who really does need some welfare benefits for a short time to 
get back on his or her feet.
    So I am wondering if could you continue to stay in touch 
with the Committee on your perspective on that, because we do 
need to find a way to make sure that we do rid ourselves of the 
abuse and the fraud, and although I don't believe any of us 
wish to diminish the opportunities for good people to serve as 
representative payees, we do have to find a way, short of 
having to prosecute or go after a repayment, to figure out how 
we can curtail the amount of abuse that does occur. So I thank 
you for that testimony.
    If I could ask Chief--is it Bowron? Mr. Bowron, as well, 
their thoughts on what Inspector General Huse said about 
expanding the prohibition on fugitive felons to the OASDI 
portion. I believe, Mr. Bowron, you agreed with that, right?
    Mr. Bowron. I do agree with the Inspector General's 
comments, yes, sir.
    Mr. Becerra. Chief, do you also agree we should extend the 
prohibition on fugitive felons.
    Mr. Dough. Yes, without a doubt.
    Mr. Becerra. OK. If we do that, the Inspector General has 
indicated that it had would be tough to implement a good law 
that extends the prohibition to fugitive felons when it comes 
to OASDI, unless there are additional resources so they can 
actually have the agents and so forth to do the work.
    Do you agree with their statement that they would probably 
need more resources to implement that new law?
    Mr. Dough. Well, I am not going to speak for the Inspector 
General but there are--there are some ways that that may allow 
us to reduce the amount of labor intensive investigators out 
there just exchanging information, and that may be some 
restricted access to either verify an address of the criminal 
felon directly into a database. And with the proper audit and 
audit capabilities, there could be a lot of other types of 
restrictions that could be put on local law enforcement. So 
just give me access, audit me and if I violate it, then, you 
know, take care of business.
    Mr. Bowron. I also can't speak specifically to the manpower 
requirements for the Offices of Inspector General, but I am 
familiar enough with programs there, the size and the breadth 
of the benefit programs to know that they are completely tasked 
and taken with what they have to do right now. So certainly to 
undertake additional responsibilities, you know, to just, you 
know, use a colloquialism, I guess, something has to give. And 
there are only so many resources and they can only be spread so 
far.
    Mr. Becerra. Thank you all for your testimony. Mr. 
Chairman, thank you very much.
    Chairman Shaw. Mr. Johnson.
    Mr. Johnson. No questions.
    Chairman Shaw. I have one last question that I would like 
to direct to Mr. Burnett, the Consortium for Citizens for 
Disabilities recommended in their testimony additional 
oversight of the government payees. Could you comment on that 
recommendation?
    Mr. Burnett. Yes, I strongly believe in Minnesota. We as I 
stated before, the representative payees have to be bonded and 
licensed. I am--the short notice that I had before the hearing 
in contacting three of those pay services that we utilize, 
though have not had any fraud or misuse of funds. They do have, 
say, same required reporting mechanisms in place. Throughout 
the Nation, though, we believe that that is not the case, that 
this is something that should be in place as stronger languages 
and stronger penalties for the misuse of funds.
    Chairman Shaw. Yes, sir. Thank you. And thank this entire 
panel for a very fine testimony. We will be going forward. This 
will be the first of a series of hearings having to do with 
this particular subject as we start to build legislation. Thank 
you very much. And we are adjourned.
    [Whereupon, at 12:18 p.m., the hearing was adjourned.]
    [Questions submitted from Chairman Shaw to the panel, and 
their responses follow:]

       National Organization of Social Security    
                         Claimants' Representatives
                                       Washington, DC 20005
                                                      June 19, 2001
E. Clay Shaw, Jr.
Chairman
Subcommittee on Social Security
U.S. House of Representatives
Washington, DC 20515

Dear Chairman Shaw:

    This letter responds to the questions in your letter dated June 6, 
2001, requesting additional information following the May 10, 2001 
hearing on the integrity of the Social Security programs. I am 
submitting these answers in my capacity as co-chair of the Consortium 
for Citizens with Disabilities Social Security Task Force. Each 
question is answered as follows:

    1. What legal or agency procedures discourage representative payee 
participation and what changes would you recommend to encourage 
individuals to become representative payees without eliminating 
safeguards to deter abuse?
Answer
    Responsible individuals who might be interested in becoming 
representative payees are discouraged by a lack of practical 
information regarding: their role as a payee; their authority as a 
payee; how to handle funds; SSA's role in monitoring their activities; 
and their potential liability. These issues may become particularly 
acute where the beneficiary is not always cooperative and challenges 
the payee's use of benefits.
    SSA needs to provide better information and ongoing support for 
representative payees. Suggestions include:
   Clarifying the scope of the representative payee's 
        authority. Information should make sure that payees understand 
        their role; explain the fiduciary relationship between the 
        beneficiary and payee; and make clear the authority of the 
        payee so long as benefits are used in the payee's best 
        interest.
   Providing general guidelines regarding handling of funds, 
        e.g., setting up bank accounts; separation of funds where 
        possible; documentation of expenditures.
   Providing training and ongoing support. This could be 
        provided by periodic trainings and orientation sessions and be 
        made available in alternative formats, e.g., in person, videos, 
        Web site, printed materials. While acknowledging the budgetary 
        and staffing constraints, it would be extremely useful if there 
        was an identified person in each field office with particular 
        expertise in representative payee issues.

    2. You recognize the need for annual accounting reports by the 
representative payee, while acknowledging the representative payee may 
not report promptly, delaying benefits payments to the recipient. Do 
you have any suggestions as to how we might resolve this problem? 
Should representative payees be required to report to the Social 
Security Administration offices within a limited number of days and if 
they fail to do so, risk being replaced by a substitute representative 
payee?

Answer
    As noted in my written statement, we generally support a provision 
that would redirect delivery of benefits if the payee fails to return 
the required accounting report, so long as adequate protections exist 
to ensure that the beneficiary's receipt of benefits is not interrupted 
and that an alternative payment procedure is provided. There is 
precedent in current law for direct payment of benefits to the 
beneficiary pending selection of a representative payee, 42 U.S.C. 
Sec. Sec. 405(j)(2)(D). In the Conference Report accompanying the 1990 
legislation that contained this provision, Congress explained that it 
was not intended that SSA be encouraged to withhold benefits from a 
beneficiary who needs a payee. This was especially true if the benefits 
were being used to meet immediate needs such as shelter, food and 
clothing.
    Replacing the payee is one way to address the failure to submit 
forms on a timely basis. However, there is a need to provide adequate 
opportunity to explain why the form was not submitted. In addition, 
from a practical point of view, finding a new payee may be difficult. 
Thorough, initial screening of representative payee applicants is the 
best way to prevent subsequent problems. In addition, SSA needs to 
explain clearly its expectations regarding accounting of benefits. 
Also, SSA should consider ways to make reporting easier for payees such 
as electronic reporting or a dedicated fax line. The availability of a 
field office staff person to answer questions would be helpful.

    3. In his testimony, the Inspector General recommended that we 
close the loophole with respect to the Trial Work Period that allows 
unscrupulous beneficiaries to keep the moneys paid by SSA during their 
Trial Work Period. In your opinion, what are the pros and cons to the 
Inspector General's recommendation and would you alter any of the 
Inspector General's proposals?

Answer
    The integrity of the Social Security and SSI disability programs 
must be protected and cases of true fraud should be uncovered. However, 
we are very concerned about creating additional penalties based on work 
activity. There is a particular need to be cautious about imposing new 
penalties just as the 1999 work incentives law is being implemented. 
For the reasons described below, we do not support the OIG's 
recommendation at this time.
    Under current law, work activity at the time of application does 
not, per se, preclude a finding of disability. In addition, work 
activity often changes while an application is pending or after 
entitlement. We are concerned that the OIG's proposal assumes that the 
individual is fraudulently concealing work activity if SSA does not 
have the information on file. In fact, there are a number of reasons, 
unrelated to fraud, why SSA does not have the information. At the 
application stage, the SSA worker taking the application may not have 
asked specific enough questions or the questions may have been 
misunderstood by the claimant, a distinct possibility in light of the 
complicated rules regarding work. Also, if the SSA worker completes the 
application for the claimant, the information may not have been 
transcribed exactly. Further, as detailed below, SSA does not have 
procedures in place that can promptly and accurately track changes in 
work activity.
    The CCD Social Security Task Force has been concerned about SSA's 
longstanding inability to track and document earnings properly or to 
promptly adjust benefits when individuals report earnings. SSA's 
failure to address this problem poses a serious threat to the agency's 
efforts to enable individuals to return to work. Until SSA is better 
able to document and track earnings, we do not support the creation of 
additional penalties, such as elimination of the trial work period.
    Currently, there is no uniform, reliable and beneficiary-friendly 
method of collecting and recording, in a timely manner, information 
regarding a worker's earnings. As the system now operates, 
beneficiaries are fearful of overpayments. Frequently, these fears are 
justified as beneficiaries receive belated notices of overpayments that 
may amount to tens of thousands of dollars.
    Further, even where earnings are properly recorded, it appears that 
SSA workers and OIG officials are unfamiliar with many of the existing 
work incentives deductions. A member of the National Organization of 
Social Security Claimants' Representatives recently reported about two 
clients who were charged criminally due to work activity. In one case, 
the attorney found that SSA had failed to provide the beneficiary with 
a number of work-related deductions which, when applied to her 
earnings, placed her well below the SGA level. Eventually, the criminal 
charges were dropped and benefits were resumed. However, this low-
income beneficiary with severe disabilities was faced with possible 
criminal penalties for years because SSA and OIG were unfamiliar with 
how to apply the proper earnings deductions.
    In the other case, an individual received both SSDI and employer-
related disability benefits. SSA terminated benefits based on a 
criminal investigation by the Federal agency employer. SSA did not act 
on a request for reconsideration because of the pending criminal 
matter. The individual's attorney met with the U. S. Attorney assigned 
to the case who was unfamiliar with the SGA level, trial work period, 
and other work incentives. The criminal matter was eventually dropped 
after the investigation concluded there was no fraud. Nevertheless, the 
Social Security reconsideration was denied and a request for hearing is 
pending.
    We raise these issues to highlight the problems with referring 
cases due to work activity and do not mean to minimize the need to 
investigate cases of true fraud.
    Thank you for inviting me to testify on behalf of the CCD Social 
Security Task Force.

            Sincerely,
                                     Ethel Zelenske
                       Co-Chair, Social Security Task Force
                          Consortium for Citizens with Disabilities

                                

        Hennepin County Children, Family and Adult Service 
                                                 Department
                                       Minneapolis, Minnesota 55487

    Is Hennepin County required to submit annual accounting reports to 
the Social Security Administration and is this overly burdensome?

    Yes, Hennepin County is required by the Social Security 
Administration (SSA) to submit ``Representative Payee Report--Form SSA-
623-OCR-SM'' for each recipients account, annually. We have electronic 
downloading of the annual line item amounts that are filled onto the 
report. For this reason, the process is no longer burdensome.

    Can you briefly describe the situations in which Hennepin County 
applies to be a representative payee when there are family or friends 
available? Why is this done and does it put the local Social Security 
Administration office in a difficult decisionmaking situation?

    This question will be address in two parts:

    Adults--Hennepin County only becomes Representative Payee for 
Adults when the County has an open Social Service case and where there 
are no other persons willing to be payee or if the previous payee was 
not responsibly handling the client's funds. In many cases we seek to 
have other family members or payee agencies be the representative 
payee.

Children--When a child is placed in out-of-home-placement the County 
becomes payee to ensure the benefits are properly used for that child's 
care. Once the County applies, the Social Security Administration 
notifies the current payee and allows 10 days for appeal of this 
decision before the transfer occurs.
    A more responsive reply to the question posed by Congressman Shaw 
regarding the concerns by the Consortium for Citizens with 
Disabilities. The Consortium recommends additional oversight of the 
government agency payees because of the dual role of fiduciary/
creditor. Of the 2,000 Representative Payee accounts within Hennepin 
County there are 210 accounts (children in placement) where the County 
acts as the fiduciary/creditor. For ALL of these accounts the State of 
Minnesota mandates either monthly personal needs payments from the Rep 
Payee account or the personal needs amount must be included in the rate 
paid the provider of services. The State and the County ensure these 
costs are met:
   Shelter
   Food
   Medical
   Clothing
   Personal Needs
    If other governmental agencies are not doing the same, then 
``yes,'' there should be additional controls put in place to ensure the 
funds first meet the needs of the beneficiary before the funds are 
taken by the creditor.

    From your perspective, can you think of any way the Social Security 
Administration could change its procedures to make the representative 
payee accounting process less onerous while still ensuring that 
benefits are used appropriately?

    With Hennepin County's electronic accounting system design it is 
not burdensome to maintain the accounts. We feel there's nothing 
further needed from the SSA in this area. If other agencies providing 
Rep Payee services to multiple recipients are not using an electronic 
system then it should be these organizations which should adopt some 
sort of electronic bookkeeping system.

    Your testimony said local agencies that are community based or 
private fee-for-service representative payees are currently required to 
have bonding and licensing in Minnesota? Would such a recommendation at 
the Federal level in your view be wise, in your view--being mindful of 
the fact that we do not want to create a more burdensome program for 
all the participants?

    Bonding and licensing ensure there is a way to obtain restitution 
in cases of fraud or misuse of recipient's funds. The requirements 
might deter groups from becoming payee. This question might be better 
answered by some of the outside agency payee services. On the last page 
of this document a few agencies providing Rep Payee services in 
Hennepin County are listed.

    You have raised a problem involving the repayment of benefits made 
to a deceased beneficiary. Could you explain the process you go through 
when a beneficiary, for whom you are a representative payee, dies? Do 
you advise the Social Security Administration of the death? Who advises 
the Treasury? Does the Treasury attach your bank account to reclaim the 
money before SSA requests repayment? What are the complications and 
costs to the county of this system and do you have any recommended 
changes?

    As soon as the County learns of a client's death the County worker 
does notify the SSA directly or through our County liaison staff. At 
the present time the County does not inform the Federal Treasury. The 
account is locked to avoid any additional disbursements until 
determination can be made of what should be done with the balance. 
After the hearing on May 10, 2001, I learned the County can ask our 
back to transmit the electronic funds received after date of death back 
to the Federal Treasury via the PAR/TRACER number. This, in turn, would 
lock up their system from taking any further reclamation(s). This may 
be the solution to the problem mentioned in my oral testimony. If SSA 
request repayment, we would inform them of our action.

    Your testimony contained references to several internal and 
external audits and controls Hennepin County has in place. How do these 
controls help you and your beneficiaries? I am particularly interested 
in your testimony regarding safeguards for situations in which the 
claimant and the county can not reach agreement. Give us an example of 
such a case and what procedures would you follow to attempt to satisfy 
the claimant? If you did not satisfy the claimant, what happens?

    Annually, the County is required to report all County bank account 
balances and reconciliations to our Internal Audit Department. This 
includes the accounts in Rep Payee. The County also arranges for an 
external auditing firm to review our books. These reconciliations and 
audits simply determine our book to bank account values. The accounts 
are available for the SSA to review to ensure payments are made to 
rightful providers of service.
    There has not been a case within the Rep Payee accounts where the 
County has had the necessity to contact another County to investigate 
or examine a claimant's complaint of fraud or misuse of funds. In my 
testimony I was only providing this information to illustrate the 
County's desire to do everything possible to ensure compliance and 
openness.

    Since your county has served the community for 35 years, can you 
provide any suggestions for improvement based on your long experience 
and the experience of the organizations you work with?

    Speaking toward the accounting aspects for Representative Payee, 
the County has designed its system with what Social Security 
Administration has in place. Mainly the direct deposits of the benefits 
to our bank account. As stated during the testimony, there is the need 
for timely cashing of payments by the SSA and a set procedure for 
reclaiming funds for deceased recipients. The main problem we hear from 
the new Representative Payee when closing our account is the time delay 
between the County returning the conserved funds and when those funds 
are sent to the new payee. In some cases the recipient does not have 
financial resource for weeks and may have to go without needs for this 
period.

                     REPRESENTATIVE PAYEE SERVICES

ENTITLEMENT MAINTENANCE
PO BOX 582832
MINNEAPOLIS MN 55458--PHONE . . . 612 420 6000

JT KITT SOCIETY
PO BOX 68036
MINNEAPOLIS MN 55418--PHONE . . . 612 781 6255

CHURCH OF ST. STEPHEN
ALLIANCE OF THE STREETS
1829 PORTLAND AVE SO
MINNEAPOLIS MN 55404 1812--PHONE . . . 612 870 0529
DIRECTOR: HERB FREY
                                                    Phillip Burnett

                                

                          Vance International, Inc.
                                Oakton, Virginia 22124-2700
                                                      June 14, 2001

    1. How do the Special Agents of the Social Security Inspector 
General's office differ from those of other Inspector General Offices? 
Is their training different? Are their duties different?

    Many of the other Inspector Generals Offices investigate almost 
exclusively internal issues--investigations of Federal employees, 
contract matters, and so forth. The majority of the investigative 
activity of the Social Security Administration Office of the Inspector 
General's (SSA OIG) Special Agents is external--investigating those 
people who perpetrate crimes against the Social Security programs. Much 
of their law enforcement activity involves fugitive felons and other 
violent criminals. In order to accomplish their mission, the SSA OIG 
Special Agents work with State and local law enforcement agencies, 
often on task forces.
    SSA OIG Special Agent training differs from other OIG Special 
Agents training in that after the basic Criminal Investigative Training 
Program and the Inspector General (IG) Investigator Training Program 
the SSA OIG Special Agents receive additional follow on training 
specific to SSA. This training includes a course in the SSA Title II 
program (Benefit Basics and Retirement Insurance Benefits, Disability 
Benefits, Health Insurance Benefits) and Title XVI program 
(Supplemental Security Income Benefits).
    The next part of the training is a weeklong program where agents 
receive training that includes:
        Field Perspective in Program Fraud
        Computer System Inquiries
        Program Fraud Investigation
        Employee Fraud
        Hotline Briefing
        Computer Requests from Treasury
        Computer Requests on the SSA System
        Administrative Case Management System
        OIG Automated Forms
        Representative Payee Investigation
        Undercover SSN Process
        Identification Theft
        Strategic Enforcement Division Overview
        Additional Agency Resources
        Special Programs
        Fugitive Felons
        Cooperative Disability Investigations Unit
        Psychology of Officer Safety
        Technical Investigative Equipment
        Ethics
    The Office of the Counsel to the Inspector General also instructs 
agents in the following specific legal topics: Agent Authority, OIG 
Administrative Subpoena Process, Employee Cases, Privacy Law, and SSA's 
disclosure policy.

    2. You mentioned the increased paperwork burden the Inspector 
General currently has under the Memorandum of Understanding regarding 
Special Agents. Can you tell me more about this? Would this burden be 
reduced if the Inspector General were granted statutory law enforcement 
authority, and if so, how?

    The Memorandum of Understanding under which the Department of 
Justice (DOJ) deputizes the SSA OIG's Special Agents must be renewed 
periodically; currently this renewal is every 3 years. This requires 
the participation of two agencies: SSA and DOJ. Furthermore, each year 
the SSA OIG is required to make a written report to DOJ's Criminal 
Division detailing the investigative and prosecutive activities of all 
of the SSA OIG's Special Agents. The report contains information on the 
number of occasions on which the authority conferred by the deputation 
was used in connection with arrests, searches, execution of restraining 
orders, protection of witnesses, dangerous surveillance of 
investigative subjects, interviews under hazardous circumstances, 
temporary custody of Federal prisoners, support for undercover 
operations, services of subpoenas under hazardous circumstances, and 
assisting in electronic surveillance. The tracking and reporting of 
each instance in which the delegated law enforcement authority is used 
creates an administrative burden on both SSA and DOJ.
    If statutory law enforcement authority were granted to the SSA OIG 
Special Agents, the Memorandum of Understanding, the periodic 
deputation renewals, and the annual written deputation activities 
report would be eliminated. The elimination of these requirements would 
reduce the paperwork burden currently experienced by the SSA OIG.

            Respectfully,
                                             Eljay B. Brown
                                           Executive Vice President

                                

                          Essex County Sheriff's Department
                                           Newark, New Jersey 07102
E. Clay Shaw, Jr., Chairman
Congress of the United States
House of Representatives
Committee on Ways and Means
Washington, D.C. 20515

Dear Chairman Shaw,

    In reference to my testimony before the Subcommittee regarding the 
integrity of Social Security programs, I have provided the following 
answers to the questions in your letter of May 21, 2001.
Question #1
    ``You have provided two examples of the types of fugitive felons 
you have apprehended with the assistance of the Inspector General. Of 
the fugitives you have apprehended, have most been found to still live 
in the Newark area? After you captured the fugitive felons, were you 
able to determine whether they had committed other crimes while they 
were fugitives?''
Answer
    Part 1--Yes, most of the fugitives were found to live in the Newark 
area.
    Part 2--No, most fugitives had no new charges pending.
Question #2
    ``You indicated in your testimony that you have received 
information on 185 fugitive criminal felons since July 2000. Can you 
tell us how many fugitive felon warrants you have submitted to the 
Inspector General?''
Answer
    Of the 185 fugitive felon warrants this office submitted to the 
Inspector General, 97 were closed out by arrest.

            Sincerely,
                                              John D. Dough
                                                              Chief

                                

    [Submissions for the record follow:]
  Statement of Michael A. Steinberg, Michael Steinberg & Associates, 
                             Tampa, Florida
    Mr. Chairman and Members of the Subcommittee on Social Security, 
thank you for the opportunity to present a written statement for the 
printed record of the above referenced hearing.
    Since the focus of the hearing is:
    a) to examine the Social Security Administration's efforts to stop 
benefits being paid to those who are ineligible for benefits and;
    b) to prevent misuse of benefits by representative payees, I will 
limit my comments to these two concerns.

                               BACKGROUND

    I am an attorney who has been practicing in the area of Social 
Security Disability law for almost 19 years. I have written articles 
for periodicals and have lectured at national Social Security 
disability law conferences.
    In my practice I have represented claimants who have been overpaid 
benefits and assisted them in applying for a waiver of overpayment or 
setting up a repayment plan. I have also served as a representative 
payee on a number of occasions and have been involved with issues 
pertaining to other representative payees' regarding misuse of funds 
and fraud.

                    WHO IS BEING OVERPAID BENEFITS?

    There are several categories of claimants who are generally 
overpaid:
    1) SSI claimants who underreport income and/or resources;
    2) Disability Beneficiaries who have received workers compensation 
or some other benefit and the Social Security Administration 
erroneously failed to offset that income;
    3) Disability Beneficiaries whose benefits were terminated, but 
elected to have those benefits continued while their appeal was 
pending, and eventually a final decision was rendered finding them 
ineligible for benefits;
    4) Persons who are incarcerated, but did not report their 
incarceration and continued to receive benefits.
    Attached hereto are samples of letters clients of mine have 
received from the Social Security Administration regarding overpayment 
of benefits. Their names are deleted to protect their privacy. I don't 
know the numbers of these payments nationwide, but considering the fact 
that I have an average size practice and there are about 3,500 
attorneys around the country who handle primarily Social Security 
Disability matters, if my clients are representative of claimants 
nationwide, the overpayment figures are enormous.
    Ironically, in most of these cases, the claimant is without fault 
in causing the overpayment. The claimants have no idea what information 
the Social Security Administration requires or how much money they 
should have been receiving. More often than not, it is the Social 
Security Administration's mistakes that cause the overpayment and, by 
the time the mistake is caught, the claimant has no funds with which to 
repay the money.

                                SOLUTION

    As you know, the Social Security Administration has a limited 
budget. If the budget was unlimited, sufficient personnel could be 
hired to calculate benefits and monitor cases so that very few 
overpayments occur. However, the cost to hire these workers may exceed 
the savings from preventing the overpayments; therefore, a cost benefit 
analysis must be performed. Ideally, the Social Security Administration 
will hire enough trained workers to reduce the number of overpayments 
to a tolerable level, but not to a point of overkill. (Economics 101--
Law of diminishing returns). A study should be conducted by the 
administration to determine this optimal number. The Social Security 
budget should be expanded if by doing so there is a savings in an 
amount greater than the expansion of the budget.

              MISUSE OF BENEFITS BY REPRESENTATIVE PAYEES

    Basically there are three types of representative payees.
    1) Family or friends of claimant;
    2) Parent or guardian of children;
    3) Non-profit organizations, such as Lutheran Social Services, 
Jewish Family Services, etc.

                    REPRESENTATIVE PAYEES FOR ADULTS

    With respect to adults, representative payees are usually 
appointed, because the claimant has a severe mental impairment which 
prevents him or her from being able to handle funds. Often alcohol or 
drug abuse is involved.
    Many times a mentally ill claimant has difficulties finding a payee 
to handle his funds, because a family member or friend cannot legally 
be compensated for acting as representative payee. Furthermore, this 
type of claimant usually is difficult to deal with, making the job of 
representative payee even more undesirable. As a result, some persons 
reluctantly agree to be representative payees, only to quit a few 
months later due to badgering by the beneficiary. Other payees simply 
turn over the check to the beneficiary without ensuring that the money 
is used for appropriate purposes. Still others illegally convert a 
portion of the beneficiary's check to their own use.
    As an illustration of the perversity in the Representative Payee 
Program, I once had a client who was a drug addict, alcoholic, and 
prostitute. She was receiving benefits herself due to being HIV 
positive. Her boyfriend was also an alcoholic and drug addict and was 
awarded Disability Insurance Benefits due to a mental disorder. Social 
Security proceeded to appoint his girlfriend as the payee. It is 
needless to say what happened to the money.
    In another case, a client was an alcoholic with a bipolar mental 
disorder. He had a history of violence as well. He was found disabled 
by an Administrative Law Judge, but the judge put in her decision that 
the claimant's wife was not to be the payee. The claimant appealed to 
the Social Security Administration, the order of the Administrative Law 
Judge regarding the appointment of a representative payee, and the 
Social Security Administration capitulated and allowed the wife to be 
the payee. A few months later I received a call from the claimant's 
father advising that his son was in jail on second degree murder 
charges for murdering his wife. (Perhaps the judge was correct in being 
concerned that the claimant would act violently if the wife tried to 
perform her duties as a representative payee appropriately).

                   REPRESENTATIVE PAYEES FOR CHILDREN

    Representative payees are always appointed for children. Usually 
parents or guardians are appointed representative payees. The Social 
Security Regulations has strict guidelines as to how SSI funds for 
children are to be deposited and used. These guidelines are almost 
never followed and the Social Security Administration almost never 
enforces these regulations.
    In the best case scenario, representative payees simply use the SSI 
money as an additional resource to pay household expenses. In the worst 
case scenario, the SSI money is used to pay for the parent's drug or 
alcohol habit.

                        NON-PROFIT ORGANIZATIONS

    On occasion, a claimant for Disability or SSI Benefits will not be 
able to find anyone to act as his representative payee and a non-profit 
organization is selected to act as his or her representative payee. 
Under appropriate circumstances, these organizations can charge a small 
fee to a beneficiary to act as representative payee, but usually don't.
    The aforesaid non-profit organizations generally make sure the 
claimant's funds are used for appropriate purposes and, because there 
is no familiarity between the organization and the claimant, the 
claimant is unable or less able to pressure the payee to improperly 
turn over the funds.

                                SOLUTION

    The Social Security Administration should attempt to use non-profit 
organizations to act as payees, if at all possible. Funds should be 
paid to these organizations to insure proper training and incentive to 
do this. This funding can come from claimants or other resources.

                               CONCLUSION

    The overpayment of benefits by the Social Security Administration 
is apparently at an intolerable level. This is not due to rampant fraud 
on the part of beneficiaries but, more often than not, due to 
inadvertence or mistake on the part of the agency.
    Possibly the Social Security Administration is underfunded to the 
point that it is impossible to reduce the amount of overpayments. 
Perhaps the agency is mismanaged and/or employees are under-trained.
    This subcommittee may not be able to improve the integrity of the 
Social Security Disability Program without help from the Appropriations 
subcommittee and the President.
    Regarding representative payees, it is essential that professional, 
paid representative payees be appointed, where a beneficiary cannot 
handle his or her funds. This would insure that funds are being used 
for the purposes intended, and also, may reduce some of the 
overpayments as well.
    Thank you for your consideration of the above and the attached.
    [Attachments are being retained in the Committee files.]

                                

STATEMENT OF SUE HEFLIN, PRESIDENT, NATIONAL ASSOCIATION OF DISABILITY 
                        EXAMINERS, SALEM, OREGON

    Chairman Shaw and members of the Subcommittee, on behalf of the 
National Association of Disability Examiners (NADE), thank you for 
providing this opportunity to comment on efforts needed to ensure the 
integrity of Social Security programs.
    NADE is a professional organization whose mission is to advance the 
art and science of disability evaluation. Our membership is strongly 
committed to ensuring the integrity of the Social Security and 
Supplemental Security Income (SSI) disability programs. Although the 
majority of our members are employed in the state Disability 
Determination Service (DDS) offices, our membership also includes 
Social Security Headquarters staff and Field Office personnel, 
attorneys, claimant advocates and physicians. It is the diversity of 
our membership, combined with our ``hands on'' experience, which we 
believe provides us with a unique understanding of the issues facing 
the Social Security and SSI disability programs. We recognize the need 
for ongoing vigilance to ensure the integrity of those programs. We 
believe it is essential that the Administration and Congress provide 
the resources necessary to administer these programs in such a way that 
those who are entitled to disability benefits receive them and that 
those who are not, do not.
    While traditionally the Social Security retirement program has 
received high grades in terms of public confidence and support, the 
disability programs have not. In part this is due to lack of public 
understanding of these programs, their more subjective nature and the 
public perception that benefits are often fraudulently obtained and/or 
are being misused.
    We agree with the Social Security Advisory Board that, 
``Consistency and fairness should be fundamental goals of the 
disability programs.'' The integrity of these programs--and the 
public's confidence in them--has been threatened by the significant, 
poorly explained, differences in decisions between states and regions 
and between different levels in the appeals process. The differences in 
decisional outcomes between the DDSs and the Administrative Law Judges 
has led to a pervasive public perception that ``everyone'' is denied by 
the DDS and must request a hearing before an Administrative Law Judge 
in order to receive the ``right'' decision. The difference in 
decisional outcomes between states and regions has received a great 
deal of press coverage in recent weeks. This, again, reduces public 
confidence in the consistency and fairness of the disability programs. 
NADE believes, and has stated in previous testimonies, that these 
inconsistencies can be corrected only through maintenance of the 
appropriate staffing levels, on-going, joint training for all decision 
makers; uniform policies, binding on both the DDSs and the ALJs; and 
clear and consistent feedback from quality assurance reviewers. To do 
this, however, requires adequate resources. NADE believes that in order 
to provide the resources necessary to efficiently administer the 
disability program, SSA's administrative budget must be removed from 
the discretionary spending cap.
    To help ensure that benefits are not fraudulently obtained, NADE 
strongly supports the Cooperative Disability Investigations (CDI) teams 
currently operating in several states. These teams combine the 
resources and talents of Office of Inspector General (OIG) special 
agents with State and local law enforcement officers, and SSA and DDS 
professionals to prevent individuals from fraudulently receiving 
benefits. These efforts have successfully prevented millions of dollars 
in benefits from being disbursed. While it is more efficient to prevent 
benefits from being awarded than to try to obtain restitution once 
benefits have been disbursed, it is equally important to stop 
disability payments if those benefits have been fraudulently obtained. 
The CDI units do both. NADE supports continued expansion of this 
project which has thus far produced excellent results and is an 
effective way to address disability fraud.
    Accurate initial disability decisions, with benefits granted 
expediently and appropriately, are essential to maintaining program 
integrity and to restoring and maintaining public confidence in the 
disability program. However, maintaining program integrity also 
requires that individuals who are no longer disabled should not be 
receiving benefits. We commend the Congress and SSA for the progress 
made in reducing the backlog of continuing disability reviews (CDRs). 
This initiative has resulted in significant program savings. It makes 
sound financial sense for Congress to continue to fund the Continuing 
Disability Reviews independently from other SSA programs so the CDR 
backlog can be kept current. Unfortunately, however, staffing levels in 
many DDSs are such that even with those funds, administrators must 
choose between processing CDRs or processing initial claims.
    It is essential that the Field Offices and the DDSs maintain 
sufficient staff to process all current and future workloads. The 
Social Security Advisory Board, in their February 2001 report, 
Challenges For The New Congress And The New Administration, stated, ``. 
. . under SSI the fact and degree of eligibility can change from month 
to month based on changes in income, resources, individual living 
arrangements and place of residence.'' It is important, both to ensure 
program integrity and to restore and retain public confidence, that the 
Social Security Field Offices have sufficient resources to monitor 
those changes. In addition, because those receiving disability benefits 
are among the country's most vulnerable population, it is equally 
important that the Field Offices have sufficient resources to monitor 
Representative Payees and to ensure that funds are being used in the 
beneficiary's best interest.
    The Social Security and Supplemental Security Income disability 
programs are a vital part of America's ``safety net.'' It is essential 
that the Congress appropriate sufficient resources to ensure that these 
programs are administered efficiently, that fraud and abuse are 
eliminated, that those who are entitled to benefits receive them as 
early in the process as possible and that those benefits are used 
appropriately.
    We believe, however, that any initiatives by SSA to maintain public 
confidence and ensure the integrity of its programs are hampered by the 
fact that the Agency does not have a permanent, confirmed Commissioner. 
Regardless of how competent or respected he or she is, an Acting 
Commissioner lacks the authority to initiate change or to provide the 
level of leadership needed to manage an agency as important as Social 
Security. SSA needs a confirmed Commissioner, respected by both 
parties, with broad management experience and a true understanding of 
the critical issues the agency is facing.
    Thank you for allowing NADE the opportunity to present this 
statement for the record. We appreciate the oversight initiatives this 
Subcommittee has consistently undertaken and remain committed to assist 
in any efforts to improve the Social Security and Supplemental Security 
Income disability programs.

                                  
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