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74–224 2001

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

(

ii

COMMITTEE ON WAYS AND MEANS

BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois

E. CLAY SHAW, JR., Florida

NANCY L. JOHNSON, Connecticut

AMO HOUGHTON, New York

WALLY HERGER, California

JIM MCCRERY, Louisiana

DAVE CAMP, Michigan

JIM RAMSTAD, Minnesota

JIM NUSSLE, Iowa

SAM JOHNSON, Texas

JENNIFER DUNN, Washington

MAC COLLINS, Georgia

ROB PORTMAN, Ohio

PHIL ENGLISH, Pennsylvania

WES WATKINS, Oklahoma

J. D. HAYWORTH, Arizona

JERRY WELLER, Illinois

KENNY C. HULSHOF, Missouri

SCOTT MCINNIS, Colorado

RON LEWIS, Kentucky

MARK FOLEY, Florida

KEVIN BRADY, Texas

PAUL RYAN, Wisconsin

CHARLES B. RANGEL, New York

FORTNEY PETE STARK, California

ROBERT T. MATSUI, California

WILLIAM J. COYNE, Pennsylvania

SANDER M. LEVIN, Michigan

BENJAMIN L. CARDIN, Maryland

JIM MCDERMOTT, Washington

GERALD D. KLECZKA, Wisconsin

JOHN LEWIS, Georgia

RICHARD E. NEAL, Massachusetts

MICHAEL R. MCNULTY, New York

WILLIAM J. JEFFERSON, Louisiana

JOHN S. TANNER, Tennessee

XAVIER BECERRA, California

KAREN L. THURMAN, Florida

LLOYD DOGGETT, Texas

EARL POMEROY, North Dakota

ALLISON GILES, Chief of Staff

JANICE MAYS, Minority Chief Counsel

SUBCOMMITTEE ON SOCIAL SECURITY

E. CLAY SHAW, Florida, Chairman

SAM JOHNSON, Texas

MAC COLLINS, Georgia

J.D. HAYWORTH, Arizona

KENNY C. HULSHOF, Missouri

RON LEWIS, Kentucky

KEVIN BRADY, Texas

PAUL RYAN, Wisconsin

ROBERT T. MATSUI, California

LLOYD DOGGETT, Texas

BENJAMIN L. CARDIN, Maryland

EARL POMEROY, North Dakota

XAVIER BECERRA, California

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.

iii

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

(1)

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:]

2

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

SUBCOMMITTEE ON SOCIAL SECURITY

SUBCOMMITTEE ON SOCIAL SECURITY

FOR IMMEDIATE RELEASE CONTACT: (202) 225–9263

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. EfVerDate 11-MAY-2000 00:18 Sep 14, 2001 Jkt 074224 PO 00000 Frm 00006 Fmt 6633 Sfmt 6621 E:\HR\OC\A224.XXX pfrm04 PsN: A224
3

forts 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/WAYSlMEANS/’’.

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.

f4

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.

5

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.

to thank and acknowledge you for calling the hearing and obviously

Mr. MATSUI. Thank you very much, Chairman Shaw. I would like

f 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 SecuVerDate 11-MAY-2000 00:18 Sep 14, 2001 Jkt 074224 PO 00000 Frm 00009 Fmt 6633 Sfmt 6602 E:\HR\OC\A224.XXX pfrm04 PsN: A224
6

rity’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.

f7

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 feefor-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.

8

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

9

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 organizaVerDate 11-MAY-2000 00:18 Sep 14, 2001 Jkt 074224 PO 00000 Frm 00013 Fmt 6633 Sfmt 6621 E:\HR\OC\A224.XXX pfrm04 PsN: A224
10

tional 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 demonstraVerDate 11-MAY-2000 00:18 Sep 14, 2001 Jkt 074224 PO 00000 Frm 00014 Fmt 6633 Sfmt 6621 E:\HR\OC\A224.XXX pfrm04 PsN: A224
11

tion 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.

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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-forservice 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,

13

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 upto-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.

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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.

15

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.

you point out that you spent $1 out of every 4 in SSA

Chairman SHAW. Yes, sir. On the first page of your testimony,

f ’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

16

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

17

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 apabout, you know, obviously you have 6-month reviews of representproximately $74 million, or about 88 percent.

Mr. MATSUI. OK. In terms of last year we talked a little bit

f ative 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

18

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

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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 redeterVerDate 11-MAY-2000 00:18 Sep 14, 2001 Jkt 074224 PO 00000 Frm 00023 Fmt 6633 Sfmt 6621 E:\HR\OC\A224.XXX pfrm04 PsN: A224
20

minations. 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 match with OPM 6 to 1

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.

Chairman S

Mr. CARDIN. That would be helpful. Thank you, Mr. Chairman.

HAW. Mr. Pomeroy.

f 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

21

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,

22

1The 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.

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.

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

23

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 subVerDate 11-MAY-2000 00:18 Sep 14, 2001 Jkt 074224 PO 00000 Frm 00027 Fmt 6633 Sfmt 6621 E:\HR\OC\A224.XXX pfrm04 PsN: A224
24

ject 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.

25

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

26

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

ffor 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 poVerDate 11-MAY-2000 00:18 Sep 14, 2001 Jkt 074224 PO 00000 Frm 00030 Fmt 6633 Sfmt 6602 E:\HR\OC\A224.XXX pfrm04 PsN: A224
27

tentially 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

28

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.

29

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

30

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 crossdesignate 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

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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

Committee will stand in recess for approximately 15 minutes so

Chairman S

’d be happy to address any questions.

HAW. Thank you. We have one vote on the floor. The

f 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:]

32

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.

fInspector 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

33

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?

34

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

35

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.

fInspector 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?

36

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 fulVerDate 11-MAY-2000 00:18 Sep 14, 2001 Jkt 074224 PO 00000 Frm 00040 Fmt 6633 Sfmt 6602 E:\HR\OC\A224.XXX pfrm04 PsN: A224
37

filling 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 mainVerDate 11-MAY-2000 00:18 Sep 14, 2001 Jkt 074224 PO 00000 Frm 00041 Fmt 6633 Sfmt 6602 E:\HR\OC\A224.XXX pfrm04 PsN: A224
38

tain 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.

39

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.

40

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

41

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

42

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 over- sight 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,

43

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.

f 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.

44

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

45

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 organizaVerDate 11-MAY-2000 00:18 Sep 14, 2001 Jkt 074224 PO 00000 Frm 00049 Fmt 6633 Sfmt 6621 E:\HR\OC\A224.XXX pfrm04 PsN: A224
46

tions 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. §§ 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

47

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. § 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 critVerDate 11-MAY-2000 00:18 Sep 14, 2001 Jkt 074224 PO 00000 Frm 00051 Fmt 6633 Sfmt 6621 E:\HR\OC\A224.XXX pfrm04 PsN: A224
48

ical 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 mainte- nance’’ 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.

§ 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. § 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. § 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. § 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

49

Research Institute for Independent Living

The Arc of the United States

mony. Burnett, you may proceed.

United Cerebral Palsy Associations, Inc.

Mr. JOHNSON. [Presiding.] Thank you. We appreciate your testif 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.

50

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.

51

• 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 S

STATEMENT OF ELJAY BOWRON, EXECUTIVE VICE

HAW. [Presiding.] Mr. Bowron.

f 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

52

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

53

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

54

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

55

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.

f 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

56

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

57

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 S

Mr. Bowron, it appears from your testimony that you are in comHAW. Thank you.

f plete 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 unVerDate 11-MAY-2000 00:18 Sep 14, 2001 Jkt 074224 PO 00000 Frm 00061 Fmt 6633 Sfmt 6602 E:\HR\OC\A224.XXX pfrm04 PsN: A224
58

charted 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.

59

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.

60

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 feefor-service?

Ms. ZELENSKE. Right.

Mr. BECERRA. Bonded or licensed.

61

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.

62

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:

63

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. §§ 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

64

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

fConsortium 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.

65

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-forservice 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

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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

f 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

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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

f68

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

f 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.

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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

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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

f 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

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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 sufVerDate 11-MAY-2000 00:18 Sep 14, 2001 Jkt 074224 PO 00000 Frm 00075 Fmt 6633 Sfmt 6621 E:\HR\OC\A224.XXX pfrm04 PsN: A224
72

ficient 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.

Æ