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91–117 PDF 2004

S. HRG. 108–240

ENSURING THE INTEGRITY OF SOCIAL SECURITY

PROGRAMS: PROTECTING SENIORS FROM

REPRESENTATIVE PAYEE FRAUD

HEARING

BEFORE THE

SPECIAL COMMITTEE ON AGING 

UNITED STATES SENATE

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

WASHINGTON, DC

SEPTEMBER 9, 2003

Serial No. 108–21

Printed for the use of the Special Committee on Aging

(

SPECIAL COMMITTEE ON AGING 

LARRY CRAIG, Idaho, Chairman 

RICHARD SHELBY, Alabama 

SUSAN COLLINS, Maine 

MIKE ENZI, Wyoming 

GORDON SMITH, Oregon 

JAMES M. TALENT, Missouri 

PETER G. FITZGERALD, Illinois 

ORRIN G. HATCH, Utah 

ELIZABETH DOLE, North Carolina 

TED STEVENS, Alaska 

RICK SANTORUM, Pennsylvania 

JOHN B. BREAUX, Louisiana, Ranking 

Member 

HARRY REID, Nevada 

HERB KOHL, Wisconsin 

JAMES M. JEFFORDS, Vermont 

RUSSELL D. FEINGOLD, Wisconsin 

RON WYDEN, Oregon 

BLANCHE L. LINCOLN, Arkansas 

EVAN BAYH, Indiana 

THOMAS R. CARPER, Delaware 

DEBBIE STABENOW, Michigan 

LUPE WISSEL, Staff Director 

MICHELLE EASTON, Ranking Member Staff Director 

(II) 

C O N T E N T S 

Page 

Opening Statement of Senator Larry E. Craig ..................................................... 1

PANEL I 

James G. Huse, Jr., Inspector General, Social Security Administration, Office 

of the Inspector General, Baltimore, MD ........................................................... 2

Frederick G. Streckwald, Assistant Deputy Commissioner, Social Security 

Administration, Washington, DC ........................................................................ 13

Shirley J. Shears, Legal Aid of West Virginia, Martinsburg, VA ........................ 34

Jason Wills, Finance Director, Community Action Partnership, Lewiston, ID .. 40

APPENDIX 

Prepared Statement of Senator John Breaux ....................................................... 53

(III) 

(1)

ENSURING THE INTEGRITY OF SOCIAL SECURITY PROGRAMS: PROTECTING SENIORS 

FROM REPRESENTATIVE PAYEE FRAUD 

TUESDAY, SEPTEMBER 9, 2003 

U.S. SENATE, 

SPECIAL COMMITTEE ON AGING, 

Washington, DC. 

The committee met, pursuant to notice, at 10 a.m., in room 

SD–628, Dirksen Senate Office Building, Hon. Larry Craig (chairman of the committee) presiding. 

Present: Senators Craig and Carper. 

OPENING STATEMENT OF SENATOR LARRY CRAIG, CHAIRMAN 

The CHAIRMAN. Good morning, everyone. The Senate Special 

Committee on Aging will be in order. 

We are here this morning to discuss an aspect of Social Security 

that is very important to our nation’s seniors. Through the representative payee program the Social Security Administration appoints representatives for persons that have difficulty managing 

their own benefits. As you all know, Social Security benefits are 

often the only source of income for millions of older Americans. The 

integrity and the accountability of the representative payee program is critical to ensure the well-being of our most vulnerable citizens. 

In May of 2000 this committee held an investigative hearing that 

revealed numerous incidents of misuse of Social Security funds by 

representative payees. It is time to take another look at this program to determine what work remains to be done to protect the Social Security benefits paid to the vulnerable elderly. 

There are currently 5.4 million representative payees who manage benefits for 7.6 million beneficiaries. Each representative payee 

has a legal responsibility to use Social Security payments for the 

use and benefit of the beneficiary. Although the vast majority of individual and organizational payees are honest and trustworthy, our 

investigation has confirmed that abuses still occur. The Social Security Administration’s inspector general has reported that in a 6-

year period over 3,200 representative payees misused approximately $26 million in benefits entrusted to their management. The 

full extent of these abuses remains unknown. 

In a recent case authorities successfully prosecuted a woman on 

murder charges. The lady murdered her spouse, for whom she was 

also the representative payee. She was further convicted of misusing Social Security benefits intended for her husband. 

2

While we commend the efforts the Inspector General of Social Security has made thus far in combatting fraud, the problems that 

I have cited raise the question that I hope to have answered today. 

To what extent are older persons under the representative payee 

program still being harmed under the current system and most importantly, what is currently being done to intensify the protection 

within the representative payee program? Clearly one of the responsibilities of this committee is oversight and the constant monitoring of programs that make a major impact on the lives of the 

elderly in this country. 

Members of the committee may be here this morning. The ranking member, Senator Breaux, although very interested in this program, is before Finance this morning looking at ID fraud and ID 

theft. Also, the Commerce Committee is meeting this morning, so 

we have cross-conflicts but our job is to build a record for the rest 

of my colleagues to look at as we work with those agencies that administer program and policy for our seniors. 

So with that, let us move right to panel one, Social Security 

Administration Office of Inspector General, James G. Huse, Jr., Inspector General. We are very pleased to have you with us this 

morning. I know you have been doing a lot of work in this area and 

we are anxious to hear your testimony. Please proceed. 

STATEMENT OF JAMES G. HUSE, JR., INSPECTOR GENERAL, 

SOCIAL SECURITY ADMINISTRATION, OFFICE OF THE 

INSPECTOR GENERAL, BALTIMORE, MD 

Mr. HUSE. Thank you, Mr. Chairman. I appreciate this Committee’s concern with respect to the Social Security Administration’s 

representative payee program. After more than 8 years of Office of 

Inspector General investigations and audits into the representative 

payee process, I can tell you in all honesty that no one is more concerned than I am. 

It is SSA’s job, my job and Congress’s job to ensure that representative payee abuse occurs as infrequently as possible, and 

that when it does, the guilty party is stopped and brought to justice 

and the beneficiary made whole as expeditiously as possible. To 

that end, we have sought legislation to enhance SSA’s ability to 

prevent representative payee misuse. 

Before I describe the measures I feel would be most beneficial, 

let me provide an example of why this legislation is so sorely needed. Sadly, this case I am about to discuss, while grander in scale 

than most, is representative of what we see in the course of our investigative and audit work. 

In Washington State an organizational rep payee service—actually named ‘‘Payee-R-Us’’ handled the benefits of as many as 200 

vulnerable beneficiaries, receiving a fee of $25 per client. Our investigation revealed that the Executive Director of ‘‘Payee-R-Us’’

embezzled over $107,000 in benefits, converting the money to her 

own use. She was sentenced to jail time and ordered to pay restitution to 88 victims. 

During the last 6 years, we opened well over 3,000 investigations 

of representative payees. In the course of those investigations, we 

have identified nearly $26 million in misused funds and have obtained more than 600 convictions. 

3

H.R. 743, which has been adopted by the House, contains many 

of the legislative provisions that we have requested to bolster the 

representative payee program. Last October, we issued an audit report that identified 121 people whose own SSA benefits had been 

terminated because they were fugitive felons but who were still 

permitted to serve as representative payees for other beneficiaries. 

This was not an oversight. SSA policy permits fugitive felons to act 

as representative payees. In March of this year, we estimate that 

SSA would place approximately $19 million in the hands of fugitive 

felons acting as representative payees. H.R. 743 would stop this 

practice and also provide other safeguards in the representative 

payee selection process. 

It is incumbent upon SSA to adequately monitor the chosen representative payees to ensure that the funds are being used to aid 

the beneficiary, not the representative payee. We have found in 

performing audits of representative payees that SSA is frequently 

unable to provide the annual accounting forms representative payees are required to submit. H.R. 743 would allow SSA to promptly 

address a representative payee’s failure to submit the annual accounting forms by requiring the representative payee to report to 

a SSA field office and submit the accounting documents in order to 

receive the beneficiary’s check. 

Our ability to deter and punish abusive representative payees 

hinges on referrals from SSA, documentation from SSA, and adequate legislation. A June 2002 review showed that SSA failed to 

refer 78 percent of representative payee abuse cases to our office 

for review. This represented over $5.9 million in misused benefits. 

While our civil monetary penalty program has proven enormously successful in deterring and punishing program fraud—the 

time has come to provide a similar tool for the representative payee 

process. H.R. 743 provides that authority. 

I appreciate this Committee’s attention to this issue, which has 

long been a target of our audit and investigative efforts. I look forward to working with you to bring improvement to this important 

aspect of the Social Security Administration’s work and I would be 

happy to answer any of your questions, Mr. Chairman. 

[The prepared statement of Mr. Huse follows:]

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The Chairman. Jim, thank you very much for that testimony. 

First and foremost let me commend you and your office for the 

work you have done to date and the initiative in looking for ways 

to improve the process and the development of H.R. 743. I think 

all of us recognize the potential vulnerability here of the individuals being served and there ought to be safeguards, there ought to 

be effective reporting forms and systems. It does not take huge 

staffs anymore to do that. It takes a computer process and a thoroughness of carrying through and investigating those who fail to 

respond. 

You mentioned in your testimony that fugitive felons by the 

thousands are administering funds on behalf of the elderly program 

and that H.R. 743 would take care of that. How has that ever been 

allowed to happen in the beginning? Was it an oversight or just the 

acceptance of the fact that that was going to be done and no one 

was going to question it? 

Mr. HUSE. I believe SSA’s policy is focussed on finding a representative payee for a particular beneficiary. SSA’s present regulations permit, for example, a fugitive felon to be a representative 

payee. However, the fugitive felon law that we enforce was not enacted until 1996, so SSA’s policy precedes that. In some instances 

these felons could be parents or relatives that maybe in the best 

position to be the representative payee and I think in that instance——

The CHAIRMAN. Physically they might be in the best position. 

Mr. HUSE. Correct. 

The CHAIRMAN. They also might have a track record that would 

suggest they are not the right person. 

Mr. HUSE. That is very true but to answer the question, I think 

the intention was service and not anything else. 

The CHAIRMAN. You mentioned that the legislation would prohibit that practice. 

Mr. HUSE. The new legislation, if it is passed and made law, will 

prohibit that practice. 

The CHAIRMAN. So I am assuming that Social Security still believes that service can be provided to an individual and still prohibit or disallow a fugitive felon from providing that service. 

Mr. HUSE. I believe that as a result of our audits, the Social Security Administration takes a very careful view of who is selected 

as a representative payee now I believe our audit work has had 

that impact. However, the ability to permit a fugitive felon to be 

a representative payee that permission is still there and those decisions from the past are still somewhat in effect. I would say that 

SSA understands the issue now. 

The CHAIRMAN. So we can suggest that the bureaucracy grinds 

forward slowly. 

Mr. HUSE. I think that is a fair statement. 

The CHAIRMAN. You mentioned over 3,000 cases that the Inspector General has pursued that have resulted in hundreds of convictions for fraud. Is it fair to say when we look at the scope of the 

numbers of payees and those being served that that is the tip of 

the iceberg? Is that a fair assessment? 

11

Mr. HUSE. The 3,000 plus cases that I mentioned are cases that 

were actually referred to us for an investigation by the Social Security Administration and those—— The CHAIRMAN. How did they rise to the level of referral? Is 

there an auditing process that is thorough and on-going that triggered an investigation that brought them forward? 

Mr. HUSE. There could be a variety of instances. The auditing 

process of representative payee reports may indicate that an investigation might be appropriate or more often than not, it might be 

complaints from the beneficiaries themselves about particular rep 

payees that prompt the action. So there are a variety of ways. 

What your question was, though, is it the tip of the iceberg? I 

am not sure, but we know that the 3,000 number is not the universe. We do know that many cases do not get referred to us for 

whatever reason there is in the business process and we also know 

that not all of the representative payee reports that are required 

to be submitted annually by rep payees are even available. 

The CHAIRMAN. Well, let us go into that because that was going 

to be my follow-up question. If there is a requirement to submit an 

annual report and that annual report is not submitted, is there a 

way to follow up? Does that failure to submit trigger an activity 

that would cause a follow-up? My reaction is that if somebody is 

failing to report on their own activity which is financial in nature, 

I would first go there. Why aren’t they reporting and are they trying by failure to report to cover something up? 

Mr. HUSE. This is a good question, Mr. Chairman. Our audit 

work indicates that your premise is correct, that many of these reports are not submitted and we also know they are not followed up 

on. These become workloads that are deferred for many reasons for 

example, resources and available time—and the net effect is that 

we do not know what we do not know, and that is not a good thing. 

I also should add that we do receive many of our allegations that 

result in investigations from our fraud hotline. 

The CHAIRMAN. In the annual report what type of information is 

required to be included that substantiates or documents the activities? 

Mr. HUSE. It is a fairly simple report. It does not require much 

more than a statement and an accounting that the funds that were 

paid to a particular beneficiary were actually used for the benefit 

of that beneficiary and how they were used. It does not require any 

great substantiation or back-up accounting material, simply the 

submission of the report itself. So it is hard to understand why we 

do not receive these. 

The CHAIRMAN. If the payee’s name is in the system and a report 

comes in from that payee and it is filed, I assume attached to that 

person’s name, and a computer button is pushed or a keyboard is 

pushed to indicate those who have not filed by a certain date and 

another notice goes out that you are in failure of filing, which probably triggers because there is always going to be honest people who 

fail to meet deadlines, I cannot understand, although there are how 

many million of them, that that is not now a computerized system 

that requires very little staffing ultimately and that there is a way 

to follow through. So I guess my question is what happens to those 

persons who fail to submit? 

12

Mr. HUSE. Well, we have suggested in our audit work that at the 

point that those annual accounting forms are not submitted and 

when SSA’s follow-up is not responded to, either, that there should 

be intervention. The representative payee should have to come to 

a field office to receive the check. Those are some of the things that 

H.R. 743 would strengthen. We believe that this field office intervention process is a key piece to representative payee accountability. 

But again I have to come back to the fact that this does become 

a workload issue and as with many workloads at Social Security, 

these get deferred in the face of more pending priorities. 

The CHAIRMAN. Beyond the legislation itself and you have suggested that the proposed legislation would correct some of these 

problems, how many of them are legislative in character or the 

need or the authority to make those kinds of decisions and how 

many of them are purely administrative that could be made within 

the current authority, as good business practices? 

Mr. HUSE. There is the possibility to get some redress for this administratively within the process itself. We believe that to help 

avoid overpayments, if Social Security issued a receipt to a person 

receiving disability benefits who reports work or changes in earnings, that might help us here. If the representative payee fails to 

provide these accounting forms, if SSA authorized the redirection 

of the payment then to a SSA field office, requiring that representative payee come in and provide the required accounting forms that 

could be done without legislation. 

We believe that disqualifying from serving as a representative 

payee persons convicted and imprisoned for more than a year or 

who are fleeing prosecution, custody or confinement, that could be 

adjusted in the rules today without legislation. So those are three 

things that could be done administratively. 

The CHAIRMAN. Well, yes, and my guess is that if you are a convicted felon, you are not going to object to the fact that you were 

discriminated against because you were not chosen to handle someone’s money. The reality is if you are a convicted felon you have 

given up, by those actions and that court decision, certain rights 

which are taken away from you. I am trying to sit here and understand why that would not be an automatic administrative action on 

the part of the Social Security system or do they feel they are liable 

for lawsuit because a felon is going to sue them, a convicted felon? 

Mr. HUSE. I think the next witness might be better able to answer the philosophical part of your question, Mr. Chairman. I know 

that there is a rationale for this. In some of these instances the 

need to provide the service sometimes requires these seeming incongruous policies or incredible policies. 

The CHAIRMAN. I guess your review of it may give you a broader 

perspective of it than mine. I am not sure I see that as an acceptable practice. 

Mr. HUSE. Neither do I. 

The CHAIRMAN. Even under the physical difficulties that we see 

in frontier States oftentimes, like Idaho, where distance and travel 

is oftentimes a substantial problem, there are honest, legitimate 

people out there who will assist in helping those who are less capaVerDate 0ct 09 2002 10:41 Jan 09, 2004 Jkt 000000 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 C:\DOCS\91117.TXT SAGING1 PsN: JOYCE
13

ble of handling their affairs to manage them. It is a matter of finding them and I think it is not that difficult. 

My last question, Jim, and I thank you for your testimony and 

response this morning, in February we looked at the misuse of 

guardianships over the elderly and trying to track those more effectively and cause our States to strengthen their review of and the 

courts’ review of guardianship, protocols that walk people through 

the process and quality them more effectively than we are qualifying them today. 

Is there any way to know how many court-appointed guardians 

are administering Social Security funds without going through the 

representative payee program? 

Mr. HUSE. No. However, we have some statistics that we obtained from SSA. When a court-appointed guardian files an application with the Social Security Administration to become a representative payee, that is the way we know and are able to account 

for that particular responsibility. Right now, with old age and survivor’s disability insurance beneficiaries, there are about 250,000 

beneficiaries who have a representative payee and a court-appointed guardian and of these, about 201,000 representative payees 

serve that 250,000 universe. 

With Supplemental Security Insurance income, about 99,000 recipients have court-appointed guardians but we do not know the 

number of representative payees that serve those 99,000. That 

number is not available. 

The CHAIRMAN. Well again, thank you very much for your testimony. 

Mr. HUSE. You are welcome. 

The CHAIRMAN. As we work our way through this I will take a 

serious look at that legislation to see how we might cause it to 

move here on the Senate side as an assistance to the Social Security Administration dealing with this problem. Again thank you. 

Mr. HUSE. Thank you, sir. 

The CHAIRMAN. Well, our next panel this morning is the Social 

Security Administration, Frederick Streckewald, assistant deputy 

commissioner for Disability and Income Security Programs. We do 

appreciate your presence here this morning and look forward to 

your testimony, Frederick, so please proceed. Thank you. 

STATEMENT OF FREDERICK G. STRECKEWALD, ASSISTANT 

DEPUTY COMMISSIONER, SOCIAL SECURITY ADMINISTRATION, WASHINGTON, DC 

Mr. STRECKEWALD. Mr. Chairman, thank you for inviting me to 

talk about Social Security’s representative payee program. We now 

have about 6.7 million Social Security and SSI beneficiaries who 

are paid more than $44 billion per year through the representative 

payees. About half of our beneficiaries are minor children and more 

than 80 percent of the representative payees are family members. 

But if an interested family member or friend cannot be found, SSA 

will arrange for an organization to perform the duties of the representative payee. This is fairly rare. Of the more than 5 million 

rep payees, only about 42,000 are organizational payees. All payees 

are closely scrutinized before being selected. Misuse occurs in less 

than 1/100th of 1 percent of all cases or about one in 10,000 cases. 

14

In reality, millions of Americans are being assisted voluntarily by 

family and friends in a way that can make us all proud. However, 

we are always seeking ways to improve the representative payment 

process because every case of misuse represents money being denied to one of our most vulnerable beneficiaries. 

Since we last testified before this committee in May 2000, we 

have conducted an aggressive and multi-faceted initiative to improve the integrity of the representative payee program. We have 

strengthened our selection procedures, expanded our monitoring efforts and made improvements to the representative payment system. We have built upon the foundation laid by the SSA Representative Advisory Committee, the in-depth work done by the Office of 

Inspector General, as well as our own program experience, and we 

have a number of initiatives under way to improve payee selection. 

For instance, we awarded a contract to Dunn & Bradstreet in 2001 

for credit background checks for fee-for-service payees. This effort 

is consistent with the IG’s suggestion that we put more emphasis 

on the selection process of representative payees and we hope to 

expand this service in 2004 to all high-volume payees. 

In addition to the court and statutorily mandated annual accounting process, we have expanded our monitoring program to 

conduct triennial reviews for about 1,700 fee-for-service and highvolume payees. These reviews include a face-to-face interview and 

an assessment of the payee’s recordkeeping. We also interview a 

sample of beneficiaries to see if their needs are being met. 

In addition, beginning June 2000 we began an annual recertification of fee-for-service organizations to ensure that the requirements for licensing or bonding continued to be met. We have other 

useful reviews; for example, a 6-month review for all newly appointed fee-for-service payees, which provides an excellent opportunity to build a relationship between the payee and the local field 

office, as well as identify any payee training needs. 

In addition, we randomly select every year 30 percent of the volume payees and fee-for-service payees who have not already been 

selected for review that year. 

Last, we also 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. 

As you would expect, there is a systems component to our efforts. 

Since March 2003 we are imaging all rep payee annual accounting 

reports, enabling more efficient storage and retrieval in the event 

of a misuse allegation. Also, we have made a number of enhancements over the last 3 years to the representative payee system, 

which is a centralized computer file with information about representative payees and the beneficiaries they serve. For example, 

the system will no longer allow a claims representative to unknowingly appoint an individual with a rep payee as a payee for another 

beneficiary. 

We recognize that administrative actions alone cannot address 

all the issues and concerns with the representative payee program. 

In April the House passed H.R. 743, a bill that would provide increased safeguards. One particularly important provision would restore benefits that have been misused by representative payees 

15

serving 15 or more beneficiaries without having a finding of negligence on SSA’s part or restitution from the organization payee. 

This bill also includes other provisions that would significantly increase the number of reviews SSA currently does, require most feefor-service organizational payees to be bonded and licensed, and increase or extend penalties for misuse of funds by representative 

payees. 

In conclusion, let me say we are keenly aware that beneficiaries 

who need a representative payee are among the most vulnerable of 

our beneficiaries. The representative payee program and its millions of volunteer payees provide a vital service to these beneficiaries. We at SSA take our responsibilities to provide prudent 

stewardship of this program very seriously and we believe that 

with the help of Congress, we will be able to further improve the 

protections for our beneficiaries with payees when funds have been 

misused. 

We look forward to working with Congress and with the Office 

of the Inspector General to assure public confidence in our programs and I would be very happy to take any questions you have. 

[The prepared statement of Mr. Streckewald follows:]

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The CHAIRMAN. Well, thank you very much. Is it Fred or Frederick? 

Mr. STRECKEWALD. Frederick. Thank you. 

The CHAIRMAN. First of all, Frederick, let me commend you, the 

Social Security Administration, obviously for the work that is done 

and effectively done to prevent fraud as it relates to how Social Security benefits get out to the recipient. The representative payee 

program is watched and watched closely because it is clearly an opportunity for fraud. I think my concern not only for the current recipients is that we are prepared administratively, functionally, organizationally to handle an ever-increasing number of beneficiaries 

as the baby-boomer crowd begins to hit the Social Security system 

in very, very large numbers. 

During the initial screening of a prospective representative 

payee, how is the accuracy of information related to identity and 

financial security verified? How do you effectively do that? I know 

that you talked about hiring for background checks and that type 

of thing. Is that a fairly limited process? Are you without a conviction or is there something to track them even more broadly? 

Mr. STRECKEWALD. We distinguish between personal payees, the 

vast majority of payees are family members and spouses and 

friends, versus organizational payees and even more so, the fee-forservice payees, who are actually allowed to collect some of the 

beneficiary’s check as a fee for their service. So for the more typical 

family member or friend, we have an application that requests a 

lot of information. 

First of all, they have to come into the office, so we get to see 

them, look them in the eye, ask them their name, look at their picture ID, make sure they are who they say they are, the way we 

do every other person dealing with us in a field office, and then we 

go through a series of questions. On the representative payee application it asks their relationship to the beneficiary and it asks them 

to state their own source of income and how they support themselves. For example, either it is a job or it is Social Security benefits. We verify that. We have queries we can pull up to verify their 

employer how much they are making, and we also, of course, have 

records on how much their Social Security benefits are. 

So we can verify their own source of income and we also ask 

other questions—have you ever been convicted of a felony? If they 

have, we drill down on that. We find out when it was. Was it last 

year or was it when you were 16 and you stole a car? Let’s find 

out the seriousness of this crime before we consider you to be a 

payee. 

We look very closely at the relationship with the payee and the 

extent to which they either have custody of the person and provide 

for them already or they are a very close friend or associate and 

they constantly visit and show an on-going concern in taking care 

of the person. 

Now on the other side of the equation, a lot less commonly but 

it does come up where you have the organizational payees. As you 

mentioned, we do a credit check for all fee-for-service payees. We 

want to find out from Dunn & Bradstreet whether or not they have 

credit-worthiness to make sure they are not a borderline company 

that does not have good financial stability. 

28

We also know about most of these organizations. The field offices 

know their communities. They have heard of that organization, so 

they have a reputation. They have local standing, which we also 

bring into play when we make a determination about whether they 

would be the best payee. 

If we are appointing an organizational payee that means that we 

have gone through our list and we could not find a spouse, a son, 

a daughter, a family member, a friend, and we have already 

checked that out and now we are down to kind of lower on the list 

of preferable payees. We begin the types of questions that we ask 

organizational payees, which has to do with their standing in the 

community and their relationship, if any, with the beneficiary. 

The CHAIRMAN. I appreciate time and thoroughness and the kind 

of staff time it takes. You are visiting with a family member, or a 

friend or the person who represents themselves as that person. You 

are walking them through the questionnaire. You ask the question, 

‘‘Have you ever been convicted?’’ and they say no. Do you take that 

a step further? Is there a check run to determine whether they 

have or have not been, if there is any suspicion whatsoever? 

Mr. STRECKEWALD. Generally not unless we have some other indicator. Again a lot of the claims reps know the people in their 

service area, they have read the newspapers, but generally not unless there is another indicator. 

However, what we have found on one study is that a number of 

people—a lot of people voluntarily tell us when we ask, yes, I have 

been convicted of a felony. When we drill down and check that out 

against felony records, it turns out half of them had not really been 

convicted of a felony; they were confused. They had been convicted 

of a misdemeanor or they thought we were talking about the beneficiary. 

So, it is a question whether a rep payee applicant has been convicted of a felony that we use as a screening tool but it is not, in 

itself, a determinant one way or the other. It is certainly two 

strikes against you if you answer yes to that question. You are not 

likely to become payee, but there are some limited circumstances, 

particularly with a crime of many years in the past; with a parent 

who has custody and is showing parenting skills and support for 

their child, their disabled child, we may find that parent to be the 

best payee, rather than an organizational payee. 

The CHAIRMAN. Your fugitive felon program appears to work very 

well to prevent fugitive felons from receiving SSI payments. Does 

your agency support the expansion of that program toward other 

Social Security payments? 

Mr. STRECKEWALD. We believe the provision in H.R. 743 has 

merit. It would make the SSI and Title II policy consistent. 

Our only hesitancy is that we think we should move carefully because of the earned benefit right of a Title II payment versus an 

SSI payment and we want to make sure that the fugitive felon 

records are 100 percent reliable before we terminate people’s benefits. That is our real concern, is reliability of the information. 

The CHAIRMAN. The term ‘‘felon,’’ one who has been convicted, 

and I do not dispute in the professional person’s ability to assess 

when that conviction occurred, what was the basis and if they have 

lived an honorable life since that time and it was X numbers of 

29

years before that, but how can a fugitive felon—and fugitive is an 

interesting word tied to that, I assume therefore on the run attempting to escape notice—how can they serve as a representative 

payee? 

Mr. STRECKEWALD. If they are the type of fugitive felon that is 

on the run and is moving from city to city, I absolutely agree with 

you; there is no way that we would want to make that person a 

rep payee because they are most likely going to use the money to 

finance their flight. 

What we have found is that there are some people listed on the 

fugitive felon database that we get from the FBI and from a lot of 

the States that, in fact, are not really on the run per se. They have 

a warrant out for their arrest. Some of them do not know that, so 

they are still at home taking care of their child or their mother. 

They may have missed a parole meeting or probation meeting. 

However, if somebody is listed as a fugitive felon we believe that 

counts very strongly against them as being a payee. We would do 

a suitability determination and we would check to see whether 

there are other persons in the family who have demonstrated concern for this beneficiary that would make a better payee. We also 

look very closely at the care that has been provided to this beneficiary by that person who is being categorized as a fugitive felon. 

So it is unlikely that we would keep them as a representative 

payee, the way our current policy is set up. The H.R. 743 provision 

basically means that we would be mandated to find another payee 

if a person is on the fugitive felon database. 

The CHAIRMAN. It is my understanding that you have about 

3,000 fugitive felons currently administering funds; is that correct? 

Mr. STRECKEWALD. I believe that number is probably pretty close 

to what our numbers are. We receive ours from the IG. They provided a number of cases to us that they felt were fugitive felons 

who were receiving benefits as rep payees and we instituted a wide 

range of suitability investigations on as many of those as we could. 

Some of them resulted in change in payees, some of them were still 

in progress as far as I know, and others we have determined that 

despite the fact that they are on a database that says they are fugitive felons, in fact they are still the preferable payee because they 

are not actually in flight and they are still maintaining the care 

and service and interest in the beneficiary. Again this is a very 

rare occurrence. 

The CHAIRMAN. Those individuals are required to make the annual report, are they not? 

Mr. STRECKEWALD. Yes. 

The CHAIRMAN. I am moving into that now because I am frustrated that that is not followed up on and accurately tracked, 

which appears to be the case. 

Mr. STRECKEWALD. If I could just add to my last answer, when 

we do the suitability review of a convicted felon or a ‘‘fugitive 

felon,’’ if we are forced because there is nobody more preferable to 

be the payee, we then institute much closer monitoring activities. 

We ask to see them more often. Most payees, they just have to send 

us a form but these folks, we have to actually see them, talk to 

them. We have to get more information from them. So we do not 

30

just treat them as any other payee if we are forced to keep them 

as a payee for the time being. I just wanted to clarify that point. 

The CHAIRMAN. As I say, they are required to make the annual 

report. Does the failure to make that report trigger an interview, 

trigger a requirement for them to come in? 

Mr. STRECKEWALD. Yes, it does. 

The CHAIRMAN. More specifically, if they are on the database as 

a fugitive felon? 

Mr. STRECKEWALD. All representative payees, virtually every one 

of them, are required by law to submit an annual accounting of 

how they spent the money and I think Mr. Huse laid it out pretty 

well, that they are given a form that says how much beneficiary 

money they have had in their trust for this last year, and how they 

spent it? How much did you save? How much was left over from 

last year? What did you do with that? 

So it specifies where the money went and when the forms are returned, they are looked at. First of all, we scan them in electronically now, so we have better access to them than we have had in 

the past. We used to have paper boxes of them lying around that 

were very hard to locate but they have been scanning them in now 

for over a year. 

We have employees that look at the forms pretty closely to see 

if everything looks copasetic. If we do not like what we see on the 

form, it is referred to a payment center or field office to follow up 

with the payee. 

Your question is if we do not get the form, what do we do, and 

we have very stringent procedures in place now, thanks again to 

the help from the IG for identifying this problem. The payee gets 

an initial request—it is computer-generated just as you assumed— and they get one more request. Right now we are getting 88 percent response rate from two requests, so at that point we are OK. 

We know some people do not get right on it. 

However, if we do not get a response after the second request 

and a reasonable number of days after the second request, the case 

is earmarked and is sent to our field office and the field office then 

takes more rigorous means to contact the person and it requires 

the payee to come into the office. Look, we need to talk and if you 

do not come into the office, it means the benefits will be suspended. 

So we get most of our reports that have been sent out. The 12 

percent that did not come in after the second request, we get most 

of them when the people come into the office because they do not 

want the benefits to stop. But if there are a few that do not come 

in, then we institute suitability investigations and we probably end 

up changing the payee, since this person has not met the responsibilities. 

The CHAIRMAN. From a failure to respond to the second inquiry 

through to a time that might provoke causing them to have to come 

in, how long is that stretch of time usually? 

Mr. STRECKEWALD. In Title II (Social Security benefits) cases, the 

payee has 120 days after a payee record has been selected for accounting and mailed to respond to an initial request for completion 

of the Representative Payee Report. If the payee does not return 

the completed reporting form within 120 days, a second request is 

mailed to the payee. If the payee does not respond within 120 days 

31

of the selection for a second request, a ‘‘nonresponder’’ alert is generated to the servicing field office (FO) for their investigation and 

possible action. Our policy requires that the FO make a personal 

contact with the payee to obtain the required information. If the 

payee is uncooperative, the FO will initiate a suitability investigation and develop for a payee change. 

For title XVI (SSI payment) cases the process is the same, except 

the timing between mailings is somewhat shorter due to systems 

differences between the two programs. For SSI, the timeframe 

between the mailing is 90 days. 

The CHAIRMAN. So what you are telling me is that after the process ultimately works its way out there is approximately 12 percent 

who fail to respond? 

Mr. STRECKEWALD. After two requests that are computer-generated, without a lot of employee intervention. These are routine 

requests to send the report in and we get about 12 percent that do 

not respond after the second request. 

The CHAIRMAN. So you are telling me that as you work it all the 

way through, that you get a response out of 100 percent payees? 

Mr. STRECKEWALD. No, I do not know the exact number of that 

12 percent that end up coming into the office and giving us the report face to face. I am assuming that there are still some that do 

not come into the office. Those are the ones that we institute suitability investigations on and we very often end up changing them 

from the payee because they did not meet their responsibilities, of 

which one is to give us an annual reporting of their expenditures. 

The CHAIRMAN. Do you know this year how many persons have 

been revoked as representative payees as a failure to report? Well, 

the year is not complete but——

Mr. STRECKEWALD. In 2002, we estimate that 40,000 representative payees were replaced because they failed to provide annual accounting forms. Of the 40,000 approximately 14,000 were representative payees for Social Security beneficiaries and 26,000 were 

payees for Supplemental Security Income beneficiaries. 

The CHAIRMAN. I just have to believe that if you have folks who 

fail and keep failing, there is a reason why it is going on besides 

absent-mindedness. 

Mr. STRECKEWALD. We agree. That is one reason we institute 

suitability investigations when this has gone on long enough. 

The CHAIRMAN. Is there ever random processing in the sense of 

checking the reports of payees to determine whether they are accurate? 

Mr. STRECKEWALD. I would say for the high volume routine personal payees, most likely not. We believe that a lot of our focus 

should be on the organizational payees because these are people 

that do not have a family or personal relationship with the beneficiary. They are a business, so we do random reviews. We just pop 

in and we say OK, we want to look at your books and your records. 

They know we are coming every 3 years but they do not know 

where or when we are coming within that 3 years and we just show 

up and say let’s see your books, let’s see if you can account for 

where all the money is going for all your beneficiaries. So that has 

really been the focus of our ad hoc reviews. 

32

The CHAIRMAN. Well, I can appreciate with those who are for 

profit providing a service, the accuracy or the overview of those and 

because you can probably look at a concentrated mass, if you will, 

of recipients. 

Mr. STRECKEWALD. Right. A lot of times there will be 100 or 200 

beneficiaries in the one site; you are right. 

The CHAIRMAN. It is my understanding that sometimes Social Security recipients die—but the money is still going to the household 

of the deceased. How prevalent is that problem on an annualized 

basis? Does Social Security hold figures on that, when money continues to go for a period of time? 

Mr. STRECKEWALD. Yes, we do. The latest figures I have for that, 

there is about $900 million released after death of the recipient. 

That is pretty small compared to the approximately $350 billion 

our outlays are but it is money we want back. In fact, we have 

worked very closely with the Treasury Department to come up with 

ways of retrieving that money from direct deposit accounts and 

from people’s table tops where the check is just sitting there because they do not know what to do now that the person is deceased. I am happy to say that we get about 90 percent of that 

money back into the trust fund and into the Treasury. 

For those that we do not get back right away, we have to believe 

there may be a fraud element there. Why are they not giving this 

money back to us? Have they spent it? Well, if so, that is fraud. 

So then we would institute a fraud proceeding and perhaps get the 

inspector general involved. 

The CHAIRMAN. How many of those failures to report death is 

tied to a representative payee? Do you have any statistics on that? 

Mr. STRECKEWALD. We are not sure how many ‘‘failure to report 

deaths’’ are associated with representative payees. However, for 

beneficiaries with payees, when we look at the number of checks 

released after death, that is, one check or, two or more checks released after death, we found that about 4,000 SSI and 10,000 Social Security beneficiaries had more than two checks released after 

death. This is about one percentage higher than for those beneficiaries who do not have payees. 

The CHAIRMAN. Under the representative payee system how 

would you decide on an organizational payee over a family member 

or a close friend? 

Mr. STRECKEWALD. In almost every circumstance that we come 

across the family member or the close friend always has preference 

over the organizational payee. The only exception would be one, if 

the family member or close friend had been convicted of a crime 

against Social Security in the past and that is something required 

by law. We are not allowed to appoint a payee if that is on their 

record and we have a record of that, so they are out no matter who 

they are. 

The second thing would be if they are a family member but they 

have not convinced us that they really have this person’s best interest at heart. That is very rare but there may be evidence in the 

community that they have not been caring for their child, they 

have not been caring for their parent, and we may be forced to look 

elsewhere. But it is very, very rare. Again this is a voluntary corps 

of rep payees. There are millions of them and most of them are conVerDate 0ct 09 2002 10:41 Jan 09, 2004 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 C:\DOCS\91117.TXT SAGING1 PsN: JOYCE
33

cerned family members and parents that just want to do the right 

thing for the beneficiary, who is usually severely disabled and incapable of handling their own benefits. 

The CHAIRMAN. Both you and Mr. Huse have referred to the legislation that is working its way through Congress. How much of 

the problems you see within the Administration can be done administratively versus the actual need to require a law to make 

things happen? 

Mr. STRECKEWALD. We think that nearly every provision needs 

to be legislatively mandated. The main exception, of course, is conducting more reviews because, on our own, we have already expanded our reviews and we could on our own expand to the number of reviews that are implied in H.R. 743. That is something we 

could do administratively. 

We also have a strong possibility of being able to administratively implement the forfeiture of fee provision, that if somebody 

misuses benefits, they have to forfeit the fee. That is a kind of common sense-type thing I do not think we would get a lot of resistance to. 

The one that Mr. Huse states that he thought we could do administratively and we are not necessarily sure of is prohibiting a 

fugitive felon or a felon, a convicted felon, from receiving benefits 

as a payee. Our general counsel has looked at that and there is the 

possibility that the way we use the information right now in our 

matching agreements with the States and with the FBI is specifically for the SSI program. We are not sure if legally we have the 

authority to use it for Title II purposes but if we had legislation, 

of course, that would give us the authority. So that is something 

we would have to look at if we were decide to do it administratively. 

The CHAIRMAN. Well, thank you very much for your testimony. 

I would appreciate that information that we have asked to be more 

specific with, that that be forthcoming, and I thank you very much. 

We will continue to work with you and track these programs as 

they grow, develop, and/or change over the years. Obviously it is 

important that the beneficiary receive his or her benefits as completely as possible. Thank you. 

Mr. STRECKEWALD. Thank you, Mr. Chairman. 

The CHAIRMAN. Our last panel this morning is going to be made 

up of Shirley Shears, Legal Aid of West Virginia, and Jason Wills, 

Finance Director for Community Action Partnership. If these folks 

would come forward, please? 

Well, again thank you both very much for being with us this 

morning. Shirley, I will turn to you, Legal Aid of West Virginia, 

and allow you to start, please.

34

STATEMENT OF SHIRLEY J. SHEARS, LEGAL AID OF WEST 

VIRGINIA, MARTINSBURG, WV 

Ms. SHEARS. Thank you, Chairman Craig. My name is Shirley 

Shears. I am a paralegal with Legal Aid of West Virginia for over 

18 years. Legal Aid of West Virginia annually obtains funding from 

Legal Aid Corporation to provide legal assistance to low-income individuals in civil matters. 

An incident which happened in my home town which was the 

subject of a segment of the news program ‘‘20/20’’ titled ‘‘When Nobody is Looking: People Robbed of Life Savings by a Man Recommended by the Social Security Administration’’ and was later 

aired on the show titled ‘‘Fleecing of America.’’ Greg Gamble, a 

local businessman, set up a nonprofit organization in the early 

1990’s, the Aurora Foundation, to be a representative payee for Social Security, VA benefits and private funds for a fee. The corporation was essentially a one-person operation. The local Social Security office routinely told beneficiaries that the Aurora Foundation 

would be their payee. Beneficiaries were not given a choice. 

From time to time beneficiaries complained to the local office 

about the manner in which their funds were handled. Those complaints were largely ignored and none were investigated. 

In 1996 a letter was written by a beneficiary to Mr. Greg Gamble 

complaining about the handling of his money. A copy was sent to 

the Social Security Administration and the letter noted his concern 

of the accountability of the organization. He was allowed to discontinue using the foundation as his payee but no investigation of 

the complaint was made. 

The Aurora victims are elderly, middle-aged and young. Some 

are physically challenged and many are mentally ill. Some suffer 

from physical and mental illnesses. Some of Mr. Gamble’s victims 

are Vietnam veterans; some suffer from AIDS and HIV. Regardless 

of the diagnosis, they have one common thread—they are the vulnerable of our society, people who are not capable of taking care 

of their own financial affairs. The victims must depend on someone 

else to pay bills, provide funds, and basic needs. Some victims are 

afraid to complain concerning the handling of their money and others are too ill or simply unaware of the problem. 

In early 1999 clients of the Aurora Foundation began to get notices of nonpayment of residential care homes, eviction notices for 

nonpayment of rent and letters from utility companies threatening 

to cutoff their services for nonpayment of bills. Several people were 

evicted from their apartments and became homeless. 

Mr. Greg Gamble, as a representative payee, had stolen their 

money for his own personal use. The money was gone. Safety deposit boxes were emptied, life savings were wiped out, lump sum 

awards were gone. The money to live in a comfortable old age was 

gone. The money stolen from the victims by Greg Gamble totaled 

over a quarter of a million dollars. 

In April 1999 an investigation from the Inspector General’s 

Office was made concerning the Aurora Foundation. Social Security 

checks for 140 clients were intercepted. On April 5, 1999 the Aurora Foundation was shut down by a court order. On April 12, 1999 

Mr. Gamble admitted to fraud. He also filed bankruptcy. Although 

the bankruptcy judge ruled that the debts to our clients and the 

35

Aurora Foundation victims are not dischargeable, Mr. Gamble has 

no assets with which to repay the individuals whom the Social Security has put in his clutches. On April 14, 2000 Mr. Gamble entered a plea to one count of embezzlement of Social Security, VA 

and private funds. On June 8, 2000 he was sentenced to 32 months 

in prison, to be followed by 3 years of supervised release. 

Mr. Gamble’s time in prison may be served but for his victims 

the nightmare is not over. The travesty is that several victims are 

dead, some have been chronically homeless, and some have given 

up hope of recovering their money. The 137 victims are in desperate need of relief. Protection must be given to prevent future 

victimization of beneficiaries by representative payees. 

I thank you for the opportunity to present my views. Thank you. 

[The prepared statement of Shirley Shears follows:]

36


91117.018
37


91117.019
38


91117.020
39


91117.021
40

The CHAIRMAN. Well, Shirley, thank you very much. Before I ask 

you any questions let me turn to Jason. Again, Jason Wills, Financial Director, Community Action Partnership from Lewiston, ID. 

STATEMENT OF JASON WILLS, FINANCE DIRECTOR, 

COMMUNITY ACTION PARTNERSHIP, LEWISTON, ID 

Mr. WILLS. Good morning. I would like to thank Chairman Craig 

and this committee for the opportunity to present testimony regarding the utilization of representative payee services. 

My name is Jason Wills. I am a CPA, as well as the Finance Director for Community Action Partnership in Lewiston, Idaho. Community Action Partnership is a social service, nonprofit organization whose services include weatherization, housing, children’s 

services, community services, and aging. 

Community Action Partnership’s involvement in the implementation of a representative payee’s service began out of our aging department approximately 12 years ago. As the need for payee services grew in proportion to our local aging population, the Social Security Administration appoints a representative payee when a beneficiary is determined incapable of managing or directing someone 

else to manage their Social Security payments. From this beginning our payee program has grown to include individuals from all 

age groups with various needs for a representative payee. 

Historically our program has had 91 payee clients as of September 2001 and 97 clients as of September 2002. Currently our 

program has approximately 94 payee clients. Of these 94 clients, 

approximately 15 are over the age of 60. Sixteen percent of our 

total client base is over 60 years old. 

All payee clients we serve are required to have a case manager. 

All financial requests are received from the client’s case manager 

and evaluated on a case-by-case basis. Our representative payee 

program has no direct contact with the actual payee clients but 

rather, shares information with the case manager to present to the 

client. 

Community Action Partnership’s highest priority for our representative payee clients is to ensure their basic needs are being 

met with the limited amount of income received. This is done by 

developing budgets on a monthly basis and projections for clients 

on an individual basis. The representative payee program does 

have some high-risk clients. High-risk clients would be individuals 

who are aware of the amount of money received from Social Security on their behalf and place requests for nonessential payments 

before all basic need payments have been met. Payments for food, 

shelter, clothing, medical care and communication are identified as 

basic needs for the representative payee clients. On average, our 

payee clients receive between $500 and $600 a month to live on. 

Community Action Partnership has been successful in developing 

partnerships within our organization that foster and encourage the 

utilization of our many resources. One of these partnerships includes the representative payee program. Recently an elderly client 

was facing neglect and abuse in their current living arrangement. 

Our Area Agency on Aging case managers were able to remove the 

individual from the potentially harmful situation and were able to 

41

have the individual’s financial needs met through the utilization of 

our payee program. 

Community Action Partnership’s representative payee program 

has not always had the strong internal controls in place that it currently has now. In early 1997 it was noted that some potential misappropriation of representative payee funds had occurred in the 

past. Community Action Partnership contracted with an outside accounting firm to perform a fraud investigation of the payee funds. 

From this investigation it provided Community Action Partnership 

with the necessary awareness and experience to implement significant changes to the internal controls surrounding the safeguarding 

of funds for the representative payee clients. 

Some of these controls are outlined as follows: automated accounting ledgers; dual signatures for cash disbursements; signatures cannot include the individual who initiated the cash disbursement; independent monthly bank reconciliations performed by an 

individual not associated with the representative payee program; 

all cash disbursements are made payable to vendors with supporting documentation; establishment of a collective bank account 

rather than separate banking accounts for every individual for efficiencies; and reconciliation of detailed monthly reporting by client. 

Community Action Partnership continues to ensure the guardianship of client funds by implementing and maintaining strong internal controls, developing good communication with our local Social Security field office, maintaining good client relations with the 

client’s case managers, and being a financial advocate for our clients in terms of debt resolution and restriction. 

Community Action Partnership helps people and changes lives. 

This statement is especially true for our representative payee program. This program proves to be a valuable alternative to guardianship of an individual’s financial affairs and provides clients with 

the empowerment to control some degree of how their money is 

spent. The ability to have influence over an individual’s financial 

affairs has proven effective especially for our elderly clients in a 

time when other privileges are being restricted. 

I would like to thank the chairman and the committee for the opportunity to share with you some of these challenges and successes 

that we have had. 

[The prepared statement of Jason Wills follows:]

42


91117.022
43


91117.023
44


91117.024
45


91117.025
46

The CHAIRMAN. Jason, thank you very much. 

Before I ask questions of either of you let me turn to my colleague who has joined us, Senator Carper, to see if he has any 

opening comments to make. 

Senator CARPER. Just that I am happy to be here, welcome our 

witnesses and look forward to asking a question or two. Thanks, 

Mr. Chairman. 

The CHAIRMAN. Thank you very much. 

Shirley, again thank you for a helpful update on the Aurora case. 

Obviously it is one that we are aware of and monitor to some degree as finally its level of abuse reached a level of exposure that 

triggered the kind of investigation and action that took place. 

What other additional recommendations would you make to Congress to make sure that what happened in the Aurora case does not 

happen again? 

Ms. SHEARS. Mr. Gamble set up that organization strictly to be 

a payee representative. His history was in the banking field rather 

than public service. From March 1995 until April 1999 he could 

have only legitimately had a fee of $89,929, so it was not a very 

prosperous business for that 4-year period to run an office and to 

pay help and maintaining taxes, and so forth. 

The point I am trying to make is that tried-and-true organizations, such as Community Action, mental health, people that have 

provided services for disabled people, who know their needs, have 

contact with them and are known in the community should be the 

only people that should be allowed to be payee representatives as 

organizations. Fly by-night organizations should not be allowed to 

be payees. This would eliminate another Greg Gamble. 

The need to listen to the recipients when they wish to change 

payees, and I can say that the Social Security office has improved 

that greatly since this time. They have taken measures to listen to 

people and people that I refer there, they have said gladly, just 

send the payee in and bring them in and we will do the paperwork. 

But they need to allow payees to continue, private payees, require better reporting. They need to require bonding and the bonding should be adequate to repay these people. They should not be 

allowed to handle funds that they do not have bonding to cover. 

The CHAIRMAN. Bonding for for-profit organizational payees, not 

individuals? 

Ms. SHEARS. Yes, sir. I believe that some of these measures, and 

better reporting and better monitoring of these agencies, but they 

definitely need to listen to the recipients when they come into the 

office, that they are having problems or other people that inquire. 

I think one thing that I will say on behalf of Social Security at 

the time that this happened with Mr. Gamble, it was a time when 

a lot of monitoring was going on. You recall the drug and alcohol 

law that came in about that time and all the people were required 

to have payees and hundreds of people were coming in seeking payees and it was a hard time for Social Security, too. It was difficult 

for all of us. We were overburdened with clients. 

The CHAIRMAN. Shirley, do you think representative payees are 

still a viable alternative to a court-appointed guardian, despite 

some of the problems we have heard about today? 

47

Ms. SHEARS. Yes. Guardianship is very restrictive in most cases 

and I do not feel that that gives people that are already vulnerable 

the freedom to do as they should be allowed to do. 

The CHAIRMAN. I appreciate that and those comments. 

Jason, thank you again for traveling the distance to be with us 

today to build this important record. Has your agency been able to 

divert elderly people from full guardianship proceedings by offering 

a representative payee program? Do you know? 

Mr. WILLS. I cannot answer that. I am not entirely sure if we 

have been faced with that situation directly. 

The CHAIRMAN. What is the most challenging aspect of serving 

as an organizational representative payee? 

Mr. WILLS. It would be really detailing out the individual needs 

of our clients because they are so vast and varied. The one constant 

is the limited amount of income and in order to stretch that to 

meet their basic needs, that comes in a variety of forms and that 

has been the biggest challenge, is getting to know the individuals 

through their case managers and then developing budgets for them 

that help them ensure that their basic needs are met. 

The CHAIRMAN. But it sounds like you have put a system in place 

or you operate under a system that is fully accountable and 

auditable at any time. 

Mr. WILLS. Yes. 

The CHAIRMAN. What advice would you give other organizational 

payees in terms of maintaining a high standard of accountability 

of Social Security monies? 

Mr. WILLS. Well, a couple of things. First, to have the understanding of a duty of care, that it is not your money; it is another 

individual’s money and these are our most vulnerable individuals 

in society—elderly, disabled, young children. Just to have the duty 

of care and that it is a fiduciary duty, that you are caring for that 

money on behalf of another individual, to take the time and resources to implement systems that track that accurately and if you 

have a staff member as a payee that is monitoring this program, 

initiating this program, doing the necessary background checks on 

these individuals, doing the necessary follow-up and supervision of 

these individuals. 

If you are subject to an independent audit, inform your independent auditor of it. Let them look at that program and consider 

it as another safeguard. 

The CHAIRMAN. I think you are moving into my next question. 

That is fine. It was going to be what is the protocol if you receive 

an allegation from the community that a representative payee program is being misused or abused in one instance? What would your 

immediate protocol be? 

Mr. WILLS. If we became aware of this instance first and foremost, it would be to inform my direct supervisor, the Executive Director of the organization, that this is a potential allegation. Beyond that, we would do an internal investigation of this allegation. 

Specifically if it was targeted from an actual payee client or if it 

was our payee system as a whole, that would take on two different 

venues—inform the board of directors, reassign the payee staff, 

whether it is administratively, whether it is reassignment to another position in the department, pull them out of that position beVerDate 0ct 09 2002 10:41 Jan 09, 2004 Jkt 000000 PO 00000 Frm 00051 Fmt 6633 Sfmt 6633 C:\DOCS\91117.TXT SAGING1 PsN: JOYCE
48

cause we have the ability to do that through our cross-training 

through this department. Also, contact an outside accounting firm, 

if necessary, and our legal counsel, if necessary, if it got to that 

point, and get in touch with our local Social Security field office 

and resolve the issue. 

The CHAIRMAN. In getting in touch with your local Social Security field office, I guess my last question of you, Social Security Administration has made good progress by all indication in enhancing 

its oversight of the representative payee program. How would you 

assess your agency’s working relationship with the local regional 

Social Security offices on their oversight? How do you see it firsthand? 

Mr. WILLS. The relationship has been one of joint partnership, 

realizing that how our program works as a payee service and the 

Social Security Administration as distributing those funds, I would 

say our relationship with our local field office, I could not ask for 

a better relationship. Like I said, we are the advocates for these 

individuals. If there is a problem, if there is a concern, if there is 

anything that comes up, we are able to contact them directly and 

get any potential issues resolved immediately. 

The CHAIRMAN. OK. Jason, Shirley, thank you. 

Let me turn to my colleague, Senator Carper, for any questions 

he might have. 

Senator CARPER. Thanks, Mr. Chairman. 

Miss Shears, the reason why, as you probably know, all of our 

colleagues are not here is because each of us serve on a variety of 

committees and we are scattered about with different hearings and 

mark-ups that are going on right now. 

I missed your comments. I heard Mr. Wills’s comments but I 

missed yours and I am going to ask you just to take the first 

minute and just give me a little thumbnail sketch of what you had 

to say, maybe what you think is the most important thing that you 

would want me to remember and us to remember coming out of 

this hearing. 

Ms. SHEARS. That the organizations that have a history of providing services for clients be the only organizations that are considered to be organizational payees, that organizations, businesses 

that come up just to handle Social Security cases, those should not 

be allowed anymore, such as the Aurora Foundation, because over 

a 4-year period it was less than $90,000 that he legally obtained. 

That is not very much to run a business and pay help and overhead, and so forth. 

It takes somebody that is really caring. It is not a lot of money 

when they do charge a fee for it and it should be people like community action agencies or mental health, and so forth. That was 

the contents of my statement. 

Senator CARPER. Good. Thanks. As I understand it, they are different categories of payee representatives. They include individuals, which are largely families. They would include, I guess, nonprofit organizations, I think you mentioned a number of which 

could serve in that capacity. They include for-profit businesses? 

Have I covered the landscape? Are there others? 

Ms. SHEARS. I do not know of any, other than individuals. 

49

Senator CARPER. This is a question for Mr. Wills, as well, but either of you. Roughly—Mr. Chairman, maybe you can help me, as 

well. Do I understand that more than 10 percent of the folks who 

receive Social Security have those monies received and handled by 

a payee representative? Does that sound about right. 

The CHAIRMAN. I have a lot of nodding of heads in the audience. 

Senator CARPER. Let the record show. 

The CHAIRMAN. Staff tells us about 13 percent, Senator. 

Senator CARPER. OK, good. Out of that 13 percent are most of 

those family members or individuals, as opposed to nonprofit or forprofit organizations? 

The CHAIRMAN. Most of that is, yes. 

Senator CARPER. OK. 

Ms. SHEARS. I believe they are and I believe that that is a very 

workable situation, but it also needs to be monitored. Social Security needs to be very vigilant. 

Senator CARPER. OK. Of the nonindividuals, generally the nonfamily members, those who serve as payee representatives be they 

as part of a nonprofit organization for for-profit organization, do 

you all have any idea which is the predominant—the nonprofit organizations who do this for a fee or out of the goodness of their 

hearts or the for-profits who do it for a fee? Which is predominant? 

Who serves the most Social Security recipients? 

Mr. WILLS. I am only aware of our own organization and then 

also, as you stated, mental health. I am not aware of any actual 

for-profit organizations, at least in the State of Idaho that are operating as a payee. 

Senator CARPER. Talk to me a little bit about your organization, 

Mr. Wills. Are you nonprofit? Are you for profit? 

Mr. WILLS. We are a nonprofit social service organization and we 

have five main areas of service, including weatherization, housing, 

children’s services, community services, and aging. Our representative payee program grew from our aging department and it kind of 

is a quasi-department between aging and community services. It is 

kind of a blend because we have a vast majority—we actually have 

a blending of clients that are over 60 and under 60—children, disabled, as such. 

Senator CARPER. Ms. Shears, are you from West Virginia? 

Ms. SHEARS. Not originally but that is where I have lived since 

the 1960’s. I used to work for a community action agency. 

Senator CARPER. I am originally from Beckley, WV. I was just 

back in my native State last week visiting some of our family. My 

mom lives over in Kentucky, in Ashland, not far from Huntington. 

She is 81 and has Alzheimer’s disease and she is doing OK. My sister takes care of a lot of the financial needs of my mom and my 

sister lives close there to where my mom is. 

Give me some idea of concerns that—let me just say the kind of 

organization, the kind of agency that Mr. Wills is here representing, do you have concerns about the work that they do and 

their fiduciary responsibility to the people that they serve? 

Ms. SHEARS. No, I am a former employee of Community Action 

agency. I was county director at one time. 

Senator CARPER. Where? 

50

Ms. SHEARS. In Mineral County, WV. I think they do a great job 

and like he says, they have taken care of most of the problems that 

they had years ago. 

Senator CARPER. Are you aware of nonprofit agencies that have 

not done a great job? 

Ms. SHEARS. No, I am not. 

Senator CARPER. Are you aware of entities maybe other than 

nonprofit—— Ms. SHEARS. Excuse me. Except for the Aurora Foundation, 

which we all know about. 

Senator CARPER. Are you aware of, other than Aurora, other organizational pay reps who do not do a good job? 

Ms. SHEARS. I do not know of any but we only have one other 

in our area and that is the mental health agency that I know of. 

Senator CARPER. Mr. Wills, could you just explain to me how 
51

them to set this up for us. It is still in the process of being negotiated. 

Senator CARPER. Roughly how many people do you serve? 

Mr. WILLS. Ninety-four. 

Senator CARPER. At some point in time when interest rates go 

back up—hopefully they will not go up too much but at some point 

in time when they go back up I would urge you to figure out how 

to make sure that money is working for the folks that it belongs 

to. 

Mr. WILLS. Absolutely. 

Senator CARPER. Legislation has been introduced, I understand, 

Mr. Chairman, I guess in the last Congress and in this Congress, 

as well. 

The CHAIRMAN. And has passed the House. 

Senator CARPER. Is it Senator Bunning’s bill? Is it his bill in the 

Senate? Is he the chief author? 

The CHAIRMAN. Yes, it is. 

Senator CARPER. I do not know if either of you have any 

thoughts on the bill that has passed the House or the legislation 

that been introduced in the Senate by Senator Jim Bunning of 

Kentucky. If you do, take a moment and just share your thoughts 

with me, please. 

Mr. WILLS. I do not have any questions. 

Ms. SHEARS. I do not have any questions. 

Senator CARPER. You do not have any thoughts about the legislation? 

Ms. SHEARS. I believe it would improve the services. I believe it 

would give Social Security the authority to enforce payee representatives to stay within the guidelines and I believe it would give 

them a better—I believe they would have some better laws in effect 

that would help them and ultimately help the beneficiaries. I believe it is a very much needed bill. 

Senator CARPER. Mr. Wills, closing word? 

Mr. WILLS. From what I have learned here today, I think that 

some of the concerns that Senator Craig has regarding the potential felons being allowed to be payees, that is a huge loophole and 

I would hope that it could be closed. 

Senator CARPER. Any closing thoughts, Ms. Shears? 

Ms. SHEARS. I appreciate the opportunity to come and speak on 

behalf of the Aurora Foundation people. One thing I would like to 

call attention to is that not one penny of this money has been refunded to the clients. As I left town this morning to catch a train, 

I passed one of the ladies that was sleeping in a car that was in 

the film and she is still homeless. She was sleeping in a doorway. 

Senator CARPER. Thank you both. 

Mr. Chairman, thanks. 

The CHAIRMAN. Tom, thank you. 

Shirley, Jason, thank you very much for your testimony and your 

insight as to your practical and real experiences in relation to this 

Social Security program. We thank you. The committee will stand 

adjourned. 

[Whereupon, at 11:20 a.m., the committee was adjourned.] 

(53)

A P P E N D I X 

PREPARED STATEMENT OF SENATOR JOHN BREAUX

I would first like to thank Chairman Craig for holding this very important hearing on Social Security representative payee fraud. I would also like to take this opportunity to thank all of the witnesses who have come before us to testify today. 

Your testimony will be of great value as the Committee works to address some of 

the critical challenges that exist in ensuring that vulnerable Social Security beneficiaries receive the benefits they are due. 

Under current law, the Social Security Administration may designate ‘‘representative payees’’ to accept monthly benefits on behalf of Social Security or Supplemental 

Security Income recipients who are considered physically or mentally incapable of 

managing their own funds, or on behalf of children under the age of 18. These representative payees are entrusted with managing the funds of the most vulnerable 

of individuals. Sadly, sometimes, this trust is betrayed. It has come to light that 

some representative payees have been misusing, misdirecting and at times stealing 

beneficiary funds. This can no longer continue. This Committee along with others 

that I sit on have held hearings and grappled with this issue in the past. We need 

solutions now. Those individuals, who need their benefits and our protection the 

most, should have it. 

Thank you once again Mr. Chairman for holding this important hearing. I look 

forward to hearing from our witnesses and working with them to address these serious issues.

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