Social Security Administration: Management Oversight Needed to Ensure Accurate Treatment of State and Local Government Employees
Published: 2010-09-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In 2007, 73 percent of state and local government employees were covered by Social Security. Unlike the private sector where most employees are covered by Social Security, federal law generally permits each public employer to decide which employees to cover. The Social Security Administration (SSA) is responsible for facilitating Social Security coverage for these employers through agreements with states. SSA is also responsible for maintaining accurate earnings records, while IRS is responsible for ensuring Social Security taxes are paid. Because of the need to ensure Social Security coverage is administered accurately, GAO was asked to review (1) how SSA works with states to approve Social Security coverage and ensure accurate coverage of public employees, and (2) how IRS identifies incorrect Social Security taxes for public employees. GAO reviewed procedures of federal agencies and selected states; surveyed all state administrators; and reviewed IRS case files.
section_title: What GAO Found
paragraphs: Although SSA approves Social Security coverage on behalf of state and local government employers, it faces challenges in ensuring accurate reporting of Social Security earnings. SSA works with states to establish and amend Social Security coverage agreements, but public employers do not always know that SSA's approval is required. For example, a small fire district in one state reported Social Security wages for more than a decade without approved coverage to do so, not realizing a coverage agreement between SSA and the state was required. While state administrators are responsible for managing the approved coverage agreements for public employers, SSA's guidance does not specify how states should go about fulfilling this responsibility, leading to variation in the extent to which states meet their responsibility. SSA lacks basic data on which public employers have approved coverage and relies on public employers to comply with coverage agreements voluntarily. SSA officials told us that the agency does not use existing information, such as lessons learned from prior coverage errors, to assess the risks that these errors pose to the accuracy of public employer wage reporting. IRS conducts compliance checks and examinations of public employers; however, examining Social Security coverage for employees is challenging due to limited data and the difficulties of determining whether employees are covered. To obtain needed data, one IRS field office sent its examiners to the SSA regional office to make copies of Social Security coverage agreements. Some other IRS field offices do not have copies of all their respective agreements. IRS tracks the results of its examinations to identify the number of public employers that need tax adjustments; however, IRS does not track whether the tax adjustments relate to Social Security coverage agreement errors even though this information is available during examinations. SSA could benefit from such information so that it could help public employers identify and correct errors. As a result, IRS's and SSA's ability to fully understand problems related to Social Security coverage is limited.
section_title: What GAO Recommends
paragraphs: GAO recommends that SSA work with IRS, state administrators, and public employers to improve management oversight and monitoring of public employer reporting of Social Security wages and that SSA clarify its guidance on state administrator responsibilities. GAO also recommends that IRS track errors found through compliance efforts and share results with SSA to the extent permitted by law. SSA and IRS reviewed the report and agreed with the recommendations.

section_title: Letter
paragraphs: Before certain amendments to the Social Security Act were made in 1950,  public employees were not covered by Social Security. After 1950, public  employers increasingly provided Social Security coverage for their  employees, and by 2007, about 73 percent of public employees were  covered. Currently, state and local governments, in conjunction with the  Social Security Administration (SSA), generally decide whether or not to  provide Social Security coverage to their employees who are members of a  public retirement system. Every state has an agreement, called a section  218 agreement, with SSA that details which public employees are covered  by Social Security. According to SSA and state officials, these agreements  ensure that granting Social Security coverage complies with state and  federal law, since certain states have laws that prohibit Social Security  coverage for certain employees. Great variation exists between states and  local governments in terms of which positions are covered by Social  Security and which are not. For example, although in the same state,  police in one city may be covered, while police in another city may not be  covered. SSA is responsible for maintaining accurate records of Social  Security-covered wages, and relies on the state administrators and the  Internal Revenue Service (IRS) to help in this responsibility. IRS audits in  2007 found that potentially hundreds of school districts in the state of  Missouri had not accurately reported the coverage status of certain part- time teachers and other school staff, resulting in confusion over the Social  Security coverage status of these employees, and uncertainty for affected  employees.
Because of the need to ensure that Social Security coverage is  administered consistent with the requirements of the Social Security Act,  we reviewed SSA’s procedures for overseeing public employer wage  reporting. Specifically, this report addresses (1) how SSA works with  states to approve Social Security coverage and ensure accurate coverage  of public employees, and (2) how IRS identifies incorrect Social Security  taxes for public employees.
To answer these questions, we used a variety of methods to review the  procedures of SSA, states, and IRS. To address how SSA works with states  to approve Social Security coverage and ensure accurate coverage of  public employees, we reviewed relevant federal laws and regulations and  conducted interviews with SSA officials in headquarters and all 10 regional  offices. We also reviewed the Memorandum of Understanding between  SSA and IRS, as well as data from SSA, such as the percent of covered  state and local government employees. We administered a Web-based  survey and received responses from all state Social Security  administrators of the 50 states, Puerto Rico, and Virgin Islands between  January and February 2010; interviewed state officials in selected states  regarding coverage agreements; and reviewed relevant documents, such as  policies and procedures of state administrators. To address how IRS  identifies incorrect Social Security taxes for public employees, we  reviewed relevant federal laws and regulations, agency policies, and  documents on Social Security and Medicare taxes for public employers.  We also conducted interviews with IRS officials in the Federal, State and  Local Governments office (FSLG) within the Tax Exempt and Government  Entities Division. We also obtained IRS data on examinations and  compliance checks completed between fiscal years 2007 and 2009. Finally,  we reviewed a judgmental sample of FSLG audit files for 10 examinations  and 20 compliance checks completed in fiscal year 2009. We did not  review state laws or verify information pertaining to state laws that were  given to us in the course of our work.
We conducted this performance audit from July 2009 through September  2010 in accordance with generally accepted government auditing  standards. Those standards require that we plan and perform the audit to  obtain sufficient, appropriate evidence to provide a reasonable basis for  our findings and conclusions based on our audit objectives. We believe  that the evidence obtained provides a reasonable basis for our findings  and conclusions based on our audit objectives. See appendix I for  additional information about our methodology.
subsections: section_title: Background
paragraphs: When the Social Security Act was passed in 1935, state and local  government employees were excluded from Social Security. As a result,  some state and local government workers who were not covered by a  retirement system were left without benefits when they retired. To help  these employees, in 1950, Congress added section 218 to the Social  Security Act allowing states to enter into voluntary agreements to provide  Social Security coverage to certain state and local government  employees. Section 218 authorizes the 50 states, Puerto Rico, and the  Virgin Islands to enter into these agreements. Although under section 21 of the Act, the District of Columbia, Guam, the Commonwealth of the  Northern Mariana Islands, and American Samoa are excluded from the  definition of “state,” employees within these territories can have Socia l  Security coverage under other provisions of the Act. Within a year of this  amendment, about 30 states had executed section 218 agreements with t Social Security Administration.
Subsequently, additional amendments to the Social Security Act changed  Social Security and Medicare coverage for state and local government  workers. Starting in 1991, the Social Security Act required all state and  local government employees to be covered by Social Security if they were  not covered by a qualifying state or local retirement system. Table 1  describes some of these amendments relating to the coverage of state and  local government workers.
More recently, Social Security has projected future financial shortfalls in  its programs. According to Social Security’s Board of Trustees, the  program’s annual surpluses of tax income over expenditures are expected  to turn to cash flow deficits this year before turning positive again in  2012. In addition, all of the accumulated Treasury obligations held by the  trust funds are expected to be exhausted by 2037. Once exhausted, annual  program revenue will be sufficient to pay only about 78 percent of  scheduled benefits in 2037 (and gradually declining to 75 percent by 2084),  according to the Social Security trustees’ 2010 intermediate assumptions.
Many options have been proposed to help assure the financial stability of  Social Security, among them requiring all newly hired public employees to  participate in the program. Although this approach could improve Social  Security’s finances at least temporarily and would simplify Social Security  as it pertains to public employees, we have previously reported that such a  change could also result in increased costs for the affected governments  and their employees.
subsections: section_title: Social Security Coverage Agreements with States
paragraphs: The extent to which public employees are covered by Social Security  varies greatly from state to state. For example, according to SSA data, in  Vermont, 98 percent of public employees are covered, but in Ohio, only  about 3 percent are covered. Figure 1 shows the variation in Social  Security coverage of public employees among states, and appendix II  provides the amount of covered and noncovered earnings by employees in  each state. Within states, there is also variation in Social Security coverage  among public employees working for the same employer. Some public  employers provide a retirement system for some of their employees who  meet certain criteria. If employees do not meet these criteria and are  ineligible for the retirement system such as a pension system, they are  covered by Social Security. In other instances, public employers may  choose to provide only Medicare coverage rather than both Social Security  and Medicare.
All states have a section 218 agreement with the SSA that allows them to  extend Social Security and/or Medicare coverage to designated public  employees. With an agreement in force, SSA and the state can coordinate  and ensure that granting coverage to public employees complies with  applicable state and federal laws, since according to SSA and state  officials, state laws can restrict certain employees who are members of  other retirement plans from receiving Social Security coverage. SSA  requires states to designate a state employee as a state Social Security  administrator and establishes the basic roles and responsibilities for these  administrators. For example, the guidance outlines that state  administrators should serve as a bridge between state and local public  employers and federal agencies, as well as administer and maintain the  Social Security coverage agreement.
If public employers within the states wish to extend Social Security  coverage to their employees, their state administrator files a draft  amendment to the coverage agreement—known as a modification—with  their SSA regional office. After the state process is completed and the SSA  Regional Office approves the modification, the public employer should  begin withholding Social Security and Medicare taxes for the employee  positions that are covered and send information on earnings to SSA. SSA is  required by law to maintain accurate earnings records for all workers. SSA  uses an employee’s earnings record to calculate the amount of Social  Security benefits—retirement, disability, or survivor benefits—for an  individual or their dependents. Covered earnings, which are posted to the  earning record, are subject to Social Security and Medicare taxes paid by  employers and employees. IRS is responsible for assuring state and local  government employers are properly paying Social Security and Medicare  taxes (also known as FICA taxes). Figure 2 shows the major  responsibilities for these government partners.
section_title: SSA Has a Process to Approve Coverage, but Faces Challenges in Ensuring Accurate Coverage
subsections: section_title: SSA Works with States to Approve Social Security Coverage, but It Is Unclear If Public Employers Always Know When to Seek Approval
paragraphs: SSA has an established process for working with states to approve  coverage. This approval process is intended to ensure that public  employers follow applicable state and federal laws regarding Social  Security coverage, as some state laws exclude certain types of employees  from receiving Social Security coverage, according to SSA and state  officials. For example, current New Hampshire law prohibits Social  Security coverage for police and fire fighters, who belong to a distinct,  more generous pension plan than other public employees in New  Hampshire, according to state officials. To obtain Social Security  coverage, public employers first contact their state Social Security  administrator who files an amendment—known as a modification—to the  state’s coverage agreement with SSA. Because all states already have an  approved agreement with SSA, any changes to include additional public  employers are modifications to the agreement. If the coverage is proposed  for employees who are members of a retirement system, then a favorable  vote of eligible employees is required. The SSA regional office reviews the  modification to ensure that it complies with all relevant laws and  procedures. If it is determined these public employees are authorized for  coverage, the regional office approves the modification and transmits it  back to the state. After coverage has been approved, the public employer  begins withholding Social Security and Medicare taxes for the employees  in covered positions. Under certain circumstances, SSA may approve  retroactive coverage, which is effective prior to the date that SSA approves  the modification. Figure 3 shows the modification approval process.
States may file modifications to their coverage agreement on behalf of  public employers under a variety of circumstances. For example, SSA  guidance specifies that a state is to amend its agreement to (1) extend  coverage to new groups of employees, (2) identify new public employers  joining a public retirement system, (3) correct errors in coverage, (4)  implement changes in federal or state law, and (5) in very limited  circumstances, make certain exclusions to previously covered services or  positions. According to our survey of state Social Security  administrators, we found that administrators in 36 states had approved a modification in the last 5 years. Of these 36 states, the most commonly  cited reasons for approving a modification were to include additional  coverage groups (23 states), followed by correcting coverage errors (20  states), and notifying SSA of new public employers joining a retirement  system that SSA has already approved for coverage on a statewide basis  (19 states).
States do not always notify SSA of changes to covered public employ which can lead to errors in the accuracy of SSA records. Under SSA  guidance, state administrators are to provide notice and evidence to SSA  y  when a public employer legally ceases to exist, or dissolves. Our surve of state administrators showed that SSA does not consistently rece information from states about dissolutions. Only 9 states reported  collecting information on all dissolutions among their public employers,  while 16 states reported collecting little or none of this information. For  example, in one state we visited, over 100 school employees were granted  retroactive coverage a decade after their school district had been formed.
The new school district was formed by consolidating two school districts that had dissolved, but an amendment to the state’s coverage agreement  had not been approved at the time of the consolidation to reflect the change. Also, when existing employers legally consolidate, anoth modification may be necessary to provide coverage for the new  consolidated employer. While 11 states responded that they collect  er  information on all consolidations that occur among their public  employers, 14 states responded that they collect little to none of this  information. Another 7 states reported that they did not know how much  information they collect on dissolutions or consolidations. If states do no collect information on dissolutions or consolidations, they do not know  about these changes to public employers and are unable to work with SSA  to approve coverage and prevent errors.
section_title: States Vary in Their to Implement SSA Guidelines
paragraphs: All states have a state Social Security administrator who is respons managing Social Security coverage for both state and local public  employers, but state administrators vary in their efforts to implement S guidelines. SSA has established the basic roles and responsibilitie s for  these administrators by providing guidance on administering the  provisions of the state Social Security agreement (see app. IV). However SSA’s guidance is broad and does not specify how a state administrator  should fulfill these responsibilities. As a result, state administrators vary  in  the extent to which they meet their responsibilities. For example, whi SSA’s guidance notes that state administrators are to administer and  maintain the coverage agreement, the guidance does not provide detail on the types of activities that are necessary for meeting this responsibility—  the types of activities that are necessary for meeting this responsibility—  such as the frequency with which modifications should be reviewed t such as the frequency with which modifications should be reviewed t determine whether changes to public employers have occurred. For o  determine whether changes to public employers have occurred. For o  example, as noted above, both New York and Missouri were unclear on  example, as noted above, both New York and Missouri were unclear on  their administrative responsibility, resulting in both states bein their administrative responsibility, resulting in both states bein coverage errors. Additionally, SSA’s guidance notes that state g at risk for  coverage errors. Additionally, SSA’s guidance notes that state g at risk for  administrators should advise public employers on Social Security,  administrators should advise public employers on Social Security,  Medicare, and tax withholding issues; and according to our survey, only 14  Medicare, and tax withholding issues; and according to our survey, only 14  states reported doing this to a very great or great extent. Likewise, onl states reported doing this to a very great or great extent. Likewise, onl y 18  y 18  states reported following SSA’s guidance on providing information to  states reported following SSA’s guidance on providing information to  public employers on policies, procedures, and standards to a very great or  public employers on policies, procedures, and standards to a very great or  great extent (see fig. 4).  great extent (see fig. 4).
In the absence of more detailed SSA or other guidance on how states  should manage Social Security coverage for state and local public  employers, the National Conference of State Social Security  Administrators (NCSSSA) in 2003 developed a list of recommended  practices for use by state administrators. These recommended practices  help state administrators to carry out SSA’s guidance. For example, one  NCSSSA practice recommends that state administrators maintain an  electronic database so that they can meet the SSA guidance on  maintaining physical custody of Social Security coverage agreements.  While 37 states reported maintaining an electronic database of state and  local public employers with Social Security coverage, we found that only  28 of these states’ databases include more detailed coverage information  such as the date of each employer’s modifications (see table 2). Moreover,  14 states could not provide the total number of public employers with  approved coverage for their employees in their state. We also found  differences in the extent to which states review these databases to check  for accuracy and completeness. Of the 37 states with an electronic  database, 5 states reported not updating their information and 1 state did  not know how often they updated their database information. Further,  only 7 states reported taking all of the following steps to ensure the  information was reliable: conducting routine monitoring of the data, using  edit checks to identify out-of-range entries, and verifying the data for  accuracy.
SSA’s guidance also sets forth that state administrators are to provide  certain information or advice to public employers, but falls short in  denoting specific ways such outreach activities can be carried out, such as  the format for distributing information and time frames for carrying out  such activities. For example, one state administrator told us that he  regularly attended local public employer association conferences so that  he could identify new public employers and provide advice to them.  However, officials in another state told us that they did not have any  formal outreach practices and updated their information on new public  employers when they read about them in the newspaper. As a result, the  state administrator could not ensure that its list of public employers was  current. While SSA’s guidance is limited, NCSSSA has developed  recommended practices for conducting outreach efforts to public  employers, such as presenting at local association meetings, providing  information via a Web site or newsletters, or pursuing other means of  outreach. Such efforts can help states educate and respond to questions  about coverage agreements. According to our survey, nine states reported  regularly (i.e., at least annually) distributing a newsletter or providing  training, while just over one-quarter of states contact public employers  included in coverage agreements to update their information (see fig. 5). In  contrast, 21 states reported that they do not conduct any of these outreach  activities. Ten of these states have nearly universal Social Security  coverage for their public employees and four states had less than half of  their public employees covered by Social Security.
The variation in how states implement the activities outlined in SSA  guidance can also be explained in part by the training, experience, and  staffing of state administrators. Some state administrators reported they  were initially unfamiliar with coverage agreements and noted there was  little or no transfer of knowledge to help them learn about coverage  issues. Twenty-seven administrators reported receiving little or no training  from their predecessor. Of those administrators who had not received  training, 93 percent had never worked on Social Security coverage issues  at all prior to becoming the administrator. Administrators cited several  reasons for the lack of training or knowledge-sharing by predecessors,  including classification of these positions (e.g., political appointees),  turnover among staff, and lack of funding.
To address this training gap, NCSSSA developed a training module which  they recently began providing to state administrators. As of July 2010, 11  state administrators have received this training, according to NCSSSA  officials we interviewed. Additionally, in our survey, the availability of  staff with expertise in coverage agreements was identified as a great or  very great challenge by 19 states. Differences in the amount of time  dedicated to the position of state administrator also varied among states.  Most state administrators view the role as an ancillary responsibility, and  not as their primary duty. Over half of those working as state  administrators reported spending 10 percent or less of their time on state  administrator responsibilities.
section_title: SSA Has Limited Management Oversight of Public Employee Wage Reporting
paragraphs: SSA relies primarily on public employers to correctly interpret their  coverage and accurately report covered wages of public employees,  according to SSA officials. However, some public employers do not  understand that a modification to the state’s agreement with SSA is  required before amending coverage under section 218 and reporting Social  Security wages. For example, a small fire district in one state reported  Social Security wages for more than a decade without approved coverage  to do so, not realizing coverage under an agreement between SSA and the  state was required. Several SSA officials told us that they also rely on IRS  to review the compliance of public employers.
The Social Security Act requires SSA to ensure that all workers have  accurate earnings records. SSA requires employers—public and private— to use SSA’s process of wage reporting (see fig. 6) to report Social Security  covered wages. In 2007, private and public employers reported nearly $5  trillion in covered wages, with public employers representing $528 billion  of that amount. (See app. II on covered and estimated noncovered wages  for state and local government employment in 2007.) The Form W-2 is the  annual report of a worker’s wages, including wages covered for Social  Security and for Medicare. SSA posts the wages to the employee’s earnings  record on its Master Earnings File and provides IRS with the W-2  information so IRS can monitor accurate payment of Social Security taxes.  SSA and IRS annually match the amounts on Form W-2 with wages that  employers report to IRS on a quarterly basis. When the amounts match,  no further steps are taken. When the amounts do not match, SSA and IRS  have processes to reconcile the amounts, including letters to contact the  employer.
SSA does not have a process to ensure that public employers only report  wages for covered employees and that such wages are associated with  valid coverage under the state’s coverage agreement. As long as the wage  amounts on the Forms W-2 and 941 match, SSA does not follow up to  ensure that reported wages actually reflect public employees who are  covered by their state’s agreement. SSA officials told us the agency does  not compare the reported wages with coverage modifications applicable to  the employer. While wage reports identify employees by their name and  Social Security number, procedures and data do not exist to verify that  employees are in positions that are covered by their state’s agreement.  SSA regional officials told us they answer questions by public employers  about whether employees are covered based on their interpretation of  coverage agreements. However, SSA officials are not able to check if the  public employers correctly report covered earnings.
While SSA does not currently monitor the accuracy of public employee  coverage, prior to 1987, SSA conducted regular oversight activities to  ensure more accurate reporting. Prior to 1987, state administrators  gathered Social Security payments in lieu of FICA taxes from public  employers with approved coverage. States were therefore accountable for  payments from public employers and employees in their state. SSA was  responsible for ensuring that state and local government employers made  the correct payments for the Social Security Trust Funds. Given its  responsibility, SSA conducted compliance reviews and collected data on  public employers, such as lists of which public employers were part of the  coverage agreement. In 1987, a legislative change took effect requiring the  IRS to collect Social Security taxes from public employers and employees  directly. As a result, public employers were required to withhold Social  Security taxes from their employees and pay taxes to the Treasury using  the same procedures as private sector employers. SSA and the states  reduced staffing, management attention, and oversight of coverage  agreements. SSA also reduced its oversight of public employers, including  discontinuing compliance reviews and ending certain data collection. In  1996, SSA’s Inspector General found that many public employers were at  risk of not complying with their states’ coverage agreements, partly due to  SSA’s reduced focus on administration after this statutory change. The  Inspector General recommended that SSA pursue regular compliance  reviews; develop a Memorandum of Understanding (MOU) with IRS; and  study the possibility of universal coverage of public employers to  eliminate the inherent complexity of their coverage. In 2002, SSA and IRS  signed an MOU regarding the compliance of state and local government  employers that specified each agency’s role, including IRS’s responsibility  to conduct compliance reviews of public employers. Among other things,  the MOU established a joint SSA-IRS committee to share information on  policies, procedures, and compliance issues.
SSA continues to lack basic data on the public employers for which it has  approved coverage, preventing the agency from monitoring potential  errors. According to Standards for Internal Control in the Federal  Government, data are important for an agency to manage its operations  and measure its activities. However, SSA does not track the number of  public employers that are under a state’s approved coverage agreement or  various activities that could expose public employers to greater risk of  committing coverage errors. From data given to us by all 10 SSA regions,  we estimated that since 1951 when coverage agreements began, SSA has  approved as many as 28,798 modifications extending Social Security  coverage for public employers. (See app. III for information on the number  and year of the last modification approved by SSA for each state as of  January 1, 2010.) However, 6 of 10 SSA regional offices no longer collect  any information on which public employers have approved coverage, and  SSA officials told us they have not required regional offices to update their  data, partly due to resource constraints. SSA has also not provided the  regional offices with guidelines for what should be collected and how. As a  result, six regions currently collect no data at all, while the four regions  still collecting data varied in the data formats and level of detail of the  information collected. For example, based on data we reviewed from  regional officials, one region had a database with details on public  employers and their coverage, while another region had a list with little  information other than the names of public employers and the date that  SSA approved coverage.
Without comprehensive and uniform data, SSA may miss opportunities to  prevent or more quickly correct errors related to public employee wages.  For example, if all regions tracked information such as recent approved  modifications, SSA could better identify which states had less activity, and  could follow up to ensure that those states and public employers were  aware of the circumstances that would warrant filing a modification. In  addition, SSA is unable to fully support IRS in its efforts to ensure  compliance. For example, SSA does not validate IRS’s database of public  employers—including covered employers—which may not always contain  correct data. Moreover, the lack of current or consistently tracked data  can limit the efficiency with which regions research or answer questions  about a particular employer. For example, one SSA regional office official  said that in order to identify a modification with information relevant to a  particular employer, it takes up to an hour to manually search paper files  for any modification made after 1987.
Officials in nearly all 10 SSA regions told us their oversight efforts to  ensure accurate reporting of public employers generally involve reacting  to errors or questions brought to their attention. When a concern is  identified, SSA regional officials respond to address the coverage of a  particular employer based on specific facts and circumstances. For  example, IRS conducted an audit of a public port and worked with SSA to  determine whether the employer had covered employees, according to  SSA officials and documents. SSA determined that the employer’s  predecessor had a modification for coverage, but the new employer did  not have coverage for its full-time employees. SSA assisted the state and  the employer to file a modification that would retroactively grant coverage  to these employees. Had SSA actively worked with the state and used data  to observe trends with modifications, the state and SSA may have  prevented this error or caught it sooner.
SSA has also been asked to resolve errors involving public employers that  are subject to a modification, but these employers and their employees  have not paid Social Security taxes. If SSA was notified of the error and  evidence of employees’ earnings was produced by employers or  employees, SSA officials told us that the agency would correct their  earnings records. IRS is authorized to collect back-taxes subject to its  statute of limitations, which is generally 3 years. Unfortunately, some of  the coverage errors in Missouri school districts involved public employers  and employees who stopped paying Social Security taxes in the 1980s.  Thus, the U.S. Treasury and Social Security Trust Funds effectively bear  the cost of any taxes employers or employees did not pay beyond the 3- year statute of limitations, according to SSA and IRS officials. Similarly, if  an error goes undetected or uncorrected, then public employees may not  have Social Security earnings posted to their record. This could result in  employees who should be covered by Social Security not becoming  eligible or not receiving the appropriate amount of Social Security benefits  in the event of retirement, disability, or survivorship.
SSA officials told us that the agency does not use existing information to  assess the extent to which coverage errors are occurring and the risk that  these errors pose to the accuracy of public employer wage reporting.  According to Standards for Internal Control in the Federal Government,  risk assessment is the identification and analysis of relevant risks  associated with achieving the agency’s objectives. SSA has many internal  and external sources of information it could use to assess the risks of  inaccurate coverage of public employees. However, SSA headquarter  officials told us that SSA may not be aware of all errors or related factors  that regional offices address, unless they are elevated to headquarters for  assistance. SSA officials in headquarters and regional offices generally told  us that SSA in recent years has not routinely shared experiences across  regions, including lessons learned from coverage errors and factors that  contribute to them. For example, one SSA regional office helped resolve a  coverage problem that involved a consolidation of a state’s capital city and  the county in which it was located. Because the public safety officers of  the city were not covered while the public safety officers of the county  were covered, the consolidation had the potential to change the Social  Security coverage of some public safety positions. Under current  budgetary pressures, some states are considering or pursuing similar  consolidations to reduce costs; however, SSA headquarters did not share  lessons learned from this example with other regions so that they could be  better prepared to address similar issues in the future. SSA headquarters  also does not routinely review internal legal opinions—known as coverage  determinations—or modifications that SSA regional offices have approved  to correct coverage errors. SSA officials told us that they have not  analyzed such information in a systematic approach to identify any  patterns or common issues. Also, SSA officials in 8 of 10 regions told us  that IRS does not typically share the results of its enforcement activities,  and IRS officials agreed. As a result, SSA is not always aware of the  coverage errors that IRS finds during examinations and compliance  checks.
SSA hosted a conference in April 2010 with IRS and state administrators to  explore options for improving how coverage agreements are administered.  Based on this conference, SSA identified possible proposals to reduce the  complexity of public employees’ coverage, including the potential for  universal coverage. It also formed 11 committees consisting of SSA and  state or IRS officials. Each week, at least one committee is supposed to  meet, and quarterly conference calls are planned for all participants to  discuss their progress starting in September 2010. According to SSA, two  committees are of the highest priority: the committee to improve training  of federal, state, and local governments, as well as the committee on  policies and procedures. A list of the 11 committees and their objectives is  in appendix V.
section_title: IRS’s Compliance Efforts Are Limited by a Lack of Social Security Coverage Information
subsections: section_title: IRS Is Responsible For Ensuring Public Employers Pay Social Security Taxes but Determining Coverage Is Challenging
paragraphs: Since 1987, IRS has been the primary agency responsible for ensuring that  public employers are accurately paying Social Security and Medicare  taxes, and its level of enforcement has increased over the years. According  to IRS officials, IRS performed limited enforcement work during the first  10 years after they became responsible for receiving public employer  Social Security taxes. In 1997, IRS started a state and local government  compliance initiative to provide outreach to public employers. In fiscal  year 2000, IRS created the Federal, State and Local Governments office  (FSLG) to facilitate more accurate reporting and collection of Social  Security and Medicare taxes by public employers, among other activities.  Initially, FSLG allocated most of its time to educational activities, but in  fiscal year 2004 began to focus more on enforcement activities.
IRS’s enforcement program consists of compliance checks and  examinations. IRS reviews selected employers each year, based partly on  its workload and staff availability. A compliance check is a method of  reaching out to public employers, and is intended to be educational.  Compliance checks review public employer tax returns and are typically  less detailed than an examination. Generally, compliance checks are  performed on smaller public employers, partly to allocate IRS  enforcement resources. By conducting compliance checks on smaller  employers, IRS can review and educate a greater number of public  employers, while still allocating staff time and resources to conduct more  time-consuming examinations on larger, more complex public employers.  For compliance checks, IRS completes a checklist of selected employment  tax areas. Our review of the checklist found that it includes four questions  about Social Security coverage agreements: (1) Does the taxpayer have an  agreement? (2) Does the taxpayer have a copy of the agreement? (3) What  are the number, date, and description of the modification to the  agreement? (4) What categories of workers are excluded from Social  Security coverage? If issues are found during the compliance check, IRS  provides the employer with a discrepancy letter identifying problems to be  resolved. We reviewed a nongeneralizable sample of 20 compliance checks  completed in fiscal year 2009 that IRS identified as having issues related to  Social Security coverage agreements. In 11 of these cases, the public  employer was not covered under the state’s Social Security coverage  agreement. In 6 of the other cases in which the state or local government  employer was actually covered under the state’s coverage agreement, IRS  found that the employer did not have a copy of its modification and in one  of these cases, the employer did not know one was in effect. In another  case, a school district that was covered under its state agreement  dissolved, and then combined with another school district that also was  subject to a modification. The school district being reviewed was not  certain if the coverage agreement was still in effect and planned to contact  the state Social Security administrator to determine if a new modification  was necessary.
IRS also has the authority to conduct examinations of public employers’  records to determine the correct tax liability. Unlike compliance checks,  examinations are in-depth, formal audits that may result in a tax  assessment. Examinations review many areas, including proper Social  Security withholding, fringe benefits, and public retirement systems. For  each examination, the IRS examiner is supposed to obtain information  about the applicable Social Security coverage agreement and determine  the employees that are covered. In making its coverage determination, IRS  examiners have to review employer records and may informally contact  the state administrators and SSA. Figure 7 shows the basic procedures IRS  uses to determine if public employees are covered by Social Security or  Medicare. Generally, examinations are performed on larger public  employers, and took an average of almost 9 months in fiscal year 2009 to  complete. If errors are found, IRS can either make a tax assessment for the  amount owed by the employer or, among other things, refund an  overpayment. Generally, IRS does not provide information about its  enforcement activities to SSA or state administrators. IRS is subject to  statutory provisions that generally prevent it from disclosing taxpayer  information unless there is an exception authorizing disclosure in the  law. One such exception is for purposes of administering certain portions  of the Social Security Act, in which case the information can be disclosed  to SSA upon a written request. The MOU between IRS and SSA states  that it serves as such a request, but IRS still does not generally tell SSA  about its examinations and compliance checks because, according to IRS  officials, many of its examiners are not aware of the MOU. According to  IRS officials, state administrators do not have an exception to the  disclosure requirements so the agency is prevented from providing  information to them.
section_title: IRS Has Limited Information about Public Employers’ Social Security Coverage but Is Working to Obtain Additional Information
paragraphs: IRS receives limited information about public employers’ Social Security  coverage. Employers are generally required to submit quarterly tax returns  to IRS providing information on wages and Social Security and Medicare  taxes paid. According to an IRS official, IRS started to receive copies of  coverage modifications from SSA around fiscal year 2000, but IRS  generally does not distribute copies of the modifications to all field offices.  To obtain a complete set of modifications, IRS officials in one field office  told us they went to the SSA regional office and duplicated them. Although  some IRS offices lack a complete set of modifications, the agency  maintains a database of public employers and over half of these employers  are designated as being covered under a Social Security coverage  agreement.
To increase its knowledge about state and local government employers’  Social Security coverage, in 2009, IRS developed an assessment document  designed to identify states with potential coverage problems. The  assessment document is filled out by IRS officials and the state  administrator and is intended to capture general information such as the  name of the state administrator and staff, and the applicable SSA and IRS  officials responsible for that state. The assessment also requests the  number of modifications and if the state maintains a list of employers  covered under its coverage agreement. Ultimately, IRS plans to use the  information obtained to identify states needing outreach and education.  By October 2009, IRS had developed a draft document and later obtained  and incorporated input from SSA and NCSSSA officials. IRS pilot tested it  in January 2010 and, according to an IRS official, started using the  document in all states in July 2010. IRS officials noted that they intend to  use the document as the basis for continued communication, outreach,  and enforcement.
In addition, from 2008 to 2010, an advisory committee to IRS developed a  detailed self-evaluation document for public employers to assess their own  compliance. The self-evaluation document expands on the IRS checklist  used in compliance checks to include understandable information on  employment tax requirements, including Social Security and Medicare  taxes. IRS plans to refine and post the document on its Web site by the end  of 2010 in an attempt to enhance voluntary compliance by public  employers.
section_title: IRS Is Evaluating Its Case Selection Process and Results of Its Compliance Checks and Examinations
paragraphs: In 2006, the Treasury Inspector General for Tax Administration (TIGTA)  issued a report that reviewed IRS’s FSLG workload selection process and  identified issues related to tracking the effectiveness of the indicators used  to select cases for review and to analyzing the results of compliance  checks. IRS utilizes 14 indicators to select cases for review from over  103,000 state and local government employers. One indicator is used to  identify issues related to Social Security coverage by computing the ratio  of Social Security wages to total wages paid. Under this computation, a  lower ratio of Social Security wages to total wages increases the chances  that an employer is selected for review. However, a low ratio may not  always indicate noncompliance with the state’s Social Security coverage  agreement. For example, a Social Security coverage agreement may not  include some employees and would result in a lower ratio of Social  Security wages to total wages paid. TIGTA found that IRS was not  systematically analyzing the effectiveness of its selection process. The  TIGTA report said that, with this information, IRS could identify more  productive indicators and provide baseline measures of the levels of  noncompliance identified. IRS officials told us that they are currently  conducting a special analysis of the indicators used for its examinations  and compliance checks conducted in 2006, 2007, and 2008, and hope to  complete this analysis by 2011.
In 2006, TIGTA also found that IRS was not analyzing the results of  completed compliance checks to identify common issues found during  reviews, and our recent work found that IRS still does not routinely  conduct such analysis. For compliance checks, IRS tracks the number of  employers that were issued a discrepancy letter, but not the number that  had issues related to Social Security coverage. In fiscal years 2007 to 2009,  IRS issued discrepancy letters to over 79 percent of the public employers  that had a compliance check. However, IRS does not know what percent  of the employers did not comply with their state’s Social Security coverage  agreement. In 2009, IRS performed a special analysis of its 2008  compliance checks to determine the issues found during the year. IRS  found that 4.1 percent of all of its closed compliance checks had Social  Security coverage issues. In 2006, TIGTA concluded that by analyzing the  results of its compliance checks, IRS could identify common issues and  focus its work for future compliance checks. IRS is currently conducting a  special analysis of the results of its compliance checks, as well as its  examinations conducted in 2006, 2007, and 2008. It plans to use this  information and information from other special projects to identify the  most common areas of noncompliance. IRS will then provide focused  outreach to state and local government employers to address these areas.  This outreach could include publishing articles in the IRS newsletter or  other industry journals. IRS officials told us that they anticipate  completing this analysis by 2011.
Table 3 provides information on the number of compliance checks  completed and discrepancy letters issued in fiscal years 2007 to 2009.
For examinations, FSLG tracks the number of cases that resulted in an  adjustment to the employers’ taxes, but does not know if such tax  adjustments are due to errors with Social Security coverage agreements.  FSLG officials told us they do not yet know the prevalence of coverage  problems and have not done enough audits to fully understand the extent  of the problems. We requested the closed examinations for fiscal year 2009  that had issues related to Social Security coverage agreements. FSLG  officials stated that due to constraints in their information system, they  could not identify all of these cases and, at best, could provide a list of  examinations that might indicate Social Security coverage agreement  issues using the amount of wage adjustments. We selected and reviewed a  sample of 10 closed examinations provided by IRS that had large wage  changes. In 5 of these examinations, the public employer did not have an  error related to its coverage agreement. In 3 of the other 5 cases in which  errors were found with coverage agreements, the public employer  misclassified the employees for whom it was not paying Social Security  taxes. For example, some Social Security coverage agreements exclude  certain categories of employees, such as student workers. In one of these  cases, IRS conducted an examination of a public employer with student  workers and determined that some of the employees classified as students  were not actually taking classes at the time. As a result, IRS found that the  employer was responsible for paying Social Security and Medicare taxes  for these employees. The following table provides information on the  number of completed examinations and the number of cases with errors in  fiscal years 2007 through 2009.
In fiscal years 2007 to 2009, over 89 percent of employers examined had  tax adjustments, but the reasons for those tax adjustments are not  tracked. In 2009, IRS issued a report on community colleges that provides  an indication of how well some state and local government employers  were following their state’s coverage agreements. The primary objective of  the report was to measure the compliance level of community colleges and  identify specific issues of noncompliance. IRS selected a random sample  of 88 community colleges for examination. Although the community  college special project results cannot be applied to all public employers,  IRS found that 10 percent of the 88 employers reviewed incorrectly  excluded workers who should have been covered by their state’s Social  Security coverage agreements.
section_title: Conclusions
paragraphs: SSA and IRS do not currently have the information needed and procedures  in place to effectively and efficiently provide oversight of Social Security  coverage for public employees. When IRS began collecting and overseeing  the accuracy of the taxes collected in 1987, SSA ceased key monitoring  activities that could help ensure states and public employers are following  the states’ agreements for Social Security coverage. Ensuring the accuracy  of the Social Security records for public employees is still a requirement  for SSA, and should be a priority for the managers of SSA and IRS. At  present, SSA and IRS managers do not know the extent to which wages  are reported accurately or to which Social Security taxes are paid in  accordance with program rules. States can also play a vital role in the  oversight structure of Social Security coverage for public employees, but  lack clear guidelines with specific responsibilities to ensure state  participation. Absent additional management attention and a system to  monitor the accuracy of public employer wage reporting, Social Security  benefits and tax payments may be inaccurately reported. Without a  coordinated monitoring process between SSA and IRS to make sure that  public employers are complying with state coverage agreements,  opportunities to identify and correct errors will be lost. Given the  projected fiscal challenges of the Social Security program in the coming  decades, every attempt should be made to assure coverage is correctly  applied so that employers and employees are reporting earnings and  paying taxes when required to do so.
section_title: Recommendations for Executive Action
paragraphs: To improve SSA’s management oversight of retirement benefits for public  employees, we recommend that the Commissioner of Social Security, in  consultation with IRS, state administrators, and public employers, develop  procedures for monitoring the accuracy of Social Security earnings  records.  This could include (1) improving data collected on public  employers, (2) identifying risk factors using existing SSA information and  IRS audit findings, and (3) targeting public employers with those risk  factors for follow-up reviews on an ongoing basis.
To improve the states’ administration of public employer wage reporting,  we recommend that the Commissioner of Social Security, in consultation  with the National Conference of State Social Security Administrators,  modify SSA’s policy guidance to clarify state responsibilities governing  their oversight of public employers and set clear expectations for the steps  state administrators should take in implementing these responsibilities.
To improve the process for identifying and correcting errors, we  recommend that the Commissioner of Internal Revenue track errors found  through its compliance efforts on Social Security and Medicare taxes and  share results with SSA, to the extent permitted by federal law.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Social Security Administration  and the Internal Revenue Service. In its written response, reproduced in  appendix VI, SSA stated that our report fairly represented the key players  involved in the administration of Social Security coverage agreements and  provided a balanced representation of the issues. SSA generally agreed  with all of our recommendations, but suggested that we reword our first  recommendation to clarify the duties of the respective agencies. SSA also  stated that IRS should collect data on employees covered under Section  218 agreements. We changed the language in the recommendation to  clarify that SSA should monitor the accuracy of Social Security earnings  records and highlighted that existing Social Security information as well as  IRS audit findings may be useful in developing risk factors. While we  believe that any monitoring effort should be coordinated with IRS and  other stakeholders, our recommendation is intended for SSA to take the  leadership role in such an effort. As we note in the conclusion above, SSA  holds the primary responsibility of ensuring accurate Social Security  records for public employees. SSA also provided technical comments that  were incorporated into this report as appropriate.
In its written response, reproduced in appendix VII, IRS stated that our  report made an important contribution to the concept of ensuring  compliance with coverage agreements. IRS agreed with our  recommendation that it should track errors found through its compliance  efforts on Social Security and Medicare taxes and stated that it has begun  identifying and tracking such errors. IRS also stated that it will ensure that  information applicable to these errors is shared with SSA to the extent  allowable by the Internal Revenue Code.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to relevant  congressional committees. In addition, this report will be available at no  charge on GAO’s Web site at http://www.gao.gov.
If you or your staffs have any questions about this report, please contact  me at (202) 512-7215 or bertonid@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff members who made key contributions to  this report are listed in appendix VIII.
section_title: Appendix I: Scope and Methodology
subsections: section_title: SSA Process for Ensuring Accurate Coverage
paragraphs: To obtain information on how the Social Security Administration (SSA)  ensures accurate coverage of public employees, we interviewed SSA  officials in Headquarters and in all 10 Regional Offices. We asked officials  about the roles and interactions of SSA, state administrators, public  employers, and the Internal Revenue Service (IRS). We asked about SSA’s  data, educational outreach, and oversight, as well as how coverage errors  are detected and corrected. We reviewed relevant federal laws and  regulations. We also reviewed documentation from SSA, such as policies  and procedures, training, Inspector General reports, the Memorandum of  Understanding (MOU) between SSA and IRS, and meeting minutes since  fiscal year 2004 of the joint SSA-IRS committee. To understand the  coverage agreement process, we reviewed selected original agreements,  modifications (i.e., amendments) that provide coverage to public  employees, internal legal opinions known as coverage determinations, and  documents on specific coverage errors such as the report of the Federal  Section 218 Task Force for Missouri School Districts.
To provide background information on the number of covered state and  local government employees and the amount of covered earnings, we  requested data from SSA on covered state and local government  employment from 2007—the most recent year for which data were  available. Specifically, we requested the number and percent of state and  local government workers with and without Social Security coverage in  each state. We also requested the amount of earnings (i.e., wages) of state  and local government workers that were covered and not covered in each  state. SSA’s Office of Research, Evaluation and Statistics used its 1 percent  sample of Social Security numbers, which is generalizable to the universe  of workers. The sample contains earnings data that employers report to  SSA on Form W-2. The data do not specify the source of coverage, such as  coverage agreements under section 218 or the provisions under section  210 of the Social Security Act. For the purposes of our tables, the data  assume that state and local government workers do not have other,  nonpublic employment. To assess the reliability of the data, we reviewed  relevant documents and interviewed knowledgeable SSA officials. On the  basis of this information, we determined that the data for 2007 were  sufficiently reliable for the purposes of our review.
To provide information on how many modifications to the coverage  agreement SSA has approved by state, we requested the number and year  of the most recently approved modification for each state. From SSA, we  requested that the 10 regional offices provide the number and date of the  amendment (i.e., modification) most recently approved by SSA as of  January 1, 2010. From states, we requested the same information through  our Web-based survey. We then compared the results and performed  follow-up work, where needed. We also reviewed relevant documents and  interviewed knowledgeable SSA and state officials about the process to  approve modifications for coverage. Based on these steps, we determined  that the data we specially requested on the number and year of the last  approved modification were sufficiently reliable for the purposes of our  review.
section_title: State Roles in Social Security Coverage Process
paragraphs: To understand the role of states in ensuring accurate coverage, we visited  four states—California, Colorado, New Hampshire, and Rhode Island. We  selected these states to provide a variety of experiences, based on the  percent of covered employees, geographic dispersion, and indicators or  referrals from SSA or the National Conference of State Social Security  Administrators (NCSSSA) of how active the state administrator is. During  our site visits, we interviewed the state officials who administer the state’s  coverage agreement with SSA. We asked about the role of the state  administrator, the practices to administer the coverage agreement, as well  as staffing and funding to do so. We also asked about interactions with  SSA and IRS. We reviewed documents from states, such as policies and  procedures, and select parts of the coverage agreement. We did not review  state laws or verify information pertaining to state laws that were given to  us in the course of our work. We also conducted interviews and obtained  documents from officials of the NCSSSA.
To obtain further information on states administering Social Security  coverage agreements, we conducted a Web-based survey that was sent to  state administrators in all 50 states, Puerto Rico, and the Virgin Islands.  The survey was conducted between January and February 2010 and had a  response rate of 100 percent. The survey included questions about the  characteristics of states’ coverage agreements, the extent to which state  administrators conduct activities to manage these agreements, as well as  the challenges state administrators face in administering these  agreements.
Because this was not a sample survey, there are no sampling errors.  However, the practical difficulties of conducting any survey may introduce  nonsampling errors, such as variations in how respondents interpret  questions and their willingness to offer accurate responses. We took a  number of steps to minimize nonsampling errors. For example, a social  science survey specialist designed the questionnaire in collaboration with  GAO staff with subject matter expertise. As part of survey development,  we received feedback from NCSSSA. The questionnaire also underwent a  peer review by a second GAO survey specialist. We also pretested the  questionnaire with appropriate officials in four states—Colorado, Florida,  Indiana, and Nevada—to ensure that the questions and information  provided to respondents were appropriate, concise, and clearly stated. We  selected pretest states based on variation in the percentage of covered  public employees, geographic dispersion, and the level of state  administrator involvement identified by NCSSSA officials. The pretesting  took place during November and December 2009 by telephone. Since these  were Web-based surveys, respondents entered their answers directly into  electronic questionnaires. This eliminated the need to have data keyed into  databases, thus removing an additional source of error. Finally, to further  minimize errors, computer programs used to analyze the survey data were  independently verified by a second GAO data analyst to ensure the  accuracy of this work.
While we did not validate specific information that administrators  reported through our survey, we reviewed their responses and took steps  to determine that they were complete, reasonable, and sufficiently reliable  for the purposes of this report. For example, during pretesting, we took  steps to ensure definitions and terms used in the survey were clear and  familiar to the respondents, categories provided in closed-ended questions  were complete and exclusive, and the ordering of survey sections and the  questions within each section were appropriate. In our review of the data,  we also identified and logically fixed skip pattern errors—questions that  respondents should have skipped but did not. On the basis of our checks,  we believe our survey data are sufficient for the purposes of this report.
section_title: IRS Identification of Incorrect Social Security Taxes
paragraphs: To understand how IRS identifies incorrect Social Security taxes for  public employees, we held interviews with IRS managers in the Federal,  State and Local Governments office (FSLG), which is responsible for the  tax compliance of federal, state, and local government employers,  including their Social Security coverage. We asked FSLG officials about  how IRS selects state and local government employers to review, performs  examinations and compliance checks, corrects any errors in coverage and  taxes, and interacts with SSA and states. We reviewed relevant federal  laws and regulations. In addition, we reviewed relevant documents,  including policies and procedures, training materials, criteria to select  employers for review, the MOU between SSA and IRS, reports from special  projects, and publicly available forms and publications.
We obtained IRS data on enforcement activities it conducted between  fiscal years 2007 and 2009, including examinations and compliance checks  completed in each state, and the results of these enforcement activities.  For examinations, IRS provided information about whether the  examination resulted in a tax adjustment. For compliance checks, IRS  provided information about number of cases that resulted in a discrepancy  letter. We reviewed documents and contacted knowledgeable IRS officials  about the data. For the purposes of our review, we determined these data  were sufficiently reliable.
To understand how IRS identifies Social Security errors for public  employees, we reviewed a judgmental sample of FSLG audit files for 10  examinations and 20 compliance checks of state and local government  employers that were completed in fiscal year 2009. Because IRS does not  track this information, we asked FSLG to provide lists of examinations  and compliance checks with an indication of noncompliance for Social  Security coverage. IRS officials told us that the indications of  noncompliance, particularly for examinations, are imperfect. For example,  IRS examiners may not consistently use the codes to denote  noncompliance related to Social Security coverage agreements. Because  examinations are in-depth reviews that may result in changes to reported  earnings and taxes, we selected 10 of 34 examinations with larger  increases and decreases of Social Security or Medicare earnings. For  compliance checks, IRS identified 20 closed compliance checks that found  issues with approved Social Security coverage. We selected all of these  cases for our review. We reviewed the files to gather information on how  IRS detected errors, what the errors were, and how they were resolved.  The review of these files is for illustrative purposes and is not  generalizable to all state and local government employers.
We conducted this performance audit from July 2009 to September 2010 in  accordance with generally accepted government auditing standards. Those  standards require that we plan and perform the audit to obtain sufficient,  appropriate evidence to provide a reasonable basis for our findings and  conclusions based on our audit objectives. We believe that the evidence  obtained provides a reasonable basis for our findings and conclusions  based on our audit objectives.
section_title: Appendix II: Social Security-Covered and Estimated Noncovered Earnings from State and Local Government Employment in 2007
subsections: section_title: (Dollars in millions, rounded to nearest million)
paragraphs: Estimated total  of covered and  noncovered  earnings  2,769  (Dollars in millions, rounded to nearest million)
Other includes American Samoa, Guam, Northern Mariana Islands, and U.S. Virgin Islands.
Although most Social Security coverage of state and local government  employees is obtained through coverage agreements, additional Social  Security provisions affect the coverage of other state and local  government employees. For example, section 210 of the Social Security  Act extends mandatory coverage for Social Security and Medicare to state  and local government employees who are not members of a qualifying  retirement system, subject to certain exceptions.
section_title: Appendix III: Number and Year of Last Modification Approved by SSA, as of January 1, 2010
paragraphs: Number of last approved  modification  Consistent with the numbering sequences of SSA and states, the table excludes a state’s original  agreement. The original agreement is not counted as a modification because it is not an amendment  to the agreement.
section_title: Appendix IV: SSA’s Guidance Related to the Responsibilities of State Social Security Administrators
subsections: section_title: Serve as a bridge between state and local public employers and federal agencies, including SSA and IRS.
paragraphs: Administer and maintain the section 218 agreement that governs voluntary Social Security and Medicare coverage by public  employers.
Prepare modifications to the section 218 coverage agreement to include additional coverage groups, correct errors in other  modifications, identify additional public employers that join a covered retirement system, and obtain Medicare coverage for public  employees whose employment relationship with a public employer has been continuous since March 31, 1986.
Provide SSA with notice and evidence of the legal dissolution of covered state and local public employers.
Conduct referenda for Social Security and Medicare coverage for services performed by employees in positions under a public    Resolve coverage and tax questions associated with Section 218 agreements and modifications with SSA and IRS.
Advise public employers on Social Security, Medicare, and tax withholding matters.
Provide information to public employers as appropriate in accordance with the state’s enabling legislation, policies, procedures,  and standards.
Provide advice on Section 218 optional exclusions applicable to the state and/or individual modifications, and advice on state and  local laws, rules, regulations and compliance concerns.
Maintain physical custody of the state’s Section 218 agreement, modifications, dissolutions, and intrastate agreements.
Appendix V: List of Committees Formed by  SSA at Its April 2010 Conference Develop and implement ways to improve interagency relationship and collaboration.
Recommend uniform procedures for the regions and state administrators.
Research policies and recommend improvements.
Develop ideas that will improve a centralized database.
Suggest and develop training materials that will help new state administrators learn the  position.
Improve succession planning procedures.
Improve training in all levels of federal, state, and local government by creating joint  training sessions.
Research to identify areas of policy or procedures that may be improved.
Raising Awareness for State Elected Officials  Develop and explore ways to strengthen agency relationships with state-elected  officials.
Review staffing issues in the regions and states and recommend solutions.
Discuss disclosure limitations.
SSA identified these committees as the highest priorities.
section_title: Appendix VI: Comments from the Social Security Administration
section_title: Appendix VII: Comments from the Internal Revenue Service
section_title: Appendix VIII: GAO Contact and Staff Acknowledgments
subsections: section_title: Staff Acknowledgments
paragraphs: Blake Ainsworth, Assistant Director; Richard Harada, Matthew Saradjian,  Anjali Tekchandani, Kris Trueblood, James Bennett, Susannah Compton,  Alex Galuten, Stuart Kaufman, Wayne Turowski, and Walter Vance made  significant contributions to this report.