Social Security: Better Coordination among Federal Agencies Could Reduce Unidentified Earnings Reports
Published: 2005-02-04T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Each year, the Social Security Administration (SSA) receives millions of employer-submitted earnings reports (Form W-2s) that it is unable to place in an individual Social Security record. If the Social Security number (SSN) and name on a W-2 do not match SSA's records, the W-2 is retained in the Earnings Suspense File (ESF). SSA's ability to match earnings reports is essential to calculating Social Security benefits. Because of concerns about the size of the ESF, GAO was asked to determine (1) how SSA processes workers' earnings reports, (2) the types of errors in ESF reports and the characteristics of employers whose reports are in the ESF, (3) how often earnings from repeatedly used SSNs have been reinstated and who receives the earnings from theses reports, and (4) what key factors contribute to ESF postings.
section_title: What GAO Found
paragraphs: Upon receiving over 250 million earnings reports annually from employers, SSA uses various processes to post such reports to workers' Social Security records. For reports in which worker names and SSNs exactly match SSA's information, the earnings are credited to the appropriate Social Security record. When SSA encounters earnings reports that do not match its records, SSA attempts to make a match through various automated processes. Such processes have allowed SSA to identify valid records for an average of 15 million reports annually. However, about 4 percent of the reports still remain unmatched and are retained in the ESF. SSA uses additional automated and manual processes to continue to identify valid records. The most recent data show that SSA posted ("reinstated") over 2 million earnings reports in the ESF to valid records from such processes. Earnings reports in the ESF have serious data problems and are particularly likely to be submitted by certain categories of employers. Such problems include missing SSNs and employer use of the same SSN for more than one worker in the same tax year. Additional problems include missing surnames or names that include nonalphabetic characters. Forty-three percent of employers associated with earnings reports in the ESF are from only 5 of the 83 broad industry categories. Among these industry categories, a small portion of employers account for a disproportionate number of ESF reports. SSA has reinstated a substantial number of earnings reports with SSNs that appear repeatedly in the ESF. We analyzed the most frequently occurring 295 SSNs, which appeared in ESF 1,000 times or more between tax years 1985 and 2000. Of the earnings reports associated with these SSNs, SSA reinstated 13.1 million to the records of about 11.7 million workers. Although most reinstatements were for U.S.-born workers, in recent years the percentage of reinstatements to foreign-born workers has markedly increased. Also increasing is the percentage of foreign-born workers that received reinstatements for earnings in years prior to receiving a valid SSN--a potential indicator of unauthorized employment. Three major factors contribute to ESF postings. Under IRS regulations, employers must ask new hires to provide their name and SSN, but are not required to independently corroborate this information with SSA. DHS requires employers to visually inspect new workers' identity and work authorization documents, but employers do not have to verify these documents, and they can be easily counterfeited. Further, IRS regulations are minimal; IRS has no record of assessing a penalty for filing inaccurate earnings reports; and DHS enforcement efforts against employers who knowingly hire unauthorized workers has been limited in recent years because of shifting priorities following the events of September 11, 2001. Last, although SSA and DHS offer employers verification free of charge, these services are voluntary, have some limitations, and remain underutilized.

section_title: Letter
paragraphs: The Social Security Administration (SSA) manages benefit programs that  cover nearly all working Americans. To carry out this responsibility, SSA  must maintain records of workers’ earnings because they are the basis for  calculating benefits for workers and their dependents. Each year, SSA  receives over 250 million earnings reports (Form W-2s). SSA posts  earnings to its records based on the name and Social Security number  (SSN) submitted with each earnings report. If the SSN or name does not  match SSA’s records, the reported earnings amount is placed in an  Earnings Suspense File (ESF), where it remains until SSA obtains  evidence to link the unidentified earnings to a valid SSN—a process  termed “earnings reinstatement.” Earnings reports with incorrect or  incomplete information have been a long standing problem, and in 2002,  SSA was unable to post to valid worker records almost 9 million reports  representing $56 billion in earnings. In November 2004, SSA reported that  the ESF contained a combined total of 246 million earnings records from  all tax years back to the inception of the Social Security program (1937),  representing about $463 billion in reported earnings. Because of your  concerns about the size of the ESF, and the potentially negative  consequences for benefit payments and tax administration associated with  incorrect earnings records, you asked us to determine (1) how SSA  processes workers’ earnings reports, (2) the types of errors in ESF reports  and the characteristics of employers whose reports are in the ESF,   (3) how often earnings from repeatedly used SSNs have been reinstated  and who receives the earnings from these reports, and (4) what key  factors contribute to ESF postings.
To complete our work, we met with SSA officials to obtain information on  the various electronic processes SSA uses to resolve errors and post  earnings to worker records. We also visited a total of eight SSA field  offices located in New York, New Jersey, Virginia, and California that had  significant reinstatement activity to observe and document SSA’s manual  procedures for reviewing and validating evidence submitted by individuals  seeking reinstated earnings. To determine the characteristics of ESF  earnings and assess reinstatement activity, we obtained and analyzed an  electronic copy of the ESF for tax years 1985 to 2000 (84.6 million  records). As part of our analysis, we assessed the reliability of the ESF by  reviewing recent SSA, Inspector General, and contractor reports;  interviewing agency officials; and checking the databases for consistency.  To analyze reinstatement of earnings reported under repeatedly used  SSNs, we selected 295 SSNs that appeared most frequently in the ESF— each appeared 1,000 or more times. We tracked the number of  reinstatements associated with these SSNs since the inception of the  program and examined the characteristics of the workers whose earnings  had been reinstated. We also documented the tools SSA makes available to  employers to assist them in verifying SSNs, reviewed Internal Revenue  Service (IRS) regulations requiring employers to solicit and document  worker names and SSNs, and interviewed key officials responsible for  enforcing those regulations. We also reviewed reports on the ESF  prepared by SSA’s Office of the Inspector General (OIG) and private  contractors. Finally, we met with officials from the Department of  Homeland Security (DHS) to document the agency’s efforts to enforce  laws that prohibit employers from knowingly hiring workers who are not  authorized to work in the United States and to obtain information about  DHS’s worker verification service. Our work was conducted between  October 2002 and December 2004 in accordance with generally accepted  government auditing standards. (See app. I for more details about our  methodology and scope.)
subsections: section_title: Background
paragraphs: Social Security benefits are based on a worker’s lifetime earnings in  covered employment. As the agency responsible for issuing SSNs and  paying retirement, survivors, and disability benefits to insured persons,  SSA must have accurate records of every worker’s earnings. Inaccurate  earnings records can create benefit payment errors.
Through a process known as enumeration, SSA assigns a unique SSN to  each individual who meets the requirements for one. Currently, SSNs are  issued to most U.S. citizens at birth. They are also available to noncitizens  lawfully admitted to the United States with permission to work. Lawfully  admitted noncitizens may also qualify for an SSN for nonwork purposes  when a federal, state, or local law requires that they have an SSN to obtain  a particular public benefit or service. SSA must obtain documentary  evidence from such applicants regarding their age, identity, U.S.  citizenship, or lawful alien status, and if they were previously assigned an  SSN. Thus, SSA maintains a historical record of each worker’s annual  earnings, which is identified by the worker’s name and Social Security  number.
The earnings reporting process begins at the end of each calendar year,  when employers submit reports of their workers’ earnings to SSA on IRS  Form W-2 (Wage and Tax Statement). To prepare the W-2, employers  generally use certain information that workers provide on Form W-4,  which is the document that determines the amount of federal income  taxes that will be withheld from the worker’s pay. If the SSN and name on  an earnings report submitted by the employer do not match information in  SSA’s Master Earnings File (MEF), the reported earnings are placed in the  ESF, which is a repository for earnings reports for unidentified workers.  The ESF is an online file that can be updated throughout the day by all  SSA field offices and various centralized components, although the  updates are performed via batch mode. Removal of earnings reports from  the ESF occurs only when a report can be matched and posted to a  worker’s MEF record. This process is termed “reinstatement” by SSA.  Thus, the number of reports in ESF on a given day fluctuates as earnings  are reinstated to the correct Social Security records. Table 1 reflects the  ESF reports remaining, listed by decade, corresponding to the tax year of  earnings for which each report applied, since inception of the Social  Security program.
section_title: SSA Uses Electronic and Manual Processes to Match Earnings Reports to Appropriate Records
paragraphs: SSA uses various processes to post reported workers’ earnings to valid  Social Security records. Generally, employers send SSA one W-2 each year  that reports the annual earnings for each of their workers. Upon receipt of  these earnings reports, SSA electronically validates whether it has  established a Social Security record for the reported SSN and surname  shown on the W-2. SSA does this by electronically matching the worker’s  surname and SSN on the W-2 to information in its number identification  file (Numident) that contains demographic information about every SSN  holder. When the SSN and the first seven characters of the surname are  identical on the W-2 and the Numident file, SSA posts those earnings to the  indicated record in its MEF. SSA is able to place about 90 percent of  employer-submitted earnings reports received each year in an appropriate  MEF record. (Fig. 1 shows SSA’s process in more detail.)
For the 10 percent of the reports that fail this initial validation test, SSA  performs more than 20 of what it calls “front-end validation routines” that  manipulate either the reported name or the SSN in a variety of ways to  correct common reporting mistakes so that SSA can find an MEF record  and prevent the posting of the earnings to the ESF. SSA’s front-end  routines identify Social Security records for about 60 percent of the  reports that are initially categorized as mismatches each year. In  manipulating worker information to find a valid record, the automated  front-end routines assume either the SSN is correct and there is a problem  in the reported name or vice versa. For example, one front-end routine for  reported name errors tests whether the first name and the surname have  been reversed on the employer-filed W-2. The name reversal routine  compares the first name from SSA’s Numident file with the surname on the  W-2. If they are the same and the first initial for the middle and surname  match the information on the W-2, then SSA assumes it has found the  proper record and posts the earnings. Other front-end routines check  whether digits in the SSN are transposed or inaccurate or whether the  name on the report contains transposed or missing letters. Another front- end routine involves searching for reinstated items that in the past have  included the same reporting error occurring in the current year’s earnings  report.
Over the past several years, such routines have allowed SSA to post an  annual average of 15 million earnings reports to individual MEF records,  rather than to the ESF. Table 2 summarizes the performance of these  front-end routines for the past 5 reporting years. It shows that SSA found  about 76 million valid records for reported earnings for tax years 1998 to  2002.
If the front-end routines do not identify a valid record, SSA posts the  earnings in the ESF. SSA subsequently performs what it calls “back-end”  processes on the items, consisting of electronic and manual actions to  match the earnings to a worker’s MEF record. For one such process, SSA  uses corrections of reported names and SSNs generated under IRS’s  automated routines. SSA then attempts to find the W-2 in the ESF and  validate the corrected name and SSN that IRS provides against SSA’s  records; when both conditions are met, SSA accepts IRS’s corrections and  reinstates the item to the worker’s record. Under another process, which  SSA calls decentralized correspondence, or DECOR, SSA sends letters to  addresses listed on each invalid W-2, seeking information to resolve the  identity issue (or to the employer if the W-2 lacks a valid address). If the  worker does not respond, SSA then sends a letter to the employer that  filed the report soliciting assistance in resolving the problem. Other types  of correspondence involve Young Child Earnings Records and Earnings  After Death, for which SSA sends letters to employers and/or the persons  whose SSNs appear on the reports; SSA automatically posts such earnings  reports to the ESF because the persons named in the reports are,  respectively, either (a) 6 years of age or younger (thus unlikely to have  earnings through employment) or (b) have a date of death recorded on  their Numident record for a year prior to the tax year for which earnings  on Form W-2 have been reported. Upon receiving satisfactory  documentation clarifying the earnings and linking them to the proper SSN,  SSA reinstates earnings reports to the individuals’ MEF record.
SSA also uses yet another process, known as FERRET, that compares  worker addresses on the W-2 with addresses that IRS has from individual  tax returns. In its Operation 30 routine, SSA staff compare ESF earnings  reports with valid SSNs with information in the Numident record. Staff  check whether nicknames, surname derivations, and other obvious  mistakes in spelling might be the cause of the posting problem. Table 3  shows that in 2001 (the last year for which data were available), selected  back-end routines reinstated almost 600,000 earnings reports totaling  almost $4 billion.
SSA has two other electronic back-end routines that have produced a large  number of reinstatements. In a process called SWEEP, SSA periodically  reruns ESF items through its records to determine whether updated  information has been added to the Numident or whether newly developed  validation routines might permit reinstatements. In 2003, SSA reinstated  123,741 items through SWEEP, covering tax years 1977-2001. GAP SWEEP  is a newly developed routine that scans earnings records for valid SSNs in  the ESF and assesses whether yearly gaps in earnings exist in the MEF  record and might be linked to similar earnings in the ESF. If a link can be  made, SSA uses slightly less stringent name match rules; if the name can  be validated, the item is reinstated. As of May 2003, SSA has reinstated  through the GAP SWEEP routine over 1.5 million items (across all tax  years back to 1937), representing $6.1 billion in earnings.
Still another back-end process involves a manual review of worker- submitted evidence and a check of automated data. Workers (and their  dependents and survivors) may visit local SSA offices to have earnings  reinstated through the Item Correction (ICOR) process. Individuals  provide SSA staff with evidence, such as W-2s, earnings statements, and  tax returns, to document earnings that are missing from their Social  Security record. Upon receiving adequate proof that links an earnings  report to the individual, SSA field staff manually reinstate the earnings,  subject to an accuracy check by a peer or supervisor. SSA provided  information indicating that in fiscal year 2003, field staff had made about  244,000 earnings reinstatements through the ICOR process.
Furthermore, each year SSA mails a Social Security statement to workers  and former workers age 25 and over who are not yet receiving benefits.  The statement lists the amount of earnings posted to the person’s Social  Security record by year and encourages persons to contact SSA about any  missing earnings. Such earnings might have been placed in the ESF  because of a name or SSN mismatch. Reinstatements related to Social  Security statements are included in the ICOR data discussed above.
section_title: ESF Earnings Reports Frequently Include Inaccurate and Missing Information
paragraphs: Earnings reports in the ESF have serious data problems. Such data  problems include missing SSNs or names, never issued numbers, and  employer use of the same SSN to report earnings for multiple workers in a  single tax year. In addition, a small portion of employers account for a  disproportionate number of ESF reports, and employers in certain  industry categories are more likely than others to submit reports with  invalid worker identity information.
subsections: section_title: ESF Reports Have Serious Data Problems
paragraphs: Out of the 84.6 million reports in the ESF for the 16 tax years that we  examined (1985-2000), some of the more serious or obvious problems  were that    8.9 million had all zeros in the SSN field and    1.4 million had reported SSNs that were never issued.
In addition, over 270,000 of the reports had various name problems. For  example,    60,476 had no surname;   261,744 had no first name;   3,760 reports contained nonalphabetic characters in the name field, such  as ?, /, %, <, &, *, @, even though SSA has developed automated routines to  delete such characters from the name field.
For the 16-year period we examined, we also found that some employers  used one SSN to report earnings for more than one worker in a given tax  year. Table 4 depicts the number of times that employers used one SSN to  report earnings of multiple workers in a tax year. For example, one case  we found involved 10 W-2s in the ESF under one SSN for tax year 2000  from one employer. Each of the reports under the SSN had different  names and different earnings, and together the earnings on the 10 reports  totaled about $44,000. Table 4 shows that employers used one SSN in   10 different reports in a single tax year and did this 308 times over the   16- year period of analysis. These employer reports accounted for   3,080 W-2s with $4.7 million in earnings recorded in the ESF. Table 4 also  shows that most employers using one SSN to report earnings for multiple  workers did this for relatively few reports (from 2 to 9). However, there  were a few employers who used one SSN for over 100 reports   (128 separate occurrences—see shaded area of table 4). The most  egregious case that we identified involved an employer who used one SSN  for 2,580 different earnings reports in a tax year.
Some employers exhibited a pattern of such errors year after year.  Between 1985 and 2000, about 61,000 employers used one SSN for more  than one worker in multiple tax years. Table 5 shows that most employers  using one SSN to report earnings for multiple workers did this in a period  ranging between 1 and 9 years. However, there were slightly over 1,000  employers who used one SSN to report the earnings of more than one  worker in 10 or more of the 16 tax years that we analyzed (see shaded area  of table 5). We found 43 employers did this every year of the entire 16-year  period we analyzed.
section_title: A Few Employers and Certain Types of Industries Have a Disproportionate Number of Reports in the ESF
paragraphs: The majority of employers submitted a relatively small number of the total  number of earnings reports in the ESF. For example, table 6 shows that   3.4 million employers had fewer than 10 reports for the period we  analyzed. In contrast, while only about 8,900 employers (0.2 percent of all  employers with reports recorded in the ESF for tax years 1985-2000) had  1,000 or more reports in the ESF, they accounted for over 30 percent of  the total number of ESF reports (see shaded area of table 6).
One measure of employer reporting problems is to identify those that, year  after year, submit reports that are posted to the ESF. For example,  relatively few employers—about 24,000—had a report in each of the   16 years, accounting for a total of 14.6 million reports. Although those  24,000 employers represented only 0.5 percent of all employers, they had  submitted about 17 percent of the total number of reports. In addition, we  found that employers with a high number of reports in the ESF had a  consistent pattern of misidentifying their workers on their annual earnings  reports to SSA. For example, one employer averaged about 13,300 reports  placed in the ESF per year over the period we analyzed, ranging from a  low of 5,971 to a high of 33,448.
Finally, certain types of businesses appear to be disproportionately  associated with earnings reports in the ESF. We obtained data from SSA  that described the types of businesses for 1.8 of the 4.3 million employers  with earnings reports in the ESF for the period examined. Figure 2 shows  that of the 83 total broad industry categories, 5 of the categories alone  accounted for 43 percent of these reports: eating and drinking  establishments, construction and special trades, agricultural production- crops, business service organizations, and health service organizations.  Our analysis of industry types may not be representative of all 4.3 million  employers with reports in the ESF, because information on the industry  categories for other 2.5 million employers was not available. However, it is  consistent with an analysis reported by SSA’s OIG. In September 1999, the  OIG examined earnings reports from 100 employers with the most  suspended wage items. OIG reported that 67 percent of these employers  were in industries that it categorized as services, restaurants, and  agriculture. It also noted that SSA’s experience is that employers who rely  on a workforce consisting of relatively unskilled or migrant workers are  the major source of suspended earnings reports.
section_title: Earnings from Frequently Used SSNs Are Often Reinstated and Increasingly Belong to Foreign- Born Workers
paragraphs: SSA successfully reinstates a substantial number of earnings reports  associated with frequently used SSNs in the ESF. Overall, the majority of  reinstated earnings we examined were posted to the Social Security  records of U.S.-born workers. In recent years, however, the number of  foreign-born workers receiving reinstatements from these SSNs has  significantly grown. Further, our analysis of data indicates that the  reinstated earnings for foreign-born workers may often relate to  unauthorized employment.
To obtain information about reinstatements made to repeatedly used  SSNs, we analyzed the 295 SSNs that appeared most frequently in the ESF  for tax years 1985-2000. Each of these SSNs had 1,000 or more earnings  records posted to them for these 16 tax years. Of the reports associated  with these SSNs since 1937, SSA reinstated 13.1 million to the records of  about 11.7 million individuals. Overall, the 295 SSNs have about   9.58 million reports for which the actual worker is still unidentified,  representing about $14.5 billion in unposted earnings. Of these 9.58 million  reports that remain in the ESF, about 8.9 million are under the all-zero SSN  (000-00-0000). The average unposted earnings associated with the   9.58 million reports were about $1,513. However, the range was wide.  Table 7 shows that almost 25 percent of the reports had unposted earnings  of $100 or less, and about 3 percent of the reports had unposted earnings  over $10,000. About 84 percent of the reports had earnings of $2,000 or  less.
Since 1937, SSA has made 13.1 million reinstatements of earnings from the   295 SSNs to 11.7 million different persons. SSA maintains limited data on  the characteristics of persons who receive reinstatements. However, the  data did allow us to document an individual worker’s gender, birth date,  and country of birth, as well as when his or her SSN was issued. Overall,  about 59 percent of these recipients were male. About 10.5 million, or   90 percent, of all persons receiving the reinstatements were born in the  United States. Males represented about 59 percent of the U.S.-born  population also. For those who are still living (10 million), the median age  of U.S.-born persons with reinstatements was 49 years old. The remaining  1.2 million persons were born in other countries, with Mexico being the  predominant country of birth (about 26 percent of all foreign-born). About  62 percent of the reinstatements to foreign-born workers went to men. The  median age of the foreign-born recipients of reinstated earnings who were  still living was 53 years old.
The data show that U.S.-born workers are the primary recipients of  reinstatements associated with the 295 SSNs we analyzed. However, when  we examined reinstatement activity in later years, the percentage of  foreign-born persons receiving such reinstatements has grown over time.  For example, table 8 shows that in 1989 foreign-born recipients more than  doubled from about 8 percent before 1986 and in 2003 grew to nearly   21 percent. This percentage is higher than the estimated 14 percent of  foreign-born workers currently in the U.S. labor force. Our analysis also  shows foreign-born recipients of recent reinstatements from the 295 SSNs  we analyzed are predominantly male—about 65 percent.
The top four countries of birth for workers who received reinstatements  were Mexico, Canada, Germany, and Cuba. Workers from these four  countries represented nearly 40 percent of all foreign-born individuals  receiving reinstatements from the SSNs we analyzed. Table 9 shows the  top 10 countries of birth for the foreign-born persons with reinstatements  we analyzed.
In addition to the growth in the percentage of foreign-born persons  receiving reinstatements, the extent of probable unauthorized work  related to such reinstatements has been growing. In order for a person to  legally work in the United States, he or she must have a valid SSN. Thus,  any earnings reports filed for a tax year before a worker’s valid SSN was  actually issued by SSA are potential indicators of unauthorized  employment. Data we analyzed show that historically about 7 percent of  foreign-born workers with reinstatements from repeatedly used SSNs had  earnings prior to SSN issuance. However, when we examined  reinstatement activity associated with more recent work years and  earnings, the percentage of reinstatements to foreign-born persons with  work activity prior to SSN issuance is significantly higher—an average of  about 32 percent of such reinstatements occurring between 1986-2003.  (See table 10). Further, in some years, these reinstatements for potentially  unauthorized work have been in excess of 50 percent of all reinstatements  to foreign-born recipients.
section_title: Several Key Factors Contribute to ESF Postings
paragraphs: Current employer requirements for obtaining and reporting worker  identity information create an environment in which inaccurate or false  names and SSNs can be used for employment purposes, leading to  difficulties associating reported earnings with the correct Social Security  record. In addition, even though IRS can penalize employers for failing to  file complete and correct information on Form W-2 and DHS can examine  and penalize problem employers’ hiring practices, enforcement efforts  have been limited and may facilitate careless reporting. Finally, although  employers have access to several systems to verify worker names, SSNs,  and work authorization status, these systems have limitations and are  underutilized.
subsections: section_title: Current Requirements for Gathering and Reporting Worker Identity Information Are Limited
paragraphs: Both the IRS and DHS have requirements that employers must follow  when gathering or reporting key information supplied by newly hired  workers. IRS requires workers to complete an IRS Form W-4, which  identifies workers for tax withholding purposes, and DHS requires  workers and employers to complete a DHS Form I-9 (Employment  Eligibility Verification Form) for identity and work authorization. IRS  regulations permit employers to use information on the I-9 to identify  workers. However, these requirements are limited and do not provide  reasonable assurance that workers’ names, SSNs, or work eligibility status  will be accurately obtained and that earnings associated with these  workers will be properly credited to valid Social Security records.
Under IRS regulations, employers rely primarily upon newly hired workers  to self-report information, such as their name and SSN, and are not  required to corroborate this information. This process involves new  workers filling out Form W-4, which includes the worker’s name, SSN,  address, tax filing status (single or married), and number of tax  exemptions claimed. While workers must report their names and SSNs to  employers, under current IRS regulations, they do not have to present  their Social Security card for inspection when they are hired. Also, the  law does not require employers to independently corroborate the worker’s  name and SSN information with SSA. Workers that do not have an SSN,  however, must submit evidence that they have applied for one, such as a  letter from SSA. As currently implemented, IRS’s limited requirements  provide few safeguards to ensure that employers solicit and report  accurate worker information. If examined by IRS, employers must simply  show that they requested worker name and SSN information. Employers  do not have to show that they attempted to corroborate this information  with SSA. Lack of verification reduces the opportunity to detect worker  misuse of SSNs and identity information and, ultimately, lead to earnings  reports being placed in the ESF and possibly underpaid Social Security  benefits. As our analysis shows, millions of reports that SSA receives each  year from employers contain incomplete or incorrect information and  cannot be posted to valid Social Security records.
DHS also requires employers to solicit key information from workers to  prevent unauthorized employment. The 1986 Immigration Reform and  Control Act (IRCA) requires employers to verify the identity and work  eligibility status of individuals hired after November 6, 1986, and prohibits  employers from knowingly hiring or continuing to employ persons who  are unauthorized to work in the United States. Form I-9 was created to  obtain information from new workers so that their employers could verify  the workers’ eligibility for employment, so as to preclude the hiring of  individuals not authorized to work in the United States. In the section of  the Form I-9 that newly hired workers must complete, the form asks new  workers to list their name, address, and SSN. (According to DHS,  providing the SSN is actually optional for workers). Such workers also  must provide employers with specific documents as proof of identity and  work authorization. These include state driver’s licenses to establish  identity, Social Security cards and birth certificates to establish work  authorization, and various types of immigration documents to establish a  person’s identity and work status. If a furnished document appears to be  genuine and appears to relate to the person presenting it, the employer  must accept the document and record what was actually reviewed.  Employers must also maintain a Form I-9 on file for 3 years from the date  of hire or 1 year from the date of termination, whichever is longer.
While the IRCA requirement is more demanding than IRS’s regulations,  employers still rely primarily on visually examining numerous types of  documents with no independent corroboration with the issuing agencies.  Fraudulent identity and work authorization documents are widely  available, can be of high quality, and are difficult to detect by employers  who are not document experts. In prior work, we testified that DHS  employer sanction data indicated that, between October 1996 and May  1998, about 50,000 unauthorized aliens had used 78,000 fraudulent  documents to obtain employment. In June 2002, we again testified that  hundreds of thousands of unauthorized workers have used fraudulent  documents to circumvent processes designed to prevent their hire. Such  documents would likely be associated with erroneous earnings reports  later filed by employers and recorded in the ESF.
section_title: Minimal IRS and DHS Enforcement Efforts May Foster Erroneous Reporting
paragraphs: Both IRS and DHS have authority to impose penalties on employers who  fail to follow their regulations for obtaining and reporting key information  for newly hired workers. However, IRS’s requirements are so limited that  employers are unlikely to be penalized. While DHS has a worksite  enforcement program to address unauthorized employment, its resources  devoted to such activities have been minimal in recent years. Thus, those  employers who do not want to prepare accurate report information have  little incentive to do so and failure to prepare accurate reports can  contribute to ESF postings.
IRS has authority to assess penalties against employers who submit  incomplete and inaccurate information on worker’s W-2s, including SSNs.  However, IRS may waive such penalties if reporting problems are due to  “reasonable cause.” For example, employers may demonstrate that a  reporting error was due to events beyond their control—such as the  worker provided false identity or SSN information. Employers must also  demonstrate that they acted responsibly to avoid errors and correct them  promptly. When employers are notified by IRS that a worker’s reported  SSN is incorrect, the employer must make up to two annual solicitations  for the correct SSN. If the worker does not comply with the requests, IRS  requires no further actions. The reasonable cause standard, however, does  not apply if an employer acts with “intentional disregard.” Intentional  disregard applies, for example, when an employer knows or should know  W-2 reporting requirements but demonstrates a pattern of ignoring them.
We recently reported that IRS’s regulations for obtaining and verifying  worker names and SSNs are so minimal that it is unlikely IRS would ever  penalize employers. IRS’s own analysis bears this point out. In 2003, IRS  reported on a review of 78 employers it defined as egregious filers of  earnings reports: those who filed either a high number or a high  percentage of their reports with incorrect worker names and SSNs. The  report that was prepared covered 50 (large and mid-sized businesses) of  the 78 businesses IRS reviewed. IRS’s evaluation concluded that all of the  employers had met the reasonable cause standard because events beyond  their control had caused the errors. That is, the workers had provided  employers with incorrect information. IRS also concluded that the  employers acted responsibly under current regulations because they  solicited names and SSNs from workers and obtained signed W-4s or I-9s.  We are concerned, however, that although the employers met IRS’s  technical requirements for soliciting names and SSNs in these cases, there  was no assurance that the information was accurate because they relied  exclusively on worker-supplied information, with no independent  corroboration with SSA or any other public or private data source. Thus,  workers using fraudulent SSNs as identity information would go  undetected.
The IRS report detailed specific actions that could improve the accuracy  of earnings reports, such as requiring employers to review the Social  Security card for prospective new workers and verify the SSN with SSA. In  discussing this issue, IRS officials expressed concern that requiring the  verification of names and SSNs may cause some employers to cease  withholding taxes and reporting income from unauthorized workers,  rather than risk losing such workers. Further, increased compliance would  likely come at the expense of other compliance activities. The net effect of  such a response would be a decrease in tax collections and compliance.  IRS also expressed concern that worker verification systems do not  always supply timely responses and that mandating such a system could  pose an undue administrative burden on employers. Nevertheless, IRS  agreed with our August 2004 report recommendation that it analyze  options and consider how best to increase the accuracy of employer  reporting. Such an effort would include re-examining its reasonable cause  standard and penalty process.
DHS has primary responsibility for ensuring that employers verify the  identity and work authorization status of newly hired workers, as required  by IRCA and the Illegal Immigration Reform and Immigrant Responsibility  Act (IIRIRA) of 1996. Under IRCA, employers are prohibited from hiring  or continuing to employ a person not authorized to work in the United  States, provided that the employer knows that the person is not authorized  to work or has lost such authorization. Employers are also prohibited from  hiring an individual for employment in the United States without verifying  his or her employment eligibility via the Form I-9. A violation of either of  these prohibited practices can subject an employer to civil monetary  penalties. Employers engaging in a pattern or practice of knowingly hiring  or continuing to employ unauthorized workers can be subject to fines and  imprisonment. However, over time, DHS has devoted limited and  decreasing resources to general worksite enforcement. For example, the  number of employer investigations and intent to fine notices have dropped  substantially (see fig. 3). The number of work years devoted to worksite  enforcement has also dramatically declined in the past 5 years, from 278 in  1999 to 105 in 2003, a decrease of 62 percent (see fig. 4).
DHS officials noted several reasons for these declines, including a change  in its enforcement strategy around 1999 because of limited resources to  arrest and detain millions of unauthorized workers. Fining employers also  came to be viewed as ineffective by DHS because the process could take  more than a year. DHS began to place more emphasis on cooperative  efforts such as auditing employer Form I-9s to identify unauthorized  workers and conducting seminars on fraudulent documents and worker  verification services. DHS also told us that the events of September 11,  2001 caused a substantial redirection of worksite enforcement activity  toward unauthorized workers in critical infrastructure facilities, such as  airports, power plants, and military bases.
DHS coordination with SSA to identify persons who do not have work  authorization has been limited, despite a 1996 law requiring such activity.  Section 414 of IIRIRA requires SSA to provide DHS with an annual listing  of persons who have earnings but do not have SSNs authorizing them to  work. For years, SSA has provided DHS with annual data on about   575,000 such persons. The data include annual earnings amounts, worker  names and addresses, and employer names and addresses as well.  However, DHS reported that it has made little use of this information in its  worksite enforcement efforts. In explaining why, DHS officials noted that  the data came from SSA in an electronic format that was incompatible  with their systems. They also noted that DHS records do not usually  contain SSNs for aliens and SSA’s records do not contain the DHS  identification number assigned to aliens, so it is difficult to match SSA’s  listing to DHS’s records. In order to facilitate the use of the data, in 2004,  DHS and SSA agreed on a new format that SSA is to use to report data to  DHS.  Also, DHS told us that it has recently begun to use a contractor to  make the SSA data more usable and available for possible enforcement  actions. While Congress developed this IIRIRA provision for reasons other  than reducing ESF earnings postings, some additional level of DHS activity  in this area might provide a deterrent against individuals who use invalid  or false SSNs that contribute to ESF earnings reports.
section_title: Voluntary Employee Verification Services Have Some Limitations and Are Underutilized
paragraphs: Employers do not widely use worker verification services offered by both  SSA and DHS. These services provide a valuable opportunity to prevent  many unintended or careless mistakes when hiring new workers and  reporting worker earnings. However, they have some limitations in  detecting the misuse of another person’s name and SSN, and they remain  underutilized.
SSA began offering employers the ability to voluntarily verify the accuracy  of worker-supplied SSNs and names to help them file more accurate  annual earnings reports. SSA does not charge employers for this service,  and over the years, it has developed several different verification methods  to meet their needs. For example, employers may:    Provide SSA with a magnetic tape or a diskette of their workers’ names  and SSNs. SSA will verify the names and SSNs for up to 250,000 workers at  a time. According to SSA, it takes about 30 days for SSA to respond, after  it receives the request. SSA data show that about 6,000 of the 6.5 million  U.S. employers sent SSA over 53 million verification requests in 2003. For  about 12 percent of the requests, SSA could not verify the worker’s name  and SSN.
Call a toll-free 800 number to verify names and SSNs. SSA staff will  immediately verify information for up to 5 workers at a time. In fiscal year  2003, SSA data show it received about 1.1 million calls from employers,  but SSA does not track how many different employers used the service.  SSA officials believe that a limited number of employers use the service. In  fact, they believe that some larger employers with significant turnover  have dedicated staff whose job is to call the 800 number throughout the  day to bypass the 5-worker per call verification limit. Thus, these  employers would represent a disproportionate number of calls to the  service.
Provide a hard-copy listing of workers’ names and SSNs that can be faxed,  mailed, or hand-delivered to local Social Security offices. SSA staff verify  information for a maximum of 50 workers at a time. Response times are  subject to office workloads; SSA stated that, generally, such response  takes 1 to 2 weeks to process, but may take longer. Our visits to   8 SSA field offices indicated that at these offices very few employers  utilize this method of verification.
SSA verifies the information received from employers by comparing it  with information in its own records. SSA then advises the employer which  worker names and SSNs do not match. While the service is an important  tool to improve reporting accuracy, the information SSA cross-matches  against varies depending upon the mode of verification employers select.  For two of the methods (requests through the 800 number or at local  offices), employers must provide SSA with a worker’s name, SSN, date of  birth, and gender. In contrast, verifications for SSA’s most predominant  mode of verification—electronic batch processing, do not include a match  against workers’ date of birth and gender. Although employers do not have  to submit dates of birth and gender, SSA will match against those two  pieces of information if employers voluntarily submit them. By not  requiring a match against dates of birth for this verification mode, SSA  exposes itself to potential fraud and identity theft. In particular, persons  using the name and SSN of persons much younger or older than  themselves for employment purposes would remain undetected, despite  the verification process. In discussing this limitation, SSA staff responsible  for the verification services acknowledged that the requirements should be  consistent, especially at a time when identity theft is a growing problem  and homeland security is a major concern. However, as of November 2004,  there was no initiative under way at SSA to address this inconsistency.
SSA’s verification systems have other limitations. As previously noted, the  response time varies among the different methods. Slow response times  are a negative feature for businesses concerned about the competitive  implications of using these systems. For example, some businesses fear  that by using the service, they will give nonusing competitors an advantage  in obtaining workers in a tight labor market. In an attempt to make  verification more attractive to employers, SSA has been testing a Web- based system, which is designed to respond to employer requests within  24 hours. Requests of up to 10 worker names and SSNs will be  instantaneous. SSA expects that this verification method will become  available in 2005.
DHS also operates a pilot program for employment eligibility confirmation  in conjunction with SSA. To reduce employment of unauthorized alien  workers, Congress required (in IIRIRA of 1996) that DHS develop and test  three pilot programs to assist employers in verifying workers’ identity and  work eligibility status. Accordingly, the Basic Pilot Program was  developed and made available to employers in six states starting in 1997.  The Basic Pilot requires participating employers to electronically verify  the status of all newly hired workers within 3 days of hire. Verification  requests are routed electronically to SSA to check the validity of the SSN,  name, and date of birth provided by the worker and whether SSA has  information indicating that the worker is a citizen or a noncitizen with  permanent work authorization. If the submitted information matches  SSA’s records, SSA immediately transmits an employment authorization  response via DHS to the employer. If SSA is unable to verify the SSN,  name, date of birth, or work eligibility status, a tentative nonconfirmation  response is transmitted to the employer. The employer must notify the  worker of the tentative nonconfirmation and check the accuracy of the  information originally submitted. If the employer finds errors in either the  Form I-9 that was completed or the data entered into the Basic Pilot  system, the employer should resubmit the verification request with  corrected data. If no such errors are found, however, the employer must  advise the worker to visit an SSA field office within 8 federal workdays  from the date of the response to resolve any discrepancies in his or her  SSA record.
If SSA is able to verify the SSN, name, and date of birth of a newly hired  noncitizen, but is unable to verify the work eligibility status, it  electronically refers the query to DHS, for a check against DHS’s  automated records. If DHS confirms that the person is work authorized,  the employer is immediately notified. If DHS cannot verify work  authorization status for the submitted name and SSN, the query is referred  to DHS field office “status verifiers” for additional research. According to  DHS, responses for queries referred to the status verifiers generally occur  within 24 hours. When the record searches cannot verify work  authorization, DHS sends a tentative nonconfirmation response to the  employer. If workers wish to contest such a response from DHS, they must  call a toll-free telephone number provided by DHS within 8 federal  workdays from the date of the response to resolve any discrepancies in  their DHS record. If employment authorization cannot be verified,  employers may terminate employment.
A 2002 study of the Basic Pilot found that work authorization for queried  workers was never resolved in about 13 percent of queried cases. In most  of these cases, the workers never contested the tentative nonconfirmation  response. However, like SSA’s verification service, the Basic Pilot has not  been widely utilized. As of June 2004, about 2,500 of 2.1 million eligible  businesses operating in the pilot states have actually registered to  participate. Those participants made about 365,000 initial verification  requests over a 2-year test period. The study also identified some problems  with the pilot, such as erroneous nonconfirmation rates and program  software that was not user friendly. In July 2004, DHS reported on actions  being taken to address these weaknesses. These actions included  improving federal data base accuracy to expedite data entry on persons  entering the country as well as updating changes in immigrant work  authorization status, switching to a Web-based verification system,  providing better training for employers, and monitoring participating  businesses.
In 2003, Congress required DHS to expand the verification service to all   50 states by December 2004. The Basic Pilot Program became available to  employers in all 50 states on December 20, 2004. Furthermore, to improve  its effectiveness and increase participation, DHS recently converted the  program to a Web-based system, which became available on July 6, 2004.  While DHS staff recognize its potential value in identifying unauthorized  workers, they noted that by law, employers cannot be charged for this  service and that the agency lacks sufficient funds to operate a system that  would be used extensively. DHS officials did not have operational cost  data for the verification service. However, in June 2002, contractors that  studied the program for DHS estimated that federal costs to make  verification of work eligibility and identity mandatory would be about   $159 million annually.
section_title: Conclusions
paragraphs: Despite the various tools used by SSA to aid in the proper crediting of  worker earnings, the number of earnings reports in the ESF is substantial.  Having effective policies and processes for verifying key SSN, identity, and  work authorization information for the nation’s workforce is critical to  SSA, which is tasked with accurately paying retirement, survivors, and  disability benefits. Sound verification processes are also critical to the  administration of tax and immigration laws. However, at present,  employers have few requirements to accurately identify their workers and  file accurate and complete earnings reports. In fact, millions of earnings  reports are submitted each year with erroneous or missing SSN and name  information, and the same employers often file substantial numbers of  such reports year after year, creating administrative problems for SSA and  IRS and the possibility that Social Security benefits to such workers will  not be accurately calculated.
Under current IRS reporting requirements, employers who chronically and  willfully file inaccurate earnings information will likely never be deemed  noncompliant or penalized. We acknowledge IRS’s concern that more  stringent employer reporting and verification requirements could have tax  compliance implications and pose additional administrative burdens on  the many employers who are already attempting to fulfill their reporting  obligations. Although IRS’s regulations meet statutory requirements, we  are concerned that its current requirements are so minimal that even the  employers with a long standing history of chronically filing reports with  critical errors are never sanctioned. In accordance with our prior  recommendation, IRS is currently examining options for strengthening  employer requirements for soliciting and verifying worker names and  SSNs and developing a formal penalty program. As this effort progresses,  SSA’s ESF data could be valuable to IRS in developing criteria as to what  employer reporting patterns and activities constitute “intentional  disregard” and improve IRS’s ability to target and penalize problem  employers.
At present, it is also unlikely that DHS will take enforcement action  against employers and workers who submit inaccurate information to SSA  to conceal unauthorized work activity. We recognize that in the post-  September 11 environment, DHS enforcement resources have been needed  in critical infrastructure industries and that data-sharing initiatives with  SSA have thus received less priority in recent years. However, it is  important that some level of coordination be reestablished to best leverage  SSA’s data on potential unauthorized work activity and DHS staff  resources to target the most egregious employers.
Finally, any effort to verify worker-supplied identification and work  authorization information warrants a thorough and accurate process. SSA  currently offers several options for employers who choose to verify  worker-provided information and has continually sought to upgrade its  services. However, for the predominant mode of verification—electronic  batch file—employers are not required to submit employee dates of birth  for verification against SSA’s records. Thus, persons using the names and  SSNs of persons much older or younger than themselves to seek  employment would not be detected under current processes. This  represents a critical flaw in SSA’s service. DHS’s Basic Pilot Program  offers another option for addressing an important element affecting ESF  postings—individuals who are not authorized to work in the United States.  However, DHS officials believe they will likely experience capacity  problems in the future if significantly more employers begin using the  service, in part because of the number of cases requiring manual  intervention to verify employment status. Accordingly, it is crucial that any  deliberations pertaining to strengthening employer verification  requirements include an informed discussion among the affected federal  agencies as to the systems requirements and safeguards necessary to  ensure the integrity, timeliness, and efficiency of the verification service.
section_title: Recommendations
paragraphs: To better ensure that workers are accurately identified on Form W-2s  necessary for the efficient administration of Social Security and tax laws,  we recommend that the Commissioner of the Internal Revenue Service    Coordinate its ongoing effort to reassess employer requirements for  soliciting and verifying worker names and SSNs with SSA. This could  include utilizing SSA’s ESF data to identify employer reporting patterns  and activities that could constitute intentional disregard and using such  data to develop criteria to better target and penalize only those employers  who chronically submit inaccurate earnings reports or requiring such  employers to verify worker identity information with SSA.
Ensure the development of any new reasonable cause requirements occurs  in consultation with SSA and DHS, which operate employee verification  services. Such consultation could facilitate systems improvements to  ensure the integrity, timeliness, and efficiency of existing verification  services.
We recommend that the Commissioner of the Social Security  Administration  require employers seeking verifications, via SSA’s electronic batch  process, to submit the workers’ dates of birth, for matching against SSA’s  records.
We recommend that the Secretary of the Department of Homeland  Security  take steps to determine how DHS can best use SSA-supplied data on  potential illegal work activity and specific industries associated most  frequently with such activity to support its worksite enforcement efforts.
section_title: Agency Comments and Our Evaluation
paragraphs: We obtained written comments on a draft of this report from the  Commissioners of SSA and IRS and the Department of Homeland Security.  The comments have been reproduced in appendixes II, III and IV. Each  agency also provided additional technical comments, which have been  incorporated in the report as appropriate.
SSA noted that it is continuing to assist the employer community in  verifying worker information and welcomed the opportunity to work with  IRS and DHS to improve verification operations. The agency also  reiterated its commitment to continued outreach to employers and other  federal agencies, as well as to facilitate accurate reporting via its Employer  800 number service and Employer Service Liaison Officers (ESLOs)  located in each region. SSA agreed to investigate further our  recommendation that it should require employers who use the electronic  batch process to submit workers’ dates of birth for matching against its  records. However, SSA noted that such a requirement could create  additional burdens for the employer community and workload increases  for SSA staff responsible for investigating mismatches. We acknowledge  SSA’s concerns in this area. However, given the volume of verification  requests processed through SSA’s batch process each year, and the  potential vulnerabilities associated with not matching against workers’  dates of birth, we continue to believe prompt action is needed. Addressing  our recommendation would also make SSA’s batch verification process  consistent with the agency’s other modes of verification, whereby  workers’ dates of birth are a required element for matching against SSA’s  records.
In its comments, IRS acknowledged that employers’ submission of  earnings reports with inaccurate SSNs increases the quantity of suspense  file postings, although it expressed the view that these mismatches stem  from inaccurate or incomplete information provided by workers. The  agency also noted that it is currently conducting compliance checks in  coordination with SSA on those employers with the most egregious cases  of reporting incomplete or inaccurate worker SSNs to SSA. Accordingly,  IRS agreed with our recommendation that it work closely with SSA in its  ongoing efforts to reassess current employer requirements for soliciting  and verifying worker names and SSNs. IRS also concurred with our  recommendation that the agency ensure that the development of any new  reasonable cause requirements occurs in consultation with SSA and DHS,  which operate worker verification services.
DHS noted that while its general worksite enforcement program has had  decreasing resources recently, since September 11 DHS has refocused its  enforcement activities on removing unauthorized workers employed in  critical infrastructure facilities. Such enforcement activities have resulted  in removing over 5,000 unauthorized workers who were employed in  industry categories that have been the historical targets of traditional  worksite enforcement operations—food service, janitorial, agriculture,  and construction, among others, but employed in critical infrastructure  facilities. Therefore, DHS contends that although there is a decrease in the  number of criminal cases and civil fines, there is still a significant effort  under way to remove unauthorized workers. DHS also explained that  although it will take the necessary steps to determine the best use of the  annual SSA-provided listing of persons with earnings who lack work  authorization, there are various impediments to accomplishing this task.  Regarding DHS’s comments, we have summarized both the reasons for  DHS’s switch in enforcement priorities and the impediments to using the  SSA-provided listing. We acknowledge DHS’s current efforts to determine  how it can best use the listing and we support cost effective ways by  which the listing might identify illegal work activity and specific industries  associated most frequently with such activity, to further worksite  enforcement efforts.
As agreed with your offices, unless you publicly announce its contents  earlier, we plan no further distribution of this report until 30 days after its  issue date. At that time, we will send copies of this report to the  Commissioner of the Social Security Administration, the Commissioner of  the Internal Revenue Service, and the Secretary of the Department of  Homeland Security, the Director of the Office of Management and Budget,  appropriate congressional committees, and other interested parties. In  addition, the report will be available at no charge on GAO's Web site at  http://www.gao.gov/.
If you have any questions concerning this report, please contact me at  (202) 512-7215 or Dan Bertoni at (202) 512-5988. Other major contributors  are listed in appendix V.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: To obtain information describing the various electronic processes that the  Social Security Administration (SSA) uses to post earnings reports to  worker records and resolve errors in reported worker names and Social  Security Numbers (SSN), we reviewed numerous SSA Office of the  Inspector General, GAO, and contractor reports on the Earnings Suspense  File (ESF). We met with SSA officials who manage the earnings posting  process and examined SSA’s Program Operations Manual System to  identify and document processes and procedures for posting earnings to  and reinstating earnings from the ESF. We reviewed information from SSA  that described the various validation routines it uses in attempting to find  valid matches of names and SSNs for earnings reports that do not initially  match its records. We obtained management data on the number of  earnings reports that these routines either posted to its records or  reinstated from the ESF. We also visited eight SSA field offices located in  New York, New Jersey, Virginia, and California that processed significant  numbers of earnings reinstatements in 2003 to discuss their reinstatement  activities and document procedures for reviewing and validating evidence  submitted by individuals seeking to have earnings reinstated from the ESF.
To determine the characteristics of earnings posted in the ESF, we  obtained and analyzed an electronic copy of the ESF for tax years 1985 to  2000. We selected these years because they covered (1) a substantial  period of time and (2) postings to and reinstatements from the ESF that  occurred after legislation enacted in 1986 granted amnesty to unauthorized  immigrants. Further, during this period, SSA also enhanced its earnings  records in a way that provided more detailed information about reinstated  earnings. The earnings records that we examined covered only reports on  current wages, including reports that were filed late. The ESF contained  84.6 million records that met our criteria at the time we obtained the file in  January 2003; these records were submitted by a total of 4.3 million  different employers. The file we obtained contained information reporting  employer’s identification number, the reported worker’s name and SSN on  the invalid earnings report, the amount of unposted earnings, and the tax  year of the report. From SSA, we were able to obtain Standard Industrial  Classification codes for 1.8 million of the employers who had earnings in  the ESF to identify the types of employers who had filed the earnings  reports that we analyzed. (Because of confidentiality requirements, we  were unable to arrange for timely access to similar codes for about   2.5 million employers in the file from the Census Bureau, which controls  this information).
To analyze the reinstatement of earnings reported under repeatedly used  SSNs, we first examined the ESF to identify the frequency that each SSN  appeared for tax years 1985 to 2000. On the basis of our examination, we  selected SSNs that appeared most frequently in the ESF for our  reinstatement analysis. Specifically, we selected 295 SSNs that had   1,000 or more reports in the ESF for the tax years analyzed. Overall, the   295 SSNs had about 9.6 million earnings reports representing about   $14.5 billion in unposted earnings still in the ESF at the time that we  received a copy of the file. We then obtained a complete copy of SSA’s  earnings reinstatement file that contained over 142 million records across  all SSNs that had received reinstatements to identify the reinstatements  made from these 295 reported SSNs. By comparing the 295 SSNs with data  in the reinstatement file, we identified that over the years SSA had  reinstated about 13.1 million earnings reports from these 295 SSNs to   11.7 million individuals. For the 11.7 million individuals, we obtained  selected information from SSA’s Numident, Master Earnings File, and  Master Beneficiary Records. This information allowed us to identify the  valid Social Security record that received each reinstated earnings report  and obtain demographic information about each valid record holder  receiving the reinstatement, such as age, gender, date when the person’s  SSN was issued, and place of birth.
To identify factors that contribute to ESF postings, we examined  provisions of law that authorize (1) penalties for employers who file  earnings reports with inaccurate SSNs and hire workers who are not  authorized to work in the United States and (2) the disclosure of  information on persons with nonwork SSNs to the Department of  Homeland Security (DHS). We met with Internal Revenue Service (IRS)  and DHS officials and obtained available enforcement data on the use of  these penalties. We did not, however, evaluate their specific enforcement  efforts. We analyzed information about worker verification tools that SSA  offers to assist employers to report their workers’ earnings and DHS offers  to identify their workers’ eligibility status under immigration laws. We also  reviewed a detailed contractor study covering DHS’s implementation of  the Basic Pilot Program. To assess the reliability of databases used, we  reviewed reports provided by SSA and its Office of the Inspector General,  which contained recent assessments of these databases. We also  interviewed knowledgeable agency officials to further document the  reliability of these databases. In addition, we checked the data for internal  logic, consistency, and reasonableness. We determined that all the  databases were sufficiently reliable for purposes of our review.
Our work was conducted between October 2002 and December 2004 in  accordance with generally accepted government auditing standards.
section_title: Appendix II: Comments from the Social Security Administration
section_title: Appendix III: Comments from the Internal Revenue Service
section_title: Appendix IV: Comments from the Department of Homeland Security
section_title: Appendix V: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: In addition to those named above, the following team members made key  contributions to this report throughout all aspects of its development:  William Staab and Paul Wright. In addition, Jean Cook, Gerard Grant,  Luann Moy, Daniel Schwimer, Vanessa Taylor, and Wayne Turowski made  contributions to this report.