Social Security Numbers: Coordinated Approach to SSN Data Could Help Reduce Unauthorized Work
Published: 2006-02-16T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: To lawfully work in the United States, individuals must have a valid Social Security number (SSN) and, if they are not citizens, authorization to work from the Department of Homeland Security (DHS). Noncitizens seeking work must provide both an SSN and evidence of work authorization to their employer. Yet individuals without these required authorizations have gained employment with false information. How these instances of unauthorized work can be identified or prevented challenges the federal agencies involved. Congress asked GAO to discuss how federal agencies can better share reported earnings data to identify unauthorized work. Specifically, this testimony addresses two issues: (1) the Social Security data that could help identify unauthorized employment and (2) coordination among certain federal agencies to improve the accuracy and usefulness of such data.
section_title: What GAO Found
paragraphs: The Social Security Administration (SSA) has two types of data that could be useful to reducing unauthorized work--individual Social Security records and earnings reports. Individual Social Security records, which include name, date of birth, and SSN, are used by SSA to provide verification services to employers wishing to assure themselves that the names and SSNs of their workers match SSA's records. SSA also uses Social Security records in a work authorization verification system developed by DHS called the Basic Pilot that offers electronic verification of worker status. These services are voluntary, and none are widely used by employers. SSA's earnings records provide additional information, which could be used as an enforcement tool to identify unauthorized work. Currently, SSA uses such records to produce two relevant files based on earnings records, which are the Nonwork Alien File and the Earnings Suspense File (ESF). The Nonwork Alien File contains earnings information posted to SSNs issued for nonwork purposes, suggesting that these individuals are working without authorization. The ESF contains earnings reports for which SSA is unable to match the name and SSN of the worker, suggesting employer error, SSN misuse, or unauthorized work activity. In addition, we have reported that the ESF, which contained roughly 250 million records as of December 2004, appears to include an increasing number of records associated with probable unauthorized work, but because of statutory constraints, the ESF is not available to DHS as an enforcement tool. Improving the usefulness of SSA data could help identify unauthorized work and ensure that limited enforcement resources are targeted effectively. Ensuring that the most useful data are available requires close coordination among the three federal agencies involved in collecting and using the data--SSA, the Internal Revenue Service (IRS), and DHS. We have previously recommended that IRS work with DHS and SSA as it considers strengthening its employer wage reporting regulations, as such action could improve the accuracy of reported wage data, and that DHS, with SSA, determine how best to use such wage data to identify potential illegal work activity. Efforts to improve data will only make a difference, however, if agencies work together to improve employer reporting and ensure they can conduct effective worksite enforcement programs.

section_title: Letter
paragraphs: I am pleased to be here today to discuss Social Security numbers (SSNs)  and their use in preventing and detecting unauthorized work. To lawfully  work in the United States, individuals must have a valid SSN and, if they  are not citizens, authorization to work from the Department of Homeland  Security (DHS). Noncitizens seeking work are required to provide both an  SSN and evidence of work authorization to their employers. Yet  individuals without these required authorizations can gain employment  with false information. How these instances of unauthorized work can be  identified or prevented challenges the federal agencies involved.
In prior GAO work on these issues, we have reported on the use of Social  Security Administration (SSA) data for identity and employment eligibility  verification. Although SSA’s verification systems have improved, use of  SSA information in worksite enforcement continues to be challenging.  Today I will discuss two issues: (1) the Social Security data that could help  identify some unauthorized employment and (2) coordination among SSA,  DHS, and the Internal Revenue Service (IRS) to improve the accuracy and  usefulness of such data.
My statement is based primarily on prior GAO work on these topics. We  are presently conducting additional work for these subcommittees  examining the use of SSA data for detecting unauthorized work. To  determine how SSA and DHS are coordinating to improve earnings data,  we conducted interviews with officials from SSA, the SSA Office of the  Inspector General, and DHS. In addition, we obtained and reviewed data  from SSA on individuals who had reported earnings under a nonwork SSN,  and we reviewed other documentation provided to us by these agencies.  We began this review in October 2005 in accordance with generally  accepted government auditing standards, and our work is ongoing.
In summary, SSA has two types of data that could be useful for addressing  unauthorized work— Social Security records for individuals and earnings  reports. Individual Social Security records include name, date of birth, and  SSN, among other things. SSA uses these data to provide SSN verification  services free of charge to employers wishing to assure themselves that the  names and SSNs that their workers provided match SSA’s records. SSA  also uses Social Security records in a work authorization verification  system called the Basic Pilot program developed by DHS, which offers  electronic verification of worker status. These systems are voluntary and  not widely used by employers. SSA’s earnings records provide a different  sort of information that could be used for identifying unauthorized work.  SSA uses such records to produce two relevant files. SSA’s Nonwork Alien  File contains earnings reports that are posted to SSNs that were issued for  nonwork purposes, which suggests individuals are working without DHS  work authorization. By law, SSA provides nonwork alien information to  DHS annually, and our ongoing work for you suggests that a number of  these records are associated with people who became work authorized  some time after receiving their nonwork SSNs. A second file of interest,  the Earnings Suspense File (ESF), contains earnings reports in which the  name and SSN do not match SSA’s records. We have reported that this  file, which contained 246 million records as of November 2004, appears to  include an increasing number of records associated with unauthorized  work.
Improving the usefulness of SSA data could help identify some  unauthorized work and ensure that limited enforcement resources are  targeted effectively. Ensuring that the most useful data are available  requires close coordination among the three federal agencies involved in  collecting and using the data—SSA, IRS, and DHS.  We have previously  recommended that IRS work with DHS and SSA as it considers  strengthening its employer wage reporting regulations, as such action  could improve the accuracy of reported wage data, and that DHS, with  SSA, determine how best to use such wage data to identify potential illegal  work activity.
subsections: section_title: Background
paragraphs: The Social Security Act of 1935 authorized the SSA to establish a record- keeping system to help manage the Social Security program and resulted  in the creation of the SSN. SSA uses the SSN as a means to track workers’  earnings and eligibility for Social Security benefits. Through a process  known as enumeration, each eligible person receives a unique number,  which SSA uses for recording workers’ employment history and Social  Security benefits. SSNs are routinely issued to U.S. citizens, and they are  also available to noncitizens lawfully admitted to the United States with  permission to work. Lawfully admitted noncitizens who lack DHS work  authorization may qualify for an SSN for nonwork purposes when a  federal, state, or local law requires that they have an SSN to obtain a  particular welfare benefit or service. In this case, the Social Security card  notes that the SSN is “Not Valid for Employment.” As of  2003, SSA had  assigned slightly more than 7 million nonwork SSNs. Over the years, SSA  has tightened the requirements for assigning nonwork SSNs.
In 1986, Congress passed the Immigration Reform and Control Act (IRCA),  which made it illegal for individuals and entities to knowingly hire and  continue to employ unauthorized workers. The act established a two- pronged approach for helping to limit the employment of unauthorized  workers: (1) an employment verification process through which employers  are to verify newly hired workers’ employment eligibility and (2) a  sanctions program for fining employers who do not comply with the act.  Under the employment verification process, workers and employers must  complete the Employment Eligibility Verification Form (Form I-9) to  certify that the workers are authorized to work in the United States. Those  employers who do not follow the verification process can be sanctioned.
section_title: SSA Individual Records and Earnings Reports Can Identify Some Unauthorized Work
paragraphs: SSA has two types of data useful to identifying unauthorized work— individual Social Security records and earnings reports. Its individual  records, which include name, date of birth, and SSN, among other things,  can be used to verify that a worker is providing the SSN that was assigned  to a person of that name. These records are used in verification services  that are available free of charge to employers on a voluntary basis. SSA’s  earnings reports could also be used to identify some unauthorized work by  reporting noncitizens who may have worked without authorization and  employers who have a history of providing SSN/name combinations that  do not match SSA records.
subsections: section_title: SSA Records Provide Verification Services to Improve Wage Data
paragraphs: SSA uses individual Social Security records in its Employee Verification  Service (EVS) and the Web-based SSN Verification Service (SSNVS),  which employers can use to assure themselves that the names and SSNs of  their workers match SSA’s records. The services, designed to ensure  accurate employer wage reporting, are offered free of charge. Employer  use is voluntary. Although these systems only confirm whether submitted  names and SSNs match, they could help employers identify workers who  provide an SSN with fictitious information.
Over the years, SSA has developed several different verification methods  under EVS. For example, employers may submit lists of workers’ names  and SSNs by mail on a variety of media, such as magnetic tapes or  diskettes. Alternatively, employers may call a toll-free number or present a  hard-copy list via fax, mail, or hand delivery to a local SSA office. SSA  verifies the information received from employers by comparing it with  information in its own records. SSA then advises the employer whether  worker names and SSNs match. EVS offers the benefit of verifying name  and SSN combinations for a company’s entire payroll. However, the  system would not be able to detect a worker’s misuse of another person’s  name and SSN as long as the name and SSN matched. Employers do not  widely use this service.
In an attempt to make verification more attractive to employers, in 2005,  SSA implemented the Web-based SSNVS. It is designed to respond to  employer requests within 24 hours. Requests of up to 10 worker names  and SSNs can be verified instantaneously. Larger requests of up to 250,000  names can be submitted in a batch file, and SSA will provide results by the  next business day. While this new system is attracting more employer  interest, it is still not widely used.
SSA also uses its records in a work eligibility verification system  developed by DHS called the Basic Pilot, which offers electronic  verification of work authorization for newly hired workers. Use of this  program by employers is also voluntary, and the service has been available  nationwide only since December 2004. Employers who agree to participate  must electronically verify the status of all newly hired workers within 3  days of hire, using information that a new hire is required to provide.  Under this program, an employer electronically sends worker data through  DHS to SSA to check the validity of the SSN, name, date of birth, and  citizenship provided by the worker. SSA records are used to confirm  information on citizens. For noncitizens, SSA confirms SSN, name, and  date of birth, then refers the request to DHS to verify work authorization  status against DHS’s automated records. If DHS cannot verify work  authorization status for the submitted name and SSN electronically, the  query is referred to a DHS field office for additional research by  immigration status verifiers. If SSA is unable to verify the SSN, name, and  date of birth or DHS record searches cannot verify work authorization, a  tentative nonconfirmation response is transmitted to the employer. After  checking the accuracy of the information and resubmitting the  information, if necessary, the employer must advise the worker of the  finding and refer him or her to either DHS or SSA to correct the problem.  During this time, employers are not to take any adverse actions against  those workers related to verification, such as limiting their work  assignments or pay. When workers do not contest their tentative  nonconfirmations within the allotted time, the Basic Pilot program issues a  final nonconfirmation. Employers are required to either immediately  terminate employment or notify DHS of their continued employment.
Like SSA’s verification services, the Basic Pilot is voluntary and is not  widely utilized. As of January 2006, about 5,500 businesses nationwide had  registered to participate, although a significantly smaller number of these  are active users. Active participants have made about 4.7 million initial  verification requests over a 5-year period (981,000 requests were made in  fiscal year 2005). DHS reported on actions taken to address weaknesses in  the program that had been identified during the early years of the program.  They included delays in updating immigration records, erroneous  nonconfirmations, and program software that was not user friendly. We  subsequently reported on additional challenges, specifically, the capacity  constraints of the system, its inability to detect identity fraud, and the fact  that the program is limited to verifying work authorization of newly hired  workers.
section_title: SSA Earnings Data May Be Used to Identify Some Unauthorized Work
paragraphs: SSA’s earnings records can also provide information on unauthorized  work. There are two sets of data that are relevant to unauthorized work.  The first set, the Nonwork Alien File, contains earnings reports for SSNs  that were issued for nonwork purposes. The second set, the Earnings  Suspense File, contains earnings reports in which the name and SSN do  not match. Both could help identify some unauthorized work.
subsections: section_title: SSA’s Nonwork Alien File
paragraphs: SSA is required by law to provide its Nonwork Alien File to DHS since it  suggests a group of people who are in the United States legally but may be  working without authorization. Since 1998, SSA has provided DHS annual  data on over half a million persons with earnings listed under nonwork  SSNs. The file includes annual earnings amounts, worker names and  addresses, and employer names and addresses as well.
DHS has found this file to be of little use to enforcement activities,  however. According to DHS officials, the file is currently not an effective  tool for worksite enforcement due in part to inaccuracies in the data and  the absence of some information that would help the department  efficiently target its enforcement.
In fact, because SSA only updates work authorization status at the request  of the SSN holder, individuals in the file may now be U.S. citizens or  otherwise legal workers who simply have not updated their status with  SSA. Our ongoing work in this area suggests that a number of these  records are indeed associated with people who later obtained permission  to work from DHS. SSA policy is to update work authorization status when  the SSN holder informs the agency of the status change and provides  supporting documentation. Unless the individual informs SSA directly of  the status change, SSA’s enumeration records will continue to show the  person as unauthorized to work and will record his or her earnings to the  Nonwork Alien File. Currently, the extent to which such noncitizens are  included in the file is unknown, but SSA and DHS officials have both  acknowledged that the file may include a number of people who are  currently authorized to work.
DHS officials said that the file would be of greater value if it contained  DHS’s identifying numbers—referred to as alien registration numbers.  According to DHS officials, because persons in the file do not have an  identifier in common use by both agencies, they cannot automatically be  matched with DHS records. As a result, DHS officials told us that they use  names and birth dates to match the records, which can result in  mismatches because names can change and numbers in birth dates may be  transposed. SSA officials have said that generally they do not collect alien  registration numbers from noncitizens. Collecting the alien registration  number and providing it in the Nonwork Alien File is possible, they stated,  but would require modifications to SSA’s information systems and  procedures. They also noted that SSA would only be able to collect the  alien registration number when noncitizens are assigned an SSN or when  such an individual updates his or her record. As part of its procedures,  SSA is required to verify the immigration status of noncitizens before  assigning them an SSN, which requires using alien registration numbers.  However, some noncitizens, such as those who have temporary visas, (e.g.  students) may not have an alien registration number. In these cases, SSA  would not be able to include the number in the Nonwork Alien File.
The time it takes SSA to validate earnings reports and convey the  Nonwork Alien File to DHS also makes the file less effective for worksite  enforcement. When SSA finishes its various processes to ensure that the  file includes the appropriate data, the reported earnings can be up to 2  years old. By that time, many of the noncitizens included in the file may  have changed employers, relocated, or changed their immigration status,  resulting in out-of-date data on individuals or ineffective leads for DHS  agents.
A DHS official told us that if the Nonwork Alien File were to contain  industry codes for the reporting employers, DHS could target those in  industries considered critical for homeland security purposes, which  would be consistent with DHS’s mission and enforcement priorities.  Having information about the industries the employers are in would help  them better link the data to areas of high enforcement priority, such as  airports, power plants, and military bases.
section_title: Earnings Suspense File
paragraphs: Another SSA earnings file, referred to as the Earnings Suspense File,  contains earnings reports in which the name and SSN do not match SSA’s  records, suggesting employer or worker error or, potentially, identity theft  and unauthorized work. We have reported that this file, which contained  246 million records as of November 2004, appears to include an increasing  number of records associated with unauthorized work. SSA’s Office of the  Inspector General has used the ESF to identify employers who have a  history of providing names and SSNs that do not match.
When SSA encounters earnings reports with names and SSNs that do not  match, it makes various attempts to correct them using over twenty  automated processes. However, about 4 percent of all earnings reports still  remain unmatched and are electronically placed in the ESF, where SSA  uses additional automated and manual processes to continue to identify  valid records. Forty-three percent of employers associated with earnings  reports in the ESF are from only 5 of the 83 broad industry categories,  with eating and drinking establishments and construction being the top  categories. A small portion of employers also account for a  disproportionate number of ESF reports. For example, only about 8,900  employers—0.2 percent of all employers with reports recorded in the ESF  for tax years 1985-2000—submitted over 30 percent of the reports we  analyzed.
Our past work has documented that individuals who worked prior to  obtaining work authorization are a growing source of the unmatched  earnings reports in the ESF that are later reinstated to a worker’s account.  Once workers obtain a valid SSN, they can provide SSA evidence of prior  earnings reports representing unauthorized employment prior to receiving  their SSN. Such earnings reports can then be used to determine a worker’s  eligibility for benefits.
DHS officials believe that the ESF could be useful for targeting its limited  worksite enforcement resources. For example, they could use the ESF to  identify employers who provide large numbers of invalid SSNs or names  and SSNs that do not match. They told us that these employers may  knowingly hire unauthorized workers with no SSN or fraudulent SSNs and  that employers who are knowingly reporting incorrect information about  their workers might also be involved in illegal activities involving  unauthorized workers.
However, it is not clear that the ESF, which is much larger than the  Nonwork Alien File, would be manageable or allow for targeted  enforcement. The ESF contains hundreds of millions of records, many  unrelated to unauthorized work, making it difficult to use for targeting  limited resources. While the ESF may help identify some of the most  egregious employers of unauthorized workers, in terms of poor earnings  reporting, its focus is not on unauthorized workers. Our work has shown  that most of the reinstatements from the file belong to U.S.-born citizens,  not to unauthorized workers. In addition, because the ESF contains  privileged taxpayer data, SSA cannot share this information with DHS  without specific legislative authorization. SSA’s Office of the Inspector  General has recommended that SSA seek legislative authority to share this  data with DHS, but SSA responded that it is beyond the agency’s purview  to advance legislation to amend the Internal Revenue Code in order to  allow DHS access to tax return information. IRS officials have also  expressed concern that sharing this data could decrease tax collections  and compliance. We are examining the usefulness of SSA data to DHS for  these subcommittees, and will consider ESF issues as part of this work.
section_title: Closer Coordination by SSA, IRS, and DHS Could Improve Usefulness of SSA Earnings Data
paragraphs: Improving the usefulness of the data could help ensure that limited  enforcement resources are targeted effectively. SSA data could help  identify areas of unauthorized work, but closer collaboration among SSA,  IRS, and DHS can help to ensure that the most useful data are available in  a form that can be used efficiently for enforcement.
Under the current data-sharing arrangement, DHS officials believe the  agency would have to invest significant resources to determine whether  employers it targets are really hiring persons who are not work authorized.  DHS has stated that determining which nonwork SSN holders are now  authorized to work may not be cost-effective and would pull resources  from other national security-related initiatives. Neither SSA nor DHS is  able to easily and quickly update work status because they lack a common  identifier for their records. Updating status without a common identifier  may not be practical because different spellings or name variations  confound large-scale matching efforts. For example, an August 2005 report  from the SSA’s Office of the Inspector General highlights a substantial  proportion of cases in which names were inconsistent between SSA and  DHS. In at least six reports in recent years, SSA’s Office of the Inspector  General has recommended or mentioned prior recommendations that SSA  work with DHS to update information about work authorization. SSA  officials maintain that it is their policy to make changes to the Social  Security record only if the SSN holder initiates the changes and provides  evidentiary documents from DHS. SSA further states that a “resolution of  the discrepant information between DHS and SSA would require more  than a simple verification.”
Despite the many problems with the data, there are steps that could be  taken to improve them. For example, the employers who submit the most  earnings reports for nonwork SSNs might be good candidates for outreach  and education about verifying work eligibility. SSA’s Office of the  Inspector General officials suggested that DHS send letters to employers  of persons with nonwork SSNs. These letters could encourage persons  listed as having nonwork SSNs, who are now authorized to work, to  update their records. The ESF also has the potential to provide useful  information to DHS, but this information has protected tax status.   Although some of the same difficulties that pertain to the Nonwork Alien  File could also affect the usefulness of the ESF to DHS enforcement  efforts, if these challenges could be overcome, authorizing transmittal of at  least some of the ESF information to DHS might be warranted.
Producing accurate, useful data will require substantial continued effort  on the part of SSA, DHS, and the IRS: these efforts will be of little value,  however, if the data are not used for enforcement and to stimulate  changes in employer and employee behavior. We have reported previously  that the IRS program of employer penalties is weak, because of limited  requirements on employers to verify and report accurate worker names  and SSNs; we have recommended that IRS consider strengthening  employer requirements, a course that could over time improve the  accuracy of wage data reported to SSA. We have also reported that,  consistent with DHS’s primary mission in the post-September 11  environment, DHS enforcement resources have focused mainly on critical  infrastructure industries in preference to general worksite enforcement.  In such circumstances, coordination to leverage usable and useful SSA  data is essential to ensure that limited DHS worksite enforcement  resources are targeted effectively.
section_title: Concluding Observations
paragraphs: The federal government likely can make use of information it already has  to better support enforcement of immigration, work authorization and tax  laws. The Earnings Suspense and the Nonwork Alien files have potential,  but even the best information will not make a difference if the relevant  federal agencies do not have credible enforcement programs. In fact,  sharing earnings data to identify potential unauthorized workers could  unnecessarily disclose sensitive taxpayer information if the data are not  utilized by enforcement programs. To address unauthorized work more  meaningfully, IRS, DHS and SSA need to work together to improve  employer reporting, develop more usable and useful data sets for  suspicious earnings reports, and better target limited enforcement  resources.  We look forward to contributing to this endeavor as we  continue to conduct our work on using SSA data to help reduce  unauthorized work.
This concludes my prepared statement. I will be happy to answer any  questions you may have.
section_title: Contacts and Acknowledgments
paragraphs: For questions regarding this testimony, please call Barbara Bovbjerg at  (202) 512-7215. Other key contributors to this statement were Blake  Ainsworth, Assistant Director; Lara Laufer, Analyst-in-Charge; Beverly  Crawford; Susan Bernstein; Michael Brostek; Rebecca Gambler; Jason  Holsclaw; Daniel Schwimer; Richard Stana; Vanessa Taylor; Walter Vance;  and Paul Wright.
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