Disability Insurance: SSA Needs to Better Track Efforts and Evaluate Options to Recover Debt and Deter Potential Fraud
Released: 2016-04-13T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: SSA's DI program provides cash benefits to millions of Americans who can no longer work due to a disability. While most benefits are paid correctly, beneficiary or SSA error can result in overpayments—that is, payments made in excess of what is owed. In fiscal year 2015, SSA detected $1.2 billion in new overpayments, adding to growing cumulative debt. Further, when individuals inappropriately obtain benefits in certain situations, SSA can levy penalties or withhold benefits for a period of time. GAO was asked to study the use of these actions, and SSA efforts to recover overpayments.

This report examined how and to what extent SSA recovers overpayments, and imposes penalties and sanctions. GAO analyzed data on existing DI overpayments and repayment amounts at the end of fiscal year 2015 to determine the effect of potential improvements in recovery methods on collection amounts; and reviewed relevant federal laws, regulations, policies, and studies.

section_title: What GAO Found
paragraphs: In fiscal year 2015, the Social Security Administration (SSA) recovered $857 million in Disability Insurance (DI) overpayments that it erroneously made to beneficiaries; however, SSA is missing opportunities to recover more. More than three-fourths of the recovered overpayments in fiscal year 2015 were collected by withholding all or a portion of a beneficiary's monthly benefits. SSA's policy is to set withholding repayment amounts based on a beneficiary's income, expenses, and assets, but its policy regarding which expenses are reasonable is not clear. Moreover, SSA cannot know if repayment periods and amounts are consistently determined due to a lack of oversight, such as supervisory review or targeted quality reviews. Further, SSA lacks concrete plans for pursuing other debt recovery options, while GAO's analysis suggests that some options could potentially increase collections from individuals having their benefits withheld. For example, about half of withholding plans at the end of fiscal year 2015 extended beyond SSA's standard 36-month time frame, and could be shortened. Making the minimum monthly repayment 10 percent of a beneficiary's monthly benefit, instead of the current $10 minimum, would shorten the median length of all scheduled withholding plans by almost a third (from 3.4 years to 2.3 years) and result in an additional $276 million collected over the next 5 years.

While SSA officials reported an increase in recent years in the amount of civil monetary penalties imposed, SSA currently lacks reliable data to effectively track the disposition of penalties and administrative sanctions. For example, SSA cannot readily track the amounts ultimately collected from penalties, which are fines imposed by the Office of the Inspector General (OIG) and collected by SSA. Further, SSA currently has only two paths for collecting on penalties—withholding benefits and voluntary payment. A recent OIG audit found that the majority of uncollected penalty amounts it reviewed were from individuals who were not receiving SSA benefits and with whom SSA had no ongoing collection actions. SSA determined it is able to use certain alternative collection tools, such as wage garnishment, but only recently began drafting regulations to use them, and the regulations are still undergoing internal review. In addition, SSA lacks and had not explored obtaining authority to use other tools for collecting penalties that it uses for collecting overpayments—such as credit bureau reporting. Related to administrative sanctions, SSA could not provide reliable data on how often it imposes sanctions, a punishment in which benefit payments are temporarily stopped. SSA's process of manually entering sanctions information into a database may be subject to errors or omissions. Regional officials said this can result in incomplete information and staff not taking appropriate action on cases. SSA changed its procedure in 2013 to direct that all potential sanctions first be reviewed for potential prosecution or civil monetary penalties, but SSA's lack of reliable data prevents it from determining whether this new procedure achieved the intended effect of more consistent application of sanctions. In an internal evaluation of its procedures, SSA identified weaknesses with how sanctions decisions are tracked and communicated, but it is in the early stages of deciding how to address them. The shortcomings in SSA's use of penalties and sanctions potentially diminish the deterrent value of these actions against individuals who may fraudulently obtain benefits.

section_title: What GAO Recommends
paragraphs: GAO is making eight recommendations to SSA, including: clarify its policy and improve oversight related to debt repayment plans, pursue additional recovery options for overpayments and penalties, and improve its ability to track penalties and sanctions. SSA agreed with seven, but disagreed with a recommendation on debt recovery options. GAO maintains the options merit exploration, as discussed further in the report.

section_title: Letter
paragraphs: The Social Security Administration’s (SSA) Disability Insurance (DI)  program serves as a critical safety net for individuals who can no longer  work because of physical or mental impairments. In fiscal year 2015,  about 10.8 million beneficiaries and their dependents received  approximately $144 billion in benefits. That same year, SSA reported  detecting $1.2 billion in new DI overpayments—payments made in excess  of what individuals are owed. Past GAO work has highlighted the  importance of preventing overpayments to DI beneficiaries given the  financial burden it places on recipients and the difficulty this population  may have in repaying these debts. Nevertheless, recovering erroneous  payments once they are made is also an important part of maintaining the  integrity of the program. While SSA has a number of tools to recover  overpaid benefits, previous GAO reviews found shortcomings in the  agency’s recovery efforts, and the total amount of DI overpayment debt  that has accumulated increased by 70 percent over the past 10 years.  SSA can also take actions against individuals who mislead the agency to  fraudulently obtain benefits by imposing civil monetary penalties, or  imposing administrative sanctions that involve halting benefit payments.  Yet past work by SSA’s Office of the Inspector General found that SSA  did not effectively collect penalties and rarely sanctioned individuals.

In light of these issues, you asked us to study SSA’s efforts to collect  overpayments, and its use of penalties and sanctions. This report  examines (1) how and to what extent SSA is recovering DI overpayments,  and (2) SSA’s procedures for imposing penalties and sanctions, and how  often they are used.

To determine how and to what extent SSA recovers overpayments, we  collected available data on the amounts of overpayments incurred,  collected, and waived or otherwise written off for fiscal years 2006  through 2015. We also obtained data on existing DI overpayments and  repayment plan amounts as of September 30, 2015. We used these data  to determine the number and amount of overpayments owed to SSA, and  to estimate the length of benefit withholding plans to repay these debts,  which were in effect as of that date. We also used these data to calculate  the effect on scheduled repayments if SSA were to implement additional  debt collection methods. We assessed the reliability of these data by  checking for implausible values and by comparing the data to figures  publicly reported by SSA. We found these data to be sufficiently reliable  for our purposes. To provide additional insight on how SSA documents  and determines how much beneficiaries can repay on overpayment  debts, we reviewed a non-representative sample of 16 overpayment  cases. We selected cases to reflect a range of amounts based on the  amount of the original overpayment and the percentage of beneficiaries’  monthly benefits withheld to repay debts. We then selected a random  sample of these subsets of cases for review.

To examine SSA’s use of civil monetary penalties and administrative  sanctions, we examined available data from SSA and SSA’s Office of the  Inspector General (OIG), and reviewed recent SSA evaluations of its  sanctions procedures. After discussing SSA’s procedures for collecting  and tracking penalties and sanctions, we determined that available data  on their disposition were not sufficiently reliable for our purposes. We also  interviewed officials responsible for overseeing sanctions in three of  SSA’s regional offices. We selected these regions (Atlanta, Chicago, and  San Francisco) based on variations in their sanctions workloads and error  rates. We also spoke to staff in the New York regional office, which  developed a database for tracking sanctions. We assessed SSA’s efforts  against Federal Internal Control Standards and GAO’s Framework for  Managing Fraud Risks in Federal Programs. To provide additional views  and perspectives, we interviewed representatives from a network of  disability advocates and an organization that represents SSA field office  managers. We also reviewed relevant federal laws and regulations, and  SSA program documentation, including policies, procedures, and  performance plans, as well as reports from SSA and SSA’s OIG.  Additional information on our scope and methodology is provided in  appendix I.

We conducted this performance audit from November 2014 to April 2016  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: SSA’s DI program provides cash benefits to individuals with disabilities,  and paid $144 billion to 10.8 million beneficiaries and their families in  fiscal year 2015. Individuals are generally considered to have a disability  if (1) they cannot perform work that they did before and cannot adjust to  other work because of their medical condition(s); and (2) their disability  has lasted or is expected to last at least 1 year, or is expected to result in  death. Further, individuals must have worked and paid into the program  for a minimum period of time to qualify for DI benefits.
subsections: section_title: DI Overpayments
paragraphs: DI overpayments occur when beneficiaries are paid more than they  should be for a given period of time. We previously found that more than  half of all DI overpayments are paid to beneficiaries earning above  program limits. Overpayments may also result if SSA does not cease  benefit payments when notified by a beneficiary of a change in work  status, when inaccurate information and administrative errors lead to  incorrectly calculated benefits, or as the result of individuals knowingly  misleading the agency or committing fraud. As of September 30, 2015,  approximately 637,000 individuals owed about $6.3 billion to SSA in DI  overpayment debt.

SSA will seek repayment of most overpaid benefits after pursuing various  procedural steps. Specifically, when SSA detects an overpayment, it  requests a full immediate refund, unless the overpayment can be withheld  from the beneficiary’s next monthly benefit. SSA also notifies the overpaid  person that they may request reconsideration, a waiver, or both. A  beneficiary requests reconsideration when he or she disputes that an  overpayment occurred or the amount of the overpayment, and requests a  waiver when asserting that he or she is neither responsible for the  overpayment nor capable of repaying it. SSA may grant a waiver request  if it finds that the beneficiary was not at fault for the overpayment and that  recovering the overpayment would defeat the purpose of the program or  be against good conscience and equity. A waiver permanently  terminates collection of a debt.

If SSA denies a reconsideration, a waiver, or both, the agency will request  full repayment. SSA will attempt to withhold SSA benefits from the  beneficiary to immediately recoup the full amount. If the individual is not  receiving SSA benefits at the time or is unable to immediately pay the full  amount owed, the agency generally requests a repayment plan. This may  take the form of voluntary remittances or withholding from monthly SSA  benefits. These withholdings may be taken from DI or other SSA benefits  being received, such as Supplemental Security Income (SSI) benefits.  Withholding from other SSA benefits is known as cross-program  recovery. SSA policy is to obtain repayment within 36 months, but it may  approve longer repayment periods after reviewing an individual’s income,  expenses, and assets. SSA regulations require a minimum monthly DI  withholding of $10, an amount that has not changed since 1960 according  to SSA.

SSA’s policy is to stop its collection activities and temporarily write off a  debt if it meets at least one of these criteria: the debtor cannot or will not  repay the debt, the debtor cannot be located after a diligent search, the  cost of collection actions is likely to exceed the amount recovered, or  the debt is at least two years delinquent. (SSA may refer to such debt  write-offs as terminating or conditionally writing off debts.) Temporarily  writing off debts conditionally removes them from SSA’s accounts  receivable balance, although SSA will refer debts to Treasury for  collection through external tools. Prior to referring debts to Treasury, SSA  notifies debtors and informs them of the appeal rights. SSA will re- establish these debts and its own collection efforts if it receives payment  through these external collection tools or if the individual becomes re- entitled to Social Security benefits. External debt collection tools include  tax refund offset, which withholds or reduces federal tax refunds to the  individual;  federal salary offset, which withholds or reduces wages and payments  to federal employees; administrative offset, which withholds or reduces other federal  payments (other than tax refunds or salary) to the individual; administrative wage garnishment, which garnishes wages and  payments from private employers or state and local governments; and  credit bureau referral, which reports delinquent debt to credit bureaus  and may adversely affect an individual’s credit scores.

Conditionally written-off debts remain subject to collections through any  available tools until the debt is paid in full or the case is otherwise  resolved. As of the end of fiscal year 2015, SSA had $1.5 billion dollars of  overpayments that were conditionally written off. The average amount of  written-off debt was about $4,100 and more than 75 percent of these  debts were written off over 5 years ago. About 30 percent of people in  written-off status were under age 18 when a parent received benefits for  them and most of these recipients were written off in their late teens or  twenties.

The amount of outstanding DI overpayments increased by 70 percent  between fiscal years 2006 and 2015, with the amount of debt newly  detected and reestablished exceeding the amount collected, waived, or  conditionally written off in 9 of the last 10 years. Moreover, while  collections of prior debt have seen some increases over the past 10  years, they have not kept pace with new debt established (see fig. 1).

section_title: Civil Monetary Penalties and Administrative Sanctions
paragraphs: SSA can take several actions against individuals who knowingly mislead  SSA or make false statements to obtain benefits, and these actions serve  as deterrents against potential fraud and abuse. Allegations of suspected  wrongdoing are referred to SSA’s OIG by SSA staff or the public. OIG  will assess each allegation received to determine whether they warrant  investigation. According to SSA, those opened for investigation must be  referred to the Department of Justice (DOJ) under the U.S. Attorney of  jurisdiction any time OIG has grounds to believe there has been a  criminal violation, as required by the Inspector General Act.

Once DOJ reviews a case for potential civil or criminal action, OIG  decides to impose civil monetary penalties (penalties) where warranted.  Section 1129 of the Social Security Act provides for penalties against  individuals who make certain false statements, representations, or  omissions in the context of determinations of initial or continuing  eligibility. Under that section, there are certain factors that must be  considered when determining the amount of a penalty, which are: the  nature of the individual’s actions, the circumstances under which the  actions occurred, the individual’s history of prior offenses, the individual’s  degree of culpability in the current case, the financial condition of the  individual, and any other factors that justice may require. OIG officials told  us that they exercise discretion when deciding which cases to pursue for  penalties and take into account the age of the individual and the  availability of OIG resources, among other considerations. A penalty of up  to $5,000 may be imposed for each false statement or material omission,  and an additional assessment up to double any payment that was made  as a result, may be imposed. OIG’s Office of Counsel to the Inspector  General (OCIG) imposes penalties, but subsequently refers penalties  imposed to SSA’s Office of Operations for collection. According to SSA,  because penalties result from fraud and misconduct, SSA cannot  terminate collection or write off the debt without the permission of DOJ.  Additionally, individuals cannot discharge penalties through bankruptcy.

If OCIG declines to impose a penalty, it will consider whether  administrative sanctions (sanctions) might be appropriate. If it determines  that sanctions may be suitable, OCIG will return the case to SSA for  further consideration. SSA is ultimately responsible for deciding whether  sanctions are imposed in each case. If it imposes sanctions, the  sanctioned individual will not receive benefit payments that he or she  would have been entitled to for the duration of the sanction period: 6  months for a first occurrence, 12 months for a second occurrence, and 24  months for any subsequent occurrences.

section_title: SSA Is Missing Opportunities to Improve Recovery of Disability Insurance Overpayments
subsections: section_title: SSA Relies on Withholding Benefits to Recover Most Overpayments
paragraphs: In fiscal year 2015, SSA identified about $1.2 billion in new DI  overpayment debt and recovered about $857 million, of which 78  percent was collected by withholding some or all of beneficiaries’ monthly  benefits (see fig. 2). SSA officials told us benefit withholding is their most  effective tool for recovering overpayments and that collecting  overpayments from individuals who no longer receive benefits can be  difficult as these individuals may lack tax refunds or other federal and  state payments to offset. Nonetheless, while withholding accounts for the  bulk of collections, individuals repaying in this way make up less than half  of people who have DI overpayment debt. Specifically, those repaying  through benefit withholding represent about 311,000 of 637,000 people  with DI overpayment debt.

section_title: Most Withholding Plans Exceed 3 Years
paragraphs: Benefit withholding plans, in which SSA withholds a specified amount of  an individual’s benefits each month, often reflect lengthy repayment  periods. We estimated the length of time needed to complete repayment  for overpayments being collected in this way at the end fiscal year 2015  (see fig. 3) and found that over 50 percent of plans will take more than 3  years to complete. In addition, about 44,000, or 1 in 7 withholding plans  are scheduled to be completed after the beneficiary’s 80th birthday. Given  the age at which these beneficiaries are scheduled to complete repaying  their debts, it is possible that many individuals will die before completing  repayment. Moreover, individuals with the longest repayment periods  account for a disproportionately large share of outstanding overpayment  debt. For example, about 10 percent of individuals with withholding plans  are scheduled to take over 30 years to repay their debts, but account for  nearly a quarter of the outstanding debt to be recouped through  withholding.

We also found that over a third of withholding amounts were less than  $50 and over half were less than $100 (see fig. 4). The median amount of  monthly benefits being withheld from beneficiaries’ DI benefits to repay  prior overpayments was $57. In addition, many withholding amounts  represented a small percentage of recipients’ monthly benefits. About  two-thirds of withholding amounts were less than 10 percent of  beneficiaries’ monthly benefit (see fig. 5). SSA withheld a median of less  than 8 percent of individuals’ monthly benefits for repayment.

We also found, when we looked at data from the end of fiscal year 2015,  that individuals with lower benefits had a larger share of their monthly  benefits withheld for an overpayment debt (see appendix II, figures 7 and  8). For example, the median withholding level for those in the lowest  quartile of monthly benefits was 10 percent, while for those in the highest  quartile of monthly benefit, the median was 6.2 percent. Appendix II  provides additional information on overpayments and withholding  amounts and rates.

section_title: Gaps Exist in SSA’s Guidance, Oversight, and Verification of Information Related to Withholding Plans
paragraphs: Despite SSA’s heavy reliance on withholding benefits to recover debt, we  found gaps in SSA’s guidance, oversight, and verification of information  related to establishing withholding plans. The importance of determining  and collecting an appropriate amount of debt from individuals is laid out in  federal standards. The Federal Claims Collection Standards indicate  agencies need to aggressively collect all debts arising out of activities of  that agency, and that the size and frequencies of installment payments  should bear a reasonable relation to the size of the debt and the debtor’s  ability to pay. When pursuing debt, it is important for SSA to balance  collection efforts against not placing too high a burden on an individual  repaying a debt, and for SSA to have policies and procedures in place  that ensure staff consistently make decisions on debt recovery that  balance these opposing goals. However, as described below, SSA policy  for determining reasonable beneficiary expenses is ambiguous,  repayment plans are not subject to review or oversight, and beneficiaries’  self-reported financial information is not independently verified. In the  absence of these elements, SSA cannot reasonably ensure that  repayment amounts and time frames determined by its staff are  appropriate and set in accordance with best practices and agency policy.
subsections: section_title: Policies for Determining Appropriate Expenses
paragraphs: SSA’s policies for how to consider beneficiaries’ expenses when  determining benefit repayment amounts are ambiguous and leave much  to the judgment of staff. Federal Internal Control Standards indicate that  agencies’ policies and procedures should be clearly documented in  administrative policies or operational manuals. According to SSA policy,  staff are to obtain an SSA form 632 documenting financial information,  including income and expenses, from a beneficiary to determine his or  her ability to repay an overpayment when the beneficiary requests a  repayment period exceeding 36 months. In these cases, SSA policy  generally directs staff to withhold the amount by which an individual’s  income exceeds expenses, or the rate permitted by income or assets if  there are excess assets, and notes that this amount should generally not  be less than $10 per month. However, a recent report prepared for SSA  by an external auditor found that the agency has contradictory policies for  determining what reasonable expenses are for beneficiaries. SSA’s policy  states that a person’s particular circumstances and lifestyle determine  whether expenses are ordinary and necessary, and that patterns of living  are established over time and these patterns must be considered when  evaluating the facts. At the same time, SSA policy also directs staff to not  allow extraordinary and unnecessary expenses, regardless of the  person’s standard of living. The report noted that these conflicting  statements can lead to confusion when determining a feasible repayment  rate. In contrast, the Internal Revenue Service provides detailed guidance  on allowable living expenses when determining taxpayers’ ability to repay  a delinquent tax liability. Its Collection Financial Standards include  national guidelines for the cost of food, clothing, and other items and local  standards for housing, utilities, and transportation costs. In the absence of  clear guidance, SSA staff may struggle to determine what a beneficiary  can reasonably afford to repay and could lead to inconsistencies across  different repayment plans.

section_title: Oversight and Documentation of Repayment Plans
paragraphs: SSA lacks effective oversight to know whether these plans are being  consistently or appropriately administered. Federal Internal Control  Standards indicate that key duties and responsibilities need to be divided  among different individuals to reduce the risk of errors, and this should  include separating responsibilities for authorizing, processing, recording,  and reviewing transactions. In 2011, we reported that SSA staff are not  required to obtain supervisory review of repayment plans, and  recommended that SSA require supervisory review of repayment plans  that extend beyond 36 months—the point at which SSA staff are directed  to evaluate an individual’s ability to repay based on income, assets, and  expenses. The agency disagreed with our recommendation and has not  taken any action to implement it. In the course of our current review, SSA  maintained that reviewing withholding plans would not increase recovery  of overpayments, but the agency did not provide any analyses or studies  to support its position. We continue to believe that supervisory review is  an important part of ensuring that staff create appropriate repayment  plans.

In addition to lacking supervisory review, SSA also has not performed  targeted reviews of repayment plans for adherence to policy, even though  the agency systematically samples cases to review other aspects of DI  overpayment decision making through its Continuous Quality Area  Director Reviews, such as whether waiver decisions are properly  documented. Without oversight provided by either supervisory or quality  assurance reviews, the consistency and appropriateness of repayment  amounts cannot be known.

While oversight over repayment plans is lacking, any efforts to provide  oversight could be hampered by a lack of documentation. Federal Internal  Control Standards state that all transactions and other significant events  need to be clearly documented, and that the documentation should be  readily available for examination. SSA policy directs staff to obtain  information and supporting documentation of the beneficiary’s income,  assets, and expenses. This information should be documented by the  beneficiary on a form 632 worksheet. Although SSA policy directs staff to  retain copies of all supporting documentation (including bills and bank  statements) for individuals whose overpayment is $75,000 or more, SSA  policy does not explicitly require that supporting documentation— including the form 632 worksheet—be retained for lesser overpayment  amounts. Since the median overpayment balance was about $3,200 at  the end of fiscal year 2015, an audit trail for conducting oversight may not  exist for many repayment plans. Our review of a small sample of  overpayment case files—with overpayment amounts ranging from about  $3,000 to about $165,000—raised questions about the sufficiency of  documentation. Our non-representative sample of 16 cases was of  overpayments being repaid through benefit withholding and with  repayment periods exceeding 36 months. In 4 cases the overpayment  was over $75,000 and retention of supporting documentation, such as  mortgage statements, bills, or pay stubs, is directed by SSA policy;  however, only 2 had any documentation verifying income or expenses.  Further, in 3 of 8 cases in which beneficiaries were directed to complete a  form 632—the worksheet used by the beneficiary to request a repayment  period exceeding 36 months and to document relevant financial  information—we found no evidence in the file that the form was  completed. Ultimately, not requiring documentation to be retained for the  record for all plans precludes the agency from reviewing the accuracy of  repayment amounts in any future review.

section_title: Verifying Self-Reported Information
paragraphs: SSA may be missing opportunities to verify self-reported financial  information, and therefore individuals’ ability to repay overpayments.  Federal Claims Collection Standards state that agencies should obtain  financial statements from debtors who represent that they are unable to  pay in one lump sum and independently verify such representations  whenever possible. Further, GAO’s Framework for Managing Fraud  Risks in Federal Programs states that managers should take steps to  verify self-reported data to effectively prevent and detect instances of  potential fraud. While SSA policy directs staff to collect evidence (such  as bank statements or bills) to corroborate self-reported financial  information from some beneficiaries, the agency may be able to more  efficiently and effectively validate self-reported information by other  means that SSA already is leveraging for other purposes. For example,  SSA is already using the Department of Health and Human Services’  National Directory of New Hires (NDNH) to determine an individual’s  initial and continued eligibility for DI and SSI benefits. The value of this  database was further demonstrated in March 2014 when SSA initiated the  Quarterly Earnings Pilot to systematically identify and contact DI  beneficiaries before their earnings cause them to accumulate large  overpayments. According to SSA, the project identified 278 cases for  contact using these data about 10 months earlier than it presumably  would have identified them using old procedures and methods,  uncovering about $3 million in overpayments. Nevertheless, SSA officials  told us the agency has not studied the feasibility of using NDNH to verify  income information from individuals seeking to establish withholding  plans. Similarly, since 2011, SSA has used an automated process,  Access to Financial Institutions (AFI), to verify Supplemental Security  Income (SSI) applicants’ bank balances and detect undisclosed accounts.  In November 2015, legislation was enacted that requires individuals to  authorize SSA to access their financial information when deciding  whether to waive their overpayments under certain circumstances.  Although SSA uses the same form to collect self-reported information for  overpayment waiver decisions and withholding plans, according to SSA  officials, the agency has not yet determined whether this recent legislation  allows it to use AFI for verifying withholding plans that extend beyond 36  months. Using information sources, like AFI and NDNH, to verify financial  information provided by beneficiaries can help SSA ensure that it is  collecting no more or no less than an individual can afford to pay.

section_title: SSA Is Taking Steps to Improve Debt Collection, but Lacks Plans for Using Additional Promising Collection Tools
paragraphs: SSA reports that it has or is taking several steps to improve the collection  of delinquent DI overpayment debt. These include:

Modernizing the External Collection Operation (ECO) system: The  ECO system identifies beneficiaries with delinquent debt and refers  them to Treasury for external collection, using tools such as wage  garnishment and tax refund offset. Currently, due to a system  limitation, if a debtor has multiple debts, all of the debts must meet the  criteria for referral to Treasury. If one debt is not eligible for referral— for instance if an individual is requesting that a debt be waived—none  of the debts will be referred. According to SSA officials, as part of its  Overpayment Redesign initiative, SSA plans to address this limitation  by changing the way in which ECO stores debts to be able to select  debts on an individual level as opposed to the aggregate beneficiary  record level. This update should allow Treasury to use external  collection tools against more debtors and potentially increase the  amount of overpayments recovered through these tools.

State Reciprocal Program: Under the State Reciprocal Program  (SRP), managed by the Treasury as part of the Treasury Offset  Program, the federal government enters into reciprocal agreements  with states to collect debts by offsetting state payments due to  debtors, such as state income tax refunds. This program provides  SSA with an additional avenue to recover overpayments from  delinquent debtors and may increase overall debt recovery. SSA  published regulations in October 2011 and modified its systems to  begin accepting offsets of state payments in 2013. According to SSA  officials, SSA is dependent upon Treasury, who enters into reciprocal  agreements with states, to expand the SRP to additional states.

Address Verification Project: Implemented in February 2015, SSA’s  Address Verification Project is expected to improve its ability to notify  individuals with delinquent debt before referring them to external  collection. Prior to implementation, SSA relied on the addresses in its  records when notifying debtors of their delinquent debt. If the United  States Postal Service returned the notice, SSA would cease collection  activity, and use a contractor to obtain a current address to re-notify  the debtor. It now obtains a current address from the contractor prior  to mailing the notice to ensure it has current address information.

SSA and GAO identified several additional options that could increase its  overpayment recoveries. Officials told us that one change they are  considering is to make the minimum monthly withholding amount 10  percent of an individual’s monthly benefit instead of the current $10  minimum, but SSA is in the early stages of studying this option and does  not yet have time frames for implementing such a change. The agency  noted that this could help minimize the number of long-term repayment  plans and would put DI collections more in line with its SSI program.  Beyond this, we identified two additional options based on past GAO work  or conversation with SSA.

Adjusting monthly benefit withholding according to cost of living  adjustments (COLA): In 1996, we recommended that SSA adjust its  monthly withholding amounts so that they keep pace with any annual  increases in benefits. This option would accelerate overpayment  recoveries with only minimal effect on recipients’ monthly benefits.

Charging interest on debt: SSA officials told us that they have the  authority to charge interest on delinquent overpayment debt and  would like to be able to do so, but that they have not done so due to  resource constraints and competing priorities. With respect to debts  that are in the process of being repaid, such as through benefit  withholding, SSA has determined that it does not have the authority to  charge interest. As we discuss below, however, charging interest on  debt that is being repaid could help protect the value of overpayments  against the effects of inflation, especially over longer repayment  periods.

However, SSA lacks concrete plans and timeframes for studying and  implementing these options or any other collection tools beyond those  already in place, and SSA officials told us the agency currently has more  pressing priorities than expanding its DI debt recovery tools. Federal  Claims Collection Standards state that federal agencies shall  aggressively collect all debts arising out of activities of, or referred or  transferred for collection services to, that agency. Further, collection  activities shall be undertaken promptly with follow-up action taken as  necessary.

Our analysis of the options we examined show that they hold promise for  increasing SSA’s recovery of DI overpayments. We reviewed  overpayments as of September 30, 2015 that were being repaid through  benefits withholding, and determined how existing scheduled benefit  withholding amounts would be affected by: (1) making the minimum  withholding amount 10 percent of monthly DI benefits, (2) adjusting  withholding amounts according to annual COLAs, and (3) charging  interest on debts being collected through withholding. We took  outstanding debts and withholding levels and computed the repayment  schedule under the status quo and each alternative option. By definition,  repayment schedules do not account for future changes such as  individuals who gain or lose eligibility for benefits or whose ability to repay  changes. Changes such as those mean that actual collections differ from  scheduled collections. Options that increase withholding will speed  recovery and reduce the effects of attrition, while charging interest will  delay the completion of repayment and magnify the effects of attrition.  Nonetheless, these options—implemented alone or in combination—have  the potential to significantly increase collections of overpayment debt.

Of the options we examined, setting a minimum withholding amount equal  to 10 percent of an individual’s monthly DI benefit has the greatest  potential to increase scheduled collections and reduce the amount of time  to fully recover overpayments. We estimate this option would increase  scheduled collections by $276 million over 5 years and reduce the  median scheduled time to fully recover all beneficiary overpayments from  3.4 years to 2.3 years. Further, those beneficiaries scheduled to take over  20 years to complete repayment would decrease from 17 percent to 4  percent. Figure 6 below provides additional information on the effect of  this scenario on scheduled repayment times. The increase in collections  under this scenario comes entirely from individuals currently having less  than 10 percent of their benefits withheld, and as such, the changes  within this portion of the population are more pronounced when examined  separately. Among those beneficiaries, the median scheduled repayment  time would decrease by over half, from 5.9 to 2.5 years.

Increasing the minimum withholding rate to 10 percent of monthly benefits  could also be implemented in a way that improves collections while  sparing or minimizing the effect on beneficiaries receiving the lowest  monthly benefits. We estimate that only about 5 percent of the increase in  collections would come from the quartile of beneficiaries receiving the  lowest monthly benefits, in part because they already have a  disproportionately larger amount of benefits withheld, and in part because  increasing the withholding rate recovers much less dollar-wise from those  receiving lower monthly benefit levels than those with higher benefits.

We estimate that adjusting monthly withholding amounts according to  COLAs or charging interest on overpayment debt would have a smaller  effect than changing the minimum withholding rate to 10 percent of  monthly benefits (see table 1), but could help protect the DI trust fund  from the effects of inflation. For example, if SSA overpaid a dollar in 1985  and the beneficiary repaid that dollar 30 years later in 2015, the  recovered dollar would have only 45 percent of the buying power of the  1985 dollar. Similarly, if SSA overpaid a dollar in 2010 and recovered it in  2015, the repaid dollar would have only about 92 percent of the buying  power of the dollar SSA overpaid. Given that many withholding plans  extend for decades, the effect of inflation can be significant. Charging  interest on outstanding overpayment balances at the rate of inflation  would counteract the effect of inflation and give repaid dollars the same  buying power they had when erroneously paid years earlier. Other  agencies already charge debtors interest. For instance, the Internal  Revenue Service charges individuals with delinquent tax debt interest at a  rate that is adjusted quarterly and is based on the federal short-term  interest rate. Similarly, adjusting monthly withholding amounts according  to COLA increases could help accelerate repayments and thus help  negate the effect of inflation on amounts repaid to the DI Trust Fund.

Implementing any combinations of the options we examined could result  in even higher scheduled collections. For instance, setting a minimum  withholding rate of 10 percent of monthly DI benefits and charging an  interest rate of 1 percent would increase scheduled collections by $287  million over the next 5 years, while these options implemented individually  would be scheduled to bring in $276 million and $7 million respectively.

section_title: SSA Lacks Reliable Data and Oversight to Know Whether Penalties and Sanctions Are Used Effectively
subsections: section_title: SSA Lacks Reliable Data to Track and Tools to Collect Penalties
paragraphs: SSA’s OIG has in recent years increased its use of penalties against  individuals who knowingly mislead the agency, according to SSA’s Office  of Counsel to the Inspector General (OCIG), which is responsible for  imposing penalties. According to SSA officials, in fiscal year 2010, OCIG  successfully resolved 89 cases and imposed penalties totaling  approximately $3.9 million. That increased to 313 cases and more than  $17.6 million in fiscal year 2015. OCIG officials attribute this increase to  improving its evaluations process and more management focus on the  use of penalties as a deterrent.

Increased penalties notwithstanding, officials told us SSA lacks reliable  data on the status of penalties, how much of penalty amounts have been  collected, and how much is delinquent. While OCIG imposes penalties on  individuals, SSA’s Office of Operations is ultimately responsible for  collecting these amounts. SSA officials said they could not provide us  with comprehensive data on the number and amount of penalties paid  because of limitations in their computer systems, and added that they  would need to review each individual case to determine its repayment  status. Federal Internal Control Standards indicate that program  managers need appropriate data to monitor the performance of their  program and help ensure accountability. Without valid data on the  disposition of penalties, SSA cannot determine whether penalties are  being used effectively across the agency and if individuals who mislead  the agency are paying as appropriate. SSA reports that it is planning a  number of steps to better track imposed penalties, and ultimately the  amounts collected as part of a larger effort to improve its processing of  overpayments and other debts. According to its plans, SSA hopes to: by  fiscal year 2018, assign penalties a unique transaction code to be able to  track them through the collection process; and by fiscal year 2020  unbundle penalties from other debts owed by an individual in its ROAR  database—which is used to track debts and collections—in order to allow  remittances to be directly applied to penalties as opposed to an  individual’s cumulative debt. While such improvements could help  address the limitations we identified, they are a number of years away.  Further, SSA notes in its plans that they may be subject to delays related  to resource constraints. Moreover, SSA is still in the process of analyzing  and planning potential fixes. As such, it is uncertain whether SSA will  meet its intended time frames or whether its currently planned efforts may  change and ultimately address the shortcomings it identified.

SSA has met with limited success collecting on imposed penalties, and is  not using some tools to better ensure that individuals who knowingly  mislead the agency pay their penalties. Officials said SSA currently only  collects penalties by either withholding DI or other SSA benefits, or  relying on individuals to voluntarily remit penalty amounts. A recent OIG  audit highlighted the difficulty that SSA has in collecting delinquent  penalties. In a sample of 50 penalties imposed between calendar years  2010 and 2012 totaling $1.9 million, OIG found that about $1.7 million of  that amount remained uncollected as of July 2014. The majority of that  amount (approximately $920,000) was associated with individuals not  receiving benefits and with whom SSA had no ongoing collection  actions—the same category of individuals who could be targeted with  external collection tools. While officials noted the agency determined it  can refer penalties for collection through some external collection tools,  such as wage garnishment, tax refund offsets, and administrative offsets,  the agency has not utilized them. According to officials, SSA drafted a  regulation for implementing these options; however, the regulation is still  undergoing internal review and SSA does not yet have time frames for  implementing these options. Moreover, the agency determined it is  prohibited by statute from referring delinquent penalties for collection  through other tools, such as federal salary offset, credit bureau reporting,  and assessing interest. Nevertheless, SSA has not explored pursuing  legislative authorities to use these tools. By not collecting some  delinquent penalties and not considering additional tools to do so, SSA  may be undermining the deterrent value of penalties against potential  fraud. GAO’s Framework for Managing Fraud Risks in Federal Programs  indicates that a consistent response to fraud demonstrates that  management takes this subject seriously, and that the likelihood that  individuals who engage in fraud will be punished serves to deter others  from engaging in fraudulent behavior.

section_title: SSA Recently Changed Its Sanctions Procedures, but Weaknesses Persist
paragraphs: SSA collaborated with OIG to change its sanctions procedures in 2013 in  an effort to more consistently impose sanctions across the agency. Prior  to this change, officials told us, SSA field offices had broad discretion to  impose sanctions. SSA officials told us that some offices were more  aggressive in pursuing sanctions and that an offense that could result in  sanctions in one office might not do so in another office. The new  procedures direct that potential sanctions cases first be evaluated for  prosecution or civil action by DOJ and then by OIG for the imposition of  civil monetary penalties. Ultimately, SSA is responsible for determining  whether to impose sanctions based on the circumstances of the case,  such as whether evidence exists to show that the individual knowingly  misled the agency. The relevant SSA field office is responsible for  developing the documentation to support the sanction, which is then  reviewed by a sanctions coordinator in the SSA regional office.

Despite changes in decision-making for sanction cases, unreliable data  and shortcomings in how SSA tracks sanctions prevent the agency from  reasonably ensuring that sanctions are imposed as appropriate, and  ultimately prevent SSA from assessing whether its recent procedural  changes had their desired effect.

SSA cannot reasonably ensure sanctions are imposed as appropriate:  SSA officials told us that they could not provide us with reliable data  on the disposition of sanction cases. SSA currently tracks the  disposition of sanctions in a database, which includes whether  sanctions were imposed and the sanction period (i.e., the period of  time during which beneficiaries will not receive benefits). However,  this database requires SSA staff receiving information on sanctions to  manually enter information about the sanction into the database,  which lacks data checks or related oversight and may lead to errors  and omissions. For instance, officials in three regional offices with  oversight responsibilities told us that decisions on sanctions cases are  generally communicated between OIG and the relevant field office. If  these officials are inadvertently not included on the communications,  they cannot ensure that the sanctions database is properly updated.  One regional official said this has resulted in instances in which SSA  headquarters wanted to know why sanctions were not imposed in  particular cases, but this official did not have the information to  respond correctly. Furthermore, officials in two regions noted that  SSA’s database does not generate alerts when field offices fail to take  action on potential sanctions cases, thus making it incumbent on  regional coordinators to manually track and follow up on the status of  cases. One regional official noted that the lack of tracking resulted in  several instances in which SSA was pursuing sanctions years after  the alleged wrongdoing.

SSA cannot evaluate procedural changes: Beyond the disposition of  specific sanctions, officials told us that they also lacked reliable data  on the number of sanctions imposed and whether this number has  changed since the current procedures were instituted in 2013. This is  likely a result of the limitations in how sanctions data are captured as  described earlier. Moreover, SSA conducted an internal assessment  to determine whether field offices followed correct procedures for  implementing sanctions. Specifically, SSA selected a sample of cases  that were originally referred to OIG, and were subsequently returned  by OCIG to field offices. SSA determined that sanctions were not  imposed in the majority of cases in which sanctions were likely  warranted, often because field offices did not take action on cases in  a timely manner. The study did not determine why the agency failed to  act on these cases in a timely manner. SSA officials speculated that it  may be due to the difficulty of imposing harsh punishment on  beneficiaries and because sanctions are labor intensive for SSA staff.

Federal Internal Control Standards indicate that managers need to  compare actual performance to planned or expected results and analyze  significant differences, and that operational data is needed to determine  whether they are meeting their goals for accountability. Furthermore, as  indicated in GAO’s Framework for Managing Fraud Risk in Federal  Programs, a prompt and consistent response to fraud demonstrates that  agency management takes reports seriously and serves to deter others  from engaging in fraudulent behavior. As a result of SSA’s internal  evaluation, the agency recognized the need to better track sanction  cases, improve how it communicates decisions, and act on them in a  timely manner. However, officials said the agency is in the early stages of  determining how it will address these identified shortcomings, and  ultimately ensure the deterrent value of sanctions.

More recently, OCIG officials told us that they plan additional changes in  how OCIG refers cases back to SSA for possible sanctions. According to  SSA, OCIG will share additional information with SSA that may be helpful  in SSA’s sanctions determinations. Notwithstanding this change,  complete and accurate data will still be needed to effectively manage and  evaluate SSA’s sanctions program.

section_title: Conclusions
paragraphs: While overpayments account for a relatively small portion of all DI benefit  payments, it is incumbent on SSA to collect these debts as a good  steward of public funds. Improvements in collecting overpayment debt,  however small, could help strengthen the solvency of the DI trust fund. In  short, the collection of overpayment debts warrants more attention than  SSA has demonstrated to date. Absent clear policies and oversight  procedures for establishing and reviewing withholding plans, which are  heavily relied on by SSA to recover the bulk of overpayments, SSA  cannot be sure that beneficiaries are repaying debts in appropriate  amounts within appropriate time frames. Further, SSA could be collecting  too little or too much money each month from beneficiaries by not  leveraging available tools to verify beneficiaries’ ability to pay. By not  implementing additional debt collection tools that would speed up lengthy  withholding plans or ensure that the value of collections is not diminished  by inflation, SSA is missing opportunities to restore debt to the DI trust  fund. Increasing the minimum monthly withholding amount would promote  more equity in how SSA deals with overpayments across its programs,  while improvements to procedures and tools for establishing repayment  plans would better protect those beneficiaries who truly lack resources to  pay.

As part of its efforts to ensure the integrity of the DI trust fund, penalties  and sanctions are key tools that the agency needs to use effectively. By  not using all available tools to collect penalties and by not consistently  imposing and tracking sanctions, SSA weakens its stance that fraud is  unacceptable, and its ability to deter other individuals from attempting to  collect benefits for which they are ineligible.

section_title: Recommendations for Executive Action
paragraphs: To ensure effective and appropriate recovery of DI overpayments and  administration of penalties and sanctions, we recommend the Acting  Commissioner of the Social Security Administration take the following 8  actions:

Clarify its policy for assessing the reasonableness of expenses used in determining beneficiaries’ repayment amounts to help ensure that withholding plans are consistently established across the agency and accurately reflect individuals’ ability to pay.

Improve oversight of DI benefit withholding agreements to ensure that they are completed appropriately. This could include requiring supervisory review of repayment plans or sampling plans as part of a quality control process, and requiring that supporting documentation for all withholding plans be retained to enable the agency to perform such oversight.

Explore the feasibility of using additional methods to independently verify financial information provided by beneficiaries to ensure that complete and reliable information is used when determining repayment amounts. These additional tools could include those already being used by the agency for other purposes.

Adjust the minimum withholding rate to 10 percent of monthly DI benefits to allow quicker recovery of debt.

Consider adjusting monthly withholding amounts according to cost of living adjustments or charging interest on debts being collected by withholding benefits. Should SSA determine that it is necessary to do so, it could pursue legislative authority to use recovery tools that it is currently unable to use.

Pursue additional debt collection tools for collecting delinquent  penalties. This includes taking steps to implement tools within its  existing authority and exploring the use of those not within its  authority, and seeking legislative authority if necessary.

Take steps to collect complete, accurate, and timely data on, and  thereby improve its ability to track both:  civil monetary penalties and their disposition; and administrative sanctions and their disposition.

section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Social Security Administration for  comment. In its written comments, reproduced in appendix III, SSA  agreed with 7 of our 8 recommendations and disagreed with 1. SSA also  raised some broader concerns about the focus of our report. SSA stated  that our report confuses two distinct issues: recovering overpayments and  deterring fraud through civil monetary penalties and administrative  sanctions. We agree that these issues are distinct; however, both are  important parts of safeguarding the integrity of the DI program, and  ensuring that payments are made in the right amounts to the right  individuals. SSA stated that overpayments are not necessarily the result  of fraud. We agree and note in our report that overpayments occur for a  number of reasons, including fraud. SSA also stated it believed it was  misleading to include deterring fraud in the title of our report, noting that  penalties and sanctions are not themselves findings of fraud, and are  based on, among other things, findings of false or misleading statements  or knowing omissions by individuals. We acknowledge this distinction,  and made revisions in the title and to the report in response to SSA’s  comments. However, we continue to believe that the consistent use of  these tools serves as a deterrent against those who would engage in  fraud or abuse of the DI program.

SSA agreed with our recommendation to clarify its policies regarding the  reasonableness of expenses when determining beneficiaries’ repayment  amounts. SSA noted that it has already taken actions to clarify its policies  regarding overpayments and waivers, and informed us in its comments  that it delivered video training to its employees in 2015 on these topics.  SSA added that it will continue to assess efforts and make other  improvements to ensure consistent and accurate application of policy. To  the extent that SSA’s efforts also address unclear written policies, such  actions could help meet the intent of the recommendation.

SSA agreed with our recommendation to improve the oversight of benefit  withholding plans and said it will explore options to do so. However, it  disagreed with requiring supervisory review of repayment plans. We  present supervisory review as just one option for improving oversight, and  there may be other approaches SSA could explore for improving  oversight in this area. Nevertheless, we continue to believe that this  option—recommended in prior GAO work—can be an effective option for  ensuring that staff create appropriate repayment plans.

SSA agreed with our recommendation to explore the feasibility of using  additional methods to independently verify financial information provided  by beneficiaries when determining repayment amounts.

SSA agreed with our recommendation to adjust the minimum withholding  rate to 10 percent of monthly DI benefits, and noted that the President’s  fiscal year 2017 budget submission contains a legislative proposal to do  so. We acknowledge that SSA recently included a paragraph in its budget  submission discussing this proposal. SSA may need to work closely with  Congress to ensure this change is realized.

SSA disagreed with our recommendation to consider adjusting monthly  withholding amounts according to cost of living adjustments or charging  interest on debts being collected through withholding benefits. For debt  subject to benefit withholding, which is not considered delinquent debt,  SSA asserted that these measures would not have a significant effect on  the amount of debt recovered, especially compared to the option of  making the minimum withholding rate 10 percent of monthly benefits. For  delinquent debt, SSA asserted charging interest on debts would require  substantial changes to multiple systems that affect its overpayment  businesses processes, and would require extensive training to its  employees. While SSA stated it has studied the potential changes  needed to charge interest on debt, without further consideration of, for  example, the costs and benefits of charging interest or adjusting  withholding amounts according to cost of living adjustments, SSA cannot  know the extent to which these options would improve debt recovery  efforts or help protect the value of debts against the effects of inflation,  which can be substantial given that withholding plans can take decades to  complete.

SSA agreed with our recommendation to pursue additional tools to collect  delinquent penalties, and stated that it has begun drafting regulations to  use existing external debt collection tools, as noted in our report.  However we state in our report that SSA lacks timeframes for completing  this action. SSA reported that it is also developing a legislative proposal  to allow it to use other tools it cannot currently utilize, such as reporting  these debts to credit bureaus and withholding federal salary payments.   Such actions, if implemented as intended, could help meet the intent of  the recommendation.

SSA agreed with our recommendations to improve its ability to track  penalties and sanctions, and noted that it is developing workload tracking  tools for both, which it expects to implement in fiscal year 2016, and is in  the planning stages of an overpayment redesign effort said that should  result in more complete, accurate, and timely data for penalties. Such  actions, if implemented as intended, could help meet the intent of the  recommendations.

SSA also provided technical comments on our draft that we incorporated  as appropriate. In particular, SSA noted that our draft report contained  sensitive information on its sanctions process, which we agreed to  exclude.

We are sending copies of this report to the appropriate congressional  committees, the Acting Commissioner of the Social Security  Administration, and other interested parties. In addition, the report will be  will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-7215 or bertonid@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report. GAO staff who made key contributions to this  report are listed in appendix IV.

section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: In conducting our review of how the Social Security Administration (SSA)  recovers Disability Insurance (DI) overpayments and oversees civil  monetary penalties and administrative sanctions, our objectives were to  examine (1) how and to what extent SSA is recovering DI overpayments,  and (2) SSA’s procedures for imposing penalties and sanctions, and how  often they are used. We conducted this performance audit from  November 2014 to April 2016, in accordance with generally accepted  government auditing standards. These standards require that we plan  and perform the audit to obtain sufficient, appropriate evidence to provide  a reasonable basis for our findings and conclusions based on our audit  objectives. We believe the evidence obtained provides a reasonable  basis for our findings and conclusions based on our audit objectives.
subsections: section_title: Recovery of DI Overpayments
paragraphs: To determine how SSA recovers DI overpayments, we reviewed relevant  federal laws and regulations, and SSA policies and procedures.  Regarding the extent to which SSA recovers overpayments, we obtained  available data from SSA on the amounts of overpayments detected,  waived or written-off, collected, and reestablished between fiscal years  2006 through 2015, as well as data on the cumulative DI overpayment  debt balance at the start and end of each fiscal year in that period. We  also obtained corresponding data on the amount of DI overpayment debt  recovered through internal and external debt collection tools.

To examine SSA efforts to improve its recovery of overpayments, we  reviewed agency plans, and publicly available documents such as its  annual performance plan, and past GAO and Office of Inspector General  (OIG) reports. We also interviewed SSA headquarters and regional staff  responsible for overseeing the collection of overpayments. To obtain  additional insight on SSA’s recovery of DI overpayments, we interviewed  officials from an organization representing SSA field office managers  (National Council of Social Security Management Associations) and an  organization representing advocates for individuals with disabilities  (National Disability Rights Network).

To gain perspective on how SSA sets and documents overpayment  repayments plans, we reviewed a non-representative sample of 16  overpayments being repaid through benefit withholding established in  fiscal year 2015. We selected a mixture of cases in terms of (1) whether  the original overpayment amount was over or under $75,000, the  threshold at which SSA policy requires the retention of documentation  supporting income and expenses; and (2) whether more or less than 10  percent of the beneficiaries’ monthly DI benefits were withheld to repay  the overpayment. We then randomly selected cases for review from each  of the 4 subsets of cases that result from applying our two criteria. In  reviewing these cases, we sought to determine how SSA verified  beneficiaries’ ability to repay overpayment and how it documented these  decisions, including reviewing whether SSA retained supporting  documentation in accordance with its policies. This sample is non- representative and our results are not generalizable to all benefit  withholding plans.

section_title: Analysis of Overpayments and Potential Recovery Options
paragraphs: To examine the extent to which SSA is recovering DI overpayments and  options for improving collections, we obtained data on DI overpayments  as of September 30, 2015. The data we obtained came from SSA’s  Master Beneficiary Record (MBR) and Recovery of Overpayments,  Accounting and Reporting (ROAR) systems. We limited our data request  and analysis to those overpayments publicly reported by SSA.

Using these data, we calculated the effect of potential enhancements in  terms of how much more SSA would be scheduled to collect in fiscal  years 2016 through 2020, and how much faster SSA would be scheduled  to recover these overpayments in full. Our estimates are based on  withholding amounts and overpayments as of the end of fiscal year 2015  and the assumption that everyone will continue to pay based on the  current schedule. This implies there will be, for example, no future  changes in eligibility for benefits, no deaths among people having benefits  withheld, and no changes in withholding amounts. We also did not  attempt to estimate future overpayments. As such, actual total collections  would differ from scheduled total collections. The enhancements we  discuss below are based on information obtained from SSA or through  examining past GAO work. We did not conduct an exhaustive review of  options for improving debt recovery and there may be others that we did  not consider.

In reporting scheduled repayments for all of our enhancement scenarios,  we adjusted repayment amounts by four inflation rates: 0, 2.0, 2.7, and  3.4 percent. This gives the reader a sense of the extent to which each of  the policy options counteracts the effects of inflation, either by inflation- adjusting repayments, or simply speeding up SSA’s recovery of  overpayments, thereby reducing its exposure to inflation. For each month,  we then computed the recipient’s remaining balance assuming that the  recipient repaid either their normal monthly repayment amount or the  remaining balance, whichever was less. We included the 0 percent  inflation scenario because it isolates the effects of factors other than  inflation. Social Security estimated long-range inflation scenarios of 2.0,  2.7, and 3.4 percent in its 2015 Trustee’s Report.

We computed total repayments in each scenario as the sum of monthly  payments. We assumed that people make monthly payments until they  have paid off their entire balance and then stop paying. If their balance  was less than their usual monthly payment, we assumed they paid  exactly the outstanding balance in their final month. We estimated  scheduled repayments for the following scenarios:  1.  Baseline collections (no change): We examined beneficiaries’  outstanding overpayment balances as of September 30, 2015, as well  as their current monthly repayment rates. We used that information to  estimate, at current withholding rates, when beneficiaries are  scheduled to complete repaying their overpayment debts, age at  scheduled repayment, as well as how much they are scheduled to  repay over the next five fiscal years.  2.  Setting the minimum withholding rate to 10 percent of monthly DI  benefits: We computed the standing repayment amount as the greater  of 10 percent of the recipient’s post-COLA benefits in each month or  the recipient’s actual repayment amount in the ROAR system as of  September 30, 2015.  3.  Adjusting monthly withholding amounts by the cost of living  adjustment (COLA): These scenarios increased the withholding  amounts that SSA reported by 0, 2.0, 2.7, or 3.4 percent effective in  January of each year. The 2.0, 2.7, and 3.4 percent estimated COLAs  are based on SSA’s long-range inflation estimates in the 2015 Social  Security Trustee’s report. This scenario adjusts both benefit and  withholding amounts.  4.  Charging interest: This scenario increases the remaining balance at  the beginning of year by 1 percent in the 0 percent COLA scenario,  and an interest rate equal to the rate of inflation in the other scenarios.  We chose the 1 percent interest rate in the no inflation scenario  because it is the rate of interest the US government is allowed to  charge in calendar year 2016 on delinquent debts.  5.  Combined scenarios: We report the results of a few policy options in  combination. It is important to note that our combination of interest  and COLA effectively undo the effects of inflation on both monthly  repayment amounts and on total debt owed.

We assessed the reliability of the data we used by checking for extreme  and implausible values and by comparing the totals in them to published  sources and found them to be sufficiently reliable for our use.

In estimating scheduled repayments for the above scenarios, we made a  number of decisions and assumptions about overpayments and  withholdings in the custom file provided by SSA. The data provided by  SSA listed all overpayments that SSA is either actively trying to collect or  has conditionally written off, referred to Treasury, and will collect if the  beneficiary becomes eligible for disability or retirement benefits. These  data lists both a claimant—the person whose disability creates eligibility  for DI benefits—and a beneficiary—who may be the claimant, the  claimant’s spouse, or a dependent of the claimant. SSA officials told us  that the agency can seek repayment from the claimant, beneficiary, or  anyone else receiving benefits on the claimant’s earnings record. We  aggregated this overpayment level data to the beneficiary level, taking the  maximum withholding amount per beneficiary if the beneficiary’s account  showed more than one overpayment, and adding together withholding in  rare instances when one person benefited from overpayments to multiple  claimants.

If a beneficiary had withholding on any one of the overpayments on his or  her record, we treated all overpayments on the account as subject to  recovery through withholding. This methodology can misstate repayment  times in situations where, for example, a beneficiary had overpayments  both on their own disability claim and their parent’s disability claim, and  both parties are involved in repaying the beneficiary’s overpayments.

We identified and excluded from our analysis beneficiaries who appeared  to be deceased by matching their Social Security Numbers (SSN) to the  full SSA Death Master File. This may exclude some recoverable  overpayments from our analysis because SSA officials told us that they  could seek repayment from anyone receiving benefits on the claimant’s  earnings record. While about 40 percent of the conditionally written off  recipients matched to the full SSA Death Master File, only about 0.01  percent of people in withholding status matched to the full SSA Death  Master File.

We computed the time to repay under the status quo condition by dividing  the sum of current balances for a beneficiary by the withholding amount,  calculated as described above. In general, this yields repayment  schedules that end—as expected—no later than December 2049 due to  limitations of SSA’s data system. In a handful of cases—where we  aggregate one beneficiary across multiple claimants—we get longer  repayment times.

To identify individual beneficiaries, we used the beneficiary’s SSN when it  was available. When the beneficiary’s SSN was not available, we  developed a replacement unique identifier, first under the assumption that  there was only one person with a given name and date of birth, for each  claimant SSN; and if the name was missing, then the assumption that  each combination of a claimant SSN and the beneficiary identification  code variable identifies a unique person. The beneficiary identification  code indicates whether the beneficiary is, for example, the claimant’s first  child, second child, or spouse. This methodology may slightly overstate  the total number of beneficiaries in the data, since it will miss cases  where the same person is the beneficiary of two different claimants.

In order to count the number of recipients in withholding, voluntary  repayment, conditionally written off, and neither paying nor in written off  status, we developed categorization rules to resolve ambiguities arising  from the small percentage of beneficiaries who had debts in more than  one status. Specifically, we considered people to be in withholding status  if any of their overpayments indicated that they were in “current pay”  status and had a withholding amount. We considered people to be  making voluntary remittances if they had no withholding on any  overpayment and had a monthly voluntary remittance amount listed on at  least one account. We considered beneficiaries to be conditionally written  off if all of their overpayments were flagged as conditionally written off.  We categorized the remaining beneficiaries as active, but not currently  repaying. Throughout this analysis, we use the monthly benefit amount— i.e., the benefits due before a variety of adjustments—to characterize  benefit levels.

We adjusted future payments in the three scenarios with positive inflation  by dividing all of the receipts in a given calendar year by (1+r)(t-2015) where  r is the inflation rate of .020, .027, or .034 and t is the year. This assumes  that all of the year’s inflation takes place on January 1, and will tend to  overstate inflation early in the year. This stylized assumption means that  our COLA plus interest scenario can precisely undo the effects of inflation  when, in fact, appropriately set annual COLA and interest charges would  typically overcorrect for inflation during some months and under-correct  for it during others.

section_title: Civil Monetary Penalties and Administrative Sanctions
paragraphs: To determine how SSA imposes penalties and sanctions, we reviewed  applicable federal laws, regulations, and guidance. We also reviewed  SSA plans for improving its administration of penalties and sanctions,  internal studies of its use of sanctions, as well as past OIG reviews of  penalties and sanctions. We interviewed officials in SSA headquarters  who oversee their use, OIG (which investigates potential fraud), and  OIG’s Office of Counsel to the Inspector General (OCIG) which has  responsibility for imposing penalties and considering whether sanctions  may be warranted. We requested available data from SSA on its use and  the disposition of penalties and sanctions. However, after discussions  with SSA officials regarding the agency’s procedures for collecting and  tracking penalties and sanctions, we determined that these data were not  sufficiently reliable for our use and did not include them in our report.

To gain further insight on how sanctions are tracked and imposed, we  interviewed regional sanctions coordinators—individuals responsible for  reviewing sanctions determinations—in three of SSA’s regions: Atlanta,  Chicago, and San Francisco. We chose these regions based on variation  in terms of sanctions workload and error rates according to past SSA  internal evaluations. The views of these officials are not generalizable  across all of SSA. We also spoke to officials in SSA’s New York regional  office, which developed a database for tracking the disposition of  sanctions.

section_title: Appendix II: Additional Information on DI Overpayments
paragraphs: This appendix provides more information about individuals repaying DI  overpayments by having a portion of their monthly benefits withheld— notably, the relationship between their monthly benefit payments and the  amount of benefits withheld. All data presented is for outstanding  overpayment balances as of September 30, 2015. Throughout this report,  the benefit levels we report are SSA’s “monthly benefit amount,” which is  the amount due to beneficiaries before withholding or other adjustments.

Figures 7 and 8 below break down this population with benefit withholding  into 10 equal groups (deciles) according to the amount of their monthly  benefits. Figure 7 shows, for each decile, the median percentage of  benefits being withheld. Figure 8 shows the median dollars withheld for  each decile. When we compared individuals with lower monthly benefit  amounts to those receiving larger benefits amounts, we found that those  with the smallest benefits had a higher percentage of their benefits  withheld to repay overpayments. The figures also show that the majority  of individuals with a larger monthly benefit amount have less than 10  percent of their DI benefits withheld. Figure 8 shows that the difference  between withholding 10 percent of the median DI benefit and actual  median withholding is more than $86 per month in the top decile, which  consists of more than 31,000 beneficiaries.

Tables 2 to 5 below provide additional information on the relationship  between withholding and benefit amounts. For each table, we report not  only the median (the 50th percentile) of the distribution, which offers a  sense of the “typical” outcome, but also:  the 25th and 75th percentiles which give a sense of the experience of  beneficiaries somewhat below and above the median, respectively;  the 5th and 95th percentiles to offer a sense of the experiences of  people experiencing fairly extreme outcomes;  the number of beneficiaries from which we computed each number;  and  the standard deviation.

The withholding and repayment time averages are often significantly  above the median because these distributions are not symmetric; rather  people with the largest withholding levels are much further above the  median than the people with the smallest withholding levels are below the  median. For example, table 3 reports that the 95th percentile withholding  level for all beneficiaries ($517) is $460 higher than the median of $57,  while the 5th percentile ($10) is $47 below the median. This asymmetric  distribution of withholding levels at higher amounts produces an average  of $133, which is more than twice the median and more than the 75th  percentile of the withholding distribution ($101).

section_title: Appendix III: Comments from the Social Security Administration

section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Michele Grgich (Assistant  Director), Daniel R. Concepcion (Analyst-in-Charge), Martin Scire, and  Robert Letzler made key contributions to this report. Additional  contributors include: Susan Aschoff, James Bennett, Kathleen Donovan,  Alex Galuten, Arthur Merriam, Monica Savoy, and Almeta Spencer.

section_title: Related GAO Products
paragraphs: Disability Insurance: SSA Could Do More to Prevent Overpayments or  Incorrect Waivers to Beneficiaries. GAO-16-34. Washington, D.C.:  October 29, 2015.

Disability Insurance: Preliminary Observations on Overpayments and  Beneficiary Work Reporting. GAO-15-673T. Washington, D.C.: June 16,  2015.

Supplemental Security Income: SSA Has Taken Steps to Prevent and  Detect Overpayments, but Additional Actions Could be Taken to Improve  Oversight. GAO-13-109. Washington, D.C.: December 14, 2012.

Disability Insurance: SSA Can Improve Efforts to Detect, Prevent, and  Recover Overpayments. GAO-11-724. Washington, D.C.: July 27, 2011.


Question-summary annotations: questions: question: How has the SSA handled DI overpayments?
answer: In fiscal year 2015, the Social Security Administration (SSA) recovered $857 million in Disability Insurance (DI) overpayments that it erroneously made to beneficiaries; however, SSA is missing opportunities to recover more.

question: How does the SSA recover overpayments?
answer: More than three-fourths of the recovered overpayments in fiscal year 2015 were collected by withholding all or a portion of a beneficiary's monthly benefits.
child_questions: question: What is the withholding method?
answer: SSA's policy is to set withholding repayment amounts based on a beneficiary's income, expenses, and assets, but its policy regarding which expenses are reasonable is not clear.
child_questions: question: What errors does this method have?
answer: Moreover, SSA cannot know if repayment periods and amounts are consistently determined due to a lack of oversight, such as supervisory review or targeted quality reviews.

question: How does the GAO think this method can be improved?
answer: Further, SSA lacks concrete plans for pursuing other debt recovery options, while GAO's analysis suggests that some options could potentially increase collections from individuals having their benefits withheld.
child_questions: question: What methods could the SSA utilize?
answer: For example, about half of withholding plans at the end of fiscal year 2015 extended beyond SSA's standard 36-month time frame, and could be shortened. Making the minimum monthly repayment 10 percent of a beneficiary's monthly benefit, instead of the current $10 minimum, would shorten the median length of all scheduled withholding plans by almost a third (from 3.4 years to 2.3 years) and result in an additional $276 million collected over the next 5 years.

questions: question: How does the SSA track penalties?
answer: While SSA officials reported an increase in recent years in the amount of civil monetary penalties imposed, SSA currently lacks reliable data to effectively track the disposition of penalties and administrative sanctions.
child_questions: question: How does tracking the payments fail?
answer: For example, SSA cannot readily track the amounts ultimately collected from penalties, which are fines imposed by the Office of the Inspector General (OIG) and collected by SSA.

question: What limits the SSA from collecting penalties?
answer: Further, SSA currently has only two paths for collecting on penalties—withholding benefits and voluntary payment.
child_questions: question: How does this affect collection from some individuals?
answer: A recent OIG audit found that the majority of uncollected penalty amounts it reviewed were from individuals who were not receiving SSA benefits and with whom SSA had no ongoing collection actions.

question: How is the SSA attempting to expand their collection?
answer: SSA determined it is able to use certain alternative collection tools, such as wage garnishment, but only recently began drafting regulations to use them, and the regulations are still undergoing internal review.

question: How has the SSA failed to expand their collection?
answer: SSA determined it is able to use certain alternative collection tools, such as wage garnishment, but only recently began drafting regulations to use them, and the regulations are still undergoing internal review. In addition, SSA lacks and had not explored obtaining authority to use other tools for collecting penalties that it uses for collecting overpayments—such as credit bureau reporting.

question: How does the SSA fail to track sanctions?
answer: Related to administrative sanctions, SSA could not provide reliable data on how often it imposes sanctions, a punishment in which benefit payments are temporarily stopped. SSA's process of manually entering sanctions information into a database may be subject to errors or omissions.
child_questions: question: What might this result in?
answer: Regional officials said this can result in incomplete information and staff not taking appropriate action on cases.

question: How has the newer SSA procedure changed sanctions?
answer: SSA changed its procedure in 2013 to direct that all potential sanctions first be reviewed for potential prosecution or civil monetary penalties, but SSA's lack of reliable data prevents it from determining whether this new procedure achieved the intended effect of more consistent application of sanctions.

question: How has the SSA evaluated their perforce with sanctions?
answer: In an internal evaluation of its procedures, SSA identified weaknesses with how sanctions decisions are tracked and communicated, but it is in the early stages of deciding how to address them.

question: What consequences does SSA penalty and sanction handling have?
answer: The shortcomings in SSA's use of penalties and sanctions potentially diminish the deterrent value of these actions against individuals who may fraudulently obtain benefits.

questions: question: What is the SSA's DI program?
answer: SSA's DI program provides cash benefits to millions of Americans who can no longer work due to a disability.

question: What errors lie in the DI payments?
answer: While most benefits are paid correctly, beneficiary or SSA error can result in overpayments—that is, payments made in excess of what is owed.
child_questions: question: How did this affect FY2015?
answer: In fiscal year 2015, SSA detected $1.2 billion in new overpayments, adding to growing cumulative debt.

question: How can these errors be resolved?
answer: Further, when individuals inappropriately obtain benefits in certain situations, SSA can levy penalties or withhold benefits for a period of time.

question: What was the GAO asked to study?
answer: GAO was asked to study the use of these actions, and SSA efforts to recover overpayments.

questions: question: What recommendations did the GAO make to the SSA?
answer: GAO is making eight recommendations to SSA, including: clarify its policy and improve oversight related to debt repayment plans, pursue additional recovery options for overpayments and penalties, and improve its ability to track penalties and sanctions.
child_questions: question: How did the SSA respond to these recommendations?
answer: SSA agreed with seven, but disagreed with a recommendation on debt recovery options.

question: How does the GAO view their recommendations?
answer: GAO maintains the options merit exploration, as discussed further in the report.