Improper Payments: Government-Wide Estimates and Use of Death Data to Help Prevent Payments to Deceased Individuals
Released: 2015-03-16T00:00:00

Letter

Improper Payments Remain a Government-Wide Challenge

Improper Payment Estimates Increased in Fiscal Year 2014

Government-wide, improper payment estimates totaled $124.7 billion in fiscal year 2014, a significant increase of approximately $19 billion from the prior year’s estimate of $105.8 billion. The estimated improper payments for fiscal year 2014 were attributable to 124 programs spread among 22 agencies. Table 1 shows the improper payment estimates, error rates, and examples of reported root causes for those 12 programs that had improper payment estimates exceeding $1 billion for fiscal year 2014, which accounted for approximately 93 percent of the government- wide estimate.

When excluding the Department of Defense’s (DOD) Defense Finance and Accounting Service Commercial Pay program, the reported government-wide error rate was 4.5 percent of program outlays in fiscal year 2014, compared to 4.0 percent reported in fiscal year 2013. The increase in the 2014 estimate is attributed primarily to increased error rates in three major programs: the Department of Health and Human Services’ (HHS) Medicare Fee-for-Service, HHS’s Medicaid, and the Department of the Treasury’s (Treasury) Earned Income Tax Credit. These three programs accounted for $80.9 billion in improper payment estimates, or approximately 65 percent of the government-wide total for fiscal year 2014. Further, the increases in improper payment estimates for these three programs were approximately $16 billion, or 85 percent of the increase in the government-wide improper payment estimate for fiscal year 2014.

Agencies Continue to Face Challenges in Estimating and Reducing Improper Payments

IPERIA is the latest in a series of laws aimed at reducing improper payments. IPERIA directs the Office of Management and Budget (OMB) to annually identify a list of high-priority programs for greater levels of oversight and review, including establishing annual targets and semiannual or quarterly actions for reducing improper payments. IPERIA also enacted into law a Do Not Pay initiative, elements of which already were being developed under executive branch authority. The Do Not Pay initiative is a web-based, centralized data-matching service that allows agencies to review multiple databases―including certain death data maintained by SSA―to determine a recipient’s award or payment eligibility prior to making payments. Similarly, the Digital Accountability and Transparency Act of 2014 (DATA Act) calls on Treasury to establish a data analysis center, or to expand an existing service, to provide data, analytic tools, and data management techniques for preventing or Effective implementation of the DATA Act reducing improper payments.and the use of data analytic tools could help agencies to detect, reduce, and prevent improper payments.

In addition to these legislative initiatives, OMB has continued to play a key role in the oversight of government-wide improper payments. OMB has established guidance for federal agencies on reporting, reducing, and recovering improper payments as required by IPIA, as amended, and on protecting privacy while reducing improper payments with the Do Not Pay initiative. For example, the most recent revision to OMB’s guidance for estimating improper payments directs agencies to report on the causes of improper payments using more detailed categories than previously required, such as program design issues or administrative errors at the federal, state, or local agency level. As we previously reported, detailed analysis of the root causes of improper payments can help agencies to identify and implement targeted corrective actions. Although the revised guidance is generally effective for fiscal year 2015 reporting, OMB has requested that the four agencies with the largest high-priority programs implement the revised guidance early―by April 30, 2015―using fiscal year 2014 information. This includes developing comprehensive corrective action plans for each program that describe root causes and establish critical path milestones to meet improper payment reductions; identifying improper payments using the new, more detailed categories outlined in the guidance; and developing plans to provide reasonable assurance that internal controls over improper payments are in place and are working effectively.

While these efforts are positive steps toward estimating and reducing improper payments, agencies continue to face challenges. In our report on the Fiscal Year 2014 Financial Report of the United States Government, we identified the issue of improper payments as a material weakness in internal control because the federal government is unable to determine the full extent to which improper payments occur and reasonably assure that appropriate actions are taken to reduce them. We found that not all agencies had developed improper payment estimates for all of the programs and activities they identified as susceptible to significant improper payments. Specifically, two federal agencies did not report estimated improper payment amounts for four risk-susceptible programs. For example, HHS did not report an improper payment estimate in fiscal year 2014 for its Temporary Assistance for Needy Families (TANF) program, which had program outlays of about $16.3 billion.

Generally, agencies must issue their performance and accountability reports or agency financial reports by November 15. Fiscal year 2013 was the third year for which IGs were required to issue annual reports on agencies’ compliance with criteria listed in IPERA. IG reports on fiscal year 2014 compliance with the criteria listed in IPERA are generally expected to be issued by May 2015. least one of these two criteria for 3 consecutive years. In addition to the legislative criteria, various IGs reported other deficiencies in their most recent annual compliance reports, including risk assessments that may not accurately assess the risk of improper payments and estimation methodologies that may not produce reliable estimates. Similarly, we have found weaknesses in improper payment risk assessments at the Department of Energy and in the estimating methodology for DOD’s TRICARE program, which could result in understated estimates of improper payments.take steps to improve its risk assessments, including revising guidance on how to address risk factors and providing examples of other risk factors likely to contribute to improper payments. For DOD’s TRICARE, we recommended that DOD implement a more comprehensive method for measuring improper payments that includes review of medical records. Both agencies concurred with our recommendations.

We recommended that the Department of Energy In addition to the challenges that we and the IGs reported, some agencies reported in their fiscal year 2014 performance and accountability reports or agency financial reports that program design issues could hinder efforts to estimate or recapture improper payments. These included the following:

Coordination with states. HHS cited statutory limitations for its state- administered TANF program, which prohibited it from requiring states to participate in developing an improper payment estimate for the program. Despite these limitations, HHS reported that it had taken actions to assist states in reducing improper payments, such as working with states to analyze noncompliance findings from audits related to TANF and requiring more accurate information about the ways states used TANF block grants.

Recovery auditing. The Department of Agriculture (USDA) reported that section 281 of the Department of Agriculture Reorganization Act of 1994 precluded the use of recovery auditing techniques.Specifically, the agency reported that section 281 provides that 90 days after the decision of a state, a county, or an area committee is final, no action may be taken to recover the amounts found to have been erroneously disbursed as a result of the decision, unless the participant had reason to believe that the decision was erroneous. This statute is commonly referred to as the Finality Rule, and according to USDA, it affects the Farm Service Agency’s ability to recover overpayments.

While agencies continue to face challenges, there are a number of strategies that can help agencies in reducing improper payments, including analyzing the root causes of improper payments to identify and implement effective preventive and detective controls. Detective controls are critical for identifying improper payments that have already been made, but strong preventive controls can serve as the frontline defense against improper payments. One example of preventive controls is up-front eligibility verification through data sharing, which allows entities that make payments to compare information from different sources to help ensure that payments are appropriate. Specifically, one type of data sharing we are highlighting today is the use of SSA death data.

Use of Death Information Can Help Prevent Improper Payments, but Agencies Face Challenges in Obtaining Accurate and More Complete Data

Programs Can Use Death Information to Help Prevent Improper Payments

Because of its mission, SSA is uniquely positioned to collect and manage death data at the federal level, and these data can be helpful in preventing improper payments to deceased individuals or those who use deceased individuals’ identities. SSA maintains two sets of death data. The complete file of death data, which we refer to as SSA’s full death file, includes data from multiple sources―such as funeral directors, family members, certain federal agencies, and states―and is available to certain eligible entities. The Social Security Act requires that SSA share its full death file, to the extent feasible, with agencies that provide federally funded benefits, provided that the arrangement meets statutory requirements. A subset of the full death file, which SSA calls the Death Master File (DMF), is available to the public. However, SSA may not include death data received from states in the DMF.reported on the value of using SSA’s death data―the full death file, if possible, or the DMF―to guard against improper payments to deceased individuals or those who use deceased individuals’ identities. For example, we have reported on payments to deceased individuals that could have been prevented by using SSA’s death data in the following areas.

Disaster assistance. In December 2014, we identified 45 recipients of Hurricane Sandy disaster benefits from the Federal Emergency Management Agency’s (FEMA) Individuals and Households Program that appeared on SSA’s full death file and had applications for the program dated after the reported date of death. Of these 45 cases, FEMA officials stated that they submitted 7 for review to determine if the assistance could be recouped, 2 payments were returned voluntarily, and 1 was under investigation for fraud. While FEMA developed a process to review SSA’s DMF, use of the more comprehensive full death file could have helped to identify likely deceased individuals who were not listed in the DMF. We recommended that FEMA collaborate with SSA to assess the cost and feasibility of checking recipient information against the full death file. FEMA concurred with our recommendations and stated that it will work with SSA to determine the feasibility and cost of this effort.

Farm programs. In June 2013, we reported that USDA needed to do more to prevent improper payments to deceased individuals made under various farm programs, including those related to farm income, disasters, conservation, and crop insurance. We found that while one USDA component had developed procedures for reviewing SSA’s DMF and recovered approximately $1 million, certain payments to deceased individuals that were deemed to be proper did not have sufficient support for the decisions. Further, the other two USDA components we reviewed did not have procedures in place to prevent potentially improper payments to deceased individuals. We recommended that USDA strengthen its existing DMF review processes and establish review processes for its two remaining components. As of March 2015, USDA reported that it is still working to address our recommendations.

Rural housing. In May 2012, we reported that USDA could enhance its efforts to identify and reduce improper rental assistance payments. We found that USDA’s efforts to identify improper payments did not examine payments made on behalf of deceased tenants, among other types of payment errors. When a tenant dies, rental assistance should either be discontinued or adjusted to reflect a change in household composition. We found that USDA relied on a deceased tenant’s landlord or family to provide notification of a tenant’s death. Failure to report such information could lead the agency to continue to make rental assistance payments on the deceased tenant’s behalf. We recommended that USDA complete steps to use SSA’s DMF to identify these improper payments and to conduct oversight of program payments. Consistent with our recommendation, USDA officials told us in March 2015 that they have been using the DMF since fiscal year 2013 to avoid making payments on behalf of deceased tenants and are planning to use the DMF to detect improper payments in future improper payment audits.

Challenges Exist in Maintaining and Sharing Death Information

While verifying eligibility using SSA’s death data can be an effective tool to help prevent improper payments to deceased individuals, SSA faces challenges in maintaining accurate death data, and other federal agencies face challenges in accessing these data. Inaccuracies in death data could adversely affect their usefulness in helping agencies prevent improper payments. In November 2013, we reported on errors and issues we found and recommended that SSA take specific actions to address death file data errors and agency access issues, as detailed below.

Improving the Accuracy and Completeness of Death Data

SSA receives death reports from multiple sources, but its procedures for collecting, verifying, and maintaining death reports could result in erroneous or untimely death information. For example, as we reported in November 2013, SSA did not independently verify all reports before including them in its death records. SSA only verified death reports for Social Security beneficiaries in order to stop benefit payments and did not verify death reports for nonbeneficiaries. Further, for Social Security beneficiaries, SSA verified only those reports from sources that it considered to be less accurate, such as reports from other federal agencies. SSA did not verify reports from what it considered to be more accurate sources, such as funeral directors, family members, and states using the Electronic Death Registration System. SSA considered death reports submitted by states through this system to be the most accurate because the information is verified with SSA databases before the reports are submitted to SSA. Because SSA verifies a limited portion of death reports, it increases the risk of having erroneous information in its death data, such as including living individuals or not including deceased individuals. Figure 1 illustrates SSA’s death report verification procedures.

Additionally, we reported in November 2013 that death reports that did not match information in SSA’s database of all Social Security number- holders, known as the Numerical Index File (Numident), were not included in SSA’s death data. SSA also did not attempt to follow up with the sources of these reports in part because, according to agency officials, it is unlikely that the sources would have any additional information. However, by not contacting the source of the death report or conducting any other outside investigation to resolve the discrepancy, the risk that death data will be inaccurate or incomplete increases, and federal benefit-paying agencies relying on these data could make improper payments as a result.

Further, we found that SSA did not perform additional reviews of reports of deaths that occurred years or decades in the past. In our November 2013 report, we identified cases in which death reports submitted to SSA in early 2013 listed dates of death that were more than a year old, and in some cases, more than 10 years old. This is of concern because, if these dates of death are accurate, SSA and other agencies may have been at risk of paying benefits to these individuals for long periods after they died. SSA officials were not able to explain with certainty why this was occurring but suggested that some cases might be the result of data entry errors.

In our November 2013 report, we also identified other instances of potentially erroneous information in the death data that raise concerns about their accuracy and usefulness. For example, we found records where the date of death preceded the individual’s recorded date of birth and records where the date of death was prior to 1936―the year Social Security numbers were first issued―although the decedents had Social Security numbers assigned to them. Other records showed a recorded age at death of between 115 and 195. Despite these vulnerabilities, SSA had not performed risk assessments to determine the impact of erroneous, untimely, or incomplete death information on SSA’s ability to prevent improper benefit payments. We recommended that SSA conduct such a risk assessment to identify the scope and extent of errors, ways to address them, and the feasibility and cost-effectiveness of addressing various types of errors based on the risk they pose. SSA partially agreed with our recommendation. According to officials, SSA recently conducted a risk assessment as a part of redesigning how the agency processes death reports and compiles the data for dissemination; however, we have not yet had an opportunity to review the risk assessment.

Ensuring Appropriate Agency Access to Death Data

Certain federal benefit-paying agencies have obtained SSA’s full set of death data directly from SSA, including HHS’s Centers for Medicare & Medicaid Services and Treasury’s Internal Revenue Service, the entities that administer the three programs with the highest improper payment estimates in fiscal year 2014. According to SSA officials, agencies receiving access to the full death file must make a formal request and have agreements in place with SSA that outline the circumstances of each data-sharing arrangement. An agency that does not access SSA’s full death file can instead access the publicly available DMF. However, the DMF is less complete than SSA’s full death file because state- reported deaths are removed. As we reported in November 2013, the DMF contained 10 percent fewer records than the full death file because of the removal of state-reported deaths. SSA officials expect the percentage of state-reported deaths as a proportion of all of SSA’s death records to increase over time as more states submit records through the Electronic Death Registration System.

We also found in our November 2013 report that SSA lacked written guidelines other than the language in the Social Security Act for determining whether agencies are eligible to access the full death file, and SSA’s determinations as to whether agencies met these requirements varied. In one example, officials stated that SSA would generally have the authority to share the full death file with the IGs at benefit-paying agencies for the purpose of ensuring proper payment of federally funded benefits. In fact, SSA officials approved a request for access to the full death file for the HHS IG. However, SSA officials also stated that the Do Not Pay Business Center, operated by Treasury, was not eligible to receive the full death file. Like the HHS IG, Treasury’s Do Not Pay Business Center was seeking access to the full death file as part of its efforts to prevent improper payments. SSA officials provided no documentation outlining their rationale for this determination but explained that they were not authorized to provide the state-reported death data to Treasury to distribute them to other agencies. Because agencies’ circumstances may differ, this variation in determinations may not represent inconsistency with the act. However, without written guidance for explaining SSA’s criteria for approving or denying agencies’ requests for the full death file, potential recipient agencies may not know whether they are eligible. We recommended that SSA develop and publicize guidance and the criteria it will use to more systematically determine whether agencies are eligible to receive SSA’s full death file. SSA has posted some limited information on accessing the full death file on its website; however, SSA disagreed with our recommendation and said it must review all requests on a case-by-case basis to ensure compliance with the Privacy Act and the Social Security Act. While we appreciate that agencies may request the full death file for a variety of intended uses, and we support SSA’s efforts to ensure compliance with all applicable legal requirements, we continue to believe that developing this guidance could help to ensure consistency in SSA’s future decision making, as well as enhance agencies’ ability to obtain the data in a timely and efficient manner Further, in November 2013, we found that SSA’s projected reimbursement amounts for the reasonable cost of sharing death data varied for different agencies, sometimes because of legal requirements, but SSA did not share with agencies how these amounts were determined. While SSA calculated a detailed breakdown of expenses internally, we found that it provided only a summary of these expenses in the estimates and billing statements it provided agencies. Consequently, recipient agencies did not know the factors that led to the reimbursement amounts they were charged, which could prevent them from making informed decisions based on the amount they are spending. We recommended that SSA provide a more detailed explanation of how it determines reimbursement amounts for providing agencies with death information from the full death file. SSA partially agreed with our recommendation, stating that SSA refined its process for estimating the cost of sharing death data in fiscal year 2013, but it is not a government- wide business practice for federal agencies to share detailed costs for reimbursable agreements. While we recognize that there may be limitations on the type of cost details SSA can provide to recipient agencies, we continue to believe that more transparency in the factors used to calculate reimbursement amounts could help agencies make more informed decisions.

In conclusion, with outlays for major programs, such as Medicare and Medicaid, expected to increase over the next few years, it is critical that actions are taken to reduce improper payments. While sharing death data can help prevent improper payments to deceased individuals, further efforts are needed to help minimize the risks posed by inaccuracies in the death data and to help ensure that agencies have access to them, as appropriate.

Chairman Johnson, Ranking Member Carper, and Members of the Committee, this completes our prepared statement. We would be pleased to respond to any questions that you may have at this time.

GAO Contacts and Staff Acknowledgments

If you or your staff have any questions about this testimony, please contact Daniel Bertoni, Director, Education, Workforce, and Income Security issues at (202) 512-7215 or bertonid@gao.gov or Beryl H. Davis, Director, Financial Management and Assurance, at (202) 512-2623 or davisbh@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff members who made key contributions to this testimony are Rachel Frisk (Assistant Director), Phillip McIntyre (Assistant Director), James Healy, Sara Pelton, and Ricky A. Perry, Jr.

Related GAO Products

Financial Audit: U.S. Government’s Fiscal Years 2014 and 2013 Consolidated Financial Statements. GAO-15-341R. Washington, D.C.: February 26, 2015.

Improper Payments: TRICARE Measurement and Reduction Efforts Could Benefit from Adopting Medical Record Reviews. GAO-15-269. Washington, D.C.: February 18, 2015.

Improper Payments: DOE’s Risk Assessments Should Be Strengthened. GAO-15-36. Washington, D.C.: December 23, 2014.

Hurricane Sandy: FEMA Has Improved Disaster Aid Verification but Could Act to Further Limit Improper Assistance. GAO-15-15. Washington, D.C.: December 12, 2014.

Improper Payments: Inspector General Reporting of Agency Compliance under the Improper Payments Elimination and Recovery Act. GAO-15-87R. Washington, D.C.: December 9, 2014.

Federal Data Transparency: Effective Implementation of the DATA Act Would Help Address Government-wide Management Challenges and Improve Oversight. GAO-15-241T. Washington, D.C.: December 3, 2014.

Improper Payments: Government-Wide Estimates and Reduction Strategies. GAO-14-737T. Washington, D.C.: July 9, 2014.

Social Security Death Data: Additional Action Needed to Address Data Errors and Federal Agency Access. GAO-14-46. Washington, D.C.: November 27, 2013.

Farm Programs: USDA Needs to Do More to Prevent Improper Payments to Deceased Individuals. GAO-13-503. Washington, D.C.: June 28, 2013.

Rural Housing Service: Efforts to Identify and Reduce Improper Rental Assistance Payments Could Be Enhanced. GAO-12-624. Washington, D.C.: May 31, 2012.

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