Social Security Administration: Agency Must Position Itself Now to Meet Profound Challenges
Released: 2002-05-02T00:00:00

Letter

Background

SSA administers three major federal programs. OASI and DI, together commonly known as Social Security, provide benefits to retired and disabled workers and their dependents and survivors. In fiscal year 2001, SSA provided OASI retirement benefits totaling more than $369 billion to over 38 million individuals and DI benefits of more than $59 billion to 6.8 million individuals. These benefits are paid from trust funds that are financed through payroll taxes paid by workers and their employers and by the self-employed. The third program, SSI, provides income for aged, blind, or disabled individuals with limited income and resources. In fiscal year 2001, 6.7 million individuals received almost $28 billion in SSI benefits. SSI payments are financed from general tax revenues.

To administer these programs, SSA must perform certain essential tasks. It must issue SSNs to individuals, maintain earnings records for individual workers by collecting wage reports from employers, use these records and other information to determine the amount of benefits an applicant may receive, and process benefit claims for all three programs.

To meet its customer service responsibilities, SSA operates a vast network of offices distributed throughout the country. These offices include approximately 1,300 field offices, which, among other things, take applications for benefits; 138 Offices of Hearings and Appeals; and 36 teleservice centers responsible for SSA’s national 800 number operations.The agency’s policy is to provide customers with a choice in how they conduct business with SSA. Options include visiting or calling a field office, calling SSA’s toll-free number, or contacting SSA through the mail or the Internet. To conduct its work, SSA employs almost 62,000 staff. In addition, to make initial and ongoing disability determinations, SSA contracts with 54 state disability determination service (DDS) agencies under authority of the Social Security Act. Although federally funded and guided by SSA in their decision making, these agencies hire their own staff and retain a degree of independence in how they manage their offices and conduct disability determinations. Overall, SSA relies extensively on information technology to support its large volumes of programmatic and administrative work.

The process for obtaining SSA disability benefits under either DI or SSI is complex, and multiple organizations are involved in determining whether a claimant is eligible for benefits. As shown in figure 1, the current process consists of an initial decision and as many as three levels of administrative appeals if the claimant is dissatisfied with SSA’s decision.

Each level of appeal involves multistep procedures for evidence collection, review, and decision making. Generally, a claimant applies for disability benefits at one of SSA’s 1,300 field offices across the country. If the claimant meets certain nonmedical program eligibility criteria, the field office staff forward the claim to the DDS. DDS staff then obtain medical evidence about the claimant’s impairment and determine whether the claimant is disabled. Claimants who are initially denied benefits can appeal by requesting the DDS to reconsider its initial denial. If the decision at the reconsideration level remains unfavorable, the claimant can request a hearing before a federal administrative law judge at an SSA hearings office and, if still dissatisfied, a review by SSA’s appeals council. After exhausting these administrative remedies, the individual may file a complaint in federal district court.

The agency’s ability to continue providing Social Security benefits over the long term is strained by profound demographic changes. The baby boom generation is nearing retirement age. In addition, life expectancy has increased continually since the 1930s, and further increases are expected. This increase in life expectancy, combined with falling fertility rates, mean that fewer workers will be contributing to Social Security for each aged, disabled, dependent, or surviving beneficiary. Beginning in 2017, Social Security’s expenditures are expected to exceed its tax income. By 2041, without corrective action, experts expect the combined OASI and DI trust funds to be depleted, leaving insufficient funds to pay the current level of benefits. Unless actions are taken to reform the social security system, the nation will face continuing difficulties in financing social security benefits in the long term. Over the past few years, a wide array of proposals has been put forth to restore Social Security’s long-term solvency, and in December 2001, a commission appointed by the president presented three alternative proposals for reform.

This solvency problem is part of a larger and significant fiscal and economic challenge facing our aging society. The expected growth in the Social Security program (OASI and DI), combined with even faster expected growth in Medicare and Medicaid, will become increasingly unsustainable over time, compounding an ongoing decline in budget flexibility. Absent changes in the structure of Social Security and Medicare, there would be virtually no room for any other budget priorities in future decades. Ultimately, restoring our long-term fiscal flexibility will involve reforming existing federal entitlement programs and promoting the saving and investment necessary for robust long-term economic growth.

Additional Progress Is Needed to Improve SSA’s Disability Determination Process and to Return People to Work

The disability determination process is time-consuming, complex, and expensive. Individuals who are initially denied benefits by SSA and appeal their claim experience lengthy waits for a final decision on their eligibility, and questions have been raised about the quality and consistency of certain disability decisions. Since 1994, SSA has introduced a wide range of initiatives intended to address long-standing problems with its disability claims process. However, the agency’s efforts, in general, have not achieved the intended result, and the problems persist. Because SSA’s DI and SSI programs are expected to grow significantly over the next decade, improving the disability determination process remains one of SSA’s most pressing and difficult challenges requiring immediate and sustained attention from the new commissioner. Additionally, in redesigning its disability decision-making process, SSA still needs to incorporate into its eligibility assessment process an evaluation of what is needed for an individual to return to work. We have recommended developing a comprehensive return-to-work strategy that focuses on identifying and enhancing the work capacities of applicants and beneficiaries.

Improvements to the Disability Determination Process Have Been Limited

SSA’s complex disability claims process has been plagued by a number of long-standing weaknesses that have resulted in lengthy waiting periods for claimants seeking disability benefits. For example, claimants who wish to appeal an initial denial of benefits frequently wait more than 1 year for a final decision. We have reported that these long waits result, in part, from complex and fragmented decision-making processes that are laden with many layers of reviews and multiple handoffs from one person to another. The cost of administering the DI and SSI programs reflects the demanding nature of the process. Although SSI and DI program benefits account for less than 20 percent of the total benefit payments made by SSA, they consume nearly 55 percent of annual administrative resources.

In addition to its difficulties in processing claims, SSA has also had difficulty ensuring that decisions about a claimant’s eligibility for disability benefits are accurate and consistent across all levels of the decision- making process. For example, our work shows that in fiscal year 2000, about 40 percent of applicants whose cases were denied at the initial level appealed this decision and about two-thirds were awarded benefits. This happens in part because decision makers at the initial level use a different approach to evaluate claims and make decisions than those at the appellate level. The inconsistency of decisions at these two levels has raised questions about the fairness, integrity, and cost of SSA’s disability programs.

In 1994, SSA laid out a plan to address these problems, yet that plan and three subsequent revisions in 1997, 1999, and 2001 have yielded only limited success. The agency’s initial plan entailed a massive effort to redesign the way it made disability decisions. Among other things, SSA planned to develop a streamlined decision-making and appeal process, more consistent guidance and training for decision makers at all levels of the process, and an improved process for reviewing the quality of eligibility decisions. In our reviews of SSA’s efforts after 2 years, 4 years, and again in 2001, we found that the agency had accomplished little. In some cases, the plans were too large and too complex to keep on track, and the results of many of the initiatives that were tested fell far short of expectations. Moreover, the agency was not able to garner consistent stakeholder support and cooperation for its proposed changes.

Despite the overall disappointing progress, the agency did experience some successes. For example, it conducted a large training effort to improve the consistency of decisions, which agency officials believe resulted in 90,000 eligible individuals’ receiving benefits 500 days sooner than otherwise might have been the case over a 3-year period. In addition, the agency issued formal guidance in a number of areas intended to improve the consistency of decisions between the initial and appellate levels.

Overall, however, significant problems persist and difficult decisions remain. For example, SSA is currently collecting final data on the results from an initiative known as the Prototype, which was implemented in 10 states in October 1999. Although interim data indicated that the Prototype resulted in more awards at the initial decision level without compromising accuracy, it also indicated that the number of appeals would increase. This, in turn, would result in both higher administrative and benefit costs and lengthen the wait for final decisions on claims. As a result, SSA decided that the Prototype would not continue in its current form. Recently, SSA announced its “short-term” decision to revise some features of the Prototype to improve disability claims processing time while it continues to develop longer-term improvements. It remains to be seen whether these revisions will retain the positive results from the Prototype while also controlling administrative and benefit costs.

Even more pressing in the near term is the management and workload crisis that SSA faces in its hearings offices. The agency’s 1999 plan included an initiative to overhaul operations at its hearing offices to increase efficiency and significantly reduce processing times at that level; however, this nationwide effort not only has failed to achieve its goals but, in some cases, has made things worse. The initiative has suffered, in part, from problems associated with implementing large-scale changes too quickly without resolving known problems. As a result, the average case- processing time slowed and backlogs of cases waiting to be processed approached crisis levels. We have recommended that the new commissioner act quickly to implement short-term strategies to reduce the backlog and develop a long-range strategy for a more permanent solution to the backlog and efficiency problems at the Office of Hearings and Appeals. According to SSA officials, they have recently made some decisions on short-term initiatives to reduce the backlogs and streamline the process, and they are preparing to negotiate with union officials regarding some of these planned changes.

Finally, SSA’s 1994 plan to redesign the claims process called for the agency to revamp its existing quality assurance system. However, because of disagreement among stakeholders on how to accomplish this difficult objective, progress in this area has been limited. In March 2001, a contractor issued a report assessing SSA’s existing quality assurance practices and recommended a significant overhaul to encompass a more comprehensive view of quality management. We agreed with this assessment and recommended that SSA develop an action plan for implementing a more comprehensive and sophisticated quality assurance program. Since then, the commissioner has signaled the high priority she attaches to this effort by appointing to her staff a senior manager for quality who reports directly to her. The senior manager is responsible for developing a proposal to establish a quality-oriented approach to all SSA business processes. The manager is currently assembling a team to carry out this challenging undertaking.

The disappointing results of some of these initiatives can be linked, in part, to slow progress in achieving technological improvements. As originally envisioned, SSA’s plan to redesign its disability determination process was heavily dependent upon these improvements. The agency spent a number of years designing and developing a new computer software application to automate the disability claims process. However, SSA decided to discontinue the initiative in July 1999, after about 7 years, citing software performance problems and delays in developing the software.

In August 2000, SSA issued a new management plan for the development of the agency’s electronic disability system. SSA expects this effort to move the agency toward a totally paperless disability claims process. The strategy consists of several key components, including (1) an electronic claims intake process for the field offices, (2) enhanced state DDS claims processing systems, and (3) technology to support the Office of Hearing and Appeals’ business processes. The components are to be linked to one another through the use of an electronic folder that is being designed to transmit data from one processing location to another and to serve as a data repository, storing documents that are keyed in, scanned, or faxed. SSA began piloting certain components of its electronic disability system in one state in May 2000 and has expanded this pilot test to one more state since then. According to agency officials, SSA has taken various steps to increase the functionality of the system; however, the agency still has a number of remaining issues to address. For example, SSA’s system must comply with privacy and data protection standards required under the Health Information Portability and Accountability Act, and the agency will need to effectively integrate its existing legacy information systems with new technologies, including interactive Web-based applications.

SSA is optimistic that it will meet its scheduled date for achieving a paperless disability claims process—anticipated for the end of 2005—and has taken several actions to ensure that its efforts support the agency’s mission. For example, to better ensure that its business processes drive its information technology strategy, SSA has transferred management of the electronic disability strategy from the Office of Systems to the Office of Disability and Income Security Programs. In addition, SSA hired a contractor to independently evaluate the electronic disability strategy and recommend options for ensuring that the effort addresses all of the business and technical issues required to meet the agency’s mission. According to an agency official, SSA is currently implementing the contractor’s recommendations. As SSA proceeds with this new system, however, it is imperative that the agency effectively identify, track, and manage the costs, benefits, schedule, and risks associated with the system’s full development and implementation. Moreover, SSA must ensure that it has the right mix of skills and capabilities to support this initiative and that desired end results are achieved.

Overall, SSA is at a crossroads in its efforts to redesign and improve its disability claims process. It has devoted significant time, energy, and resources to its redesign initiatives over the last 7 years, yet progress has been limited and often disappointing. SSA is not the only government agency to experience difficulty in overhauling or reengineering its operations. According to reengineering experts, many federal, state, and local agencies have failed in similar efforts. Frequent leadership turnover, constraints on flexibility posed by laws and regulations, and the fact that government agencies often must serve multiple stakeholders with competing interests all constrain progress. Yet, it is vital that SSA address its claims process problems now, before the agency experiences another surge in workload as the baby boomers reach their disability-prone years. To date, the focus on changing the steps and procedures of the process or changing the duties of its decision makers has not been successful. Given this experience, it may be appropriate for the agency to undertake a new and comprehensive analysis of the fundamental issues impeding progress. Such an analysis might include reassessing the root causes contributing to its problems and would encompass concerns raised by the Social Security Advisory Board, such as the fragmentation and structural problems in the agency’s overall disability service delivery system. The outcome of this analysis may, in some cases, require legislative changes.

SSA Lacks a Comprehensive Strategy to Return People with Disabilities to Work

The number of working-age beneficiaries of the DI and SSI programs has increased by 61 percent over the past 10 years. We have reported that as the beneficiary population has grown, numerous technological and medical advances, combined with changes in society and the nature of work, have increased the potential for some people with disabilities to return to, or remain in, the labor force. Also, legislative changes have focused on returning disabled beneficiaries to work. The Americans with Disabilities Act of 1990 supports the premise that people with disabilities can work and have the right to work, and the Ticket to Work and Work Incentives Improvement Act of 1999 increased beneficiaries’ access to vocational services. Indeed, many beneficiaries with disabilities indicate that they want to work, and many may be able work in today’s labor market if they receive needed support. In 1996, we recommended that SSA place a greater priority on helping disabled beneficiaries work, and the agency has taken a number of actions to improve its return-to-work practices. But even with these actions, SSA has achieved poor results in this arena, where fewer than 1 in 500 DI beneficiaries and few SSI beneficiaries leave the disability rolls to work.

Even in light of the Ticket to Work Act, SSA will continue to face difficulties in returning beneficiaries to work, in part owing to weaknesses, both statutory and policy, in the design of the DI program. As we have reported in the past, these weaknesses include an either/or disability decision-making process that characterizes individuals as either unable to work or having the capacity to work. This either/or process produces a strong incentive for applicants to establish their inability to work to qualify for benefits.

Moreover, return-to-work services are offered only after a lengthy determination process. Because applicants are either unemployed or only marginally connected to the labor force at the time of application and remain so during the eligibility determination process, it is likely that their skills, work habits, and motivation to work deteriorate during this wait. Thus, individuals who have successfully established their disability may have little reason or desire to attempt rehabilitation and work. Unlike some private sector disability insurers and foreign social insurance systems, SSA does not incorporate into its initial or continuing eligibility assessment process an evaluation of what is needed for an individual to return to work. Instead of receiving assistance to stay in the workforce or return to work—and thus to stay off the long-term disability rolls—an individual can obtain assistance through DI or SSI only by proving his or her inability to work. And even in its efforts to redesign the decision- making process, SSA has yet to incorporate into these initiatives an evaluation of what an individual may need to return to work.

Moreover, SSA has made limited strides in developing baseline data to measure progress in the return-to-work area. In June 2000, we reported that many of SSA’s fiscal year 2001 performance measures were not sufficiently results oriented, making it difficult to track progress. SSA’s fiscal year 2002 performance plan shows that SSA has begun to incorporate more outcome-oriented performance indicators that could support their efforts in this area. Two new indicators, in particular, could help SSA gauge progress: the percentage increase in the number of DI beneficiaries whose benefits are suspended or terminated owing to employment and the percentage increase in the number of disabled SSI beneficiaries no longer receiving cash benefits. However, SSA has not yet set specific performance targets for these measures.

Nevertheless, SSA has recently stepped up its return-to-work efforts. For example, it has (1) established an Office of Employment Support Programs to promote employment of disabled beneficiaries; (2) recruited 184 public or private entities to provide vocational rehabilitation, employment, and other support services to beneficiaries under the Ticket to Work Program; (3) raised the limit on the amount a DI beneficiary can earn from work and still receive benefits to encourage people with disabilities to work; (4) funded 12 state partnership agreements that are intended to help the states develop services to increase beneficiary employment; and (5) completed a pilot study on the deployment of work incentive specialists to SSA field offices and is currently determining how to best implement the position nationally.

While these efforts represent positive steps in trying to return people with disabilities to work, much remains to be done. As we have recommended previously, SSA still needs to move forward in developing a comprehensive return-to-work strategy that integrates, as appropriate, earlier intervention, including earlier and more effective identification of work capacities, and the expansion of such capacities by providing essential return-to-work assistance for applicants and beneficiaries. Adopting such a strategy is likely to require improvements to staff skill levels and areas of expertise, as well as changes to the disability determination process. It will also require fundamental changes to the underlying philosophy and direction of the DI and SSI programs, as well as legislative changes in some cases. Policymakers will need to carefully weigh the implications of such changes. Nevertheless, we remain concerned that the absence of such a strategy and accompanying performance plan goals may hinder SSA’s efforts to make significant strides in the return-to-work area. An improved return-to-work strategy could benefit both the beneficiaries who want to work and the American taxpayer.

Longstanding High- Risk SSI Issues Require Sustained Management and Oversight

The SSI program is the nation’s largest cash assistance program for the poor. In fiscal year 2000, the program paid 6.6 million low-income aged, blind, and disabled recipients $31 billion in benefits. During that year, newly detected overpayments and outstanding SSI debt totaled more than $3.9 billion. In 1997, after several years of reporting on specific instances of abuse and mismanagement, increasing overpayments, and poor recovery of outstanding SSI debt, we designated SSI a high-risk program. The SSI program poses a special challenge for SSA because, unlike OASI and DI, it is a means-tested program; thus, SSA must collect and verify information on income, resources, and recipient living arrangements to determine initial and continuing eligibility for the program. Our prior work, however, shows that SSA has often placed a greater priority on quickly processing and paying SSI claims with insufficient attention to verifying recipient self-reported information, controlling program expenditures, and pursuing overpayment recoveries once they occur.

In response to our high-risk designation, SSA has made progress in coordination with Congress to improve the financial integrity and management of SSI, including developing a major SSI legislative proposal with numerous overpayment deterrence and recovery provisions. Many of these provisions were incorporated into the Foster Care Independence Act, which was signed into law in December 1999. The act directly addresses a number of our prior recommendations and provides SSA with additional tools to obtain applicant income and resource information from financial institutions; imposes a period of ineligibility for applicants who transfer assets to qualify for SSI benefits; and authorizes the use of credit bureaus, private collection agencies, interest levies, and other means to recover delinquent debt. SSA also obtained separate legislative authority in 1998 to recover overpayments from former SSI recipients currently receiving OASI or DI benefits. The agency was previously excluded from using this cross-program recovery tool to recover SSI overpayments without first obtaining debtor consent. As a result of this new authority, SSA has recently begun the process of recovering overpayments from Social Security benefits of individuals no longer on the SSI rolls. The agency has also issued regulations on the use of credit bureaus and drafted regulations for wage garnishments. We have been told that the draft regulations are currently under review by the new commissioner and by the Office of Management and Budget.

In addition to establishing the new legislative authorities, SSA has initiated a number of internal administrative actions to further strengthen SSI program integrity. These include using tax refund offsets for delinquent SSI debtors, an action that SSA said resulted in $61 million in additional overpayment recoveries last year. SSA also uses more frequent (monthly) automated matches to identify ineligible SSI recipients living in nursing homes and other institutions. As of January 2001, SSA’s field offices were also provided on-line access to wage, new-hire, and unemployment insurance data maintained by the Office of Child Support Enforcement. These data are key to field staff’s ability to more quickly verify employment and income information essential to determining SSI eligibility and benefit levels. SSA also increased the number of SSI financial redeterminations that it conducted, from about 1.8 million in fiscal year 1997 to about 2.2 million in fiscal year 2000. These reviews focus on income and resource factors affecting eligibility and payment amounts. SSA estimates that by conducting more redeterminations and refining its methodology for targeting cases most likely to have payment errors, it prevented nearly $600 million in additional overpayments in fiscal year 1999.

SSA’s Office of Inspector General (OIG) has also increased the level of resources and staff devoted to investigating SSI fraud and abuse; key among the OIG’s efforts is the formation of Cooperative Disability Investigation teams in 13 field locations. These teams are designed to identify fraud and abuse before SSI benefits are approved and paid. Finally, in response to our prior recommendation, SSA has revised its field office work credit and measurement system to better reward staff for time spent thoroughly verifying applicant eligibility information and developing fraud referrals. If properly implemented, such measures should provide field staff with much-needed incentives for preventing fraud and abuse and controlling overpayments.

SSA’s current initiatives demonstrate a stronger management commitment to SSI integrity issues and have the potential to significantly improve program management; however, our work shows that SSA overpayments and outstanding debt owed to the program remain at high levels. A number of the agency’s initiatives—especially those associated with the Foster Care Independence Act—are still in the early planning or implementation stages and have yet to yield results. In addition, at this stage, it is not clear how great an effect the impact of SSA’s enhanced matching efforts, online access tools, and other internal initiatives has had on the agency’s ability to recover and avoid overpayments. The same is true for the agency’s efforts to improve the accuracy of SSI eligibility decisions.

SSA also has not yet addressed a key program vulnerability—program complexity—that is associated with increased SSI overpayments. In prior work, we have reported that SSI living arrangement and in-kind support and maintenance policies used by SSA to calculate eligibility and benefit amounts were complex, prone to error, and a major source of overpayments. We also recommended that SSA develop options for simplifying the program. Last year, SSA’s policy office issued a study that discussed various options for simplifying complex SSI policies. Although SSA is considering various options, it has not moved forward in recommending specific cost neutral proposals for change.

We believe that sustained management attention is necessary to improve SSI program integrity. Thus, it is important that SSA move forward in fully implementing the overpayment deterrence and recovery tools currently available to it and seek out additional ways to improve program management. Accordingly, we have a review under way that is aimed at documenting the range of SSI activities currently in place; their effects on program management and operations; and additional legislative or administrative actions, or both, necessary to further improve SSA’s ability to control and recover overpayments. A particular focus of this review will be to assess remaining weaknesses in SSA’s initial and ongoing eligibility verification procedures, application of penalties for individuals who fail to report essential eligibility information, and overpayment recovery policies.

SSA Lacks a Plan to Help It Cope with Future Service Delivery Challenges

Among federal agencies, SSA has long been considered one of the leaders in service delivery. Indeed, for fiscal year 2001, SSA reported that 81 percent of its customers rated the agency’s services as “excellent,” “very good,” or “good.” SSA considers service delivery one of its top priorities, and its current performance plan includes specific goals and strategies to provide accurate, timely, and useful service to the public. However, the agency faces significant challenges that could hamper its ability to provide high-quality service over the next decade and beyond. Demand for services will grow rapidly as the baby boom generation ages and enters the disability-prone years. By 2010, SSA expects worker applications for DI to increase by as much as 32 percent over 2000 levels. Determining eligibility for disability benefits is a complex process that spans a number of offices and can take over a year to complete. As we have observed earlier in this statement, SSA already has trouble managing its disability determination workload; adding additional cases without rectifying serious case processing issues will only make things worse. Furthermore, by 2010, SSA projects that applications for retirement benefits will also increase dramatically—by 31 percent over the 2000 levels.

SSA’s ability to provide high-quality service delivery is also potentially weakened by challenges regarding its workforce. First, SSA’s workforce is aging, and SSA is predicting a retirement wave that will peak in the years 2007 through 2010, when it expects about 2,500 employees to retire each year. By 2010, SSA projects that about 37 percent of its almost 62,000 employees will retire. The percentage is higher for employees in SSA’s supervisory or managerial ranks. In particular, more than 70 percent of SSA’s upper-level managers and executives (GS-14, GS-15, and SES level) are expected to retire by 2010. Second, SSA will need to increase staff skills to deal with changing customer expectations and needs. SSA’s staff will need to obtain and continually update the skills needed to use the most current technology available to serve the public in a more convenient, cost effective, and secure manner. At the same time, some aspects of SSA’s customer service workload will likely become more time consuming and labor intensive, owing primarily to the growing proportion of SSA’s non-English speaking customers and the rising number of disability cases involving mental impairments. Both situations result in more complex cases that require diverse staff skills.

SSA has a number of workforce initiatives under way to help it prepare for the future. For example, as we recommended in 1993, and as required by law, SSA developed a workforce transition plan to lay out actions to help ensure that its workforce will be able to handle future service delivery challenges. In addition, recognizing that it will shortly be facing the prospect of increasing retirements, SSA conducted a study that predicts staff retirements and attrition each year, from 1999 to 2020, by major job position and agency component. SSA also began to take steps to fill its expected leadership gap. We have long stressed the importance of succession planning and formal programs to develop and train managers at all levels of SSA. As early as 1993, we recommended that SSA make succession planning a permanent aspect of its human resource planning and evaluate the adequacy of its investments in management training and development. SSA created three new leadership development programs to help prepare selected staff to assume mid- and top-level leadership positions at the agency. Overall, many of the efforts being made today are consistent with principles of human capital management, and good human capital management is fundamental to the federal government’s ability to serve the American people. For this reason, we have designated strategic human capital management a high-risk area across the federal government.

However, SSA is taking these human capital measures in the absence of a concrete service delivery plan to help guide its investments. We recommended as long ago as 1993 that SSA complete such a plan to ensure that its human capital and other key investments are put to the best use.In 1998, the agency took a first step by beginning a multiyear project to monitor and measure the needs, expectations, priorities, and satisfaction of customer groups, major stakeholders, and its workforce. In 2000, SSA completed a document that articulates how it envisions the agency functioning in the future. For example, SSA anticipates offering services in person, over the telephone, and via the Internet; its telephonic and electronic access services will be equipped with sophisticated voice recognition and language translation features, and work will be accomplished through a paperless process. In this service vision document, SSA also states that it will rely heavily on a workforce with diverse and updated skills to accomplish its mission. Although this new vision represents a positive step for the agency toward acknowledging and preparing for future service delivery challenges, it is too broad and general to be useful in making specific information technology and workforce decisions. We have stressed that this document should be followed by a more detailed service delivery plan that spells out who will provide what type of services in the future, where these services will be made available, and the steps and timetables for accomplishing needed changes. SSA officials told us that they are working on such a blueprint. Without this plan, SSA cannot ensure that its investments in its workforce and technology are consistent with and fully support its future approach to service delivery.

SSA’s Future Success Is Linked to Effectively Managing Information Technology Initiatives

SSA also plans to rely heavily on information technology to cope with growing workloads and to enhance its processing capabilities. To this end, the agency has devoted considerable time and effort to identifying strategies to meet its goal of providing world-class service. For example, SSA has begun expanding its electronic service delivery capability— offering retirees the option of applying for benefits on-line as well as pursuing other on-line or Internet options to facilitate customer access to the agency’s information and services. Yet, SSA’s overall success in meeting its service delivery challenge will depend on how effectively it manages its information technology initiatives. As SSA transitions to electronic processes, it will be challenged to think strategically about its information technology investments and to effectively link these investments to the agency’s service delivery goals and performance. Furthermore, its actions and decisions must effectively address dual modes of service delivery—its traditional services via telephone, face-to- face, and mail contacts that are supported primarily by its mainframe computer operations, as well as a more interactive, on-line, Web-based environment aimed at delivering more readily accessible services in response to increased customer demands.

SSA has experienced mixed success in carrying out prior information technology initiatives. For example, the agency has made substantial progress in modernizing workstations and local area networks to support its work processes, and it has clearly defined its business needs and linked information technology projects to its strategic objectives. Moreover, our evaluation of its information technology policies, procedures, and practices in five key areas—investment management, enterprise architecture, software development and acquisition, human capital, and information security—found that SSA had many important information technology management policies and procedures in place. For instance, SSA had sound policies and procedures for software development that were consistent with best practices.

However, SSA had not implemented its policies and procedures uniformly and had not established several key policies and procedures essential to ensuring that its information technology investments and human capital were effectively managed. We noted weaknesses in each of the five key areas and recommended actions to improve SSA’s information technology management practices in each area. In total, our report included 20 specific recommendations for more effectively managing the agency’s information technology. In responding to our report, SSA agreed with all of the recommendations.

Let me illustrate some of the weaknesses that formed the basis for our recommendations. In making decisions on technology projects, SSA lacked key criteria and regular oversight for ensuring consistent investment management and decision-making practices. It also did not always consider costs, benefits, schedules, and risks when making project selections and as part of its ongoing management controls. Without such information, SSA cannot be assured that its investment proposals will provide the most cost-effective solutions and achieve measurable and specific program-related benefits (e.g., high-quality service delivered on time, within cost, and to the customer’s satisfaction). Furthermore, given competing priorities and funding needs, SSA will need such information to make essential tradeoffs among its information technology investment proposals and set priorities that can maximize the potential for both short- and longer-term improvements to services provided to the public.

As SSA pursues Internet and Web-based applications to better serve its customers, it must ensure that these efforts are aligned with the agency’s information technology environment. A key element for achieving this transition is the successful implementation of SSA’s enterprise architecture. An enterprise architecture serves as a blueprint for systematically and completely defining an organization’s current (baseline) and desired (target) environment and is essential for evolving information systems, developing new systems, and inserting emerging technologies that optimize their mission value. It also provides a tool for assessing benefits, impacts, and capital investment measurements and supporting analyses of alternatives, risks, and trade-offs. Nonetheless, we found that SSA had not completed key elements of its enterprise architecture, including (1) finalizing its enterprise architecture framework, (2) updating and organizing its architectures and architecture definitions under the framework, and (3) reflecting its future service delivery vision and e-business goals. In addition, it had not ensured that enterprise architecture change management and legacy system integration policies, procedures, and processes were effectively implemented across the agency.

As SSA moves forward in implementing electronic services and other technologies, its architecture will be critical to defining, managing, and enforcing adherence to the framework required to support its current and future information processing needs. Moreover, without effective enterprise architecture change management and legacy system integration processes, SSA will lack assurance that (1) it can successfully manage and document changes to its architecture as business functions evolve and new technologies are acquired and (2) new software and hardware technologies will interoperate with existing systems in a cost-effective manner. In surveying 116 agencies across the federal government, we found the use of enterprise architectures to be a work in progress, with much left to be accomplished. We assessed SSA at a relatively low level of maturity in enterprise architecture management.

SSA plans to rely extensively on software-intensive systems to help achieve processing efficiencies and improved customer service. Because SSA is an agency in which software development continues to be predominantly an in-house effort, in 1997, its Office of Systems established the Software Process Improvement program, in which new policies and procedures were created to enhance the quality of the agency’s software development. However, our evaluation of these policies and procedures found that SSA was not consistently applying them to its software development projects. In particular, SSA had not applied sound management and technical practices in its development of the electronic disability system. This poses a significant risk given SSA’s history of problems in developing and delivering the critical software needed to support its redesigned work processes. The use of sound, disciplined software development processes is critical to ensuring that SSA delivers quality software on schedule and within established cost estimates. Until SSA consistently and effectively implements its software development policies and procedures, it will lack assurance that it can meet its goal of developing a technological infrastructure to support its service delivery vision.

As SSA places increased emphasis on using information technology to support new ways of delivering service, it must ensure that it effectively manages its human capital to anticipate, plan for, and support its information technology requirements. However, SSA had not taken all of the necessary steps to ensure the adequacy of its future information technology workforce. For instance, we found that although SSA had begun evaluating its short- and longer-term information technology needs, these efforts were not complete. Specifically, SSA had not linked its information technology staff needs to the competencies it would require to meet mission goals. Doing so is necessary, however, to ensure that SSA’s plans project workforce needs far enough in advance to allow adequate time for staff recruitment and hiring, skills refreshment and training, or outsourcing considerations. Furthermore, SSA lacked an inventory identifying the knowledge and skills of current information technology staff, which is essential for uncovering gaps between current staff and future requirements. Without such an inventory, SSA has no assurance that its plans for hiring, training, and professionally developing information technology staff will effectively target short- and long-term skills needed to sustain its current and future operations. These shortcomings in SSA’s information technology human capital management could have serious ramifications as the agency moves toward making larger investments in new electronic service delivery options, such as Internet applications. Developing Internet applications represents a new era for SSA—one in which the agency must ensure that is has enough of the right people and skills to bring its electronic service delivery plan to fruition.

As SSA proceeds with the development and implementation of Internet and Web-based initiatives, the need for a strong program to address threats to the security and integrity of its operations will grow. Without proper safeguards, these initiatives pose enormous risks that make it easier for individuals and groups with malicious intentions to intrude into inadequately protected systems and use such access to obtain sensitive information, commit fraud, disrupt operations, or launch attacks against other organizations’ sites.

SSA has made progress in addressing the information protection issues raised in prior years. Specifically, during fiscal year 2001, the agency conducted a risk assessment to identify critical assets and vulnerabilities as part of the Critical Infrastructure Protection project; issued a final security policy for the state Disability Determination Service sites in accordance with the information security requirements included in the National Institute of Standards and Technology Special Publication 800-18; established and published technical security configuration standards for operating systems and servers; completed updates for accreditation and certification of key systems; and further strengthened physical access controls over the National Computer Center.

Nonetheless, weaknesses in SSA’s information security program continue to threaten its ability to effectively mitigate the risk of unauthorized access to, and disclosure of, sensitive information. For example, although the agency has made improvements to its entity-wide security program and standards, control weaknesses continue to expose key elements of its distributed systems and networks to unauthorized access to sensitive data. The general areas where exposures occurred included implementation, enforcement, and ongoing monitoring of compliance with technical security configuration standards and rules governing the operation of firewalls; monitoring controls over security violations and periodic reviews of user access; and physical access controls at nonheadquarters locations. These exposures exist primarily because SSA has not completed implementation of its enterprise-wide security program.

Until a complete security framework is implemented and maintained, SSA’s ability to effectively mitigate the risk of unauthorized access to, and modification or disclosure of, sensitive SSA data will be impaired. Unauthorized access to sensitive data can result in the loss of data as well as trust fund assets, and compromised privacy of information associated with SSA’s enumeration, earnings, benefit payment processes, and programs. The need for a strong security framework to address threats to the security and integrity of SSA operations will grow as the agency continues to implement Internet and Web-based applications to serve the American public.

Program Challenges Require SSA to Play an Active Role in Research, Evaluation, and Policy Development

In the past, we have reported that SSA has not undertaken the range of research, evaluation, and policy analysis necessary (1) to identify areas where legislative or other changes are needed to address program weaknesses and (2) to assist policymakers in exploring and developing options for change.

The long-term solvency of the Social Security system is a critical issue facing the nation and SSA. As the debate on Social Security reform proceeds, policymakers and the general public need thoughtful, detailed, and timely analyses of the likely effect of different proposals on workers, beneficiaries, and the economy. SSA is well positioned to assess the programmatic impacts of economic and demographic trends and to identify areas where policy changes are needed to ensure that recipients’ needs are met efficiently and cost effectively.

At the same time, SSA needs to prepare for the implementation of whatever programmatic changes are eventually made. Many of the reform proposals currently under debate will likely affect not only SSA but other government agencies as well. As part of their debate, policymakers need to understand the administrative aspects of each proposal, including the amount of time and money necessary to implement the proposed changes. SSA has information that could be central to the implementation and administration of proposed Social Security reforms and should be providing this information in a timely and accurate manner.

SSA also faces a wide range of pressing challenges with its disability programs, including how best to 1) ensure the quality and timeliness of its decisions, 2) integrate return-to-work strategies into all phases of its disability determination process, and 3) address program complexity problems that have contributed to vulnerability in the SSI program. To address these challenges, SSA will need to target its research and conduct analyses that will allow the agency to play a key role in proposing and analyzing major policy changes. However, in the past, we have noted SSA’s reluctance to take the actions needed to fulfill its policy development and planning role in advance of major program crises, particularly when they require long-term solutions, legislative change, or both.

In recent years, SSA has taken action to strengthen its research and policy development role in these and other areas. It has initiated several reorganizations of its policy component to strengthen its capacity. The agency has also significantly increased the level of staff and resources available to support research activities and has several analyses planned or under way to address key policy issues. Specific to the long-term solvency issue, SSA’s Office of the Actuary has long provided key information on the financial outlook of Social Security and projections of the effects of different reform proposals on trust fund finances. In addition, SSA has expanded its ability to use modeling techniques to predict the effects of proposed program changes, and it has established a research consortium to conduct and advise on relevant research and policy activities. With respect to its disability programs, SSA has established a separate disability research institute and has submitted to the Congress its first major SSI legislative proposal aimed at improving program integrity. However, many of the agency’s actions and studies are in the early stages, and it is not yet clear how the agency will use them and what their ultimate effect on SSA program policy will be.

The Need to Protect Personal Information Has Gained New Urgency

The Social Security Administration is responsible for issuing SSNs to most Americans. The agency relies on the SSN to record wage data, maintain earnings records, and efficiently administer its benefit programs. In addition, the SSN is used by other government agencies as well as the private sector. This widespread use offers many benefits; however, combined with an increase in reports of identify theft, it has raised public concern over how this and other personal information is being used and protected. Moreover, the growth of the Internet, which can make personal information contained in electronic records more readily accessible to the general public, has heightened this concern. Finally, the terrorist attacks of September 11th and the indication that some of the terrorists fraudulently obtained SSNs have added new urgency to the need to assess how SSNs are used and protected.

We have recently testified on work we are completing at the request of Chairman Shaw and others to review the many uses of SSNs at all levels of government and to assess how these government entities safeguard the SSNs. We found that SSNs are widely used across multiple agencies and departments at all levels of government. They are used by agencies that deliver benefits and services to the public as a convenient and efficient means of managing records. More importantly, these agencies rely on SSNs when they share data with one another, for example, to make sure that only eligible individuals receive benefits and to collect outstanding debt individuals owe the government. Although these agencies are taking steps to safeguard the SSNs from improper disclosure, our work identified potential weaknesses in the security of information systems at all levels of government. In addition, SSNs are widely found in documents that are routinely made available to the public, that is, in public records. Although some government agencies and courts are trying innovative approaches to prevent the SSN from appearing on public records, not all agencies maintaining public records have adopted these approaches. Moreover, increasing numbers of departments are considering placing or planning to place documents that may contain SSNs on the Internet, which would make these numbers much more readily available to others, raising the risk of their misuse.

We also found that SSNs are one of three personal identifiers most often sought by identity thieves and that SSNs are often used to generate additional false documents, which can be used to set up false identities. What is harder to determine is a clear answer on where identify thieves obtain the SSNs they misuse. Ultimately, in light of the recent terrorist events, the nation must grapple with the need to find the proper balance between the widespread and legitimate uses of personal information such as SSNs, by both government and the private sector, and the need to protect individual privacy.

There are no easy answers to these questions, but SSA has an important role to play in protecting the integrity of the SSN. Given the widespread use of SSNs, the agency needs to take steps to ensure that it is taking all necessary precautions to prevent individuals who are not entitled to SSNs from obtaining them. Currently, the agency is reexamining its process of assigning SSNs to individuals. This may require the agency to find a new balance between two competing goals: the need to take time to verify documents submitted during the application process and the desire to serve the applicant as quickly as possible. In addition, the agency is studying ways to make sure it provides accurate and timely information to financial institutions on deceased SSN holders. However, once SSA has issued an SSN, it has little control over how the number is used by other government agencies and the private sector. In this light, we look forward to exploring additional options to better protect SSNs with you as we complete our ongoing work in this area.

Concluding Observations

We have outlined a number of difficult challenges, most of them long- standing, that the SSA Commissioner faces. These are, in general, the same challenges we have been highlighting since SSA became an independent agency. In some cases, SSA has begun to take positive steps to address its challenges. Specifically, SSA’s efforts to strengthen its research, evaluation, and policy development activities show promise. Likewise, SSA has made considerable progress in addressing weaknesses in the integrity of the SSI program. However, more can be done in these areas. As new pressures inevitably arise that will also demand attention from the commissioner and her team, it will be important for the commissioner to sustain and expand on the agency’s actions to date.

We are particularly concerned, however, about other challenges where SSA’s efforts to date have fallen short and where the agency faces increasing pressures in the near future. The commissioner faces crucial decisions on how to proceed on several of these challenges. SSA has made disappointing progress on (1) its efforts to improve its disability claims process, (2) the need to better integrate return-to-work strategies into all phases of the disability process, and (3) the need to better plan for future service delivery pressures and changes. These challenges will be exacerbated by growing workload pressures as the baby boom generation ages. After almost a year without a long-term leadership structure in place, the commissioner and a SSA team have an opportunity to take a fresh look at these longstanding challenges and the fundamental issues impeding faster progress in these areas. Again, focused and sustained attention to these challenges is vital, as the agency is running out of time to make needed changes before the expected increases in workload overwhelm its operations.

Mr. Chairman, this concludes my statement. I would be pleased to respond to any questions that you or other member of the subcommittees may have.

Contacts and Acknowledgments

For further information regarding this testimony, please contact Barbara D. Bovbjerg, Director, or Kay E. Brown, Assistant Director, Education, Workforce, and Income Security at (202) 512-7215. Individuals making key contributions to this testimony include Michael Alexander, Yvette Banks, Daniel Bertoni, Alicia Puente Cackley, Ellen Habenicht, Carol Langelier, Valerie Melvin, Angela Miles, Carol Dawn Petersen, and William Thompson.

Related GAO Products

Social Security Reform

Social Security: Issues in Evaluating Reform Proposals. GAO-02-288T. Washington, D.C.: December 10, 2001.

Social Security: Program’s Role in Helping Ensure Income Adequacy. GAO-02-62. Washington, D.C.: November 30, 2001.

Social Security: Evaluating Reform Proposals. GAO/AIMD/HEHS-00-29. Washington, D.C.: November 4, 1999.

SSA’s Management Challenges: Strong Leadership Needed to Turn Plans Into Timely, Meaningful Action. GAO/T-HEHS-98-113. Washington, D.C.: March 12, 1998.

Social Security Disability Programs

Social Security Disability: Disappointing Results From SSA’s Efforts to Improve the Disability Claims Process Warrant Immediate Attention. GAO-02-322. Washington, D.C.: February 27, 2002.

SSA Disability: SGA Levels Appear to Affect the Work Behavior of Relatively Few Beneficiaries, but More Data Needed. GAO-02-224. Washington, D.C.: January 16, 2002.

SSA Disability: Other Programs May Provide Lessons for Improving Return-to-Work Efforts. GAO-01-153. Washington, D.C.: January 12, 2001.

Social Security Disability: SSA Has Had Mixed Success in Efforts to Improve Caseload Management. GAO/T-HEHS-00-22. Washington, D.C.: October 21, 1999.

SSA Disability Redesign: Actions Needed to Enhance Future Progress. GAO/HEHS/99-25. Washington, D.C.: March 12, 1999.

SSA Disability: SSA Return-to-Work Strategies From Other Systems May Improve Federal Programs. GAO-HEHS-96-133. Washington, D.C.: July 11, 1996.

Supplemental Security Income Program

High Risk Series: An Update. GAO-01-273. Washington, D.C.: January 2001.

Supplemental Security Income: Additional Actions Needed to Reduce Program Vulnerability to Fraud and Abuse. GAO/HEHS-99-151. Washington, D.C.: September 15, 1999.

Supplemental Security Income: Long-Standing Issues Require More Active Management and Program Oversight. GAO/T-HEHS-99-51. Washington, D.C.: February 3, 1999.

Supplemental Security Income: Action Needed on Long-Standing Problems Affecting Program Integrity. GAO/HEHS-98-158. Washington, D.C.: September 14, 1998.

Service Delivery to the Public

SSA Customer Service: Broad Service Delivery Plan Needed to Address Future Challenges. GAO/T-HEHS/AIMD-00-75. Washington, D.C.: February 10, 2000.

Information Technology

Information Security: Additional Actions Needed to Fully Implement Reform Legislation. GAO-02-470T. Washington, D.C.: March 6, 2002.

Information Technology: Enterprise Architecture Use Across the Federal Government Can Be Improved. GAO-02-6. Washington, D.C.: February 19, 2002.

Information Technology Management: Social Security Administration Practices Can Be Improved. GAO-01-961. Washington, D.C.: August 21, 2001.

Information Security: Serious and Widespread Weaknesses Persist at Federal Agencies. GAO/AIMD-00-295. Washington, D.C.: September 6, 2000.

SSA Customer Service: Broad Service Delivery Plan Needed to Address Future Challenges. GAO/T-HEHS/AIMD-00-75. Washington, D.C.: February 10, 2000.

Social Security Administration: Update on Year 2000 and Other Key Information Technology Initiatives. GAO/T-AIMD-99-259. Washington, D.C.: July 29, 1999.

Information Security: Serious Weaknesses Place Critical Federal Operations and Assets at Risk. GAO/AIMD-98-92. Washington, D.C.: September 23, 1998.