SSI provides monthly cash benefits to qualified aged, blind, and disabled persons. Because it is a program based on need, monthly changes in the amount of non-SSI income that clients receive can increase or decrease the amount of SSI benefits to which they are entitled or make them completely ineligible for benefits. Resources, including financial accounts, that exceed $2,000 for an individual or $3,000 for a couple make that individual or couple ineligible for the program. To minimize occurrences of over- and underpayments, the program requires clients to promptly report to SSA any fluctuations in their income or assets. As part of the application process, SSI clients are required to disclose all of their income and resources to SSA field staff who process their applications. SSA policy requires that field staff obtain documentation to verify the amount of income and resources that applicants report. It does not require, however, that field staff check for unreported income and resources unless they suspect that applicants are not fully disclosing them. Thus, at the time of application, SSA normally relies on applicants to portray their financial situations accurately. To ensure that newly eligible recipients have accurately portrayed their financial condition and that ongoing recipients continue to do so, SSA uses both financial eligibility reviews, known as redeterminations, and computer matching to verify income and resource levels. During redeterminations, recipients report their income on mail-in questionnaires or in face-to-face or telephone interviews. The method used to contact the client and the frequency of such contacts depend on the likelihood that a client’s financial situation will change. Computer matches, which compare the individual’s SSI record against data obtained from federal and state agencies, enable SSA to detect some types of income and resources that clients have not reported. The computer matching process to detect undisclosed income compares earnings income reported by clients to the earnings information contained on IRS form W-2s, which employers must file annually with SSA. SSA conducts this match annually. The W-2 match is supplemented twice a year with quarterly earnings information provided by 45 states and the District of Columbia. To do this, SSA sends computer tapes or cartridges containing the names of SSI recipients to each state. The states in turn append to the bottom of these tapes any earnings information pertaining to the SSI recipients residing in their states and then mail the tapes back to SSA. Once SSA receives the tapes, it matches them against the agency’s own records to determine if recipients have disclosed all of their earnings to the agency. In order to detect unreported financial accounts, information reported by clients is compared to IRS form 1099s, which are filed annually by financial institutions and contain the amount of interest earned on financial accounts. Because form 1099 data only contain interest accrued on financial accounts, this match can detect only interest-bearing accounts. Each September, SSA conducts this match using data from the previous year, which covers most SSI recipients from that year. A primary cause of SSI overpayments has been that clients do not always disclose their earnings and financial accounts when they apply for benefits or once they are receiving such payments. For example, SSA’s fiscal year 1996 payment accuracy study shows that out of a total of $1.6 billion in overpayments, approximately 40 percent (nearly $647.6 million) was the result of nondisclosed earnings and financial accounts. About $379.5 million of these overpayments occurred because SSI clients did not disclose their earnings and $268.1 million occurred because SSI clients did not disclose their financial accounts. Many of these overpayments could have been prevented or more quickly detected if more timely and comprehensive information on the earnings and financial accounts of SSI clients had been available. SSA conducts a second annual payment accuracy study, which contains more detailed information on the amount of overpayments in the SSI program. However, neither study accurately estimates for the entire SSI population the amount of overpayments made because of nondisclosure at the time of application versus the amount made because of nondisclosure after clients began receiving benefits. Regardless, both studies have consistently shown over the years that hundreds of millions of dollars in overpayments occur at both of these junctures. Such findings, in turn, indicate that the agency needs to address systemwide weaknesses in both the application and post-entitlement procedures it uses to determine program eligibility and payment amount. Of the hundreds of millions of dollars in overpayments that have been made, SSA has gotten little of it back. SSA statistics show that, on average, the agency recovers only about 15 percent of all outstanding overpayments. The older the overpayment, the more difficult it is to recover. Moreover, when an individual is removed from SSI’s rolls—which can happen when an overpayment is the result of a nondisclosed financial account—the overpayment will probably never be recovered because the individual no longer receives a monthly SSI benefit payment from which SSA can withhold funds. SSA’s overpayment recovery rate is low partly because SSI recipients are poor and do not have the funds to repay this debt. SSA’s present data sources and procedures for detecting undisclosed earnings do not provide up-to-date and comprehensive information on the earnings of applicants and recipients. Such information is critical because earnings are a primary factor in determining both initial program eligibility and the amount of benefits recipients should receive each month. SSA could obtain such information by using new data sources on earnings and by enhancing its current computer-matching procedures. SSA uses data that are outdated and do not reflect the current earnings status of SSI clients. When individuals apply for SSI benefits, SSA field staff are required to check the agency’s database that contains IRS form W-2 information to verify that applicants have accurately portrayed their work histories. How current this information is depends on when SSA enters an applicant’s W-2 data and when the applicant comes in to apply for SSI benefits. For example, SSA began entering 1996 W-2 earnings information into its database in February 1997, shortly after it was reported by employers. By April, SSA had entered about 45 percent of the 1996 W-2s into its database, and by September, the agency had entered 98.5 percent of the earnings information. Thus, in April 1997, there was about a 45-percent chance that the 1996 earnings of an SSI applicant would be recorded in SSA’s database. Earnings from December 1996 would be 4 months old, and earnings from January 1996 would be 16 months old. If an application were made in April 1998 and the individual’s 1997 W-2 information had not yet been entered, the only earnings information available to SSA field staff would be 1996 W-2 information, which would then be 15 to 27 months out of date. After clients have begun receiving SSI payments, SSA checks for undisclosed earnings in two computer matches: a semiannual match that uses quarterly earnings data that employers file with the states, and another that uses the annual W-2 information. Because of the age of the data used in the match, these matches can detect only undisclosed earnings that were received 6 to 21 months in the past. For example, state quarterly data sent to SSA in March 1998 covers earnings through the quarter ending September 1997. If a client had earnings as of September 1997, the March 1998 match would only detect those earnings 6 months after they were received. Similarly, if the client’s last earnings occurred as early as July 1997, the March 1998 match would not have detected them until 9 months after they were earned. Because state earnings information is not provided by all states, SSA supplements this match by conducting a computer match each September using W-2 information from the previous year. Thus, if a recipient had earnings in December of the previous year, they would not be discovered for 9 months, and if a recipient had earnings in January of the previous year, this match would not detect them for 21 months. Although the state computer matches provide more current information than the W-2 data match, state data are not always as comprehensive as the W-2 data. First, states provide earnings information to SSA only for current SSI recipients, so this information cannot be used to verify the earnings reported by new SSI applicants. Also, only 45 states and the District of Columbia have agreed to provide SSA with this information. Finally, the process of conducting the match can be unwieldy, and SSA is often not able to complete the match for all participating states. To perform matches, SSA must prepare and send computer tapes or cartridges containing the names of SSI recipients in each state to all participating states. The states in turn provide earnings information, if any, on these recipients to SSA. Often, however, the tapes get lost or damaged in the mail, or the state prepares the data in a format that SSA’s computers cannot read. For example, in the first half of 1997, SSA was able to complete the match for only 37 of the 45 states that had agreed to provide the agency with this information. The process of SSA and the states exchanging computer tapes is so cumbersome that even though the states have new information four times a year, SSA only attempts to get it twice a year. New data sources exist that could help improve earnings verification. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) requires that states report the names of newly hired employees as well as all of the quarterly earnings information reported for individuals working in their states to OCSE. OCSE uses this information to identify those parents who could make child support payments. SSA, which helped OCSE develop these databases, is responsible for housing and maintaining them at its National Computer Center and has authority under PRWORA to use the information contained in them.