OFFICE OF
THE INSPECTOR GENERAL

SOCIAL SECURITY ADMINISTRATION

DISABLED SUPPLEMENTAL SECURITY
INCOME RECIPIENTS
WITH EARNINGS

April 2005

A-01-04-14085

AUDIT REPORT

Mission

We improve SSA programs and operations and protect them against fraud, waste, and abuse by conducting independent and objective audits, evaluations, and investigations. We provide timely, useful, and reliable information and advice to Administration officials, the Congress, and the public.

Authority

The Inspector General Act created independent audit and investigative units, called the Office of Inspector General (OIG). The mission of the OIG, as spelled out in the Act, is to:

Conduct and supervise independent and objective audits and investigations relating to agency programs and operations.
Promote economy, effectiveness, and efficiency within the agency.
Prevent and detect fraud, waste, and abuse in agency programs and operations.
Review and make recommendations regarding existing and proposed legislation and regulations relating to agency programs and operations.
Keep the agency head and the Congress fully and currently informed of problems in agency programs and operations.

To ensure objectivity, the IG Act empowers the IG with:

Independence to determine what reviews to perform.
Access to all information necessary for the reviews.
Authority to publish findings and recommendations based on the reviews.

Vision

By conducting independent and objective audits, investigations, and evaluations, we are agents of positive change striving for continuous improvement in the Social Security Administration's programs, operations, and management and in our own office.

SOCIAL SECURITY

MEMORANDUM

Date: April 11, 2005

To: The Commissioner

From: Inspector General

Subject: Disabled Supplemental Security Income Recipients with Earnings (A 01 04-14085)

Our objective was to evaluate whether the Social Security Administration (SSA) considered the earnings of disabled individuals when determining Supplemental Security Income (SSI) eligibility and payment amounts.

BACKGROUND

Title XVI of the Social Security Act established the SSI program in 1972. SSI is a nationwide Federal cash assistance program administered by SSA that provides a minimum level of income to financially needy individuals who are aged, blind or disabled. In Fiscal Year (FY) 2004, SSA paid approximately $35.2 billion in SSI payments to about 7.1 million recipients.

DETECTING AND EVALUATING UNREPORTED EARNINGS

SSA relies heavily on recipient self-disclosure of all financial resources, as well as computer matching with other Federal and State agencies, to ensure payment accuracy. According to SSA, the majority of SSI overpayments result from recipients' failure to report changes in income (such as earnings).

Computer Data Matches

SSA conducts several computer matches with Federal and State agencies to detect and verify unreported (or underreported) earnings. For example, in 1998, SSA began running quarterly matches against wage data maintained by the Office of Child Support Enforcement's National Directory of New Hires database. In addition, SSA compares earnings recorded on its Master Earnings File (MEF) to the earnings used to calculate SSI payments as shown on the Supplemental Security Record (SSR). When significant discrepancies are found from either of these matches, diaries are established to alert Field Office employees to the need for a review based on the match.

Redeterminations

The SSI program requires that individuals' income, resources and living arrangements be assessed on a monthly basis for purposes of determining eligibility and payment amounts. Therefore, SSA conducts redeterminations and limited issue reviews to ensure recipients remain eligible for SSI payments. Scheduled redeterminations are selected annually or once every 6 years, depending on the likelihood of payment error. Unscheduled redeterminations and limited issue reviews are also completed when SSI recipients report-or SSA discovers-certain changes in circumstances that could affect continuing SSI payment amounts (for example, earnings discrepancies identified through computer matches). According to SSA, redeterminations are the Agency's most powerful tools in identifying and preventing SSI overpayments. The Agency processed over 2.2 million periodic redeterminations in FY 2004.

Modernized Supplemental Security Income Claims System

SSA's Modernized Supplemental Security Income Claims System (MSSICS) is the primary data collection and processing system for the SSI program. SSA uses the system to process and document SSI events. Use of the system maintains a permanent and accessible record of a claimant's SSI initial application and any subsequent transactions. For example, when a Field Office employee verifies the earnings of an SSI recipient, the earnings are recorded in MSSICS. For the earnings to be used in the SSI payment calculations, the employee must transmit the information from MSSICS to the SSR.

ADMINISTRATIVE FINALITY

Administrative finality is the term used by SSA to describe the rules under which the Agency may reopen and revise determinations of eligibility and payment amounts. Under the Agency's rules, determinations may be reopened and revised:
Within 1 year for any reason;
Within 2 years for good cause; or
At any time if fraud or similar fault exists.

When SSA discovers earnings discrepancies for prior years and administrative finality applies, revisions to determinations are limited to the time periods allowed under the rules. Therefore, the Agency only assesses overpayments within the administrative finality time periods unless fraud or similar fault exists. Even though individuals may have had earnings which would have caused SSI ineligibility if detected sooner, SSA does not pursue recovery of payments issued beyond these time periods and it does not record them as overpayments.

RESULTS OF REVIEW

SSA considered the earnings of most disabled individuals when determining SSI eligibility and payment amounts. However, we identified some overpayments that were previously undetected because not all of the recipients' earnings were considered in the SSI payment calculations. In addition, we identified payments that would have been considered overpayments if SSA discovered and reviewed the earnings within the time periods allowed under the Agency's administrative finality rules.

Based on the results of our sample, we estimate that approximately $12.4 million was overpaid to about 11,880 recipients because SSA did not previously consider all of their earnings when calculating SSI payment amounts. We also estimate that, if the Agency resolved the earnings discrepancies within the administrative finality periods, approximately an additional $74.7 million in overpayments to about 61,380 recipients would have been recognized. Finally, we estimate that about $8.1 million in underpayments to about 11,880 SSI recipients was not paid because administrative finality was invoked and their SSI records were not revised.

Of the 275 recipients in our sample:

43 recipients' earnings were not considered when SSA calculated SSI payment amounts;

224 recipients' earnings were properly considered; and

8 recipients' earnings continued to be evaluated by SSA as of March 2005.

EARNINGS NOT CONSIDERED IN SSI PAYMENT CALCULATIONS

Of the 275 SSI recipients in our sample, 43 (16 percent) had earnings recorded on the MEF that were not recorded on the SSR. Of these 43 recipients,
6 had undetected overpayments because earnings were not previously developed;
37 may have been incorrectly paid, however, the Agency invoked administrative finality and did not review the variances.

Undetected Overpayments

We identified 6 cases in which earnings were not previously developed and overpayments totaling $6,272 went undetected by SSA. As a result of our audit, the Agency reviewed the earnings and assessed the overpayments.

For example, earnings recorded on the MEF for one recipient were not reported on the SSR for 2002. Although the earnings were on the MEF, SSA did not review and post the earnings to the SSR. As a result of our audit, the Agency reviewed the earnings and assessed an overpayment of $1,456.

Impact of Administrative Finality

SSA invoked administrative finality and did not review the earnings discrepancies for 37 recipients in our sample. This includes 31 recipients whose earnings would likely have caused overpayments totaling about $37,739 if the Agency reviewed the discrepancies and recorded the earnings to the SSR within the 2-year administrative finality reopening period. This also includes 6 individuals whose actual earnings were less than the estimated earnings previously used in the SSI calculations. Additional SSI payments (totaling about $4,104) may have been due these 6 individuals if not for administrative finality.

For example, the earnings recorded on the MEF for one individual in our sample exceeded the amounts used to calculate the SSI payments that were issued in 1998, 1999 and 2001. Although the earnings were recorded on the MEF, SSA did not previously review the earnings. We alerted the Agency to the case during our audit but, because too much time had elapsed since the individual received the earnings, SSA did not review the discrepancies. We estimate that SSA would have recorded an overpayment of approximately $3,525 if the Agency reviewed the earnings within the 2-year administrative finality period.

In another example, SSA withheld a portion of a recipient's SSI payments based on her estimated earnings for 1999 and 2000. However, her actual earnings posted to the MEF were less than the amounts previously estimated. Although we alerted SSA to the discrepancy during our audit, too much time elapsed and the Agency did not review the earnings because of administrative finality. We estimate that this individual may have been eligible to receive an additional $1,019 in SSI payments if the Agency reviewed the earnings within the 2-year administrative finality period.

Opportunities Existed to Identify and Evaluate Earnings

Of the 43 recipients with earnings that were not considered in the SSI calculations, we found that SSA had the opportunity to evaluate the earnings of at least 28 individuals sooner. The following describes some past opportunities SSA had to identify and evaluate the recipients' earnings and the impact the earnings could have had on SSI eligibility and payment amounts.

SSA performed redeterminations or limited issue reviews for 27 individuals but did not evaluate the earnings discrepancies. For example, a recipient had earnings on the MEF that exceeded earnings recorded on the SSR. A redetermination was processed in October 2000 but SSA did not review the earnings discrepancy.

SSA's computer matching programs successfully identified the earnings discrepancies for at least 8 cases in our sample and established diaries to alert SSA personnel. Although earnings-related diaries were present for the years with the discrepancies, SSA did not review the earnings. For example, one individual had earnings recorded on the MEF that were greater than those recorded on the SSR for 1998 and 2000. The discrepancy was detected through a computer match and an earnings-related diary was established on the SSR in 2001 but SSA did not evaluate the earnings. We estimate that this recipient would have been overpaid at least $7,053 but, due to the Agency's rules under administrative finality, SSA will not assess or collect this amount.

Based on the results of our sample, we estimate the earnings of about 7,920 recipients were recorded on MSSICS but not transmitted to the SSR. For example, a Field Office employee recorded one recipient's earnings for 2000 and 2001 on MSSICS but did not close the transaction and send the information to the SSR. As a result, the earnings were not included in the SSI payment calculations. We estimate that this recipient would have been overpaid $3,449, but due to the Agency's rules under administrative finality, SSA will not reopen the case.

CONCLUSIONS AND RECOMMENDATIONS

We identified some overpayments that were previously undetected because not all recipients' earnings were considered when SSA calculated SSI eligibility and payment amounts. In addition, we identified payments that would have been considered overpayments if the Agency had discovered and reviewed the earnings within the time periods allowed under the Agency's administrative finality rules. It is important that SSA take all cost-effective steps to ensure payment accuracy, especially in light of the Agency's strategic goals for FY 2005, which include ensuring superior stewardship of Social Security programs and resources. To assist SSA in achieving its goals, we recommend that the Agency:

1. Ensure that earnings-related diaries resulting from computer matches are adequately controlled by management and resolved timely.
2. Remind Field Office employees to: (a) review earnings recorded on the MEF whenever redeterminations and limited issue reviews are performed, (b) review and resolve any discrepancies that exist between the MEF and the SSR, and (c) transmit earnings data to the SSR when recorded in MSSICS.

AGENCY COMMENTS

SSA agreed with our recommendations. Specifically, in April 2005, the Agency plans to issue reminders to Field Office managers and staff about the importance of using available resources to control and resolve earnings-related diaries. (See Appendix D for SSA's comments.)

Patrick P. O'Carroll, Jr.

Appendices
APPENDIX A - Acronyms
APPENDIX B - Identification and Prevention of Overpayments Caused by Earnings
APPENDIX C - Scope, Methodology and Sample Results
APPENDIX D - Agency Comments
APPENDIX E - OIG Contacts and Staff Acknowledgments

Appendix A
Acronyms
C.F.R. Code of Federal Regulations
FY Fiscal Year
MEF Master Earnings File
MSSICS Modernized Supplemental Security Income Claims System
POMS Program Operations Manual System
SSA Social Security Administration
SSI Supplemental Security Income
SSR Supplemental Security Record
U.S.C. United States Code

Appendix B
Identification and Prevention of Overpayments Caused by Earnings

In addition to the current tools used by the Social Security Administration (SSA), the Agency is also pursuing implementation of new tools to help identify and prevent Supplemental Security Income (SSI) overpayments caused by earnings. Examples of some pilots (or testing) conducted by SSA are discussed below.

Between May and December 2003, SSA performed a pilot to test the effectiveness of reporting wages by telephone. Approximately 1,341 individuals volunteered to report their wages to SSA each month by dialing a toll-free number. The pilot found that the telephone wage reports were much more accurate than the estimated wage amounts they replaced. SSA estimated that approximately $200 in overpayments and $400 in underpayments would be prevented annually for every person who reports his wages each month.

Effective in January 2005, SSA began a centralized wage reporting test in which wage reports from SSI recipients serviced by 10 Field Offices are processed by a centralized unit. SSI wage earners serviced by the 10 Field Offices were notified about the test and requested to send pay stubs of their wages to the centralized unit which, in turn, will record the earnings on the record. The Centralized Wage Reporting Test is intended to improve SSI payment accuracy, provide workload relief to the Field Offices, and provide consistency to the wage reporting process by having SSI monthly wage reporters send their pay stubs to the centralized unit.

Appendix C
Scope, Methodology and Sample Results
To accomplish our objective, we

Reviewed applicable sections of the Social Security Act, the Code of Federal Regulations, and the Social Security Administration's (SSA) Program Operations Manual System.

Obtained a file of all Supplemental Security Income (SSI) recipients from 1 of 20 Social Security number segments, who were receiving disability payments as of March 2002. We then determined which of these recipients had at least 1 year of earnings reported to the Master Earnings File (MEF) for years 1996 to 2000 in which their earnings exceeded $780. We further narrowed this population by excluding cases in which:

1. the recipients were entitled to disability benefits based on blindness; or

2. the reported earnings were in the year of, or before, the recipients' initial SSI application dates.

Selected a random sample of 275 recipients from the population we identified and analyzed any earnings discrepancies. Specifically, we determined whether variances existed between earnings posted to the MEF and the earnings SSA considered when calculating SSI eligibility per the Supplemental Security Record (SSR). If the earnings did not reasonably agree to earnings recorded on the SSR, we reconciled the variances with SSA (using available electronic data and/or contacting appropriate Agency employees).

We performed our audit in Boston, Massachusetts between April and November 2004. We tested the data we obtained for our audit for accuracy and completeness and determined it to be sufficiently reliable to meet our audit objective. The entities audited were the Office of Income Security Programs under the Deputy Commissioner for Disability and Income Security Programs and SSA Field Offices under the Deputy Commissioner for Operations. We conducted our audit in accordance with generally accepted government auditing standards.

SAMPLE RESULTS

Table 1: Population and Sample Size
Population Size (one segment) 27,225
Sample Size 275
Estimated Number of Recipients in Universe (Population of audited segment 544,500
multiplied by 20 segments)

Table 2: SSI Recipients Whose Overpayments Were Results in Estimate
Not Detected By SSA Because Their Earnings Were Audited in All 20
Not Accurately Considered in the SSI Calculations Segment Segments
Attribute Appraisal
Total Sample Results 6 NA
Point Estimate 594 11,880
Projection Lower Limit 262 5,240
Projection Upper Limit 1,157 23,140
Variable Appraisal
Total Sample Results $ 6,272 NA
Point Estimate $ 620,925 $ 12,418,500
Projection Lower Limit $ 181,884 $ 3,637,680
Projection Upper Limit $ 1,059,966 $ 21,199,320
Note: All projections are at the 90 percent confidence level.

Table 3: SSI Recipients Who May Have Been Over- Results in Estimate
Paid If SSA Evaluated the Earnings Discrepancies Prior Audited in All 20
to the Expiration of Administrative Finality Periods Segment Segments
Attribute Appraisal
Total Sample Results 31 NA
Point Estimate 3,069 61,380
Projection Lower Limit 2,258 45,160
Projection Upper Limit 4,054 81,080
Variable Appraisal
Total Sample Results $ 37,739 NA
Point Estimate $ 3,736,179 $ 74,723,580
Projection Lower Limit $ 2,027,776 $ 40,555,520
Projection Upper Limit $ 5,444,582 $ 108,891,640
Note: All projections are at the 90 percent confidence level.

Table 4: SSI Recipients Who May Have Been Under- Results in Estimate
Paid If SSA Evaluated the Earnings Discrepancies Prior Audited in All 20
to the Expiration of Administrative Finality Periods Segment Segments
Attribute Appraisal
Total Sample Results 6 NA
Point Estimate 594 11,880
Projection Lower Limit 262 5,240
Projection Upper Limit 1,157 23,140
Variable Appraisal
Total Sample Results $ 4,104 NA
Point Estimate $ 406,322 $ 8,126,440
Projection Lower Limit $ 119,275 $ 2,385,500
Projection Upper Limit $ 693,368 $ 13,867,360
Note: All projections are at the 90 percent confidence level.

Table 5: SSI Records in Which Earnings Were Verified Results in Estimate
Per MSSICS, But the Earnings Were Not Sent to the SSR Audited in All 20
to Update the SSI Due and Paid Calculations Segment Segments
Attribute Appraisal
Total Sample Results 4 NA
Point Estimate 396 7,920
Projection Lower Limit 137 2,740
Projection Upper Limit 895 17,900
Note: All projections are at the 90 percent confidence level.

Appendix D
Agency Comments

MEMORANDUM

Date: March 23, 2005

To: Patrick P. O'Carroll
Inspector General

From: Larry W. Dye /s/
Chief of Staff

Subject: Office of Inspector General (OIG) Draft Report, "Disabled Supplemental Security Income Recipients with Earnings" (A-01-04-14085)--INFORMATION

We appreciate OIG's efforts in conducting this review. Our comments to the recommendations are attached.

Please let us know if we can be of further assistance. Staff questions may be referred to
Candace Skurnik on extension 54636.

SSA Response

COMMENTS ON THE OFFICE OF INSPECTOR GENERAL (OIG) DRAFT REPORT, "DISABLED SUPPLEMENTAL SECURITY INCOME RECIPIENTS WITH EARNINGS" (A-01-04-14085)

Thank you for the opportunity to review the OIG draft report. We agree with the findings and recommendations contained in the report, and we will continue to take all cost-effective steps to ensure payment accuracy.

Our responses to the specific recommendations are provided below. We have also included a technical comment for your consideration.

Recommendation 1

SSA should ensure that earnings-related diaries resulting from computer matches are adequately controlled by management and resolved timely.

Comment

We agree. Payments are more accurate when earnings discrepancies are identified and resolved within the time frames afforded by the Agency's administrative finality regulations. Adequate controls are provided to the regional offices, area offices, and field offices (FOs) through the instructions given them regarding the number and time frame for clearance of SSI redetermination and limited issue cases. Additionally, the Modernized Supplemental Security Initial Claims System (MSSICS) enhancements provide further management controls by now precluding redetermination clearances unless the active computer match diaries are properly addressed. Through the use of management monitoring tools, management has the ability to accurately track the clearance of redetermination and limited issue cases. By April 1, 2005, we will issue a reminder to FO managers to keep tight control of earnings-related diaries so that they are resolved in a timely manner.

Recommendation 2

SSA should remind FO employees to: (a) review earnings recorded on the Master Earnings File (MEF) whenever redeterminations and limited issue reviews are performed, (b) review and resolve any discrepancies that exist between the MEF and the Supplemental Security Record (SSR), and (c) transmit earnings data to the SSR when recorded in MSSICS.

Comment

We agree. The Agency has taken the necessary steps to address these issues. Since March 27, 2002, the Agency has required the use of the RZwiz application, a computer program designed to provide interview assistance for SSI redetermination or limited issue cases. It is not intended to replace the SSR, but instead highlights error-prone areas, such as earned income for the eligible individual, eligible spouse and deemors (parents and/or spouses of disabled children and adults whose income is used to determine the disabled individual's or child's SSI payment amount).

Mandatory use of the RZwiz is incorporated in the Program Operations Manual System (POMS) SI 02305.071: "RZwiz implements a SSI High-Risk Workgroup recommendation to improve detection of wages, the single greatest cause of SSI payment error. RZwiz …improves the RZ [redetermination] interview (the most error prone stage of the RZ process), by providing [field office] claims representatives with an easy-to-use tool that automatically retrieves, consolidates and interprets queries used during the RZ interview."

The recommended procedures are consistent with POMS guidelines. However, by April 1, 2005, we will issue a reminder to FO employees to reinforce the importance of following the existing POMS SI 020310.055 and .062 procedures.

[SSA provided additional technical comments which we incorporated into this report as appropriate.]

Appendix E
OIG Contacts and Staff Acknowledgments
OIG Contacts
Judith Oliveira, Director, Boston Audit Division (617) 565-1765

Acknowledgments
In addition to those named above:
Jeffrey Brown, Senior Auditor
Kevin Joyce, IT Specialist
Brennan Kraje, Statistician
Alexander Rosania, Auditor
Melinda Tabicas, Auditor

For additional copies of this report, please visit our web site at www.socialsecurity.gov/oig or contact the Office of the Inspector General's Public Affairs Specialist at (410) 965-3218. Refer to Common Identification Number
A-01-04-14085.

Overview of the Office of the Inspector General

The Office of the Inspector General (OIG) is comprised of our Office of Investigations (OI), Office of Audit (OA), Office of the Chief Counsel to the Inspector General (OCCIG), and Office of Executive Operations (OEO). To ensure compliance with policies and procedures, internal controls, and professional standards, we also have a comprehensive Professional Responsibility and Quality Assurance program.

Office of Audit

OA conducts and/or supervises financial and performance audits of the Social Security Administration's (SSA) programs and operations and makes recommendations to ensure program objectives are achieved effectively and efficiently. Financial audits assess whether SSA's financial statements fairly present SSA's financial position, results of operations, and cash flow. Performance audits review the economy, efficiency, and effectiveness of SSA's programs and operations. OA also conducts short-term management and program evaluations and projects on issues of concern to SSA, Congress, and the general public.

Office of Investigations

OI conducts and coordinates investigative activity related to fraud, waste, abuse, and mismanagement in SSA programs and operations. This includes wrongdoing by applicants, beneficiaries, contractors, third parties, or SSA employees performing their official duties. This office serves as OIG liaison to the Department of Justice on all matters relating to the investigations of SSA programs and personnel. OI also conducts joint investigations with other Federal, State, and local law enforcement agencies.

Office of the Chief Counsel to the Inspector General

OCCIG provides independent legal advice and counsel to the IG on various matters, including statutes, regulations, legislation, and policy directives. OCCIG also advises the IG on investigative procedures and techniques, as well as on legal implications and conclusions to be drawn from audit and investigative material. Finally, OCCIG administers the Civil Monetary Penalty program.

Office of Executive Operations

OEO supports OIG by providing information resource management and systems security. OEO also coordinates OIG's budget, procurement, telecommunications, facilities, and human resources. In addition, OEO is the focal point for OIG's strategic planning function and the development and implementation of performance measures required by the Government Performance and Results Act of 1993.