OFFICE OF
THE INSPECTOR GENERAL

SOCIAL SECURITY ADMINISTRATION

FUGITIVE FELONS SERVING AS
REPRESENTATIVE PAYEES

March 2009

A-01-08-18021

AUDIT REPORT

Mission

By conducting independent and objective audits, evaluations and investigations, we inspire public confidence in the integrity and security of SSA's programs and operations and protect them against fraud, waste and abuse. We provide timely, useful and reliable information and advice to Administration officials, 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

We strive for continual improvement in SSA's programs, operations and management by proactively seeking new ways to prevent and deter fraud, waste and abuse. We commit to integrity and excellence by supporting an environment that provides a valuable public service while encouraging employee development and retention and fostering diversity and innovation.

MEMORANDUM

Date: March 31, 2009

To: The Commissioner

From: Inspector General

Subject: Fugitive Felons Serving As Representative Payees (A-01-08-18021)

OBJECTIVE

Our objective was to assess the Social Security Administration's (SSA) controls to prevent fugitive felons from serving as representative payees.

BACKGROUND

Some individuals cannot manage their finances because of their youth, mental, and/or physical impairments. Consequently, Congress granted SSA the authority to appoint representative payees to receive and manage these individuals' Social Security benefit payments.

In a March 2003 report, we concluded that SSA should use fugitive warrant information to screen representative payees because a fugitive felon may not be in the best position to manage a beneficiary's funds. After our report was issued, the Social Security Protection Act of 2004 was signed into law. This law, which took effect in April 2005, contains a provision that disqualifies fugitive felons from serving as representative payees.

THE FUGITIVE FELON PAYEE IDENTIFICATION PROCESS

SSA obtains the names, dates of birth, and Social Security numbers of individuals with outstanding warrants from law enforcement agencies. After SSA verifies the individuals' identities through its Enumeration Verification System and the Office of the Inspector General (OIG) confirms the warrants are still valid, the information is sent to the Agency's Fugitive Felon SSA Control File (FFSCF).

SSA began matching data in FFSCF and the Agency's Representative Payee System (RPS) in November 2005. Each day, the data in FFSCF are compared to RPS to identify fugitive felons who are payees or fugitive felons who have an application pending to serve as a representative payee. If data match at the first attempt, RPS is annotated and the addresses of the payees or applicants are returned to FFSCF to be shared with law enforcement agencies.

If there is a match, an alert is generated in RPS indicating the payee is a fugitive felon. After 60 days, the OIG will confirm and return unresolved open warrants to FFSCF for a second comparison to RPS. If the data match a second time-indicating the payee or applicant still has an outstanding felony warrant-an alert is sent to the local SSA field office and the issue is annotated in RPS. Then, SSA field office staff will find a more suitable payee and/or consider direct payment, if appropriate. (See Appendix B for a flowchart that illustrates this process.)

METHODOLOGY

To conduct our review, we obtained a file of fugitive records from our Office of Investigations and identified 14,594 individuals for whom arrest warrants had been issued and who were representative payees for SSA beneficiaries as of July 2007. We randomly selected 275 individuals from this population for detailed analysis. (See Appendix C for our Scope, Methodology and Sample Results.)

RESULTS OF REVIEW

SSA's controls need to be improved to prevent fugitive felons from serving as representative payees. Based on our sample, we estimate that since the law took effect in April 2005 through September 2008, about $75.8 million in Social Security funds was paid to about 6,527 fugitive felons. These payees received benefits for about 8,384 SSA beneficiaries.

Of the $75.8 million, we estimate that approximately $47.6 million (63 percent) in benefits was paid to about 2,070 representative payees whose warrants remained unsatisfied through September 2008. Additionally, about $19.4 million will be paid over the next 12 months if these warrants remain unsatisfied and the fugitive felons continue serving as representative payees.

SAMPLE RESULTS

We sampled 275 individuals for whom arrest warrants had been issued and who served as representative payees. We found that

123 (45 percent) were representative payees for 158 beneficiaries and received $1,429,103 while they had outstanding felony warrants;

96 (35 percent) were not representative payees with active felony warrants; and

56 (20 percent) were issued warrants for violating conditions of probation or parole.

Of the 123 payees in our sample who had received $1.4 million in benefits even though they had outstanding arrest warrants, 84 had satisfied their warrants or were no longer serving as representative payees before the start of our audit; whereas the remaining 39 payees still had active warrants. As of September 2008:

73 representative payees had satisfied their warrants. Before satisfying their warrants, these 73 representative payees received $402,787 on behalf of 95 beneficiaries for an average of 9 months while the warrants were still outstanding.

11 fugitive felons were no longer representative payees because (a) they or the beneficiaries they served were deceased; (b) the beneficiaries were no longer entitled to benefits; (c) more suitable payees were selected; or (d) direct payment to the beneficiaries was established. These 11 representative payees received $129,262 on behalf of 11 beneficiaries for an average of 22 months (almost 2 years) while the warrants were still outstanding.

39 representative payees still had outstanding felony warrants at the time of our audit, but SSA took corrective action because of our request that it review the cases. These 39 representative payees received $897,054 on behalf of 52 beneficiaries for an average of 32 months (or over 2 ½ years).

Table 1 shows the number of months the 123 fugitive felons served as representative payees while their warrants remained unsatisfied. On average, these 123 fugitive felons served as payees for 17 months.

Table 1
Number of Months the Fugitive Felons Served as Representative Payees Number of Representative Payees
1 to 12 months 61
13 to 24 months 21
25 to 36 months 18
37 to 42 months 23
Total 123

For example, one individual in our sample was selected as representative payee for her children in July 1998. In February 2006, an outstanding felony warrant for forgery was issued for the representative payee, but the warrant was not satisfied until June 2007. Therefore, this individual was considered a fugitive felon while serving as a representative payee for 17 months (from February 2006 through June 2007), and during this time, she was paid a total of $30,822 in benefits on behalf of her children.

Of the 123 fugitive felons who served as representative payees, 39 (32 percent) were not replaced as representative payees until we requested that SSA review the cases as part of our audit. We referred these 39 cases to SSA in June and July 2008. These 39 fugitive felons received $897,054 (of the $1.4 million in benefits) while their warrants were outstanding. If not for our referral, these 39 fugitive felons would have received an average of about $9,352 in benefits over the next year.

For example, one representative payee with an unsatisfied drug-related felony warrant received $23,684 in benefits for more than 2 ½ years. This fugitive felon was selected as a representative payee in April 2001 and was still a representative payee when the warrant was issued in October 2005. SSA removed this individual as representative payee in June 2008 after we referred the case to the Agency. If not for our referral, this individual would have received about $9,400 in benefits over the next year.

As of September 2008, the Agency had either replaced the representative payees or suspended benefits to find new representative payees. These 39 fugitive felons served as representative payees for periods ranging from 13 to 42 months-on average, more than 2 ½ years.

The fugitive felons in our sample were wanted for various crimes while serving as representative payees, including larceny, fraud, and drug-related offenses. Chart 1 summarizes the types of offenses for which the fugitive felons in our sample were wanted.

BENEFICIARIES WHOSE REPRESENTATIVE PAYEES WERE FUGITIVE FELONS

The 123 individuals who had outstanding felony warrants in our sample served as representative payees for 158 beneficiaries. For these beneficiaries, we found that

77 (49 percent) were receiving benefits because they were disabled (including 47 who had mental disorders); and

81 (51 percent) were not disabled.

Table 2 summarizes the relationship between the representative payee and each beneficiary.

Table 2
Relationship of Payee to Beneficiary Number of Beneficiaries Percent
Mother 88 56%
Father 31 20%
Relative 14 9%
Child 10 6%
Other 10 6%
Spouse 2 1%
Stepfather 2 1%
Grandparent 1 1%
Total 158 100%

For example, a beneficiary was receiving a Title XVI disability benefit for mental retardation, and his representative payee was selected to manage the benefits in December 1993. The representative payee was a relative of the beneficiary and had an outstanding warrant for burglary that was issued in 1991. The fugitive felon continued to serve as representative payee until we referred the case to SSA in June 2008. From April 2005, when the law went into effect prohibiting fugitive felons from serving as representative payees, this fugitive received $25,019 in benefits on behalf of the mentally disabled beneficiary. We referred this case to SSA in June 2008, and the Agency replaced the fugitive with a more suitable representative payee. Had we not referred this case to SSA, the fugitive felon would have received $7,644 over the next 12 months.

WHY FUGITIVE FELONS WERE NOT REPLACED AS REPRESENTATIVE PAYEES

SSA began matching between FFSCF and RPS in November 2005. If a match is found, an alert is supposed to be generated in RPS indicating the representative payee is a fugitive felon. However, our analysis of the sample cases showed that SSA's matching process did not identify all payees who were fugitive felons, and alerts were not generated in RPS. Therefore, it appears the matching between FFSCF and RPS is incomplete. We notified SSA's Office of Systems of this issue in September 2008. As of February 2009, Systems staff were reviewing the matching process to determine why it was not identifying all cases.

If the matching process does not generate alerts and annotate RPS, SSA field office employees cannot determine whether a representative payee has an outstanding warrant, and fugitive felons continue to serve as payees.

CONCLUSION AND RECOMMENDATIONS

Although SSA implemented a computer match in November 2005 to identify fugitive felons serving as representative payees and established procedures for addressing the identified cases, we estimate that about 6,527 fugitive felons received about $75.8 million in Social Security funds while serving as representative payees for others. Additionally, we estimate about $19.4 million will be paid over the next 12 months if the individuals who still have unsatisfied felony warrants continue to serve as representative payees.

We recommend SSA:

1. Conduct a match between FFSCF and RPS to identify all representative payees with unsatisfied felony warrants (including those representative payees who were selected before November 2005) and determine whether more suitable representative payees are needed.

2. Review its current computer matching process to ensure that, in the future, alerts are generated and resolved for all representative payees with outstanding felony warrants.
AGENCY COMMENTS

SSA agreed with the recommendations (see Appendix D).

Patrick P. O'Carroll, Jr.

Appendices

APPENDIX A - Acronyms
APPENDIX B - Representative Payee Fugitive Felon Alert Process
APPENDIX C - Scope, Methodology and Sample Results
APPENDIX D - Agency Comments
APPENDIX E - OIG Contacts and Staff Acknowledgments

Appendix A
Acronyms

AMFED Allegation Management and Fugitive Enforcement Division
FFSCF Fugitive Felon SSA Control File
OIG Office of the Inspector General
POMS Program Operations Manual System
Pub. L. No. Public Law Number
RPS Representative Payee System
SSA Social Security Administration

Appendix B
Representative Payee Fugitive Felon Alert Process

Appendix C
Scope, Methodology and Sample Results

To accomplish our objective, we:

Researched the Social Security Act and the Social Security Protection Act of 2004; as well as the Social Security Administration's (SSA) regulations, policies and procedures related to fugitive felons and representative payees.

Obtained a file of fugitive records from the Office of the Inspector General's Office of Investigations as of June 2007. Through computer analysis, we identified
14,594 individuals with warrants who were representative payees for Title II and XVI beneficiaries as of July 2007. We randomly selected 275 individuals from this population for detailed analysis. Specifically, we

calculated the funds paid to fugitive felons while serving as representative payees;

confirmed with the Office of the Inspector General's Allegation Management and Fugitive Enforcement Division (AMFED) the warrant's status (such as whether the warrant was still outstanding);

confirmed that AMFED had referred these cases to SSA for action; and

referred to the Office of Operations cases in our sample that had fugitive felons serving as representative payees for corrective action.

Obtained information from SSA's Offices of Systems and Operations concerning the representative payee fugitive felon alert process.

Consulted with SSA's Office of General Counsel and the Office of the Inspector General's Office of the Counsel to the Inspector General concerning parole and probation violators.

We conducted our audit in Boston, Massachusetts, between May and October 2008. We tested the data obtained for our audit and determined them to be sufficiently reliable to meet our objective. The entity audited was SSA's Office of Systems under the Deputy Commissioner for Systems.

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

SAMPLE RESULTS AND ESTIMATES/PROJECTIONS

Table 1: Population and Sample Size
Population Size 14,594
Sample Size 275

FUGITIVE FELONS SERVING AS REPRESENTATIVE PAYEES
Table 2: Fugitive Felons Who Served as Representative Payees Number of Fugitive Felons Number of Beneficiaries Dollars
Sample Results 123 158 $1,429,103
Point Estimate 6,527 $75,841,193
Projection Lower Limit 5,797 $60,494,624
Projection Upper Limit 7,270 $91,187,762
Note: All projections are at the 90-percent confidence level.

To estimate the number of beneficiaries, we conducted the following ratio analysis: 158 beneficiaries divided by 123 fugitive felons equals 1.2845. Multiplying 1.2845 by 6,527 (the point estimate) provides an estimate of 8,384 beneficiaries who had their funds received by fugitive felons.
Table 3: Fugitive Felons Who Served as Representative Payees that Need to be Replaced Number of Fugitive Felons Number of Beneficiaries Dollars
Sample Results 39 52 $897,054
Point Estimate 2,070 $47,605,817
Projection Lower Limit 1,587 $33,285,637
Projection Upper Limit 2,638 $61,925,997
Note: All projections are at the 90-percent confidence level.

To estimate the number of beneficiaries, we conducted the following ratio analysis: 52 beneficiaries divided by 39 fugitive felons equals 1.3333. Multiplying 1.3333 by 2,070 (the point estimate) provides an estimate of 2,760 beneficiaries who had their funds received by fugitive felons and still need the payee replaced.

Funds Received Over the Next 12 Months by Payees Who Have Outstanding Felony Warrants as of September 2008

Within our sample, 39 fugitive felons will receive an average of $9,352 in funds over the next 12 months if not replaced as payees. Therefore, we estimate that approximately $19,358,640 will be received by about 2,070 fugitive felons (from Table 3 above) over the next 12 months if not replaced with new payees.

Appendix D
Agency Comments

MEMORANDUM

Date: March 25, 2009

To: Patrick P. O'Carroll, Jr.
Inspector General

From: James A. Winn /s/
Chief of Staff

Subject: Office of the Inspector General (OIG) Draft Report, "Fugitive Felons Serving As Representative Payees (A-01-08-18021)"-INFORMATION

Thank you for the opportunity to review and comment on the draft report. We appreciate the comprehensive work that the OIG auditing team did on this report and the prior related audit. Our response to the report findings and recommendations is attached.

Please let me know if we can be of further assistance. Staff inquiries may be directed to Candace Skurnik, Director, Audit Management and Liaison Staff, at (410) 965-4636.

COMMENTS ON THE OFFICE OF THE INSPECTOR GENERAL'S DRAFT REPORT, FUGITIVE FELONS SERVING AS REPRESENTATIVE PAYEES (A-01-08-18021)

We agree that it is important to identify all representative payees (rep payees) with unsatisfied felony arrest warrants to determine whether or not we need to replace them. We will change our current computer matching process to ensure that we generate and resolve alerts. We expect, however, that we will have to modify the way in which we process fugitive felon information in the near future depending on the settlement of a nationwide class action lawsuit that is currently pending; Martinez v. Astrue, No. 08-4735 (N.D. Cal.).

Recommendation 1

Conduct a match between the Fugitive Felon SSA Control File and the Representative Payee System to identify all rep payees with unsatisfied felony warrants (including those rep payees who were selected before November 2005) and determine whether more suitable rep payees are needed.

Comment

We agree. We will conduct a match for the offense codes specified in the final settlement and then work to determine whether or not we need a more suitable rep payee.

Recommendation 2

Review our current computer matching process to ensure that, in the future, we generate and resolve alerts for all rep payees with outstanding felony warrants.

Comment

We agree. We will review our computer matching process to ensure that, in the future, we generate and resolve alerts for all rep payees with outstanding felony arrest warrants for the offense codes specified in the final settlement.

Appendix E

OIG Contacts and Staff Acknowledgments
OIG Contacts
Judith Oliveira, Director, Boston Audit Division
Jeffrey Brown, Audit Manager
Acknowledgments
In addition to those named above:
Kevin Joyce, IT Specialist
N. Brennan Kraje, Statistician
Frank Salamone, Senior Auditor
David York, Program Analyst

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 Staff Assistant at (410) 965-4518. Refer to Common Identification Number A-01-08-18021

Overview of the Office of the Inspector General
The Office of the Inspector General (OIG) is comprised of an Office of Audit (OA), Office of Investigations (OI), Office of the Counsel to the Inspector General (OCIG), Office of External Relations (OER), and Office of Technology and Resource Management (OTRM). To ensure compliance with policies and procedures, internal controls, and professional standards, the OIG also has a comprehensive Professional Responsibility and Quality Assurance program.

Office of Audit
OA conducts 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 reviews and program evaluations on issues of concern to SSA, Congress, and the general public.

Office of Investigations
OI conducts investigations 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 liaison to the Department of Justice on all matters relating to the investigation of SSA programs and personnel. OI also conducts joint investigations with other Federal, State, and local law enforcement agencies.

Office of the Counsel to the Inspector General
OCIG provides independent legal advice and counsel to the IG on various matters, including statutes, regulations, legislation, and policy directives. OCIG 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. Also, OCCIG administers the Civil Monetary Penalty program.

Office of External Relations
OER manages OIG's external and public affairs programs, and serves as the principal advisor on news releases and in providing information to the various news reporting services. OER develops OIG's media and public information policies, directs OIG's external and public affairs programs, and serves as the primary contact for those seeking information about OIG. OER prepares OIG publications, speeches, and presentations to internal and external organizations, and responds to Congressional correspondence.

Office of Technology and Resource Management
OTRM supports OIG by providing information management and systems security. OTRM also coordinates OIG's budget, procurement, telecommunications, facilities, and human resources. In addition, OTRM is the focal point for OIG's strategic planning function, and the development and monitoring of performance measures. In addition, OTRM receives and assigns for action allegations of criminal and administrative violations of Social Security laws, identifies fugitives receiving benefit payments from SSA, and provides technological assistance to investigations.