SOCIAL SECURITY ADMINISTRATION

RETROACTIVE TITLE II PAYMENTS TO
RELEASED PRISONERS

July 2010

A-06-08-38081

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: July 14, 2010 Refer To:

To: The Commissioner

From: Inspector General

Subject: Retroactive Title II Payments to Released Prisoners (A-06-08-38081)

OBJECTIVE

Our objective was to determine whether beneficiaries, shown in the Social Security Administration’s (SSA) records as having been convicted of a criminal offense and confined to a penal or mental institution, were eligible for retroactive Old-Age, Survivors and Disability Insurance (OASDI) payments they received after their release date.

BACKGROUND

Subject to certain conditions, SSA suspends OASDI payments to beneficiaries confined to correctional institutions because they were convicted of a criminal offense or were confined to mental institutions because they were found not guilty of a criminal offense by reason of insanity or other mental condition. SSA will reinstate benefits after a beneficiary has been officially released because of completion of a sentence, parole, or pardon.

The Prisoner Update Processing System (PUPS) records inmate information. When an inmate’s Social Security number (SSN) is entered into PUPS, SSA verifies the SSN and determines whether the individual is receiving benefits using the Master Beneficiary and Supplemental Security Records. If SSA determines the prisoner is receiving benefits, a PUPS indicator is added to the payment record, and benefits are suspended during the period of incarceration.

A recent Office of the Inspector General investigation involved a field office employee who fraudulently issued over $13,000 in retroactive OASDI benefits to an individual shortly after her release from prison. The individual served approximately 12 consecutive months in prison and was ineligible to receive benefits during the period of incarceration. SSA correctly suspended the OASDI benefits during most of the confinement period. However, the field office employee altered the prison release date in PUPS to provide the false appearance that the individual was released from prison the same day she was incarcerated. This transaction removed the benefit suspension and incorrectly prompted the payment system to issue a retroactive lump sum payment equal to the amount of previously suspended benefits.

To determine whether other retroactive payments to released prisoners were paid incorrectly, we obtained SSA data identifying 1,640 retroactive payment transactions in amounts of $10,000 or higher that beneficiaries received after a prison release date recorded in PUPS. SSA issued these payments—totaling over $25 million—between October 2004 and September 2008. Our audit focused on the appropriateness of a random sample of 100 of these retroactive payments. See Appendix B for a discussion of our scope and methodology and Appendix C for our sampling methodology and results.

RESULTS OF REVIEW

SSA improperly issued retroactive payments to beneficiaries after their release from prison. In 15 of 100 transactions reviewed, SSA personnel issued payments totaling $258,408 that released prisoners were not entitled to receive. Further, in another 36 of 100 transactions reviewed, SSA personnel authorized the retroactive payments totaling $549,188 without providing any documentation that explained or justified the payment.

Based on our sample results, we estimate SSA issued approximately $3.8 million in retroactive payments that released prisoners were not entitled to receive. We also estimate that SSA issued approximately $6.5 million in additional retroactive payments that could not be explained or justified based on the documentation provided.

Most of these payments involved complicating factors that made establishing entitlement to the payment confusing for even highly trained SSA staff. For example, the retroactive payment transactions could involve multiple periods of incarceration, both OASDI and Supplemental Security Income payments, various other benefit offsets, and/or claims of identity fraud or mistaken identity.

SSA requires that field office personnel document circumstances related to incorrect prisoner benefit suspensions. However, SSA’s systems allowed personnel to issue large retroactive payments without explanation or justification. We forwarded the improper and unsubstantiated payments identified during our review to applicable SSA Regional Center for Security and Integrity (CSI) staff for review. CSI staff and/or other regional staff generally agreed with our conclusions regarding the validity of these transactions. Lack of sufficient controls over these payments increases the potential for fraud, waste, or abuse.

IMPROPER RETROACTIVE PAYMENTS TO RELEASED PRISONERS

SSA improperly issued retroactive payments to beneficiaries after their release from prison. We reviewed a sample of 100 payment transactions and determined that, in 15 instances, SSA personnel authorized large retroactive payments the beneficiary was not entitled to receive. Examples follow.

• In September 2007, SSA issued a $140,189 payment to a Pomona, California, beneficiary who was released from prison in November 2004. As part of its Special Disability Workload (SDW), SSA determined the man was due retroactive OASDI disability benefits covering the period December 1977 through August 2007. However, SSA payment records indicated the man was not entitled to the retroactive payment because, since 1977, SSA had paid him OASDI child disability benefits under his father’s earnings record. The OASDI benefits already paid should have been offset against any amount due because of SDW. However, it appeared the Philadelphia Payment Service Center did not consider these benefit payments when it computed retroactive benefits payable under SDW. Philadelphia Payment Service Center staff could not locate documentation to indicate how this payment amount was calculated and acknowledged it appeared the calculation did not consider the disability benefits already paid to the released prisoner. SSA payment records indicate the individual did not cash either of the retroactive benefit checks, likely because he had been incarcerated four additional times since September 2007. Unless SSA takes appropriate action to adjust this individual’s payment record, the improper payments could be re-issued.

• In November 2005, SSA issued a $13,946 payment to the representative payee of a Texas beneficiary who was confined in a Missouri mental hospital in December 2004. SSA correctly suspended benefit payments to this individual in 2004 based on notification of the beneficiary’s confinement. However, in November 2005, it appeared the prisoner’s representative payee visited an SSA field office and claimed the beneficiary was released from the mental hospital in December 2004. For some unknown reason, it appeared an SSA employee accepted the representative payee’s assertion without verification. The employee altered the PUPS prison release date to match the prisoner’s incarceration date. This action caused the payment system to issue the representative payee a $13,946 retroactive payment equal to the amount of benefits suspended since December 2004. We contacted the Missouri mental hospital that reported the beneficiary’s December 2004 confinement. Hospital officials confirmed the beneficiary was incarcerated in December 2004 and remained in custody until her release in November 2005. Acceptance of the representative payee’s assertion without verification and input of the erroneous release date in PUPS resulted in a $13,946 improper payment. Dallas Region staff reviewed this transaction and agreed the retroactive payment was improper.

• In August and September 2004, SSA issued two retroactive payments totaling $21,464 to a Missouri beneficiary who was incarcerated in a Federal prison in July 2003. SSA’s records established this individual was not entitled to either retroactive payment and contained no indication why the payments were authorized. Further, SSA improperly paid disability benefits to the individual the entire time he was incarcerated. In August 2004, SSA established a $20,617 overpayment on the beneficiary’s record to recover improper disability payments issued while the individual was in prison. It appeared that, in October 2004, someone altered the prison release date in PUPS to show the beneficiary was incarcerated and released the same day. This transaction resulted in the issuance of a third improper retroactive payment totaling $12,028, which the system applied against the beneficiary’s overpayment. Kansas City Region and Mid-America Processing Center staff reviewed these transactions and agreed the retroactive payments were improper.

Based on our sample results, we estimate that SSA issued approximately $3.8 million in retroactive payments that released prisoners were not entitled to receive.

UNSUPPORTED RETROACTIVE PAYMENTS TO RELEASED PRISONERS

SSA personnel authorized large retroactive payments, but did not provide documentation or explanation to support the payments. Of our 100 sampled transactions, SSA did not provide documentation to substantiate 36 retroactive payments. For example:

• In March 2008, SSA issued a New York beneficiary a $24,594 retroactive OASDI disability benefit payment. SSA issued the payment as the result of a favorable disability determination that made the individual eligible for disability benefits dating from February 2006. However, SSA’s records indicate the individual was incarcerated in Federal prison on April 11, 2006, making him ineligible to receive benefits during most of this retroactive period. Without explanation, an SSA employee altered the prison release date in PUPS to make it appear the man was released from prison on April 11, 2006. This input caused the payment system to issue the large retroactive payment.

• In January 2005, SSA awarded a $28,676 retroactive payment to a California beneficiary. SSA’s records indicate that, in November 2004, the Agency received a PUPS report that the beneficiary was incarcerated by the Missouri Department of Corrections on August 8, 2002. An SSA employee subsequently contacted the Missouri Department of Corrections and input a remark in PUPS that stated, “Beneficiary has been in custody since 08/08/02 and not yet released with a sentence of more than one year certified by [name removed] 11/23/04.” As a result of this verification, SSA determined benefits electronically deposited into this beneficiary’s bank account since August 2002 were improper and established a $28,676 overpayment on the beneficiary’s payment record. Without explanation, in January 2005, an SSA employee altered the prison release date to show the prisoner was released from custody on August 8, 2002. This input restored the suspended benefits and caused the payment system to issue the $28,676 payment, which then offset the overpayment.

• In October 2008, SSA issued a $13,775 retroactive payment to a Florida beneficiary. SSA had previously suspended disability benefit payments to this individual because he served multiple periods of incarceration since July 2006, and because he was a fugitive felon from May 2007 through March 2008. Without explanation, SSA authorized the retroactive payment to restore the previously suspended benefits.

It is possible that unique facts or circumstances existed in these cases that may have justified some or all of the retroactive payments. However, absent documentation which explains these facts or circumstances, each of these payments are questionable. Based on our sample results, we estimate that SSA issued approximately $6.5 million in questionable retroactive payments that could not be explained or justified based on available documentation.

 
Payment Controls

Imprisonment is just one of several factors that can affect an individual’s entitlement to OASDI benefits. Determining whether an individual is entitled to retroactive benefits covering prior months or years requires implementation of effective controls that ensure retroactive payments are valid and appropriate. However, our audit results indicate that SSA employees authorized large retroactive payments incorrectly and/or provided no documentation to explain or justify these payments. In addition, PUPS allowed SSA employees to restore benefits, suspended as the result of imprisonment, by simply altering the prison release date. PUPS accepted these inputs without the need for
co-worker or supervisor review or approval.

CONCLUSION AND RECOMMENDATIONS

SSA issued improper or questionable retroactive payments to beneficiaries after their release from prison. About half the retroactive payment transactions of $10,000 or more we reviewed were either improper or issued without any explanation or justification being documented. SSA did not establish sufficient controls to ensure large retroactive payments to released prisoners were valid. Specifically, SSA payment systems allowed SSA personnel to compute and issue large retroactive payments without explanation or justification and without supervisory review. The lack of sufficient controls over these payments increased the potential for fraud, waste, or abuse. Based on our sample results, we estimate that SSA issued approximately $10.3 million in retroactive payments to prisoners that were either incorrect or could not be explained based on available documentation. As a result, we recommend SSA:

1. Take appropriate action (suspend benefits, recover improper payments, or refer potential instances of fraud to the Office of Investigations) for the 15 retroactive payments determined to be improper.
2. Establish controls to ensure employees explain and justify large retroactive payments issued to released prisoners. At a minimum, SSA employees should document circumstances that resulted in the underpayment, describe evidence reviewed or obtained to substantiate beneficiary assertions, and provide detailed information indicating how the payment amount was computed.
3. Establish a payment threshold amount above which an SSA employee must obtain supervisory approval before issuing the large retroactive payment.

AGENCY COMMENTS

SSA agreed with our recommendations. SSA’s comments are included in Appendix D.

/s/

Patrick P. O’Carroll, Jr.

Appendices
APPENDIX A – Acronyms
APPENDIX B – Scope and Methodology
APPENDIX C – Sampling Methodology and Results
APPENDIX D – Agency Comments
APPENDIX E – OIG Contacts and Staff Acknowledgments

Appendix A
Acronyms

CSI Center for Security and Integrity
OASDI Old-Age, Survivors and Disability Insurance
POMS Program Operations Manual System
PUPS Prisoner Update Processing System
SDW Special Disability Workload
SSA Social Security Administration
SSN Social Security Number

Appendix B
Scope and Methodology

To accomplish our objective, we:

• Researched the Social Security Administration’s (SSA) regulations, policies, and procedures related to prisoner benefit suspension.

• Obtained data from the Payment History Update System identifying 1,640 retroactive Old-Age, Survivors and Disability Insurance payment transactions in amounts of $10,000 or more that SSA issued between October 2004 and September 2008 to beneficiaries after a prison release date was recorded in the Prisoner Update Processing System (PUPS). The payment transactions totaled $25,291,851.

• Analyzed the retroactive payment data and divided the transactions into two sampling populations.
 103 transactions where the confinement and release dates recorded on the beneficiaries’ PUPS record matched. We reviewed these transactions separately because the matching dates indicated that field office staff may have processed a transaction to override the release date reported in PUPS. An Office of Investigations case determined an SSA employee used this type of transaction to fraudulently issue payments to a released prisoner.
 1,537 transactions remaining in our population.

• We randomly selected 50 transactions from each group for detailed review. For each sampled case, we
 determined whether the initial benefit suspension and subsequent benefit reinstatement were justified,
 determined whether documentation existed to support the retroactive payment amount, and
 reviewed any related overpayment transactions appearing on the beneficiaries’ payment records.

• Worked with applicable Regional Centers for Security and Integrity staff regarding discrepancies identified during our audit.

We performed our review from December 2008 through December 2009 in Dallas, Texas. We determined the data used for this audit were sufficiently reliable to meet our objective. The entities audited were the Office of Income Security Programs under the Deputy Commissioner for Retirement and Disability Policy, and the Office of Central Operations under the Deputy Commissioner for Operations. 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 objective. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objective.

Appendix C
Sampling Methodology and Results

We selected a random sample of 100 retroactive Old-Age, Survivors and Disability Insurance payment transactions in amounts of $10,000 or more that the Social Security Administration issued from October 2004 through September 2008 to beneficiaries after the prison release date recorded in the Prisoner Update Processing System (PUPS). We separated the transactions into two groups—payment transactions where the confinement and release dates recorded on the beneficiaries’ PUPS record matched and payment transactions where the confinement and release dates recorded on the beneficiaries’ PUPS record did not match. We sampled 50 transactions from each group. The first group included 103 transactions totaling $1,718,836, and the second group included 1,537 transactions totaling $23,573,015.

RETROACTIVE PAYMENT TRANSACTIONS $10,000 OR HIGHER
ISSUED AFTER BENEFICIARY’S RELEASE FROM PRISON
FISCAL YEARS 2005 THROUGH 2008

Group Number of Transactions Dollar Amount Sample Size
Group 1: Confinement and Release Dates Matched 103 $1,718,836 50
Group 2: Confinement and Release Dates did not Match 1,537 $23,573,015 50
Total 1,640 $25,291,851
100

IMPROPER PAYMENTS

Group 1 – Confinement and Release Dates Matched

Of the 50 payment transactions in our sample, 5 payment transactions, totaling $142,768, were improper. Employing a straight-line estimation methodology, we estimate that, within this group, approximately 10 payment transactions totaling about $285,536 were improper.

Group 2 – Confinement and Release Dates did not Match

Of the 50 payment transactions in our sample, 10 transactions totaling $115,640 were improper. Based on our sample results, we estimate that, within this group, approximately 307 payments totaling about $3,554,771 were improper.

Improper Payments Number of Transactions Dollar Amount
Identified in Sample 10 $115,640
Projection of Improper Payments in Population:
Point Estimate 307 $3,554,771
Projection at Lower Limit 176 $5,560,508
Projection at Upper Limit 482 $1,549,033
All projections are at the 90-percent confidence level.

Summary – Improper Payments

Of the 100 payment transaction sample items reviewed from both groups, 15 payment transactions totaling $258,408 were improper. Based on our sample results, we estimate that, within the audit population, approximately 317 payment transactions totaling about $3,840,307 were improper.

Projection of Improper Payment Transactions in Population
Improper Payments in Sample Improper Payments in Population
Group Number Dollar Amount Number Dollar Amount
Group 1: 5 $142,768 10 $285,536
Group 2: 10 $115,640 307 $3,554,771
Total 15 $258,408 317 $3,840,307

UNSUPPORTED PAYMENTS

Group 1 – Confinement and Release Dates Matched

Of the 50 payment transactions in our sample, 22 payment transactions totaling $362,322 were unsupported. Employing a straight-line estimation methodology, we estimate that, within this group, approximately 44 payment transactions totaling about $724,644 were unsupported.

Group 2 – Confinement and Release Dates did not Match

Of the 50 payment transactions in our sample, 14 transactions totaling $186,866 were unsupported. Based on our sample results, we estimate that, within this group, approximately 430 payments totaling $5,744,270 were unsupported.

Unsupported Payments Number of Transactions Dollar Amount
Identified in Sample 14 $186,866
Projection of Unsupported Payments in Population:
Point Estimate 430 $5,744,270
Projection at Lower Limit 276 $3,527,772
Projection at Upper Limit 615 $7,960,768
All projections are at the 90-percent confidence level.
Summary – Unsupported Payments

Of the 100 payment transaction sample items reviewed from both groups, 36 payment transactions totaling $549,188 were not supported. Based on our sample results, we estimated that, within the audit population, approximately 474 payment transactions totaling about $6,468,914 were unsupported.

Projection of Unsupported Payment Transactions in Population
Improper Payments in Sample Improper Payments in Population
Group Number Dollar Amount Number Dollar Amount
Group 1: 22 $362,322 44 $724,644
Group 2: 14 $186,866 430 $5,744,270
Total 36 $549,188 474 $6,468,914

Appendix D
Agency Comments

SOCIAL SECURITY

MEMORANDUM

Date: July 7, 2010 Refer To: S1J-3

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

From: James A. Winn /s/
Executive Counselor
to the Commissioner

Subject: Office of the Inspector General (OIG) Draft Report, “Retroactive Title II Payments to Released Prisoner” (A-06-08-38081)--INFORMATION

Thank you for the opportunity to review and comment on the draft report. We appreciate OIG’s efforts in conducting this review. Attached is our response to the report recommendations.

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

Attachment

COMMENTS ON THE OFFICE OF THE INSPECTOR GENERAL (OIG) DRAFT REPORT, “RETROACTIVE TITLE II PAYMENTS TO RELEASED PRISONERS” A-06-08-38081

Thank you for the opportunity to review the subject draft report. We generally agree with your findings and recommendations and offer the following comments:
Recommendation 1
Take appropriate action (suspend benefits, recover improper payments, or refer potential instances of fraud to the Office of Investigations) for the 15 retroactive payments determined to be improper.

Comment

We agree and we will take appropriate actions by the end of the calendar year. In addition, we will also review the 36 cases you document in your report that we released “unsupported retroactive payments to released prisoners,” and take corrective actions where appropriate.
Recommendation 2
Establish controls to ensure employees explain and justify large retroactive payments issued to released prisoners. At a minimum, SSA employees should document circumstances that resulted in the underpayment, describe evidence reviewed or obtained to substantiate beneficiary assertions, and provide detailed information indicating how the payment amount was computed.

Comment

We agree. We will develop and implement additional procedural controls that will instruct our employees to explain, justify, and document the circumstances surrounding all retroactive payments to released prisoners. We will also explore possible systems’ controls and implement them as information technology resources become available.
Recommendation 3
Establish a payment threshold amount above which an SSA employee must obtain supervisory approval before issuing the large retroactive payment.

Comment

We partially agree. We will establish an appropriate monetary threshold and require secondary approval for all retroactive payments exceeding that amount. Instead of supervisory approval as you suggest, we will require technical expert approval for this activity.

[In addition to the information listed above, SSA also provided additional comments, which were incorporated in the report where appropriate.]

Appendix E
OIG Contacts and Staff Acknowledgments
OIG Contacts

Ron Gunia, Director, Dallas Audit Division

Jason Arrington, Audit Manager

Acknowledgments

In addition to those named above:

Teresa Williams, Senior Auditor

For additional copies of this report, please visit our web site at www.ssa.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-06-08-38081.

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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.
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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.
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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.