OFFICE OF
THE INSPECTOR GENERAL

SOCIAL SECURITY ADMINISTRATION

CONTROLS OVER
MISCELLANEOUS PAYMENTS
MADE THROUGH
THE SINGLE PAYMENT SYSTEM

October 2007

A-09-07-17119

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: October 25, 2007

To: The Commissioner

From: Inspector General

Subject: Controls over Miscellaneous Payments Made Through the Single Payment System (A-09-07-17119)

OBJECTIVE

Our objective was to determine whether the Social Security Administration (SSA) had adequate controls over miscellaneous payments made through the Single Payment System (SPS).

BACKGROUND

SSA administers the Old-Age, Survivors and Disability Insurance (OASDI) program under Title II of the Social Security Act. SSA generally provides monthly benefits to eligible individuals through its Title II system. However, certain types of payments that cannot be made through the Title II system are processed through SPS. For example, SPS is used to pay death underpayments to non beneficiaries when the payment due a beneficiary exceeds $29,999.99 or issue a returned Lump Sum Death Payment. SPS was designed to ensure the timeliness of these payments, stop duplicate and erroneous payments, and provide management information.

Our audit included a review of the approximately $373 million in SPS death underpayments paid to 327,580 non-beneficiaries for the period July 1, 2002 through April 10, 2006. We also examined a population of 2,281 individuals who may have received duplicate SPS payments totaling $48.3 million during this period.

RESULTS OF REVIEW

We found that SSA's controls to prevent or detect improper or duplicate miscellaneous payments were generally effective. However, SSA needs to improve its controls over the retention of supporting documentation for miscellaneous SPS payments and the recording of Social Security numbers (SSN) for SPS payments issued to non-beneficiaries. Based on our review of a random sample of 275 death underpayments from the population of 327,580 non beneficiaries, we found that SSA

improperly paid an estimated $7.3 million to 11,912 non-beneficiaries,

did not retain adequate supporting documentation for an estimated $98 million in payments made to 50,030 non-beneficiaries (see Appendix C),

did not obtain or record the SSNs for 176,029 (53 percent) of the 332,680 death underpayments issued to non-beneficiaries, and

paid improper duplicate payments of $27,480 to 3 individuals.

Improper Death Underpayments Paid to Non-Beneficiaries

Death underpayments occur when beneficiaries die before they receive all benefits due them or before they endorse a benefit check payable before the month of death. Death underpayments are payable to relatives or the legal representatives of the estates of deceased beneficiaries under the following order of priority established by the Social Security Act.

1. A spouse who was living with the beneficiary at the time of death or a spouse entitled on the same earnings record at the time of death.
2. A child entitled on the same earnings record.
3. A parent entitled on the same earnings record of the deceased person.
4. A spouse not entitled on the same earnings record.
5. A child not entitled on the same earnings record.
6. A parent not entitled on the same earnings record.
7. A legal representative of the estate.

Based on our review of a random sample of 275 non-beneficiaries who were paid a death underpayment, we found that SSA improperly paid $6,192 to 10 individuals. Projecting our sample results to our population of 327,580 non-beneficiaries, we estimate that SSA improperly paid $7.3 million to 11,912 non-beneficiaries (see Appendix C). This occurred, in part, because SSA paid some individuals more than the amount to which they were entitled, issued payments to individuals who were not entitled or did not pay the full underpayment amount to entitled individuals.

Incorrect Payment Amount Processed - According to the Social Security Act, death underpayments due to more than one individual in the same order of priority must be divided equally. For example, if there are two children entitled to the payment, each child must receive an equal share of the death underpayment. However, our audit disclosed that SSA did not always pay the correct amount when two or more individuals were entitled to a death underpayment. Specifically, we identified three non beneficiaries who were paid more than the amount due. This occurred, in part, because SSA technicians incorrectly divided the underpayments among the entitled non-beneficiaries or simply made payments for incorrect amounts. As a result, these three individuals received $1,763 more than they were entitled.

No Death Underpayment Due - We identified three individuals to whom SSA issued $3,439 in death underpayments. However, in two cases, the payment was for the month the beneficiary died and therefore was not a death underpayment payable to the non-beneficiary. In the third case, SSA issued a payment that was incorrectly recorded as a death underpayment. After the payment was issued, SSA determined it was not due the beneficiary and recovered it.

Individual Was Not Entitled - SSA improperly paid a death underpayment to one individual who was not entitled to receive it. This occurred because an SSA technician did not follow the priority order for payment of the underpayment. Instead of paying the underpayment to the entitled child of the deceased beneficiary, SSA paid a widow who was not living with the deceased. As a result, the widow received $570 to which she was not entitled. SSA subsequently paid the death underpayment to the child and established an overpayment for the widow. However, SSA terminated its collection efforts for the overpayment.

Outstanding Death Underpayments - Individuals who were qualified to receive death underpayments did not always receive the full amount that was payable on behalf of the deceased beneficiaries. Specifically, we determined that three non-beneficiaries did not receive the full amount of the underpayment. This occurred because SSA did not pay two individuals the amount of unnegotiated checks due a deceased beneficiary and did not pay the entire underpayment amount due one individual. Consequently, these three individuals did not receive $420 in payments to which they were entitled.

Unsupported Death Underpayments

A written request for a death underpayment is not required if SSA's records contain sufficient information to determine the identities and current addresses of all persons entitled to the underpayment. Otherwise, a written request is required from at least one person entitled to receive a portion of the underpayment. The written request must include (1) the applicant's relationship to the deceased, (2) the names and addresses of individuals in the highest order of priority for payment, (3) the applicant(s) SSN (if they have one), and (4) whether the deceased had a surviving spouse living in the same household at the time of death. SSA uses the application Form SSA-1724, Claim for Amounts Due in the Case of a Deceased Beneficiary, to obtain this information. SSA requires that claims folders, either in electronic or paper form, contain documentation that supports the underpayments issued to these individuals. Specifically, SSA policy requires that staff retain a scanned copy of the Form SSA-1724 in SSA's Paperless Processing Center System, which is a document imaging and management system. After SSA determines the Form SSA-1724 image is clearly readable, the original document may be destroyed.

We found that SSA did not have adequate paper or electronic documentation to support 42 (15 percent) of the 275 death underpayments to non-beneficiaries. Specifically, SSA had not obtained or retained the Form SSA 1724 or any other written documentation to support the issuance of the death underpayments. In addition, there was insufficient information in SSA's records to determine the identities and addresses of all persons entitled to the underpayment. As a result, we could not determine whether $82,505 in payments to the 42 non-beneficiaries was paid to the correct individual. Projecting our sample results to the population, we estimate that SSA did not have adequate documentation to support $98 million in death underpayments paid to 50,030 non beneficiaries (see Appendix C).

For example, in one case, SSA paid an individual a death underpayment of $1,849. A scanned image of the SSA-1724 was not in the Paperless Processing Center System. In addition, we requested the claims folder to determine whether the Form SSA-1724 or any other documentation existed to support the individual's entitlement to the underpayment. Unfortunately, the claims folder had been destroyed. We also found that the payment was issued without an SSN, which prevented us from determining the identity or the relationship between the non-beneficiary and the deceased beneficiary.

Underpayments Processed Without the Recipient's Social Security Number

SSA procedures require that individuals provide an SSN on applications for a death underpayment unless they do not have an SSN. Generally, individuals requesting death underpayments use the Form SSA-1724. Although this Form includes a field for the SSN, our review of the SPS input screen used by SSA technicians to process miscellaneous payments disclosed that the SSN field is optional. SSA technicians can bypass the field and process payments without the SSN.

In our July 2004 audit of Title II Underpayments for Deceased Beneficiaries, we found that 51 percent of death underpayments were issued without an SSN. At that time, SSA policy did not require the collection of an SSN to pay a death underpayment. In response to our report, in January 2005, SSA revised its procedures to require an SSN if the non-beneficiary had one.

To assess the effectiveness of SSA's policy change to require an SSN, we analyzed the SPS death underpayments made from July 2002 through December 2004 and from January 2005 through April 10, 2006. Although SSA's policy has resulted in a slight improvement in the collection and recording of SSNs for SPS payments, we found SSA continues to issue SPS payments without recording the recipients' SSNs (see table below).

SPS Payment July 2002
Through December 2004 January 2005 Through
April 10, 2006 July 2002
Through
April 10, 2006

Issued Without an SSN
118,489
57,540
176,029

Issued with an SSN
93,772
62,879
156,651

Total Payments
212,261
120,419
332,680
Percent of Payments Issued Without an SSN
56
48
53

SSA is required to provide the SSN on the Social Security Benefit Statement (SSA 1099) to notify recipients as well as the Internal Revenue Service of SSA benefits received during the year that are subject to income tax. However, when SSA does not include the SSN on the SPS payment, the SSA-1099 will not contain the recipient's SSN. Consequently, SSA did not provide the Internal Revenue Service with needed SSNs for 176,029 individuals who received $209 million in payments that are subject to income tax.

SSNs Were Obtained - We found that SSA obtained or already had the SSN for many of the individuals who received a death underpayment. From our sample of
275 cases, SSA issued 88 payments after it changed its policy to require an SSN. Of these, we found that SSA issued 43 payments without including the SSN; however, we were able to locate the SSN for 17 (40 percent) of the payments. We found that 15 individuals provided their SSN on the SSA 1724 or as an attachment to the Form, and 2 individuals' SSNs were in the claim folders. For example, in one case, the surviving spouse of the deceased beneficiary completed and submitted a SSA-1724 to claim an $11,411 death underpayment. The widow included her SSN on the SSA 1724. However, when the payment was processed through SPS, the SSA technician did not enter it in the SSN field.

Improper Duplicate Payments

SPS was created, in part, to reduce duplicate and erroneous payments. To do this, SPS creates systems alerts that warn technicians of potential problems with a particular payment action. For example, SPS will generate a systems alert if a potential payment action could result in a duplicate payment. According to SSA policy, the technician is required to review the Payment History Update System, which records all SPS payments, prior to initiating the alerted payment action. However, SSA technicians can override the SPS alerts and process the payment without providing an explanation or obtaining supervisory approval.

We identified a population of 2,281 individuals who may have received duplicate payments from July 2002 through April 10, 2006. These individuals received at least two payments issued for the same reason and for the same amount. Based on a random sample of 100 of these payments, we found that SSA improperly issued duplicate payments totaling $27,480 to 3 individuals.

Our review disclosed that SSA controls did not always prevent improper duplicate payments through SPS. Specifically, based on our review of SSA records, we determined that technicians improperly overrode alerts that a pending payment action could result in a duplicate payment. In these cases, a review of Payment History Update System would have revealed that the pending payment was a duplicate. For example, one individual received four payments issued via both the Title II system and SPS. Consequently, this individual was improperly paid $26,053.

CONCLUSION AND RECOMMENDATIONS

We found that SSA's controls to prevent or detect improper or duplicate miscellaneous payments were generally effective. However, SSA needs to improve its controls over the retention of supporting documentation for miscellaneous SPS payments and the recording of Social Security numbers for SPS payments issued to non-beneficiaries. Specifically, our review identified an estimated $7.3 million in improper payments to 11,912 non-beneficiaries and unsupported payments of $98 million to 50,030 non beneficiaries. We also found that SSA needs to improve controls to
ensure SSNs are properly recorded on SPS payments, and to prevent improper duplicate payments.

We recommend that SSA:

1. Take corrective actions on the improper and duplicate SPS payments identified by our audit.

2. Remind staff of the proper procedures to follow when determining underpayment amounts payable to non-beneficiaries.

3. Establish an appropriate control to ensure the SSA-1724 or other written application for a death underpayment is retained.

4. Establish a SPS alert for all instances in which a SSN is not recorded for non-beneficiaries.

5. Remind staff to review Payment History Update System to identify and prevent improper duplicate SPS payments.

AGENCY COMMENTS

SSA agreed with all our recommendations. See Appendix D for the full text of SSA's comments.

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
POMS Program Operations Manual System
SPS Single Payment System
SSA Social Security Administration
SSN Social Security Number

Appendix B
Scope and Methodology
We obtained a file containing information on payments issued through the Social Security Administration's (SSA) Single Payment System (SPS) between July 1, 2002 and April 10, 2006. From this file, we identified two populations. The first population consisted of 327,580 individuals who were issued death underpayments, and the second population consisted of 2,281 individuals who may have received duplicate payments. We randomly selected a sample of 275 individuals from the first population and 100 individuals from the second population.

To achieve our objective, we

reviewed the applicable sections of the Social Security Act, U.S. Code, and SSA's Program Operations Manual system;

interviewed SSA employees from the Western Program Service Center and the Office of Retirement and Survivors Insurance Systems;

reviewed prior Office of the Inspector General audit reports pertaining to death underpayments;

reviewed actions SSA took to address recommendations from the prior report;

obtained necessary files from the Master Beneficiary Record and Payment History Update System;

reviewed SSA's paperless system for supporting documentation; and

obtained and reviewed case folders as needed.

We verified the payment information contained in SPS against the Payment History Update System. For each death underpayment reviewed, we determined whether adequate documentation existed to support the payment and whether SSA complied with its policies and procedures for issuing the payment. For each potential duplicate payment reviewed, we reviewed SSA's records to assess the validity of the payments. Based on this analysis, we determined the number and amount of improper and unsupported payments made through SPS.

We determined the computer-processed data were sufficiently reliable to achieve our audit objective. We performed our work in Richmond, California, and Baltimore, Maryland, between December 2006 and May 2007. The entity audited was the Office of the Deputy Commissioner for Operations. We conducted our audit in accordance with generally accepted government auditing standards.

Appendix C
Sampling Methodology and Results

We obtained a file containing information on payments issued through the Social Security Administration's (SSA) Single Payment System between July 1, 2002 and April 10, 2006. From this file, we identified two populations. The populations consisted of individuals who received death underpayments and individuals likely to have received duplicate payments.

We identified a population of 327,580 individuals who received death underpayments. We randomly selected 275 individuals to determine whether SSA complied with its policies and procedures for the payment of death underpayments to non-beneficiaries.

Based on a random sample of 275 individuals who received death underpayments from July 1, 2002 through April 10, 2006, we found that SSA improperly paid $6,192 in payments to 10 individuals on behalf of deceased beneficiaries. We also found that SSA did not retain adequate documentation to support about $83,000 in payments made to 42 individuals who received death underpayments. Projecting these results to our population of 327,580 individuals, we estimate that SSA paid about $7.3 million in improper payments to 11,912 individuals and $98 million in unsupported payments to 50,030 individuals. The following tables provide the details of our sample results and statistical projections.

Table 1 - Improper Payments
Projection
Number of Errors
Amount
Sample Results 10 $6,192
Point Estimate 11,912 $7,376,351
Lower Limit 6,508 $1,864,344
Upper Limit 19,946 $12,888,358

Table 2 - Unsupported Payments
Projection
Number of Errors
Amount
Sample Results 42 $82,505
Point Estimate 50,030 $98,280,016
Lower Limit 38,711 $31,726,705
Upper Limit 63,221 $164,833,327

All statistical projections are reported at the 90-percent confidence level.

Appendix D
Agency Comments

Appendix E
OIG Contacts and Staff Acknowledgments
OIG Contacts
James J. Klein, Director, San Francisco Audit Division, (510) 970-1739
Joseph Robleto, Audit Manager, (510) 970-1737
Acknowledgments
In addition to those named above:
Regina Finley, Auditor-in-Charge

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-09-07-17119.

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 Resource Management (ORM). 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 Resource Management
ORM supports OIG by providing information resource management and systems security. ORM also coordinates OIG's budget, procurement, telecommunications, facilities, and human resources. In addition, ORM 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.