Social Security Administration Office of the Inspector General SARC.pdfSection 1140 of the Social Security Act prohibits the use of SSA’s program words, letters, symbols, or emblems

Inspector General’s Report to Congress120

Social Security AdministrationOffice of the Inspector General

Semiannual Report to Congress

SSA’s FY 1999 Accountability Report 121

Mission/Vision StatementMission

We improve the Social SecurityAdministration’s programs andoperations and protect themagainst fraud, waste, and abuseby conducting independent andobjective audits, evaluations, andinvestigations. We providetimely, useful, and reliableinformation and advice toAdministration officials,Congress, and the public.

Vision

By conducting independent andobjective audits, investigations,and evaluations, we are agents ofpositive change striving forcontinuous improvement in theSocial Security Administration’sprograms, operations, andmanagement.


Message from theInspector GeneralUsually at this time of year, Office of the Inspectors General provide to theirAgency heads a Semiannual Report. This is the fourth time since Congresscreated an independent Social Security Administration (SSA) that the Officeof the Inspector General (OIG) has joined with the Agency to present ouraccomplishments to our stakeholders and partners in SSA’s AccountabilityReport. We are pleased to be a part of this endeavor to streamline andconsolidate the statutory reporting requirements.

This year our investigative operations have led to unprecedented results. TheCooperative Disability Investigations team project and the Fugitive Felonproject have identified over $64 million in overpayments and projectedsavings to the Government. The monetary results of these two projects aloneexceed our Fiscal Year 1999 appropriation and coupled with our audit workand our investigative results we estimate that we surpassed our appropriationby over $300 million. Also this year, our Office of the Counsel to the Inspector General was instrumentalin the prosecution of individuals guilty of violating section 1140 of the Social Security Act (i.e.,misleading advertising). This action sends a clear message to the direct mailing industry that bilkingconsumers under Social Security’s good name will not be tolerated.

Anticipating an increase in requests to provide Congress, SSA management, and the general public withinformation and advice, I also created a Quick Response Team within the Office of Audit (OA). Thisteam focuses on a variety of pressing issues requiring immediate attention. In addition, OA and theOffice of Investigations have joined forces in the areas of Social Security number misuse andSupplemental Security Income program integrity. We find this approach the best use of our resources toimprove the management and integrity in SSA’s programs. With congressional support, we alsostrengthened our audit capacity to meet the requirements of the Government Performance and ResultsAct.

Our Office of Quality Assurance completed its first full year of operation. This office reviews OIGactivities nationwide to ensure that our audits, investigations, and administrative functions are conductedin accordance with Federal requirements and guidelines as well as our self-imposed policies andprocedures.

Our organization recognizes the necessity to build upon our efforts to date. We have created a flexibleand responsive organization. I expect that in the future, Government decision-makers will rely upon ourprocess even more for timely information and advice. We look forward to this challenge and will striveto achieve the highest level of integrity and accountability in all our efforts.

Sincerely,

James G. Huse, Jr.Inspector General


Table of ContentsReporting Requirements 125

Significant Activities 126

Office of the Counsel to the Inspector General 132

Office of Investigations 134

Office of Audit 146

Resolving Office of the Inspector GeneralRecommendations 160

Reports Issued from October 1, 1998, throughSeptember 30, 1999 164

Appendices 170


Reporting RequirementsThe Inspector General Act of 1978, as amended, specifies reporting requirements for semiannualreports. The requirements are listed below and indexed to their appropriate pages in this report.

Reporting Requirement PageSection 4(a)(2): Review of Legislation and Regulations 133

Section 5(a)(1): Significant Problems, Abuses, and Deficiencies 126-159

Section 5(a)(2): Recommendations with Respect to Significant Problems,Abuses, and Deficiencies

126-159

Section 5(a)(3): Recommendations Described in Previous Semiannual Reportson which Corrective Actions Have Not Been Completed

186

Section 5(a)(4): Matters Referred to Prosecutorial Authorities 132-145

Sections 5(a)(5) and 6(b)(2): Summary of Instances where Information was Refused None

Section 5(a)(6): List of Audit Reports 164-166Section 5(a)(7): Summary of Particularly Significant Reports 146-159

Section 5(a)(8): Statistical Table Showing the Total Number of Audit Reportsand Total Dollar Value of Questioned Costs

160-161

Section 5(a)(9): Statistical Table Showing the Total Number of Audit Reportsand the Total Dollar Value of Recommendations that Funds bePut to Better Use

162-163

Section 5(a)(10): Audit Recommendations More than 6 Months Old for whichNo Management Decision Has Been Made

160-163

Section 5(a)(11): Significant Management Decisions that were Revised Duringthe Reporting Period

None

Section 5(a)(12): Significant Management Decisions with which the InspectorGeneral Disagrees

190-191


Significant Activitieshe Social Security Administration’s(SSA) Office of the Inspector General(OIG) is comprised of the Offices of

Audit (OA) and Investigations (OI) and issupported by the Offices of ManagementServices, External Affairs, and the Counsel tothe Inspector General (OCIG). These officesplanned and executed OIG operations for thepast fiscal year (FY). This section provides asnapshot of our most notable efforts. Detailson the specific accomplishments of OCIG,OI, and OA are contained in their respectivesections of this report.

Cooperative Initiatives toAddress Identity Theft andFraud

The Identity Theft and AssumptionDeterrence Act of 1998 (P.L. 105-318),commonly called the Identity Theft Act,acknowledges that the Social Security number(SSN) is a means of identifying an individual.This legislation empowers law enforcementauthorities to arrest, prosecute, and convictindividuals who fraudulently use anotherperson’s SSN to create a false identity. Thislaw also charges the Federal TradeCommission (FTC) with establishing acentralized identity theft complaint data baseand providing informational material onidentity theft to complainants. In addition, theFTC may refer identity theft allegations toappropriate Federal, State, or local lawenforcement agencies, as well as to the threemajor credit bureaus.

T

C O U N S E L T O T H EI N S P E C T O R G E N E R A L

OFF ICE OFM A N A G E M E N T

S E R V I C E S

O F F I C E O FINVESTIGATIONS

O F F I C E O FA U D I T

OFF ICE OF EXTERNALA F F A I R S

D E P U T YIN S P E C T O R G E N E R A L

IN S P E C T O R G E N E R A L


Armed with this new statute, OIG is workingcollectively with other Federal organizationsto reduce the incidents and impact of thesecrimes. Over the past FY, OIG’s proactivestance in addressing identity theft includedour participation in the following activities.

• OIG worked with the FTC to developeducational and informational materialthat is consistent throughout the FederalGovernment for victims of identity theft.

• OIG reviewed and provided input onFTC’s proposed identity theft complaintform.

• OIG is a member of the Identity TheftSubcommittee, of the Law EnforcementInitiatives Committee, of the AttorneyGeneral’s Council on White-Collar Crimeat the Department of Justice. It gauges theextent of the identity theft problem anddetermines if other enforcement initiativesor strategies are needed.

• OIG is participating in the planning of theDepartment of the Treasury’s “Summit onIdentity Theft” scheduled for FY 2000.

• OIG staff members attended a conferenceof Federal, State, and local lawenforcement agencies at the U.S.Attorney’s Office in Milwaukee,Wisconsin, to discuss the implementationof the new Identity Theft Act.

• OCIG wrote an article entitled “SocialSecurity Number Misuse and IdentityTheft” for the FTC’s Summer 1999 issueof Fraudbusters! Magazine.

• OIG staff members met with U.S.Sentencing Commission representatives todiscuss sentencing guidelines forindividuals convicted of identity theft.

• OIG staff members met withrepresentatives of Canada NationalServices on June 29, 1999, to discussidentity theft enforcement andmethodologies.

• OA prepared an analysis of SSN misuseallegations made to SSA’s Fraud Hotline(Hotline) that found over 81 percent ofthese types of allegations are related toidentity theft.

• OI launched SSN misuse pilot projects infive cities across the Nation. As part ofthese projects, OI has started to receiveidentity theft complaints from the FTC.Special Agents provide the lead inworking with various Federal and Stateagencies along with the Assistant U.S.Attorneys and State Prosecutors on SSNmisuse allegations referred to OIG.

• As a result of the substantial numbers ofSSN misuse allegations, OI and OA havecombined resources and are workingtogether to identify and investigate SSNfraud. OA identifies potential fraud casesand refers them to OI for investigation.

• OI was responsible for the first indictmentand conviction of an individual foridentity theft under the Identity Theft Act.The details of this case are described laterin the report.


The SSA Fraud Hotline

OI oversees the operation of the Hotline,which is the focal point for receivingallegations of fraud, waste, and abuse againstSSA’s programs and operations.

In FY 1999, the Hotline processed nearly75,000 allegations representing a 150 percentincrease in productivity from FY 1998. Thisis partially attributed to an increase in Hotlinestaff during FY 1999. This increase wasnecessary in order to handle the large volumeof allegations received from the public; SSAemployees; other Federal, State, and localauthorities; and Congress.

Sources of Allegations

30%

45%

3%

9%

13%

State/Local Agencies

SSA

Federal LawEnforcement

Other Sources

Private Citizens

Allegations by Category

3%3%1%

39%

26%

21%

7%

Social Security Number

Supplemental SecurityIncome - Disability

Disability Insurance

Old-Age and SurvivorsInsurance

Supplemental SecurityIncome - Aged

Other

Employee


Efforts to CombatMisleading Advertising

Section 1140 of the Social Security Actprohibits the use of SSA’s program words,letters, symbols, or emblems inadvertisements or other communications thatimply or falsely convey SSA’s approval,endorsement, or authorization. TheCommissioner of SSA delegated theauthority to impose Civil MonetaryPenalties (CMP) against violators to OIG.OCIG administers this program for OIG.

A major CMP settlement was reached withtwo of four defendants in the FederalRecords Service Corporation (FRSC) case.FRSC targeted new brides and new motherswith deceptive SSA-related advertisements.OCIG initially issued a cease and desistletter to FRSC. When FRSC continued tomail its deceptive solicitations, OCIG issueda “Notice of Proposal to Impose Penalties”letter in the amount of $640,000.

OCIG subsequently partnered with OI,SSA’s Office of the General Counsel, andthe Department of Justice to develop astrong case, effectuate a preliminaryinjunction, and negotiate a favorablesettlement of this matter. Under the terms ofthe settlement, FRSC will be dissolved andthe first two defendants will pay a penalty of$845,000 to the Social Security Trust Fund.Of that amount, $195,000 is in cash and$650,000 will be paid over the next10 years, with future payments based on theamount of income that the companypresident earns outside of the direct mailingindustry.

Because of our success in prosecutingFRSC, the Senate Committee onGovernmental Affairs, PermanentSubcommittee on Investigations, requested

the Acting Inspector General to submit astatement for the record concerning ourefforts to curb deceptive mailings. Thisstatement included details about the FRSCcase and also highlighted the followinginvestigation.

OI investigated an individual who contactedSSA beneficiaries by telephone or by mail,alleging to be an SSA employee. He wouldmail correspondence bearing the words“Social Security Administration” and theofficial SSA seal advising SSA beneficiariesthat they had been approved to receiveadditional benefits. He would request aprocessing fee ranging from $9 to $99 andwould also require additional financialinformation to process the benefits. Usingthis information he would create bank draftsand withdraw money directly from thevictims’ checking accounts. As a result ofOI’s investigation, the individual wassentenced in Federal court to 36 months’incarceration, a fine of $7,500, andrestitution of $6,736.17 to 20 SSAbeneficiaries.

Cooperative DisabilityInvestigations

SSA and OIG developed the concept ofCooperative Disability Investigations (CDI)teams. This project initially established fiveCDI teams in Georgia, Louisiana, Illinois,New York, and California. These teams arecomposed of OIG Special Agents and Statelaw enforcement officers, as well as SSAand State Disability Determination Service(DDS) claims professionals. These teamsuse their combined resources and talents toinvestigate suspicious initial and continuingclaims of disability and seek to have theDepartment of Justice prosecute third partiesthat facilitate disability fraud.


The DDS refers suspicious cases to theteam, which in turn collects evidence toverify or refute the suspicion. If the teamconfirms that the claim is fraudulent, theDDS is notified and either denies theapplication or terminates benefits.

During FY 1999, these five CDI teamsreceived 1,098 allegations of fraud or falseapplications, and confirmed 378 cases offraud or false applications. In addition, theteams documented $362,739 in restitutionand scheduled recoveries to SSA, identified$20,366,102 in estimated SSA programsavings, and reported an additional$6,309,860 in estimated savings to otherFederal and State programs. Because oftheir success, new teams were established inMissouri, Oregon, and Texas duringFY 1999.

SSA and OIG derive an additional benefitfrom these units. As more and morefraudulent claims are denied, investigatorsgather valuable intelligence that helps toidentify patterns of criminal activity. Thisproject also deters false applications andeliminates the perception of “easy money.”

Fugitive Felon Project

The Personal Responsibility and WorkOpportunity Reconciliation Act of 1996(commonly known as the Welfare ReformAct) made individuals ineligible to receive

Supplemental Security Income (SSI) duringany month in which the recipient is fleeingto avoid prosecution for a felony; fleeing toavoid custody or confinement afterconviction for a felony; or violating acondition of probation or parole imposedunder Federal or State law.

This project identifies individuals illegallyreceiving SSI by conducting computermatches with the Federal Bureau ofInvestigation (FBI), the U.S. MarshalsService, and State agencies. When OISpecial Agents identify SSI recipients whoare fugitives, they notify SSA. SSA stopspayments and calculates overpayments. Inaddition, OI Special Agents assist State andlocal law enforcement with the fugitives’apprehension.

In FY 1999, OI identified 7,421 fugitiveswho were overpaid a total of $17,219,213.This also resulted in estimated programsavings of $27,087,149. Out of the7,421 fugitives, 1,586 have been arrested.OI identified 4,375 more fugitives in thesecond half of the FY (after only one Statematch in June 1999). This represents abouta 287 percent increase in the second half ofthe FY over the prior period. The chartbelow summarizes OI’s Fugitive FelonProject achievements.

STATISTICS FOR THE FUGITIVE FELON PROJECT – FY 1999

FugitivesIdentified

FugitivesArrested Overpayments

EstimatedSavings

October 1998 – March 1999 1,523 633 $6.7 million $12.2 million

April 1999 – September 1999 5,898 953 $10.5 million $14.8 million

Total 7,421 1,586 $17.2 million $27.0 million


Office of the Counsel to theInspector General

CIG provides legal advice andcounsel to the Inspector General onvarious matters, including:

(1) statutes, regulations, legislation, andpolicy directives governing theadministration of SSA’s programs;(2) investigative procedures and techniques;and (3) legal implications and conclusions tobe drawn from audit and investigativematerial produced by OIG.

OCIG is also responsible for regulatorycommentary pursuant to The InspectorGeneral Act of 1978, as amended. Finally,the Commissioner of SSA delegated theCMP authority under section 1140 andsection 1129 of the Social Security Act toOIG. OCIG is responsible for implementingthis program which has been instrumental inadvancing SSA’s initiative of “ZeroTolerance for Fraud.”

Civil Monetary Penalties

Section 1140 – MisleadingAdvertising

In addition to the major settlement withFRSC cited earlier, in FY 1999, OCIGreviewed complaints or referrals involving37 new entities and issued 12 cease anddesist letters. OCIG also closed 35 existingand/or new cases because companies eithervoluntarily modified their advertisement,ceased mailing, or there was no violation ofsection 1140. Currently, there are29 potential section 1140 cases underreview.

The following are additional examples ofmisleading advertising cases processed byOCIG this FY.

• A company called U.S. DocumentRecords (USDR) based inAtlanta, Georgia, charged $16 toindividuals to process name changes fornewly married women. USDR did sousing a highly misleading mailing thatincluded an actual SSA application form.USDR requested that individualscomplete the form and provide originalor certified marriage documents. OnJanuary 26, 1999, OCIG issued a ceaseand desist letter and the owners agreedto voluntarily comply and ceasedbusiness as USDR.

• A company called U.S. DocumentServices (USDS) based in Plano, Texas,charged $12 to individuals to processname changes for newly marriedwomen. OCIG notified the companyand requested that it modify itssolicitation in accordance with thejudge’s order in the FRSC case;otherwise it would face administrativeaction. USDS communicated to OCIGthat it decided to leave the direct mailindustry altogether rather than make thedisclosures called for by the judge’sorder. On September 23, 1999, OCIGsent a letter to the company confirmingits decision to permanently ceaseoperations.

O


Section 1129 – False Statements

Under section 1129 of the Social SecurityAct, and as authorized by the AttorneyGeneral pursuant to established procedures,SSA may impose CMPs against individualswho make certain material false statementsor omissions (after October 1, 1994) in orderto receive benefits under the Social SecurityAct. Specifically, this section allows OIG toimpose a $5,000 penalty for each falsestatement and an assessment of up to twicethe amount of benefits paid because of thefalse statement.

During FY 1999, OCIG reviewed 41 newreferrals and imposed a total of$110,441.17 in penalties and assessments in8 final CMP actions. OCIG continued itsinitiative with OI to increase the number ofsection 1129 referrals where criminal andcivil declinations from the Department ofJustice have already been obtained. As aresult, the number of referrals increasedfrom 5 in the first half of FY 1999 to 36 inthe second half. The following caseshighlight some of the most significant work.

• A perceptive SSA employee informedOI about a couple who misrepresentedbusiness income to receive higher SocialSecurity benefits. Penalties andassessments of $38,000 were imposedagainst the couple.

• OCIG imposed penalties andassessments totaling $10,693.27 againsta representative payee (Rep Payee) whomade a series of false statements to SSA,in an attempt to conceal the recent deathof a beneficiary. Because of these falsestatements, the Rep Payee improperlysecured and cashed several benefitchecks.

Legislative Review andAdvocacy

OCIG reviewed the Legislative Package forthe Social Security Amendments for 1999and suggested to SSA that the legislativepackage include the following.

• Expand section 1129 of the SocialSecurity Act 42 U.S.C. § 1320a-8, CMPs(enforced by OIG), to include the misuseof Social Security cards and numbersand the misuse of benefits by RepPayees.

• Provide for the increase of the maximumimprisonment for Social Security Fraudunder section 208 of the Act and section1632 of the Act from 5 years to 10 years.

• Provide for statutory law enforcementauthority for OI Special Agents.


Office of InvestigationsI conducts and coordinatesinvestigative activity related to fraud,waste, abuse, and mismanagement in

SSA’s programs and operations. Itinvestigates wrongdoing by applicants,beneficiaries, contractors, Rep Payees, third-party facilitators, and SSA employees. TheOffice frequently conducts jointinvestigations with other Federal, State, andlocal law enforcement agencies. OI is alsoresponsible for operating the Hotline.

OI focuses its work in the six areas in SSA’sprograms and operations that have potentialfor widespread fraud and abuse. These sixareas are:

• Employee Fraud,• Disability Fraud,• SSI Eligibility Fraud,• Institutionalization,• Payments Made to Deceased Individuals,

and• SSN Misuse.

During this FY, OI reached new heights in itsinvestigative results as shown in the chartsbelow. The following sections highlight OI’sinvestigative projects and cases.

Investigative Statistics

Allegations Received 74,360

Cases Opened 9,238Cases Closed 7,308

Convictions 3,139**includes 593 illegal alien apprehensions and 1,586 fugitives

SSA Funds Non-SSA Funds* Total Funds

ScheduledRecoveries $26,198,304 $1,279,125 $27,477,429

Fines $172,940 $752,905 $925,845Settlements/Judgments $734,069 $105,500 $839,569

Restitution $13,165,784 $12,545,253 $25,711,037

Estimated Savings $144,235,534 $14,766,442 $159,001,976

Total $184,506,631 $29,449,225 $213,955,856

*Non-SSA Funds represent monies attributed to other government organizations and financial institutions thatbenefit from the results of OI’s investigative work.

O


Employee Fraud

While employee fraud comprises the fewestnumber of allegations and cases, it is still anOI priority. One employee working alone orwith conspirators can corrupt the system,cause financial losses to the Trust Fund,co-opt claimants and other employees, andundermine the integrity of SSA’s programs.

In an ongoing cooperative project with threefinancial institutions, OI has identified eightSSA employees who provided confidentialSSN data to individuals who used theinformation to fraudulently activate creditcards. During FY 1999, this effort identified$2.5 million in fraud losses to the financialinstitutions.

In addition to this project, OI conductedother employee investigations. Thefollowing highlights two of these cases.

Two Employees Sentenced for DefraudingSSA

OI investigated two SSA employees whomisused their positions to defraud SSAprograms. The principal offender worked asa Benefits Authorizer in a program servicecenter. In this capacity, the employeeauthorized the issuance of SSA checkspayable to herself, as well as her relatives,friends, and acquaintances. The employeesolicited a fellow worker to expand thescheme.

As a result of this investigation, bothemployees were terminated from their SSApositions and prosecuted in Federal court.The principal SSA employee was sentencedto 15 months in prison and 3 years’probation and was ordered to pay SSA$174,312 in restitution. The secondemployee was sentenced to 5 years’

supervised probation and ordered to paySSA $20,993 in restitution.

Employee Accesses ConfidentialInformation on Individuals in the LocalBusiness Community

On June 17, 1999, an SSA employee pledguilty to a Criminal Information thatcharged her with unauthorized access ofSSA’s systems from 1993 through at leastNovember 18, 1997. As part of a signedPlea Agreement, she was required to payrestitution of $4,658 to SSA, a specialassessment of $25, and resign from herposition.

This case was initiated based on ananonymous letter sent to a former U.S.Attorney in Chicago. The author allegedthat the SSA employee had accessed theU.S. Attorney’s SSA records, as well asthose of his deceased brother. OIGconfirmed the access and also learned duringthe investigation that the SSA employee hadmade many other unauthorized queries. Sheeven obtained earnings information forindividuals in the local business community.These individuals included the bankpresident, a pharmacist, a physician, anattorney, and even her treating psychologist.

Disability Fraud

Disability fraud allegations represent about47 percent of all fraud allegations reportedto OI. The CDI teams, discussed earlier inour report, significantly contribute to ourefforts in combating disability fraud. CDIteams focus on “prevention” of fraud anddetection of ineligible recipients is usuallyresolved administratively. The followingcases highlight the CDI work for FY 1999.

Atlanta. This team conducted aninvestigation of an individual who claimed


that his mental disability prevented himfrom operating his business and functioningoutside the home. Third-party interviewsindicated that the claimant not only ran thebusiness on a daily basis, but also increasedhis level of work activity after the loss of hisonly employee. CDI investigators alsodetermined that this individual wasreceiving concurrent benefits from theDepart of Veterans Affairs (VA) for Post-Traumatic Stress Syndrome. The CDI teamis cooperating with the VA’s OIG, which isseeking termination of the VA benefits. Theindividual’s disability claim was denied andprosecutorial decisions are pending.

Baton Rouge. This team investigated a29-year-old Social Security and SSIrecipient who was scheduled for aContinuing Disability Review (CDR). Thewoman reported that she suffered from a“nervous condition, depression, leg andstomach pain” after contracting hepatitis.She also alleged she was unable to perform

simple tasks such as combing her hair anddressing herself. She repeatedly claimedthat she seldom, if ever, drove a vehicle.During examinations with physicians and apsychiatrist, she routinely gave nonsensicalanswers.

Investigators determined that the claimanthad qualified to become a school bus driverand possessed a Commercial Driver’sLicense (CDL). To obtain the CDL, thewoman had to complete a 4-week trainingcourse, during and after which she wasreported to have been articulate,knowledgeable, and proficient. The CDLalso required a physical examination, atwhich she professed to be healthy andwithout any physical, mental, or emotionalproblems that would affect her ability tosafely operate a school bus. SSA tookaction to end her disability benefits as aresult of this investigation.

FY 99 CDI STATISTICS

Atlanta Chicago Dallas LosAngelesNew York

City Total

Allegations Received 219 145 144 394 196 1,098

Confirmed FraudCases 96 30 32 150 70 378

SSA Recoveries &Restitution 78,737 0 0 55,392 228,610 362,739

SSA Savings 4,751,355 1,871,685 1,900,979 8,237,667 3,604,416 20,366,102

Non-SSA Savings 925,245 1,305,500 0 3,993,533 85,582 6,309,860


Chicago. This team investigated a man whoclaimed that he wore a back brace, walkedwith a cane, and suffered from depression,headaches and memory loss. During anundercover operation, the man indicated toCDI investigators that he was seeking workin engineering and provided his resume. Hewas also videotaped lifting 7 – 10 poundboxes of documents. Armed with thisinformation, SSA denied his application fordisability benefits and saved an estimated$66,500 by preventing this individual fromcoming onto the rolls. The case was declinedfor prosecution.

New York City. This team conducted aninvestigation of an individual that owned andoperated a travel agency for the past 10 yearswhile simultaneously receiving SocialSecurity disability benefits. The teamobserved and videotaped the man workingalone at his office. When confronted byinvestigators, the individual voluntarilysigned a statement in which he admitted tothe work activity. As a result, in May 1999,this individual’s disability benefits werestopped and SSA determined that theindividual was overpaid $28,777. This caseis pending criminally.

Oakland. This team investigated a51-year-old female applicant who allegedback problems and at a medical examinationrelied heavily on two crutches. The medicalexamination found that there were fewphysical findings to support the need forcrutches. Investigators subsequentlyconducted surveillance and observed thesubject walking approximately ¾ of a mileand minimally relying on only one crutch. Atdifferent points during her walk she did notuse the crutch at all. Based on this evidence,SSA reopened and denied her claim.

In addition to the CDI teams’ proactiveefforts to identify and address disability

fraud, other instances of disability fraud andabuse are reported to, and investigated by,our field divisions nationwide. Two casesare featured in the following.

Man Fraudulently Receives DisabilityBenefits for 25 Years

OI conducted a joint investigation with theU.S. Postal Inspection Service of a man whocreated a false identity to continue receivingdisability benefits while he was gainfullyemployed. The man created a secondidentity under which he was employed as atruck driver. The man continued the schemefor over 25 years while earning enoughincome that would have disqualified him forbenefits. The man pled guilty to SocialSecurity fraud and was sentenced to366 days’ incarceration, 3 years’ supervisedrelease, and was ordered to pay SSA$131,210 restitution.

Man Caught After 13 Years of Workingwhile Receiving Disability Benefits

OI and the U.S. Postal Inspection Serviceconducted another investigation of adisability beneficiary who was working underanother SSN. The investigation determinedthat the individual had worked at a U.S.Postal Service facility under the second SSNsince 1984. SSA overpaid the individual andhis family $109,116.

The individual was prosecuted civillythrough the Department of Justice’sAffirmative Civil Enforcement program.Based on a “Stipulation For Judgment ByConsent,” the individual agreed to paydamages of $167,000.

SSI Eligibility Fraud

The SSI Eligibility Fraud initiative wasestablished to identify ineligible SSI


recipients, stop fraudulent payments, recovermonies, and initiate administrative actionsand criminal investigations when possible.The primary theme driving the project is toidentify SSI recipients who may not reside inthe United States, may be deceased, or maybe fictitious— and who have not had a recent,face-to-face redetermination.

In FY 1999, OI had four projects related tothis initiative. The following highlights theaccomplishments of these efforts.

New York Project. The New York FieldDivision continued its partnership withSSA’s Region II in a major SSI EligibilityVerification Project. During FY 1999,statistical accomplishments included:86 investigations that resulted in locating3,930 individuals whose overpaymentsamounted to $7,838,128. The suspension andtermination of these benefits to individualsresulted in $56,002,816 in estimated savings.The ineligible recipients fall into a number ofcategories including those who:

• Were absent from the United States orwho failed to correctly report their timeoutside of the United States.

• Failed to respond to SSA’s official noticeto report or provide required information.

• Were found to be deceased.

• Exceeded SSI income and resourcelevels.

OI continues to review project results andopen criminal cases as information warrants.

During June 1999, the next phase of theNew York Project was initiated involving asample of 15,992 additional SSI recipientswho will be evaluated and selected forredetermination interviews. Because of the

success of the New York project, SSA alongwith OIG are working together to expand thisproject to other areas. For example, thisproject was expanded to New Jersey wherean additional 7,982 SSI recipients wereselected for review.

Chicago Project. In October 1998, OIGselected a group of 1,177 SSI recipients inthe Chicago area for review. OI mailedquestionnaires to these individuals and fromthese, OI identified 598 recipients who werethen scheduled for redeterminationinterviews. During the first 2 weeks ofDecember 1998, a team consisting of OISpecial Agents and SSA Region Vrepresentatives interviewed 316 of theserecipients. The remaining 282 recipientswere scheduled for redeterminationinterviews by the local SSA field offices(FO). The interviews and redeterminationsare now completed. It was determined that81 subjects were overpaid a total of$88,593, and their suspensions andterminations resulted in $1.4 million inestimated savings.

Miami Project. At our request, the State ofFlorida agreed to work with OI to identifySSI recipients believed to be ineligible forSSI; this resulted in a list of 8,900individuals. OI reviewed this list andidentified 857 high-risk cases. SSA agreed toconduct eligibility redeterminations for theserecipients and mailed them a letter requestingthat they visit the local SSA FO for aneligibility redetermination interview.

During February 1999, OIG conductedunannounced visits to recipients who did notrespond to the request for a redeterminationand to recipients whose addresses could notbe verified by their bank or the U.S. PostalService.


Eighty-eight individuals were overpaid a totalof $284,004 and their suspensions andterminations resulted in $810,140 inestimated savings.

Dallas Project. At the request of theImmigration and Naturalization Service(INS) and the U.S. Customs Service, OIconducted a special operation at ports ofentry to identify ineligible SSI recipients.Phase I was held in Laredo, Texas, inAugust 1998; Phase II was held in EaglePass, Texas, in December 1998; and Phase IIIwas conducted in Brownsville, Texas, inFebruary 1999. All three phases resulted in64 investigations involving 69 individualswith a fraud loss of $186,047 and estimatedsavings of $284,921.

Of the 69 subjects, 47 involve SSI fraud with9 SSI cases from the Laredo initiativeaccepted for Federal prosecution in FY 1999.In July 1999, three individuals found to beresiding outside the United States whilereceiving SSI payments were arrested. Theremainder of the cases from the three phasesinvolves SSN card fraud and tax evasion.Additionally, the Texas Department ofHuman Services Inspector General hasreported a fraud loss in the Texas StateMedicaid program of $482,653 from thisinvestigation.

The OI field divisions also conducted thefollowing investigations involving SSI fraud.

Man Embezzles over $55,000 in SSIDisability Benefits

An OI investigation determined that a manconverted approximately $55,000 in SSIdisability benefits to his own use. He workedat a company that served as the Rep Payeefor SSI recipients. The man embezzled thefunds earmarked for these individuals.

He was ordered to repay $53,110 and wassentenced to 4 months’ imprisonment,followed by 4 months’ communityconfinement and 5 years’ supervised release.He was also ordered to receive mental healthtreatment.

Rep Payee Sentenced for SSI Fraud

The Connecticut Chief State’s Attorney’sOffice (CSAO) referred a case involving aman who was the Rep Payee for his parents,who were receiving concurrent SSI andSocial Security disability benefits. CSAOhad been investigating the individual forarson and determined during theirinvestigation that he had defrauded the Stateand SSA by failing to report that his parentswere residing in Portugal while collectingbenefits from SSA and the State. Theinvestigation also revealed that his fatherdied in Portugal in 1993.

The man pled guilty to larceny and the fraudagainst SSA and the State. He was sentencedto 3 years’ incarceration and 5 years’probation. As part of his guilty plea, the manreleased $121,000 from an escrowed accountto the State of Connecticut; $8,975.68 of thatamount was paid to SSA as full restitution.

Institutionalization

In most instances, the Social Security Actprohibits SSI payments to individuals whoare confined or reside in a public institutionfor a full calendar month. The Act alsoprohibits Old-Age, Survivors and DisabilityInsurance (OASDI) payments to individualswho are confined in a penal institution afterbeing convicted of an offense punishable byimprisonment for more than 1 year and thoseindividuals who are confined by court orderin an institution at public expense inconnection with specific verdicts or findingsin certain criminal cases. As highlighted


earlier in our Fugitive Felon Projectdiscussion, an August 1996 change to theSocial Security Act also makes a personineligible for SSI payments if they are afugitive from justice.

The following cases highlight OI’s effort inthis area.

SSI Recipient Arrested for Shooting aNew York City Police Officer

The New York City (NYC) PoliceDepartment requested OI’s assistance with aninvestigation involving a man who waswanted in connection with the shooting of aNYC Police Officer. The New York StateDivision of Parole also wanted the individualfor violating his parole. OI’s investigationled to a Pennsylvania address where theindividual was arrested. After his arrest theindividual confessed and named hisaccomplices. This led to the apprehension offour additional suspects who were involvedin the crime. The investigation resulted in afraud loss to SSA of $2,181 and estimatedsavings of $35,220.

Rep Payee Failed to Report Son’sIncarceration

A Rep Payee was sentenced to 5 years’probation and ordered to make restitution toSSA in the amount of $93,667. Theindividual failed to notify SSA that her son, abeneficiary, was incarcerated. Theinvestigation disclosed that the son beganreceiving disability benefits in 1979. In1985, his mother became his Rep Payee. In1987, the son was imprisoned for armedrobbery and was paroled in 1991. He wasimprisoned again in 1991 and remainedincarcerated until January 1997. InJuly 1997, the son was arrested on Federalcharges and in May 1998 he escaped.

Approximately 4 days later he was convictedin his absence and is currently a fugitive.

Fugitive Felon Arrested after Being Wantedfor 6 Years

When a fugitive felon contacted SSA abouthis SSI payments, an alert SSA employeedetermined that there was an outstandingarrest warrant on his record. The employeenotified her supervisor who immediatelyreferred the case to OI. Special Agentsassisted the local police department inarresting the fugitive, once they verified thewarrant. The fugitive was overpaid$47,859.60 in SSI payments. This fugitivehad been wanted for 6 years on a charge ofmolestation of a child under the age of 14.

Payments Made to DeceasedIndividuals

OI receives allegations about individuals whoare illegally receiving Social Securitypayments issued to deceased SSAbeneficiaries. This information is receivedfrom a variety of sources including SSA,Federal, State and local agencies, businesses,and concerned citizens. Due to the frequencyof these referrals, OI has developed,implemented, and participated in projects toidentify unreported deaths and individualswho negotiate payments issued to deceasedindividuals.

For example, OI participated with SSA andits field offices in its Centenarian andNonagenarian projects. As part of theproject, SSA’s field offices contact allbeneficiaries who attained the age of98, 99, or 100 during FY 1999. During thisperiod, SSA identified and verified the statusof 87,955 Centenarian/Nonagenarian casesfor review, which resulted in 116 referrals toOIG.


The following three cases highlight some ofOI’s work related to this area.

Man Sentenced for Fraudulently Obtaining$97,000 in Social Security Benefits byConcealing the Death of His Father

Based on an SSA referral, OI conducted aninvestigation of an individual who refused todivulge the location of his 101-year-oldfather, who had been receiving SocialSecurity benefits since January 1961. Therewas strong suspicion that the father wasdeceased and that the son had concealed hisfather’s death to continue receiving thefather’s benefits.

During interviews with the son, SpecialAgents were unable to determine the father’swhereabouts. They also could not find adeath certificate filed with the State Bureauof Vital Statistics; however, theirinvestigation later determined that the fatherdied in 1970.

The son pled guilty to Social Security fraudin Federal court. He was sentenced to21 months in prison and ordered to makerestitution to SSA totaling $97,141. He wasalso ordered to pay a $2,500 fine and a$200 special assessment fee. To ensure fullrestitution, the judge ordered the man toconsign to SSA his lease agreement with BellSouth Corporation for a telecommunicationstower located on his property.

Husband and Wife Scheme to EmbezzleDeceased Parents’ Benefits

A husband and wife were sentenced to5 years’ probation and ordered to pay jointrestitution of $100,357 to SSA after pleadingguilty to the embezzlement of Social Securitybenefits intended for the wife’s deceasedparents.

An investigation conducted by OI and theU.S. Secret Service determined that thewife’s parents, who were Social Securitybeneficiaries, died in 1994. Their deathswere not reported to SSA. SSA benefitstotaling $100,357 continued to be directdeposited into the deceased couples’ bankaccount. After their deaths, the daughter andher husband assumed the identities of thedeceased parents and continued to use thebenefits for their own personal gain. Infurtherance of the scheme, the daughter,impersonating her mother, called and wroteletters to SSA.

79-Year-Old Son Cashed DeceasedMother’s Checks

As part of the “Centenarian Project,” an SSAFO was unable to contact and verify receiptof benefits for an SSA beneficiary over age100. OI conducted an investigation revealingthat the 79-year-old son of the deceased hadbeen cashing his mother’s SSA checks sinceher death in 1981. Loss to SSA was$117,494. Because of the son’s age, it wasdetermined that a civil action through theDepartment of Justice’s Affirmative CivilEnforcement program was appropriate. As aresult, the son was ordered to pay tripledamages and a $10,000 fine to SSA. Thetotal was $352,482.

SSN Misuse

The expanded use of the SSN as an identifierhas given rise to the practice of counterfeitingSSN cards, obtaining SSN cards based onfalse information, and using SSNs belongingto another to obtain benefits and servicesfrom Federal programs, credit cardcompanies, retailers, and other businesses.

Because of the passage of the Identity TheftAct, OI has stepped up its focus on SSNmisuse investigations.


The following cases highlight both program-related and other SSN misuse investigations.

Program Fraud Cases

Defendant Convicted of Violating NewIdentity Theft Statute

OI received a referral from the WisconsinCapitol Police, which resulted in what isbelieved to be the first Federal prosecutionunder the new Identity Theft Act. OnApril 21, 1999, an SSI recipient was indictedfor identity theft, SSN misuse, and makingfalse statements to SSA and the InternalRevenue Service (IRS).

OI’s investigation revealed that the man hadobtained the SSN of another individual andthen used the SSN to obtain employment as acleaning crew supervisor. He subsequentlystole over $80,000 in computer equipmentfrom the State of Wisconsin office where heworked. In addition, the man had falsely toldSSA that he was not employed in order toreceive full SSI payments, which resulted inan overpayment in excess of $6,800. He alsoused the SSN of the victim to obtain aWisconsin Identification card that he thenused to open a bank account in the victim’sname. He also filed false income tax returnswith the IRS using the victim’s name andSSN.

The man was sentenced to 21 months inprison and ordered to pay $62,846 inrestitution to the Wisconsin Supreme Court.

SSI Recipient Receives Benefits under TwoSSNs

An individual applied for and was issued twoSSNs after submitting false information toSSA. In 1974, he applied for and beganreceiving SSI payments under one SSN. InJuly 1990, he applied for and began receiving

SSI payments under the second SSN. Thisscheme allowed him to unlawfully obtain SSIpayments and an additional $5,000 in foodstamps and Ohio welfare assistancepayments. Special Agents arrested the manon a Federal warrant. He was charged withknowingly stealing, embezzling, purloining,and converting SSI funds for his own use inthe amount of $92,018.08.

Man Sentenced to 1-Year Imprisonment forCollecting Disability Benefits whileWorking Under Another SSN

SSA provided information to OIG whichresulted in an investigation of an individualwho had been collecting disability benefitssince September 1991, and at the same timeworking under an assumed name and SSN.During an interview with OI Special Agents,the individual confessed and provided asigned sworn statement. A Federal districtjudge sentenced the individual to 1-yearimprisonment and 3 years’ probation. Hewas ordered to pay a special assessment of$100 and to make $73,398 restitution to SSA.

Man Assumes Deceased Individual’sIdentity to Conceal Work Activity

A Social Security disability beneficiaryadmitted using the name and SSN of adeceased individual to work. While workingunder the deceased’s name and SSN, he alsostaged accidents and filed workers’compensation claims for alleged injuries.

He pled guilty to Theft of GovernmentMoney and was sentenced to 5 months’custody of the Bureau of Prisons to befollowed by 3 years’ supervised release. Hewas ordered to pay $56,728.33 restitution tothe SSA.


Man Obtains SSN to Create False Identityand Conceal Employment

OI’s investigation revealed that a mandevised a fictitious identity by fraudulentlyobtaining an SSN in 1970. He used thisfictitious identity to prevent unpaid creditorsfrom garnishing his wages. The man alsoapplied for Social Security disability benefitsin 1976 under his true SSN. Shortly after hewas awarded benefits, he returned to work.For the next 23 years he concealed hisearnings under the fictitious SSN. Hisscheme unraveled when he tried to apply forbenefits under his fictitious identity and SSN,at which point SSA linked the two identitiesand referred the case to OI.

He was sentenced to 3 years’ probation, withthe first 6 months in home detention withelectronic monitoring, and ordered to pay$110,000 restitution to SSA.

Other SSN Misuse Cases

Government Employee Steals SSN toFraudulently Obtain Credit Cards

OI and the U.S. Postal Service conducted aninvestigation of an individual who obtainednames, dates of birth, and SSNs frompersonnel folders while working for theFederal Government. He used thisinformation to apply for 53 credit cards, ofwhich he received 3 cards.

The man was charged with using one or moreunauthorized access devices and one count offraudulent use of an SSN. He was sentencedto 16 months’ imprisonment and 3 years’supervised release and ordered to pay$5,893.74 restitution and a specialassessment of $200.

Man Impersonated an OI Special Agent toObtain Personal Information and File forSSNs

An individual, impersonating an OI SpecialAgent, obtained personal information abouthis victims and filed fraudulent SSNapplications. These SSNs were used tocommit financial crimes against variousfinancial institutions.

He was sentenced to 71 months in Federalprison, 5 years’ supervised released, andordered to pay $114,033 restitution to variousfinancial institutions for his part in theconspiracy.

Woman Misused SSNs to Illegally ObtainLoans

In a joint investigation, OI discovered that awoman, while using an SSN that sheinvented, obtained a Department of Housingand Urban Development mortgage loan inexcess of $76,000 for a new house and anautomobile loan in excess of $11,000. Shethen attempted to obtain a $12,500 homeimprovement loan using the same SSN. Thelending institution became suspicious of thehome improvement loan when they realizedthat it was for a brand new house. She nevermade a payment on the house, and theautomobile was repossessed.

She was sentenced to 6 months’ homeconfinement, 3 years’ supervised release, andordered to perform 150 hours of communityservice after pleading guilty to misuse of anSSN to obtain loans.

Man Incarcerated for Conspiring with anSSA Employee

OI conducted this investigation with a localpolice department, the U.S. Secret Service,and the FBI. This investigation was initiated


after it was discovered that an SSA employeehad, without authorization, obtainednumerous SSA disability documents andaccessed SSN information. The employeesold the documents and information to a manwho used the information to fraudulentlypurchase about $425,000 in paging services,computer components, cellular telephones, anautomobile, rental cars, and other goods andservices.

The man was charged with the unlawful useof unauthorized access devices and wassentenced to 27 months’ incarceration,3 years’ supervised release, and ordered topay $264,781 restitution. The SSA employeewas charged with the unlawful disclosure ofSSNs, sentenced to 3 years’ supervisedprobation, and resigned from her position atSSA.

Other Cases and Projects ofInterest

The following selections represent other OIefforts nationwide.

Woman Sentenced for Defrauding SSA andVarious Financial Institutions

OI worked with the FBI to investigate awoman who was receiving SSI payments forherself and acting as a Rep Payee for threechildren and one grandchild. Theinvestigation established that the womandefrauded SSA out of $55,192, the FoodStamp program out of $3,502, and variousfinancial institutions out of $52,919. She wascharged with the following offenses in a28-count felony indictment:

• purchasing five automobiles using falseSSNs;

• misusing $5,890 in disability benefitspaid to her on behalf of a grandchild whoshe had stated was in her care, but who,in fact, had never been in her care;

• wrongfully receiving $21,195 by failingto report the receipt of State child supportfor two of her children for whom she wasalso receiving full SSI payments;

• wrongfully receiving $25,425 by failingto report her own income and resources,which precluded SSI entitlement forherself;

• wrongfully receiving $2,681 byperiodically reporting that she did notreceive SSI checks for her children andherself, while she actually cashed boththe original and replacement checks; and

• submitting fraudulent Food Stampapplications.

On January 25, 1999, the woman wassentenced to 15 months’ incarceration,ordered to pay $500 in special assessments,and ordered to pay $111,613 in restitution toSSA, the Food Stamp program, and severalfinancial institutions.

Private Investigator Impersonates an SSAManager and Law Enforcement Official toObtain SSA Information

Based on a referral from an SSA employee,OI identified an individual who impersonatedan SSA FO Manager and a law enforcementofficial. The individual would contact anSSA employee and request various personalinformation from SSA’s records. Believingthe request was legitimate, the SSA employeewould fax the information to the individual.OI’s investigation determined that theindividual was really a private investigator


who used the SSA information forcommercial advantage and financial gain.

The individual was sentenced in Federalcourt to 2 months’ home detention and3 years’ probation. He was fined $5,000 andprohibited from acting as a licensed privateinvestigator during the 3 years of probation.Documents found during a forensicexamination of the individual’s computer,indicated that he had used a similar schemeto obtain information from numerousGovernment and private organizations.

Rep Payee Fraudulently Converted Benefitsto Her Own Use

OI conducted a joint investigation with theFBI on an individual who was a fee-for-service Rep Payee for 320 individuals. Theinvestigation determined that the individualfraudulently converted to her own use SSAand SSI funds totaling approximately$274,000. The individual was sentenced inFederal court to 18 months’ incarceration,3 years’ probation, and ordered to pay full

restitution to SSA on behalf of the320 individuals.

Rep Payee Misuses Funds and BribesWitness to Lie

A former guardian and Rep Payee tonumerous elderly and incapacitated VA andSSA recipients misappropriated their benefitsfor her own personal gain. When the womanlearned of the Federal investigation, she triedto obstruct the investigation by attempting tobribe a witness and instructing him to lie tothe OI Special Agents.

The woman was sentenced to 37 months’incarceration and 3 years’ supervised releaseand was also ordered to make restitutiontotaling $200,000 to the five VA and SSArecipients that she had defrauded. Prior tosentencing, the woman presented theprobation office with a check for $200,000 aspayment for the anticipated restitution order.


Office of AuditA is organized into issue area teamsthat conduct comprehensive financialand performance audits of SSA’s

programs and operations. Our audits result inrecommendations to ensure that SSA’sprogram objectives are achieved effectivelyand efficiently. We also conduct managementand program evaluations that identify andrecommend ways of preventing programfraud and maximizing efficiency.

During FY 1999, we issued 59 reports withrecommendations of $84 million inquestioned costs and approximately$270 million in Federal funds that could beput to better use. The results of oursignificant work are discussed in thefollowing sections.

Enumeration

Enumeration is the process by which SSAassigns original SSNs, issues replacementcards to people with existing SSNs, andverifies SSNs for employers and other Federalagencies.

The importance placed on SSNs in today’ssociety provides a tempting motive forindividuals to fraudulently acquire an SSNand use it for illegal purposes. These crimesaffect the victims’ attempts to receivelegitimate benefits and harm their creditratings. In addition, the financial industrypasses on the cost associated with identitytheft to all of their consumers.

During FY 1999 we issued three significantreports in this area.

Using Social Security Numbers to CommitFraud

We performed this review to inform SSAofficials of trends involving the fraudulentuses of SSNs. The report described selectedSSN fraud cases, which OI referred to theDepartment of Justice for prosecution. Ourreport included observations regarding the useof SSNs to commit identity fraud that SSAcan use as a catalyst for changes essential toensuring the integrity of SSA’s enumerationresponsibility.

OA recommended that SSA:

• Make it clear through its policies andperformance measures that fraudprevention measures should never becircumvented to satisfy customer servicedemands.

• Incorporate preventive controls in itsModernized Enumeration System.

• Require verification from the issuing Statewhen an out-of-State birth certificate ispresented as evidence for an SSNapplication.

• Continue efforts to have the INS and StateDepartment collect and verifyenumeration information for aliens.

In response to our report, SSA plans to issue areminder to FO personnel regarding theimportance of adhering to fraud preventionprocedures, irrespective of customer servicedemands. SSA stated that it would work withOIG to target potential fraudulent activitywhen multiple SSNs are sent to the sameaddress and hoped to obtain on-line access to

O


State vital records data in the future.Additionally, SSA is currently conductingtwo pilots in which the Agency will test thefraud prevention benefits of more stringentbirth certificate verification procedures. SSAalso plans to continue its efforts with INS andthe State Department for those agencies tocollect enumeration information fornoncitizens, continue to be vigilant inguarding against fraudulent documents, andcontinue to work with INS to shorten theverification process.

In the Agency’s final comments to this report,Commissioner Apfel reiterated his concernregarding the serious issue of SSN misuse andpromised that the Agency would be proactivein fighting this problem. Nevertheless, theAgency continued to disagree with several ofour recommendations because it believed thatthe suggested measures would negativelyimpact customer service.

Analysis of Social Security Number MisuseAllegations made to the Social SecurityAdministration Fraud Hotline

In a related report, we identified the differenttypes of SSN misuse allegations andestimated the number of occurrences for eachcategory during the period of our review. Ouranalysis showed that the sampled Hotlineallegations or contacts could be placed in fivecategories: identity verification; salessolicitation; loss of SSN card; problems withSSN; and identity theft. Our report notedabout 81 percent of the SSN misuseallegations the Hotline receives relate directlyto identity theft. As a result, OI staff willconduct more reviews in this area todetermine the validity of those allegations.

Sample Hotline Contacts Received

Review of Controls over Nonwork SocialSecurity Numbers

Nonwork SSNs are issued to legal aliens whodo not have authorization from INS to workin the United States. The Social Security Actincluded no provision for the issuance ofnonwork SSNs. Over time, use of the SSNspread to other Federal and private entitiesand it became apparent that many aliens whowere lawfully present in the United Stateswithout work authorization needed SSNs forother purposes.

SSA’s policy of crediting nonwork SSNs withearnings for periods of unauthorized work hasbeen, and will continue to be, very costly toSSA’s Trust Fund unless it is changed. As ofMay 1998, unauthorized earnings associatedwith nonwork SSNs have already cost SSA’sTrust Fund an estimated $287 million. If SSAcontinues to pay benefits to these individualsand/or their dependents, SSA may spend anadditional $63 million per year. Over thelifetime of the nonwork number holders andtheir dependents, we estimate thatunauthorized earnings associated with theseaccounts will cost the Trust Fundapproximately $1.7 billion.

We reviewed the nonwork SSN applicationsprocessed at three FOs and determined thecontrols over this process are insufficient.

9 %

2 %

2 %

8 1 %

6 % Ident i tyVer i f icat ionSa les

L o s s o f C a r d

P r o b l e m w ithS S NIdent i ty Thef t


We found that FOs erroneously issued SocialSecurity cards to individuals not authorized towork, and issued nonwork SSNs toindividuals who did not have a valid reasonfor them.

We recommended SSA:

• Seek legislation to prohibit the creditingof nonwork earnings for purposes ofbenefit entitlement.

• Conduct periodic quality reviews ofprocessed SSN applications and providetimely feedback to FO personnel.

• Review the 452 unrestricted SSNs issuederroneously to identify other coding errorsthat resulted in the incorrect issuance ofSocial Security cards.

• Perform its own actuarial calculations ofthe effects of the nonwork quarters ofcoverage on benefit payments, if deemednecessary, to support changes inlegislation.

SSA did not agree to implement any of ourrecommendations. Instead, SSA believes theissues identified in our report would be moreappropriately addressed through alternateinitiatives and will conduct a study in thisarea. Nevertheless, we continue to believethat our recommendations are valid and,therefore, we have encouraged SSA toreconsider its initial response.

Earnings

Social Security benefits are based on anindividual’s earnings as reported to SSA.SSA establishes and maintains a record of anindividual’s earnings for use in determiningan individual’s entitlement to benefits and forcalculating benefit payment amounts.

Patterns of Reporting Errors andIrregularities by 100 Employers with theMost Suspended Wage Items

Title II of the Social Security Act requiresSSA to maintain records of wages employerspay to individuals. SSA matches employees’SSNs and names to SSA’s master file to posttheir earnings to the Master Earnings File.Wage items that fail to match SSA name andSSN records are placed in the EarningsSuspense File.

We conducted this audit to identify patterns oferrors and irregularities in wage reporting forthose 100 employers who had the mostsuspended wage items from 1993 through1996. We also reviewed SSA’s controls andedits to detect patterns of errors andirregularities in wage reporting practices. Ourreview showed that 84 of the 100 employersexperienced increases in their suspense itemsover the 4-year period, increasing at a40-percent growth rate versus a 29-percentgrowth rate for the entire Suspense File. Thisincluded 27 employers with increases of100 percent or more. The number ofsuspended W-2s for a restaurant chain grewfrom 283 in 1993 to 3,617 in 1996, a1,178-percent increase. The 1996 SuspenseFile for the 100 employers contained variouspatterns of reporting errors, including:(1) duplicate mailing addresses;(2) unassigned SSNs; (3) SSNs used two ormore times; and (4) reporting three or moreconsecutively numbered SSNs.

We recommended that SSA: (1) develop andimplement a corrective action plan for the100 employers and continue efforts to contactthose employers who are responsible for largenumbers of suspended wage items and(2) improve its internal control procedures byestablishing preventive controls to detectwage report errors and irregularities.


SSA officials did not have any majorcomments or concerns regarding the auditresults or the presentation of the data in thereport. SSA noted that over the last 3 years ithas been contacting approximately 7,000employers with 100 or more suspense itemsannually. However, problems have persisted;currently IRS does not penalize employers forW-2 reporting errors.

Systems

One of the challenges facing SSA is givingthe public the service it expects during aperiod of increasing demands without acorresponding increase in staff. Demographicchanges in the Nation’s population over thenext several years will cause substantialincreases in SSA’s operational workloads.To meet this challenge, SSA must increasereliance on automated systems. Thesensitivity of the data maintained and themagnitude of funds expended make controlsin automated systems critical to the integrityof SSA programs and client satisfaction.

To assist SSA in ensuring the integrity of thecontrols over application softwaredevelopment and maintenance at SSA, weconducted the following reviews.

Identifying and Validating Non-MissionCritical Software for Year 2000 Compliance

We conducted an audit to determine whetherSSA’s non-mission critical software has beenidentified and validated for Year 2000 (Y2K)compliance. Our review identified two areasof concern. First, SSA’s Y2K inventory ofnon-mission critical software was incomplete.Without a complete Y2K inventorymaintained on SSA’s servers, SSA cannotensure that all of its commercial software isY2K compliant. Second, our tests identified54 data files (32 percent) provided bycommercial applications with 2-digit dates.

Files having 2-digit dates could potentiallydisrupt SSA’s non-mission critical operationswith system failures or corrupt information.

SSA has either agreed to take action or hastaken action to address our concerns. SSA isusing two software packages to assist inidentifying files with two-digit dates. Inaddition, SSA has instructed components toreview reports generated from these utilitiesto investigate and take action on potentialY2K problems.

Follow-up Audit of Physical Security at theSocial Security Administration’s NationalComputer Center (Confidential Report)

To ensure SSA has adequate security of itsinformation resources and facilities, weconducted a follow-up audit of SSA’sprogress in implementing recommendationsfrom a prior report, Review of PhysicalSecurity at the Social SecurityAdministration’s National Computer Center(A-13-96-11046), issued in June 1997.During our follow-up, we identified physicalsecurity concerns that warrantedmanagement’s immediate attention. Weconducted briefings with senior managementand prepared a management advisory reportdetailing the specific deficiencies that must beaddressed. SSA agreed with all but 1 of our11 recommendations. Because of thesensitive nature of this audit, we cannotdescribe the findings of this report. Thereport is not available for distribution.

Contingency Planning for the SocialSecurity Administration (ConfidentialReport)

We initiated this audit to follow up on prioraudit findings related to SSA’s back-up andrecovery procedures. We expanded the scopeto address the overall effectiveness of SSA’scontingency planning for unexpected events,


which could interrupt service deliverythroughout SSA. Inadequate preparation forcontingencies could significantly impactSSA’s ability to provide timely services to itscustomers.

Our findings revealed that SSA’s contingencyplanning program did not comply withFederal criteria established by the ComputerSecurity Act of 1987, the Office ofManagement and Budget (OMB)Circular A-130, Security of FederalAutomated Information Resources, and theNational Institute of Standards andTechnology. The fundamental cause ofdeficiencies can be attributed to aninfrastructure that lacks clearly defined rolesand responsibilities for contingency planning.We briefed the Agency on our findings andissued a report with 20 recommendations.Because of the sensitive nature of thisaudit, we cannot describe the findings ofthis report. The report is not available fordistribution.

In general, SSA agreed with ourrecommendations and commented that theyhad convened an agencywide task force toaddress contingency planning issues.

Testing of the Contingency Plan for theSocial Security Administration's NationalComputer Center (Confidential Report)

We evaluated the effectiveness of SSA’stesting of the contingency plan for theNational Computer Center (NCC). Thereview focused on whether or not SSAadequately tested its ability to reestablish itsNCC operations at a remote facility after alarge-scale disruption such as a naturaldisaster or massive sabotage.

We identified several instances where SSAdid not adequately test key elements of itscontingency plan for NCC operations.

Because of these deficiencies, the Agencycannot be sure of its ability to reestablishNCC operations at a remote facility.

As a result of our review, we made ninerecommendations to the Agency. SSA tookexception to one recommendation, yet webelieve that this recommendation needs to beimplemented. Because of the sensitivenature of this audit, we cannot describe thefindings of this report. The report is notavailable for distribution.

Supplemental SecurityIncome

The General Accounting Office declared SSIa high-risk program in February 1997. Toassist in ensuring the integrity of the SSIprogram, Congress enacted the PersonalResponsibility and Work OpportunityReconciliation Act of 1996 (commonlyknown as the Welfare Reform Act), whichrequires that SSA conduct CDRs in certaininstances. The Welfare Reform Act alsoauthorized appropriations for CDRs andredeterminations for FYs 1997 and 1998.SSA reports annually on its progress inconducting CDRs.

Welfare Reform Childhood RedeterminationAccuracy

The objective of this review was to determinehow SSA will investigate and correctaccuracy problems for cessations andcontinuances of children redetermined byState DDS offices.

On December 17, 1997, SSA released areport, Review of SSA’s Implementation ofNew SSI Childhood Disability Legislation,that outlined its findings on theimplementation of new childhood disabilityprovisions in the Welfare Reform Act. Under


this Act, individuals under age 18 areconsidered disabled if they have a medicallydeterminable physical or mental impairmentthat results in marked and severe functionallimitations and meets the statutory durationrequirement.

SSA’s report stated that, overall, SSA and theDDSs had done well in implementing theprovisions of the Welfare Reform Act.However, because SSA found someinconsistencies in the application of the rules,there were problems with the accuracy of theassessment of childhood cases at the DDSoffices. SSA further stated that SSA andDDS staff would be given updated training,many of the cases that were ceased under thenew disability criteria would be reworked,continuances would be reviewed on a prioritybasis, and certain disability criteria would berevised. After SSA issued its report, SSAestablished a steering committee to implementthese corrective actions.

Our review found that SSA had taken actionto provide training, rework ceased cases, andrevise criteria, but SSA had not given priorityto potentially erroneous continuances. Weestimated that at least $9.5 million in Federaland State SSI funds were at risk over a 1-yearperiod if SSA failed to identify and correctinaccurately continued SSI childhood cases.By correcting problems with cessation andcontinuance cases, SSA can offset most of theFederal and State costs incurred by theprocess while ensuring that all children whoshould continue receiving SSI payments do soand those whose payments should be ceasedare stopped.

We recommended that SSA identifyquestionable continuation cases and updatetheir profiles to expedite the next scheduledCDR. SSA agreed with the overallconclusion that CDRs on childhoodcontinuances made by States with low

continuance accuracy is important. SSA alsonoted that it planned to release these cases forCDRs early in FY 1999. However, SSA tookexception to our statistical calculations. As aresult, we provided our most conservativeestimates of funds at risk by providing anestimate range and adjusting these estimatesto reflect the expected appeal and overturnrates.

Payment Accuracy Task Force Report – SSIUnearned Income

Prompted, in part, by the General AccountingOffice’s 1997 designation of SSI as a high-risk program, SSA issued a self-challenge toincrease the SSI payment accuracy rate to96 percent by FY 2002. Through acooperative effort between SSA and OIG, theAgency established a Payment Accuracy TaskForce.

Unearned income includes annuities,pensions, and other periodic payments;alimony and support payments; dividends,interests and royalties; rents; prizes andawards.

In FY 1999, the Task Force reviewed anddeveloped the causes of SSI unearned incomeerrors and developed agencywiderecommendations to improve paymentaccuracy. The Task Force recommendedseveral changes to help decrease SSIunearned income payment errors.

The Task Force recommended that SSA:

• Reinforce unearned income reportingresponsibilities.

• Retitle the Program Operations ManualSystem section on prizes, and modifyModernized Supplemental SecurityIncome Claims System screens to add


information about gambling and lotterywinnings.

• Adapt the Unearned Income portion of theInteractive Video Training for on-linetraining.

• Pursue direct on-line access to State ChildSupport Enforcement.

Old-Age, Survivors andDisability Insurance

OASDI programs, commonly referred to asSocial Security, provide a comprehensivepackage of protection against the loss ofearnings because of retirement, disability, anddeath. Monthly cash benefits are financedthrough payroll taxes paid by workers andtheir employers and by self-employedindividuals. Social Security is more thanretirement, it also provides protection forsurviving spouses and children. OAconducted several reviews about the SocialSecurity Program, which are described in thissection.

School Attendance by Child BeneficiariesOver Age 18

The Social Security Act provides benefits tochildren of insured workers upon theretirement, death or disability of the worker.Generally, child beneficiaries may continue toreceive benefits until they marry or reach age18. Amendments to the Act provide forextended benefits beyond age 18 to enablechild beneficiaries who are full-time studentsto complete their education.

We conducted this audit to determine thepropriety of Social Security benefits tostudent beneficiaries reaching age 18 and theadequacy of controls and procedures to ensurethey attended school on a full-time basis.

Our review disclosed that an estimated30,991 individuals received payments towhich they were not entitled. Also, we wereunable to determine the propriety of paymentsto an additional 35,950 individuals. Weestimated that the incorrect and unsupportedpayments amounted to $73.9 and$140.4 million, respectively.

The incorrect payments occurred becauseSSA had not established an effectivemonitoring system to detect when studentswere not attending school on a full-time basis.In addition, SSA had not establishedautomated controls to prevent overpaymentsresulting from clerical errors in determiningthe maximum age of entitlement for students.

The unsupported payments occurred becauseSSA’s procedures require that documentationrelated to student beneficiaries be destroyed120 days after processing. Also, SSA had notretained sufficient information to otherwisesupport its basis for awarding studentbenefits.

We recommended and SSA agreed to:

• Request assistance from school officials inidentifying and reporting changes instudent attendance that may affect theirbenefit status.

• Evaluate the feasibility of shifting theresponsibility for monitoring studentbeneficiaries from the program servicecenters to the FOs.

• Obtain additional information fromschools about student attendance beforeawarding benefit payments.

• Provide training and guidance toemployees who monitor studentbeneficiaries to ensure that they fullyunderstand the requirements for


determining the maximum age ofentitlement.

• Perform a follow-up review to identify allstudents in current pay status beyondage 19 years, and 2 months prior to theend of FY 2000.

• Retain school information to provide thesupporting documentation for awardingstudent benefits and the necessaryinformation for monitoring studentbeneficiaries.

Waivers Granted for Title II OverpaymentsExceeding $500

SSA’s procedures allow FO employees towaive the recovery of overpayments if abeneficiary is “without fault” and therecovery would “defeat the purpose of theSocial Security Act” or is “against equity andgood conscience.” We conducted this audit todetermine whether SSA granted waivers ofoverpayments exceeding $500 to beneficiariesin accordance with the Social Security Act.

Our review disclosed that an estimated2,260 waivers of overpayments wereincorrectly granted and an additional13,058 waivers were inadequately supported.We estimated that the incorrect andunsupported waiver decisions amounted to$4.3 million and $37.4 million, respectively.

Because of the complexity and subjectivity ofthe waiver process, we determined that theincorrect waiver decisions resulted from:(1) the misapplications of waiver criteria byFO employees and (2) clerical errors. Weconsidered other waiver decisions to beunsupported because: SSA was unable toprovide us with the case folders; supportingdocumentation for the waiver decisions wasmissing; or FO employees did not adequatelydevelop the cases.

We recommended that SSA:

• Provide FOs with additional guidance andtraining to clarify when recovery ofoverpayments from beneficiaries would“defeat the purpose of the Social SecurityAct” or be “against equity and goodconscience.”

• Strengthen procedures to preclude waiversto beneficiaries who have the ability torepay their debts.

• Revise procedures to clarify whatconstitutes “lack of good faith” to ensurethat waivers are denied to beneficiarieswho are at fault for causing theiroverpayments.

• Improve controls over the retention of

case folders, including supportingdocumentation for waiver decisions.

• Instruct FOs to document the verificationof all information, either financial ortestimonial.

SSA agreed with the intent of therecommendations but did not believe that allof the suggested changes would achieve thedesired results. Generally, SSA attributed thefindings to insufficient training rather thaninadequate procedures and is working toprepare and schedule an updated trainingprogram.

Performance Monitoring

We developed a 3-year work plan (seeAppendix A) to review SSA’s implementationof the Government Performance and ResultsAct (GPRA). In implementing this plan,every OA issue team conducts GPRA-relatedreviews, with one issue team dedicated tocoordinating all GPRA reviews. All of theteams determine the reliability of SSA’s


performance data and ensure that SSA’simplementation of GPRA is in accordancewith GPRA requirements. Additionally inFY 1999, we acquired contracted services toassist us in completing our 3-year plan.

Performance Measure Review: Evaluationof the Thirteenth Annual Social SecurityCustomer Satisfaction Survey Data

Since 1984, SSA’s Annual CustomerSatisfaction Survey has served as SSA’sgauge of how well it serves the public. Theenactment of GPRA, in August 1993,highlighted the importance of the datacollected by the Customer SatisfactionSurvey. Three of SSA’s GPRA performancegoals relate directly to data collected throughthe Customer Satisfaction Survey— overallcustomer satisfaction, staff courtesy, andclarity of SSA mail.

We evaluated the survey data to determinewhether SSA’s performance measurementdata for its overall customer satisfaction, staffcourtesy, and clarity of mail were accurateand appropriately measuring performance inthese areas.

The Customer Satisfaction Survey accuratelymeasured performance in overall customersatisfaction, staff courtesy, and mail clarityfor the population that it reached. However,not all types of SSA customers were sampled.Also, the proportion of disabled customers inthe FY 1997 sample was less than in previousyears, which may have affected the overallsatisfaction rating which had increased.

We recommended SSA identify and addressthe populations not currently reached by theCustomer Satisfaction Survey and track theeffects of the proportion of disabledcustomers on the overall satisfaction rating.

In its response, SSA agreed with ourrecommendations. It plans to expand theuniverse of customers surveyed with theFifteenth Annual Survey and expects that thechanges already made in the samplingselection methodology will provide a samplemore representative of SSA’s universe ofcustomers.

Performance Measure Review: PeriodicFull Medical Continuing Disability ReviewData Collection

A periodic CDR is routinely conducted todetermine whether a disabled individual isstill medically eligible to receive benefitsunder the Disability Insurance (DI) or SSIprograms. This evaluation assessed SSA’sprocess to accumulate and report periodic fullmedical CDR workload data to Congress.

Overall, SSA’s process for accumulatingaggregate full medical CDR workload datawas adequate, but the National DisabilityDetermination Services System (NDDSS) didnot have the capability to fully distinguishperiodic CDRs from other workloads forcongressional reporting. As a result, SSAcould not ensure that all full medical CDRsreported in FY 1997 were correctly classifiedas periodic CDRs. These NDDSSclassification problems increase the risk thatSSA is over-reporting the number of periodicCDRs performed to Congress.

Although the CDR classification codes arekey to SSA’s attempt to categorize CDRworkloads, SSA has not provided consistentguidance on these codes to the DDS offices.Also, the multiple software programs andcomputer systems DDS offices use makecoding problems difficult to monitor andcorrect. We found that six of the seven DDSoffices contacted lacked a complete, up-to-date listing of codes in their NDDSS interfacesoftware programs.


To assist the DDS offices with their CDRworkload and improve the accuracy of CDRdata reported to Congress, we recommendedthat SSA: (1) provide guidance to SSA andDDS offices on transmittal sheets and propercoding; (2) provide SSA components andDDS offices with a single source ofauthoritative and updated CDR classificationcodes; (3) coordinate with DDS offices toupdate the coding in their software programs;and (4) update the edits in NDDSS.

SSA agreed with all of our recommendationsexcept for updating the edits in NDDSS. SSAtook alternative action that eliminated theneed to update these edits.

General Management

General Management reviews encompass awide range of SSA’s administrative functions,extensive public information activities, dataprocessing systems, data exchanges withother agencies, and research and policymaking. Parts of SSA’s core businessprocesses involve the dissemination ofinformation about its programs. Thefollowing highlights one of our reviews in thisarea.

The Social Security Administration’sManagement of Its Freedom of InformationAct Activities

The Freedom of Information Act (FOIA)requires Agencies and Departments toestablish procedures advising the public ofwhat records they keep and their availabilityfor examination upon request, provides appealrights if disclosure is denied, and shifts theburden to the Government if access to recordsis denied. This audit evaluated SSA’smanagement of its FOIA activities todetermine compliance with FOIA and relatedcriteria and the level of service provided tothe public.

We noted that SSA has taken numerousinitiatives intended to improve itsmanagement of FOIA activities, such asimplementing “multi-track” processing ofrequests and creating and maintaining FOIAinformation on-line so that the public hasaccess to FOIA information from SSA’s Webpage. However, further improvements arenecessary to improve service to the public.

Our review indicated that the ways the publiccan make FOIA requests are limited; requestshave generally not been answered withinstatutory time limits; annual reports toCongress lack data that fully reflect SSA’smanagement of its FOIA activities; advice tothe public could be improved; and someFOIA reading room materials are not readilyavailable at SSA’s FOs.

We recommended that SSA:

• Expand the modes by which the publicmay make a FOIA request and makecommensurate changes in its regulationsand other relevant publications.

• Make additional efforts to comply withthe legal requirement to provide adetermination reply to a FOIA requestwithin 20 business days.

• Provide the public with its best estimate ofthe time SSA takes to provide adetermination in response to a FOIArequest.

• Provide additional and more accurate datain the annual report on its effort to fullyadminister FOIA.

• Provide a workstation with on-linecomputer access to SSA’s FOIA Webpage at every FO so the public can access,inspect, and print FOIA reading roomrecords.


SSA did not agree with expanding the modesby which the public may make a FOIArequest, at least until such time as it canprovide an appropriate level of customerservice. SSA also did not agree that it neededto provide additional and more accurate datain the annual report to the Attorney Generalon its effort to fully administer FOIA. Lastly,SSA asserted that it met the FOIA reportingrequirements.

However, SSA did agree with ourrecommendations to make further efforts toprovide timely replies and provide the publicwith its best estimate of the time it takes toprovide a reply to a FOIA request.

SSA won’t decide on the finalrecommendation to provide a workstationwith on-line computer access to SSA’s FOIAWeb page until it completes an assessment ofrelevant issues.

Financial Audits

The Chief Financial Officers Act of 1990(P.L 101-576), as amended, requires that theInspector General or an independent externalauditor, as determined by the InspectorGeneral, audit SSA’s financial statements inaccordance with the General AccountingOffice’s Government Auditing Standards.

In addition to our audit of the financialstatement, we conduct financial-related auditsof SSA programs, segments, line-items andaccounts, including related internal control.We also conduct administrative audits of theState agencies and contractors receivingFederal funds for making initial andcontinuing disability determinations foreligibility under the DI and SSI programs andother contracts as referred by SSA’s Office ofAcquisitions and Grants.

Fiscal Year 1998 SSA Financial StatementAudit

Under a contract monitored by OIG,PricewaterhouseCoopers LLP, (PwC) anindependent certified public accounting firm,audited SSA’s FY 1998 financial statements.PwC issued an unqualified opinion statingthat the principal financial statements werefairly stated in all material respects, andmanagement fa