Social Security Administration
A More Formal Approach Could Enhance SSA's Ability to Develop and Manage Totalization Agreements Gao ID: GAO-05-250 February 28, 2005Since 1977, the U.S. has entered into bilateral social security totalization agreements with 20 foreign countries. In fiscal year 2004, the Social Security Administration (SSA) paid approximately $206 million to 102,000 beneficiaries in these countries based on their eligible periods of coverage. If put into force, pending agreements with Mexico and Japan will increase the number of beneficiaries receiving totalized benefits, as well as the amount of benefits paid. Given the costs to the Social Security Trust Funds posed by existing and pending agreements, GAO was asked to (1) document SSA's policies and procedures for assessing the accuracy of foreign countries' data when entering into a totalization agreement, and (2) examine SSA's processes for verifying beneficiaries' initial and continuing eligibility for benefits once an agreement is in force.
SSA's policies and procedures for assessing the accuracy and reliability of important information from foreign countries--such as birth and death data--when entering into totalization agreements remain generally informal, but recent initiatives for improvement seem promising. Historically, SSA has conducted only limited reviews, focusing primarily on broad policy issues and systems compatibility, rather than the integrity and reliability of earnings data and evidentiary documents. For example, during preliminary negotiations with Mexico, SSA conducted a limited review of that country's social security system but did not assess the reliability of that country's data. SSA has also developed several initiatives to identify risks associated with totalization agreements. These include: developing a standardized questionnaire for assessing the reliability of foreign earnings data, soliciting input from other government agencies, and using a matrix to compare potential agreement countries. SSA is also conducting "vulnerability assessments" to detect potential problems with foreign countries' documents. All of these tools are positive steps to help SSA assess potential risks posed by unreliable foreign data. However, SSA has not integrated these initiatives into formal procedures. Given the upcoming retirement of key management officials, SSA may lose critical institutional knowledge, which may limit the agency's ability to assess risks associated with future agreements. Our review identified potential vulnerabilities in SSA's policies and procedures for verifying individuals' eligibility for benefits once an agreement is in force. When establishing an individual's initial eligibility for benefits, the agency generally accepts critical documentation from foreign countries, without independently verifying the accuracy of such information. We also found that SSA's two primary tools for determining an individual's continuing eligibility--validation surveys and personal questionnaires--may be insufficient to ensure that only truly eligible individuals receive benefits. For example, SSA mails questionnaires to all beneficiaries living abroad (including totalized beneficiaries) at least once every 2 years requesting information on their eligibility status, but does not independently verify the responses on these questionnaires. These questionnaires rely on beneficiaries to accurately self-report important information that may affect their eligibility for benefits, with no additional verification. SSA does not currently have the ability to independently verify the responses on these questionnaires using computer matches or other forms of third-party verification, as it does with domestic beneficiaries. The agency's inability to conduct matches with foreign countries is partly because it does not capture beneficiaries' foreign social insurance numbers on its systems.
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Director: Team: Phone:GAO-05-250, Social Security Administration: A More Formal Approach Could Enhance SSA's Ability to Develop and Manage Totalization Agreements
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Report to Congressional Requesters:
United States Government Accountability Office:
GAO:
February 2005:
Social Security Administration:
A More Formal Approach Could Enhance SSA's Ability to Develop and
Manage Totalization Agreements:
GAO-05-250:
GAO Highlights:
Highlights of GAO-05-250, a report to congressional requesters:
Why GAO Did This Study:
Since 1977, the U.S. has entered into bilateral social security
totalization agreements with 20 foreign countries. In fiscal year 2004,
the Social Security Administration (SSA) paid approximately $206
million to 102,000 beneficiaries in these countries based on their
eligible periods of coverage. If put into force, pending agreements
with Mexico and Japan will increase the number of beneficiaries
receiving totalized benefits, as well as the amount of benefits paid.
Given the costs to the Social Security Trust Funds posed by existing
and pending agreements, GAO was asked to (1) document SSA‘s policies
and procedures for assessing the accuracy of foreign countries‘ data
when entering into a totalization agreement, and (2) examine SSA‘s
processes for verifying beneficiaries‘ initial and continuing
eligibility for benefits once an agreement is in force.
What GAO Found:
SSA‘s policies and procedures for assessing the accuracy and
reliability of important information from foreign countries”such as
birth and death data”when entering into totalization agreements remain
generally informal, but recent initiatives for improvement seem
promising. Historically, SSA has conducted only limited reviews,
focusing primarily on broad policy issues and systems compatibility,
rather than the integrity and reliability of earnings data and
evidentiary documents. For example, during preliminary negotiations
with Mexico, SSA conducted a limited review of that country‘s social
security system but did not assess the reliability of that country‘s
data. SSA has also developed several initiatives to identify risks
associated with totalization agreements. These include: developing a
standardized questionnaire for assessing the reliability of foreign
earnings data, soliciting input from other government agencies, and
using a matrix to compare potential agreement countries. SSA is also
conducting ’vulnerability assessments“ to detect potential problems
with foreign countries‘ documents. All of these tools are positive
steps to help SSA assess potential risks posed by unreliable foreign
data. However, SSA has not integrated these initiatives into formal
procedures. Given the upcoming retirement of key management officials,
SSA may lose critical institutional knowledge, which may limit the
agency‘s ability to assess risks associated with future agreements.
Our review identified potential vulnerabilities in SSA‘s policies and
procedures for verifying individuals‘ eligibility for benefits once an
agreement is in force. When establishing an individual‘s initial
eligibility for benefits, the agency generally accepts critical
documentation from foreign countries, without independently verifying
the accuracy of such information. We also found that SSA‘s two primary
tools for determining an individual‘s continuing eligibility”validation
surveys and personal questionnaires”may be insufficient to ensure that
only truly eligible individuals receive benefits. For example, SSA
mails questionnaires to all beneficiaries living abroad (including
totalized beneficiaries) at least once every 2 years requesting
information on their eligibility status, but does not independently
verify the responses on these questionnaires. These questionnaires rely
on beneficiaries to accurately self-report important information that
may affect their eligibility for benefits, with no additional
verification. SSA does not currently have the ability to independently
verify the responses on these questionnaires using computer matches or
other forms of third-party verification, as it does with domestic
beneficiaries. The agency‘s inability to conduct matches with foreign
countries is partly because it does not capture beneficiaries‘ foreign
social insurance numbers on its systems.
What GAO Recommends:
GAO recommends that SSA (1) develop a standardized set of protocols
that integrate and formalize the various initiatives for verifying
foreign countries‘ data when negotiating future agreements and (2)
explore ways to improve current processes for verifying beneficiaries‘
initial and continuing eligibility for benefits.
SSA agreed with our recommendations and we have incorporated their
technical comments where appropriate.
www.gao.gov/cgi-bin/getrpt?GAO-05-250.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Barbara Bovbjerg at (202)
512-7215 or bovbjergb@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
SSA Lacks A Formal Process to Assess the Accuracy and Reliability of
Foreign Countries' Data When Entering into Totalization Agreements, but
Recent Initiatives Appear Promising:
SSA Is Limited In Its Ability to Verify Individuals' Initial and
Continuing Eligibility for Benefits:
Conclusions:
Recommendations:
Agency Comments and Our Evaluation:
Appendix I: Comments from the Social Security Administration:
Appendix II: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Staff Acknowledgments:
Related GAO Products:
Table:
Table 1: Existing Totalization Agreements between the United States and
Other Countries and the Year the Original Agreements Became Effective:
Figure:
Figure 1: Application Process for Obtaining Totalized Benefits:
Abbreviations:
FBOs: Federal Benefits Officers:
FSP: Foreign Service Post:
OASDI: Old Age Survivors and Disability Insurance:
OIG: Office of Inspector General:
OIO: Office of International Operations:
OIP: Office of International Programs:
POMS: Program Operations Manual System:
SSA: Social Security Administration:
United States Government Accountability Office:
Washington, DC 20548:
February 28, 2005:
The Honorable Jim McCrery:
Chairman:
Subcommittee on Social Security:
Committee on Ways and Means:
House of Representatives:
The Honorable E. Clay Shaw, Jr.:
House of Representatives:
Totalization agreements are bilateral agreements between the United
States and other countries. These agreements are designed to foster
international commerce and protect social security benefits for persons
who have worked in foreign countries in two ways. First, the agreements
eliminate dual social security taxes that multinational employers and
their employees pay when they operate and reside in countries with
parallel social security programs. They also help fill gaps in benefit
protection for persons who have worked in different countries for
portions of their careers. Since 1977, the U.S. has entered into social
security totalization agreements with 20 foreign countries.[Footnote 1]
In fiscal year 2004, the Social Security Administration (SSA) paid
approximately $206 million to about 102,000 totalized beneficiaries in
these countries. These beneficiaries include retired and disabled
workers, as well as their dependents and survivors. Thus, while these
agreements pose a cost to the U.S. Social Security Trust Funds, they
provide savings to U.S. workers and employers operating in foreign
countries as well as foreign benefits for U.S. citizens and residents.
If put in force, pending agreements with countries such as Mexico and
Japan will increase the number of beneficiaries receiving totalized
benefits, as well as the amount of benefits paid by the U.S. Social
Security Trust Funds. Reliable data from foreign countries is required
to ensure that payments to totalized beneficiaries are accurate. Given
the potential costs to the trust funds posed by existing and pending
agreements, the Subcommittee on Social Security, Committee on Ways and
Means, asked GAO to (1) document SSA's policies and procedures for
assessing the accuracy of foreign countries' data, including birth,
death, marriage, divorce, and earnings information when entering into
totalization agreements, and (2) examine SSA's processes for verifying
beneficiaries' initial and continuing eligibility for benefits once an
agreement is in force.
To address these objectives, we reviewed existing totalization
agreements and SSA's procedures for administering them. We interviewed
numerous management officials and line staff in SSA's Offices of
International Operations (OIO) and International Programs (OIP) to
obtain their perspectives on SSA's current processes when entering into
agreements, as well as their perspectives on existing procedures for
verifying beneficiaries' initial and continuing eligibility for
benefits. We also interviewed an official from the Office of Inspector
General (OIG) to determine if the OIG had performed any studies on SSA
totalization agreements. In addition, we contacted the supreme audit
institutions[Footnote 2] in countries with totalization agreements to
determine if they conducted any studies on their country's management
of totalization agreements. We examined SSA's benefit payment data for
totalized beneficiaries in fiscal year 2004, as well as the results of
available periodic SSA "validation surveys" in which home visits are
performed for selected foreign beneficiaries by staff from SSA and the
Department of State. We also reviewed questionnaires mailed to all
foreign beneficiaries to solicit information on their current
eligibility status. We conducted our work between August 2004 and
January 2005 in accordance with generally accepted government auditing
standards.
Results in Brief:
SSA's policies and procedures for assessing the accuracy and
reliability of important information from foreign countries--such as
birth and death data--when entering into totalization agreements remain
generally informal, despite recent initiatives for improvement.
Historically, SSA has conducted only limited reviews, focusing
primarily on broad policy issues and systems compatibility, rather than
examining the integrity and reliability of earnings data and
evidentiary documents. For example, as we reported in 2003, during
preliminary negotiations with Mexico in August 2002, SSA officials
conducted a limited review of that country's social security system but
did not assess the reliability of data needed to pay benefits.
Subsequently, in response to our recommendation, SSA returned twice to
Mexico to assess the procedures and controls pertaining to earnings
data, and to evaluate the integrity of selected documents submitted by
claimants to establish identity and eligibility. In addition to actions
taken in Mexico, SSA officials told us that the agency has developed
several new initiatives to identify risks associated with totalization
agreements. SSA has developed a standardized questionnaire to help the
agency identify and assess the reliability of earnings data in
countries under consideration for future totalization agreements. In
addition, SSA has undertaken two initiatives aimed at determining which
countries may be suitable for future agreements. One initiative
involves conducting discussions with other U.S. government agencies
such as the Department of Commerce to better assess which countries may
be suitable for future agreements. SSA is also developing a matrix to
compare relevant factors, including data accessibility across countries
where agreements could be negotiated in the future. Finally, in an
effort to improve existing procedures, SSA is conducting numerous
"vulnerability assessments" to detect potential problems with the
accuracy of foreign countries' documents. While these tools appear to
be a positive first step for helping SSA identify potential risks
associated with future totalization agreements, SSA has only recently
begun implementing them and has not developed plans to integrate these
initiatives into formal procedures. The lack of a formal protocol,
coupled with the expected retirement of key management and staff over
the next few years, may result in the loss of important institutional
knowledge relating to totalization agreements, which may hinder the
agency's ability to effectively assess risks associated with future
agreements.
Our review also identified potential vulnerabilities in SSA's policies
and procedures for verifying individuals' eligibility for benefits once
an agreement is in force. When establishing an individual's initial
eligibility for benefits, the agency generally accepts critical
documentation from foreign countries, such as birth certificates,
without independently verifying the accuracy of such information. We
also found that SSA's two primary tools for determining an individual's
continuing eligibility--validation surveys and personal questionnaires--
may be insufficient to ensure that only those still eligible for
benefits continue to receive them. In particular, while validation
surveys conducted prior to calendar year 2000 verified several pieces
of information including beneficiaries' work activity and earnings, due
to staff and budgetary limitations, those conducted since 2000
generally only verify beneficiaries' identity and existence. SSA's
second tool to determine continuing eligibility entails mailing
questionnaires to all beneficiaries living abroad (including totalized
beneficiaries) at least once every 2 years requesting information on
their eligibility status. These questionnaires rely on beneficiaries to
accurately self-report important information that may affect their
eligibility for benefits, such as whether they are working, with no
additional verification. To date, SSA has not attempted to test the
accuracy of the responses on the questionnaires by comparing them with
the results from a given country's validation survey. SSA also does not
currently have the ability to verify the responses on these
questionnaires using computer matches or other forms of third-party
verification. In contrast, SSA routinely uses computer matches with
databases in the U.S. to verify the eligibility of domestic
beneficiaries.
We recognize that assessing the reliability of foreign countries' data
and ensuring beneficiaries' initial and continuing eligibility for
benefits presents challenges for SSA. However, there are several areas
where we believe SSA can make improvements. Accordingly, we are
recommending that the Commissioner of SSA develop a formal protocol for
entering into future totalization agreements and explore ways to
improve existing procedures for ensuring that only truly eligible
individuals receive totalized benefits once an agreement is in force.
SSA agreed with our recommendations, but suggested that the report be
revised to better characterize some of its procedures for verifying the
accuracy and reliability of foreign evidence--including evidence for
totalized and all foreign beneficiaries. We have modified the report to
reflect their comments as appropriate. SSA provided additional comments
that we discuss in the Agency Comments and Our Evaluation section of
the report. Their full comments appear in appendix I.
Background:
SSA administers the Old Age, Survivors, and Disability Insurance
(OASDI) programs under Title II of the Social Security Act. About 96
percent of the nation's work force is in social security-covered
employment and pays taxes on annual earnings. When workers pay social
security taxes, they earn coverage credits,[Footnote 3] and 40 credits-
-equal to at least 10 years of work--entitle them to social security
benefits when they reach retirement age.[Footnote 4]
In 1977, the Congress authorized the President to enter into
totalization agreements with other countries. These bilateral
agreements are intended to accomplish several purposes. First, they
eliminate dual social security coverage and taxes that multinational
employers and employees encounter when they operate and their workers
temporarily reside in a foreign country with its own social security
program. Under the agreements, U.S. employers and their workers sent
temporarily abroad benefit by paying only U.S. social security taxes,
and foreign businesses and their workers benefit by paying only social
security taxes to their home country. Second, the agreements provide
benefit protection to workers who have divided their careers between
the U.S. and a foreign country, but lack enough coverage under one or
both social security systems to qualify for benefits, despite paying
taxes into both systems. Totalization agreements allow such workers to
combine (totalize) work credits earned in both countries to meet
minimum benefit qualification requirements. Third, totalization
agreements generally improve the portability of social security
benefits by authorizing waiver of residency requirements.
SSA officials provided a description of how totalization agreements are
developed. These agreements involve several steps from the time they
are proposed until the time benefits are paid to beneficiaries. Before
SSA can begin to develop an agreement with a foreign country, it must
receive approval from the Department of State (State). If negotiations
between SSA and the foreign country are successful, SSA requests
authorization from State to arrange for signing the agreement. SSA
reviews the draft agreement for policy implications and to ensure that
the translation of the agreement (if there is one) has the same meaning
in both languages. Once signed, the agreement does not become legally
binding until both countries have completed their respective
ratification processes. For the U.S., the ratification involves the
following steps: (1) the Commissioner of SSA asks State to forward the
signed agreement to the President; (2) if State concurs, it sends the
agreement to the President; (3) if the President approves the
agreement, he transmits it to the Congress; and (4) the agreement
becomes effective on a date specified in the agreement, which must be
at least 60 session days, during which at least one House of Congress
was in session after the President sends it to Congress, unless either
House of Congress adopts a resolution of disapproval. Table 1 shows
existing agreements and the dates they became effective.
Table 1: Existing Totalization Agreements between the United States and
Other Countries and the Year the Original Agreements Became Effective:
Country: Italy;
Effective year of agreement: 1978.
Country: Germany;
Effective year of agreement: 1979.
Country: Switzerland;
Effective year of agreement: 1980.
Country: Belgium;
Effective year of agreement: 1984.
Country: Norway;
Effective year of agreement: 1984.
Country: Canada;
Effective year of agreement: 1984.
Country: United Kingdom;
Effective year of agreement: 1985.
Country: Sweden;
Effective year of agreement: 1987.
Country: Spain;
Effective year of agreement: 1988.
Country: France;
Effective year of agreement: 1988.
Country: Portugal;
Effective year of agreement: 1989.
Country: Netherlands;
Effective year of agreement: 1990.
Country: Austria;
Effective year of agreement: 1991.
Country: Finland;
Effective year of agreement: 1992.
Country: Ireland;
Effective year of agreement: 1993.
Country: Luxembourg;
Effective year of agreement: 1993.
Country: Greece;
Effective year of agreement: 1994.
Country: South Korea;
Effective year of agreement: 2001.
Country: Chile;
Effective year of agreement: 2001.
Country: Australia;
Effective year of agreement: 2002.
Source: SSA.
Note: SSA has also signed agreements with Japan and Mexico. The Japan
agreement has been approved by the Administration and is being reviewed
by the Congress. The Mexico agreement was still under review at SSA at
the time of this study.
[End of table]
To qualify for totalized U.S. social security benefits, a worker must
have at least 6 but no more than 39 U.S. coverage credits. Benefit
amounts are based on the portion of time worked in the United States,
and thus are almost always lower than full social security benefits. As
of September 2004, the average monthly totalized benefit amount for
OASDI beneficiaries was about $163. Overall, SSA paid approximately
$2.4 billion to about 430 thousand foreign beneficiaries[Footnote 5] in
fiscal year 2004, including about $206 million paid to approximately
102,000 totalized beneficiaries.[Footnote 6]
Individuals living in the U.S. may apply for totalized benefits at any
of SSA's approximately 1,300 field offices. SSA policies and procedures
for processing claims are located in SSA's Program Operations Manual
System (POMS). When an applicant files for benefits in an SSA field
office, a claims representative helps the individual fill out the
application, reviews the applicant's eligibility information with POMS
guidance, and sends the claim packet to SSA's OIO for final processing.
The application process for individuals living abroad is essentially
the same as that for domestic applicants, with one basic exception.
Instead of visiting a domestic SSA field office, individuals living
abroad are generally required to apply at one of numerous Foreign
Service Posts located in U.S. embassies or consulates around the world,
or at their country's social security agency. Applications are
processed by Foreign Service Nationals who review pertinent
documentation (such as evidence of birth, and marital status) and
forward the application to OIO, which requests the foreign earnings
record, if one has not already been provided. The application package
is then reviewed by SSA staff for completeness and compliance with SSA
standards. In instances where SSA staff question the accuracy or
completeness of any information, they may contact the foreign social
security agency or the claimant directly to request clarification. If
SSA staff determine that the application contains sufficient
eligibility information and the individual is entitled to totalized
OASDI benefits, then the application is approved and submitted for
payment. (See fig. 1):
Figure 1: Application Process for Obtaining Totalized Benefits:
[See PDF for image]
[A] Claims can also be filed at Foreign Social Security Agencies (FSSA)
in countries where the U.S. has totalization agreements in place. If a
claimant files at an FSSA, the claim is generally referred to the FSP,
which contacts the claimant directly to develop the claim.
[B] Only if the claim is filed with an FSP. If claim is filed with a
U.S. domestic FO, OIO requests foreign coverage record.
[End of figure]
In addition to managing and updating the agreements that are already in
place, SSA continues to negotiate additional agreements with other
countries.[Footnote 7] SSA has pending totalization agreements with
Mexico and Japan. The President transmitted the Japanese agreement to
the Congress in November 2004. The Mexican agreement was under review
at SSA at the time of this study. In a prior report on the Mexican
agreement, we recommended that SSA establish formal processes for
entering into totalization agreements that include mechanisms to assess
the risk associated with such agreements and to document the range of
analyses SSA conducts. The report also recommended that reports of
proposed agreements be enhanced to make them more consistent and
informative and that SSA establish a regular process to reassess the
accuracy of its actuarial estimates.[Footnote 8]
SSA Lacks A Formal Process to Assess the Accuracy and Reliability of
Foreign Countries' Data When Entering into Totalization Agreements, but
Recent Initiatives Appear Promising:
SSA's policies and procedures for assessing the accuracy and
reliability of important information from foreign countries--such as
birth and death data--when entering into totalization agreements remain
generally informal, despite recent initiatives for improvement.
Historically, the agency has focused on broad policy issues and systems
compatibility, rather than integrity and reliability of earnings data
and authenticity of evidentiary documents. For example, during
preliminary negotiations for an agreement with Mexico, SSA conducted a
limited review of that country's social security system and policies in
August 2002, but did not assess the accuracy and reliability of data
needed to pay benefits or the relevant controls over that data. In
response to our recommendations, SSA made two return visits to Mexico
to more thoroughly assess its social security information system and to
examine the integrity of documents submitted by claimants to establish
identity and eligibility--such as birth records. In October 2003, SSA's
systems specialists and program integrity experts examined Mexico's
social security information system and earnings data. In particular,
these experts assessed the integrity of processes and controls
associated with the collection, maintenance and reporting of social
security earnings. After reviewing processes at the Mexican social
security agency's headquarters, field offices and data storage center,
SSA determined that Mexico's policies and controls were sufficient for
SSA to rely on Mexican earnings data to pay benefits. On its second
review, SSA returned to Mexico in 2004 to physically examine documents
submitted by claimants as evidence of identity and eligibility, and
attempted to verify the authenticity of these documents with the
Mexican state archives. While the agency was unable to provide us with
a copy of the report because it was still being reviewed internally at
the time of our study, it did share some preliminary results. Within
the selected sample, SSA reported that only a small number of the
documents were of questionable authenticity and concluded that most
types of Mexican documents were reliable.
Beyond the actions taken in Mexico, SSA officials reported that the
agency is working on a number of additional initiatives to help assess
the risks associated with future totalization agreements. SSA has
developed a standardized questionnaire for foreign social security
officials to help the agency identify and assess the reliability of
earnings data in countries under consideration for future totalization
agreements. This tool is designed to capture information about the
technical, security, and management controls over the collection and
maintenance of workers' earnings. This questionnaire may provide the
agency with a useful tool to assess the security of foreign country's
earnings data. SSA recently used this tool as part of its negotiations
for entering into a totalization agreement with Japan. Agency officials
reported that they made additional contacts with Japanese officials and
asked them selected questions from the new questionnaire.
In addition, SSA has also begun two initiatives aimed at determining
which countries may be suitable for future agreements, taking into
consideration the reliability of a country's data and records. For
example, SSA officials reported that the agency has held initial
meetings with officials from the Departments of State and Commerce in
an effort to develop a more formalized process for identifying
countries for potential totalization agreements. SSA officials reported
that soliciting input from other government entities will provide SSA
with a broader perspective, and assist the agency in identifying
potential agreement countries in a more strategic and systematic
manner. In addition to seeking input from other federal agencies, SSA
recently developed a matrix consisting of 14 economic and
administrative factors, including known risk factors such as the
availability of accurate earnings/coverage records, that may impact a
country's ability to determine individual's eligibility for benefits
under an agreement. This matrix provides a standard template to
facilitate comparison among countries and assist SSA in evaluating
these countries' suitability for future totalization agreements. For
example, this tool includes a step to help SSA evaluate potential
problems with foreign data, including the prevalence of fraudulent or
counterfeit documents in a country, or potential problems accessing
critical records. In addition, the template includes factors such as
projections of lost tax revenue and the number of U.S. taxpayers
working in a country, which could be used to calculate the potential
impact of a totalization agreement on the Social Security Trust Funds.
Finally, in an effort to improve existing procedures, especially with
regard to foreign eligibility evidence, SSA officials reported that
they are currently conducting numerous "vulnerability assessments" to
detect potential problems or limitations with the accuracy of foreign
countries' documents, including documents from totalized countries.
These vulnerability assessments are generally conducted by former SSA
employees known as Federal Benefits Officers (FBO),[Footnote 9] who
contact other State and embassy officials to obtain information on
document reliability. Vulnerability assessments are intended to
identify the potential for document fraud and other problems with
foreign data and have prompted SSA to more thoroughly investigate the
reliability of documents in a particular country. For example, such an
assessment conducted in one country detailed the ease of fraudulently
obtaining official documents such as birth certificates through bribes
and other means and recommended that SSA require independent
verification of any documents before paying benefits. As a result of
this review, SSA reported that it is scrutinizing documents from that
country more closely to ensure that only truly entitled beneficiaries
receive payments. Although SSA does not have a totalization agreement
with this country, the vulnerability assessment demonstrated the
agency's ability to more thoroughly examine the reliability of data in
all countries where foreign beneficiaries reside, including totalized
beneficiaries.
All these initiatives are positive steps in SSA's efforts to identify
and assess the potential risks posed by inaccurate or unreliable
foreign data when entering into totalization agreements. Although these
initiatives seem promising, the agency has not developed plans for
integrating them into a formal protocol for assessing the accuracy and
reliability of foreign countries' data. SSA officials told us that the
current informal approach for entering into agreements is practical
given institutional knowledge possessed by experienced managers
responsible for overseeing the initiation of the agreements. However,
some officials acknowledged that the current informal approach has
weaknesses. In particular, without a more formal mechanism in place,
given expected retirement of key management officials in coming years,
SSA risks the loss of critical institutional knowledge, thus
diminishing the agency's ability to effectively assess risks associated
with future agreements.
SSA Is Limited In Its Ability to Verify Individuals' Initial and
Continuing Eligibility for Benefits:
We identified potential vulnerabilities in SSA's existing policies and
procedures for verifying individuals' eligibility for benefits once an
agreement is in force. First, under existing totalization agreements,
SSA generally accepts documentation from foreign countries' social
security agencies with no independent verification of this information
when establishing an individuals' initial eligibility for benefits. For
example, agency staff accept documents such as foreign birth
certificates that the foreign social security agency has certified as
accurate without independently determining the authenticity of such
documents. This practice has been a standard procedure based on our
review of the 20 existing totalization agreements.[Footnote 10] We
found that SSA is hampered in its ability to independently verify such
documentation because it lacks tools such as computer matching that it
routinely uses in the United States to independently verify domestic
beneficiaries' eligibility for benefits. For example, SSA verifies
applicants' birth certificates by manually or electronically accessing
state data. While SSA lacks the ability to perform this type of
independent verification with foreign countries, it does have some
tools at its disposal--validation surveys and personal questionnaires-
-to verify an individual's identity and continuing eligibility.
SSA officials reported that the agency performs periodic validation
surveys in countries where foreign social security beneficiaries
[Footnote 11] live, including countries with totalization agreements.
SSA's Office of Central Operations staff with assistance from foreign
service staff administer the surveys at individual beneficiaries' homes
to verify beneficiaries' identity and continuing eligibility. The
agency generally conducts surveys in about 3 countries each year. The
frequency of such surveys varies widely, and is dependent upon
differences in the results of surveys over time or known problems with
data reliability in a particular country. For example, agency officials
told us that surveys are administered in some countries such as
Portugal as frequently as every 5 years. Other countries such as Sweden
may only be reviewed once every 30 years. SSA provided us with examples
of 5 surveys performed between 1998 and 2003.[Footnote 12] SSA data
show that the surveys are generally useful for detecting important
information such as unreported death, and are also effective for
detecting and reducing overpayments. For example, a 1998 survey
conducted in Canada identified overpayments of approximately
$132,000.[Footnote 13] Most of the overpayments detected in the survey
were attributable to unreported earnings and work activity, as well as
unreported deaths. More importantly, the survey helped SSA avoid future
overpayments for the individuals it identified, which, over a period of
years, would likely have been significantly higher than the initial
amount it detected. Unlike this more in-depth Canadian survey,
according to agency officials, those conducted since 2000 are more
limited in scope and generally only verify a beneficiary's identity and
existence. They also do not attempt to independently verify other
important information that can affect an individual's benefits, such as
work activity and earnings. SSA officials told us that while more
frequent, comprehensive reviews would be helpful to monitor
beneficiaries' continuing eligibility in a number of countries, the
agency is constrained by limited staff and budgetary resources.
In addition to using validation surveys, SSA also distributes annual
and biennial questionnaires to all foreign beneficiaries requesting
information on their continuing eligibility for benefits. These
questionnaires are designed to ensure that beneficiaries are alive and
to solicit information that could affect the amount of benefits
received, such as a change in marital status or work activity. However,
these questionnaires typically rely on beneficiaries to accurately self-
report such information with no independent verification to determine
the reliability of the responses. For example, agency officials told us
that they have not attempted to compare the results of in-person
validation surveys conducted in specific countries with the information
reported on the questionnaires to test the consistency and accuracy of
the data provided. In this regard, SSA has little assurance that the
information it receives from the questionnaires is accurate. Moreover,
while SSA routinely uses computer matches with databases in the U.S. to
help it verify domestic beneficiaries' initial and continuing
eligibility for benefits,[Footnote 14] it does not currently have the
capacity to perform such matches for foreign beneficiaries. Moreover,
SSA does not currently have any mechanism in place--either manual or
electronic--to independently verify when foreign beneficiaries die.
Agency officials reported that SSA is developing pilot computer match
projects with Italy and Germany to establish an independent, third-
party mechanism for verifying beneficiaries' continuing eligibility for
benefits. For example, SSA is exploring the potential of conducting a
match between SSA's databases such as the Death Master File and Italian
death records. While officials reported that such a match would be a
useful tool for identifying unreported deaths, SSA is partly limited in
its ability to conduct such matches with all other totalized countries
because it does not currently capture foreign social insurance numbers
on its computer systems. These unique identifiers are required to
conduct accurate computer matches and access to such numbers is
necessary to assure a reliable match between SSA and its counterparts.
Agency officials reported that space limitations on the Master
Beneficiary Record--the main database used for administering OASDI
benefits--preclude it from electronically storing such information at
this time. At present, the agency must use other, less reliable
information, such as a beneficiary's name and date of birth, to conduct
matches. In addition, while a recent report from SSA's OIG found that
some countries such as Canada and the United Kingdom have expressed
concerns about disclosing such data to SSA for purposes of conducting
matches, the OIG concluded that the ongoing negotiations with Italy are
expected to provide solutions to such barriers.[Footnote 15]
Conclusions:
Totalization agreements between the U.S. and other countries often
foster enhanced diplomatic relations and provide mutually beneficial
business, tax, and other incentives to employers and employees affected
by these agreements. However, the agreements also impose a financial
cost to both countries' social security programs and require initial
and continued assurances that data on potential beneficiaries are
accurate. Because SSA historically has only performed limited
activities to assess the accuracy and reliability of foreign countries'
data when entering into totalization agreements--such as birth, death,
marriage, and divorce records--incorrect or falsified documentation
could expose the Social Security Trust Funds to improper payments.
SSA's additional work in Mexico represents a more thorough effort to
verify critical information, such as birth documentation, than it has
traditionally undertaken in countries with existing agreements.
Moreover, the various initiatives that SSA has undertaken--such as its
matrix to assess foreign countries suitability for a totalization
agreement and its vulnerability assessments--are positive first steps
in assessing the accuracy and reliability of foreign countries' data.
However, the agency has not determined whether these procedures will be
integrated into a more formal protocol for assessing the accuracy and
reliability of foreign countries' data when entering into future
agreements. Thus, the potential exposure of the trust funds to improper
payments resulting from inaccurate or incomplete foreign data remains
an area of concern.
Once totalization agreements are in force, verification of individuals'
initial and continuing eligibility for benefits is essential to ensure
that benefits are paid only to entitled recipients. The relatively
limited scope of SSA's current verification procedures may not provide
adequate assurance that the trust funds are protected from improper
payments. Moreover, because the agency lacks the ability to
independently verify the information it receives from foreign
beneficiaries on its questionnaires, SSA has little assurance that
questionnaire responses are accurate. Thus, SSA may not be aware of
changes in beneficiaries' eligibility status, resulting in improper
payments for an extended period of time. Given the likely growth in the
number of foreign beneficiaries in coming years, including totalized
beneficiaries, the trust funds will likely face increased exposure if
existing processes are not improved. In an environment of limited staff
and budgetary resources, SSA could benefit from a more systematic
approach for independently verifying information that can affect
individuals' initial and continuing eligibility for benefits, such as
computer matches. While SSA has taken some positive steps in this
regard such as its negotiations for conducting a death match with
Italy, additional challenges remain. In particular, the agency
currently lacks the authority to conduct computer matches with foreign
countries--a prerequisite for conducting such matches and other forms
of independent verification with foreign countries.
Recommendations:
In light of the potential impact of existing and future totalization
agreements on the Social Security Trust Funds, we recommend that the
Commissioner of Social Security:
1. Develop a standardized set of protocols that integrate and formalize
the various initiatives for verifying foreign countries' data when
negotiating future agreements.
2. Explore cost-effective ways to improve the current processes for
verifying beneficiaries' initial and continuing eligibility for
benefits. Such improvements may include enhancing the scope of the
validation studies, and assessing ways to independently verify the
results of its questionnaires. Other potential improvements may include
enhanced efforts to explore the potential for developing a mechanism--
either manual or electronic--to independently verify the death of all
foreign beneficiaries living abroad, including totalized beneficiaries.
Agency Comments and Our Evaluation:
We obtained written comments on a draft of this report from the
Commissioner of SSA. The comments have been reproduced in appendix I.
SSA also provided additional technical comments, which have been
incorporated in the report as appropriate.
SSA agreed with our recommendations. However, the agency suggested that
the report be revised to clarify that its procedures for assessing the
accuracy and reliability of foreign data (such as birth certificates)
for totalized beneficiaries are the same as those for foreign
beneficiaries under non-totalized claims. SSA was concerned that, as
drafted, our report may give the incorrect impression that totalization
claims introduce new elements of risk to the social security program.
SSA noted that its Program Operations Manual System contains detailed
procedures and guidelines that are used in evaluating all foreign
evidence. We have revised the report to note that SSA's processes for
verifying foreign data are the same for both totalized and non-
totalized beneficiaries.
SSA also commented on our observation that it regularly accepts
critical documentation from foreign countries without independently
verifying the accuracy of such information. In its comments, SSA stated
that in cases where years of pre-agreement experience and an
examination of the other country's system of records provides assurance
that the data is reliable, SSA and the other country have agreed to use
each other's verification of certain eligibility factors. SSA also
noted that each agreement includes a provision that makes clear that
SSA remains the final judge of the probative value of any evidence it
receives from any source. We acknowledge SSA's concern in this area.
However, our prior work and this report show that the agency has
generally accepted such data without independent verification for all
20 countries with existing agreements. Therefore, we continue to
believe that our description of the current process is accurate, and
that the agency may still be vulnerable to inaccurate data from foreign
countries.
SSA was also concerned that our report may give the impression that the
agency does little to verify the accuracy of information used to make
benefit decisions and that cost-effective options were readily
available. SSA noted its validation surveys and other efforts as
evidence that they are taking steps to deter fraud. The agency also
stated that more intrusive verification steps would be costly and may
not produce net savings to the Social Security trust funds. We
acknowledge SSA's efforts, but continue to believe more can be done to
ensure the reliability of data. This includes making further
enhancements to its validation surveys. Our report describes how
validation surveys are currently being used to detect fraud, and points
out that the agency's own data show that these surveys are generally
cost-effective. Moreover, as indicated in our second recommendation, we
encourage SSA to enhance the scope of its validation surveys only to
the extent that such options are cost-effective.
Unless you publicly announce its contents earlier, we plan no further
distribution until 30 days after the date of this report. At that time,
we will send copies of this report to the House and Senate Committees
with oversight responsibility for the Social Security Administration.
We will also make copies available to other parties upon request. In
addition, the report will be available at no charge on GAO's Web site
at http://www.gao.gov. If you have any questions concerning this
report, please contact me at (202) 512-7215.
Signed by:
Barbara D. Bovbjerg, Director,
Education, Workforce, and Income Security Issues:
[End of section]
Appendix I: Comments from the Social Security Administration:
SOCIAL SECURITY:
The Commissioner:
February 18,2005:
Ms. Barbara D. Bovbjerg:
Director, Education, Workforce, and Income Security Issues:
U.S. Government Accountability Office:
Washington, D.C. 20548:
Dear Ms. Bovbjerg:
Thank you for the opportunity to review the draft report, "Social
Security Administration: A More Formal Approach Could Enhance SSA's
Ability to Develop and Manage Totalization Agreements" (GAO-05-250).
Staff questions may be directed to Martin H. Gerry, Deputy Commissioner
for Disability and Income Security Programs at 410-965-0100.
Sincerely,
Signed by:
Jo Anne B. Barnhart:
Enclosure:
COMMENTS OF THE SOCIAL SECURITY ADMINISTRATION (SSA) ON THE GOVERNMENT
ACCOUNTABILITY OFFICE'S (GAO) DRAFT REPORT, "SOCIAL SECURITY
ADMINISTRATION: AMORE FORMAL APPROACH COULD ENHANCE SSA'S ABILITY TO
DEVELOP AND MANAGE TOTALIZATION AGREEMENTS" (GAO-05-250):
General Comments:
Thank you for the opportunity to review and provide comments on this
draft report. As noted below in our comments on the recommendations
contained in this GAO draft report, we agree with these recommendations
and are taking actions responsive to them.
We recommend, however, that the draft report be revised to clarify
that, except with respect to the certification of foreign periods of
coverage, the procedures for assessing the accuracy and reliability of
foreign data (such as medical evidence and birth, death and marriage
certificates) in connection with claims under totalization agreements
are the same as the procedures for assessing foreign data in connection
with regular, non-totalization claims. Certainly, totalization
agreements increase the number of benefit claims that are filed and
therefore the amount of evidence that must be evaluated. However, they
do not introduce new elements of risk in connection with the evaluation
of evidence.
SSA evaluates foreign evidence as outlined in the Program Operations
Manual System (POMS) in section GN 00307. We believe it would be
informative for the Congress to know that the POMS contain detailed
procedures and guidelines that are used in evaluating foreign evidence.
As currently drafted, the GAO draft report may give the impression that
the evaluation of evidence in totalization cases is different from the
processes used to evaluate evidence submitted in regular claims and
may, therefore, give an incorrect impression that totalization
agreements introduce new elements of risk to the Social Security
program.
In several instances, the draft report mentions that SSA accepts
critical documentation from foreign countries without independently
verifying the accuracy of such information. Under some totalization
agreements, SSA and the other country's agency have agreed to use each
other's verification of certain eligibility factors, such as a
claimant's date of birth. However, this is done only in cases where
years of pre-agreement experience and an examination of the other
country's system of records during implementation meetings has
indicated that evidence from that particular country is reliable, and
only if no material discrcpancy exists with other evidence in file.
This policy eliminates the duplication of effort that would result if
the agencies of both countries were required to verify the same
information. However, each agreement includes a provision that makes
clear that SSA remain the final judge of the probative value of any
evidence it receives from any source. SSA is, therefore, able to verify
the accuracy of the other country's certification by obtaining original
or certified copies of documents and by contacting the claimant
directly.
The draft report's criticism of SSA for not doing more to investigate
and uncover document fraud may leave the impression that: 1) SSA does
little to verify the accuracy of information on which it makes benefit
decisions, and 2) cost-effective options to remedy the problem are
readily available. In fact, SSA conducts validation surveys when it
becomes concerned that document fraud may be becoming a problem in a
country and each year it selects three countries from a rotating list
to conduct `Identity and existence' surveys. Also, SSA trains the
foreign-service nationals to be vigilant for fraud when examining
documents and instructs them to check primary and secondary sources to
verify the accuracy of documents. More intrusive verification in
foreign countries around the world would be costly and it is not clear
that such routine procedures would produce net savings to the Social
Security trust funds. For this reason, SSA has proceeded with systems-
based approaches to check on the status of beneficiaries and applicants
for benefits.
Recommendation 1:
Develop a standardized set of protocols that integrate and formalize
the various initiatives for verifying foreign countries' data when
negotiating future agreements.
Comment:
We agree. By the end of the third quarter of fiscal year 2005, we plan
to develop a standardized set of protocols that integrate and formalize
the various initiatives we have already undertaken for verifying
foreign countries' data when negotiating future totalization agreements.
Recommendation 2:
Explore cost-effective ways to improve the current processes for
verifying beneficiaries' initial and continuing eligibility for
benefits. Such improvements may include enhancing the scope of the
validation studies and assessing ways to independently verify the
results of its questionnaires. Other potential improvements may include
enhanced efforts to explore the potential for developing a mechanism -
either manual or electronic - to independently verify the death of all
foreign beneficiaries living abroad, including totalized beneficiaries.
Comment:
We agree. We will continue to explore ways to improve existing
processes for verifying beneficiaries' initial and continuing
eligibility for benefits.
[End of section]
Appendix II: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Daniel Bertoni, Assistant Director (202) 512-5988;
Jeremy D. Cox, Analyst-in-Charge (202) 512-5717:
Staff Acknowledgments:
In addition to those named above, Joseph Applebaum, Jeff Bernstein,
Erin Daugherty, Jean L. Mcsween, Daniel A. Schwimer, and Salvatore F.
Sorbello, made important contributions to this report.
[End of section]
Related GAO Products:
Disability Insurance: SSA Should Strengthen Its Efforts to Detect and
Prevent Overpayments. GAO-04-929. Washington, D.C.: September 10, 2004.
Social Security: Proposed Totalization Agreement With Mexico Presents
Unique Challenges. GAO-03-1035T. Washington, D.C.: September 11, 2003.
Social Security: Proposed Totalization Agreement With Mexico Presents
Unique Challenges. GAO-03-993. Washington, D.C.: September 30, 2003.
Social Security: Observations on Improving Distribution of Death
Information. GAO-02-233T. Washington, D.C.: November 8, 2001.
FOOTNOTES
[1] SSA has pending totalization agreements with Mexico and Japan.
According to SSA, the President transmitted the Japanese agreement to
the Congress in November 2004. The Mexican agreement was still under
review at SSA at the time of this study. Once submitted to the
Congress, the agreements may be brought into force after 60 session
days unless either house of Congress adopts a resolution of
disapproval.
[2] Supreme Audit Institutions are the highest public auditing body of
a state or supranational organization.
[3] A "quarter of coverage" is a U.S. social security program specific
term defining a U.S. social security work credit. A quarter of coverage
was originally defined as wages of $50 dollars or more earned during a
calendar quarter. Over time, this figure has been revised. In 2005,
$920 of earnings constituted a quarter of coverage.
[4] Different requirements govern the number of coverage credits
necessary to receive disability and survivors benefits for workers who
become disabled or die with relatively short work careers.
[5] This number includes survivor and dependent beneficiaries.
[6] These figures include payments made to individuals with
disabilities.
[7] The U.S. government may revise existing totalization agreements
when the other country changes its social security system. For example,
SSA revised its totalization agreement with the Netherlands after the
Dutch government changed one of its social security laws and contacted
SSA requesting a change to the existing totalization agreement.
[8] See Social Security: Proposed Totalization Agreement with Mexico
Presents Unique Challenges, GAO-03-993 (Washington, D.C., Sept. 30,
2003).
[9] Federal Benefits Officers are generally employees of the Department
of State, each managing a particular global region, usually consisting
of multiple countries. Federal Benefits Officers are located in Mexico
City, Mexico; San Jose, Costa Rica; London, England; Rome, Italy;
Frankfurt, Germany; Athens, Greece; and Manila, Philippines. These
Federal Benefits Officers have supervisory authority over the claims-
taking Foreign Service Posts and conduct vulnerability assessments to
uncover trends in document fraud in their regions.
[10] SSA told us that its procedures for assessing the accuracy and
reliability of evidence for totalized beneficiaries--such as birth
certificates--are the same as its procedures for verifying evidence for
all foreign beneficiaries. The agency noted that section GN 00307 of
its Program Operations Manual System contains detailed procedures and
guidelines that are used in evaluating foreign evidence.
[11] Foreign beneficiaries include U.S. citizens as well as non-
citizens living abroad and receiving benefits.
[12] SSA provided the following surveys: Canada (1998); France (2000);
Sweden (2001); Austria (2002); and the Netherlands (2003).
[13] The surveys are also cost-effective according to SSA data. For
example, the 1998 survey of Canada cost about $41,000.
[14] SSA periodically compares earnings information in its Master
Beneficiary Record with wage data from the Internal Revenue Service.
SSA also maintains a database that serves as a master death file in the
U.S.
[15] See Office of the Inspector General, Social Security
Administration, Data Matching With Foreign Countries, A-13-03-23015,
(June 17, 2003).
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