Social Security Administration
Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Benefits Gao ID: GAO-10-949T August 4, 2010This testimony discusses the results of our investigation of the disability programs managed by the Social Security Administration (SSA). SSA administers two of the nation's largest cash benefit programs for people with disabilities: the Disability Insurance (DI) program, which provides benefits to workers with disabilities and their family members, and the Supplemental Security Income (SSI) program, which provides income for aged, blind, or disabled people with limited income and resources. In 2008, the DI program provided about $104 billion to some 9 million beneficiaries, and the SSI program provided about $38 billion in financial benefits to some 7.5 million recipients. Given the magnitude of these cash benefit payments, it is important for SSA to have effective fraud prevention controls in place to minimize fraudulent and improper payments. This statement summarizes our most recent report, describing cases of federal workers, commercial drivers, and commercial vehicle company owners who fraudulently or improperly received disability benefits. The objectives of the investigation were to (1) determine whether federal employees and commercial vehicle drivers and company owners may be improperly receiving disability benefits and (2) develop case study examples of individuals who fraudulently and/or improperly received these benefits. In conducting this investigation, we compared DI and SSI benefit data to civilian payroll records of certain federal agencies and carrier/driver records from the Department of Transportation (DOT) and 12 selected states.
We found the following: 1) Thousands of federal employees, commercial drivers, and owners of commercial vehicle companies received Social Security disability benefits during fiscal year 2008, though we could not determine the extent to which beneficiaries improperly or fraudulently received payments. Because further investigation is required to determine whether these individuals are entitled to receive payments, our analysis provides only an indicator of potentially improper or fraudulent activity. Federal salary data from selected agencies for October 2006 through December 2008 show that about 1,500 federal employees may be improperly receiving payments. These employees were (1) DI beneficiaries who received federal salary above the earnings threshold for more than 12 months after the start date of their disabilities or (2) SSI recipients who received more than 2 months of federal salary above the maximum SSA earnings threshold for the SSI program after the start date of their disabilities. Based on their SSA benefit amounts, we estimate that these federal employees received about $1.7 million in benefits a month. 2) Based on our overall analysis above, we selected 20 nonrepresentative examples of federal employees, commercial drivers, and registrants of commercial vehicle companies who received disability payments fraudulently and/or improperly. The 20 cases were primarily selected based on our analysis of SSA electronic and paper files for the higher overpayment amounts, the types of employment, and the locations of employment, and thus they cannot be projected to other federal employees, commercial drivers, or commercial vehicle owners who received SSA disability payments. In each case, SSA's internal controls did not prevent improper and fraudulent payments, and as a result, tens of thousands of dollars of overpayments were made to individuals for 18 of these 20 cases. For the 20 cases, our investigations found the following: (1) For five cases, we believe that there is sufficient evidence that the beneficiaries committed fraud to obtain or continue receiving Social Security disability payments by withholding employment information. (2) For 10 cases, SSA improperly increased the benefit amounts of the disability payments because the individuals had increases in the reported wages on which the disability benefit payments are based. (3) Several individuals from our cases were placed in long-term, interest-free repayment plans for improperly accepting disability overpayments, even though SSA can charge interest. One individual's $33,000 repayment plan was in $20 monthly installments--resulting in a repayment period of 130 years. For 10 cases, the individuals were continuing to receive disability benefits as of October 2009. For 18 of these 20 cases, the individuals also received $250 stimulus checks as part of the American Recovery and Reinvestment Act of 2009 (Recovery Act) while they were improperly receiving SSA disability payments. According to SSA officials, most of these individuals were entitled to and would have received the $250 stimulus checks even if SSA had properly suspended the disability payments to them. Specifically, SSA officials stated that beneficiaries covered under the DI program would have been covered under an extended period of eligibility (EPE), which is a 36-month period in which SSA does not pay any benefit amounts (i.e., payments are suspended) if the beneficiary has earnings above the substantial gainful activity (SGA) threshold. According to SSA officials, all working DI beneficiaries covered by an EPE received the $250 stimulus check.
GAO-10-949T, Social Security Administration: Cases of Federal Employees and Transportation Drivers and Owners Who Fraudulently and/or Improperly Received SSA Benefits
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Testimony:
Before the Permanent Subcommittee on Investigations, Committee on
Homeland Security and Governmental Affairs, U.S. Senate:
United States Government Accountability Office:
GAO:
For Release on Delivery:
Expected at 2:30 p.m. EDT:
Wednesday, August 4, 2010:
Social Security Administration:
Cases of Federal Employees and Transportation Drivers and Owners Who
Fraudulently and/or Improperly Received SSA Benefits:
Statement of Gregory D. Kutz, Managing Director:
Forensic Audits and Special Investigations:
GAO-10-949T:
[End of section]
Mr. Chairman and Members of the Subcommittee:
Thank you for the opportunity to discuss the results of our
investigation of the disability programs managed by the Social
Security Administration (SSA). SSA administers two of the nation's
largest cash benefit programs for people with disabilities: the
Disability Insurance (DI) program,[Footnote 1] which provides benefits
to workers with disabilities and their family members, and the
Supplemental Security Income (SSI) program, which provides income for
aged, blind, or disabled people with limited income and resources. In
2008, the DI program provided about $104 billion to some 9 million
beneficiaries,[Footnote 2] and the SSI program provided about $38
billion in financial benefits to some 7.5 million recipients.[Footnote
3]
Given the magnitude of these cash benefit payments, it is important
for SSA to have effective fraud prevention controls in place to
minimize fraudulent and improper payments. My statement today
summarizes our most recent report, describing cases of federal
workers, commercial drivers, and commercial vehicle company owners who
fraudulently or improperly received disability benefits.[Footnote 4]
The objectives of the investigation were to (1) determine whether
federal employees and commercial vehicle drivers and company owners
may be improperly receiving disability benefits and (2) develop case
study examples of individuals who fraudulently and/or improperly
received these benefits. In conducting this investigation, we compared
DI and SSI benefit data to civilian payroll records of certain federal
agencies[Footnote 5] and carrier/driver records from the Department of
Transportation (DOT) and 12 selected states.[Footnote 6] To develop
our cases, we interviewed, as appropriate, each beneficiary and the
beneficiary's employer and reviewed relevant SSA case file documents
and employer payroll records. We conducted our audit work in
accordance with generally accepted government auditing standards and
our investigative work in accordance with standards prescribed by the
Council of the Inspectors General on Integrity and Efficiency.
Federal Employees, Commercial Drivers, and Commercial Vehicle Company
Owners Received SSA Disability Benefits:
Thousands of federal employees, commercial drivers, and owners of
commercial vehicle companies received Social Security disability
benefits during fiscal year 2008, though we could not determine the
extent to which beneficiaries improperly or fraudulently received
payments. Because further investigation is required to determine
whether these individuals are entitled to receive payments, our
analysis provides only an indicator of potentially improper or
fraudulent activity.[Footnote 7]
Federal salary data from selected agencies for October 2006 through
December 2008 show that about 1,500 federal employees may be
improperly receiving payments.[Footnote 8] These employees were (1) DI
beneficiaries who received federal salary above the earnings threshold
for more than 12 months after the start date of their disabilities or
(2) SSI recipients who received more than 2 months of federal salary
above the maximum SSA earnings threshold for the SSI program after the
start date of their disabilities. Based on their SSA benefit amounts,
we estimate that these federal employees received about $1.7 million
in benefits a month.
According to SSA officials, SSA currently does not obtain payroll
records from the federal government to identify SSA disability
beneficiaries or recipients who are currently working. SSA officials
stated that they have not determined the feasibility of conducting
such a match. However, SSA acknowledged that these payroll records may
be helpful in more quickly identifying individuals who are working so
that work continuing disability reviews could be performed to evaluate
whether those individuals should have their disability payments
suspended.
Our analysis of data from DOT on commercial drivers and from SSA on
disability beneficiaries found that about 600,000 individuals had been
issued commercial driver's licenses (CDL) and were receiving full
Social Security disability benefits. The actual number of SSA
disability beneficiaries with active CDLs cannot be determined for two
reasons. First, states, not DOT, maintain the current status of CDLs.
[Footnote 9] Second, possession of a CDL does not necessarily indicate
that the individual returned to work. Because federal regulations
require interstate commercial drivers to be examined and certified by
a licensed medical examiner to be able to physically drive a
commercial vehicle once every 2 years, we selected a nonrepresentative
selection of 12 states[Footnote 10] to determine how many SSA
disability beneficiaries had CDLs issued after their disabilities were
determined by SSA. Of the 600,000 CDL holders receiving Social
Security disability benefits, about 144,000 of these individuals were
from our 12 selected states. About 62,000 of these 144,000
individuals, or about 43 percent, had CDLs that were issued after SSA
determined that the individuals met the federal requirements for full
disability benefits. Because federal regulations require interstate
commercial drivers to be examined and certified every 2 years by a
licensed medical examiner to be able to physically drive a commercial
vehicle, we consider the issuance of CDLs to be an indication that
these individuals may no longer have serious medical conditions and
may have returned to work.
Our analysis of DOT data on commercial carriers found about 7,900
individuals who registered as transportation businesses[Footnote 11]
and also received SSA disability benefits. The extent to which these
business registrants are obtaining disability benefits fraudulently,
improperly, or both is not known because each case must be
investigated separately for such a determination to be reached. These
companies may have gone out of business and not reported their closure
to DOT, which would explain their registration. In addition, DI
beneficiaries may have a passive interest in the business, which would
not affect their eligibility for benefits. However, we believe that
the registration of a business is an indicator that the individual
could be actively engaged in the management of the company and
gainfully employed, potentially disqualifying him or her from
receiving either DI or SSI benefits. It also suggests that the
individual's assets may exceed the SSI maximum for eligibility.
According to SSA officials, SSA currently does not obtain CDL or
transportation businesses registrant records from DOT. SSA officials
stated that these records do not have specific income records
associated with them.
Examples of Individuals Fraudulently and/or Improperly Receiving SSA
Disability Benefits:
Based on our overall analysis above, we selected 20 nonrepresentative
examples of federal employees, commercial drivers, and registrants of
commercial vehicle companies who received disability payments
fraudulently and/or improperly. The 20 cases were primarily selected
based on our analysis of SSA electronic and paper files for the higher
overpayment amounts, the types of employment, and the locations of
employment, and thus they cannot be projected to other federal
employees, commercial drivers, or commercial vehicle owners who
received SSA disability payments. In each case, SSA's internal
controls did not prevent improper and fraudulent payments, and as a
result, tens of thousands of dollars of overpayments were made to
individuals for 18 of these 20 cases.
For the 20 cases, our investigations found the following:
* For five cases, we believe that there is sufficient evidence that
the beneficiaries committed fraud to obtain or continue receiving
Social Security disability payments by withholding employment
information. Our investigations also found that 11 other individuals
potentially committed fraud because these individuals likely withheld
required employment information from SSA.
* For 10 cases, SSA improperly increased the benefit amounts of the
disability payments because the individuals had increases in the
reported wages on which the disability benefit payments are based.
SSA's Automated Earnings Reappraisal Operation (AERO), which screens
changes in an individual's earnings record, is not used to identify
individuals who return to work and alert SSA staff to review these
individuals' records for possible suspension of disability payments.
[Footnote 12]
* Several individuals from our cases were placed in long-term,
interest-free repayment plans for improperly accepting disability
overpayments, even though SSA can charge interest. One individual's
$33,000 repayment plan was in $20 monthly installments--resulting in a
repayment period of 130 years.
* For 10 cases, the individuals were continuing to receive disability
benefits as of October 2009.
For 18 of these 20 cases, the individuals also received $250 stimulus
checks as part of the American Recovery and Reinvestment Act of 2009
(Recovery Act) while they were improperly receiving SSA disability
payments. According to SSA officials, most of these individuals were
entitled to and would have received the $250 stimulus checks even if
SSA had properly suspended the disability payments to them.
Specifically, SSA officials stated that beneficiaries covered under
the DI program would have been covered under an extended period of
eligibility (EPE),[Footnote 13] which is a 36-month period in which
SSA does not pay any benefit amounts (i.e., payments are suspended) if
the beneficiary has earnings above the substantial gainful activity
(SGA)[Footnote 14] threshold. According to SSA officials, all working
DI beneficiaries covered by an EPE received the $250 stimulus check.
The Recovery Act states that these stimulus benefit payments should be
provided to individuals who are entitled to DI benefit payments or are
eligible for SSI cash benefits.[Footnote 15] SSA stated that it did
not seek a formal legal determination as to whether individuals who
had their payments suspended because of employment should receive
these stimulus payments. In total, SSA paid about $10.5 million in
stimulus payments to approximately 42,000 individuals who were covered
by an EPE.[Footnote 16] However, we believe that a question exists as
to whether these payments were proper and believe that SSA should have
at least sought a formal legal opinion before making the payments.
Table 1 highlights 5 of the 20 individuals we investigated. We
referred all 20 cases to SSA management for collection action. The SSA
Office of Inspector General has been informed of the 5 cases in which
we believe the individuals committed fraud. We also referred 1 case
involving an SSA employee to the SSA Office of Inspector General for
investigation.
Table 1: Summary Information on Federal Employees and Commercial
Vehicle Company Owners Who Improperly or Fraudulently Received SSA
Disability Benefits While Working:
Case no.: 1;
Details:
* Our investigation found that the beneficiary committed fraud in
obtaining SSA disability payments;
* The beneficiary was a Transportation Security Administration
screener who worked in California. The estimated overpayment was about
$108,000;
* SSA approved DI payments starting in 1995 for mood and anxiety
disorders;
* The beneficiary began full-time federal employment in 2003. From
2003 through 2008, her annual earnings were from $36,000 to $50,000;
* SSA requested a Work Activity Report from the beneficiary in April
2005, but the beneficiary did not provide it;
* In November 2005, SSA notified the beneficiary that based on wages
earned in 2004 her benefits would be increased;
* SSA's case file indicates that in July 2006 the beneficiary called
SSA and stated that she did not want SSA to contact her employer for
work review and that she would submit a Work Activity Report as soon
as possible. SSA records do not indicate that the beneficiary provided
this report;
* In November 2006, SSA notified the beneficiary that based on wages
earned in 2005 her benefits would be increased;
* In November 2007, SSA notified the beneficiary that based on wages
earned in 2006 her benefits would be increased;
* As of October 2009, SSA continued to pay the beneficiary a monthly
benefit. The beneficiary also received a $250 economic stimulus
payment;
* The beneficiary stated that she is working full-time and receiving
disability benefits;
* According to SSA officials, SSA has subsequently suspended the
beneficiary's disability benefit payments for failure to cooperate in
a medical disability review in the latter part of 2009;
* The beneficiary resides in a house that is currently listed for sale
at about $1,800,000.
Case no.: 2;
Details:
* Our investigation found that the beneficiary committed fraud in
obtaining SSA disability payments;
* The beneficiary was a home improvement contractor located in
Maryland. The estimated overpayment could not be determined;
* SSA approved DI payments starting in 1998 for back disorders and
vascular disease;
* The beneficiary owns an active construction business registered with
DOT;
* The beneficiary stated that his home improvement business includes
drywall, roofing, carpeting, siding, decks, kitchens, and any other
home improvement work. We found evidence of fraud by the beneficiary,
who stated that he puts everything in his wife's name because he is on
disability for heart problems;
* The beneficiary stated that he always has at least two jobs going on
at a time and that he has three trucks;
* Our investigators observed the beneficiary driving a pickup truck
with ladders attached to the roof. The Maryland Home Improvement
Contractor license displayed on the side of another truck on the
property is listed under the wife's name;
* In April 2006, SSA notified the beneficiary that the State of
Maryland will pay the Medicare medical insurance premium beginning in
February 2006;
* In June 2009, SSA notified the beneficiary that the agency had
received his application for help with Medicare prescription drug plan
costs. The application asked "Have you worked in 2008 or 2009?" SSA
records indicate that the beneficiary answered "No." Later in the
month, SSA notified the beneficiary that he is automatically eligible
for extra help with Medicare prescription drug plan costs because he
receives DI, Medicaid, or participates in the Medicare Savings Program;
* As of October 2009, SSA continued to pay the beneficiary a monthly
benefit of $1,072. SSA also sent the beneficiary the $250 economic
stimulus payment;
* According to SSA officials, no work continuing disability review has
been conducted for this beneficiary and no earnings information exists
in his records.
Case no.: 3;
Details:
* Our investigation found that the beneficiary committed fraud in
obtaining SSA disability payments;
* The beneficiary was a laundry worker for the Department of Veterans
Affairs who worked in West Virginia. The estimated overpayment was
about $39,000;
* The beneficiary began work as a textile care production worker,
earning around $35,000 per year in April 2007;
* The position description for the job states that continuous
standing, walking, stretching, stooping, bending, and arduous labor
are required in the position. The shift supervisor stated that the
beneficiary performs all the regular functions of the job and that no
special accommodations have been arranged for his work;
* SSA approved DI payments starting in August 2007 for back disorders
and mood disorders. At the time of SSA approval for DI, the
beneficiary was working full-time at the Department of Veterans
Affairs;
thus the beneficiary was never entitled to any disability payments;
* In November 2008, SSA notified the beneficiary that based on wages
earned in 2007 his benefits would be increased;
* In July 2009, SSA notified the beneficiary that he was entitled to
Medicare hospital and medical insurance beginning in August 2009;
* The beneficiary stated that SSA said he could work even though he
was on disability. The beneficiary stated that he did not know that he
was supposed to report to SSA when he began working;
* As of October 2009, SSA continued to send the beneficiary a monthly
benefit payment of $1,236. SSA also sent the beneficiary a $250
economic stimulus payment;
* SSA officials stated that the recipient returned to work prior to
his eligibility start date and was therefore not eligible for any SSA
disability benefits.
Case no.: 4;
Details:
* Our investigation found that the beneficiary potentially committed
fraud in obtaining SSA disability payments;
* The beneficiary was a legal assistant for SSA who worked in Arizona.
The estimated overpayment was about $11,000;
* SSA approved DI payments starting in 2003 for affective/mood
disorders and osteoarthrosis;
* The beneficiary began working for SSA in the third quarter of 2007;
* According to SSA records, the beneficiary did not contact the agency
as required;
* In November 2008, SSA notified the beneficiary that based on wages
earned in 2007 her benefits would be increased;
* The SSA Office of Inspector General opened an investigation of the
employee after we informed the agency of her employment status;
* According to SSA officials, SSA disability programs do not have
access to SSA's payroll records to determine whether their employees
are receiving disability payments and thus should be evaluated for
eligibility;
* SSA sent the beneficiary a $250 economic stimulus payment;
* SSA officials stated that a work continuing disability review for
the recipient is pending.
Case no.: 5;
Details:
* Our investigation found that the beneficiary committed fraud in
obtaining SSA disability payments;
* The beneficiary was a mail clerk for the U.S. Postal Service who
worked in Pennsylvania. The estimated overpayment was about $19,000;
* SSA approved DI payments starting in 2006 for a brain tumor;
* The beneficiary stated that she returned to work in 2007;
* The beneficiary stated that around July 2009 she received a
statement from SSA that the agency had found out about her working and
that her benefits were to be terminated. SSA stated that she would
have to repay about $19,000 in benefits;
* The beneficiary stated that she agreed to repay $100 per month by
check and that she will likely die before paying back the full debt;
* We found evidence of fraud when the beneficiary stated that she knew
she was supposed to notify SSA of her work but that she did not
because she needed the money;
* SSA sent the beneficiary a $250 economic stimulus payment.
Source: GAO.
[End of table]
Recommendations for Executive Action:
In our report, we recommend that the Commissioner of Social Security
take the following two actions to improve the agency's processes:
* Evaluate the feasibility (including consideration of any costs and
operational and system modifications) of incorporating the AERO
process to identify individuals who have returned to work.
* Evaluate the feasibility of periodically matching SSA disability
beneficiaries and recipients to federal payroll data. Such matches
would provide SSA with more timely data to help SSA systematically and
more effectively identify federal employees who are likely to incur
overpayments.
In written comments on the draft of the report, SSA agreed with our
recommendations, saying that it will evaluate using the AERO process
and review the efficacy of matching federal salary payment records
with SSA disability files of DI beneficiaries and SSI recipients. SSA
stated that their existing processes already identified certain cases
as overpayments. SSA does have a process in place that likely
identifies some abuses that are occurring; our report identifies 6
cases where SSA identified the disability overpayment and sent
notification letters to the individuals indicating that they would
have to repay the debts. However we do not believe that identifying
fraudulent or improper payments after dollars have been disbursed is
an effective internal control. Our work across the government has
shown that once fraudulent or improper payments are made, the
government is likely to only recover pennies on the dollar. Preventive
controls are the most efficient and effective. SSA also expressed
concern that the overall message of our report is misleading and in
some cases factually incorrect. We believe our report accurately
describes the cases and our methodology.
Mr. Chairman, this concludes my statement. I would be pleased to
answer any questions that you or other members of the subcommittee may
have at this time.
Contacts:
For further information regarding this testimony, please contact
Gregory D. Kutz at (202) 512-6722 or kutzg@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this statement.
[End of section]
Footnotes:
[1] To be eligible for DI benefits, individuals with disabilities must
have a specified number of recent work credits under Social Security
at the onset of medical impairment. Individuals may also be able to
qualify based on the work record of a deceased spouse or of a parent
who is deceased, retired, or eligible for disability benefits.
[2] The approximately 9 million DI beneficiaries include about 7
million eligible workers and about 2 million dependent spouses and
children.
[3] The 7.5 million SSI recipients include 6.3 million recipients who
are either blind or medically impaired and 1.2 million aged recipients.
[4] GAO, Social Security Administration: Cases of Federal Employees
and Transportation Drivers and Owners Who Fraudulently and/or
Improperly Received SSA Disability Payments, [hyperlink,
http://www.gao.gov/products/GAO-10-444] (Washington, D.C.: June 25,
2010).
[5] The payroll records were obtained from the Department of the
Treasury, the U.S. Postal Service, and the Defense Finance and
Accounting Service (DFAS).
[6] The 12 selected states were California, Florida, Illinois,
Kentucky, Maryland, Michigan, Minnesota, Montana, Tennessee, Texas,
Virginia, and Wisconsin. The 12 states were selected primarily based
on the size of the licensed commercial driver population.
[7] Federal disability programs, such as SSA's "Ticket to Work,"
encourage certain disability beneficiaries to work and still receive
all or a portion of their disability benefits. In addition, from the
beneficiary's income, SSA may exclude certain out-of-pocket work
expenses (e.g., costs of car modifications or attendant care) from the
calculation of the beneficiary's income. The beneficiary's salary may
also include compensation for sick leave, which SSA also excludes from
the calculation of the beneficiary's income. From our analysis of the
data, it is impossible to determine the extent to which this
population beyond our 20 cases was affected by these factors.
[8] Federal civilian salary data and SSA disability data indicate that
the total number of employees at the selected agencies is about 7,000.
They earned wages while receiving SSA disability benefits during
fiscal year 2008. While many of these beneficiaries may not receive
payments fraudulently or improperly, the number suggests the
importance of monitoring these cases.
[9] The DOT data do not contain identifiers to indicate whether a
license is currently active. It is an index system designed to ensure
that drivers do not obtain CDLs from multiple states. As a result,
DOT's database includes drivers with valid, suspended, revoked, or
lapsed licenses.
[10] The states were chosen primarily based on size and availability
of data.
[11] Each business is a registered motor carrier in DOT's Motor
Carrier Management Information System with an active DOT number. For
private motor carriers, there is no cost associated with maintaining
an active listing.
[12] AERO is a computer operation that reexamines an individual's
earnings record to determine whether the beneficiary is due a
recomputation to include earnings not previously considered in the
monthly disability amount. If an increase is due, AERO processes a
benefit change and notifies the beneficiary. If no increase is due,
AERO does not send a notice. AERO is run twice for each earnings year,
usually in late October and late March.
[13] After the 9-month trial work period, SSA beneficiaries are
covered under an EPE. This is a 36-month period in which SSA does not
pay any benefit amounts if the beneficiary has earnings above the SSA
earnings threshold for the DI program. If earnings are under the
substantial gainful activity threshold, the full benefit is paid.
[14] SGA is defined as work activity that involves significant
physical or mental activities performed for pay or profit. SSA has
established earnings guidelines as a basis for determining whether an
individual is engaged in SGA.
[15] Pub. L. No. 111-5 § 2201 (Feb. 17, 2009).
[16] According to SSA officials, the "Making Work Pay" tax credit is
reduced by the amount of any stimulus payments. The extent to which
these individuals reduced their "Making Work Pay" tax credit for these
stimulus benefit payments is not known.
[End of section]
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