[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]
SOCIAL SECURITY REPRESENTATIVE PAYEES
=======================================================================
HEARING
before the
SUBCOMMITTEE ON SOCIAL SECURITY
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
__________
MAY 4, 2000
__________
Serial 106-57
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
66-526 CC WASHINGTON : 2000
COMMITTEE ON WAYS AND MEANS
BILL ARCHER, Texas, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
BILL THOMAS, California FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York SANDER M. LEVIN, Michigan
WALLY HERGER, California BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana JIM McDERMOTT, Washington
DAVE CAMP, Michigan GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
A.L. Singleton, Chief of Staff
Janice Mays, Minority Chief Counsel
______
Subcommittee on Social Security
E. CLAY SHAW, Jr., Florida, Chairman
SAM JOHNSON, Texas ROBERT T. MATSUI, California
MAC COLLINS, Georgia SANDER M. LEVIN, Michigan
ROB PORTMAN, Ohio JOHN S. TANNER, Tennessee
J.D. HAYWORTH, Arizona LLOYD DOGGETT, Texas
JERRY WELLER, Illinois BENJAMIN L. CARDIN, Maryland
KENNY HULSHOF, Missouri
JIM McCRERY, Louisiana
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
__________
Page
Advisory of April 25, 2000, announcing the hearing............... 2
WITNESSES
Social Security Administration:
Susan M. Daniels, Ph.D., Deputy Commissioner, Disability and
Income Security Programs; accompanied by Larry Massanari,
Regional Commissioner, Philadelphia, Pennsylvania.......... 5
Hon. James G. Huse, Jr., Inspector General, Office of the
Inspector General.......................................... 36
______
Coleman, Nancy, Federal Advisory Board, and American Bar
Association.................................................... 49
Maryland Association of Community Services for Persons with
Developmental Disabilities, Inc., Diane McComb................. 62
Mental Health Association of York County, Ann Sparks............. 60
National Association of Reimbursement Officers, Reginald Glover.. 57
West Virginia Legal Services Plan, Inc., Garry G. Geffert........ 64
SUBMISSIONS FOR THE RECORD
National Alliance for the Mentally Ill, Arlington, VA, and Sue
Davis, Scottsdale, AZ, statement............................... 77
Reese, Dawn, Harrisburg, PA, statement........................... 80
SOCIAL SECURITY REPRESENTATIVE PAYEES
----------
THURSDAY, MAY 4, 2000
House of Representatives,
Committee on Ways and Means,
Subcommittee on Social Security,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:10 a.m. in
room B-318, Rayburn House Office Building, Hon. E. Clay Shaw
(Chairman of the Subcommittee) presiding.
[The advisory announcing the hearing follows:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON SOCIAL SECURITY
CONTACT: (202) 225-3943
FOR IMMEDIATE RELEASE
April 25, 2000
No. SS-16
Shaw Announces Hearing on Social Security Representative Payees
Congressman E. Clay Shaw, Jr., (R-FL), Chairman, Subcommittee on
Social Security of the Committee on Ways and Means, today announced
that the Subcommittee will hold a hearing on Social Security
representative payees. The hearing will take place on Thursday, May 4,
2000 , in room B-318 of the Rayburn House Office Building, beginning at
10:00 a.m.
Oral testimony at this hearing will be from invited witnesses only.
Witnesses will include representatives of the Social Security
Administration (SSA), including Social Security's Inspector General, as
well as organizations that serve as representative payees for
beneficiaries. However, any individual or organization not scheduled
for an oral appearance may submit a written statement for consideration
by the Committee and for inclusion in the printed record of the
hearing.
BACKGROUND:
Social Security and Supplemental Security Income (SSI) benefits are
distributed to more than 50 million Americans, including many
determined to be unable to manage their own financial affairs. In such
cases, SSA will work with the beneficiary and his or her family or
other responsible individuals to locate a ``representative payee,''
often called a ``rep payee.'' Rep payees are individuals or
organizations that have been approved and designated by SSA to receive
a recipient's benefits directly from SSA on the recipient's behalf. The
primary purpose of the rep payee is to safeguard a recipient's monthly
benefits and ensure the money is spent on the beneficiary's needs.
According to SSA, more than 6.5 million Social Security and SSI
beneficiaries have rep payees.
SSA has a variety of systems in place to ensure the responsibility
and trustworthiness of individuals and organizations that serve as rep
payees. Despite such protections, in certain instances the systems have
failed to prevent the misuse of benefit payments. Given the degree of
responsibility and trust afforded rep payees, such breaches have
resulted in significant harm to beneficiaries, and have led to
concerted efforts to stem further abuse. Most recently, SSA submitted
draft legislation to Congress on February 22, 2000, suggesting specific
changes to improve the oversight and the effectiveness of the rep payee
program.
In announcing the hearing, Chairman Shaw stated: ``Social Security
beneficiaries who depend on rep payees to handle their affairs are
among the most vulnerable people Social Security serves. This hearing
will help us assess Social Security's procedures to protect
beneficiaries, how and why these procedures sometimes fall short, and
ways to better protect beneficiaries in the future.''
FOCUS OF THE HEARING:
The hearing will examine current eligibility requirements for rep
payees, SSA's oversight systems, instances in which those systems
failed to protect beneficiaries from fraud and abuse, and suggestions
for improving beneficiary protections. Witnesses will review
legislative proposals, including those made by SSA, for improving the
rep payee program and its protections for beneficiaries.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Any person or organization wishing to submit a written statement
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch
diskette in WordPerfect or MS Word format, with their name, address,
and hearing date noted on a label, by the close of business, Thursday,
May 18, 2000 , to A.L. Singleton, Chief of Staff, Committee on Ways and
Means, U.S. House of Representatives, 1102 Longworth House Office
Building, Washington, D.C. 20515. If those filing written statements
wish to have their statements distributed to the press and interested
public at the hearing, they may deliver 200 additional copies for this
purpose to the Subcommittee on Social Security office, room B-316
Rayburn House Office Building, by close of business the day before the
hearing.
FORMATTING REQUIREMENTS:
Each statement presented for printing to the Committee by a
witness, any written statement or exhibit submitted for the printed
record or any written comments in response to a request for written
comments must conform to the guidelines listed below. Any statement or
exhibit not in compliance with these guidelines will not be printed,
but will be maintained in the Committee files for review and use by the
Committee.
1. All statements and any accompanying exhibits for printing must
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect or
MS Word format, typed in single space and may not exceed a total of 10
pages including attachments. Witnesses are advised that the Committee
will rely on electronic submissions for printing the official hearing
record.
2. Copies of whole documents submitted as exhibit material will not
be accepted for printing. Instead, exhibit material should be
referenced and quoted or paraphrased. All exhibit material not meeting
these specifications will be maintained in the Committee files for
review and use by the Committee.
3. A witness appearing at a public hearing, or submitting a
statement for the record of a public hearing, or submitting written
comments in response to a published request for comments by the
Committee, must include on his statement or submission a list of all
clients, persons, or organizations on whose behalf the witness appears.
4. A supplemental sheet must accompany each statement listing the
name, company, address, telephone and fax numbers where the witness or
the designated representative may be reached. This supplemental sheet
will not be included in the printed record.
The above restrictions and limitations apply only to material being
submitted for printing. Statements and exhibits or supplementary
material submitted solely for distribution to the Members, the press,
and the public during the course of a public hearing may be submitted
in other forms.
Note: All Committee advisories and news releases are available on
the World Wide Web at `HTTP://WWW.HOUSE.GOV/WAYS__MEANS/'.
The Committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
business days notice is requested). Questions with regard to special
accommodation needs in general (including availability of Committee
materials in alternative formats) may be directed to the Committee as
noted above.
Chairman Shaw. Good morning and welcome to today's hearing.
More than 50 million people receive Social Security and SSI
benefits because they can not work due to age or disability.
Despite those limitations, most beneficiaries are still able to
handle their financial affairs for themselves.
Today's hearing is about the more than six million
beneficiaries who can not. They are left in the especially
vulnerable position of having to trust others to manage their
affairs for them.
The Social Security Administration has called the people
they turn to for help, representative payees, or rep payees,
for short. In most cases, the rep payee is a family member; for
example, a parent receiving a SSI check for their child.
There are about 45,000 organizations, including local
government agencies and nonprofit groups, that serve as rep
payees for more than 750,000 beneficiaries, when relatives or
friends can not be found or can not be counted on.
Any allegation of abuse by someone in such a position of
trust would be disturbing. But recent revelations of abuse
involving organizations that serve as rep payees are especially
troubling; in fact, they are sickening.
In one recent case in West Virginia, a rep payee for more
than 100 beneficiaries stole their Social Security benefits and
any other assets he could get his hands on. One beneficiary
lost $60,000 in his savings account, and ending up living in
her car. Another elderly woman lost her home, and later was
threatened with removal from her nursing home.
The man who did this is now headed for jail. We should
throw the book at anyone who would abuse such a position of
trust. But this case has raised a number of troubling questions
about who can become a rep payee and how the Social Security
Administration makes sure rep payees are doing their job.
This hearing is designed to answer these questions, so we
can make some common sense changes to this program in the weeks
ahead. In the process, we will work with the SSA and SSA's
Inspector General, as well as responsible voices in the
beneficiary and rep payee community. I am sure everyone here
agrees that even one case of abuse is one too many.
But we also need to remember that examples of abuse are
fortunately rare, especially compared with the millions of
honest and trustworthy rep payees that are out there. We
certainly do not want to scare off the millions of family
members, friends, churches, and civil groups who voluntarily
take on this tough but important duty. That would result in an
even greater tragedy than some of the horror stories that we
have seen in recent months.
Mr. Matsui.
Mr. Matsui. Thank you very much, Mr. Chairman. I appreciate
the fact that you are holding these hearings on certainly what
you have stated is a very serious problem. The $7.5 million may
not seem like a lot of money from Congressional or executive
branch standards. But it certainly is, when it is down to the
individual level.
And we have to make sure that whatever legislation that we
look to, that we make sure that we keep the beneficiary, that
is, the Social Security recipient, whole because that person
certainly has done nothing wrong and is totally blameless for
whatever losses that he or she may sustain.
And, second, as the Chairman has said, we have to make sure
that those that commit the act, that is the representative
payee, are held accountable and responsible, and that we are in
a position to collect the money from that individual or group
or entity or organization, when in fact an abuse actually
occurs.
And so I look forward to working with the Chairman, and
certainly the administration and others, to make sure that we
address this very pressing problem.
And, again, Mr. Chairman, I would like to thank you for
holding these hearings. I think it is critical that we really
address this in the way that you are suggesting.
Thank you.
Chairman. Shaw. This morning we have our first panel, who
is seated in front of us. Dr. Susan Daniels is an old friend of
this Committee, who is the Deputy Commissioner of the
Disability and Income Security Programs. She is accompanied by
Larry Massanari, who is the Regional Commissioner, from
Philadelphia, Pennsylvania.
Dr. Daniels.
STATEMENT OF SUSAN M. DANIELS, PH.D., DEPUTY COMMISSIONER,
DISABILITY AND INCOME SECURITY PROGRAMS, SOCIAL SECURITY
ADMINISTRATION; ACCOMPANIED BY LARRY MASSANARI, REGIONAL
COMMISSIONER, PHILADELPHIA, PENNSYLVANIA
Ms. Daniels. Thank you.
Mr. Chairman, Mr. Matsui, thank you for inviting me here
today to talk to you about the Social Security rep payee
program, particularly as it relates to organizational payees.
Today, I will discuss a few general features of the
program: Our recent changes that we have implemented to
strengthen the payee program, legislation we have sent to
Congress in order to improve the program; and of course, I will
take your questions when I am done.
As you stated earlier, almost all the representative payees
provided much needed help to our beneficiaries in a careful,
compassionate and totally voluntary basis. Eighty-four percent
of the payees are family members or friends. Only one in ten
thousand representative payee cases each year results in some
form of misuse.
I can truthfully tell you that millions of Americans are
being assisted, mostly by family and friends, in a way that can
make all of us proud. Nevertheless, it is no consolation to any
beneficiary that may have lost his or her benefits; nor, is it
acceptable to us.
In the early nineties and toward the middle of the
nineties, we recognized that the representative payee
population was changing. In 1995 and 1996, SSA chartered an
advisory Committee to conduct research and hearings on
representative payee issues. We also asked the Office of the
Inspector General to review and make recommendations to improve
our representative payee program.
Both the advisory Committee and the OIG made several
recommendations: From how to select a representative payee to
the kinds of monitoring program we ought to have. SSA evaluated
these recommendations within the framework of our competing
priorities and our financial limitations and resources.
We have implemented most of the recommendations: The
development and distribution of a handbook for organizational
payees; issuing instructions to our field office to tighten up
on the screening of potential payees, conducting on-site
reviews for fee-for-service and volume payees--volume meaning
the payee is serving many beneficiaries--developing and
distributing pamphlets to beneficiaries so they would know
their rights under the payee program; and changing the focus of
our current program from accounting to monitoring and
compliance.
In addition, we have the following recommendations in
process. We are not finished with these, but we are working on
them: Developing an accounting form tailored to the
organizational payee; expanding our automated system to keep
track of representative payees and other issues; developing and
distributing a handbook for individual payees, making sure they
understand their responsibilities and roles; and instructing
field offices to take better control of their documentation, so
that we know and can find the history of our representative
payees.
As a result of the recent criminal enterprises that were
uncovered, SSA's oversight activities have been strengthened.
Our new initiatives underway now are triennial on-site review
of all fee-for-service payees and for volume payees serving
more than 100 beneficiaries. In addition, all individual payees
serving 20 or more beneficiaries will be part of the triennial
on-site review. Three hundred of these triennial reviews have
already been conducted.
Non-governmental fee-for-service organizational payees must
either be licensed or bonded. Beginning in June, SSA will
require them to annually update their file to show us that they
continue to be eligible to be payees.
Number three is a 6 month review of all newly appointed
fee-for-service payees. We will go on-site and visit these
payees within the first 6 months, to make sure they have their
accounting procedures in order, and they understand their
duties and responsibilities.
Number four is a random review. In addition to the
triennial reviews, of volume and fee-for-service payees, we
will be choosing a random sample of about 30 percent of those
not part of the triennial review.
In addition, SSA will continue to monitor any trigger
events or allegations of misuse that come to our attention. We
are working on tightening our screening of potential payees,
consistent with the OIG's recommendation. And further, SSA
attorneys are working in conjunction with U.S. attorneys to
assist in prosecution of individuals who misuse the funds.
In February, we sent to Congress a legislative proposal for
consideration that would provide additional safeguards for
beneficiaries.
Currently, when any payee is determined to have mishandled
individuals benefits, SSA can reissue those benefits under two
conditions: One, we have received restitution from the payee;
or second, when we declare ourselves negligent.
To facilitate restitution of misused funds, our legislative
proposal would require SSA to reissue benefit payments,
including any fees that were taken in any cases where the
organizational payee is found to have misused the funds,
whether or not negligence or restitution has occurred. Of
course, we will continue to seek restitution as a deterrent and
in order to replenish the funds--the trust funds or general
revenves that were used to reissue benefits.
In addition to this change, our legislative proposal
includes other provisions: requiring non-governmental fee-for-
service organizations to be bonded and licensed, not ``or
licensed,'' providing that when an organization has been found
to misuse benefits, that they not be allowed to collect a fee
for those months in which they misused benefits; and finally,
counting as an overpayment to a payee, any funds of the
beneficiary misused by the payee, on behalf of another
beneficiary.
We urge Congress to give these proposals prompt attention,
and we are delighted that Representative Wise has begun this
process.
In conclusion, let me tell you that we are truly grateful
to the millions of voluntary payees who assist our
beneficiaries, and do so carefully and compassionately. We have
a special concern for those beneficiaries who have no one to
help them in their personal lives, and must be represented by
organizations or fee-for-service payees. We will continue to
monitor our representative payee program more carefully.
And finally, we are eager to work with you on strengthening
the program, so that we have more tools in order to safeguard
our beneficiaries.
I would be delighted to take your questions.
[The prepared statement follows:]
Statement of Susan M. Daniels, Ph.D., Deputy Commissioner, Disability
and Income Security Programs, Social Security Administration
Mr. Chairman, Congressman Matsui, members of the Committee,
thank you for inviting me here today to talk to you about SSA's
representative payee program--particularly as it relates to
organizational payees. Today, I will outline for you the Social
Security Administration's representative payee program as it
applies to organizations, the problems we have faced (including
resource constraints), recent changes that we have implemented
and legislation we have sent to Congress in order to improve
our program. Then, of course, I would be happy to respond to
your questions.
History of Representative Payments
Congress passed legislation in 1939 which granted SSA broad
discretionary authority to appoint representative payees to
receive and disburse benefits for those beneficiaries who were
found to be incapable of managing or directing the management
of their benefits. The appointment of a payee was intended to
ensure that SSA's most vulnerable beneficiaries receive the
full support and benefit that their payments are intended to
deliver. In this same 1939 legislation, Congress extended
benefits to wives of retired workers, and widows and dependent
children of deceased workers. Accordingly, the representative
payee program was initially designed with the needs of the
elderly and children in mind.
Subsequent events, including the enactment of disability
benefits in 1956, the enactment of Supplemental Security Income
(SSI) in 1972, and demographic and political changes in
American society--such as the de-institutionalization of the
mentally ill, and the increase in substance abusers--have all
contributed to the change in the nature of the beneficiary
population served by representative payees. Thirty years ago,
5.2 percent of the Social Security population were paid through
representative payees. Since the implementation of SSI, this
has risen to about 13.3 percent of our 49 million beneficiaries
have representative payees--6.5 million beneficiaries served by
about 4.2 million payees. About 42 percent of beneficiaries who
are paid through a representative payee today are disabled.
The Social Security and SSI disability rolls typically
include people with special needs, such as the mentally ill and
homeless, many of whom are substance abusers. (However,
individuals whose sole medical disability is drug or alcohol
addiction, no longer qualify for benefits.) Many years ago,
these same individuals might have been institutionalized, with
the institution serving as their payee. Today, these
individuals are not institutionalized and often have no close
family willing or able to serve as payee. When such
beneficiaries need help in the management of their financial
affairs, institutions and organizations, or sometimes
acquaintances, have stepped in to act as payees. Many times, in
addition to money management, these payees must address social
service issues, such as finding shelter for the habitually
homeless, dealing with medical decisions, and encouraging
beneficiaries to seek treatment for substance abuse or mental
illness.
We cannot over-emphasize the valuable role that
representative payees serve. When an individual agrees to be a
payee for a beneficiary, he or she takes on an important
responsibility. Sometimes the task of managing another person's
benefits can be a difficult one--especially if the beneficiary
is not always cooperative--and payees deserve a lot of
recognition for volunteering their time and effort. As I
mentioned earlier, many representative payees go beyond
fulfilling their basic responsibilities as a payee and provide
other valuable services to the beneficiary.
Organizational Payees
As I mentioned earlier, about 6.5 million Social Security
and SSI beneficiaries require representative payees. Family
members serve as representative payees for about 84 percent of
these beneficiaries. Payees for the remaining 16 percent are
friends or institutions of various types, such as government or
social service agencies, financial organizations and fee-for-
service organizations. (Fee-for-service organizations meet the
qualifications and are authorized to collect a fee from the
beneficiary's payment for their services as representative
payee.) Currently, about 45,000 organizational representative
payees serve approximately 750,000 Social Security and SSI
beneficiaries. Among those, there are approximately:
855 fee-for-service payees serving almost 60,000
SSA beneficiaries;
1,000 entities (excluding fee-for-service
organizations), which we call ``volume payees,'' serving
250,000 beneficiaries. (A ``volume payee'' is an organization
that serves 100 or more beneficiaries.); and
360 State mental hospitals serving 80,000
beneficiaries.
In order to qualify to collect a fee, an organization must
serve at least 5 beneficiaries and be a:
State or local government agency whose mission is
to carry out income maintenance, social service or health-care
related activities;
State or local government agency with fiduciary
responsibilities, or
Community-based, non-profit social service agency
which is bonded or licensed in the state that it serves.
Determining the Need for Representative Payment
The law provides that if the Commissioner determines that
it is in the interest of the individual, benefits may be paid
to a representative payee. Generally, we appoint a payee if we
determine that the beneficiary is not able to manage or direct
the management of benefit payments in his or her interest. If
the beneficiary is under age 18, payment is usually made to a
representative payee. (Emancipated minors can receive benefits
directly.) In the case of an adult beneficiary, benefits will
be paid to a representative payee if the individual is legally
incompetent, or mentally or physically incapable of managing or
directing the management of his or her benefit payments.
To decide if an individual has a mental or physical
impairment that prevents him or her from receiving benefits
directly, we look at:
medical evidence;
the beneficiary's living situation (such as
whether he/she lives alone if anyone helps him/her manage their
funds);
how the beneficiary is handling money now; and
what his/her needs are and how they are being met
(whether they can obtain their own food, clothing and shelter
or if he/she is dependent on others to supply those needs).
Once we determine that an individual needs a payee, SSA
identifies persons who are willing and best able to serve in
this capacity. Whenever possible, the preferred payee is a
family member or friend who has shown interest in the well-
being of the beneficiary. When such persons cannot be found,
SSA turns to certain organizations that have agreed to perform
the duties of a representative payee.
SSA closely reviews all applications for representative
payment before selecting a payee. Individuals must show their
relationship and interest in the beneficiary. Plus, the
beneficiary is given the opportunity to protest the selection
of a prospective payee. We notify the beneficiary that someone
has applied to be their payee and who that person or
organization is. We ask the beneficiary to contact our field
office if they disagree with either the fact that they need a
payee or if they would prefer that someone else serve as their
representative payee.
Representative Payee Responsibilities
The representative payee is to use the benefit payments
only for the beneficiary's current and foreseeable needs or
save and invest them, if the beneficiary's current needs are
being met. We believe that the representative payment program
best accomplishes this when we have a collaboration with the
payee and the beneficiary. To that end, we strive for a payee
program that:
preserves the rights of beneficiaries and treats
them with respect and dignity;
keeps beneficiaries well-informed about their
benefits;
prepares new representative payees with a clear
understanding of their role and our expectations of them;
furnishes continuing support to payees as they
execute their duties;
ensures that benefits are used in the best
interest of the beneficiary; and
monitors the use of benefits in an effective and
productive manner.
SSA informs the representative payee of his or her
responsibilities at the time he/she files to be representative
payee and also mails a more extensive guide to the payee once
he/she has been selected. Once selected, all representative
payees are required to:
determine the beneficiary's needs and use his/her
payments to meet those needs;
conserve any money left after meeting those needs;
report any changes or events which could affect
the beneficiary's eligibility for benefits;
help the beneficiary get medical treatment when
necessary;
maintain records of the money received on behalf
of the beneficiary and records of all expenditures; and
complete written reports accounting for the use of
the funds.
Annually, SSA requires each representative payee -whether
an individual who represents only one beneficiary or an
organization that represents hundreds--to give an accounting of
the benefits received for each beneficiary and how they were
spent. More specifically, the accounting form asks how much of
the benefits were spent on food, housing, personal items and
how much was saved and in what type of account the money was
conserved. (The only exception to this annual accounting
process is for State mental institutions which undergo an
onsite visit every 3 years.) Each accounting request is
controlled to make sure it is completed. All returned forms are
reviewed to ensure that responses are complete and acceptable.
If incomplete, or if the accounting form raises questions, SSA
will contact the payee to resolve the issue. If the
representative payee fails to return the accounting form, our
local field office conducts a face-to-face interview with the
payee, the beneficiary and, if different from the payee, the
custodian (e.g., the nursing home if a relative is the payee).
SSA Initiatives to Deter Misuse of Benefits by Organizational Payees
Almost all representative payees provide much needed help to
beneficiaries without abusing this responsibility. Unfortunately, there
have been some instances of misuse by representative payees. Misuse of
benefits occurs when the payee neither uses benefits for the current
and foreseeable needs of the beneficiary, nor conserves benefits for
the beneficiary. Of the 6.5 million beneficiaries with representative
payees, there are only about 650 instances of misuse confirmed per
year, or only about 1 in every 10,000 representative payee cases. The
amount of benefits misused by payees is a small percentage of the total
benefits paid -about $3 million per year of the $30 billion in annual
benefits for beneficiaries with payees. However, that is no consolation
to a beneficiary who has lost his or her much needed benefits. Nor is
it acceptable to those of us charged with administering the Social
Security and SSI programs.
SSA is committed to protecting beneficiaries from benefit misuse.
The recently televised representative payee misuse case, the Aurora
Foundation, Inc., in Martinsburg, West Virginia, has resulted in the
president of that organization pleading guilty to the embezzlement of
Social Security and SSI beneficiary funds. As a result of our review of
this criminal enterprise, SSA has strengthened our oversight process.
To that end, we have several new initiatives underway that will help
prevent misuse by organizational payees.
1. Triennial Onsite Reviews of all Fee-for-Service and Volume Payees.
SSA has begun a review of the approximately 855 fee-for-service
payees on a triennial cycle. SSA will also perform triennial reviews of
all volume organizational payees--those serving 100 or more
beneficiaries--and of all individual payees serving 20 or more
beneficiaries. SSA's Office of the Inspector General will participate,
as necessary, in these reviews. This review will ensure payee
compliance through a face-to-face meeting with the payee and
examination of a sample of beneficiary records. The review includes an
assessment of the payee's record keeping, and SSA will interview a
sample of beneficiaries in order to assess whether their needs are
being met. Expenses may be corroborated with providers of the services.
In addition, we will contact vendors to ensure that bills are being
paid. We believe that an added benefit of this initiative will be that
the lines of communication between SSA and the payee will be improved.
Over the last year, approximately 300 of these reviews have already
been conducted as part of a pilot process, and a regular ongoing
schedule will begin this summer.
2. Annual Verification of Bonding or Licensing.
Currently, in order to collect a fee from a beneficiary's check,
non-governmental fee-for-service organizational payees must be either
licensed or bonded as long as they serve as payee. This is a statutory
requirement. Beginning June of this year, SSA will require all non-
governmental fee-for-service organizations to annually show that they
continue to meet those requirements.
3. A 6-Month Review for All Newly Appointed Fee-for-Service Payees.
SSA will visit fee-for-service payees 6 months after their initial
appointment as payee to ensure that they fully understand their duties
and responsibilities, and are on the right track with respect to record
keeping and reporting. We will focus on their accounting procedures so
that, they will be able to account for beneficiaries' funds as well as
comply with our requests for review. This initiative is now in place
and applies to all new fee-for-service payees appointed on or after
January 1, 2000.
4. Random Reviews of Volume and Fee-for-Service Payees.
Each year SSA will conduct a random sample of 30 percent of volume
payees (serving 100 or more beneficiaries) and fee-for-service payees.
We will review a sample of beneficiary records for compliance with our
policies and procedures. We are developing guidelines and instructions
needed to implement this initiative. The instructions provide our
reviewers with information that includes: how to conduct the interview,
the interviewing forms, how to review the record keeping (bank
statements, cancelled checks, bills, contracts, etc.), and how to
document our database with the findings from the review. This
initiative is scheduled for implementation in Fiscal Year 2001.
In addition, SSA continues to monitor for ``trigger'' events. That
is, we conduct reviews of payees in response to certain ``trigger''
events, such as third-party reports of misuse and complaints from
vendors of failure to receive payment. This review has an emphasis on
addressing the complaints.
Finally, we are looking at tightening up the investigation of
potential payees. This is consistent with OIG's suggestion that we put
more emphasis on the selection of representative payees.
I believe that these measures will help to ensure that
organizational representative payees appointed by SSA will carry out
their duties and responsibilities in accordance with the policies and
procedures that are designed to protect our beneficiaries. This
improved organizational payee monitoring process will:
Provide the oversight necessary to ensure that payees
fulfill their duties to our beneficiaries;
Deter potential misuse by regular site visits coupled with
random reviews;
Provide an opportunity for ongoing education by SSA for
these payees about their duties and responsibilities;
Improve lines of communication between the payee and SSA;
and
Ensure that the payee continues to be qualified under the
law to charge a fee for its services.
Further, Social Security attorneys are working in conjunction with
several U.S. Attorneys' offices to assist in the prosecution of Social
Security program fraud, including representative payee misuse cases.
Legislation
We recognize that administrative actions alone are not
sufficient to address all of the problems we identified as a
result of our analysis of the Aurora misuse case. We believe
that some of these problems can only be resolved through
legislation. Therefore, in February, we sent to Congress a
legislative proposal for consideration that would provide
additional safeguards for beneficiaries with representative
payees.
Currently, when any payee has been determined to have
misused an individual's benefits, SSA can reissue the benefits
only in cases where there has been negligent failure on our
part to investigate or monitor the payee. In virtually all
other cases, the individual loses his or her funds unless SSA
or the beneficiary can obtain restitution of the misused
benefits from the payee. Additionally, SSA can seek restitution
only through civil processes if the representative payee
refuses to return the misused funds.
To facilitate restitution of misused funds to
beneficiaries, our legislative proposal would require SSA to
reissue benefit payments (including any respective fees for
fee-for-service payees) in all cases when an organizational
payee is found to have misused a beneficiary's funds, without
either a finding of negligence on SSA's part or restitution
from the organizational payee. Requiring re-issuance of such
misused benefit payments, including any fees that were deducted
from the beneficiary's benefit, would provide additional
protection to the most vulnerable of beneficiaries.
This new authority would enable us to promptly restore
benefits that have been misused by an organizational
representative payee, thereby avoiding the hardship that can be
caused by such a loss. SSA would, through all available avenues
of legal recourse, continue to seek restitution of the misused
funds from the former representative payee. We would do so for
two reasons. First, for the deterrent effect and, second, to
offset the additional costs incurred by the Social Security
trust funds or the general fund in restoring misused benefits
to the beneficiary.
In addition to this change, the legislative proposal would
include other provisions designed to increase the safeguards
for beneficiaries with representative payees. Specifically, it
would:
Require non-governmental fee-for-service
organizational payees to be bonded and licensed, provided that
licensing is available under State or local law. (The
requirement under current law is bonding or licensing.) This
proposed requirement would add further safeguards to a
beneficiary's funds. State licensing provides some oversight by
the state into the organization's business practices, and
bonding provides some assurance that a surety company has
investigated the organization and approved it for the level of
risk associated with the bond. The proceeds from redeemed bonds
would reduce the costs to the program when re-issuing benefits
in cases of representative payee misuse.
Provide that when an organization has been found
to have misused an individual's benefits, the organization
shall not qualify for the fee from that individual's benefits
for months the payee misused the funds. Requiring payees to
return the fees charged for periods of misuse is reasonable
because the payee was clearly not properly performing the
service for which the fee was paid. Permitting the organization
to retain the fees is tantamount to rewarding the payee for
violating his or her responsibility to use the benefits for the
individual's current and future needs.
Provide that misused benefits (including any
respective representative payee fees) would be treated as an
overpayment to the representative payee and, therefore, subject
to current SSA overpayment recovery authority. Although SSA has
been given expanded authority in the recovery of overpayments
(such as tax refund offset, referral to contract collection
agencies, notifying credit bureaus, and administrative offset
of future federal benefit/payments), these tools cannot be used
to recoup benefits misused by a representative payee. Providing
that benefits misused by any representative payee would be an
overpayment to the payee would provide SSA with additional
means for recouping the misused payments. This proposal would
also permit re-issuance of the recovered amounts to the
beneficiary (unless already re-issued by SSA). This change
would improve the protection of all beneficiaries with payees,
not just those with organizational payees.
Also, in September 1999, we sent a legislative proposal to
Congress that, in addition to other provisions, would extend
civil monetary penalty provisions to representative payees that
misuse benefits. As it pertains to representative payees, this
legislative proposal would allow SSA to impose administrative
penalties and assessments against representative payees who
make false statements to obtain or retain benefits. This would
improve our ability to ensure that individuals who commit this
type of fraud against SSA are penalized, even if such
individuals are not prosecuted criminally. We urge Congress to
give these proposals their prompt attention.
Advisory Committee & Inspector General Recommendations Implemented
To address the evolving needs of the beneficiaries and the
payees that assist them, SSA chartered an advisory committee
(AdCom)--a panel of external experts--to review the
representative payee program. In 1995 and 1996, the committee
held hearings and conducted research into key representative
payment issues. SSA also requested its Office of the Inspector
General (OIG) to review and make recommendations to improve the
representative payee program. SSA requested these reviews in
order to better meet the needs of the changing demographics of
our representative payee population.
Both the AdCom and OIG made several recommendations--from
how to select a representative payee to the kind of monitoring
program needed. SSA evaluated the recommendations within the
framework of our competing priorities and resource limitations.
We have implemented several recommendations including:
The development and distribution of a handbook for
organizational payees. (OIG)
Issuing instructions to field offices to screen
payees more thoroughly. (OIG)
Conducting onsite reviews of fee-for-service and
volume payees. (AdCom/OIG)
Developing and distributing a pamphlet for
beneficiaries informing them of their rights and
responsibilities. (OIG)
Changing the focus of the current process from
accounting to monitoring and compliance. (OIG)
In addition, we have the following initiatives in process:
Develop an accounting form tailored to
organizational payees. (AdCom/OIG)
Expand our automated Representative Payment
System. (OIG)
Develop and distribute a handbook for individual
payees. (AdCom)
Instruct field offices to improve controls over
retention of supporting documentation of non-responder alerts
and accounting forms. (OIG)
Advisory Committee & Inspector General Recommendations Not Implemented
There were some recommendations that we have not adopted.
For example, it was suggested that SSA require a high level of
case management (such as social services) from organizations
that collect a fee (fee-for-service payees). We do encourage
organizations to provide extra services (e.g., negotiating the
beneficiary's rental agreement with the landlord). However, we
did not adopt this suggestion because we believe that requiring
extra services would discourage the organization from providing
the basic payee services that some individuals would not have
otherwise. Another example is the recommendation that SSA only
accept a challenge of a beneficiary's capability from those in
a position to know. While we agree that a finding of
incapability is a serious matter, and we are wary of spurious
allegations, our policy is to respond to third party reports of
beneficiary incapability by conducting an investigation,
regardless of the nature of the source. Only then can we be
assured that the beneficiary receives the full benefit of their
funds.
Conclusion
In conclusion, let me convey our special concern for
beneficiaries who need a representative payee because these are
the most vulnerable of our beneficiaries. We will not tolerate
misuse of benefits by representative payees and we will
continue to strive for ways to strengthen our representative
payee program. Recognizing this, we have looked outside of our
agency (AdCom) and within (OIG) for improvements. We have
implemented some of the recommendations and, as resources
permit, we will implement others. We have recently set in
motion plans to improve our monitoring and oversight process.
In addition, we have met with representatives of organizations
that support the interests of beneficiaries with payees and, at
their request, we are working with them to develop a statutory
definition of misuse. Finally, we believe with the help of
Congress, we will be able to improve the package of protections
for our beneficiaries with payees when funds have been misused.
Chairman Shaw. Thank you very much, Dr. Daniels.
Mr. Massanari, is that the correct pronunciation?
Mr. Massanari. I do not have a formal statement, Mr.
Chairman. That is correct, Massanari. But I will be prepared to
respond to any questions you might have.
Chairman Shaw. Mr. Matsui.
Mr. Matsui. Thank you, Mr. Chairman.
Dr. Daniels, how many referrals are there to, I would
assume, the Justice Department, or maybe it is local law
enforcement, on an annual basis? Do you happen to have that
number?
Ms. Daniels. No, I do not. But you are going to be hearing
from the IG in a few minutes, and I am sure he will be a good
source of information on that issue.
Mr. Matsui. Do you have standards in your department, as to
when you actually make a referral to the local enforcement
agencies, or the Justice Department, for possible criminal
action, when you think there is a violation that is rather
severe?
Ms. Daniels. When we hear any allegation of representative
payee misuse, or investigate any possible wrong doing, we try
to determine if there is reason to call in the IG. And I think
we have a very close relationship with the office of the
Inspector General, and we plan to do many of our on-site
monitoring or follow-up investigations jointly.
It is not so much of a referral as it is a team effort. If
we see that something is going on that we need a more in depth
look at, from an audit perspective or from a legal perspective,
we certainly call them in immediately.
Mr. Matsui. I am not suggesting that every matter that is
investigated in which there is some kind of activity where the
benefits do not go to the beneficiary be referred. But I think
a few examples might help over time, and I do not mean to make
examples out of people. But, you know, at least if there is a
notion that there is criminal sanctions, that certainly could
help.
I think Mr. Shaw is correct, on the other hand, that we do
not want to discourage family members and others, that really
are acting in good faith, from taking action.
Ms. Daniels. And I agree with you. It is quite a balancing
act to encourage volunteers to be part of the program, and not
burden them with expensive or time-consuming routines, and at
the same time, protect individuals who are very vulnerable,
because they have no family or friends to help them.
So it is a balancing act. And I think our proposals help us
get closer to protecting people, when they have no family and
friends to look after them.
Mr. Matsui. Did you have something to add, Mr. Massanari?
Mr. Massanari. Perhaps, Mr. Matsui, I ought to add that in
the case of organizational payees, whenever there is any
indication, or whenever there is any evidence of misuse, we
would routinely make that referral to the Office of the
Inspector General, and they would make the determination as to
whether or not to undertake an investigation. But that is
something that we would do routinely, particularly as it
relates to organizational payees.
Ms. Daniels. Mr. Matsui, staff behind me just handed me a
few numbers, and maybe that will help. In the last two and-a-
half years, 1,352 cases were opened, and 313 convictions were
obtained.
Mr. Matsui. Wow, that is pretty impressive. That is a good,
impressive number. I am impressed with that.
I want to thank both of you for your help and testimony. I,
frankly, think that the recommendations made by SSA in their
referral in February, in terms of possible legislative changes,
make a lot of sense. And, obviously, the Chairman and others
and I will have to be working with you on that.
But I do think that it would probably be helpful in at
least protecting the beneficiary and keeping some
accountability. But I do want to thank you for your help and
your efforts and everything else you are doing with respect to
this issue.
Ms. Daniels. We look forward to working with you.
Chairman Shaw. Dr. Daniels, in my opening remarks, I made
reference to the West Virginia case. This was the Aurora
Foundation case. All of us are disturbed to hear about the
situation involving the Aurora Foundation.
Ultimately, Gregory Gamble, who essentially operated a one
person operation, pleaded guilty to embezzlement of Social
Security benefits. The SSA's Office of Inspector General
determined that 127 Aurora clients lost over $223,000.
Garry Geffert, who is a staff attorney with the West
Virginia Legal Services and a witness on our next panel, makes
a number of statements in his testimony. And I would like you
to react to them. I will read them; there are a series of them.
He indicates that the Social Security Administration
routinely told beneficiaries that the Aurora Foundation would
be their payee, and that they were not given a choice. Have you
looked into that, and is there any truth to that?
Ms. Daniels. Would you mind if I refer this question to
Larry Massanari? That is in his region, and he has intimate
knowledge of this situation.
Chairman Shaw. Not at all.
Mr. Massanari. Mr. Chairman, that is not quite accurate.
The first preference for appointing a payee is always a family
member or friend or an organization that has custody of the
individual.
But in this case, there was only one fee-for-service or
organizational payee in the Martinsburg, West Virginia area. So
it is true that as a matter of routine, when there were not
suitable payees available, Aurora, in effect, became the payee
of last resort. So that is where we made our referrals.
Chairman Shaw. He also reports that complaints were made
about the Aurora Foundation to SSA about the manner in which
their funds were handled, but that these complaints were
largely ignored. What record do you have of the complaints, and
at what point were they looked at?
Mr. Massanari. We have record of one complaint, back in
1996, where a beneficiary had written to Aurora and had also
sent a copy to us, indicating that when he received his first
check, he felt that the amount of the fee was incorrect. And,
in fact, it was. What Aurora had done was to compute the fee at
10 percent, rather than the cap of $50.
At the time that that occurred, we contacted Aurora. We got
their records. We also went back to this individual's file, a
few months ago, and we actually have a copy of that letter in
the file, which was dated July 31.
On August the 26th, less than a month later, we made
contact with his representative at West Virginia Legal
Services. That paralegal told our claims representative that
the situation had been rectified, that he had gotten his money
back.
The following day, August the 27th, the beneficiary came
into the office. He, too, told us that the situation had been
resolved, that it had been corrected, that he had received his
money. But he was also interested in becoming his own payee.
At that point, we submitted medical evidence back to the
state disability unit. They determined that he no longer needed
the payee. And to Aurora's credit in this case, they did
provide all the conserved funds that were owed him, when he
became his own payee.
That is the only complaint that we are aware of, up until
early 1999. We not only have no record of other complaints, we
have also talked to the staff there in Martinsburg, and none of
them have any recollection of any complaints regarding moneys
not being used for the benefit of the beneficiaries.
We did begin to receive complaints in late 1998/early
1999--there were a couple of local merchants who called us.
Among them was a local supermarket, who indicated that they had
not been paid by Aurora. When we followed up, they had been
paid, but they did receive payment late. Some of the bills were
being paid late.
We got a specific complaint on April the 8th from a local
attorney. Prior to that, we had no indication that
beneficiaries' bills were not being paid. In fact, over that
entire 4-year period, there was never a hint that there was any
criminal activity underway.
Chairman Shaw. Perhaps Mr. Geffert would substantiate that
comment when he testifies.
He also reports that one person sent a letter of complaint
to Aurora and copied the local Social Security office. And
perhaps that is the one you already referred to. This
individual was allowed to discontinue using Aurora as a payee,
although no investigation of the complaint was made.
Mr. Massanari. That is the letter that I was referring to.
I suspect that Mr. Geffert is also referring to this letter
from 1996. It is not that the individual was no longer using
Aurora as a payee because of the quality of the service
provided by Aurora in that instance, but rather because, as it
turned out, he was capable of handling his own benefits.
Chairman Shaw. What is the criteria for removing a rep
payee, and if a beneficiary complains and requests the removal
of their rep payee, how does the SSA determine whether a rep
payee should be removed?
Mr. Massanari. First of all, if there is any indication of
misuse, we would immediately suspend payment to that payee and
seek an alternative payee. So, that would happen as a matter of
course.
When we appoint a payee, we notify the beneficiary who we
have appointed and that is considered an initial determination
that is appealable. So they do have the right to appeal our
appointment of a payee.
Chairman Shaw. Was Aurora bonded?
Mr. Massanari. Yes, they were. They were bonded. The bond
was taken out in 1995. They were also chartered or licensed by
the State of West Virginia. That licensing took place in 1992.
Gregory Gamble let that bond expire in about 1996/1997,
when he failed to submit the renewal fee, but he continued to
be licensed. And he has to be either bonded or licensed,
according to statute.
Chairman Shaw. Is it either/or?
Mr. Massanari. I am sorry, that was Aurora, yes. He had a
couple of employees. But, essentially, Gregory Gamble was
Aurora.
Chairman Shaw. No, I mean, it is either licensed or bonded?
Mr. Massanari. Yes, I am sorry, it is either/or.
As he began to provide payee services, he was both. And
that is not uncommon. But we are proposing, of course, in the
legislation that we require that fee-for-service payees be not
either/or, but rather both, bonded and licensed.
Ms. Daniels. And starting this year, Mr. Shaw, we are going
to be requiring that annually they verify that they maintain
this status of licensed or bonded. As you know, Mr. Gamble let
his lapse.
Chairman Shaw. Can felons qualify?
Ms. Daniels. Can felons qualify as payees? Our statute
specifically says that if anyone has a felony conviction
because they misused any funds under the Social Security
statute, they are not available to be a payee. They are
disqualified from being a payee.
We asked the question on our application. If an individual
has been convicted of a felony, we certainly would do
everything we could to find another payee.
In some very small circumstances, a family member may be
the person who would be the payee, and may have been convicted
of a felony, but we certainly look for others who are not. But
anyone who has misused Social Security funds is not eligible to
be a payee.
Chairman Shaw. How many people are denied becoming a payee
because of that rule?
Ms. Daniels. I certainly do not have that number. And if we
have it, I will certainly supply it to you for the record.
[The information follows:]
Two hundred and eighty payee applicants were not selected
due to felony convictions for the first calendar quarter of the
current year (1/1/00-3/31/00), according to our management
information report. The previous 3 quarters show 150,301, and
250 non-selections due to felony convictions, for a total of
981 non-selects for the 12-month period 4/1/99-3/31/00.
The non-select categories shown on the management
information report are not all inclusive, i.e., other non-
select categories could be used to describe the non-selection
of a potential payee who was also a felon, e.g., the abatement
category or selection of a more suitable person.
Chairman Shaw. Mr. Geffert also addresses the reporting
requirement for the rep payees. Is it true that while
individual account records may be reviewed, that no one checks
the overall picture to ensure that all the accounts overseen by
the rep payee add up?
Ms. Daniels. I am not sure I understand the question. Let
me try this. I will tell you what we do, and let us see if that
answers the question.
Annually, every payee is required to file a form that tells
what the money was used for. That form is checked in one of our
processing centers. And if anything is untoward about the form
or anything is unusual about the form, then an alert is sent
for a follow-up and for investigation, and so forth. So we do
have an annual accounting for each beneficiary that has a
payee.
Chairman Shaw. Are these accounts audited?
Ms. Daniels. These are reviewed.
Chairman Shaw. But there is no verification. Do you go and
actually check the banks accounts?
Ms. Daniels. We look at receipts.
Chairman Shaw. Do you get direct verification from the
bank?
Ms. Daniels. Only if we do an on-site review. We do not
follow-up on each one of the six million annual reports that we
get.
Chairman Shaw. The rep payee, though, I assume they put the
money into one bank account, like a trust account, and that
they then have individual accounts from which these
disbursements are made. Do we check the total amounts that are
coming in, just like a regular accounting, the funds received
and how they are all paid out, and you come up with some
totals?
Ms. Daniels. Well, that would be done in an on-site review,
and the full financial records would be reviewed. But that is
not done on an annual basis.
Chairman Shaw. But you do not have on-site reviews every
year.
Ms. Daniels. That is correct.
Chairman Shaw. So nothing is submitted that would do that.
Ms. Daniels. Not that I know of, Mr. Shaw.
Chairman Shaw. I would suggest that we ought to impose
that, either by regulation or statute.
Mr. Massanari. We are, Mr. Chairman, though, undertaking a
whole review effort, where we will be on-site in each of these
payee organizations, at least every 3 years. And we will also
be doing random checks of 30 percent of them, each year, as
this is a part of a new initiative, in order to tighten and
strengthen the protection and safeguards as a part of the payee
process.
When we go on site, though, what we are looking at are the
individual payee accounts. We are not undertaking formal
financial audits to assess the financial health of the
organization. But we would be looking to see the amount of
income going into each account, as well as disbursements from
the accounts.
Many of the payees set up individual bank accounts. More of
them do have collective accounts. But we need to be able to
track moneys into and out of the accounts. And in the case of
Mr. Gamble, he had co-mingled the funds. That is why it is very
difficult for us now to allocate the misused funds to
individual beneficiaries.
But it is a requirement that we be able to track the
movement of funds, even where those funds are set up in
collective accounts.
Chairman Shaw. Well, even if you were to do this by
sampling, just under general accounting rules, it would helpful
for your auditors. Are these qualified auditors that are out in
the field?
Mr. Massanari. No, what we are doing, typically, when we go
in and do an on-site review, we are using our field office
employees, unless they just happen to coincidentally have an
accounting background.
But the Office of the Inspector General is working very
closely with us, as we embark upon this new initiative. We are
working in partnership, so that we do gain some understanding
from them. And part of their role is to educate our field
people, so that they are better equipped to do these reviews.
But they will really not constitute audits, as such. They
are really not prepared to do audits. They do not have that
background.
Chairman Shaw. Are these high school graduates, colleges
graduates; what are their qualifications?
Mr. Massanari. Most of them would be high school graduates.
Some would be college graduates. But, certainly, they have
enough knowledge to track the flow of money in and out. But I
think it would overstate it to say that they are there to do a
true financial audit.
Chairman Shaw. Are there any audits that are made with
auditors?
Mr. Massanari. There will be some. As I say, that is why we
are working with the Office of the Inspector General. The
Inspector General's auditors will be going in with us. And in
those cases, they will be doing actual audits. I suspect that
is a question that ought to be raised with the Inspector
General.
Ms. Daniels. Mr. Shaw, I would like to add something here,
as well. I think that we were using the bonding and licensing
as a proxy for financial accountability; that those agencies
that are licensed by the state are licensed to do whatever
kinds of services support that they do.
And we believed that we could rely upon the state
mechanisms to assure the basic financial health of
organizations, either through licensing or bonding. Of course,
now we are asking for both licensing and bonding in our
legislative proposal. But we realize that that is not enough.
And that is the reason we have undertaken the reviews, as well.
So we have several different tiers of oversight here. One
is just to get in the licensing and, we hope, bonding. And
those require certain evidence of financial responsibility, and
then our triennial reviews, and then our spot checking. Of
course, any target situation where somebody complains is a
special situation outside of that.
So we are building here layers of accountability and
monitoring. We hope that this number of layers will be
sufficient to provide the kind of oversight that is necessary.
Chairman Shaw. What type of regulations do the various
states have for licensing? Have we done a review of all of the
states, and have some type of minimum requirements for us to
recognize their licensing authority? I mean, it could be they
just send in an application, and that is it.
Ms. Daniels. That is true. There is a wide variety of ways
in which a state can issue a license, and the various standards
they use in order to issue those licenses.
As we go through the review process, the triennial, over
the next few years, we will gather more information about the
licenses that people have. And I think we can give you more
information then, because we will be on site for every fee-for-
service organizational payee in the next 3 years.
I think at this point, I have to admit, there is a wide
variety. Some are very tight, and others are probably not as
tight as we would like them to be. But our proposal is that
they be both licensed and bonded, and those two layers
together, we hope, will knit together a good base.
Chairman Shaw. If the rep payee is bonded, does the bonding
company do a regular audit of the books?
Ms. Daniels. I am not really certain if they do, but they
certainly take risk of the default on the bonding, if they do
not. And I am pretty sure they are shrewd enough, for whatever
the bond is for, to know that they have to have some reasonable
expectation that the person is able to conduct their business
in an evenhanded way.
Mr. Massanari. It depends a little bit on the surety
company, as to what their requirements are. And as Dr. Daniels
indicated, it depends a little bit on the amount of the bond.
But our hope is that, at least, there was some level of
investigation, and that they do some background checks on the
organization, in order to protect their own financial
interests.
Chairman Shaw. In the Aurora case, is there going to be any
recovery for the beneficiaries that were lost $200,000-plus
dollars?
Mr. Massanari. It does not appear so. The only way that we
could reissue payment to the beneficiaries who have lost money
is if now we can recover moneys from Mr. Gamble. Mr. Gamble has
filed for bankruptcy. And we do not believe that he has any
funds available.
Chairman Shaw. Has he been sentenced?
Mr. Massanari. He plead guilty in early March to embezzling
$303,000. He will be sentenced on June the 5th.
Ms. Daniels. If we could get restitution, of course, we
could begin that process. The reason we are asking for this
legislation is because we would like to be able to make whole
the beneficiaries that were harmed, without necessarily first
collecting it from Mr. Gamble.
Chairman Shaw. Is embezzlement a debt that is removed in
bankruptcy?
Mr. Massanari. I can not answer that. I am not an attorney.
I do not know. I would suspect not. I think that he will have a
continuing responsibility, but it would be over a very, very
long period of time.
And that, of course, as Dr. Daniels said, is why this
legislation is important, and why we are so pleased that
Congressman Wise has submitted his proposal. Our legislation
would permit us, and in fact we have structured our proposal in
a way that we would assure that we can cover the beneficiaries
who were victimized in Aurora.
To date, as such, we have not made the formal misuse
determinations, so that we would be able to reissue the amount
of the benefits, plus the amount of the fees, to the 123
beneficiaries who have lost money.
Chairman Shaw. Does anybody else have any other questions
for the witnesses?
Mr. Matsui. Yes, I just wanted to follow-up on the
Chairman's line of questioning here. Let me say this, I want to
preface my remarks by not suggesting that there were any
problems with your office and the administration of your
responsibilities.
But I am mindful of the fact that under current law, you
cannot reimburse unless there is a finding of negligence. It is
a very complex situation. It puts you in a conflict of
interest. You want to help the beneficiaries. But on the other
hand, you know, you do not want an allegation of negligence to
hold against your office and the employees of your office.
And so I can understand why this is a very difficult
situation for those that really want to be helpful to the
beneficiaries.
On the other hand, and again, I do not want to do this for
embarrassment sake or anything of that nature, but we had a
situation in Sacramento that I mentioned at the last hearing,
in which a woman, Dorthea Puente, who you undoubtedly have
heard of, in the mideighties, was collecting benefits as a
representative payee.
And she was murdering the beneficiaries. I do not think she
even got up to $200,000. And obviously, the beneficiaries were
in no position to complain. They were dead. They were buried in
her back yard.
And it seems to me that this is an awful large sum of money
to have gone on for the period of time that it has, without
raising red flags.
And, again, I would like some explanation. I know you have
tried to explain it to the Chairman. But it is difficult for me
to understand how a quarter of a million dollars could have
been taken, with no complaints from the beneficiaries, or no
action taken.
Mr. Massanari. I think that is a very fair question. And
let me take you back to the point at which the initial
investigation and screening was done.
At the time that Mr. Gamble came in to apply to be a
representative payee, the staff and the office did, in fact,
investigate him. He was the Vice President of a local bank. He
sat on the Board of Directors of a local senior center. He was
active in his local church. And some of the employees in the
office actually knew of him and his family.
So based upon everything that they knew, that we knew, we
certainly had every reason to believe that he would be an
honest and reputable payee.
We, too, are shocked, frankly, that there were not some
indications earlier. Even the 1996 letter was not a red flag.
And in retrospect, as I look at the letter, I would not have
reached the conclusion that there was misuse. I think in this
case, there may have been--and I am reluctant to say--an honest
mistake. But it may simply have been a mistake by the
bookkeeper.
In talking to the folks and the staff, which I have done
personally, they all assured me, and most of them have been in
that office for a number of years. They certainly knew of
Gregory Gamble and the Aurora Organization. But they have
assured me that they never got any complaints until, as I
mentioned, in late 1998, early 1999, when some bills were not
paid.
We also had accounting reports coming in, on a regular
basis. And based upon what we have seen now in our automated
system, as well as accounting forms that we have been able to
retrieve, there is nothing in those forms that would suggest
that there is an inconsistency or any unacceptable information.
Some of the instances in which folks began to have
problems, and some of those were documented on television, I
think, began to occur in early 1999. And that is the point at
which the accounting forms were not being submitted, that the
local office began to get alerts that they were not responding.
And I think everything sort of came to a head at the point that
we got that complaint in early April from a local attorney.
But beyond that, I really cannot explain it, except to say
that I have every confidence that we have no record of any
reports of bills not being paid. In fact, we have every
indication that up until early 1999 that the needs of the
beneficiaries were being met.
Ms. Daniels. I know it is hard to defend yourself in a
situation like this when something so horrible like this has
happened to our beneficiaries.
But I think one of the things that was consoling to me was
that as soon as there was an even small body of evidence that
things were not going right with our beneficiaries, the field
office made calls saying that they were going to come in for
review. And the very next day, Mr. Gamble turned himself into
the FBI.
So in a sense, our system did work. The complaints
triggered an action on the part of the field office to go in
and look. And that precipitated his turning himself in.
Mr. Matsui. Well, I know the purpose is not specifically
the Aurora situation. You know, what is troubling to me, and I
was not planning on talking about this when we walked in today,
but perhaps the agency gave too much credence to somebody who
happened to be an outstanding citizen, instead of those that
were actually complaining.
And that is certainly not the way government should
operate. It should not operate on the basis that I know this
person, and I trust them. It should operate on the basis of
every individual, whether rich or poor, handicapped or
disabled, should have that right to an equal hearing. And
perhaps that was not done.
In that case, there was, I would say, close to misfeasance,
if not negligence, on behalf of your office, there. And, again,
I do not mean to throw stones. But, certainly, it sounds to me
like negligence.
Mr. Massanari. Well, I am comfortable that the screening
was done appropriately, and that there was an adequate
investigation.
But, clearly, this particular instance, as well as the
recommendations that have come from our Office of Inspector
General, that we be more aggressive, that we tighten up our
monitoring responsibility is something we have taken very
seriously. And that is why we have instituted this whole series
of on-site reviews.
And if somebody is unscrupulous and wants to cook the
books, it may be difficult to even identify problems at that
point. But we are going beyond looking at the books. We are
actually going out and talking to beneficiaries to make sure
that their current needs are being met.
So we think that by tightening up the process as we have,
we will not only deter and detect fraud earlier, but in many
cases, we will prevent it.
Mr. Matsui. Well, thank you.
Chairman Shaw. I would beg to differ with one thing. Dr.
Daniels, you said that the system worked. Well, no it did not
work; not until you got up to about a quarter of a million
dollars misappropriated. I think that Mr. Matsui has been very
vocal in that position, and I certainly agree with him.
Where were these checks deposited? Were they deposited in
the proper trust account, and then disbursements made out of
it; or did he start depositing them into his own personal bank
account? I mean, these things are traceable.
It has been a long time since I was an auditor. But I can
tell you, as rusty as I am, I bet you I could trace every dime.
It has to go into a bank. It has to come out of a bank. So this
should not be that difficult.
Mr. Massanari. Well, it varies. One of the things about
Aurora, which also led us to continue to refer people to
Aurora, was that Gamble was also a representative payee for
state benefits, and was also a court-appointed conservator. He
has been appointed conservator by the West Virginia courts.
Many of the accounts and, in fact, large sums of money,
were in these conserved accounts which did not relate to Social
Security benefits.
Gamble did have individual accounts for some individuals.
But for most of them, he had co-mingled the moneys. And so you
could not really trace the flow of moneys. And as I said, that
is why we are having some difficulty in allocating the amount
of misuse to individuals.
I suspect you are right; had we looked at the accounts, we
probably would have gotten suspicious. And that is precisely
the reason that we have instituted--
Chairman Shaw. Where were your checks being deposited?
Mr. Massanari. Where were they? They were being deposited
in the local bank. I am not sure which one.
Chairman Shaw. I mean, when your bank statement comes in,
do you keep an eye on what account they went into?
Mr. Massanari. No, that is not something that we would do.
When we go in on site, we are looking at the records.
Chairman Shaw. Well, I mean, why would you not do that from
your office, or from where the checks are sent, just to be sure
that they were properly deposited? There has got to be some
guidelines.
Mr. Massanari. I believe in this case, as in the case of
most payees, we do encourage, and in some cases, require that
there be direct deposit. So that we could determine it, but not
necessarily the account. I think we would have to go on site to
do that.
Chairman Shaw. Do you wire transfer some of this?
Mr. Massanari. Most of it.
Chairman Shaw. So you know, you can just look back at your
records and know where these moneys were deposited and what
bank account.
Mr. Massanari. You could look at the inscription on the
account, but I am not sure we could tell from that whether it
was appropriately allocated to the individual. I am really not
sure we could provide an answer to that.
Chairman Shaw. Well, no, you could not. But you could then
come back and get his bank statements and his bank records, and
find out where the money went.
Mr. Massanari. Yes.
Chairman Shaw. But we are talking about the co-mingling of
funds. We can at least be sure that it gets into the right
account, initially. And then you might have to go on-site to
decide where the funds went, from that particular account.
Mr. Massanari. There is another step in the process that we
have now instituted. We are going in after an organizational
payee is set up, initially.
We are going to go in after six months. We go on-site to
meet with the folks in that organization to look at the
accounts to assure that the accounts are set up properly; that
the proper inscription is on the accounts; and that moneys are
not being co-mingled.
So a part of this is an educational process that we are
undertaking, as well.
Chairman Shaw. Do we have CPAs in your employ?
Mr. Massanari. No, we do not within the larger Social
Security Administration, but certainly the Inspector General
has CPAs on his staff.
Chairman Shaw. I would strongly suggest that you either do
this in-house or out-of-house, that you have auditing standards
that are set up, that any field representative would have to
adhere to, in going into any of these places.
I mean, this one has popped up out of the ground. It is
kind of like you are plowing a field, and all of a sudden, you
hook onto some relic that jumps up.
We all know there are a bunch more of these out here that
we have not caught yet. And the fact that this guy was so
blatant that as soon as you said you are going to come look at
the books, he goes and turns himself in, I mean, he did not
even think he had a sporting chance of getting away with it.
[Laughter.]
Mr. Massanari. Well, there are guidelines for the folks who
are undertaking these reviews.
Ms. Daniels. Yes.
Mr. Massanari. Dr. Daniels' staff has developed a set of
standards and requirements and guidelines, which are part of an
instruction that our field staff are now following, as they go
out to do the on-site reviews. So, there are standards.
Chairman Shaw. Who wrote these?
Ms. Daniels. The Office of Program Benefits, inside the
agency.
Chairman Shaw. Are they CPAs?
Ms. Daniels. No, they are not. These are not, in the
technical sense financial audits. They are reviews of the
accounting of the individual funds for the use of the
beneficiary.
Chairman Shaw. I would suggest either in-house, or you get
an accounting firm to review those standards and set up minimum
standards, and make suggestions as to what it can do.
I remember when I was studying accounting. They said when
you go into an audit, the first thing you do, like if you are
going to do an automobile agency, the first thing you do is to
figure out how you can get one of the automobiles off the
showroom without anybody knowing about it. And once you figure
that out, then you know that they have got some problems, and
you can go back and make suggestions to management.
And it seems to me that you really need top level,
professional advice. Obviously, you can not hire that type of
expertise to go out into the field. But at least they should be
the ones that set up the standards.
And it is a form of audit, even though it is not, in the
technical sense. But tracing these funds and doing a positive
verification from the banks as to bank balances and a few
things like this, those are sort of no-brainers. You can figure
those things out.
Ms. Daniels. We will certainly take a look at the review
standards and get back with you on that.
[The information follows:]
In developing the review standards for the ``Guide for
Conducting Site Reviews'', SSA staff requested and received
input from the Office of Inspector General's Office of Audit.
In the event that a site review uncovers what appears to be
fraudulent financial practices, the guide directs reviews to
immediately request assistance from the Office of the Inspector
General.
Chairman Shaw. I look forward to working with you both on
this. Thank you very much.
Ms. Daniels. It is our pleasure. Thank you.
Chairman Shaw. I have one other question, Dr. Daniels. You
were talking about bonding requirements. Now those bonding
requirements that you are suggesting for legislation apply only
to fee-for-service type of people. What about charitable
organizations, non-family members that are not fee-for-service?
Ms. Daniels. Our proposal does not include at this time the
non-fee-for-service volunteer organizations.
Chairman Shaw. Should it?
Ms. Daniels. I would really need to talk with the staff
about what the implications would be, especially the cost.
Chairman Shaw. Give us your recommendation on that, because
the non-profits, they can steal, too.
Ms. Daniels. They certainly can. Again, we are trying to
seek that balance of encouraging the non-profits that have
contact with the beneficiaries for other reasons, maybe case
management or whatever, to be organizational payees when they
can, and not burden them with any additional costs. And at the
same time, you are right, we have to be sure that they are
responsible and acting responsibly.
Chairman Shaw. Even in family situations, is there any
interview that takes place, before the decision is made?
Ms. Daniels. Yes, absolutely. The face-to-face interview in
the office, and quite a lengthy procedure of verifying who they
are and their earnings, et cetera.
Chairman Shaw. Thank you.
Ms. Daniels. You are welcome.
[Questions submitted by Chairman Shaw, and Ms. Daniels'
responses, follow:]
Susan Daniels, SSA Questions and Answers
1.A. Regarding annual accounting requirements, the IG testified
that SSA could initially produce only 12 of the more than 100
accounting reports the Aurora Foundation was required to submit
annually for the beneficiaries for which it served as rep payee.
SSA Response
In the Aurora Foundation case, our computer records indicate that
required accountings were filed timely. In May of 2000, our search
indicated that Aurora was a representative payee for 121 beneficiaries
at the time it closed. Seventy-four (74) accounting forms should have
been filed with SSA; the remaining 47 beneficiaries had not been
represented by Aurora long enough to require that accounting forms be
filed, i.e., more than 12 months. In response to an Office of the
Inspector General's (OIG) early request to locate accounting forms, 12
forms were located initially. The search for those forms was quick but
cursory, based on the immediacy of SSA's need to respond to the
investigation. (As indicated below, additional forms have since been
located.)
Congressional testimony regarding Aurora indicated that 15
uncompleted accounting forms were located at the Foundation's office by
investigators. We found that 8 of these were current requests for the
accounting period ending March 1999 and would not have been considered
late until after June 30, 1999 (at which point Aurora was not in
business).
The other 7 requests were for the period ending October 1998 and
were actually 'second requests' that must have crossed in the mail with
the initial completed forms. Our physical search, which is not yet
completed, located 5 of the 7 completed forms. In light of the above
facts, it would be inaccurate to assume that our accounting requests to
the Aurora Foundation were going unanswered.
B. How many accounting reports did you receive from Aurora in each
of the years during which Aurora was a rep payee for Social Security/
SSI beneficiaries? How does that compare with the number of
beneficiaries for which Aurora was rep payee during each of those
years?
SSA Response
The exact number is unknown. An annual account form for each
beneficiary is sent to all representative payees (except State
institutions participating in the triennial onsite review program) to
return to SSA showing how benefits were used during the preceding 12-
month period. Aurora was payee for many individuals for varying lengths
of times. Therefore, they would have had varied reporting times for
each SSA beneficiary and for some, Aurora would not have been required
to complete an accounting form because they were payee for less than a
full year. Our computer records show that Aurora returned its
accounting reports timely except for one March 1999 report. (Discussed
below.)
C. Why did Aurora's failure to submit so many accounting forms not
result in a closer examination of its operations by SSA?
SSA Response
We reviewed the non-responder activity for Aurora within the
confines of our systems structure. In looking at the non-responder list
for November 1999, which covered the accounting period ending March
1999, we found only one name on that list for which Aurora was
representative payee. Interviews with local office employees revealed
that Aurora filed its accounting reports on time. The forms we have
retrieved to date also indicate that, with the exception of the last
month of business, accounting reports were filed.
D. Do you agree or disagree with the IG ``belief'' that ``adequate
monitoring'' would have detected problems with Aurora sooner, better
protecting at least some of the benefits that were lost?
SSA Response
Because the owner of Aurora was essentially running a criminal
enterprise and diligently trying to deceive SSA, it would have been
extremely difficult for SSA to detect problems early, especially since
no complaints were received. However, given the unfortunate outcome of
this case, we believe more oversight is needed to ensure that
beneficiaries are provided the requisite protection. While SSA does
monitor representative payee performance in a number of ways, including
accounting for benefits, timely reporting of changes, and resolution of
complaints from beneficiaries, increasing our monitoring capacity will
enable us to strengthen our oversight of the program. Therefore, we
have implemented an expanded monitoring program (described in our
response to question 4) and we are continuing to look at other
improvements through our representative payee task force.
E. Are you still searching for files from Aurora? Have you found
any additional files? If so, how many?
SSA Response
In May 2000, SSA undertook on its own motion to search for all of
the Aurora accounting forms. Aurora was representative payee for 121
beneficiaries at the time of its closure. After reviewing our
beneficiary records, we determined that 74 forms should have been filed
and been retained. Accountings would not be available on the remaining
client population because the 12-month anniversary for the accounting
had not yet arrived or the request was made when Aurora closed its
operation. Of the 74 forms that were filed (according to our computer
records), we have located 40 forms to date. We were unable to find 12
forms in storage though our computer records showed that they had been
filed. Our search for the remaining forms continues. As of this date,
we have not completed our search of the 6 million forms returned
yearly. We believe this manual search will locate an additional 15-22
forms. The volume of forms we receive and the method of storage hampers
our retrieval efforts. We are exploring ways to store these forms so
that they are more easily retrieved.
F. What other examples are there of rep payees that fail to submit
accounting forms as required? What has been SSA's response in other
cases in the past? Do you expect that response to change?
SSA Response
A December 1996 IG report, Monitoring Representative Payee
Performance: Nonresponding Payees, showed approximately 76 percent of
non responding representative payees were parents and other relatives
with custody. Mothers with custody composed the single largest group;
agencies and institutions were the most common high-volume
nonresponding representative payees.
SSA's policy requires the field offices to consider paying the
beneficiary directly, or changing a payee when the current
representative payee will not cooperate after repeated attempts to
obtain the required accounting form. This policy is difficult to
administer when the majority of nonresponders are parents with custody
of minor children and other concerned relatives (e.g., spouse, child
for parent, grandparent, etc.). When an organization does not respond,
it is considered a ``triggering event'' for a review of such payees.
(See 4.A.) However, we are reviewing the nonresponder process to
determine other alternatives that would assist us to obtain the
required accounting form from all individual and organizational
representative payees.
2. Why has it taken so long to implement the IGs recommendation
about non-responding payees? In December 1996 the Inspector General
made specific recommendations regarding monitoring non-responding
payees, specifically on following up non-receipt of reports and
verifying local office action. SSA is now proposing to conduct these
checks. But why wasn't action taken in the last 4 years? Obviously you
think this step will help reduce fraud and abuse or you wouldn't be
moving forward now. How many abuses might have been prevented if you
had followed the IG's advice three and a half years ago? What amount of
benefits would have been protected in the Aurora case if the first
instance of non-response had resulted in the selection of a new payee?
The second? Third?
SSA Response
In the December 1996 report, Monitoring Representative Payee
Performance: Nonresponding Payees, the IG identified the number of
representative payees who did not respond to requests for annual
accounting after 1 year and recommended an improved system for tracking
nonresponding payees.
We agreed that SSA should retain historical data on nonresponding
payees and indicated that a future enhancement to the Master
Representative Payee File systems plan would include the control and
tracking of the annual accounting process. These activities have yet to
be assigned implementation dates due to competing high priority Agency
initiatives, such as the Title II Redesign. However, we did put in
place procedures which require field offices to input data in the
Master Representative Payee File, via the Representative Payee System
(RPS), that documents the pertinent facts surrounding a payee change,
including nonresponse for annual accounting. This documentation is
considered when determining a representative payee's suitability for
future appointments.
The recommendation to develop a more immediate and appropriate
method (e.g., suspension of benefits, immediate change of payee with
final accounting from former payee) to be used in conjunction with
tracking to obtain accountings from nonresponding representative payees
was delayed pending the results of additional IG work as described in
the September 1999 report, Nonresponder Representative Payee Alerts for
SSI Recipients.
In response to that report, we convened a workgroup to identify
which representative payees do not return the accounting forms, their
relationship to the beneficiary, and compliance history; and to
research what legal/statutory authority the Agency could use to put any
revised procedures in place. The focus of the workgroup was to examine
the feasibility and advisability of changing our procedures to allow
for redirecting benefit checks to the field office address in an
attempt to obtain the required accounting form. The workgroup's
findings and recommendation are being reviewed.
Separate from the December 1996 IG report, in March 1998 we
developed guidelines and began conducting in-depth reviews of fee-for-
service organizations. It was the notification of a site visit which
caused Mr. Gamble of the Aurora Foundation to turn himself in to the
FBI. We are unable to determine the amount of benefits that would have
been protected had Mr. Gamble received the notice prior to April 1999.
3. Where is the documentation? The IG believes that retention of
supporting documentation for the failure to timely complete rep payee
accountability forms and the ability to easily retrieve these forms is
essential to the identification and ultimate prosecution of rep payees
for fraud or misuse. According to the IG, your own procedures say that
rep payee accounting reports must be retrievable in the event the form
must be reviewed for misuse or fraud allegation. Yet your offices are
required to send these documents to an outside storage facility. Where
are local offices storing these documents today? What instructions are
your local offices following?
SSA Response
We process over 6 million annual accounting forms each year.
Monthly, we send out approximately 1/12 of the total annual accounting
forms. When returned by the representative payee, the forms are stored
together by accounting month or in a box by SSN and have a 2-year
retention period; the 8 processing centers are responsible for storing
the completed forms. The majority of forms are stored onsite (or in
rented space in close proximity to the processing center), or at SSA's
Security Records Center in Boyers, PA.
4.A. Should organizational rep payees be subject to audits? More
specifically, should any organization be allowed to serve as a rep
payee without being able to submit to SSA an annual audit of its
operations?
SSA Response
With rare exceptions, it has been our experience that
organizational representative payees perform their duties
satisfactorily. An OIG report on representative payee performance
(September 1996) found that organizational representative payees as a
group are among our best representative payees, with a low incidence of
poor performance. We believe requiring an annual audit of an
organization's operations may not be warranted, but we are assessing
the impact such a requirement would have on organizational
representative payees.
We recognize that even though the incidence of misuse by
organizational representative payees is infrequent, that is no
consolation to a beneficiary who has lost his or her much needed
benefits. We have several new initiatives underway that will help
prevent misuse by organizational representative payees. During one of
these initiatives, site reviews described below, we will obtain and
review copies of any external audit conducted.
Triennial Site Reviews--SSA has begun a review of all fee-for-
service representative payees and all volume representative payees
serving 100 or more beneficiaries on a triennial cycle. In addition, we
will review individuals who serve as representative payee for 20 or
more beneficiaries. These reviews will ensure representative payee
compliance through a face-to-face meeting and examination of a sample
of beneficiary records; expenses may be corroborated with providers of
the services they provide to the beneficiary. An added benefit of this
initiative will be improved lines of communication between SSA and the
representative payee.
Annual Verification of Bonding or Licensing--Non-governmental fee-
for-service representative payees will be required annually to show
that they continue to meet the bonding or licensing requirements for
charging a fee for their representative payee services.
6-Month Site Visits--SSA will visit fee-for-service representative
payees 6 months after their appointment to ensure that they fully
understand their duties and responsibilities, and are on the right
track with respect to accounting for the funds, record keeping and
reporting.
Random Reviews--SSA will conduct reviews of a random sample of 30
percent of volume representative payees and all fee-for-service
representative payees that are not reviewed (in the current year) as
part of the triennial cycle. We will review a sample of beneficiaries
the payees serve for compliance with our policies and procedures.
Quick Response Checks--SSA will continue to conduct reviews of
representative payees as needed in response to certain ``trigger''
events such as third party reports of misuse or complaints from vendors
of failure to receive payment.
We believe that these measures will help to ensure that
organizational representative payees appointed by SSA will carry out
their duties and responsibilities in accordance with the policies and
procedures that are designed to protect our beneficiaries.
B. How many organizational rep payees currently have their own
operations audited?
SSA Response
Some organizational representative payees currently are subject to
audits because they are State or local agencies, or because of IRS
regulations. Because this is not a requirement for appointment as a
representative payee, we do not have this information.
C. How many organizations might no longer be eligible to serve as
rep payees if this requirement were made and enforced?
SSA Response
While we do not know how many, we believe that it is reasonable to
assume that some portion of our organizational representative payee
population (particularly the smaller, volunteer representative payees),
would choose not to serve as a representative payee if they had to
absorb the added expense of an annual audit.
D. Could other payees be found in those cases?
SSA Response
Considering that the beneficiary population served by these
organizational representative payees includes those who have no family
members willing or able to serve as representative payee, we believe
our field offices (FOs) would have difficulty in finding alternate
representative payee sources if the pool of payee candidates was
reduced.
5. Are SSA screening procedures adequate? In his testimony, the IG
points out that in terms of the screening and selection of rep payees,
SSA essentially conducts a records verification of certain documents
such as drivers licenses, state identification cards, credit cards, and
bank books. However, SSA does not verify the accuracy of this
information. Nor does it provide credit or security checks to determine
if the potential payee has financial problems, credit problems, or may
have been convicted of any other felony. In March 1997, the IG made
specific recommendations to SSA to conduct a more thorough screening of
potential rep payees. Why weren't these suggestions adopted? Are you
currently implementing any of the IG recommendations regarding the
conduct of a more thorough screening of potential rep payees? If so,
what is the status?
SSA Response
Before selecting any representative payee applicant, SSA is
required by law to conduct an investigation of that applicant's
suitability. The Social Security Act, at section 205(j)(2)(A) and (B)
and section 1631(a)(2)(B)(i) and (ii), requires SSA to conduct a face-
to-face interview with the applicant for the purpose of verifying:
The applicant's identity,
The applicant's SSN (or Employer Identification Number
(EIN)),
Whether the applicant was convicted of a violation of
section 208 or 1632, and
Whether the applicant had ever been determined to have
misused benefits.
SSA does not perform credit or security checks. In conjunction with
the December 1994 Report to Congress on the feasibility of conducting
criminal background checks, preliminary research indicated that
background investigations would be prohibitively expensive. However, we
are currently exploring whether criminal background or credit checks
are now economically feasible.
Following are the IG's March 1997 recommendations and SSA's
responses:
IG: During custody checks, verify payees' statements made on the
application and during the interview.
SSA: We have revised our operating instructions to indicate that
FOs should use whatever means available to verify an applicant's
statements, particularly an allegation of custody, including contact
with a reliable third party. Offices are expected to exercise judgement
in deciding when verification is needed.
IG: For agencies, institutions, or other volume payees, determine
whether the potential payees' record keeping systems are sufficient to
ensure that beneficiaries' needs will be adequately met.
SSA: We agree that volume representative payees' record keeping
systems should be sufficient to ensure all beneficiaries' needs are
met. At the initial interview, volume representative payees are asked
to provide SSA with information regarding their systems. We have
augmented our operating instructions to reflect that volume
representative payees must provide a description on how beneficiaries'
monies are recorded and disbursed. Additionally, in June 2000, we began
visiting fee-for-service payees 6 months after their appointment as
payees to ensure they fully understand their duties and
responsibilities. (See answer to 4.A.)
IG: Conduct suitability checks only for payees intended for
selection. We do not believe that SSA needs to conduct checks for all
payee applicants.
SSA: We believe that to ensure the selection of the best possible
representative payee, the suitability of all applicants must be
investigated. Who the payee should be cannot always be predetermined. A
suitability check is one way to decide which representative payee is
preferable.
6.A. What licensing or bonding requirements should organizational
rep payees have to satisfy? SSA's proposal would require only
organization payees who perform this service for a fee to be licensed
and bonded. Other witnesses supported requiring licensing and bonding
of all organizational payees and you indicated openness to considering
expanding your proposal in this direction. What arguments can you think
of against requiring licensing and bonding in all cases? Do you support
those arguments?
SSA Response
SSA requires organizational representative payees who are filing to
be fee-for-service representative payees to be bonded or licensed. The
bonding requirement is an insurance contract guaranteeing payment to a
third party on behalf of the organization in the event of unforeseen
financial loss by the action or inaction of an employee. For the
purpose of payment for services, the licensing document must be issued
in the State in which the agency serves as representative payee and
permit the agency to:
conduct business or operate in the State (generally
referred to as an operating license), or
provide a specialized service to residents of the State
(e.g., licensed to provide Medicaid services).
Certainly the best argument against requiring licensing and bonding
of all organizational representative payees may be the expense to the
payee and the resulting loss of available payees. Recently, a task
force has been appointed to consider the extension of bonding to non
fee-for-service organizational representative payees and to individual
representative payees who serve a significant number of beneficiaries.
We need additional information about bonding requirements and the
effect required bonding would have on volunteer nonprofit organizations
that serve SSA beneficiaries. We need to evaluate the extent to which
mandatory bonding or licensing on these organizations would burden them
with additional cost and how it would effect our ability to recruit
representative payees.
B. Your original proposal implies that higher standards should be
applied to organizations that serve as rep payees under fee-for-service
arrangements? Is that justified? Do more allegations of abuse result
from fee or non-fee organizational rep payees? How about convictions?
SSA Response
Higher standards may be applied to fee-for-service organizational
representative payees because they are approved to collect a fee for
their services from the beneficiaries' funds. Therefore, we believe it
is reasonable to require higher standards.
SSA has no evidence that abuse of funds is more (or less) likely to
occur with a fee-for-service organization than with a non fee-for-
service organization. We are also unaware of any conviction statistics
because the U. S. Attorney determines which cases to prosecute.
C. What proof does an organization applying to be a rep payee have
to provide SSA regarding whether it is licensed or bonded? Does SSA
check this information annually to ensure that the organization remains
licensed or bonded? How? Should an organization lose its licensing or
bonding, how quickly will SSA know of it? What response will SSA take?
SSA Response
The organization is responsible for submitting all evidence
required proving it qualifies to become a fee-for-service
representative payee. The bonding or licensing documents are part of
this evidence; if it cannot be determined that the organization is
bonded or licensed, the FO will contact a representative of the company
or State agency which issued the agreement or license. Additionally,
the FO will obtain the necessary information, such as the protection
given under the bonding agreement or the purpose of the license.
Recently, we implemented new procedures for fee-for-service and
volume representative payees which will increase our monitoring of
these payees (see our response to Question 4). One of the new features
(beginning this year) will require fee-for-services representative
payees to annually prove they continue to meet SSA requirements that
allow an organization to collect a fee. This certification will require
the payee to present proof of current licensing and/or bonding. If an
organization no longer meets all qualifying factors (including
licensing or bonding), we will revoke their authorization beginning
with the first day of the month after the month in which the decision
is made.
The organization is supposed to notify SSA of any events that would
effect benefits including loss of licensing or bonding. Information of
this nature may also be passed on to SSA from a third party. There is
no national, State or local system that has such information. And,
because bonding would be through a private company of the
organizations' choosing and licensing could be through any one of the
thousands of State or local governmental licensing bureaus, such a
computer link on an individual basis would not be feasible.
D. One recent case of rep payee abuse involves an individual who
took over the operation of a non-profit group that previously did not
provide payee services. What can SSA do to prevent fraud in such cases?
SSA Response
The task force appointed by the Commissioner is reviewing different
approaches to screening representative payees, especially the
possibility of doing credit and criminal background checks. By
increasing SSA's screening and monitoring activities we hope to
increase our capacity to improve selection of representative payees
that serve some of our most vulnerable of our beneficiaries.
E. Section 2 of your proposed legislation states that a non-
governmental organizational representative payee must be licensed in
each State in which it serves as a representative payee (provided that
licensing is available in such State). It is our understanding that in
some States, while the State does not require licensing, a county or
locality might. Under your bill, would a representative payee still be
required to be licensed in these circumstances? If so, should it be
required?
SSA Response
Currently, the law requires that a fee-for-service organizational
representative payee be licensed or bonded. If our bill were enacted,
organizations that file to be fee-for-service representative payees
would have to meet the licensing requirement as well as a bonding
requirement. FOs are expected to be aware of their State, county and
local laws in their service areas when it comes to businesses requiring
operating licenses. This draft bill would not change this requirement.
7. Should credit checks be done on all potential rep payees? You
can't buy a car, much less be put in charge of another person's
finances, without a credit check. Does SSA perform a credit check on
potential rep payees, including individual rep payees? Has a sample
ever been performed to determine what SSA would find if it did so?
Especially if non-fee organizational representative payees are not
required to be licensed and bonded, should such organizations at least
be required to pass a credit check? What would that cost? Would that
otherwise happen in the course of bonding?
SSA Response
SSA does not perform credit or background checks. In conjunction
with the December 1994 Report to Congress on the feasibility of
conducting criminal background checks, preliminary research indicated
that background investigations would be prohibitively expensive. Our
task force is going to revisit this issue again to see if criminal
background checks can be incorporated into the program.
Conducting credit checks on all new representative payee applicants
would require an initial outlay of $162,500 for hardware and a yearly
cost of approximately $10 million. We are in the process of examining
various levels of bonding to determine at what point the underwriter
would perform credit checks and background checks on those individuals
in the organization who are in positions that allow them to determine
the flow of funds. We believe that the bonding requirement in some
cases may be used in place of SSA performing these types of checks.
8.A. What other standards are there for rep payee services? I
understand that a witness before the Senate Aging Committee testified
that she became a rep payee for a number of beneficiaries after
applying over the phone. Is that true? Can that still occur?
SSA Response
When the witness, representing her organization, first applied to
become a representative payee, and subsequently applied to be a fee-
for-service payee, she appeared in the local field office and filed in
person. She visited the field office on numerous occasions and was
known to them. It is SSA policy that after a representative payee has
been screened and approved it is possible (and permissible) to execute
subsequent representative payee applications over the phone when
additional beneficiaries are assigned to that approved payee.
When applying to be a representative payee, the representative of
that organization must provide: the name of the organization and its
Employer Identification Number, identify any debts that the beneficiary
has to the organization, and identify other beneficiaries for whom the
organization is representative payee.
The witness referenced here was an organizational fee-for-service
payee. The additional standards for a fee-for-service payee are that
they must serve at least 5 beneficiaries and be a:
State or local government agency whose mission is to carry
out income maintenance, social service or health-care related
activities;
State or local government agency with fiduciary
responsibilities, or
Community-based, non-profit social service agency which is
bonded or licensed in the state that it serves.
B. Is there a minimum age requirement for a person to be a rep
payee? How old are the youngest payees? How many are there this age?
SSA Response
The law requires that a beneficiary under the age of 15 must have a
representative payee and, therefore, someone under that age, who is
receiving benefits, could not serve as a payee. Further, rarely would
we appoint someone under the age of 18 to be payee; however, on a case-
by-case basis, it can occur, for example a mother under age 18 whose
child is on our rolls could serve as representative payee. Provisions
for direct payment under age 18 are provided in 20 CFR 404.2010(b) for
title II and 20 CFR 416.610(b) for title XVI. We do not know the number
of representative payees under age 18 because we do not maintain data
on the ages of our representative payees.
C. Most rep payees are individuals and not organizations. Do you
have any concerns about fraud involving individuals who serve as
payees, as opposed to organizations, which is the thrust of SSA's
legislative proposal? What are some recent examples of fraud involving
individual rep payees? Why did you not include suggestions to address
these cases?
SSA Response
As you stated, most representative payees are individuals and most
of those are relatives with custody. We are concerned about the
potential for abuse and have built numerous protections into the
representative payee systems to guard against unknowingly assigning
someone who poses a risk. Currently, we capture data about misuse,
representative payee related fraud convictions, self-reported felony
convictions, etc. In recognition of the fact that such individuals may
pose a problem, we will conduct site reviews of individual
representative payees who serve 20 or more beneficiaries. We also
believe it would be useful to include individual representative payees
serving 20 or more beneficiaries in the legislative proposal and permit
re-issuance of misused benefits. We will continue to explore other
alternatives for minimizing the potential for fraud.
Recent examples of individual representative payee fraud involve
non-reporting of death or loss of custody of the beneficiary in order
to continue receiving checks, fraudulent applications and forgery of
checks.
9.A. Can felons serve as rep payees? Under what conditions may
convicted felons serve as rep payees, whether as organizations or as
individuals?
SSA Response
Under current law, the only criminal convictions prohibiting a
person's appointment as representative payee are felony convictions of
sections 208 or 1632 of the Social Security Act. However, our
representative payee application does ask if the applicant to be an
individual representative payee has been convicted of any felony, and,
if so, the specifics of that conviction (see B. below).
A representative payee applicant convicted of a violation (other
than sections 208 or 1632 of the Social Security Act) is generally not
a suitable payee. It is in the beneficiary's best interest for SSA to
find an alternative representative payee or make direct payment rather
than appoint a convicted felon as a payee. If there are no alternative
payees and direct payment is prohibited, we evaluate the impact of the
felony on the applicant's ability to serve as payee. We consider the
nature of the crime, the applicant's relationship to the beneficiary,
how recently the crime was committed, and any indications of a
recurrence of criminal behavior. If it is determined that the payee
applicant remains suitable, we document the decision on the RPS and
establish diaries to closely monitor the payee's performance. With
respect to organizational representative payees, we do not ask whether
the applicant (on behalf of the organization) has been convicted of a
felony because an organization cannot be convicted of a felony.
However, our taskforce is also looking at the possibility of background
checks for organizational representatives.
B. How does SSA enforce current restrictions on convicted felons
serving as rep payees? Does SSA actually check its records or other
databases or does it rely on the word of the individual applying to be
a rep payee? How many people are denied becoming rep payees each year
because of current restrictions?
SSA Response
SSA screens representative payee applicants against agency records
of such violations. Quarterly reports from OIG identify individuals
convicted of violating sections 208/1632 of the Social Security Act and
also individuals convicted under other statutes when the violator was a
representative payee. This information is stored on the RPS and is
displayed to the technician to aid in making a representative payee
selection. The RPS systematically blocks the selection of any
individual convicted of a violation under sections 208/1632 of the
Social Security Act.
In addition, during the application process we ask whether the
applicant to be an individual representative payee has ever been
convicted of any felony. If yes, we ask what was the crime, date of
conviction, sentence, if imprisoned when released and, if on probation,
when it will end.
Last year, 981 individuals were not selected due to felony
convictions.
C. Based on your records, how many convicted felons serve as rep
payees today? Is that number expected to grow in the future?
SSA Response
Our records indicate that about 92,000 or two percent of
representative payees have self-reported felony convictions but field
office investigation has shown that almost one half of the 92,000
representative payees reporting themselves as convicted felons actually
reported the information in error. Reasons for the inaccurate reporting
are varied; representative payees sometime misunderstand the question
or think it refers to the beneficiary; others report misdemeanors as
felonies. In addition, payees with a felony conviction who are selected
are usually parents or relatives with custody of the beneficiary. We
expect this number will increase in conjunction with the expected
overall increase in the representative payee population.
D. Of cases involving allegations of abuse by rep payees, how many
involve previously-convicted felons? How many cases involving
convictions for abuse by rep payees involve previously-convicted
felons?
SSA Response
We do not know the number of allegations of/convictions for abuse
that involve previously convicted felons. However, a study of
previously convicted felons serving as representative payees found the
vast majority (97.4%) of payees who reported that they were convicted
felons properly discharged their payee duties.
We do fully investigate allegations of abuse by a representative
payee and document any findings on the RPS. If a representative payee
is convicted under statutes other than sections 208/1632, we display
this on the RPS and if any details of the conviction are available we
describe it in the text area of the RPS. This information will aid the
technician in making a payee selection. Also, as noted previously, when
a previously convicted felon is appointed as a payee, we establish
diaries and monitor the payee with personal contact follow-ups.
E. If the law were changed to prohibit all convicted felons
(including individuals convicted for felonies "">not related to Social
Security or SSI benefits) from serving as rep payees, what impact would
this have on beneficiaries? Would you expect more or less abuse by rep
payees of vulnerable beneficiaries?
SSA Response
Prohibiting all convicted felons from serving as representative
payee would have a negative impact on our beneficiaries. This could
result in our prohibiting a parent who stole a car at age 18 from
serving as representative payee for his/her child. A very large
percentage of these payees are relatives with custody of the
beneficiary. Finding an equally qualified person to see to the needs of
the beneficiary in these circumstances is not likely. As noted above,
our study of previously convicted felons serving as representative
payees found the vast majority (97.4%) of payees who reported that they
were convicted felons properly discharged their payee duties. Even
among the remainder, no misuse was discovered. Therefore, prohibiting
all convicted felons from serving as representative payees would not
significantly change the amount of representative payee abuse.
F. If a rep payee misuses benefits, presumably SSA will attempt to
locate another rep payee for the beneficiary. However, the first rep
payee may never be convicted of the misuse, especially if the loss is
not large. For example, the IG provides testimony about a father who
stole SSI benefits from his son for about two years, yet was never
prosecuted. Does that father serve as a rep payee for any beneficiary
today? Could he? Does SSA maintain records about such (former) rep
payees? For example, does SSA know how many current rep payees have
misused benefits in the past?
SSA Response
The father in question does not currently serve as representative
payee for any beneficiary. While it is possible that he could serve as
a representative payee at another time or for another beneficiary, SSA
would not appoint him unless direct payment was not possible, there was
no alternative payee, and there was compelling evidence that such an
appointment would be in the beneficiary's best interest. When misuse is
established, even if the IG does not secure a conviction, SSA inputs
that data into the RPS. If the misuser files again, the interviewer
will be alerted to his/her past poor history and it will be considered
when making the appointment. According to the RPS, there are 1,539
current representative payees who have misused benefits in the past.
G. SSA has proposed new civil and monetary penalties against payees
who misuse benefits. Would persons subject to these penalties also be
specifically disqualified from serving as a rep payee again?
SSA Response
The proposed new civil monetary penalties proposal does not include
any provision for specifically disqualifying as a representative payee
individuals who were subject to these penalties because they misused
benefits. However, we believe that this would be a good change to the
proposed extension of the civil monetary penalties provision.
10. Why is SSA only now implementing some recommendations? In the
IG's testimony, he highlights a number of recommendations his office
has made to SSA regarding the rep payee oversight process over the
years. Some of these have never been implemented, some are only now
being implemented. Why? Which recommendations has SSA not implemented
or does not intend to implement and why?
SSA Response
At SSA's request, in the last several years the OIG has conducted a
series of reviews of our representative payee monitoring process to
provide recommendations on how to improve the program's effectiveness
and efficiency. As a result, the OIG made several recommendations, from
changes to the Representative Payee Report form used to collect
information from our payees, to systems changes on how to better
support the program. SSA evaluated the recommendations within the
framework of our competing priorities and resource limitations. We have
implemented several recommendations including:
Developing and distributing a handbook for organizational
representative payees.
Issuing instructions to field offices to screen payees
more thoroughly.
Conducting onsite reviews of fee-for-service and volume
payees.
Developing and distributing a pamphlet for beneficiaries
informing them of their rights and responsibilities.
Changing the focus of the current process which relies on
accounting forms to monitoring and compliance of the payee.
In addition, we have started to implement the following
recommendations. These involve systems changes which require longer
lead time to implement:
Expand our automated Representative Payment System.
Instruct field offices to improve controls over retention
of supporting documentation of non-responder alerts and accounting
forms.
Develop an accounting form tailored to organizational
payees.
There are several OIG recommendations that SSA did not adopt:
IG: SSA should exempt from annual reporting those payees who
complete extensive reporting for an official or an external guardian
(i.e., legal guardians). SSA should periodically certify that these
payees still complete the alternate accounting.
SSA: We did not adopt this suggestion because of the statutory
requirement to obtain accountings from all payees (this was noted by
OIG), and because many of these payees have creditor relationships with
the beneficiaries, and few have custody.
IG: SSA should conduct suitability checks only for payees intended
for selection. We do not believe that SSA needs to conduct checks for
all payee applicants.
SSA: We believe that suitability checks are necessary for all
applicants in order to ensure that the best payee applicant is
selected.
IG: Revise the payee accounting form to include questions which
focus on events that payees commonly fail to report.
SSA: The representative payee accounting form is designed to
monitor the payees' use of the benefits, and to elicit information on
how any unused funds were conserved. The form also asks other payee-
related questions such as whether the representative payee has been
convicted of a felony or if the custody of a child has changed.
Further, instructions sent with the accounting form explain other
events-to be reported. We believe asking questions not related to use
of benefits would dilute the primary purpose of the form. Other forms
are available to address eligibility and should be used.
11. Why are abuses rising? According to the IG's office,
allegations of fraud involving rep payees have increased on average
from 206 per month in 1998 to about 1,100 a month so far this year. I
know the IG's office has grown during that time, enhancing its ability
to investigate abuse. But is there fire under this smoke? How do you
account for such a rise in allegations?
SSA Response
While we believe the IG may best be able to respond to the rise in
receipts of allegations of fraud involving representative payees,
several factors may play a role in explaining the increase. One factor
is the establishment of the OIG Hotline, which now receives calls
directly from individuals who previously contacted SSA field offices.
The FO's often handled these inquiries with no involvement by the IG.
Other factors that contribute to the rise in allegations may be the
extensive publicity of misuse cases and an increase in the number of
investigators. Further, the Agency has placed increased emphasis on the
representative payment program.
12. How does H.R. 3666 differ? In addition to legislation that SSA
has forwarded on this issue, Congressman Bob Wise of West Virginia has
introduced H.R. 3666. How does this bill differ from the proposal SSA
has put forward? It appears to the subcommittee that the retroactivity
under H.R. 3666 is without limit, meaning any benefits determined to
have been misused in the past, whether in 2000 prior to enactment, or
in 1999 or even in 1989 and before are eligible for reimbursement
provided other conditions are met. Is this reading correct? If enacted,
should a limit be placed on the retroactivity of legislation like H.R.
3666? What should that limit be?
SSA Response
We believe that Representative Wise's bill moves in the right
direction in attempting to make beneficiaries whole when their benefits
have been misused by their representative payee. In that respect we
support H.R. 3666. Like the SSA's proposal, this bill would improve the
safeguards for beneficiaries with representative payees. Beneficiaries
with representative payees are some of the most vulnerable of
beneficiaries.
As drafted, H.R. 3666 is broader than the SSA proposal. However,
this may have been more a result of drafting than of intent. Currently,
when any representative payee has been determined to have misused an
individual's benefits, SSA can reissue the Social Security or
Supplemental Security Income benefits only in cases where there was
negligent failure on SSA's part to investigate or monitor the
performance of the payee. Our proposal would provide that when an
organizational payee misuses a beneficiary's benefits, SSA would
reissue the benefits automatically, without regard to whether SSA
failed to investigate or monitor the performance of the payee. Thus, a
distinction between SSA's proposal and H.R. 3666 is that our proposal
is limited to cases of misuse by organizational payees. We have
recently, however, stated that we would support expanding our proposal
to include individual payees representing 20 or more beneficiaries.
With regard to the effective date issue, we agree that the
retroactivity under H.R. 3666 appears to be without limit. However, the
provision in the Social Security Act that allows us to make
beneficiaries whole in certain misuse situations was included in the
Omnibus Budget Reconciliation Act of 1990 (OBRA '90--P.L. 101-508,
enacted 11/5/90), which was effective upon enactment. Therefore, H.R.
3666 may be limited to that effective date. Subsequent to the
submission of your questions, Congressman Wise introduced another bill,
H.R. 4651. This bill parallels the Administration's proposed bill
except that is has an OBRA '90 effective date.
Having done further review of the availability of information
contained in our electronic systems, we now believe that it would be
preferable to make provisions relating to re-issuance of benefits
effective with respect to misuse determinations made in January 1995 or
later. We believe this date is the earliest point in time that SSA has
reliable information on our computer records for cases that involved
misuse of benefits. Additionally, this effective date would allow SSA
to reissue benefits in the affected misuse cases even if the misuse
determinations have already been made. Included among such cases would
be the beneficiaries whose benefits were misused by Ivy Services--a
misuse case mentioned in Inspector General Huse's testimony. (Misuse
determinations were made in this case in 1997.)
SSA's Office of the Actuary advises that whether the effective date
for SSA's proposal remains unchanged (i.e., effective for misuse
determinations made after 1999) or is made effective retroactive to
January 1995, the proposal is still estimated to have a negligible
effect on outlays from the OASDI trust funds.
13. What has been done about payments to deceased rep payees?
Please tell us what steps have been taken to prevent continued payments
to rep payees who have died. We now allow for recovery of this money as
if it were an overpayment. How much is being recovered? Compared with
what total overpayment? Do you have further suggestions for better
preventing payments after rep payees have died?
SSA Response
SSA has conducted a study of cases that were initially identified
as potential ``payments to dead representative payees.'' Our study
revealed that in most cases, we were in fact paying benefits to a new
representative payee. However, incorrect coding indicated otherwise;
that is, we were paying a new person, but failed to update the new
payee's social security number on our systems.
Our study did find several instances where payments were being
certified to deceased representative payees, however, and, therefore,
SSA will be performing a match of death computer files against our
representative payee system and investigating all appropriate cases. We
plan to complete this within the next 6 months.
We assume your overpayment recovery questions stem from the
recently enacted Foster Care Independence Act of 1999 (P.L. 106-169).
This law made representative payees personally liable for benefits they
received on behalf of a beneficiary after the beneficiary's death and
has no bearing on cases where the payee is a deceased individual. In
fact, as the benefits in these cases belong to the beneficiary (who is
still entitled) and not the representative payee, they do not represent
overpayments.
14. Why haven't certain Freedom of Information Act requests
described by Mr. Geffert been granted? Are there other Freedom of
Information requests involving rep payees that SSA has denied in the
year? For what information? In each case, what has been the
justification for the denial?
SSA Response
We denied Mr. Geffert's request for records pertaining to the
Aurora Foundation because the Office of the Inspector General (OIG)
advised us that the investigation was ongoing and disclosure of
investigatory records could interfere with the investigation. The
documents were withheld under Freedom of Information Act (FOIA)
exemption (b)(7)(A). Mr. Geffert has resubmitted his request, and while
we have been advised that the investigation is still ongoing, we expect
to release some documents, including the Aurora screens in the
Representative Payee File and Aurora's applications for bonding and
licensing. We have informed Mr. Geffert that this information will be
released as soon as the U.S. Attorney involved in the Aurora case
allows release.
We have identified only two other similar FOIA requests involving
representative payees within the past year. Case NR5363 originally
requested an electronic copy of the Master Representative Payee File.
The requester agreed to withdraw the request after we explained that
extensive reprogramming followed by manual review would be necessary to
delete personal information protected by the Privacy Act which we would
have withheld under FOIA exemption (b)(6). Case NR1597 involved
allegations of misuse by the Association for Retarded Citizens of
Rutland, Inc. In this case, the investigation was closed. Portions of
the documents were deleted or withheld under FOIA exemptions (b)(5),
(b)(6), (b)(7)(C), and the grand jury materials were withheld under
FOIA exemption (b)(3).
In addition, Subcommittee staff forwarded the following question:
15. How is the foreign representative payee program different from
the domestic program? What safeguards are in place to monitor the
foreign representative payee program?
SSA Response
Generally, the same policies directing development and selection of
representative payees and use and accountability of benefits that are
in effect domestically are applied outside the United States. However,
significant differences exist between the domestic and foreign
representative payee programs, and modification of procedures is
frequently required. For example, suitable representative payees are
usually not difficult to find outside the United States; most of the
beneficiaries requiring management of their benefits are children under
age 18, not homeless individuals or those living in boarding house or
institutional situations. More typically, beneficiaries are living in
family settings with close relative-payees who are interested in their
care and well-being. In addition, in some countries such as Canada,
there is a large number of public officials empowered by law to act for
mentally incompetent individuals as their representative payees.
Through SSA's ongoing program of validation surveys and other
extensive studies of the foreign program, we have regularly reviewed
the foreign representative payee program and have gained an awareness
of unique customs and cultural differences in various countries that
might influence our selection of a payee or the payee's ability to
perform his or her duties. For example, in the Philippines, the wife or
mother usually assumes responsibility for the financial resources of
the family. For this reason, a mother will be preferred over a father
as a representative payee for the child. If the father is selected, a
comprehensive explanation supporting this decision must be included in
the file.
Another standard practice for Foreign Service Posts (FSPs) that
service a significant beneficiary population is the establishing and
maintaining of records of representative payees who have been proven to
be unsuitable. The FSPs consult these records during the payee
selection process to assist them in choosing the best payee possible
for the beneficiary.
Further, there is an extensive history of oversight of the foreign
representative payee program to assure that payees are carefully and
correctly executing their duties for the welfare of the beneficiary.
One such effort is the Foreign Enforcement Program, under which an
annual contact is made with every representative payee on behalf of
every beneficiary whose benefits are subject to representative payment.
The purpose of this contact, in the form of a written questionnaire, is
to ascertain that the beneficiary remains eligible for benefits and
that the payee is using the benefits for the beneficiary's support and
welfare or conserving them in an appropriate manner.
When considering the small size (as of April 2000, there are 31,409
foreign beneficiaries who have representative payees) and unusual
nature of the foreign payee role, and the continued effectiveness of
the existing safeguards, we believe that the foreign representative
payee program succeeds in addressing the needs of beneficiaries outside
the United States who are unable to manage or direct the management of
their payments.
Chairman Shaw. And now we have Mr. James Huse, who is the
Inspector General in the Office of the Inspector General. Mr.
Huse, if you would have a seat at the table.
Mr. Huse?
STATEMENT OF HON. JAMES G. HUSE, JR., INSPECTOR GENERAL, OFFICE
OF THE INSPECTOR GENERAL, SOCIAL SECURITY ADMINISTRATION
Mr. Huse. Good morning, Mr. Chairman and Congressman
Matsui. Thank you for the opportunity to discuss the Social
Security Administration's representative payee program.
This critical program is designed to protect the interests
of some of the most vulnerable members of our society. Today, I
would like to summarize my full statement for the record.
But first, I need to emphasize that the vast majority of
rep payees are honest, trustworthy people. However, recent
events have shown that this program needs tighter controls to
prevent abuses by those entrusted with this great
responsibility.
Since fiscal year 1998, we have opened in the OIG 1,352 rep
payee investigations, obtained 313 convictions, and identified
over $7.5 million in losses. Several of our cases represent
severe abuses, where a number of individuals were victimized.
In my written statement, I highlighted our investigation of
Ivy's Social Services, Incorporated, whose owner misused about
$274,000 of beneficiaries' funds for personal purchases over a
15 month period, while serving as a fee-for-service rep payee
for 330 individuals.
Our Aurora Foundation investigation is our most recognized
case. Aurora was an organizational fee-for-service rep payee
that served over 140 disabled individuals. The president of
Aurora embezzled about $300,000 over a 4 year period, of which
almost half represented payments issued by Social Security.
Even though Aurora had been a fee-for-service rep payee
since 1995, Social Security had never conducted an on-site
review. However, at the time of our investigation, Social
Security notified Aurora of a pending site visit, based on
complaints against it.
We have also encountered significant abuses by individuals
serving as rep payees. After receiving a complaint from the
Veterans Affairs Inspector General, my office opened an
investigation that involved Ms. Jean Bote.
She acted as a professional guardian and rep payee for
approximately 20 beneficiaries. Our investigation determined
that Ms. Bote misused over $200,000 in Social Security and
Veterans Affairs benefits.
Currently, when Social Security determines that an
individual is incapable of managing his or her own benefits, it
searches for a suitable rep payee. To determine suitability,
Social Security interviews individuals and conducts a limited
review of documents, supplied by the potential payees.
Please keep in mind that this is not an investigation, but
serves as a means for Social Security to verify information
within its own systems. Social Security, generally, does not
verify the accuracy of the information, unless there is a
reason to question suitability; nor does the agency perform
credit or security background checks.
We believe that the agency needs to strengthen its
selection process, because this is Social Security's best
opportunity to prevent the misuse.
Social Security also needs to strengthen its rep payee
monitoring program. We have recommended that Social Security
implement additional controls to ensure that payees do not
misuse benefits.
In our work, we identified problems with payees who did not
respond to Social Security's annual request for accounting of
how benefits were used for the individuals they represented. We
are pleased that Social Security is proposing to conduct quick
response checks when rep payees do not respond.
On-site reviews are another part of the monitoring program.
State institutions that participate in the rep payee program
are reviewed every 3 years.
Social Security may also conduct on-site reviews if a
problem is brought to its attention. Unfortunately, these
reviews are detective, rather than preventative. We believe
Social Security should conduct periodic reviews of payees and
focus more on monitoring and compliance issues.
Finally, in another review, we found that payments were
often made to deceased rep payees. We estimated that since July
1998, about $17 million in payments were issued to over 2,000
deceased payees. We recommended that Social Security conduct
routine computer matches, to ensure that it promptly identifies
payees who are deceased, and quickly selects new payees.
Social Security has acknowledged the need to address rep
payee oversight issues. And we have agreed to work together
with the agency to protect our expertise.
Mr. Chairman, we look forward to working with the agency
and this Committee to improve this vital program, and protect
Social Security's most vulnerable beneficiaries.
I will be happy to answer any questions you may have.
[The prepared statement follows:]
Statement of the Hon. James G. Huse, Jr., Inspector General, Office of
the Inspector General, Social Security Administration
Good morning, Mr. Chairman and members of the Subcommittee.
Thank you for the opportunity to discuss the Social Security
Administration's (SSA) Representative Payee (Rep Payee)
Program. While the Agency's Rep Payee Program is designed to
protect the most vulnerable members of our society, recent
events have demonstrated that these laudable goals are
sometimes compromised. Today, I would like to focus on some
practical solutions that would strengthen the Agency's Rep
Payee Program. In particular, I would like to highlight several
recent audit recommendations that offer solutions to prevent
and detect Rep Payee abuses. Additionally, I would like to
discuss several investigations that have highlighted weaknesses
in the Rep Payee Program. We are working closely with the
Agency to rapidly address the vulnerabilities identified in
these reports and investigations, and to implement sensible
solutions.
The Rep Payee Program--A Brief Overview
SSA provides Social Security and Supplemental Security
Income (SSI) benefits to the most vulnerable members of our
society--the young, the elderly, and the disabled. Congress
granted SSA the authority to appoint Rep Payees for those
beneficiaries that SSA determines to be incapable of managing
their own benefit payments. Each Rep Payee has a legal
responsibility to use SSA's benefit payments for the use and
benefit of the beneficiary only. At the present time, about 6.5
million Social Security and SSI beneficiaries rely on Rep
Payees to manage their monthly benefits.
There are two major types of Rep Payees--individual Rep
Payees and organizational Rep Payees. Individual Rep Payees are
typically relatives of the beneficiary, who are entrusted to
use such funds in the best interest of the beneficiary.
Although individual Rep Payees may at times provide services to
multiple beneficiaries, they are prohibited from charging fees
for such services. Organizational Rep Payees are typically
large institutions that provide care and treatment for
beneficiaries residing in such institutions (e.g., Department
of Veterans Affairs hospitals, State psychiatric institutions,
nursing homes, and extended care facilities). Other types of
organizational Rep Payees may include community groups,
charitable organizations, and other nonprofit agencies. The
Social Security Act allows qualified and authorized
organizational Rep Payees to collect a fee for providing Rep
Payee services.
Early Warning Signs
Over the last several years, our audits and investigations
revealed early warning signs that may have gone unheeded by the
Agency. These warning signs existed in both the Rep Payee
selection process and during post-selection monitoring process.
Screening and Selection of Rep Payees--When SSA determines
that a beneficiary is incapable of managing his or her own
benefit payments, SSA searches for a suitable Rep Payee. SSA
regulations give preference to family members over friends,
third parties, and organizational Rep Payees.
To determine suitability, SSA interviews prospective Rep
Payees. This usually consists of a review of documents supplied
by the prospective Rep Payee. It is not an investigation, but
rather a means to conduct an SSA records verification. Some of
the documents that SSA reviews for individual applicants
include:
Drivers licenses;
State Identification cards;
Credit cards; or
Bank books/check books
However, SSA generally does not verify the accuracy of the
identification and financial information presented, unless it
has reason to question the applicant's suitability. SSA does
verify the accuracy of the Rep Payee's income by comparing the
information on the Rep Payee application to SSA's records. SSA
also verifies with our office that the prospective Rep Payee
has not been convicted of a felony against Social Security
programs.
For organizational payees, SSA verifies the Employer
Identification Number (EIN) of the Rep Payee by comparing the
EIN on the Rep Payee application to the EIN contained in SSA's
records. SSA does not perform credit or security background
checks on prospective individual or organizational Rep Payees.
Based on existing regulations, SSA does not determine if the
individual Rep Payee or organizational Rep Payee has financial
problems, credit problems, or if they, or their employees, may
have been convicted of any other felony.
We believe that the selection process, specifically the
suitability determination, should be strengthened. This
presents SSA with the best opportunity to prevent improper
benefit payments before issuance. In a March 1997 evaluation
report entitled, Monitoring Representative Payee Performance:
Roll-Up Report, we recommended that SSA conduct a more thorough
screening of potential Rep Payees.
Rep Payee Monitoring and Oversight Activities--SSA has some
basic safeguards in place to ensure that Rep Payees do not
misuse benefits. SSA requires an annual accounting report from
all Rep Payees, for each beneficiary under their care.
Additionally, SSA has the ability to conduct on-site reviews of
organizational Rep Payees.
Annual Accountability Reports--An annual accounting report
form, the ``Representative Payee Report,'' is sent to every Rep
Payee. The form elicits information concerning the dispensation
of SSA funds that the Rep Payee has received, on behalf of each
beneficiary.
In our December 1996 report entitled, Monitoring
Representative Payee Performance: Nonresponding Payees, we
identified problems with Rep Payees who did not respond to
these annual accounting reports. We recommended that SSA
determine (1) why Rep Payees did not complete and return these
accounting reports; and (2) whether SSA staff properly
processed systems-generated alerts for Rep Payees who did not
respond. In the intervening 3-year period, there were several
organizational Rep Payee fraud cases in which such accounting
forms could not be located. Thus, we are extremely pleased that
SSA is proposing to conduct Quick Response checks when Rep
Payees do not return these financial accounting reports.
In our September 1999 report entitled, Nonresponder
Representative Payee Alerts for Supplemental Security Income
Recipients, we found that the field offices lacked supporting
documentation for the failure to timely complete accountability
forms. This lack of documentation resulted in an inability to
identify the reasons that Rep Payees had not completed their
accounting forms as required. We recommended that SSA instruct
field offices to improve controls over the retention of
supporting documentation and obtain accounting forms from Rep
Payees. SSA disagreed with our recommendation and stated that
field offices are required to send these documents to an
outside storage facility. We believe that the retention of
these documents, and their ability to be easily retrieved, is
essential to the identification, and ultimate prosecution, of
Rep Payee's for fraud or misuse. Indeed, this is consistent
with SSA's written policy. SSA's Program Operations Manual
System (POMS) states that payee accounting reports must be
retrievable in the event that the form must be reviewed for a
misuse or fraud allegation.
On-site Reviews of Representative Payees--Another part of
SSA's oversight and monitoring of Rep Payees involves on-site
reviews. State institutions that participate in the on-site
review program are reviewed once every 3 years. In addition,
SSA may conduct an on-site review if a problem with a payee is
brought to its attention. On-site reviews are visits with the
Rep Payee or the administrators of such organizations, and they
consist of an examination of the relevant accounting records.
Additionally, interviews with beneficiaries are conducted to
determine if their needs are being met. Unfortunately, these
reviews may not identify Rep Payee abuses until after the fraud
has occurred. Further, many beneficiaries are incapable of
communicating any problems due to their disabilities--the basis
of their need for a Rep Payee in the first place.
In our March 1997 Roll-up report, we made several
recommendations to improve the efficiency and effectiveness of
SSA's Rep Payee monitoring program. Included in the report were
recommendations for SSA to conduct periodic reviews of selected
Rep Payees and to change the focus of the current process from
accounting to monitoring and compliance.
Finally, in our September 1999 report, The Social Security
Administration's Procedures to Identify Representative Payees
Who Are Deceased, we reported that benefit payments were
sometimes made to deceased Rep Payees. In some cases, SSA could
not be sure that the funds were ever used on behalf of the
beneficiaries for which they were intended. We also reported
that SSA does not ensure that new Rep Payees are selected when
former Rep Payees have died. In July 1998, from a review of
SSA's Death Master File, we estimated that 2,091 deceased Rep
Payees received about $17 million in Social Security and SSI
payments. We recommended that SSA: (1) conduct routine computer
matches to ensure that SSA promptly identifies Rep Payees who
are deceased and; (2) select new Rep Payees in a more timely
manner. SSA agreed with our assessments and plans to implement
our recommendations.
Fraud Cases Highlight Program Vulnerabilities
While the vast majority of Rep Payees are honest,
trustworthy people, several recent cases have demonstrated that
key controls could have prevented major fraud cases. No case
better exemplifies this point than the Aurora Foundation case,
which was the subject of a television news magazine segment in
January 2000, entitled ``When Nobody's Looking.'' Aurora
Foundation, Inc. was a high-volume, organizational Rep Payee
that served over 140 disabled individuals in West Virginia.
Although Aurora had been a fee-for-service Rep Payee since
1995, SSA had not yet performed an on-site review. However, at
the time of our investigation, SSA had notified Aurora, by
mail, of a pending review based on complaints.
Our investigation revealed that the head of the Aurora
Foundation, Gregory Gamble, had embezzled over $300,000 between
April 1995 and May 1999. The majority of these diverted funds
were SSA payments. Mr. Gamble has since pleaded guilty to
embezzlement of Social Security benefits, Veterans Affairs
benefits, and private funds. Mr. Gamble is scheduled for
sentencing on June 5, 2000.
During the course of our investigation, my office asked SSA
to retrieve all of the financial accounting forms submitted by
Aurora. SSA was only able to secure 12 of the accounting forms
that were submitted by the Aurora Foundation during its final
year of operation. The missing forms reflect a lack of program
oversight on behalf of SSA. It still remains unclear as to
whether the remaining accounting forms were submitted and
subsequently misplaced, or never submitted in the first place
by the Aurora Foundation. We continue to believe that SSA needs
to conduct regular inspections and reviews of organizational
Rep Payees, especially those Rep Payees who do not submit the
required financial accounting forms.
From November 1996 to February 1997, a SSA Field Office
(FO) received approximately 45 complaints of funds being
mismanaged by Ivy's Social Services, Incorporated (Ivy's), a
fee-for-service Rep Payee located in Phoenix, Arizona and
Denver, Colorado. Upon receiving this information from the FO,
my office promptly opened an investigation. Our investigation
revealed that Ivy's was an organizational Rep Payee for 330
individuals from March 1996 to May 1997. During this short
period of time, the head of Ivy's spent approximately $274,000
of the beneficiaries' money to make personal purchases. In
addition to paying off $65,000 in personal credit card debt,
the subject of the investigation also used the funds to
furnish, and pay the rent for, three personal residences. In
May 1999, the head of Ivy's was sentenced to 18 months
imprisonment, and ordered to pay full restitution of $274,000
to SSA.
We have also encountered significant abuses by individual
Rep Payees who are not affiliated with an organization. Ms.
Jean Bote acted as professional guardian and Rep Payee for
approximately 20 recipients of Social Security benefits.
Several of the beneficiaries for whom she collected benefits
were elderly veterans with mental disabilities. In response to
a complaint received by the Veterans Affairs Inspector General,
my office opened an investigation and determined that she
misused over $200,000 in SSA and VA benefits for her own
personal gain. Subsequently, Ms. Bote was sentenced to 37
months incarceration and 3-years supervised release. She was
also ordered to make restitution totaling $200,000 to the five
victims. Prior to sentencing, Ms. Bote presented the probation
office with a $200,000 check in anticipation of the restitution
ordered.
Since Fiscal Year 1998, our office has opened 1,352 Rep
Payee investigations, which have led to 313 convictions and
identified over $7,500,000 in fraud losses. The vast majority
of these investigations have involved individual Rep Payees
acting on behalf of one individual, as opposed to
organizational Rep Payees that are responsible for multiple
individuals.
Working Together to Find Common Sense Solutions
As SSA has acknowledged the need to address Rep Payee
oversight issues, we have agreed to work together with the
Agency and provide our expertise and assistance. Specifically,
over the next several months, we will work with the Agency to:
Identify and recommend appropriate improvements to
the program;
Provide support to SSA staff during on-site
reviews of selected Rep Payees;
Conduct periodic audits of the program, including
Agency adherence to program policies and procedures; and
Evaluate, on an ongoing basis, the need for
revised policies and procedures.
We hope that this type of fraud, which so often victimizes
the most vulnerable in our society, will be more quickly
discovered and referred to us for investigation and
prosecution.
We also believe that with additional Civil Monetary Penalty
(CMP) authority, SSA can make sure that Rep Payees who abuse
the system are punished, even when they are not prosecuted. The
CMP program has proved to be enormously valuable both in
preventing fraud from occurring, and in recovering monies
stolen from SSA. However, there are currently limitations to
pursuing CMPs in the Rep Payee Program.
I would like to illustrate this point by telling you about
a father who applied to be the Rep Payee for his disabled minor
son in 1996. He received approximately $10,713 in SSI
disability payments for his son's benefit and care. Later, in
July 1998, the child's mother applied to be his Rep Payee. It
became apparent that the father never had custody of the child,
and that he used the payments designated for his son for his
personal use for almost 2 years. The father refused to repay
the funds to SSA. Because the dollar loss fell below the
prosecutive threshold, both the criminal and civil divisions of
the U.S. Attorneys Office declined the case for prosecution. At
that point, our Office of Investigations referred the case to
our Office of Counsel for possible action under the CMP
program. Unfortunately, we could take no action in this case
because the son was eligible for the payments. Therefore, under
existing law, the funds were properly paid despite the fact the
child most likely never benefited from them. The father's
conversion of these benefits did not constitute a false
statement made in order to obtain or retain the benefits--as I
said, the benefits themselves were proper. In the absence of
specific CMP language pertaining to theft or misuse, the
father's theft of his disabled child's benefits had to go
unpunished.
Finally, I would like to comment on an important Agency
legislative proposal that would counter organizational and
individual Rep Payee abuses. In February 2000, SSA submitted a
draft Rep Payee bill for consideration by this Congress. This
draft legislation would require, among other things, that
organizational Rep Payees be licensed and bonded. It also seeks
to expand the CMP program to address the improper conversion of
benefits by Rep Payees--a scenario described earlier in my
testimony. I applaud SSA's recent efforts in this area to deter
and detect Rep Payee abuse before it starts.
While I strongly support SSA's recent legislative efforts,
there are additional front-end safeguards that may be
appropriate. Specifically, individual Rep Payee identity and
financial documents should be verified thoroughly, prior to
selection of a Rep Payee. Further, large organizational Rep
Payees should be subject to financial and background screening
prior to selection.
Once a Rep Payee has been selected, more rigorous
monitoring would be beneficial. SSA's current business process,
for collecting and retrieving Rep Payee accounting forms,
should be examined carefully. Additionally, I look forward to
SSA's planned on-site reviews, as mentioned earlier. These
reviews will be more detailed and thorough than any prior
reviews conducted by SSA.
Mr. Chairman, we look forward to working with the Agency
and this Committee to improve this vital program. We need to be
sure that appropriate Rep Payees are selected and that the
benefits are used for the purposes there were originally
intended.
Thank you for holding this hearing. At this time I will be
happy to answer any questions that you may have.
Chairman Shaw. You made reference to deceased payees. What
happened? Where is the money going when you have a deceased rep
payee?
Mr. Huse. Well, it goes to probably another family member
or another person.
Chairman Shaw. Are the checks going out or the bank account
that money is being wired into, does that generally have more
than one signatory on it? How are they getting the money out to
the beneficiary; or if it is being misplaced or misused, how is
that?
Mr. Huse. I am not sure I understand your question.
Chairman Shaw. Well, how are they cashing the checks?
Mr. Huse. They are cashing the checks, most of these, by
electronic funds transfer. By not reporting the death, the
automatic payment is made. And as far as Social Security is
concerned, the rep payee is still alive, so the funds are then
disbursed by family members or spouses, or whatever the
situation is.
This is an area that plagues us, not only in this
particular program, but in other benefits, too, by failing to
report that.
Chairman Shaw. Well, I know if a recipient dies, through
death certificates and what not, if they die in this country,
the Social Security Administration is advised. Could you cross-
check with that with the rep payees? Do you get their Social
Security numbers, or is there any way we have of checking that?
Mr. Huse. Well, you are correct, Mr. Chairman, Social
Security maintains a master death file. And, in fact, many
other agencies use it, because it garners this information from
across the country. What we are suggesting is that that death
file be matched against the rep payee program in a computer
match.
Chairman Shaw. So you are suggesting the question I just
asked?
Mr. Huse. Exactly, exactly, and we have audit work to that
effect that we have done and made recommendations to the agency
on that issue.
Chairman Shaw. Have you reviewed the procedures? Dr.
Daniels did not like to call this auditing procedures, because
of the qualifications of the people that are in the field.
But whatever you call it, the record checking that is done
in the field, she indicated that there is a procedure that they
go through. Is that a written procedure that you have looked at
or have been able to review?
Mr. Huse. We have looked at it in our work, and we have
suggested areas where it can be strengthened. When this current
wave of provocative cases came to the attention of Social
Security, I wrote a letter to the Commissioner, and took the
extraordinary step of volunteering our audit services to
participate in this endeavor to put something on the street
immediately, to try and deal with this problem.
So we have, as Dr. Daniels said, a partnership arrangement,
where we will offer our expertise and advice, and we do have
the accountants go to Social Security, as they try to make a
more robust and effective process, here.
Chairman Shaw. Have they been responsive to your
suggestions?
Mr. Huse. Yes, sir, they have.
Chairman Shaw. Good. Do you think that an overall review of
their procedures should be underway at this point, based upon
the experience that we have had?
Mr. Huse. Well, we have been in existence as an OIG now for
5 years, since independence. In that period of time, we have
done three strong audit reports on the representative payee
process, and made numerous recommendations to the agency. If
implemented, these would, in effect, have strengthened some of
these areas.
Chairman Shaw. If they were put into effect?
Mr. Huse. If they were put into effect.
Chairman Shaw. They have not been?
Mr. Huse. Well, I was just going to go there. This is a
workload Social Security, in the field, that gets deferred. It
is not addressed because there are other priorities that
interfere.
We do not have a performance measure in our performance
plan that deals with having this process as effective and
having the best integrity that it possibly could. And in my
opinion, where you do not have a performance measure, normally
in life, you do not have much compliance or an incentive. So we
think that that is probably called for, also.
Chairman Shaw. What about overseas beneficiaries; how do we
know that they are still alive?
Mr. Huse. Well, Social Security has overseas payment
benefit officers that monitor the overseas payments, and has a
series of reviews that are conducted, country by country, each
year.
We send OIG investigators on these reviews to look at the
deceased. And most of this is in the deceased payee realm. And
I can give you a much better answer of what has been done there
in writing, if you wish, over the past 5 years. But we have
been doing this.
Chairman Shaw. Yes, I would like to look at that in all
areas, because I think we are probably paying a lot of dead
beneficiaries in other countries, where we do not get the
information back, where with the wire transfers, the money just
keeps flowing.
It seems to me there should be, whether there are enough
Social Security people around the globe to check on this, the
people receiving these things, at some regular intervals,
should be required to come in to see the different consular
offices or something.
Mr. Huse. And that is basically how this survey is
conducted. They take the universe and a country and a sample.
Chairman Shaw. Is it sufficient?
Mr. Huse. I think it is a good process. In some foreign
countries, of course, the numbers are daunting. There are some
European countries where we have significant numbers of retired
beneficiaries. And in other places, we can take the entire
universe. But it is a business process that works.
Chairman Shaw. Mr. Matsui?
Mr. Matsui. Thank you, Mr. Chairman.
Mr. Huse, did you review the file on the Aurora situation?
Mr. Huse. Yes, sir.
Mr. Matsui. And you are very familiar with that?
Mr. Huse. I am very familiar with Aurora.
Mr. Matsui. And your office obviously did a thorough
investigation, talked to people over there, talked to the
beneficiaries that were defrauded, and all of this?
Mr. Huse. We did a complete investigation for the United
States.
Mr. Matsui. Is it your opinion that there were only a
couple of complaints in that 4 year period, from your review of
the file, or was there more than that? I am just puzzled by
this, and I can not seem to get to the bottom of it, from my
own perspective.
It seems to me that when you have that many beneficiaries
and that much money involved over a 4 year period, that there
had to have been more complaints than what was represented. And
maybe I am totally off on this. But what does your file show,
from your reading of the files?
Mr. Huse. I do not know that we can answer that question,
specifically. But in other areas that had early warning
potential, for example, the use of this annual accounting form
that is required on every individual beneficiary, in our
investigation, we were only able to find in Social Security's
field records 12 of these forms for a universe of around 140
beneficiaries. That meant that a significant number of these
were missing.
When we executed a search warrant on Mr. Gamble's office, a
number of these accounting forms were in his files, still in
the original envelopes, that he never responded to.
Again, I come back to the fact that these are great
processes, but they only work if they are followed as a
business process.
Mr. Matsui. Yes, and let me say this. I think your
recommendations and what the SSA has implemented is helpful.
But, you know, on-site inspections and all of those, they are
helpful if there is competence at the level of administering
the programs and the benefits.
Mr. Huse. Exactly.
Mr. Matsui. And that is where I am kind of coming from. You
know, there is obviously a total breakdown in the system, some
place. If this was $20,000 over a year period, well, OK, I will
give the person a break. But this is 4 years and a quarter of a
million dollars, and it just does not seem to smell right.
And I was somewhat taken aback that this guy was an
outstanding citizen and all this stuff, and that had an impact,
I suppose. But I remember back in the early eighties, when we
had a lot of S&L suede shoe guys that were outstanding citizens
in S&L, that defrauded the government of some trillion billion
dollars.
Mr. Huse. Sure.
Mr. Matsui. I need an explanation of this. You know, this
is great, what you are recommending, on-site inspections, more
paperwork and all this stuff. That is great. But if you have
got folks that do not understand what they are doing or do not
care what they are doing, there has to be more to this.
Mr. Huse. And that is why I made the suggestion that by
making this a performance measure or goal that the agency
strives to reach, then it becomes an imperative for managers
and executives to ensure that this particular workload is
accomplished.
Of course, in the broad scheme of things, that means
probably some other adjustments have to be made, maybe on the
customer service side. But that is the nature of government.
You have to make these choices.
Mr. Matsui. I know, but that does not answer my question.
Mr. Huse. I want to be responsive.
Mr. Matsui. Well, is there accountability by some of the
folks in the SSA office and the regions? There has got to be
some accountability.
I mean, here we are having this hearing and you are the
Inspector General. Could you say that there were people in that
office that should have done a better job? Do they commit acts
of misfeasance, or is this something that you could prefer not
to talk about? And I would understand that.
Mr. Huse. Well, the technical term of whether an entity is
negligent or not, it has legal implications.
Mr. Matsui. You used a stronger word than negligence.
Mr. Huse. Right.
Mr. Matsui. I am using misfeasance.
Mr. Huse. But I think I can comfortably state, based on the
record of reports that have been issued, both in my name and my
predecessor's name, in the last 5 years, that this is a
business process that needs to be fixed. It needs to be fixed
with stronger accountability, and it needs to be strengthened
with better performance. And we are on record saying this.
Mr. Matsui. I know, and you are suggesting things, and some
of them have been implemented, you know, more on-site
inspections and those. But that is not the question I am asking
you. I mean, I am saying, those are a given.
Could this have happened in spite of that? And I kind of
think that maybe it could have, given what I am hearing, and
the fact that this went over a 4 year, 48 month period, because
this guy was a good neighbor.
Mr. Huse. If you are suggesting that there needs to be a
different focus, I agree with you.
Mr. Matsui. Yes, that is what I am saying.
Mr. Huse. Because in these instances, we have a focus in
Social Security, and an appropriate one.
Mr. Matsui. If I could just say this, I do not want to be
snowed, OK. I mean, I do not want this little fix. And, you
know, I agree the legislation makes sense.
But in a way, it makes it easier if we hold the beneficiary
harmless. Because, you know, maybe then the whole Aurora issue
would not have even been before our attention, because the
beneficiaries would not be here complaining, and their
attorneys would not be here complaining. So maybe we need to
have that safeguard.
So I am concerned about, was there any accountability; are
there letters in personnel? And I know they are personnel
matters, so I can not be involved in that. But, certainly,
there has to be more than just mistakes were made.
I mean, gosh, we are talking about a quarter of a million
dollars. A lot of folks were hurt. People that you and I and
everybody else were supposed to be protecting.
And I can not see us as saying, well, mistakes were made.
This guy was a good citizen, so we were misled. That is just
not enough for me.
Mr. Huse. That is why, in my testimony, I really think we
need to do a totally different job in selecting these people in
the first place.
Mr. Matsui. Well, if this guy was a good citizen, they
would have selected him under any circumstances. He went to
church with them. He was a banker.
Mr. Huse. And I know I am sliding around, coming to the
answer that you want.
Mr. Matsui. Well, I just want honesty.
Mr. Huse. And I hope I am honest.
Mr. Matsui. Well, you are, but I mean, what I want is why
this happened. It happened because somebody screwed up, because
some folks were misled, right, by this guy, and they should
have done a better job of holding this guy accountable. And so
maybe these people have to be held accountable. That is the
whole idea of government.
Mr. Huse. But this particular situation happens when this
focus, this stewardship, if you will, of this particular area
was not important. What was more important was to get benefits
out the door.
Mr. Matsui. You did not get benefits out the door.
Mr. Huse. They got them out the door.
Mr. Matsui. Well, they got them out to the wrong person.
Mr. Huse. Right.
Mr. Matsui. And this is great that we are doing all these
great things. But it will not make any difference if the guy is
a crook, and people say he is a nice guy, so we do not want to
embarrass him.
Mr. Huse. I think in the past 5 years, since we have had an
Office of the Inspector General at Social Security, we have
done a lot of consciousness raising about fraud and integrity
issues.
And we have really tried to shift a culture that really is
focused on social work, not on fraud prevention. And we have
come a long way, and a lot of it with the help of this
Committee, in resources and agents and auditors. We are still
engaged in that.
But it is still to be reached, and we are not laying that
down. But that is really at the heart of what you are talking
about.
Mr. Matsui. Do you know where there has been accountability
to these folks that were administering this program?
Mr. Huse. I do not believe there has been, no. I mean, that
is in the administrative area.
Mr. Matsui. You know, is that something you are supposed to
look into?
Mr. Huse. Well, we have. I mean, we have down the record of
what these situations are.
Mr. Matsui. And you do not think there should be anything
beyond that, then?
Mr. Huse. Are you referring to disciplinary actions and the
like?
Mr. Matsui. Well, I mean, obviously, individuals were
involved in this. You know, maybe I should not ask that.
Mr. Huse. My belief is that the record is there, which is
what the Inspector General does. We do not propose
administrative actions or disciplinary actions. We merely bring
the facts to the table.
Mr. Matsui. Yes.
Mr. Huse. I do not think there is a focus here that
anything really went wrong. I think it is more viewed as an
accident of circumstances. Our audit work says something else.
We really need to have stronger procedures. That is about all I
can say.
Mr. Matsui. I am really troubled by this. But I guess I
have to accept your comments.
But it just seems to me that there should be more. And I am
sorry, Mr. Chairman, I do not mean to take too much time on
this.
Chairman Shaw. Go ahead.
Mr. Matsui. But there should be some accountability.
Mr. Huse. And I accept the fact that, you know, I have a
position where I speak to these issues. And I do, as strongly
as I can. But I can only make recommendations to the
Commissioner and to the agency. What they do with those, all I
can do is report back to Congress on what we have reported and
what has happened.
Chairman Shaw. You spoke of accounting forms, and you said
there were less than 20 of them, and there should have been
well over 100 of them. Are these forms required?
Mr. Huse. They are required by the existing procedures that
Social Security has.
Chairman Shaw. Well, now the previous panel said they had
no warning that there was something wrong. Well, goodness, if
the reports were not coming in that they require, that is the
biggest red flag that you can possibly have. And probably what
happened, Mr. Gamble said, nobody is looking at me.
I mean, this goes back to the situation--the locks on your
house keep honest people honest. If somebody wants to get in,
they are going to get in. And it seems to me that these reports
are going to keep honest people honest.
And it may be that Mr. Gamble, if he knew that he had to
file these reports regularly, and that people were going to get
after him if he did not. I am amazed. That is a red flag that
should have just gone right up. So I think the system failed
badly.
Mr. Huse. The system fails because it was not followed.
And, again, I know from our work that it has become one of
these workloads that gets set aside.
Chairman Shaw. I wish the previous panel was still here,
because I would like to call them back to the table, based upon
that. Because to me, that is a huge question. And we will
follow it up with written questions to both of those witnesses
as to why that did not raise a flag. And, also, I hope they
start reviewing other files to be sure that that stuff is
coming in.
Mr. Huse. That is all part of this new emphasis that we
have put together. When I say ``we'' that is the Social
Security and the OIG, working together, because it is sort of
an emergency. I mean, we really believe we need to do something
there.
Chairman Shaw. But your testimony is that the existing
system was not being followed.
Mr. Huse. That is correct. And our audit reports, on the
record, have indicated that over a 5 year period, in different
aspects.
Chairman Shaw. Yes, go ahead, Mr. Matsui.
Mr. Matsui. The one thing that brings accountability to the
system is to find out who made the mistakes and hold them
accountable. And that does not sound to be what is going on
right now. You are coming up with these recommendations that
kind of lulls us into thinking that maybe this is a great way
to handle it.
But I think it is more than that. I have to believe what
the gentleman to your left said, that this guy was somebody we
trusted. And that is not enough. I think, as the Chairman said,
they did not look at the records. They did not try to figure
out what was going on.
And I have to believe that those beneficiaries, a number of
them, had to have been complaining somehow. Maybe they did not
log it, but there had to have been more complaints than two or
three. It just does not make sense when you lose a quarter of a
million dollars.
Mr. Huse. My concern here is that whatever process we
finally strengthen and have as an abiding process, that it
function in a preventative manner, as opposed to detective.
Mr. Matsui. Well, I do not want to get argumentative with
you. But preventive, that is exactly what I am talking about.
If you hold somebody accountable, and then others find out
about it, then perhaps they will not do the same kind of thing,
within the office.
I am not talking about the Aurora people. I am talking
about the people that were administering the program that
perhaps were not up to doing a good job.
Mr. Huse. I am not arguing with you at all.
Mr. Matsui. But that is where I am coming from.
Mr. Huse. OK.
Mr. Matsui. There has to be some accountability. And I do
not think that anybody is paying attention to the
accountability part of it.
Mr. Huse. I think, in the recent months since these very
provocative cases have come to the public eye, there is quite a
bit of attention being paid to this now.
Chairman Shaw. Thank you.
Thank you, Mr. Huse.
Mr. Huse. Thank you.
Chairman Shaw. Mr. Huse, we may have some more questions,
after we get this final panel, that we would like submitted in
writing to you.
Mr. Huse. I will be glad to answer them.
Chairman Shaw. OK, thank you very much.
The final panel is Nancy Coleman, who is the Chair of the
Federal Advisory Committee on Representative Payees, and
Director of the Commission on Legal Problems of the Elderly,
the American Bar Association; Reginald Glover, who is the
Director of the Patient Resources Offices of the Mental
Hygiene, State of New York, on behalf of the National
Association of Reimbursement Officers; Ann Sparks, who is a
Representative Payee Director of the Mental Health Association
of York County, in York Pennsylvania; Diane McComb, who is the
Executive Director of the Maryland Association of Community
Services, Severna Park, Maryland; and Garry Geffert, whose name
has been used several times today, who is a Staff Attorney the
West Virginia Legal Services Plan, Incorporated, in
Martinsburg, West Virginia.
Welcome, and we have all of your written statements. We
would invite you to summarize, as you see fit.
Ms. Coleman?
Ms. Coleman. Thank you.
Chairman Shaw. I saw you back there, shaking your head up
and down quite bit, so I am looking forward to your testimony.
STATEMENT OF NANCY COLEMAN, CHAIR, REPRESENTATIVE PAYMENT
PROGRAM, FEDERAL ADVISORY COMMITTEE, AND DIRECTOR, COMMISSION
ON LEGAL PROBLEMS OF THE ELDERLY, AMERICAN BAR ASSOCIATION
Ms. Coleman. I am Nancy Coleman. I am here today as a
private citizen. I do not represent the American Bar
Association. While the Assocation is my employer, I am not here
in any official capacity.
I was fortunate enough to chair the Federal Advisory
Committee created by Social Security a number of years ago. The
committee came out with 25 recommendations, which I have
provided to the Committee's staff already.
Instead of going to my written testimony, let me look at
several of the issues that have arisen this morning, and
comment on those to see where we might go.
I was quite disturbed at the question of whether or not
state licensing of an agency, private, not-for-profit, or
otherwise, was adequate to any audit or any other kind of
question.
I do not know, having looked at state licensure of agencies
throughout the country, any standards that exist for those;
nor, do I know what kinds of standards one would expect a state
to put on an agency providing rep payee services.
The Advisory Committee suggested that there be a Federal
set of standards developed, and that those Federal standards
include both monitoring standards, as well as standards for
performance; a set of standards that would combine both a
monitoring function, an auditing function, as well as an
accountability function for agencies.
I do not think that suggestion gets around the question of
bonding. I think that bonding is a separate question and one
that needs to apply not simply to those agencies which are fee-
for-service agencies under rep payee services, but for all
payee services; that is all organizational payees.
That includes mental health institutions, which are exempt
now from some of the requirements that other organizations must
meet under this program. It also includes governmental
agencies.
The Inspector General, in the early nineties and throughout
the nineties, found many public agencies--whether they were
agencies of state, departments of social services, or
guardianship agencies--also had numerous problems.
They could be self-bonded and self-assurance bonded, but
they need to make those assurances. They are handling hundreds
of thousands of dollars of Social Security benefits.
Now the second issue the Committee discussed, and one I
would like to turn to, is the responsibility that a rep payee
organization has toward the beneficiaries.
This is one issue that is not really talked about, but it
seems to me comes to the critical point which you, Congressman
Matsui, were looking at a minute ago. That is, one needs to
find out what the needs are of the beneficiary and address
those needs; i.e., through funding.
In a case that we looked at in Tennessee 4 years ago, we
found that the agency charged a fee up front and charged a fee
to send checks out to the beneficiary, because they were in
different parts of the state. Once the check was received, the
beneficiary had to pay a check cashing fee as well.
It seems to me that we are not maximizing benefits here,
but we are minimizing benefits in an effort to try and monitor
the dollars that are going out. So it seems to me that the
organizational payee needs to not only be accountable to the
beneficiary; but they also need to make sure that the money is
used appropriately.
It seems to me that a third area needs to be considered. As
addressed by Chairman Shaw, there is not now a requirement that
any of these agencies be audited as a condition for being a
participant as a representative payee. There is no reason why
they should not; why not?
If I was looking at the Aurora situation today, I would ask
another question. If, in fact, Mr. Gamble was to submit annual
reports on an individual basis for each individual where he was
rep payee, he should also, and this is not a requirement now,
as a permanent standard, be able to account for all of the
moneys, on an annualized basis, that run through his hands for
beneficiaries.
This should not be simply a statement that says: I spent
this much on Mrs. Jones. Rather this statement should account
for all beneficiaries. Again, this is an auditing requirement
that seems to be very reasonable given that he was handling
hundreds of thousands of dollars annually for beneficiaries.
The cost of business, it seems to me, needs to be looked at.
Finally, I guess one of the things that is very disturbing
about Aurora, and something we see happening throughout the
rest of the United States in some cases, is a situation where
we have very little communication between the courts and the
rep payee systems in Social Security. In fact, we have a
statutory provision which does not allow us to share the list
of Social Security beneficiaries with the court system.
So even in cases where you have kids who might be under a
court order for abuse and neglect or under court supervision
and receiving Social Security benefits, there is no way of
communicating between the court system because of a prohibition
in the legislation. I talk a little bit about this in my
written testimony.
It seems to me that there are a number of areas where we
need to look forward, and also look backward. Specifically, I
think Congressman Matsui, about the issue of standards and
performance and where we should go with this.
I think the legislation is fine. I also think that it is
really limiting and does not goes far enough. I think that the
suggestions made by Social Security to change their system for
on-site reviews, and so forth, are going in the right
direction, but are not going far enough; nor, do these
suggestions deal with, prospectively, some of the issues that
will develop in the future.
Let me discuss three things that the Advisory Committee
reviewed. One, is the need for performance standards. Two, the
need to randomly find any type of rep payee beneficiary problem
by looking at all beneficiaries on a random basis.
While you do not have to look at 30 percent a year, you do
need to be able to say that Mrs. Jones, acting on behalf of
Mrs. Smith, has the same probability of being looked at as Mr.
Gamble does, simply because she could be stealing what would
amount to be a life savings from an individual not simply a
quarter of a million dollars, over a period of time.
Second, it seems to me that you have to look at and do away
with the distinction of mental health institutions as a
separate category that currently have on-site inspections once
every 3 years.
I mean, people have moved out of institutions. In
Massachusetts, for instance, people are held on the
institutional rolls. They've got living community settings, yet
they do not have access to the dollars and the benefits,
because they are all held and paid for out of the
institutional's rep payees.
Second, the governmental agencies, as entities, as rep
payees, need to have the same level of oversight that large
organizational payees do. They are no different than anybody
else in many ways.
So I will stop there, and take questions. I am very
concerned about this. While we looked at a number of the issues
and our report has a number of recommendations in this area, we
did not look specifically at how the beneficiary may be made
whole again. It was not an area in which we thought we could
make any systematic recommendations.
[The prepared statement follows:]
Statement of Nancy Coleman, Chair, Representative Payment Program,
Federal Advisory Committee, and Director, Commission on Legal Problems
of the Elderly, American Bar Association
Thank you for including me in your list of witnesses today.
My name is Nancy Coleman and I am here today as a private
citizen. The Social Security Administration created a Federal
Advisory Committee in July 1995 to look at the Representative
Payment program. I chaired that Advisory Committee which
presented its findings to Social Security November 1996. The
insights and recommendations that I will share with you today
derive from that experience through working with the
Representative Payment Staff, the field hearings that were held
throughout the country and with the other distinguished members
of the Advisory Committee. My knowledge of the field of Social
Security and Guardianship, as well as other law and aging
issues comes from the many experiences that I have had
throughout my professional life. I served as an investigator
for the Senate Aging Committee in the late 1970s, I have served
on the boards of several national aging organizations, and I
have worked for several national advocacy organizations. While
I am currently employed as the Director of the American Bar
Association's Commission on Legal Problems of the Elderly, the
views I am presenting are my own personal views and should not
be construed as representing the views of the ABA or any of its
entities.
The Representative Payment Federal Advisory Committee held
four field hearings across the country over a period of sixteen
months. During this period we heard from beneficiaries, payees,
Social Security officials, advocates, governmental agencies and
advocates about some of the problems faced by this large number
of beneficiaries who receive their benefits through
organizational payees. The Committee spent a great deal of its
time considering aspects of the program that dealt with
organizational payees. Several critical issues developed that
included the appropriate use of funds by payees, the type of
staffing that an organization should have and the types of
standards by which the performance of payees should be
measured. The Advisory Committee worked at the same time that
the Office of Inspector General was also looking at misuse and
appropriate use of funds by payees and reached many of the same
conclusions.
The Committee should consider broadening the language of
the proposed legislation because it is currently limited to
``fee for service'' organizations with regard to bonding. All
organizational payees should be required to be bonded.
Governmental agencies should be self insured and state that
they are. I will elaborate on this later when I discuss the
recommendations of the Advisory Committee.
There are a number of issues which are related to the
quality, delivery, and accountability of services to
beneficiaries who have payees, especially organizational
payees. All payees should be subject to filing annual reports.
Institutional payees do not currently have to file any reports
because of the on-sight reviews that they are now subject to.
This distinction should be removed.
Social Security, through legislation or regulation should
develop standards for all organizational payees. These
standards should include but not be limited to bonding, access
to records by the beneficiary, access to dollars by the
beneficiary, limits on self dealing, and maximization of
benefits, etc. The standards that are developed should be
subject to public comment.
The proposed legislation and some of the newly developed
policies at SSA suggests that Random Reviews and inspections
should be developed for volume payees. The Advisory Committee
along with the Inspector General found that random on-site
inspections should exist for all types of payees and not be
limited solely to volume payees. The IG found non-custodial
adults to be as troublesome as large organizations. IG also
found government payees to be a problem. Institutions were also
found to be a problem.
The proposed legislation Annual certification requirement
should not be limited to fee for service payees but rather
should be made by all organizational payees without distinction
to size, fee or non-fee, institution or government agency.
The Advisory Committee did not make recommendations about
reissuance of benefits but we did have some discussion about it
and heard testimony about the issue. We were told by SSA that
they did not have the authority nor inclination for overpayment
recovery unless there was an individual who was acting as payee
and they could charge as overpayments against any personal
benefit that they might have had, so we would have been
supportive of these recommendations that are now before you for
fee forfeiture, reissuance of benefits, overpayment recovery,
and civil monetary penalties. The latter we were told was
within the authority of the IG if the office every sought to
use it.
Another issue which the legislation should be concerned
with and does not at the current time is the ability of state
Courts dealing with beneficiaries who may or may not have
representative payees to access SSA records. Courts may have
jurisdiction over a child or an adult but they are not
currently able to find out about benefits, appointment of
payees, or other information about the individual. This freedom
is granted in a few cases to state offices of social services
under an agreement. The problem has surfaced in the context of
a grant that the American Bar Association's Fund for Justice
and Education now has from the State Justice Institute and SSA.
The grant is to educate Social Security about guardianship and
state courts about representative payment.
The importance of making sure that the beneficiary is made
whole when the payee takes advantage is a prime concern and
something that the Advisory Committee discussed but did not
make any recommendations about. However the Committee did
believe that there needed to be a much better way of monitoring
and creating standards for the performance of organizational
payees. If standards were developed and monitored there would
probably be less misuse of the limited amounts of benefits.
I have included several of the recommendations from the
Advisory Committee's report for your consideration.
Recommendations from the Final Report, November 1996. Representative
Payment Advisory Committee
Recommendation for Organizational Performance Standards
Establish performance standards for all organizations
wishing to serve as payee beyond those set for individuals. In
addition to money management, reporting, advocacy, and support
for beneficiary self-improvement, standards for organizations
should include such elements as financial stability and overall
responsible presence in the community in which the beneficiary
resides; sound record-keeping and data management; integration
of case management, budgeting, financial decisions to ensure
that case managers have appropriate access to the beneficiary's
assets to meet needs; as well as established processes for
appropriate personal interaction between those decision-makers
and the beneficiary.
Negotiate with providers of services (landlords,
banks, grocers, utilities, etc.) to secure the ``best possible
deal'' for the beneficiary;
SSA should also develop a contract or job
description for payees which is tailored to payee type
(individual or organizational). This could explain the
principles for payee performance, rules regarding use of
benefits, bonding and other financial requirements as well as
other suggested ``best'' payee practices. Payees should be
required to sign this contract agreeing to comply with the
requirements of serving as payee.
Demonstrate effective internal communication
between case management and financial management components to
ensure that case workers will receive final decisions regarding
requests for beneficiaries' needs within 24 hours.
Agree to receive funds through direct deposit.
Be bonded or self-insured (i.e., governmental
payees) to a degree commensurate with the amount of funds
handled and maintain ongoing documentation of this protection;
Demonstrate sound financial management policies;
Hold funds in State or federally insured interest-
bearing bank accounts, county-based bank accounts, brokerage
accounts and other collateralized accounts. (Interest accruing
in these accounts is the property of the beneficiary and must
be held in accordance with all the rules governing
beneficiaries' funds. It should never be co-mingled with the
organization's operating funds);
Maintain records on computer software provided by
SSA or meet systems standards set by SSA;
Have a stable presence in the community in which
the beneficiary resides;
Maintain adequate resources to assist the
beneficiary with his/her social service needs;
Maintain adequate and well-trained staff to
perform the expected duties of a payee; and
Secure annual independent audits of their
financial management of beneficiaries' funds, be subject to
triennial onsite review by SSA, and submit an annual affidavit
to confirm their adherence to established standards.
Because of the fragmentation of responsibility which often
occurs within organizational payees, the Committee believes it
is important that all case managers tending to the needs of
beneficiaries should have ready access to those controlling
funding.
In the case of organizational payees who are also creditors
of beneficiaries (for example, custodial institutions or board
and care operators), the payee should file a conflict of
interest statement which attests to the organization's
commitment to ensure that the beneficiary's needs are given
priority over any debt owing to the payee.
Recommendation Fees for Services
Cap at the lesser of $25 or 10 percent of monthly benefits
the monthly fee for payee services, regardless of type of
benefit being paid. Expand selection criteria and performance
standards for organizations which collect a fee for payee
services to require prior experience in serving the clientele
and community recognition.
Although it remains deeply troubled that beneficiaries
currently pay the cost of fees for payee services, the
Committee regretfully acknowledges that no viable alternative
for funding currently exists. Therefore, the Committee
reaffirms SSA's current policy of allowing certain nonprofit
and governmental organizational payees to collect a fee for
their services and reluctantly accedes to the reality that
beneficiaries currently must bear this burden. Should
alternative funding become available from sources other than
beneficiaries' funds, the Committee would almost certainly
support it.
Furthermore, nonprofit organizations which wish to be
authorized to collect a fee for payee services, must submit for
evaluation, additional information to establish their financial
stability and experience in providing services within the
community. These requirements are in addition to those which
already exist.
These organizations should:
Have been in existence for at least 2 years providing
services to the clientele for whom they now wish to serve as
payee and collect a fee;
Provide information about the services provided which
establishes ability to effectively serve as payee. This
information should include evidence of linkages with other
community organizations and appropriate banking support as well
as list all other funding sources identifying the purpose for
which each source was granted;
Provide at least three references from local community
service organizations who could attest to the stability of the
organization and ability to effectively advocate;
Submit a copy of a current bonding instrument to
demonstrate that bonding is commensurate with the
organization's financial risk (regardless of the number of
beneficiaries being served);
Provide a statement of affirmation that additional fees
(such as check cashing fees) will not be solicited from the
beneficiary and that the authorized fee will not be collected
in any month for which the beneficiary's basic needs could not
be met.
An organization collecting a fee must meet the performance
standards required of other organizational payees as well as
the ``best practices'' standards SSA encourages all payees to
follow these should be included as standards not simply
practices:
Maintain regular contact (generally at least once
monthly) with the beneficiary. These contacts should be face-
to-face unless the payee can adequately describe an alternative
approach that provides comparable results;
Demonstrate an active interest in advocating for
the beneficiary to obtain needed services. This includes
providing assistance in completing application forms and other
tasks where beneficiaries are unlikely to obtain needed
services if left to perform those tasks on their own;
Receive and disburse funds in a manner which
minimizes the possibility of diversion of funds to the purchase
of drugs or alcohol. This includes encouraging beneficiaries to
participate in alcohol or drug treatment, support groups (such
as Alcoholics Anonymous, Narcotics Anonymous, etc.) employment
or other institutional or non-institutional programs involving
steps to self-improvement and lifestyle enhancement;
Negotiate with providers of services (landlords,
banks, grocers, utilities, etc.) to secure the ``best possible
deal'' for the beneficiary;
Encourage positive lifestyle choices and where
possible, help foster beneficiary independence and self-
sufficiency. This includes developing a mutually agreed-on
budget for meeting current and future needs, and paying
outstanding debts; and
Avail themselves of opportunities to attend
orientation and training sessions as directed by SSA.
SSA Response to Misuse
Enhance beneficiary protection by strengthening
investigation of all misuse complaints/reports, tracking their
outcome, and pursuing legislative support for recovery from the
misuser. Develop a specific misuse recording and tracking form
to be used for this purpose.
Accountability Goes Hand in Hand with Standards
Authority--SSA's policies on payee accountability are
derived from the Act Sec. 205 and Sec. 1631 and 20 CFR 404.2001
and 416.601.
Sec. 205(j)(3) and Sec. 1631(a)(2)(C) of the Act specify
that ``. . .the Commissioner of Social Security shall establish
a system of accountability monitoring whereby such person shall
report not less often than annually with respect to the use of
such payments. . .'' The regulations at 20 CFR 404.2065 specify
that SSA ``may require periodic written reports from
representative payees. . .''
Current Policy--SSA's current accountability process relies
on the yearly report sent to each payee. The purpose of the
report is to monitor payee performance in spending, saving and
investing benefits, as well as soliciting certain facts that
might trigger a reassessment of the payeeship (payee felony
convictions, changes in custody status, etc.).
Accountability reports represent a high volume workload for
the Agency. To manage this volume, and to permit some tailoring
of the report questions to make it more user-friendly, SSA has
developed two basic report formats--one for parents (and
grandparents or stepparents) with custody of up to four minor
children, and a less tailored format for all other payee types.
[Note: The current accountability process, whereby each payee
is asked to complete an annual report, was developed in concert
with the Jordan Court which required universal annual
accountability of all payees, including parents and spouses
with custody of the beneficiary. Some State institutions which
are subject to a different accountability process were exempted
from the Jordan order.]
Discussion--As considered by the Committee, accountability
within the representative payment program is composed of
several elements:
The payee's direct accountability to the beneficiary;
The payee's responsibility for providing a periodic accounting
to SSA, as well as submitting to any special reviews of
financial records that may be requested; and
SSA's overall monitoring of payee performance to ensure that
appropriate practices are being followed and that beneficiary
needs are being appropriately addressed.
The Committee heard testimony that some payees regularly
meet with the beneficiaries they serve to discuss financial
planning, review bank records and balances, cost of care
records, etc. But it was not clear that this level of
interaction is generally the practice. In line with earlier
recommendations regarding the beneficiary's role, the Committee
recommends that SSA's instructions to the payee include more
emphasis on the payee's obligation to have regular discussions
with the beneficiary (preferably face-to-face) about how the
beneficiary's needs will be met. Part of that discussion should
include a review of recent disbursements of funds. How that
review is carried out depends upon the type of records that are
kept and how monies are spent. Bank records, custodial charges,
etc. should be available for beneficiary review. Cash
expenditures should involve receipts in most instances, and
these could be reviewed with the beneficiary. Finally, the
payee should be required to discuss and furnish, to the
beneficiary, a copy of any yearly SSA accountability report.
This is no different than a standard established for payees.
The Committee reaffirms the need for annual reports from
all payees. However, the Committee believes SSA can make the
accountability process more effective in detecting
irregularities and perhaps simplify Agency processing if it
develops additional report formats which could be tailored to
solicit more pertinent information of specific payee types.
The Committee would like to see all payees account with
more specificity about how retroactive benefits (or funds
conserved from a prior period) were used; break out large,
durable purchases from daily living expenses for food,
clothing, and housing; and acknowledge any ``no value added''
expenses (such as check cashing fees). All payees should also
be asked questions designed to identify cases where the
payeeship may no longer be needed or appropriate. In addition,
organizations should be asked to disclose information about
other services provided to the beneficiary and whether any fees
have been charged.
SSA's responsibility for monitoring overall payee
performance can be satisfied, for most individual payees
serving few beneficiaries, through a program of ongoing
integrity reviews as discussed later in the report. But for
payees serving substantial numbers of beneficiaries, additional
oversight will be necessary to ensure that the payee's
practices (integration of case management and financial
planning, prompt reporting of events, bonding instruments,
auditing, etc.) satisfy the enhanced standards of performance
the Committee recommends. This is true whether the payee is
considered an ``organization'' or an ``individual'' such as a
public guardian, an attorney or a volunteer, etc. serving a
significant number of beneficiaries.
The Committee believes this oversight should take the form
of an onsite review. Because FO personnel often make case
referrals to the larger payees who might fall under this
review, the Committee recommends the onsite reviews be handled
by an SSA's assessment component to avoid any inherent conflict
of interest. A list of available payees, shown to be capable of
providing adequate service for additional cases, would be
provided to FOs for use in streamlining the payee selection and
application process.
Recommendation Direct Payee Accountability to the Beneficiary
Require payees to periodically inform beneficiaries about
how their benefits have been spent or saved, and to provide the
beneficiary with copies of any accountability reports furnished
to SSA.
Payees must agree at the time of their appointment to meet
frequently with the beneficiary to discuss and assess the
beneficiary's current and future needs. Periodically, the payee
should, as appropriate to the beneficiary's capacity, review
disbursements actually made. The payee should also provide the
beneficiary with a copy of the annual report filed with SSA.
Agreement by the payee to interact with the beneficiary in
this manner will help signify an ongoing commitment to
responsible benefit use. Educating beneficiaries regarding the
payees' responsibility to be accountable and promoting
beneficiary access to information about the handling of
benefits will decrease the potential for exploitation.
Recommendation Annual Payee Reports
Retain an annual accountability report requirement tied to
individual cases for all payees. Develop separate tailored
reports for custodial and non-custodial individual and
organizational payees to elicit information about expenses, use
of retroactive benefits, disclosure of creditor relationships
and restored capability. For organizational payees, once a year
require an affidavit regarding organizational reporting
standards. Explore the feasibility of electronic reporting for
organizations and individuals serving as payees.
All accountability report formats should identify the full
amount for which the accountability report is required
(including any retroactive benefits and conserved funds) and
elicit accountability for the following:
Housing;
Food;
Medical treatment;
Personal expenses;
Fees paid on behalf of the beneficiary (such as check cashing
fees, etc.);
Fees collected for providing representative payment services;
Large purchases (e.g., such as the purchase of a television
set); and
Funds used to pay outstanding debts.
Accountability reports should disclose whether or not the
beneficiary has been in the custody of the payee for the
reporting period. For non-family member payees, the form should
elicit whether the payee is an organization, and if so, the
total number of beneficiaries it serves.
Affidavit Requirement/ Performance Standards
In addition to the annual accountability report it submits
for each beneficiary served, organizations should be required
to submit an annual affidavit to confirm:
Bonding commensurate with the financial volume of the
organization's program;
Date of last independent audit; and
Other services provided to the beneficiary by the organization.
Electronic Reporting/Performance Standards
At its hearings, the Committee heard testimony from some
organizational payees that they currently use electronic methods of
internal bookkeeping. The Committee recommends that SSA establish
criteria and standards for accepting electronically transmitted
accountability reports. Electronic reporting by payees may prove less
burdensome on them and may result in a more detailed report.
Recommendation Onsite Reviews
Replace SSA's current onsite review process (which covers only
certain State institutions) with a broader process which would
triennially assess the continuing ability of all types of organizations
and individuals to serve as payee for multiple beneficiaries.
The Committee heard testimony regarding the potential impact of
poor performance by individual and organizational payees serving
multiple beneficiaries. The Committee believes that an onsite review
process is integral to determining a payee's continuing ability to
adequately serve its clients if that payee is an organization or an
individual serving a substantial number of beneficiaries. Though the
Committee recognizes the potential cost of such reviews, it recommends
they be completed on a triennial basis.
The Committee recommends that these onsite reviews cover:
Integration of client services with financial planning.
(How the program is set up to meet the comprehensive needs of the
beneficiaries served. For example: how often the beneficiary is seen;
whether and how funds are provided directly to the beneficiary;
beneficiary access to information about the status of his/her funds;
provision for beneficiary input into the financial planning process,
etc.)
Record keeping and data management. (Adequacy of record
keeping practices, including records regarding expenditures;
identification of any fees charged to the beneficiary; posting of
interest, etc.).
Employee training. (Adequacy of internal practices to keep
payee or its employees trained regarding payee requirements and changes
in the entitlement programs).
Willingness/capacity to serve additional clients.
The Committee notes that the current onsite reviews are sometimes
conducted by field personnel in offices parallel to the facilities
reviewed. The Committee believes an SSA component other than the FO
should conduct these onsite reviews to avoid any potential conflict of
interest. The Committee further suggests that SSA's assessment
component, the Office of Program and Integrity Reviews (OPIR) is
probably best suited to conduct these onsite reviews.
The results of the onsite reviews should be made part of the
precedent files maintained by the appropriate FOs to be used in future
appointment actions and decisions to help ensure that any new
appointments are consistent with the payees' capacity for acceptable
performance.
Integrity Reviews
The Committee notes that case sampling to measure program
effectiveness in therepresentative payment area has in the past
generally been restricted to ad hoc reviews of targeted accountability
workloads. The Committee concludes that ongoing sampling of all
representative payment workloads are necessary to ensure program
integrity and to identify trends that should influence policy making.
Recommendation Annual Sampling
Implement annual sampling programs that would gauge the quality of
SSA decisions rendered in the representative payment program in the
areas of (in)capability decisions, payee selections, and misuse
determinations. Determine the integrity of payee accountability reports
by sampling which includes corroborative verification of the
information provided.
It is important for SSA to implement sampling programs to identify
problem areas that need correction. These sampling programs could also
assess trends in program results that might point to needed policy
changes. At present, SSA has little objective data regarding the
overall quality or consistency of decisions rendered in the
representative payment program. Accountability reports also are taken
at face value with no corroborative review. A corroborative review of
these reports could identify possible procedural weaknesses as well
uncover misuse not currently detectable. SSA's sampling techniques
should involve redevelopment of the cases with collateral verification.
The Committee recommends that case sampling to measure the
effectiveness of decisions made with respect to representative payment
issues should be conducted by OPIR. As the SSA component with
responsibility for and experience in managing assessment activities,
the Committee believes that OPIR is well qualified to develop the most
meaningful and accurate results.
I am testifying in my personal capacity and in this capacity I do
not receive funding from SSA. However, the ABA Fund for Justice in
Education receives funding from a cooperative agreement with the State
Justice Institute and SSA on a project on guardianship and
representative payees. Additional funding comes from the Administration
on Aging of DHHS, the Department of Justice, and numerous foundations.
Chairman Shaw. Thank you, Ms. Coleman.
Mr. Glover.
STATEMENT OF REGINALD GLOVER, PAST-PRESIDENT, NATIONAL
ASSOCIATION OF REIMBURSEMENT OFFICERS
Mr. Glover. Good morning, Chairman Shaw and Members of the
Subcommittee. I am Reginald Glover, past President of the
National Association of Reimbursement Offices, known as NARO. I
am pleased to present testimony in support of the legislative
amendments proposed by the Social Security Administration to
improve the oversight of representative payees.
Since its inception in 1955, NARO has provided a forum for
professionals serving mental health, mental retardation, and
additive disorder programs operated by or in service of state
and local governments.
Although primarily involved in reimbursement and financing
of these programs, many of our members also serve as
representative payees for Social Security and other eligible
benefits for our clients. On the whole, NARO members serve as
representative payee for thousands of consumers who are
incapable of managing their own funds.
Many of our members serve as representative payees of
Social Security benefits on behalf of state-operated
institutions. As such, we are subject to a review of the
management of our payee programs by Social Security every 3
years, the triennial review that everyone has been referring
to.
In general, our members have established longstanding and
productive relationships with both the local and regional
Social Security representative in our jurisdiction. We have
found the triennial reviews to offer constructive ways in which
we can continue to improve our procedures and practices as rep
payees.
I would add, although it is not in my written testimony,
that we are audited routinely by our State Comptroller's Office
about how we handle these benefits. There is a significant
amount of auditing on how the benefits are handled.
When a consumer leaves one of our member institutions, a
new rep payee is sought. In some cases, our members assist in
the process of finding a new payee.
Several of our members have reported difficulty with new
payees. Occasionally, a beneficiary's funds are not used for
current needs and living expenses. In a few cases, our members
have seen the benefits of groups of former clients misused,
with funds not available for the beneficiaries' needs.
The clients for whom we serve as payee are among the most
vulnerable of the nation's citizens. Without Social Security
benefits appropriately used on their behalf, many of our
clients would return to institutional treatment.
In the District of Columbia, for example, one
organizational payee filed for bankruptcy of its service
programs over 5 years ago. Beneficiary funds were apparently
used to meet routine program expenses and, as of this date, the
beneficiaries have not received any repayment of these funds.
The institutional provider was re-established as payee until
the bankruptcy proceedings become final.
As I understand it, the proposed legislation would remove
the requirement that there be a finding of negligence on the
Social Security Administration's part in order for a
beneficiary to receive funds misused by a rep payee.
NARO fully supports this amendment in that it will allow
beneficiaries such as those we represent to continue to live in
the community and maintain benefits. We also support the
provisions of this legislation that requires non-governmental
payees to provide a bond and that withholds fees to any payee
who may have misused a beneficiary's funds.
We do have some concerns about the regulations under which
Social Security will define misuse. Often, the appropriate use
of a beneficiary's funds by a rep payee may be viewed by the
beneficiary or another agency as a potential misuse of funds.
Regulations regarding misuse must be written to include
specific conditions that define an instance of misuse. We would
be willing to work with the SSA Commissioner in the development
of these regulations.
NARO also believes that this legislation could be
strengthened with additional amendments to require public
notification of payees that have misused funds. Such
notification may assist our members to avoid discharging our
clients to payees who have misused funds in the past.
Further, since many organizational payees also receive
payment for services provided from the beneficiary's funds,
NARO would support an extension of this bill that prohibits
payment to the payee from the beneficiary's funds until the
full amount of misused funds by the payee is restored.
I thank you the Chairman for the opportunity to present the
views of the National Association of Reimbursement Officers. I
would be happy to accept any questions.
[The prepared statement follows:]
Statement of Reginald Glover, Past-President, National Association of
Reimbursement Officers
Good Morning, Chairman Shaw and members of the
Subcommittee, I am Reginald Glover, Past-President of the
National Association of Reimbursement Officers (NARO). I am
pleased to present testimony in support of the legislative
amendments proposed by the Social Security Administration to
improve oversight of Representative Payees.
Since its inception in 1955, NARO has provided a forum for
professionals serving mental health, mental retardation and
addictive disorder programs operated by or in service of state
and local governments. Although primarily involved in
reimbursement and financing of these programs, many of our
members also serve as Representative Payee for Social Security
and other eligible benefits for our clients. On the whole, NARO
members serve as Representative Payee for thousands of
consumers who are incapable of managing their own funds.
Many of our members serve as Representative Payees of
Social Security benefits on behalf of state-operated
institutions. As such, we are subject to a review of the
management of our Payee programs by the Social Security
Administration every three years. In general, our members have
established long-standing and productive relationships with
both the local and regional Social Security representatives in
our jurisdiction. We have found the triennial reviews to offer
constructive ways in which we can continue to improve our
procedures and practices as Rep Payee.
When a consumer leaves one of our member institutions, a
new Rep Payee is sought. In some cases, our members assist in
the process of finding a new Payee. Several of our members have
reported difficulty with new Payees. Occasionally, a
beneficiary's funds are not used for current needs and living
expenses. In a few cases, our members have seen the benefits of
groups of former clients misused, with funds not available for
the beneficiaries' needs. The clients for whom we serve as
Payee are among the most vulnerable of the nation's citizens.
Without Social Security benefits appropriately used on their
behalf, many of our clients would return to institutional
treatment. In the District of Columbia, for example, one
organizational Payee filed for bankruptcy of its service
programs over five years ago. Beneficiary funds were apparently
used to meet routine program expenses, and, as of this date,
the beneficiaries have not received any repayment of these
funds. The institutional provider was re-established as Payee
until the bankruptcy proceedings become final.
As I understand it the proposed legislation would remove
the requirement that there be a finding of negligence on the
Social Security Administration's part in order for a
beneficiary to receive funds misused by a Rep Payee. NARO fully
supports this amendment in that it will allow beneficiaries
such as those we represent to continue to live in the community
and maintain benefits. We also support the provisions of this
legislation that requires non-governmental Payees to provide a
bond and that withholds fees to any Payee who may have misused
a beneficiary's funds.
We have some concerns about the regulations under which SSA
will define misuse. Often, the appropriate use of a
beneficiary's funds by a Rep Payee may be viewed by the
beneficiary or another agency as a potential misuse of funds.
Regulations regarding misuse must be written to include
specific conditions that define and instance of misuse. We
would be willing to work with the SSA Commissioner in the
development of these regulations. NARO also believes that this
legislation could be strengthened with additional amendments to
require public notification of Payees that have misused funds.
Such notification may assist NARO members to avoid discharging
our clients to Payees who have misused funds in the past.
Further, since many organizational Payees also receive payment
for services provided from the beneficiary's funds, NARO would
support an extension of this bill that prohibits payment to the
Payee from the beneficiary's funds until the full amount
misused by the Payee is restored.
I thank you Mr. Chairman, for the opportunity to present
the views of the National Association of Reimbursement Officers
of this proposed legislation. I would be happy to answer any
questions you may have.
Chairman Shaw. Thank you, Mr. Glover.
Ms. Sparks.
STATEMENT OF ANN SPARKS, DIRECTOR, REPRESENTATIVE PAYEE
PROGRAM, MENTAL HEALTH ASSOCIATION OF YORK COUNTY, YORK,
PENNSYLVANIA
Ms. Sparks. Thank you, Mr. Chairman and Mr. Congressman. I
appreciate the opportunity to speak with you today. I would
like to address the amendments proposed by the Social Security
Administration to the Social Security Act.
I am the Director of the Representative Payee Program of
the Mental Health Association of York County. There are 130
mental health clients in our program.
Social Security limits the fee to $28 a month. In our
program, the fee was established by a formula set down by the
accounting, Mental Health/Mental Retardation of York County.
We calculate the total budget necessities (the rent, the
utilities, the food, clothing, medical needs.) Then we subtract
their total monthly income. That leaves a net amount which then
has a discretionary fund of $50 for their use. That is
deducted, and the remainder is left.
What the remainder is, if it is $28 or more, then we charge
a $28 fee, and the rest goes toward their savings. If it is
under $28, then it is set, whatever that amount is.
The population we serve, people with a mental illness, are
very vulnerable. They are frequently taken advantage of by
family and friends, and then they are referred to us. We are
feeling more of an opposite from what you are seeing here.
Clients referred to us are also often victims of their
family or friends who have been their payees and mismanaged
their benefits, before they come to us. They are referred to
our program by their caseworkers from the mental health office
in York.
Having an organization as payee alleviates many of their
problems. It is unfortunate that organizational payees have
also taken advantage of this population that they have accepted
responsibility to represent.
There are a variety of different procedures that
organizations use as payees. We have some in the Pittsburgh
area that have volunteers that manage their individual
checkbooks. And some have a computer program that is designed
for representative payees.
The proposed amendments will enable Social Security to
reissue the benefits when there is misuse, which I agree that
there needs to be defined on what misuse is. Especially with
our clientele. If I would just say, you can not have more money
because it is going to rent or whatever, Social Security might
consider that a complaint; whereas, all their needs have been
met, but they want money because they are out of cigarettes or
something.
It will also encourage the organizations to take a closer
look at the checks and balances and the security.
I strongly advocate for the Social Security Administration
to promote the use of a centralized computer program for all
organizations appointed as payees. This will promote the
recording of the transactions for the clients, and facilitate
the monitoring of their benefits.
We do a lot of computer printouts for Social Security, and
showing what checks we have written for their needs. Also, we
are bonded.
And with the payee reports that you were talking about in
West Virginia, if we do not get them back within a month, they
send us a second notice, and we get it back. But sometimes the
second notice comes before the month is even up. We are
regularly reporting on them.
We have monthly meetings with our caseworkers and our
clients to go over what needs are being met for the clients. So
we are not only just monitored by our Social Security, but also
by their caseworkers.
Thank you.
[The prepared statement follows:]
Statement of Ann Sparks, Director, Representative Payee Program, Mental
Health Association of York County, York, Pennsylvania
Thank you. I appreciate the opportunity to speak with you
today. I would like to address the amendments proposed by the
Social Security Administration to the Social Security Act.
I am the Director of the Representative Payee Program of
the Mental Health Association of York County, PA. There are 130
clients in our program, the majority of whom have a diagnosable
mental illness. Social Security limits the fee to $28.00 a
month. In our program the fee is established by a formula. We
calculate the Total Budget Necessities (rent, utilities, food,
clothing, medical needs) then subtract the Total Monthly
Income. That leaves the Net Amount which then has a
Discretionary Fund ($50.00 minimum) deducted and a Remainder is
left. This Remainder decides the amount of the fee. If it is
more or equal to $28.00 then the fee is $28.00 and the
remaining amount is used for the client's savings. If the
Remainder is less then $28.00 then the fee is set at that
amount left. So the fees vary from $0.00 to $28.00 with an
average fee being $19.00.
The population we serve, people with a mental illness, is
very vulnerable. They are frequently taken advantage of by
family and friends and stigmatized by society. Clients referred
to us are often victims of family or friends who have been
their representative payees and mismanaged their benefits.
Having an organization as payee alleviates many of these
problems. It is unfortunate that organizational payees have
also taken advantage of this population that they have accepted
responsibility to represent.
I am aware of a variety of different procedures that
organizations use as representative payees. From having
volunteers manage individual checkbooks for clients to computer
programs specifically designed for representative payees.
The proposed amendments will not only enable Social
Security to reissue beneficiaries' benefits when misused by an
organization but it will also encourage the organizations to
take a closer look at the checks and balances and the security
measures they have for their programs.
I strongly advocate for the Social Security Administration
to promote the use of a computer program for all organizations
appointed as representative payees that will promote the
recording of all transactions for the clients. Thereby,
facilitating the Social Security Administration monitoring the
usage of the beneficiaries' benefits.
Chairman Shaw. Thank you, Ms. Sparks.
Ms. McComb.
STATEMENT OF DIANE MCCOMB, EXECUTIVE DIRECTOR, MARYLAND
ASSOCIATION OF COMMUNITY SERVICES FOR PERSONS WITH
DEVELOPMENTAL DISABILITIES, INC., SEVERNA PARK, MARYLAND
Ms. McComb. Good morning, and thank you for the opportunity
to be here today. My name is Diane McComb. I am the Executive
Director of the Maryland Association of Community Services for
people with developmental disabilities.
Our organization has in its membership 105 community
organizations that support over 21,000 people with
developmental disabilities, and their families, in the State of
Maryland.
We have a system in Maryland that allows many people to
make choices, live where they want to live, and live in very
small programs. We do not have large community intermediate
care facilities, as other states do. We support people in a
variety of settings. And practices, with regard to
representative payees, are varied.
I polled our members, prior to coming, and asked what their
experiences were, based on some of the questions that the staff
thought might be helpful in your deliberations here today. And
while I did not hear from everyone, and we have not formally
discussed this as an issue that could be problematic, I find
the responses rather interesting.
It is estimated that 85 percent of the people in our system
of developmental disabilities do receive SSI or SSDI. And it is
estimated that a high percentage of those do, in fact, have
representative payees, which may be family members, but often
are organizations.
With the exception of a very few of our organizations, most
of them would not fall into the large organization or large
representative payee classification, and most are nonprofit
organizations.
Clarification of the definitions would be very helpful, as
well as guidelines and the handbook that others had talked
about, as the standards do not appear to be uniform.
Some very well intended individuals may have a very
subjective response to an individual with a disability, and
when they would like to have funding access for a personal
reason, may deny them. Some may unknowingly use the funds, for
fees inappropriately, may overcharge for rent. Often, the
organizations that are the payees are, in fact, the residential
support agencies and sometimes the landlords.
While we believe that standards are in place in our State
to monitor for that type of abuse, (for instance, we have just
adopted new regulations, almost a year ago now,) that requires
licensing to monitor individual finances and the policies that
are set within each of the organizations. But to my knowledge,
they are not specific and they are not uniformly applied.
There appears to be a sense that we can put a lot of
policies in place, and they will keep honest people honest. If
somebody wants to abuse funds of individuals with disabilities,
if they are the representative payee, there is lots of latitude
to do that.
I echo the others that spoke before me that even a well-
intentioned nonprofit organization could, in fact, have
something in place in their policies and procedures that might
not be according to the wishes of the individual with the
disability, or in accordance with what might be perceived,
generally, to be in the best interests of the individual.
And that does not mean that they are malevolent. It may be
that what was once thought 20 years ago to be a good concept is
no longer a good concept.
I will give you an example. As our state has shifted from
agencies that are funded by the state with budgets that are
assured to one where something like a voucher is allocated to a
person with a disability, and they can choose where they live
and with which agency they might seek support, the individual
who identifies the representative payee takes on a much bigger
role. The funds that are available to the individuals with
cognitive disabilities really should be monitored.
Our organization supports monitoring that is reasonable and
not be burdensome. But at this point, I would not think that it
would necessarily be a good idea to exclude the smaller
organizations that are acting in that capacity.
Thank you for the opportunity to come here today. Being
asked to participate stirred the interests in our membership
about this issue. We recognize that as a professional
organization, we have not adopted standards that we would
recommend to our agencies.
And it does raise the question, as our system has changed
and the way that we view the rights of individuals with
disabilities, that this is an area that should certainly be
looked at.
Thank you.
[The prepared statement follows:]
Statement of Diane McComb, Executive Director, Maryland Association of
Community Services for Persons with Developmental Disabilities, Inc.,
Severna Park, Maryland
The Maryland Association of Community Services for Persons
with Developmental Disabilities (MACS) is a private, nonprofit
organization dedicated to strengthening agencies to better
support people with disabilities in their own communities. MACS
is comprised of 105 member agencies that support over 21,000
Maryland citizens with developmental disabilities and their
families in numerous community living, supported-employment,
habilitation, and other support settings throughout the state.
MACS provides advocacy to increase the capacity of Maryland's
communities to support people in inclusive settings; to foster
a climate that develops and nurtures a quality workforce; and
to promote the highest standards of program excellence.
We were asked to present information regarding rep payee
practices in our state. In Maryland, many situations are
prevalent. Although I am unaware of any organization set up to
exclusively manage SSI or SSDI benefits on behalf of an
individual, there are certainly trusts that are managed to do
just that. It is very common for nonprofit agencies that
provide comprehensive supports to individuals with
developmental disabilities to assist those individuals in
managing their finances.
Clarification of the fiduciary relationship between people
with developmental disabilities and those individuals who
exercise control or authority over their resources would be
welcomed by many of the organizations that serve in the
capacity of representative payee for disability benefits.
Although many people with developmental disabilities are
capable of independently managing their money, there are many
others for whom assistance is essential. Regardless, protocols
should be in place for any situation in which someone other
than the individual receiving benefits serves in a rep payee
capacity. Some of the agency practices which appear to provide
safeguards include:
the separation of consumer funds from agency
monies;
consumer benefits deposited directly into their
own individual account;
original bank statements mailed to an independent
monitor, or to an individual who has no interaction with the
staff responsible for assisting consumer in money management;
a prohibition against bank checks;
the imposition of a set limit for withdrawal
amounts at any one time;
the requirement for staff to provide all receipts
and delineation of expenditures routinely;
Although abuse seems neither wide-spread nor frequent among
our member programs, there does not appear to be a universal
use of safeguards. Some agencies routinely have consumers sign
withdrawal slips so that staff can go to the bank and access
accounts with no formal process in place to assure that
consumer assets are protected.
Given the times, and the move to support people with
disabilities in communities and homes of their own choosing,
safeguards are more essential than ever to protect the
financial resources available to individuals. The proposed
changes by the Social Security Administration appear likely to
hold representative payees more accountable while offering
additional protections to the intended beneficiaries.
Chairman Shaw. Thank you, Ms. McComb.
Mr. Geffert.
STATEMENT OF GARRY G. GEFFERT, STAFF ATTORNEY, WEST VIRGINIA
LEGAL SERVICES PLAN, INC., MARTINSBURG, WEST VIRGINIA
Mr. Geffert. Thank you, Mr. Chairman and Members of the
Committee. I am Garry Geffert. I am a Staff Attorney in the
Martinsburg Office of the West Virginia Legal Services Plan
where, among others, I represent some of the victims of the
Aurora Foundation.
I am here to urge the Subcommittee to recommend passage of
H.R. 3666, which was proposed by my Congressman, Bob Wise,
along with some of the additional measures like bonding, that
the Social Security Administration has proposed.
I think his bill and the supplemental measures would give
meaningful protection to some of the most vulnerable people in
our society. These are people who, because of their
disabilities, can not handle their financial affairs. I think
it is also important that Congressman Wise's bill makes the
relief retroactive.
I want to talk about the Aurora Foundation a little bit. In
the early nineties, the Aurora Foundation was set up by Gregory
Gamble. It was set up as a non-profit corporation. Mr. Gamble
was a local businessman.
Once the foundation was established, the Social Security
Office routinely told beneficiaries that the Aurora Foundation
would be their payee, and beneficiaries were not given a
choice. Our information is that this was also true for
beneficiaries who wanted some individual to be the payee. The
Aurora Foundation was pushed to be their representative payee.
Our information is also that, from time to time, many of
the Aurora Foundation clients made complaints about the way
their money was handled, or about some bill that was not paid.
These complaints were made orally. These are not people who
regularly work with paper.
I thought it was significant that Social Security sprang
into action when they got something from a lawyer, because
lawyers know how to put on paper and get somebody's attention.
I think what happened is that attention was not paid to the
beneficiaries who were making what were probably viewed as
isolated complaints, but together formed a pattern.
Then in early 1999, the clients of the Foundation began
getting eviction notices for nonpayment of rent and notices
from utility companies that their service was going to be
cutoff for nonpayment of bills. Of course, the Aurora
Foundation was supposed to have been paying those bills.
Soon, the Foundation office was closed, and a receiver was
appointed, but the state's action was too late. The money was
gone. There is no bond. There is nothing to collect from. Mr.
Gamble has entered a plea of guilty to embezzlement of Social
Security funds. He has also filed for bankruptcy.
In response to your question, Mr. Chairman, the bankruptcy
judge has ruled that the debts owed as a result of the
embezzlement are not dischargeable, but Mr. Gamble does not
have any money to repay the some $223,000 that the Inspector
General has found is owed to the various Aurora Foundation
clients.
Under the current law, my clients are going to be able to
recover their lost Social Security benefits only if they can
prove that the loss was the result of the negligent failure of
the Commissioner of Social Security to investigate or monitor
their representative payee. But this is neither a simple nor a
swift task.
Social Security's monitoring duties are so minimal that it
is difficult to prove that they negligently failed to meet
them. All that Social Security requires of the payee is to file
this two page form, and this is it. It has a few boxes and a
couple of places to put check marks.
This summary accounting is probably appropriate when the
payee is a family member of the beneficiary. It is not,
however, appropriate for organizations like the Aurora
Foundation, which handle a lot of money for a lot of people.
Most of the money that was paid to beneficiaries who use
the Aurora Foundation was put into one checking account. At
least until the end, that checking account usually had enough
money in it to show that they had enough money to cover for any
one individual.
But nobody, not Social Security, or anybody else, ever
required the Aurora Foundation to take and add up this line on
here, which shows how much was saved for the client, and add
those up for all the beneficiaries, and see if that much money
was in the account. That simple accounting step would have
shown much earlier that money was missing from the Aurora
Foundation.
In fact, we took testimony of the bookkeeper from the
Aurora Foundation, and she said she could never make the books
balance. The boss just assured her that everything was OK,
because he had the checks, missing from the records.
The additional problem my clients face is they have to
prove the negligence in the Social Security administrative
complaint scheme. This is a system which is excruciatingly
slow, and where we do not have the sort of discovery procedures
that are available in a court proceeding to get information.
Of course, most of the information we need to show what
Social Security did is in the hands of the Social Security
Administration. Right now, they are playing ``hide the ball.''
I have made Freedom of Information Act requests for basic
information, like what the Foundation files applied to be a
payee. And my clients, and I, on their behalf, have made
Privacy Act requests, asking for copies of these statements
that were supposed to have been filed.
Social Security denied my Freedom of Information Act
request, saying that disclosure might interfere with the
criminal investigation which, of course, is not the standard.
They have not even responded to the Privacy Act request, asking
for copies of the individual account statements.
I learned when I read the Inspector General's testimony
that he gave in the Senate on Tuesday, that maybe it is because
there are only twelve of the statements. But that is something
that they have not told either to my clients or me.
I think Congressman Wise's bill will solve these problems.
It eliminates the need for us to show negligence. Social
Security beneficiaries could promptly recover benefits upon
which they depend for the necessities of life. And Social
Security can then recover from the representative payee, and I
think they are in a better position to do that. In addition,
the bill would make the relief retroactive, which is of primary
importance for my clients.
I thank you for the opportunity to address you, and urge
you to approve this legislation.
[The prepared statement follows:]
Statement of Garry G. Geffert, Staff Attorney, West Virginia Legal
Services Plan, Inc., Martinsburg, West Virginia
My name is Garry G. Geffert. I have been a staff attorney
with the West Virginia Legal Services Plan, Inc. office in
Martinsburg, West Virginia, for almost twenty years. The West
Virginia Legal Services Plan, Inc. annually obtains a grant
from the Legal Services Corporation to provide legal assistance
to low-income individuals in civil matters.
I urge the Subcommittee to recommend passage of H.R. 3666,
proposed by my Congressman, Representative Bob Wise, amending
Titles II and XVI of the Social Security Act. Congressman
Wise's bill would give meaningful protection from exploitation
to the most vulnerable to Social Security and SSI
beneficiaries, those who cannot handle their own financial
affairs and so must depend on representative payees.
Congressman Wise's bill does this by permitting a social
security beneficiary to recover any benefits which have been
misappropriated by a representative payee without proving that
the Social Security Administration was negligent in overseeing
the representative payee. And, it would provide retroactive
relief.
A recent incident which occurred in my home town, and which
was the subject of a segment on the news program 20/20, shows
the need for passage of Congressman Wise's bill.
Many social security beneficiaries in our area have no
family member who can serve as a representative payee. In the
early 1990's, a local business man, Gregory Gamble, set up a
non-profit corporation, called the Aurora Foundation, to be a
representative payee, for a fee. The corporation was
essentially a one-person operation. Once the Foundation was
established, the local Social Security office routinely told
beneficiaries that the Aurora Foundation would be their payee;
beneficiaries were not given a choice.
From time to time, beneficiaries complained about the
Aurora Foundation and the manner in which their funds were
handled. Those complaints were largely ignored; none were
investigated. In 1996, a beneficiary wrote to the Foundation
complaining about the handling of his money, and sent a copy to
the Social Security Administration. He was subsequently allowed
to discontinue using the Foundation as his payee, but no
investigation of his complaint was made.
In early 1999, clients of the Aurora Foundation began
getting eviction notices for nonpayment of rent and letters
from utility companies threatening to cut off service for
nonpayment of bills. These were, of course, payments that the
Aurora Foundation was supposed to have made for its clients.
The Foundation office closed and the state court appointed a
receiver. The state's action was too late. The money was gone.
The Office of the Inspector General of the Social Security
Administration audited the Foundation's records and determined
that $223,353.00 had been stolen from 127 Aurora Foundation
clients.
Mr. Gamble has entered a plea of guilty to embezzlement of
Social Security funds. He has also filed for bankruptcy.
Although the Bankruptcy Judge has ruled that the debts to my
clients, and other Aurora Foundation victims, are not
dischargeable, Mr. Gamble has no assets from which to repay the
individuals whom the Social Security Administration put in his
clutches.
Under current law, my clients may be able to recover from
the Social Security Administration (``SSA'') the benefits which
the Aurora Foundation misappropriated. However, in order to
recover they must show that the they lost their benefits as the
result of ``the negligent failure of the Commissioner of Social
Security to investigate or monitor a representative payee.'' 42
U.S.C. Sec. 405(j)(5); 42 U.S.C. Sec. 1383(a)(2)(E). This is
neither a simple, nor a swift, task.
Social Security's monitoring duties are so minimal that it
is difficult to show they negligently failed to meet them. All
Social Security requires of a payee is the filing of a two-page
summary of income and expenses. (Form SSA-623-F6). While this
summary accounting is appropriate for a family member acting as
payee, it is inadequate for an organization which handles the
money of many individuals.
The inadequacy of the reporting requirement is demonstrated
by the Aurora Foundation. The Aurora Foundation maintained one
checking account, into which were placed all the benefits for
almost all of its clients. The Foundation then purported to
keep records showing how much of the account belonged to each
client. Until the end, the account usually had more money in it
than belonged to any one client. However, no one ever required
the Foundation to show that the account had all of the money
for all of the beneficiaries. Social Security does not even
require an organizational payee to show that its bank accounts
balance. The Aurora Foundation's part-time clerk testified that
she tried to balance the client checking account, but could not
make it balance. When she asked her boss about it, he said that
the problem was caused by bookkeeping entries he had failed to
make, and that she should not worry about it.
Further, negligence must be proven in the SSA
administrative complaint scheme, a system which has no time
deadlines and can be excruciatingly slow, and under which there
are none of the normal procedures through which information can
be obtained. This seriously handicaps the ability of my clients
to pursue their claims, as neither my clients nor I have been
able to determine whether the Foundation even filed the short
summary forms which the SSA does require. While both my clients
and I have made requests under the Freedom of Information Act
and the Privacy Act, SSA has been playing hide the ball. It has
refused to turn over even basic information about the
Foundation, claiming that release of that information could
hinder its criminal investigation, and it has failed to respond
to any of the Privacy Act requests seeking copies of the annual
summary statements which the Foundation should have filed for
the clients.
Congressman Wise's bill, H.R. 3666, would solve these
problems. It would eliminate the need to show that the SSA was
negligent in its oversight of the representative payee. The SSA
beneficiaries could promptly recover the benefits upon which
they depend for the necessities of life. The SSA could then
recover from the dishonest representative payee, a task which
it is in a far better position to accomplish than are the
beneficiaries.
Congressman Wise's bill also does what the SSA's bill does
not; it makes the removal of the ``negligence'' requirement
retroactive. This is of crucial importance to my clients, and
the other victims of the Aurora Foundation. Their money was
stolen prior to the end of 1999; under the SSA's bill, they
would recover nothing. That is not fair. It was not their
choice to have the Aurora Foundation appointed as their payee;
the SSA directed them to the Foundation. They should not suffer
from the poor choice of the SSA.
The one hundred twenty-seven victims of the Aurora
Foundation are in desperate need of the relief which
Congressman Wise's bill would afford them. On their behalf, I
ask that your Committee recommend passage of H.R. 3666 to the
House of Representatives.
Thank you for the opportunity to present these views to
you.
Chairman Shaw. Thank you, Mr. Geffert.
Mr. Matsui.
Mr. Matsui. Thank you very much, Mr. Chairman.
Mr. Geffert, I think you have said this. But it is your
testimony that the SSA office in West Virginia was
knowledgeable about complaints for quite some time; did you say
that?
Mr. Geffert. Yes, as we have been able to piece it
together, complaints were be made. Somebody would go in and
say, I have got this problem. But no record was ever made of
it.
Mr. Matsui. Right, right.
Mr. Geffert. And I think that is the problem. And I think
it may be a function of what you were discussing earlier, as
well. Everybody knows this guy, and he is a good guy. So there
can not be anything wrong. But because they did not log their
reports of the complaint, the pattern never emerged.
It may also be, as some of the witnesses here have
suggested, that the beneficiaries were questioning something
that there is nothing wrong with. But the problem we faced, and
the clients faced, is that even with the justified complaints,
there is no record, so you can not uncover what is going on.
Mr. Matsui. I am going to defer other questions, Mr.
Chairman, because I know you and others may have questions. But
I want to thank the five members of this panel. It has been
very helpful, and I really appreciate it. We hopefully can take
some kind of action to address the issues you raise.
Thank you.
Chairman Shaw. Mr. Collins.
Mr. Collins. I do not have any questions, but I do
appreciate the testimony here today.
Chairman Shaw. Mr. Geffert, the accounting form that you
were holding up, is that the one that Mr. Huse testified, that
there were less than 20 of them?
Mr. Geffert. I believe it is. It is this form, SSA-623, F-
6, and I think that is what he was making reference to,
although he would probably have a better answer to that than I
would. But that is the only form that I am aware of that has
that information.
Chairman Shaw. Did you find out anything today that helps
your case?
Mr. Geffert. Well, yes, I found out that there were only 12
reports, and I think that indicates something.
Chairman Shaw. I think it indicates a lot. But I am not
trying to help you, or tell you how to try your case.
[Laughter.]
Mr. Geffert. Well, I am looking forward to having a hearing
record to put in with our complaint.
Mr. Matsui. If you need any jurors, just call us.
[Laughter.]
Chairman Shaw. I am interested about what they are hiding
from you in the discovery. Are you going through the discovery
process, and they are putting up some kind of a defense, or
what is the problem?
Mr. Geffert. There is no discovery process in the
administrative scheme. So what we did is try to use the Freedom
of Information Act. And I asked for basic documents, because I
understand there was a criminal investigation going on, at the
time I made the request.
What I asked for was, what did the Aurora Foundation show
you when they got the license? What information did they submit
to show that they should be a representative payee, and what
did you do, looking at them? I think those are the three basic
areas.
And the response I got is, we can not tell you anything
because there is a criminal investigation going on. That is not
the standard of the Freedom of Information Act. There has got
to be a showing that disclosure would somehow interfere with
the investigation. And I do not know how that information would
interfere.
But with a Privacy Act request, which I find more
troublesome, my clients asked for documents about them and to
which they are absolutely entitled, as I understand the law.
And that is about these representative payee reports, because
our suspicion is that they were not filed. We did not even get
a response.
Now most of my clients went in with a letter from me
saying, here is what you need to ask for. Some of them reported
that the letter was taken. Some of them were told, we will get
back to you. Everybody tells me, nobody got back.
And I lend credence to that, because I made a written
request on behalf of one of my clients, with the requisite
forms, to which I have never received a response. I sent it to
the local office, where I understand there is supposed to be a
record of at least whether or not these reports were filed. And
to that, I have not gotten a response. That troubles me.
But it may be that because of the poor recordkeeping, there
is nothing there, and so that is why we are not getting
anything back.
Chairman Shaw. Is there a statutory requirement that those
things be filed?
Ms. Coleman. Yes.
Mr. Geffert. I know it is regulatory. I do not know if it
is statutory.
Chairman Shaw. Ms. Coleman.
Ms. Coleman. Yes, there was a Supreme Court case called
Jordan, which mandated that there be annual reports made for
every beneficiary, except those institutions that have the 3-
year, on-site review.
Chairman Shaw. So Mr. Gamble should have been required.
Ms. Coleman. Mr. Gamble was obligated in accepting the
responsibility of being a rep payee to file individual reports
annually on each individual to whom he was appointed rep payee.
He did not, obviously.
And if only 12 reports were filed over a 4 year period of
time, and there are several hundred beneficiaries, he has
missed a lot.
Chairman Shaw. Is this an annual report?
Ms. Coleman. It is an annual report.
Now I think that there are two things that are important to
understand about the annual report.
Chairman Shaw. Now wait a minute. There were only 12 filed
over how many years?
Mr. Geffert. All I know is what I read in the testimony and
it was not clear whether that was the total over the number of
years or for the last year.
Chairman Shaw. Oh, I did not realize you were here, Mr.
Huse.
Mr. Huse. But what we are focusing on is what we found at
the time that the case broke, and we only had 12. Now they have
since found another 20.
Chairman Shaw. Total, over what period of time?
Mr. Huse. That is subsequent to our search that day.
Chairman Shaw. Did you find them in the government files,
or did you find them in Mr. Gamble's file?
Mr. Huse. We were looking in the agency's files. But while
we were searching, we found the unopened envelopes from Social
Security in his files.
Chairman Shaw. Is the procedure that the Social Security
sends those out for each payee and, obviously, no one is
monitoring whether they come back? Boy, I will tell you, if the
IRS did this, April 15th would become a holiday.
[Laughter.]
Mr. Geffert. Actually, the Inspector General, in one of his
earlier monitoring reports about this, described the procedure.
And something that struck me as odd was the tracking system.
They send a report form out. If it does not come back
within, I don't know, 30 days, they send out another letter.
This is all done through a private contractor on a computerized
system.
And then there is a second step, and a follow-up request.
But at the end of the year, if no report has been filed, they
start over again, and the computer record is written over.
Chairman Shaw. I think I will submit a question to the Dr.
Daniels as to whether or not these letters were sent out, and
whether they were followed up. That is something that this
Committee should know.
Ms. Coleman, you talked about problems between the Social
Security and the courts, that they are not communicating with
each other.
Ms. Coleman. Correct.
Chairman Shaw. What is the purpose of that? You said it was
statutory, I believe.
Ms. Coleman. Well, it is a privacy prohibition. Currently
there are a few statutory overrides to it that allow states to
get a hold of records.
But at the moment, there is no overall provision that
enables Social Security to share that information with courts,
where they may have beneficiaries in common. And there is a
need for such a provision.
Chairman Shaw. OK, we will have to look into that.
Thank you all very much. We appreciate it. It has been a
very good hearing.
Ms. Coleman. Thank you.
Chairman Shaw. We are now adjourned.
[Whereupon, at 12 noon, the hearing was adjourned.]
[Questions submitted by Chairman Shaw, and Mr. Huse's
responses follow:]
OIG Responses to Representative Payee Questions
1. Regarding annual accounting requirement, the IG
testified that SSA could initially produce only 12 of the more
than 100 accounting reports the Aurora Foundation was required
to submit annually for the beneficiaries for which it served as
rep payee. Later, a limited number of additional reports were
found in SSA's files, but still were short of the amount Aurora
was obliged to submit as rep payee. In fact, when the IG
investigated Aurora's files, it found many of the accounting
report forms still unopened in their original envelopes from
SSA.
How many accounting reports did you receive from
Aurora in each of the years during which Aurora was a rep payee
for Social Security/SSI beneficiaries? How does that compare
with the number of beneficiaries for which Aurora was rep payee
during each of those years?
Why did Aurora's failure to submit so many
accounting forms not result in a closer examination of its
operations by SSA?
Why do you think the IG testified that ``it is our
belief that adequate monitoring would have detected financial
discrepancies in the rep payee's accounting records'' in
several cases of fraud? Do you agree or disagree that
``adequate monitoring'' would have detected problems with
Aurora sooner, better protecting at least some of the benefits
that were lost?
Are you still searching for files from Aurora?
Have you found any additional files? If so, how many?
What other examples are there of rep payees that
fail to submit accounting forms as required? What has been
SSA's response in other cases in the past? Do you expect that
response to change?
Answer
We cannot attest as to how many Aurora rep payee
accountability reports SSA received each year. While we
requested all the reports, SSA only provided 12, substantially
less than should have been filed for the 120-140 beneficiaries
for which it was payee. SSA staff advised us that most forms
were actually filed, but were not originally provided to us
because of problems in locating and retrieving them.
If Aurora did not file the remaining forms, we
defer to SSA to explain why this did not result in closer
examination of Aurora's operations. SSA does have policies and
procedures that require follow-up action when a rep payee does
not file an annual accountability report.
We believe adequate monitoring will better detect
rep payee fraud, and may have better protected some victims in
the Aurora case by detecting problems sooner. Monitoring
practices when the fraud in the Aurora case occurred were
insufficient to detect fraud.
We are not independently searching for any
additional accounting forms from Aurora. In addition, SSA has
not provided us with any additional accounting forms for
Aurora.
We will defer to SSA regarding examples of
instances in which rep payees failed to submit a required
accounting form, as well as SSA's previous responses to these
instances and planned future responses. Generally, SSA does not
notify us about a non-response situation unless there is an
indication of fraud. With increased awareness and congressional
concern in this area, we expect SSA will strive to improve its
recordkeeping and retrieval process for accounting forms, and
will conduct all required follow-up actions when a rep payee
does not file an annual accountability report.
2. Why has it taken so long to implement the IG's
recommendations about non-responding payees? In December 1996
the Inspector General made specific recommendations regarding
monitoring non-responding payees, specifically on following up
non-receipt of reports and verifying local Office action. SSA
is now proposing to conduct these checks. But why wasn't action
taken in the last 4 years? Obviously you think this step will
help reduce fraud and abuse or you wouldn't be moving forward
now. How many abuses might have been prevented if you had
follwed the IG's advice three and a half years ago? What amount
of benefits would have been protected in the Aurora case if the
first instance of non-response had resulted in the selection of
a new rep payee? The second? Third?
Answer
We will defer to SSA to explain why it has taken
this long to implement our December 1996 recommendations
regarding nonresponding payees, and the known effect of the
delay in implementation.
As for the Aurora case, we cannot determine what
amount of benefits would have been protected from misuse if
instances of nonresponse had resulted in the selection of a new
payee. Based on our review of SSA's records, we cannot
determine when the initial nonresponse occurred in each
instance because SSA's records do not maintain a history of
previous nonresponders. However, you should be aware, that the
accountability reports are only one aspect of a more
comprehensive monitoring system necessary to deter and detect
fraud. The accountability reports require minimal information
as reported by the rep payee. A dishonest payee may falsify
information in the report and send it in timely. In these
cases, fraud may easily go undetected unless SSA exercises some
oversight or review of the information reported.
3. Where is the documentation? The IG believes that
retention of supporting documentation for the failure to timely
complete rep payee accountability forms and the ability to
easily retrieve these forms is essential to the identification
and ultimate prosecution of rep payees for fraud or misuse.
According to the IG, your own procedures say the rep payee
accounting reports must be retrievable in the event the form
must be reviewed for misuse or fraud allegation. Yet your
offices are required to send these documents to an outside
storage facility. Where are local offices storing these
documents today? What instructions are your local offices
following?
Answer
All accountability reports are returned to SSA at
a data operations center (DOC) in Wilkes-Barre, Pennsylvania.
The DOC completes the initial screening, data verification, and
review of all returned accountability reports. If no further
action is needed, the reports are stored for 2 years. The forms
are stored in SSA's processing centers or in private facilities
near those processing centers, and in SSA's record center in
Boyers, Pennsylvania. Because of the volume of forms, SSA
generally groups the forms by reporting period date for
storage. This is not conducive to making the forms easily
retrievable.
We previously recommended that SSA study the
desirability of optical scanning of completed annual
accountability reports.\1\ This would enable SSA to maintain
the information in an electronic database and would reduce
problems with retrieving paper copies. Field offices are
supposed to follow the procedures in SSA's Program Operations
Manual System which state that payee accounting forms must be
retrievable in the event that the form must be reviewed for a
misuse or fraud allegation.
---------------------------------------------------------------------------
\1\ Monitoring Representative Payee Performance: Roll-Up Report, A-
09-96-64201, dated March 1997.
---------------------------------------------------------------------------
4. Should organizational rep payees be subject to audits?
More specifically, should any organization be allowed to serve
as a rep payee without being able to submit to SSA an annual
audit of its operations? How many organizational rep payees
currently have their own operations audited? How many
organizations might no longer be eligible to serve as rep
payees if this requirement were made and enforced? Could other
rep payees be found in those cases?
Answer
There are about 45,000 organizational rep payees. We do not
know how many of them have annual audits of their operations,
how many would continue to be eligible to be a rep payee if
audits were required, or whether other rep payees could be
found if audit findings required a different rep payee. We do
believe that, in some cases, it would be prudent to require an
audit of the organization before SSA selects it as a rep payee.
5. Are SSA screening procedures adequate? In his testimony,
the IG points out that in terms of the screening and selection
of rep payees, SSA essentially conducts a records verification
of certain documents such as drivers licenses, state
identification cards, credit cards, and bank books. However,
SSA does not verify the accuracy of this information. Nor does
it provide credit or security checks to determine if the
potential payee has financial problems, credit problems, or may
have been convicted of any other felony. In March 1997, the IG
made specific recommendations to SSA to conduct a more thorough
screening of potential rep payees. Why weren't these
suggestions adopted? Are you currently implementing any of the
IG recommendations regarding the conduct of a more thorough
screening of potential rep payees? If so, what is the status?
Answer
In a previous audit, we made several recommendations that
SSA make a more thorough screening of potential rep payees.\2\
We recommended that SSA conduct custody checks to verify
custody information provided by the payee applicant. However,
SSA believes custody verification should be left to the
discretion of field office staff. We also recommended that SSA
check the adequacy of the rep payee applicant's recordkeeping
system during the screening and selection process. SSA agreed
to improve its procedures by requiring a description of how
beneficiaries' monies are recorded and disbursed. SSA plans to
have this in place by August 2000. Finally, we recommended that
SSA conduct suitability checks only for rep payees intended for
selection. SSA disagreed and indicated that suitability checks
will be done for all applicants in order to select the best
possible applicant. There is a degree of uncertainty regarding
the appropriate level of scrutiny potential rep payees will
undergo as a part of a suitability check. This is an issue to
be considered by the Agency's work group on rep payee
strategies.
---------------------------------------------------------------------------
\2\ Ibid.
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6. What licensing or bonding requirements should
organizational rep payees have to satisfy? SSA's proposal would
require only organizational payees who perform this service for
a fee to be licensed and bonded. Other witnesses supported
requiring licensing and bonding of all organizational payees,
and you indicated an openness to considering expanding your
proposal in this direction.
What arguments can you think of against requiring
licensing and bonding in all cases? Do you support those
arguments?
Your original proposal implies that higher
standards should be applied to organizations that serve as rep
payees under fee-for-service arrangements. Is that justified?
Do more allegations of abuse result from fee or non-fee
organizational rep payees? How about convictions?
What proof does an organization applying to be a
rep payee have to provide SSA regarding whether it is licensed
or bonded? Does SSA check this information annually to ensure
that the organization remains licensed or bonded? How? Should
an organization lose its licensing or bonding, how quickly will
SSA know of it? What response will SSA take?
One recent case of rep payee abuse involves an
individual who took over the operation of a non-profit group
(which was licensed and bonded) that previously did not provide
rep payee services. What can SSA do to prevent fraud in such
cases?
Section 2 of your proposed legislation states that
a nongovernmental organizational representative payee must be
licensed in each State in which it serves as a representative
payee (provided that licensing is available in such State). It
is our understanding that in some States, while the State does
not require licensing, a county or locality might. Under your
bill, would a representative payee still be required to be
licensed in these circumstances? If no, should it be required?
Answer
Currently, nongovernmental fee-for-service
organizational rep payees must be licensed orbonded. Beginning
in June 2000, SSA will require that they annually update their
files to show their bond or license is still in effect. SSA has
also proposed legislation that would require fee-for-service
organizational rep payees to be licensed and bonded. The
legislative proposal does not require licensing and bonding of
all organizational rep payees.
SSA has gone on record in prior congressional
testimony that it would need to study the implications of
extending bonding requirements to nonprofit organizations. We
believe the increased cost for rep payees of requiring
licensing and bonding in all cases is the most compelling
argument against their enactment. Increased costs for these
organizations could discourage some at a time when finding
suitable payees is not always easy. We do not believe the cost
factor should necessarily defeat the adoption of licensing and
bonding requirements. We do agree that the implications of
extending these extra requirements to nonprofits should be
studied for impact before any legislation is proposed. SSA is
developing a policy to balance the need for strengthened
investigation and monitoring with costs and burdens to rep
payees. We will reserve judgment on extending these
requirements until SSA's policies are in place and an
evaluation of their impact has been conducted.
We believe there could be justification to support
higher standards for fee-for-service organizational rep payees.
However, we do not have any data readily available to support
this position. We do not know whether more allegations of
abuse, or related convictions, arise in fee or nonfee
organizational rep payee situations. Our allegation management
system does not capture information that distinguishes between
fee and nonfee organizational rep payees. We are updating our
system that collects and records data to include information
regarding the number of allegations and convictions against rep
payees and their various classifications (individual, fee, and
nonfee organizational, etc.).
We defer to SSA to advise you of what proof it
requires for licensing and bonding; whether SSA checks that
licensing or bonding remains in place; how quickly it learns
about rep payees who lose their licensing or bonding; and what
action SSA takes when a rep payee loses its license or bond.
In the case you refer to, only a monitoring
program that involved on-site review of financial records at
regular intervals would have been effective in detecting fraud.
As far as preventing the fraud in the first place, even more
thorough screening may not be sufficient. Although the new rep
payee had a prior criminal conviction, it would not have barred
her from becoming a rep payee under current law. Licensing and
bonding of the organization that employed the individual did
not prevent this individual from assuming her position.
As written, we feel SSA's proposed legislation
would require licensing in the situation you described. If a
county or locality requires licensing, licensing is available
in that State. The legislation only requires that licensing be
available in the State, not required. We do agree, however,
that this language could be improved to make this clearer.
7. Should credit checks be done on all potential rep
payees? You can't buy a car, much less be put in charge of
another person's finances, without a credit check. Does SSA
perform a credit check on potential rep payees, including
individual rep payees? Has a sample ever been performed to
determine what SSA would find if it did so? Especially if non-
fee organizational payees are not required to be licensed and
bonded, should such organizations at least be required to pass
a credit check? What would that cost? Would that otherwise
happen in the course of bonding?
Answer
It is our understanding that SSA's policies and procedures
require that a SSA employee interview prospective rep payees.
However, the review does not include a verification of the
information supplied by the prospective rep payee unless SSA
has reason to question the applicant's suitability. SSA does
not routinely perform a background check to determine whether
the applicant has financial problems or bad credit. We are
unaware of any studies to determine the credit histories of rep
payees. We are not in a position to answer your question of
whether a credit check should be required on nonorganizational
rep payees that do not have to be licensed or bonded. There are
millions of such rep payees, and the costeffectiveness of
conducting credit checks is not known. In instances where an
organizational rep payee is bonded, we believe local bonding
requirements vary, but probably involve credit checks of some
level.
8. What other standards are there for rep payees? I
understand that a witness before the Senate Aging Committee
testified that she became a rep payee for a number of
beneficiaries after applying over the phone. Is that true? How
did that happen? can that still occur?
Is there a minimum age for a person to be a rep payee? How
old are the youngest rep payees? How many are there this age?
Most rep payees are individuals and not organizations. do
you have any concerns about fraud involving individuals who
serve as rep payees, as opposed to organizations, which is the
thrust of SSA's legislative proposal? What are some recent
examples of fraud involving individual rep payees? Why did you
not included suggestions to address these cases?
Answer
SSA policies and procedures allow rep payee
applications to be filed over the phone in limited
circumstances. This is consistent with SSA's commitment to
expand service delivery options to its customers. However, a
face-to face interview is generally required prior to the rep
payee selection decision.
There is no specific minimum age for a person to
qualify as a rep payee. SSA will use its discretion. However,
SSA policies and procedures state that individuals cannot be
their own payee if under age 15 and individuals with rep payees
cannot serve as another's rep payee. There is a strong
implication that a person under this age would not be selected
to be a rep payee.
We do not have information on the age of the
youngest rep payees and how many there are. We defer to SSA for
this information.
Since most payees are individuals and not
organizations, we are concerned that controls and oversight are
necessary to prevent, detect, and deter any individual who
would commit fraud or misuse while serving as a rep payee. Some
recent examples of fraud cases involving individual rep payees
are described below.
Our New York office investigated a rep payee who had failed to
report her son's incarceration, a Supplemental Security Income
(SSI) recipient. During a redetermination, the woman stated her
son was at home watching television. The investigation
determined the man was incarcerated when his mother stated he
was at home. The woman was subsequently indicted, arrested, and
convicted for failing to report her son's incarceration. She
misappropriated $33,902 in SSI benefits. The woman was
sentenced to 5 months' incarceration and 5 months' home
confinement, and she was ordered to make restitution of $33,902
to SSA.
A resident of Louisiana pleaded guilty to a two-count
indictment of violations of title 18, United States Code,
section 1001, False Statements. The subject was sentenced to 18
months and ordered to pay $18,168.00 in restitution to SSA. An
investigation by our Houston, Texas, Sub-Office showed the
subject was the rep payee for a SSI recipient and made false
statements to SSA about the recipient's living arrangements and
how she had used the SSI funds she received on his behalf. The
rep payee indicated that the SSI recipient was residing with
her, and she had been using the SSI funds for the recipient's
benefit. During this period of time, the SSI recipient had been
incarcerated in the Louisiana Department of Corrections.
A resident of Houston, Texas, pled guilty to one count of
violation of title 18, United States Code, section 1001, False
Statements. She was sentenced to 4 months in prison, 4 months'
home detention, and 3 years' supervised release. She also was
ordered to make $6,034.00 in restitution to SSA. The subject
was the rep payee for an individual who received both SSA and
SSI payments. The subject made false statements to SSA about
how she had used the SSA funds she received on the
beneficiary's behalf. The SSA beneficiary was deceased when the
rep payee indicated on SSA forms that she had used the SSA
funds she had received on the beneficiary's behalf.
In Sheridan, Wyoming, a man who was rep payee for a child
failed to notify SSA that the Department of Family Services had
removed the child from his care. The investigation resulted in
the man pleading guilty to Theft of Public Money. In Cheyenne,
Wyoming, the U.S. District Court judge sentenced the man to 3
years probation and ordered him to pay $2,070 in restitution.
We are not sure of SSA's reasoning for limiting certain
legislative proposals to organizational rep payees, such as SSA
reimbursement for victims of rep payee misuse, although costs
would certainly be a factor.
9. Can felons serve as rep payees?
Under what conditions may convicted felons serve
as rep payees, whether as organizations or as individuals?
How does SSA enforce current restrictions on
convicted felons serving as rep payees? Does SSA actually check
its records or other databases or does it rely on the word of
the individual applying to be a rep payee? How many people are
denied becoming rep payees each year because of current
restrictions?
Based on your records, how many convicted felons
serve as rep payees today? Is that number expected to grow in
the future?
Of cases involving allegations of abuse by rep
payees, how many involve previously-convicted felons? How many
cases involving convictions for abuse by rep payees involve
previously-convicted felons?
If the law were changed to prohibit all convicted
felons (including individuals convicted for felonies not
related to Social Security or SSI benefits) from serving as rep
payees, what impact would this have on beneficiaries? Would you
expect more or less abuse by rep payees of vulnerable
beneficiaries?
If a rep payee misuses benefits, presumably SSA
will attempt to locate another rep payee for the beneficiary.
However, the first rep payee may never be convicted of the
misuse, especially if the loss is not large. For example, the
IG provides testimony about a father who stole SSI benefits
from his son for about two years, yet was never prosecuted.
Does that father serve as a rep payee for any beneficiary
today? Could he? Does SSA maintain records about such (former)
rep payees? For example, does SSA know how many current rep
payees have misused benefits in the past?
SSA has proposed new civil and monetary penalties
against payees who misuse benefits. Would persons subject to
the penalties also be specifically disqualified from serving as
a rep payee again?
Answer
Under the Social Security Act,\3\ individuals are
prohibited from serving as a rep payee only if they have been
convicted of a felony of misusing funds in violation of the
Social Security Act. Individuals convicted of all other types
of felonies may serve as rep payees.
---------------------------------------------------------------------------
\3\ 42 U.S.C. 408 (a) and 42 U.S.C. 1383a.
---------------------------------------------------------------------------
We maintain a listing of all rep payees convicted
of misuse under the Social Security Act and provide that
information to SSA. We defer to SSA to inform you of what it
does with this information and whether it has resulted in any
denials for rep payee applicants.
SSA records indicate there were 92,243 active rep
payees with felony convictions as of April 2000. This
information is based on self-reporting by rep payee applicants.
We assume the number of felons serving as rep payees will grow
proportionately with the growth of the rep payee population.
Our case management system does not capture
information on prior convictions of the subjects of our
investigations. We do not have information on how many
allegations or convictions for misuse involve previously
convicted felons.
We do not have any data with which we can make an
informed opinion on the impact of prohibiting all convicted
felons from serving as a rep payee, nor whether this would
decrease instances of abuse.
In the case of the father who misused benefits but
was never criminally prosecuted, SSA records indicate the
father is not currently a rep payee for any beneficiary.
Theoretically, he could become a rep payee since he is not
barred under the Social Security Act. We would defer to SSA as
to what information it keeps on such former rep payees.
Persons subject to penalties imposed by the OIG in
accordance with its civil monetary penalty program are not
prohibited from serving as rep payee in the future. We strongly
support the addition of explicit language in the statute making
said persons ineligible to become future rep payees.
10. Why is SSA only now implementing some recommendations?
In the IG's testimony, he highlights a number of
recommendations his office has made to SSA regarding the rep
payee oversight process over recent years. Some of these
recommendations have never been implemented, some are only now
being implemented. Why? Which recommendations has SSA not
implemented or does not intend to implement why?
Answer
We will defer to SSA regarding its decisions on
implementing our recommendations as well as the timing of items
scheduled for implementation. We do track the status of prior
OIG recommendations. SSA either has implemented or plans to
implement most of our recommendations. However, SSA rejected a
few of our prior recommendations. We will defer to SSA to
advise us which recommendations it rejected, and why.
11. Why are abuses rising? According to the IG's Office,
allegations of fraud involving rep payees have increased on
average of 206 per month in 1998 to about 1100 a month so far
this year. I know the IG's office has grown during that time,
enhancing its ability to investigate abuse. But is there fire
under this smoke? How do you account for such a rise in
allegations?
Answer
We attribute the rise in the receipt of rep payee abuse
allegations to increased publicity and public awareness, a
significantly expanded OIG toll-free hotline, and an increase
in the number of OIG investigators. The expansion and easy
access to information about rep payee misuse, what constitutes
violations, and where to send allegations or suspicions of
potential violations are also contributing factors.
12. How does H.R. 3666 differ? In addition to legislation
that SSA has forwarded on this issue, Congressman Bob Wise of
West Virginia has introduced H.R. 3666. How does this bill
differ from the proposal SSA has put forward? It appears to the
Subcommittee that the retroactivity under H.R. 3666 is without
limit, meaning any benefits determined to have been misused in
the past, whether in 2000 prior to enactment, or in 1999 or
even in 1989 and before are eligible for reimbursement provided
other are conditions are met. Is this reading correct? If
enacted, should a limit placed on the retroactivity of
legislation like H.R. 3666? What should that limit be?
Answer
SSA's proposed legislation differs from H.R. 3666 in that
(1) it would only apply in cases of organizational rep payee
misuse and (2) it would not apply retroactively. Under SSA's
proposed legislation, beneficiaries who are victimized by a rep
payee would still need to meet the negligence standard for
reimbursement. SSA is in the best position to determine the
associated cost and, therefore, burden of unlimited
retroactivity of legislation like H.R. 3666.
13. What has been done about payments to deceased rep
payees? Please tell us what steps have been taken to prevent
continued payments to rep payees who have died. We now allow
for recovery of this money as if it were an overpayment. How
much is being recovered? Compared with what total overpayment?
Do you have further suggestions for better preventing payments
after rep payees have died?
Answer
In September 1999, we issued a report on payments
made to deceased rep payees.\4\ The objective of the review was
to determine whether SSA identifies all cases in which a rep
payee is needed when a former rep payee dies. We found that SSA
procedures did not ensure that a new rep payee was selected
when a former payee dies, causing millions in overpayments. We
made six recommendations to address the condition.
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\4\ The Social Security Administration's Procedures to Identify
Representative Payees Who Are Deceased (A-01-98-61009).
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SSA agreed with our recommendations and has begun
implementing them or plans to implement them. SSA provided us
with an estimated timetable for corrective actions. We
identified about $17.3 million in Social Security and SSI
overpayments. We have no information on overpayment recoveries
in these cases. We have no further recommendations at this time
to prevent payments to deceased rep payees.
14. Why haven't certain Freedom of Information Act requests
described by Mr. Geffert been granted? Are there other Freedom
of Information Act requests involving rep payees that SSA has
denied in the past year? For what information? In each case,
what has been the justification for the denial?
Answer
In his May 4, 2000 testimony, Mr. Geffert stated
that SSA denied his Freedom of Information Act (FOIA) requests
in cases where the Aurora Foundation was the rep payee for his
clients on the grounds that there was an open criminal
investigation.
The authority to grant or deny FOIA requests lies
solely within the discretion of SSA's Office of Disclosure
Policy (ODP). However, when SSA believes that records may be in
the possession of OIG, our office evaluates the request and
provides a recommendation for or against disclosure to ODP to
use in making their final determination. In this case, Mr.
Geffert's request was forwarded to OIG's FOIA coordinator who
determined that there was an open criminal investigation
regarding the Aurora Foundation. Based on that determination,
our FOIA coordinator recommended that the request for
information be denied.
As required by law, SSA compiles and publishes an
annual report on FOIA activities. In 1999, SSA provided
combined data on FOIA and Privacy Act requests. SSA reported
that it processed 134,609 requests, and granted full disclosure
in 131,783 instances. There were 971 partial grants and 565
denials. The overwhelming reason for these was based on the
exemption that disclosure would constitute a clearly
unwarranted invasion of another's personal privacy. We do not
have any information on how many partial grants and denials
were issued in FOIA requests involving rep payees.
[Submissions for the record follow:]
Statement of Sue Davis, Scottsdale, Arizona, on Behalf of the National
Alliance for the Mentally Ill
Chairman Shaw, Representative Matsui and members of the
Subcommittee, I am Sue Davis of Scottsdale, Arizona, and a
constituent of Representative J. D. Hayworth in Arizona
Congressional District 6. I am pleased to offer the views of
NAMI the National Alliance for the Mentally Ill on the Social
Security Administrations Representative Payee Program. NAMI is
the nations largest membership organization 210,000 members and
1,200 affiliates representing individuals with severe mental
illnesses and their families. In addition to serving on the
NAMI Board of Directors, I am also the parent of an adult child
with a severe mental illness.
My son Tod developed schizophrenia in 1983 during his
junior year at the Massachusetts Institute of Technology (MIT)
in Cambridge, Massachusetts. The level of disability caused by
his illness necessitated that he apply for disability
assistance through Social Security. In 1986 Social Security
determined that he was permanently and totally disabled. He
began receiving Supplemental Security Income (SSI) payments. I
became his Representative Payee several years later because the
cognitive deficits caused by schizophrenia demonstrated that he
needed assistance managing his money. I am also his Designated
Representative for the purpose of helping him make medical and
life decisions. I receive no financial remuneration for these
time-consuming services. I gain satisfaction knowing that I am
helping my son live with chronic illness and wisely manage his
limited resources.
At the outset, I would like to offer NAMIs thanks for
convening this important hearing. Social Security disability
cash benefits are perhaps the most important source of support
for many adults with the most severe and disabling mental
illnesses. These limited, fixed incomes provide what is needed
to pay rent, purchase groceries and meet other basic needs. For
those who depend on organizational and non-family-member
representative payees, fraud, abuse, and mismanagement of these
funds are critical concerns. NAMI strongly supports every
effort of this Subcommittee to prevent fraud and abuse and to
ensure that those who have victimized beneficiaries are fully
prosecuted. Where fraud and abuse have occurred, NAMI urges
that every effort be made to expeditiously restore lost
benefits something that has not always occurred under Social
Securitys current rules and regulations.
As members of this Subcommittee know all too well, persons
diagnosed with severe mental illnesses such as schizophrenia,
bipolar disorder, and major depression represent a significant
portion of the population of non-elderly adults with
disabilities on the Disability Insurance (SSDI) and
Supplemental Security Income (SSI) rolls (they make up one-
quarter of the SSDI rolls and one-third of the SSI rolls,
according to recent SSA estimates).
While not all SSDI and SSI beneficiaries with severe mental
illnesses need a representative payee to manage their cash
benefits, many do. In most cases, representative payees are
appointed according to the recommendation of a Social Security
field office that has determined that an individuals cognitive
disability renders him or her unable to manage his or her own
financial affairs.
Fraud and Abuse in Representative Payee Programs Should Not Be
Tolerated
As the Social Security Administration (SSA) has noted in
testimony before the Subcommittee, 6.5 million elderly and
disabled beneficiaries have representative payees. Over 750,000
of these Social Security beneficiaries are served by
organizational representative payees rather than family
members. In NAMIs view, it is the performance of these
organizational and non-family member payees that is the proper
focus of these hearings. As several witnesses have noted, the
most egregious cases of fraud and abuse that have occurred in
recent years have involved either organizational or non-family
individual payees including the Aurora Foundation case from
West Virginia (over $300,000 embezzled from over 140
beneficiaries) and the Ivy Foundation case from Phoenix,
Arizona, and Denver, Colorado (over $274,000 in funds
misappropriated from 330 beneficiaries). Likewise, Social
Securitys Inspector General has uncovered a troubling lack of
oversight in cases of non-family-member individual payees,
including the case of Jean Bote, a representative payee and
guardian for more than 20 beneficiaries, who was able to misuse
over $200,000 in Social Security and veterans benefits for
personal gain.
While these extreme cases may be rare (only 650 cases of
misuse are uncovered every year, according to SSA) and
typically in small amounts (only $3 million out of $30 billion
paid out to beneficiaries through payees), infrequency and a
lack of large amounts of money are no consolation to an
individual with a severe disability who has lost needed
benefits.
In NAMIs view, it is proper for Congress and SSA to focus
their prevention and prosecution efforts on these
organizational and non-family-member payees. Along these lines,
I would like to quote a statement made by a previous witness at
this hearing that NAMI wants to make sure does not go
unchallenged. In testimony before this Subcommittee today, Ann
Sparks of the York County, Pennsylvania, Mental Health
Association asserted They [people with mental illness] are
frequently taken advantage of by family and friends and She
said that clients referred for organizational payees are often
victims of family or friends who have been their representative
payees and mismanaged their benefits.
NAMI is troubled by this reckless statement, especially
given that no other witness, including officials from either
SSA or the Inspector Generals office, made a similar assertion.
Such a sweeping assertion, in NAMIs view, is not only
unsupported by independent evidence, but more importantly it
unfairly maligns the nearly 5.8 million family members such as
myself who currently serve as their loved ones payee. Nearly
all of the legislative remedies put forward by SSA deal with
organizational and non-family representative payees, a clear
expression from SSAs perspective that this is where the real
problem lies. More important, an examination of the role that
family members play in the representative payee program reveals
that they fulfill responsibilities far beyond money management
at considerable savings to taxpayers.
Family Members as Representative Payees
According to the Social Security Administration (SSA), in
cases where a representative payee is needed, family members
serve in this role 84 percent of the time. In NAMIs view, these
family member representative payees do a tremendous job under
sometimes difficult circumstances. Not only do they handle
their disabled loved ones financial affairs, they also serve
critically important functions such as coordinating social
services, housing, medical and psychiatric treatment, and all
other aspects of support in the community. It is important to
note that family members that serve as representative payees
must do so against the backdrop of the discrimination, stigma,
and misunderstanding that are so closely associated with severe
mental illness. Moreover, in contrast to many organizational
payees who accept fees from SSA, parents and siblings assume
these responsibilities at no cost to anyone.
This burden can be especially difficult for the large
number of aging parents caring for adult children with severe
mental illness. As more and more of these parents of the so-
called baby-boom generation age into their seventies and
eighties, the responsibilities of being a representative payees
are certain to become more and more difficult for them to
fulfill. While many of these families will assign siblings the
responsibility of being the representative payee, the reality
is that the demand for institutional representative payees is
likely to grow. NAMI therefore believes that Congress and SSA
need to make every effort to ensure that the integrity of this
program is restored and promoted in every way possible.
Social Security Administrations Administrative Actions
Before turning to the specifics of SSAs legislative
proposal to combat and prevent fraud and abuse in the
representative payee program, I would like to note some of the
important administrative measures the agency has undertaken to
promote the integrity of the program. Perhaps the most
important of these administrative steps is SSAs triennial
review of all organizational payees serving 100 or more
beneficiaries and individual payees serving more than 20
beneficiaries. While only a sample of these payees will
actually have face-to-face reviews, this is a step in the right
direction. These reviews could be improved even further by
becoming more like financial audits, rather than remaining
simply contact with vendors and corroboration of expenses.
NAMI is also pleased that SSA intends to increase scrutiny
of newly appointed fee-for-service payees. We believe that this
process could be improved even further by making technical
assistance available for newly appointed family-member payees
to avoid misunderstanding program rules and responsibilities.
NAMI respects that SSAs limited administrative budget prevents
more extensive audits of all high-volume payees. However, we
believe that more can be done to respond promptly to trigger
events involving high-volume payees, such as stepped reviews
once reports of misuse of funds are received from beneficiaries
or credible third parties.
Social Security Administrations Legislative Proposal
NAMI would like to offer strong support for many of the
provisions contained in SSAs recommended legislative proposal
to combat fraud and abuse in the representative payee program.
Perhaps the most important of these recommendations concerns
access to restitution of cash benefits that have been lost
through fraud, abuse, or misappropriation. Under current law,
when a payee has been determined to have misused benefits, SSA
can reissue the benefits only in cases where SSA is found to
have been negligent in investigating or monitoring the payee.
In nearly all other cases, the individual beneficiary loses his
or her benefits. It is very difficult for the beneficiary to
claim this reissue on his or her own and can result in extreme
hardship for beneficiaries.
NAMI therefore strongly endorses a requirement for SSA to
reissue benefit payments (including respective fees for fee-
for-service payees) in all cases when an organizational payee
is found to have misused beneficiary funds, without either a
finding of negligence on SSAs part or restitution from the
payee. At the same time, NAMI wants to ensure that this long-
overdue reform does not result in SSA retreating from its
existing duty of demanding restitution of misused funds from
former payees to ensure that an appropriate deterrent to misuse
is not eroded.
Second, NAMI supports SSAs recommendation for all non-
governmental, fee-for-service, organizational representative
payees to be both licensed and bonded. Current requirements
allow either state licensing or bonding. Mandating that
institutional payees meet both requirements will ensure
necessary state oversight of business practices and
investigation by surety companies that issue bonds. Proceeds
from redeemed bonds would also reduce the costs to Social
Security from misused benefits that are reissued.
Third, NAMI supports efforts to ensure that organizational
payees that have been found to have misused an individuals
benefits cannot qualify for any fees from that individuals
benefits for the months the payee misused the funds. It is
troubling that any organizational payee has ever been able to
actually profit by collecting fees from beneficiaries they were
simultaneously defrauding. NAMI would like to see this long
overdue reform expanded by requiring SSA to notify the
beneficiary that their organizational payee has been found to
have misused funds and has had fees withheld. Such a notice
should also give the beneficiary the opportunity to immediately
switch to a different payee.
Fourth, while NAMI supports SSAs efforts to step up
restitution of misused benefits and payee fees directly from
payees including efforts to recover these funds through
overpayment recovery we believe that misuse needs to be more
clearly defined to protect individual payees who are also
Social Security beneficiaries. In their legislation, SSA is
proposing the use of existing overpayment recovery methods (tax
refund offsets, referral to collection agencies, notice to
credit bureaus, etc.) to recoup benefits misused by individual
representative payees. In other words, misused funds (and any
fees paid out to organizational payees) would be treated the
same as an overpayment made to the payee.
While NAMI strongly supports the goal of expanding
restitution of benefits misused by payees, we want to ensure
that these recovery methods are limited to genuine instances of
fraud and conversion and not to subjective judgments about
whether or not handling of benefits by an individual payee
(particularly a family member) is in the best interests of the
beneficiary. NAMI therefore urges that language be added to
this Proposal specifically limiting SSAs authority to use these
expanded overpayment collection methods against family
representative payees to situations in which there has been
actual theft or conversion of funds for personal use. Moreover,
SSA should be prevented from using these overpayment collection
methods against a family member payee until an allegation of
theft or conversion has actually been proven, not simply
alleged.
Finally, NAMI strongly supports granting SSA authority to
levy civil monetary penalties against organizational payees
that misuse benefits. In their legislative proposal, SSA is
seeking authority to impose administrative penalties against
payees who make false statements to improperly obtain or retain
benefits. This would help SSA go after those payees who commit
fraud but are never prosecuted criminally, in many cases
because the amounts they have stolen are small or prosecutors
declined to move forward on criminal charges. The existence of
civil monetary penalties will help create a new deterrent
against fraud by organizational payees and non-family
individual payees who handle large numbers of beneficiaries.
Conclusion
Chairman Shaw, on behalf of NAMIs consumer and family
membership, I would like to thank you for the opportunity to
offer our views on this important issue. We look forward to
working with all members of the Subcommittee to promote the
integrity of the Social Security Representative Payee Program
to ensure that the interests of all beneficiaries and their
families are protected.
Statement of Dawn Reese, Harrisburg, PA, Former Representative Payee
Honorable Chairman and Members of the Ways and Means
Committee, thank you for holding this fact finding hearing
today on representative payees and potential misuse of social
security funds.
Mr. Chairman, today I feel compelled to urge you to review
the current selection process of representative payees for
Survivor Benefits.
Automatically naming as representative payee a surviving
ex-spouse caring for the deceased parent's child--as long as
they have not committed a felony or are not currently under
investigation for endangering the child--has merit. But I
believe we can do more to protect the most vulnerable of our
society, our children.
I recently served as a representative payee for my eleven
year old nephew, Brian. Brian's father died on February 17,
2000, one month after being diagnosed with cancer. Brian's
father, Alan, was the custodial parent of Brian and his
brothers for the last five years. Upon Alan's death, custody
automatically reverted to their mother. Unfortunately, their
mother suffers from manic depression. She has made numerous
attempts on her life, and was convicted of endangering the
welfare of her children. She is remarried and currently
receives Supplement Social Security because she is unable to
work due to her disability. Her current husband recently served
as her representative payee. They clearly exhibit the inability
to manage their financial affairs and are unable to secure a
checking account due to a history of writing bad checks.
Together, Brian's mother and I decided I would be the best
person to provide for Brian's needs and save for his future,
and become his representative payee. Approximately one month,
and two checks, after being named representative payee, Brian's
mother decided she would like to have full access to Brian's
money. She, along with her husband, went to the local Social
Security Office and requested that she become Brian's
representative payee. The Social Security Administration
notified me and told me they are required to name her rep payee
and that I must submit receipts for monies spent and return all
remaining benefits to be reissued to her. There is no doubt in
my mind that Brian's survivor benefits, over $1000 a month,
will be used to support and buy for the entire, non-working
family.
What I would like you to consider today is whether or not
someone with a history of endangering the welfare of their
children should automatically be designated representative
payee for their child. Should a non-custodial parent
automatically be named representative payee upon the death of
their ex-spouse, without regard to why that person was the non-
custodial parent? Should a person receiving Social Security
benefits because of their inability to work because of their
mental illness, be designated to administer benefits for
another?
We are here today because of the misuses of benefit
payments by representative payees. I am here today to bring to
your attention the need to make some changes in the way
selection, approval, and designations of representative payees
are determined for survivor benefits. If we only had a few
additional safeguards built into the selection process, we
could protect our children and their benefits, and ensure that
the administrators of these funds, the representative payees,
are responsible individuals capable of carrying out their
duties.
I suggest the committee develop procedures to make sure
representative payees are, at a minimum, responsible people
with no history of abuse or neglect; parents who did not fail
to provide child support to the child or to their children from
a former marriage; are not mentally disabled; are capable of
administering the funds; and dedicated to serving the best
interests of the child.
At the time of death, if the deceased was the custodial
parent of the children, a background check of the non-custodial
parent could be made if they seek to be named representative
payee. In my state, we have a statewide central register within
the Department of Public Welfare which issues child abuse
clearances. The non-custodial parent could be required to
present a child abuse clearance in order to be named payee. An
investigation could be made to find out whether or not the non-
custodial parent or their spouse is not fulfilling their
support obligations to children of prior marriages. A few extra
steps to prevent abuse of funds and provide protection to
beneficiaries is well worth the efforts.
There is one other issue that tugs at my heart. The current
policy of refusing survivor benefits to a remarried parent
taking care of a deceased spouse's child, advocates divorce and
the break-up of the family. It is assumed that a married person
has the benefit of a working spouse. That is not always the
case. Many children in these households are living in poverty.
Parents are not excused from their financial obligation to
their child if their ex-spouse remarries. Social Security
should do no less.
Thank you allowing me to share my concerns with you today.
You have a major task before you and when revising the laws and
policies for organizational representative payees, I urge you
to review the laws and policies for designating individual
representative payees.
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