Social Security Administration: A More Formal Approach Could
Enhance SSA's Ability to Develop and Manage Totalization
Agreements (28-FEB-05, GAO-05-250).
Since 1977, the U.S. has entered into bilateral social security
totalization agreements with 20 foreign countries. In fiscal year
2004, the Social Security Administration (SSA) paid approximately
$206 million to 102,000 beneficiaries in these countries based on
their eligible periods of coverage. If put into force, pending
agreements with Mexico and Japan will increase the number of
beneficiaries receiving totalized benefits, as well as the amount
of benefits paid. Given the costs to the Social Security Trust
Funds posed by existing and pending agreements, GAO was asked to
(1) document SSA's policies and procedures for assessing the
accuracy of foreign countries' data when entering into a
totalization agreement, and (2) examine SSA's processes for
verifying beneficiaries' initial and continuing eligibility for
benefits once an agreement is in force.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-05-250
ACCNO: A18356
TITLE: Social Security Administration: A More Formal Approach
Could Enhance SSA's Ability to Develop and Manage Totalization
Agreements
DATE: 02/28/2005
SUBJECT: Beneficiaries
Data integrity
Eligibility criteria
Eligibility determinations
Federal social security programs
Foreign governments
International agreements
International relations
Policy evaluation
Social security benefits
Data collection
Strategic planning
Policies and procedures
Risk assessment
Old Age Survivors and Disability
Insurance Program
Social Security Trust Fund
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GAO-05-250
United States Government Accountability Office
GAO
Report to Congressional Requesters
February 2005
SOCIAL SECURITY
ADMINISTRATION
A More Formal Approach Could Enhance SSA's Ability to Develop and Manage
Totalization Agreements
GAO-05-250
[IMG]
February 2005
SOCIAL SECURITY ADMINISTRATION
A More Formal Approach Could Enhance SSA's Ability to Develop and Manage
Totalization Agreements
What GAO Found
SSA's policies and procedures for assessing the accuracy and reliability
of important information from foreign countries-such as birth and death
data-when entering into totalization agreements remain generally informal,
but recent initiatives for improvement seem promising. Historically, SSA
has conducted only limited reviews, focusing primarily on broad policy
issues and systems compatibility, rather than the integrity and
reliability of earnings data and evidentiary documents. For example,
during preliminary negotiations with Mexico, SSA conducted a limited
review of that country's social security system but did not assess the
reliability of that country's data. SSA has also developed several
initiatives to identify risks associated with totalization agreements.
These include: developing a standardized questionnaire for assessing the
reliability of foreign earnings data, soliciting input from other
government agencies, and using a matrix to compare potential agreement
countries. SSA is also conducting "vulnerability assessments" to detect
potential problems with foreign countries' documents. All of these tools
are positive steps to help SSA assess potential risks posed by unreliable
foreign data. However, SSA has not integrated these initiatives into
formal procedures. Given the upcoming retirement of key management
officials, SSA may lose critical institutional knowledge, which may limit
the agency's ability to assess risks associated with future agreements.
Our review identified potential vulnerabilities in SSA's policies and
procedures for verifying individuals' eligibility for benefits once an
agreement is in force. When establishing an individual's initial
eligibility for benefits, the agency generally accepts critical
documentation from foreign countries, without independently verifying the
accuracy of such information. We also found that SSA's two primary tools
for determining an individual's continuing eligibility-validation surveys
and personal questionnaires-may be insufficient to ensure that only truly
eligible individuals receive benefits. For example, SSA mails
questionnaires to all beneficiaries living abroad (including totalized
beneficiaries) at least once every 2 years requesting information on their
eligibility status, but does not independently verify the responses on
these questionnaires. These questionnaires rely on beneficiaries to
accurately self-report important information that may affect their
eligibility for benefits, with no additional verification. SSA does not
currently have the ability to independently verify the responses on these
questionnaires using computer matches or other forms of third-party
verification, as it does with domestic beneficiaries. The agency's
inability to conduct matches with foreign countries is partly because it
does not capture beneficiaries' foreign social insurance numbers on its
systems.
United States Government Accountability Office
Contents
Letter
Results in Brief
Background
SSA Lacks A Formal Process to Assess the Accuracy and
Reliability of Foreign Countries' Data When Entering into
Totalization Agreements, but Recent Initiatives Appear
Promising
SSA Is Limited In Its Ability to Verify Individuals' Initial and
Continuing Eligibility for Benefits
Conclusions
Recommendations
Agency Comments and Our Evaluation
1
2 4
9
12 15 16 16
Appendix I Comments from the Social Security Administration
Appendix II GAO Contacts and Staff Acknowledgments 22
GAO Contacts 22
Staff Acknowledgments 22
Related GAO Products
Table
Table 1: Existing Totalization Agreements between the United States and
Other Countries and the Year the Original Agreements Became Effective
Figure
Figure 1: Application Process for Obtaining Totalized Benefits 8
Abbreviations
FBOs Federal Benefits Officers
FSP Foreign Service Post
OASDI Old Age Survivors and Disability Insurance
OIG Office of Inspector General
OIO Office of International Operations
OIP Office of International Programs
POMS Program Operations Manual System
SSA Social Security Administration
This is a work of the U.S. government and is not subject to copyright
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separately.
United States Government Accountability Office Washington, DC 20548
February 28, 2005
The Honorable Jim McCrery
Chairman
Subcommittee on Social Security
Committee on Ways and Means
House of Representatives
The Honorable E. Clay Shaw, Jr.
House of Representatives
Totalization agreements are bilateral agreements between the United
States and other countries. These agreements are designed to foster
international commerce and protect social security benefits for persons
who have worked in foreign countries in two ways. First, the agreements
eliminate dual social security taxes that multinational employers and
their
employees pay when they operate and reside in countries with parallel
social security programs. They also help fill gaps in benefit protection
for
persons who have worked in different countries for portions of their
careers. Since 1977, the U.S. has entered into social security
totalization
agreements with 20 foreign countries.1 In fiscal year 2004, the Social
Security Administration (SSA) paid approximately $206 million to about
102,000 totalized beneficiaries in these countries. These beneficiaries
include retired and disabled workers, as well as their dependents and
survivors. Thus, while these agreements pose a cost to the U.S. Social
Security Trust Funds, they provide savings to U.S. workers and employers
operating in foreign countries as well as foreign benefits for U.S.
citizens
and residents.
If put in force, pending agreements with countries such as Mexico and
Japan will increase the number of beneficiaries receiving totalized
benefits, as well as the amount of benefits paid by the U.S. Social
Security
Trust Funds. Reliable data from foreign countries is required to ensure
that payments to totalized beneficiaries are accurate. Given the potential
1SSA has pending totalization agreements with Mexico and Japan. According
to SSA, the President transmitted the Japanese agreement to the Congress
in November 2004. The Mexican agreement was still under review at SSA at
the time of this study. Once submitted to the Congress, the agreements may
be brought into force after 60 session days unless either house of
Congress adopts a resolution of disapproval.
costs to the trust funds posed by existing and pending agreements, the
Subcommittee on Social Security, Committee on Ways and Means, asked GAO to
(1) document SSA's policies and procedures for assessing the accuracy of
foreign countries' data, including birth, death, marriage, divorce, and
earnings information when entering into totalization agreements, and (2)
examine SSA's processes for verifying beneficiaries' initial and
continuing eligibility for benefits once an agreement is in force.
To address these objectives, we reviewed existing totalization agreements
and SSA's procedures for administering them. We interviewed numerous
management officials and line staff in SSA's Offices of International
Operations (OIO) and International Programs (OIP) to obtain their
perspectives on SSA's current processes when entering into agreements, as
well as their perspectives on existing procedures for verifying
beneficiaries' initial and continuing eligibility for benefits. We also
interviewed an official from the Office of Inspector General (OIG) to
determine if the OIG had performed any studies on SSA totalization
agreements. In addition, we contacted the supreme audit institutions2 in
countries with totalization agreements to determine if they conducted any
studies on their country's management of totalization agreements. We
examined SSA's benefit payment data for totalized beneficiaries in fiscal
year 2004, as well as the results of available periodic SSA "validation
surveys" in which home visits are performed for selected foreign
beneficiaries by staff from SSA and the Department of State. We also
reviewed questionnaires mailed to all foreign beneficiaries to solicit
information on their current eligibility status. We conducted our work
between August 2004 and January 2005 in accordance with generally accepted
government auditing standards.
SSA's policies and procedures for assessing the accuracy and reliability
of important information from foreign countries-such as birth and death
data-when entering into totalization agreements remain generally informal,
despite recent initiatives for improvement. Historically, SSA has
conducted only limited reviews, focusing primarily on broad policy issues
and systems compatibility, rather than examining the integrity and
reliability of earnings data and evidentiary documents. For example, as we
reported in 2003, during preliminary negotiations with Mexico in August
2Supreme Audit Institutions are the highest public auditing body of a
state or supranational organization.
Results in Brief
2002, SSA officials conducted a limited review of that country's social
security system but did not assess the reliability of data needed to pay
benefits. Subsequently, in response to our recommendation, SSA returned
twice to Mexico to assess the procedures and controls pertaining to
earnings data, and to evaluate the integrity of selected documents
submitted by claimants to establish identity and eligibility. In addition
to actions taken in Mexico, SSA officials told us that the agency has
developed several new initiatives to identify risks associated with
totalization agreements. SSA has developed a standardized questionnaire to
help the agency identify and assess the reliability of earnings data in
countries under consideration for future totalization agreements. In
addition, SSA has undertaken two initiatives aimed at determining which
countries may be suitable for future agreements. One initiative involves
conducting discussions with other U.S. government agencies such as the
Department of Commerce to better assess which countries may be suitable
for future agreements. SSA is also developing a matrix to compare relevant
factors, including data accessibility across countries where agreements
could be negotiated in the future. Finally, in an effort to improve
existing procedures, SSA is conducting numerous "vulnerability
assessments" to detect potential problems with the accuracy of foreign
countries' documents. While these tools appear to be a positive first step
for helping SSA identify potential risks associated with future
totalization agreements, SSA has only recently begun implementing them and
has not developed plans to integrate these initiatives into formal
procedures. The lack of a formal protocol, coupled with the expected
retirement of key management and staff over the next few years, may result
in the loss of important institutional knowledge relating to totalization
agreements, which may hinder the agency's ability to effectively assess
risks associated with future agreements.
Our review also identified potential vulnerabilities in SSA's policies and
procedures for verifying individuals' eligibility for benefits once an
agreement is in force. When establishing an individual's initial
eligibility for benefits, the agency generally accepts critical
documentation from foreign countries, such as birth certificates, without
independently verifying the accuracy of such information. We also found
that SSA's two primary tools for determining an individual's continuing
eligibility- validation surveys and personal questionnaires-may be
insufficient to ensure that only those still eligible for benefits
continue to receive them. In particular, while validation surveys
conducted prior to calendar year 2000 verified several pieces of
information including beneficiaries' work activity and earnings, due to
staff and budgetary limitations, those conducted since 2000 generally only
verify beneficiaries' identity and
existence. SSA's second tool to determine continuing eligibility entails
mailing questionnaires to all beneficiaries living abroad (including
totalized beneficiaries) at least once every 2 years requesting
information on their eligibility status. These questionnaires rely on
beneficiaries to accurately self-report important information that may
affect their eligibility for benefits, such as whether they are working,
with no additional verification. To date, SSA has not attempted to test
the accuracy of the responses on the questionnaires by comparing them with
the results from a given country's validation survey. SSA also does not
currently have the ability to verify the responses on these questionnaires
using computer matches or other forms of third-party verification. In
contrast, SSA routinely uses computer matches with databases in the U.S.
to verify the eligibility of domestic beneficiaries.
We recognize that assessing the reliability of foreign countries' data and
ensuring beneficiaries' initial and continuing eligibility for benefits
presents challenges for SSA. However, there are several areas where we
believe SSA can make improvements. Accordingly, we are recommending that
the Commissioner of SSA develop a formal protocol for entering into future
totalization agreements and explore ways to improve existing procedures
for ensuring that only truly eligible individuals receive totalized
benefits once an agreement is in force.
SSA agreed with our recommendations, but suggested that the report be
revised to better characterize some of its procedures for verifying the
accuracy and reliability of foreign evidence-including evidence for
totalized and all foreign beneficiaries. We have modified the report to
reflect their comments as appropriate. SSA provided additional comments
that we discuss in the Agency Comments and Our Evaluation section of the
report. Their full comments appear in appendix I.
Background SSA administers the Old Age, Survivors, and Disability
Insurance (OASDI) programs under Title II of the Social Security Act.
About 96 percent of the nation's work force is in social security-covered
employment and pays taxes on annual earnings. When workers pay social
security taxes, they
earn coverage credits,3 and 40 credits-equal to at least 10 years of work-
entitle them to social security benefits when they reach retirement age.4
In 1977, the Congress authorized the President to enter into totalization
agreements with other countries. These bilateral agreements are intended
to accomplish several purposes. First, they eliminate dual social security
coverage and taxes that multinational employers and employees encounter
when they operate and their workers temporarily reside in a foreign
country with its own social security program. Under the agreements, U.S.
employers and their workers sent temporarily abroad benefit by paying only
U.S. social security taxes, and foreign businesses and their workers
benefit by paying only social security taxes to their home country.
Second, the agreements provide benefit protection to workers who have
divided their careers between the U.S. and a foreign country, but lack
enough coverage under one or both social security systems to qualify for
benefits, despite paying taxes into both systems. Totalization agreements
allow such workers to combine (totalize) work credits earned in both
countries to meet minimum benefit qualification requirements. Third,
totalization agreements generally improve the portability of social
security benefits by authorizing waiver of residency requirements.
SSA officials provided a description of how totalization agreements are
developed. These agreements involve several steps from the time they are
proposed until the time benefits are paid to beneficiaries. Before SSA can
begin to develop an agreement with a foreign country, it must receive
approval from the Department of State (State). If negotiations between SSA
and the foreign country are successful, SSA requests authorization from
State to arrange for signing the agreement. SSA reviews the draft
agreement for policy implications and to ensure that the translation of
the agreement (if there is one) has the same meaning in both languages.
Once signed, the agreement does not become legally binding until both
countries have completed their respective ratification processes. For the
U.S., the ratification involves the following steps: (1) the Commissioner
of
3A "quarter of coverage" is a U.S. social security program specific term
defining a U.S. social security work credit. A quarter of coverage was
originally defined as wages of $50 dollars or more earned during a
calendar quarter. Over time, this figure has been revised. In 2005, $920
of earnings constituted a quarter of coverage.
4Different requirements govern the number of coverage credits necessary to
receive disability and survivors benefits for workers who become disabled
or die with relatively short work careers.
SSA asks State to forward the signed agreement to the President; (2) if
State concurs, it sends the agreement to the President; (3) if the
President
approves the agreement, he transmits it to the Congress; and (4) the
agreement becomes effective on a date specified in the agreement, which
must be at least 60 session days, during which at least one House of
Congress was in session after the President sends it to Congress, unless
either House of Congress adopts a resolution of disapproval. Table 1
shows existing agreements and the dates they became effective.
Table 1: Existing Totalization Agreements between the United States and
Other Countries and the Year the Original Agreements Became Effective
Country Effective year of agreement
Italy 1978
Germany 1979
Switzerland 1980
Belgium 1984
Norway 1984
Canada 1984
United Kingdom 1985
Sweden 1987
Spain 1988
France 1988
Portugal 1989
Netherlands 1990
Austria 1991
Finland 1992
Ireland 1993
Luxembourg 1993
Greece 1994
South Korea 2001
Chile 2001
Australia 2002
Source: SSA.
Note: SSA has also signed agreements with Japan and Mexico. The Japan
agreement has been approved by the Administration and is being reviewed by
the Congress. The Mexico agreement was still under review at SSA at the
time of this study.
To qualify for totalized U.S. social security benefits, a worker must have
at least 6 but no more than 39 U.S. coverage credits. Benefit amounts are
based on the portion of time worked in the United States, and thus are
almost always lower than full social security benefits. As of September
2004, the average monthly totalized benefit amount for OASDI beneficiaries
was about $163. Overall, SSA paid approximately $2.4 billion to about 430
thousand foreign beneficiaries5 in fiscal year 2004, including about $206
million paid to approximately 102,000 totalized beneficiaries.6
Individuals living in the U.S. may apply for totalized benefits at any of
SSA's approximately 1,300 field offices. SSA policies and procedures for
processing claims are located in SSA's Program Operations Manual System
(POMS). When an applicant files for benefits in an SSA field office, a
claims representative helps the individual fill out the application,
reviews the applicant's eligibility information with POMS guidance, and
sends the claim packet to SSA's OIO for final processing.
The application process for individuals living abroad is essentially the
same as that for domestic applicants, with one basic exception. Instead of
visiting a domestic SSA field office, individuals living abroad are
generally required to apply at one of numerous Foreign Service Posts
located in U.S. embassies or consulates around the world, or at their
country's social security agency. Applications are processed by Foreign
Service Nationals who review pertinent documentation (such as evidence of
birth, and marital status) and forward the application to OIO, which
requests the foreign earnings record, if one has not already been
provided. The application package is then reviewed by SSA staff for
completeness and compliance with SSA standards. In instances where SSA
staff question the accuracy or completeness of any information, they may
contact the foreign social security agency or the claimant directly to
request clarification. If SSA staff determine that the application
contains sufficient eligibility information and the individual is entitled
to totalized OASDI benefits, then the application is approved and
submitted for payment. (See fig. 1)
5This number includes survivor and dependent beneficiaries. 6These figures
include payments made to individuals with disabilities.
Figure 1: Application Process for Obtaining Totalized Benefits
aClaims can also be filed at Foreign Social Security Agencies (FSSA) in
countries where the U.S. has totalization agreements in place. If a
claimant files at an FSSA, the claim is generally referred to the FSP,
which contacts the claimant directly to develop the claim.
bOnly if the claim is filed with an FSP. If claim is filed with a U.S.
domestic FO, OIO requests foreign coverage record.
SSA Lacks A Formal Process to Assess the Accuracy and Reliability of Foreign
Countries' Data When Entering into Totalization Agreements, but Recent
Initiatives Appear Promising
In addition to managing and updating the agreements that are already in
place, SSA continues to negotiate additional agreements with other
countries.7 SSA has pending totalization agreements with Mexico and Japan.
The President transmitted the Japanese agreement to the Congress in
November 2004. The Mexican agreement was under review at SSA at the time
of this study. In a prior report on the Mexican agreement, we recommended
that SSA establish formal processes for entering into totalization
agreements that include mechanisms to assess the risk associated with such
agreements and to document the range of analyses SSA conducts. The report
also recommended that reports of proposed agreements be enhanced to make
them more consistent and informative and that SSA establish a regular
process to reassess the accuracy of its actuarial estimates.8
SSA's policies and procedures for assessing the accuracy and reliability
of important information from foreign countries-such as birth and death
data-when entering into totalization agreements remain generally informal,
despite recent initiatives for improvement. Historically, the agency has
focused on broad policy issues and systems compatibility, rather than
integrity and reliability of earnings data and authenticity of evidentiary
documents. For example, during preliminary negotiations for an agreement
with Mexico, SSA conducted a limited review of that country's social
security system and policies in August 2002, but did not assess the
accuracy and reliability of data needed to pay benefits or the relevant
controls over that data. In response to our recommendations, SSA made two
return visits to Mexico to more thoroughly assess its social security
information system and to examine the integrity of documents submitted by
claimants to establish identity and eligibility-such as birth records. In
October 2003, SSA's systems specialists and program integrity experts
examined Mexico's social security information system and earnings data. In
particular, these experts assessed the integrity of processes and controls
associated with the collection, maintenance and reporting of social
security earnings. After reviewing processes at the
7The U.S. government may revise existing totalization agreements when the
other country changes its social security system. For example, SSA revised
its totalization agreement with the Netherlands after the Dutch government
changed one of its social security laws and contacted SSA requesting a
change to the existing totalization agreement.
8See Social Security: Proposed Totalization Agreement with Mexico Presents
Unique Challenges, GAO-03-993 (Washington, D.C., Sept. 30, 2003).
Mexican social security agency's headquarters, field offices and data
storage center, SSA determined that Mexico's policies and controls were
sufficient for SSA to rely on Mexican earnings data to pay benefits. On
its second review, SSA returned to Mexico in 2004 to physically examine
documents submitted by claimants as evidence of identity and eligibility,
and attempted to verify the authenticity of these documents with the
Mexican state archives. While the agency was unable to provide us with a
copy of the report because it was still being reviewed internally at the
time of our study, it did share some preliminary results. Within the
selected sample, SSA reported that only a small number of the documents
were of questionable authenticity and concluded that most types of Mexican
documents were reliable.
Beyond the actions taken in Mexico, SSA officials reported that the agency
is working on a number of additional initiatives to help assess the risks
associated with future totalization agreements. SSA has developed a
standardized questionnaire for foreign social security officials to help
the agency identify and assess the reliability of earnings data in
countries under consideration for future totalization agreements. This
tool is designed to capture information about the technical, security, and
management controls over the collection and maintenance of workers'
earnings. This questionnaire may provide the agency with a useful tool to
assess the security of foreign country's earnings data. SSA recently used
this tool as part of its negotiations for entering into a totalization
agreement with Japan. Agency officials reported that they made additional
contacts with Japanese officials and asked them selected questions from
the new questionnaire.
In addition, SSA has also begun two initiatives aimed at determining which
countries may be suitable for future agreements, taking into consideration
the reliability of a country's data and records. For example, SSA
officials reported that the agency has held initial meetings with
officials from the Departments of State and Commerce in an effort to
develop a more formalized process for identifying countries for potential
totalization agreements. SSA officials reported that soliciting input from
other government entities will provide SSA with a broader perspective, and
assist the agency in identifying potential agreement countries in a more
strategic and systematic manner. In addition to seeking input from other
federal agencies, SSA recently developed a matrix consisting of 14
economic and administrative factors, including known risk factors such as
the availability of accurate earnings/coverage records, that may impact a
country's ability to determine individual's eligibility for benefits under
an agreement. This matrix provides a standard template to facilitate
comparison among countries and assist SSA in evaluating these countries'
suitability for future totalization agreements. For example, this tool
includes a step to help SSA evaluate potential problems with foreign data,
including the prevalence of fraudulent or counterfeit documents in a
country, or potential problems accessing critical records. In addition,
the template includes factors such as projections of lost tax revenue and
the number of U.S. taxpayers working in a country, which could be used to
calculate the potential impact of a totalization agreement on the Social
Security Trust Funds.
Finally, in an effort to improve existing procedures, especially with
regard to foreign eligibility evidence, SSA officials reported that they
are currently conducting numerous "vulnerability assessments" to detect
potential problems or limitations with the accuracy of foreign countries'
documents, including documents from totalized countries. These
vulnerability assessments are generally conducted by former SSA employees
known as Federal Benefits Officers (FBO),9 who contact other State and
embassy officials to obtain information on document reliability.
Vulnerability assessments are intended to identify the potential for
document fraud and other problems with foreign data and have prompted SSA
to more thoroughly investigate the reliability of documents in a
particular country. For example, such an assessment conducted in one
country detailed the ease of fraudulently obtaining official documents
such as birth certificates through bribes and other means and recommended
that SSA require independent verification of any documents before paying
benefits. As a result of this review, SSA reported that it is scrutinizing
documents from that country more closely to ensure that only truly
entitled beneficiaries receive payments. Although SSA does not have a
totalization agreement with this country, the vulnerability assessment
demonstrated the agency's ability to more thoroughly examine the
reliability of data in all countries where foreign beneficiaries reside,
including totalized beneficiaries.
9Federal Benefits Officers are generally employees of the Department of
State, each managing a particular global region, usually consisting of
multiple countries. Federal Benefits Officers are located in Mexico City,
Mexico; San Jose, Costa Rica; London, England; Rome, Italy; Frankfurt,
Germany; Athens, Greece; and Manila, Philippines. These Federal Benefits
Officers have supervisory authority over the claims-taking Foreign Service
Posts and conduct vulnerability assessments to uncover trends in document
fraud in their regions.
All these initiatives are positive steps in SSA's efforts to identify and
assess the potential risks posed by inaccurate or unreliable foreign data
when entering into totalization agreements. Although these initiatives
seem promising, the agency has not developed plans for integrating them
into a formal protocol for assessing the accuracy and reliability of
foreign countries' data. SSA officials told us that the current informal
approach for entering into agreements is practical given institutional
knowledge possessed by experienced managers responsible for overseeing the
initiation of the agreements. However, some officials acknowledged that
the current informal approach has weaknesses. In particular, without a
more formal mechanism in place, given expected retirement of key
management officials in coming years, SSA risks the loss of critical
institutional knowledge, thus diminishing the agency's ability to
effectively assess risks associated with future agreements.
SSA Is Limited In Its Ability to Verify Individuals' Initial and Continuing
Eligibility for Benefits
We identified potential vulnerabilities in SSA's existing policies and
procedures for verifying individuals' eligibility for benefits once an
agreement is in force. First, under existing totalization agreements, SSA
generally accepts documentation from foreign countries' social security
agencies with no independent verification of this information when
establishing an individuals' initial eligibility for benefits. For
example, agency staff accept documents such as foreign birth certificates
that the foreign social security agency has certified as accurate without
independently determining the authenticity of such documents. This
practice has been a standard procedure based on our review of the 20
existing totalization agreements.10 We found that SSA is hampered in its
ability to independently verify such documentation because it lacks tools
such as computer matching that it routinely uses in the United States to
independently verify domestic beneficiaries' eligibility for benefits. For
example, SSA verifies applicants' birth certificates by manually or
electronically accessing state data. While SSA lacks the ability to
perform this type of independent verification with foreign countries, it
does have some tools at its disposal-validation surveys and personal
questionnaires-to verify an individual's identity and continuing
eligibility.
10SSA told us that its procedures for assessing the accuracy and
reliability of evidence for totalized beneficiaries-such as birth
certificates-are the same as its procedures for verifying evidence for all
foreign beneficiaries. The agency noted that section GN 00307 of its
Program Operations Manual System contains detailed procedures and
guidelines that are used in evaluating foreign evidence.
SSA officials reported that the agency performs periodic validation
surveys in countries where foreign social security beneficiaries11 live,
including countries with totalization agreements. SSA's Office of Central
Operations staff with assistance from foreign service staff administer the
surveys at individual beneficiaries' homes to verify beneficiaries'
identity and continuing eligibility. The agency generally conducts surveys
in about 3 countries each year. The frequency of such surveys varies
widely, and is dependent upon differences in the results of surveys over
time or known problems with data reliability in a particular country. For
example, agency officials told us that surveys are administered in some
countries such as Portugal as frequently as every 5 years. Other countries
such as Sweden may only be reviewed once every 30 years. SSA provided us
with examples of 5 surveys performed between 1998 and 2003.12 SSA data
show that the surveys are generally useful for detecting important
information such as unreported death, and are also effective for detecting
and reducing overpayments. For example, a 1998 survey conducted in Canada
identified overpayments of approximately $132,000.13 Most of the
overpayments detected in the survey were attributable to unreported
earnings and work activity, as well as unreported deaths. More
importantly, the survey helped SSA avoid future overpayments for the
individuals it identified, which, over a period of years, would likely
have been significantly higher than the initial amount it detected. Unlike
this more in-depth Canadian survey, according to agency officials, those
conducted since 2000 are more limited in scope and generally only verify a
beneficiary's identity and existence. They also do not attempt to
independently verify other important information that can affect an
individual's benefits, such as work activity and earnings. SSA officials
told us that while more frequent, comprehensive reviews would be helpful
to monitor beneficiaries' continuing eligibility in a number of countries,
the agency is constrained by limited staff and budgetary resources.
In addition to using validation surveys, SSA also distributes annual and
biennial questionnaires to all foreign beneficiaries requesting
information on their continuing eligibility for benefits. These
questionnaires are
11Foreign beneficiaries include U.S. citizens as well as non-citizens
living abroad and receiving benefits.
12SSA provided the following surveys: Canada (1998); France (2000); Sweden
(2001); Austria (2002); and the Netherlands (2003).
13The surveys are also cost-effective according to SSA data. For example,
the 1998 survey of Canada cost about $41,000.
designed to ensure that beneficiaries are alive and to solicit information
that could affect the amount of benefits received, such as a change in
marital status or work activity. However, these questionnaires typically
rely on beneficiaries to accurately self-report such information with no
independent verification to determine the reliability of the responses.
For example, agency officials told us that they have not attempted to
compare the results of in-person validation surveys conducted in specific
countries with the information reported on the questionnaires to test the
consistency and accuracy of the data provided. In this regard, SSA has
little assurance that the information it receives from the questionnaires
is accurate. Moreover, while SSA routinely uses computer matches with
databases in the U.S. to help it verify domestic beneficiaries' initial
and continuing eligibility for benefits,14 it does not currently have the
capacity to perform such matches for foreign beneficiaries. Moreover, SSA
does not currently have any mechanism in place-either manual or
electronic-to independently verify when foreign beneficiaries die. Agency
officials reported that SSA is developing pilot computer match projects
with Italy and Germany to establish an independent, third-party mechanism
for verifying beneficiaries' continuing eligibility for benefits. For
example, SSA is exploring the potential of conducting a match between
SSA's databases such as the Death Master File and Italian death records.
While officials reported that such a match would be a useful tool for
identifying unreported deaths, SSA is partly limited in its ability to
conduct such matches with all other totalized countries because it does
not currently capture foreign social insurance numbers on its computer
systems. These unique identifiers are required to conduct accurate
computer matches and access to such numbers is necessary to assure a
reliable match between SSA and its counterparts. Agency officials reported
that space limitations on the Master Beneficiary Record-the main database
used for administering OASDI benefits-preclude it from electronically
storing such information at this time. At present, the agency must use
other, less reliable information, such as a beneficiary's name and date of
birth, to conduct matches. In addition, while a recent report from SSA's
OIG found that some countries such as Canada and the United Kingdom have
expressed concerns about disclosing such data to SSA for purposes of
14SSA periodically compares earnings information in its Master Beneficiary
Record with wage data from the Internal Revenue Service. SSA also
maintains a database that serves as a master death file in the U.S.
Conclusions
conducting matches, the OIG concluded that the ongoing negotiations with
Italy are expected to provide solutions to such barriers.15
Totalization agreements between the U.S. and other countries often foster
enhanced diplomatic relations and provide mutually beneficial business,
tax, and other incentives to employers and employees affected by these
agreements. However, the agreements also impose a financial cost to both
countries' social security programs and require initial and continued
assurances that data on potential beneficiaries are accurate. Because SSA
historically has only performed limited activities to assess the accuracy
and reliability of foreign countries' data when entering into totalization
agreements-such as birth, death, marriage, and divorce records- incorrect
or falsified documentation could expose the Social Security Trust Funds to
improper payments. SSA's additional work in Mexico represents a more
thorough effort to verify critical information, such as birth
documentation, than it has traditionally undertaken in countries with
existing agreements. Moreover, the various initiatives that SSA has
undertaken-such as its matrix to assess foreign countries suitability for
a totalization agreement and its vulnerability assessments-are positive
first steps in assessing the accuracy and reliability of foreign
countries' data. However, the agency has not determined whether these
procedures will be integrated into a more formal protocol for assessing
the accuracy and reliability of foreign countries' data when entering into
future agreements. Thus, the potential exposure of the trust funds to
improper payments resulting from inaccurate or incomplete foreign data
remains an area of concern.
Once totalization agreements are in force, verification of individuals'
initial and continuing eligibility for benefits is essential to ensure
that benefits are paid only to entitled recipients. The relatively limited
scope of SSA's current verification procedures may not provide adequate
assurance that the trust funds are protected from improper payments.
Moreover, because the agency lacks the ability to independently verify the
information it receives from foreign beneficiaries on its questionnaires,
SSA has little assurance that questionnaire responses are accurate. Thus,
SSA may not be aware of changes in beneficiaries' eligibility status,
resulting in improper payments for an extended period of time. Given the
likely
15See Office of the Inspector General, Social Security Administration,
Data Matching With Foreign Countries, A-13-03-23015, (June 17, 2003).
Recommendations
Agency Comments and Our Evaluation
growth in the number of foreign beneficiaries in coming years, including
totalized beneficiaries, the trust funds will likely face increased
exposure if existing processes are not improved. In an environment of
limited staff and budgetary resources, SSA could benefit from a more
systematic approach for independently verifying information that can
affect individuals' initial and continuing eligibility for benefits, such
as computer matches. While SSA has taken some positive steps in this
regard such as its negotiations for conducting a death match with Italy,
additional challenges remain. In particular, the agency currently lacks
the authority to conduct computer matches with foreign countries-a
prerequisite for conducting such matches and other forms of independent
verification with foreign countries.
In light of the potential impact of existing and future totalization
agreements on the Social Security Trust Funds, we recommend that the
Commissioner of Social Security:
1. Develop a standardized set of protocols that integrate and formalize
the various initiatives for verifying foreign countries' data when
negotiating future agreements.
2. Explore cost-effective ways to improve the current processes for
verifying beneficiaries' initial and continuing eligibility for benefits.
Such improvements may include enhancing the scope of the validation
studies, and assessing ways to independently verify the results of its
questionnaires. Other potential improvements may include enhanced efforts
to explore the potential for developing a mechanism-either manual or
electronic-to independently verify the death of all foreign beneficiaries
living abroad, including totalized beneficiaries.
We obtained written comments on a draft of this report from the
Commissioner of SSA. The comments have been reproduced in appendix I. SSA
also provided additional technical comments, which have been incorporated
in the report as appropriate.
SSA agreed with our recommendations. However, the agency suggested that
the report be revised to clarify that its procedures for assessing the
accuracy and reliability of foreign data (such as birth certificates) for
totalized beneficiaries are the same as those for foreign beneficiaries
under non-totalized claims. SSA was concerned that, as drafted, our report
may give the incorrect impression that totalization claims introduce new
elements of risk to the social security program. SSA noted that its
Program Operations Manual System contains detailed procedures and
guidelines that are used in evaluating all foreign evidence. We have
revised the report to note that SSA's processes for verifying foreign data
are the same for both totalized and non-totalized beneficiaries.
SSA also commented on our observation that it regularly accepts critical
documentation from foreign countries without independently verifying the
accuracy of such information. In its comments, SSA stated that in cases
where years of pre-agreement experience and an examination of the other
country's system of records provides assurance that the data is reliable,
SSA and the other country have agreed to use each other's verification of
certain eligibility factors. SSA also noted that each agreement includes a
provision that makes clear that SSA remains the final judge of the
probative value of any evidence it receives from any source. We
acknowledge SSA's concern in this area. However, our prior work and this
report show that the agency has generally accepted such data without
independent verification for all 20 countries with existing agreements.
Therefore, we continue to believe that our description of the current
process is accurate, and that the agency may still be vulnerable to
inaccurate data from foreign countries.
SSA was also concerned that our report may give the impression that the
agency does little to verify the accuracy of information used to make
benefit decisions and that cost-effective options were readily available.
SSA noted its validation surveys and other efforts as evidence that they
are taking steps to deter fraud. The agency also stated that more
intrusive verification steps would be costly and may not produce net
savings to the Social Security trust funds. We acknowledge SSA's efforts,
but continue to believe more can be done to ensure the reliability of
data. This includes making further enhancements to its validation surveys.
Our report describes how validation surveys are currently being used to
detect fraud, and points out that the agency's own data show that these
surveys are generally cost-effective. Moreover, as indicated in our second
recommendation, we encourage SSA to enhance the scope of its validation
surveys only to the extent that such options are cost-effective.
Unless you publicly announce its contents earlier, we plan no further
distribution until 30 days after the date of this report. At that time, we
will send copies of this report to the House and Senate Committees with
oversight responsibility for the Social Security Administration. We will
also make copies available to other parties upon request. In addition, the
report will be available at no charge on GAO's Web site at
http//:www.gao.gov. If you have any questions concerning this report,
please contact me at (202) 512-7215.
Barbara D. Bovbjerg, Director, Education, Workforce, and Income Security
Issues
Page 19 GAO-05-250 Social Security Administration
Page 20 GAO-05-250 Social Security Administration
Page 21 GAO-05-250 Social Security Administration
Appendix II: GAO Contacts and Staff Acknowledgments
GAO Contacts Daniel Bertoni, Assistant Director (202) 512-5988 Jeremy D.
Cox, Analyst-in-Charge (202) 512-5717
Staff In addition to those named above, Joseph Applebaum, Jeff Bernstein,
Erin Daugherty, Jean L. Mcsween, Daniel A. Schwimer, and
Acknowledgments Salvatore F. Sorbello, made important contributions to
this report.
Related GAO Products
Disability Insurance: SSA Should Strengthen Its Efforts to Detect and
Prevent Overpayments. GAO-04-929. Washington, D.C.: September 10, 2004.
Social Security: Proposed Totalization Agreement With Mexico Presents
Unique Challenges. GAO-03-1035T. Washington, D.C.: September 11, 2003.
Social Security: Proposed Totalization Agreement With Mexico Presents
Unique Challenges. GAO-03-993. Washington, D.C.: September 30, 2003.
Social Security: Observations on Improving Distribution of Death
Information. GAO-02-233T. Washington, D.C.: November 8, 2001.
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