5
New Approaches to Detect Misuse

This chapter continues the committee’s response to the third of four specific items in its charge and addresses the fourth item: “to identify the types of representative payees that have the highest risk of misuse of benefits” and to “find ways to reduce the risk of misuse of benefits and ways to better protect beneficiaries.” The first section in this chapter presents a new strategy the committee developed to identify the types of representative payees that have the highest risk of misuse of benefits and a methodology to identify misusers. The second section examines four common violations of Social Security Administration (SSA) policies that would not be classified as misuse by the current definitions but raise questions about whether they mask misuse. The third section examines the annual accounting form and its possible role in better protecting beneficiaries. The fourth section considers the use of bank-account-linked debit cards for use in the Representative Payee Program as a way to better serve and protect beneficiaries. In the last section we consider the role of the program staff structure in terms of detecting misuse and protecting beneficiaries.

A NEW METHOD TO DETECT MISUSE

As detailed in the previous chapter, none of the methods currently used by the SSA to detect misuse appears effective. Based only on identified misusers in SSA administrative records, the incidence of misuse is about 0.01 percent in a population of about 5.4 million representative payees.



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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse 5 New Approaches to Detect Misuse This chapter continues the committee’s response to the third of four specific items in its charge and addresses the fourth item: “to identify the types of representative payees that have the highest risk of misuse of benefits” and to “find ways to reduce the risk of misuse of benefits and ways to better protect beneficiaries.” The first section in this chapter presents a new strategy the committee developed to identify the types of representative payees that have the highest risk of misuse of benefits and a methodology to identify misusers. The second section examines four common violations of Social Security Administration (SSA) policies that would not be classified as misuse by the current definitions but raise questions about whether they mask misuse. The third section examines the annual accounting form and its possible role in better protecting beneficiaries. The fourth section considers the use of bank-account-linked debit cards for use in the Representative Payee Program as a way to better serve and protect beneficiaries. In the last section we consider the role of the program staff structure in terms of detecting misuse and protecting beneficiaries. A NEW METHOD TO DETECT MISUSE As detailed in the previous chapter, none of the methods currently used by the SSA to detect misuse appears effective. Based only on identified misusers in SSA administrative records, the incidence of misuse is about 0.01 percent in a population of about 5.4 million representative payees.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse Indeed, Fritz Streckewald, Acting Assistant Deputy Commissioner for Disability and Income Security Programs at SSA, said in testimony before the House Ways and Means Subcommittee on Social Security on May 10, 2001, that “misuse of funds occurs in less than one-hundredth of one percent of cases.” Moreover, the SSA’s Office of the Inspector General (IG) studies of misuse that are based on small, simple random samples of payees have, not surprisingly, never found a case of misuse. The goal in this phase of the project was to determine if the committee could find a method to enable SSA to efficiently select individual representative payees for audit to detect misuse of beneficiary funds. Determining Possible Indicators of Misuse The committee began by looking at the available administrative data, analyzing our in-depth study of misusers (see Appendix D), and talking with SSA field and headquarters staff. The committee also reviewed the methodology used by the SSA IG, and, for comparison, the methodology used by the Internal Revenue Service for selecting taxpayers for audit. The committee then selected 15 variables from the administrative records that seemed to be indicators of possible misuse of beneficiary funds by a representative payee. Payee is a nonrelative. Payee does not live with beneficiary. Payee is under 50 years of age. Payee has sources of income other than employment. Payee receives welfare (TANF1). Payee lists self-employment income. Payee receives either OASDI or SSI income or both. Payee is a convicted felon. Payee has served time in prison. Payee’s mailing and residence addresses differ. Payee has had three or more address changes in the last two years. Payee does not have a phone number in the administrative records. Payee has been terminated two times or more. Payee serves for four or more beneficiaries. Payee lives in different zip code from beneficiary. 1 Temporary Assistance for Needy Families (TANF) took effect on July 1, 1997. It replaced Aid to Families with Dependent Children and the Job Opportunities and Basic Skills Training programs. It provides assistance and work opportunities to needy families.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse Each variable was scored as a 1 (payee had the characteristic) or 0 and summed for all representative payees in the sample. Unfortunately, the administrative data in the Representative Payee System (RPS) often proved to be wrong, leading to some committee concern about the accuracy of the scores. For many representative payees, several variables were blank or missing: in those cases, a de facto score of 0 was assigned for those variables, thus lowering the probability of scoring high on the scale of 0 to 15. The committee analyzed the records of more than 5,000 representative payees. Of these payeees, 288 were deemed to have high scores and were selected to be the basis of a reinterview group to be studied in more detail as potential misusers. Reinterviews: Process The committee did not have the time or the funds to reinterview all 288 cases. Therefore, the committee identified six states (California, Connecticut, Florida, Ohio, Oregon, and Texas) in six SSA regions that each contained a large number of cases. This step led to the identification of 99 of the 288 cases for reinterviews. (All but three of the payees had been interviewed in the initial survey of representative payees.) Because the reinterviews would entail asking detailed questions about finances, banking accounts, and expenditures, two-person teams were used for them. One was a person with financial expertise; the other was a senior social scientist. The process began with a certified letter signed by an SSA official notifying the representative payee of the location and time of the reinterview. Because the letters were certified, the payees had to sign for them. The letter stated that the reinterview was mandatory, identified the location and time of the reinterview, pledged confidentiality, and listed the documents that the payee should bring. Because of SSA office procedures, all reinterviews had to be scheduled during normal working hours. In the next step, shortly after the letters were sent, staff of the survey firm working for the committee (see Chapter 1), Westat, made telephone calls to the recipients to ensure that the letters had been received and confirming the appointments. During these follow-up telephone calls, the payees were reminded of what documents were required. The final preinterview step was a reminder call from Westat staff to the representative payees a few days before the scheduled reinterviews. Before the reinterviews, the teams reviewed all the financial data available from SSA and noted any questions to be raised with the payees. After the reinterviews, the teams wrote reports that were sent to Westat for review within 36 hours. These reports noted whether or not the team had

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse categorized the case as misuse, uncertain or potential misuse, or no misuse. The reports were then forwarded to the committee for its review. The committee review involved detailed examinations and discussions, in conference calls and, in some cases, again at committee meetings. Reinterviews: Results Of the 99 cases selected for the reinterview process, 76 could be analyzed: 4 payees could not be found (although two of them had been interviewed in the survey 3 months earlier), and 19 did not show up for their scheduled reinterviews. Of the 76 cases, the committee determined that 16 cases involved misuse, 17 showed uncertain or potential misuse, and 43 did not involve misuse. In reviewing the data on those 76 cases, we looked separately at two particular groups of representative payees: 36 people appointed by courts in some guardianship position and 17 people who ran group homes. Table 5-1 shows the results of the reinterview study by type of payee. The first group of court-appointed conservators and legal guardians were likely to have organized documentation of benefit expenditures. Many of them employed administrative staff who did the actual record-keeping. The reinterviewers had expected that misuse might be minimal among this group given the strict requirements of state courts. Many states have strict rules about how guardians and conservators must keep records, and require mandatory training. Some of the attorneys in this group noted that a benefit of accepting court-appointed payee positions was to maintain a positive relationship with judges. This information led the committee to consider that accountability is probably driven by the courts rather than by SSA. However, misuse did occur even within this group. A case categorized by the committee as misuse involved a lawyer appointed by a probate court. TABLE 5-1 Misuse by Type of Payee in Reinterview Cases Type of Representative Payee No Misuse Misuse Uncertain or Potential Misuse Total Court appointed 27 2 7 36 Group home 6 7 4 17 All other 10 7 6 23 Total 43 16 17 76 SOURCE: Data from the reinterview of selected respondents to the national survey of representative payees and beneficiaries conducted for the National Academies Committee on Social Security Representative Payees (2006).

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse At the time of the reinterview, he was the payee for ten beneficiaries. He did not use direct deposit. He did not seem to know much about the beneficiaries he served; indeed, SSA had to notify him that one of them was in jail. What triggered the committee’s interest was that there was one $600 withdrawal from a beneficiary’s account apparently paid to the representative payee himself. He said yes, that he had taken it because otherwise the state (or maybe SSA) would take it, since the amount in the account exceeded what SSA allowed. He did not use the money for the beneficiary and was quite clear that he used it for himself to avoid having the state take it. Another case in this group was that of a lawyer who was the payee for his adult child. The beneficiary worked part time at a relative’s law firm, for which he received a W-2 form. This salary went into his account, along with his SSA funds. The beneficiary’s expenditures included rent, utilities, club membership, computer lease, allowance, medical expenses, and renter’s insurance. In the past, the payee had had to pay back a large amount to the SSA for overpayments. Several entries in the check register were to the payee, who claimed to have receipts for all of them, but did not show them to the interview team. The committee categorized this as a case of uncertain misuse. For the second group, 17 people who ran group homes, SSA is often unaware that payees run such homes. The differences among states concerning regulation of these group homes accounted for much of the misuse found among these payees: For example, Oregon and Florida appear to have fairly rigorous standards for group homes (see Chapter 6). There were varied patterns of misuse among this group. In one case, a woman took care of three elderly beneficiaries in her home. She commingled all funds and used the money for food, clothing, cleaning supplies, medications, taking the beneficiaries out to dinner once a week, and her own car maintenance. She did not keep separate accounts, nor did she keep records of expenditures. The funds were used to keep the group, including her, afloat. The committee characterized this case as misuse. In another situation, a group of related payees in one state ran several homes for the mentally handicapped. They refused to use direct deposit and pooled all beneficiary funds. There was no rationale for the amounts charged for room and board, which were very high. Payees in this family learned from each other how to set up these homes and they applied for payee status at different SSA offices, even though they lived close to each other. These payees met together on a regular basis to discuss fees and other policies for their group homes. These cases were characterized as misuse by the committee. These examples show the potential for problems when creditors of beneficiaries also serve as representative payees. Yet at least one state requires

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse a group home administrator or owner to be the representative payee for all of the beneficiaries under that person’s care, although this state also requires separate accounts and very specific record-keeping, as well as training and standard job descriptions (see Chapter 6). Among the 23 “other” cases, there was also a great deal of misuse and potential misuse. In one case, the payee admitted that he charged each of his beneficiaries $25 a month to be their payee. In another case, the payee commingled the beneficiary’s funds with her own bank account, kept no records, and kept track of the balance “in her head.” There was no documentation or evidence of how the money was spent. In addition to a relatively high rate of misuse and potential misuse for the 76 cases the committee examined in depth, the committee is concerned about the implications of the high rate of no-shows and nonrespondent cases. As noted above, the interviewers could not locate payees in four of the cases, by registered mail or by phone. One can only wonder how they receive beneficiary checks and whether they interact with their beneficiaries. In the other 19 cases, in which the payees had received the letter and talked to someone on the phone, the payees still did not show up at their appointed times, despite such accommodations as rearranging appointments. There could be several explanations for such behavior. Although the letter stated that the reinterview was mandatory, the payees may have believed from past experience that SSA would not penalize them for failing to attend. Moreover, this group contained a high percentage of felons and people who had served time in prison, so they may have been wary of responding to government inquiries. Another possible reason is that since a higher percentage of these people than all payees were under 50, they were more likely to be employed, and it may have been difficult for them to take time off from their jobs. Indeed, some payees who did participate in the reinterviews complained that it was costing them money. The committee was not able to further investigate the reasons for the high number of no-shows, and we are concerned that failure to participate could indicate a substantial number of additional misusers. The committee’s analysis of the 76 payees who were reinterviewed cannot be used as a basis for determining what percentage of representative payees as a whole are misusers, because we did not include representative payees with low scores on the 15 variables in the reinterview sample. If the IG selected a sample for audit that included cases from all sampled domain groups identified in Chapter 2, an overall estimate of misuse could be made. However, the committee can say with some assurance that misuse among payees with high scores on the 15 variables is much more common than that detected by other methods currently used by SSA to detect misuse. Indeed, misuse is probably more common than we found through the reinterview process. For example, mothers of beneficiary children were not

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse included in the reinterview process, but this group was described in the in-depth study as the group with the largest number of misusers. In Chapter 4 we note that there were nine representative payees who did not know where their beneficiaries were; it is likely that at least some of these cases involve misuse. The large number of cases in the uncertain or potential misuse category also illustrates how difficult it is to identify misuse with any certainty under the current definition. Many of these uncertain cases were so classified because the payees did not provide any financial records or did not have sufficient records, thus preventing any conclusive determinations as to misuse. Because SSA does not assess penalties for failure to keep records, some payees know that they can fail to identify expenditures. Finally, even in the cases that we classified as “no misuse,” there were many violations of SSA policies. This, too, is important because violations may cover up misuse. Some of the more common violations are (1) commingling of funds, (2) failure to notify SSA of changes in a beneficiary’s situation, (3) failure to maintain clear and separate accounts, and (4) failure to make financial records available when requested by SSA. In the next section we discuss these violations, using examples from the reinterviews for illustration. Conclusions and Recommendations Through the committee’s analysis, we learned that many payees were sincerely interested in the welfare of their beneficiaries, but we also learned that there were unscrupulous people taking advantage of some beneficiaries. And we learned that some payees just do not seem to understand the policies and inadvertently misuse funds. Even in our small sample of reinterviews, we found some very sad cases in which some payees use beneficiary funds to keep a household afloat. The committee concludes that its strategy in attempting to identify characteristics associated with misuse was successful. Three of the characteristics—being a felon or having served prison time (characteristics 8 and 9) and receiving welfare benefits (TANF or its predecessors, characteristic 5)—were most often blank in the RPS, so their usefulness is limited until SSA undertakes an effort to ensure that these data and updates are obtained. The standard errors of the estimates are high and, therefore, no one variable can be declared a good discriminator. Using the characteristics led to the identification of a substantial number of court-appointed representative payees. Administrative data in the RPS could be used to identify these payees and eliminate them from the process. It also seems inefficient to review cases for which the benefits are a very small amount, perhaps less than $500.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse CONCLUSION The characteristics identified in the committee’s in-depth study of misuse are effective in targeting representative payees for auditing for the purpose of detecting misuse. RECOMMENDATION 5.1 The Social Security Administration (including its Inspector General) should use probability sampling with targeted sample selection, using criteria associated with misuse of funds such as those suggested in this report, to audit representative payees who are more likely to be misusers. RECOMMENDATION 5.2 The Social Security Administration should develop criteria associated with misuse of funds, such as those suggested in this report, to select and monitor representative payees. In the process of selecting new representative payees, SSA could add the scores and try to avoid selecting people with high scores. In the monitoring process, the SSA could set up a differential program of monitoring, giving more frequent attention to payees with higher scores than average. CONCLUSION The use of a specialized team of auditors was effective in uncovering misuse of funds by representative payees. RECOMMENDATION 5.3 The Social Security Administration should establish a team of experts, such as the audit teams used in the committee’s study, to audit those payees who are suspected of misuse or who have been included in a targeted sample of potential misusers. Mothers of minor children are 54.5 percent of all representative payees and were the most frequent misusers found in the in-depth study of misuse (see Appendix D). The above list of characteristics would not identify mothers. Therefore, the committee suggests that another set of characteristics focused on parents, perhaps those with frequent changes of custody, could identify a sample that should be monitored more closely. POLICY VIOLATIONS Commingling of Funds One of the most common violations of SSA policy we found was the commingling of funds by the payee. This could happen in at least two ways. One is when the representative payee had a bank account for the beneficiary into which all money for the beneficiary was deposited. That might mean that money from investments, alimony, Department of Veterans Affairs

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse benefits, and other sources were mixed together, as frequently happened when the payee was an attorney, conservator, or a professional guardian. In the booklet that SSA gives to representative payees (see Chapter 1), commingling is prohibited (U.S. Social Security Administration, 2006). Notwithstanding that stated prohibition, SSA, when asked about this by the committee, replied that it has no restriction on holding SSA funds with other funds in the same account as long as a clear record of expenditures is kept: “SSA has no restriction regarding holding Social Security funds along with other funds in the same account” (see Appendix C). When commingling is done by guardians who are also representative payees, it allows a guardian to calculate his or her fees based, in part, on SSA funds (because such fees are allowed by state courts to be based on a percentage of the total income for the beneficiary). However, during the reinterviews, the payees usually said the fee was paid only from the non-SSA funds. There was also evidence during the reinterviews that other representative payees commingled funds, but without the type of court oversight given to those payees who were also appointed guardians or conservators. A second way funds were commingled was when a representative payee deposited funds for several people in a common bank account. In some cases, a payee with only one beneficiary put the SSA funds into his or her own bank account. In other cases, a payee with several beneficiaries put the SSA funds for all of them into a common account. In these latter cases, all expenses for the upkeep of the group came from these pooled funds, and there was little documentation of expenditures available. The money from any one beneficiary was going to support others, sometimes a family. The committee deemed these cases to be misuse. In some of these cases, when a beneficiary went to jail, the payee failed to notify SSA, probably because the household could not survive without that money. Pooling of SSA benefits by a representative payee, either with his or her own funds or with the funds of others, made it extremely difficult to determine whether the SSA benefits were used solely for the specified beneficiary. Failure to Notify SSA of Changes in a Beneficiary’s Situation SSA rules about the role of representative payees state that a payee must notify SSA when there are changes in the beneficiary’s status that might affect benefit levels. The changes might include death, a job, an inheritance, or an incarceration. When a beneficiary dies, it is incumbent on the payee to notify SSA and return any check received for that month. Similarly, when a beneficiary is institutionalized, the payee is required to notify SSA. While a beneficiary is in jail or some other kind of penal institution, he or she is not entitled to receive SSA benefits. Likewise, when a beneficiary obtains a

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse job and is earning money, the payee is to notify SSA, since the income from the job may affect the beneficiary’s rights to collect benefits or the amount of the benefits. In several cases in the reinterview sample, payees had not notified SSA of these kinds of changes. Failure to Maintain Clear and Separate Accounts One of the duties of a payee is to maintain clear and separate accounts that provide a clear audit trail of all financial transactions for the beneficiary. This duty was not met by a large number of payees in the reinterview sample. One commonly heard justification was that the amount received was too small and so it would have been unduly costly and burdensome to open a separate account. Others suggested that because the SSA amount was a small percentage of the beneficiary’s total income, it would be costly to separate it out. These same representative payees suggested that since most of the monthly income was going to pay for some kind of institutional care (nursing home or assisted living) and the costs of this care were greater than the benefit amount, a separate account was not needed. Some payees said that they did not know that they should be keeping separate accounts. Others seemed to be baffled by the record-keeping requirements. Yet we note that many payees kept excellent records, especially the lawyers, conservators, and professional guardians in states in which the courts examined the records. Some of the guardian payees did not know exactly what the SSA program required in terms of records, but knew it was less than what the courts asked for. Those whose record-keeping was poor often fell into the pool of cases for which the committee thought that misuse was uncertain. Without a record of expenditures, it was difficult to determine whether misuse had occurred. Failure to Make Financial Records Available when Requested by SSA Many payees did not bring any records to the reinterviews, even though they had been specifically told to do so by certified mail and by telephone. The IG’s report also mentioned that records were not always available. It is apparent that SSA does little to enforce its policies and that the payees are aware of this lack. In fact, one payee called the SSA a “toothless tiger” because it did not contact payees often, if at all, and because the only accounting to be made was the very basic annual accounting form. Some of the violations noted in this section led to the committee’s judgment of misuse; others did not. The committee assigned the “misuse” label only when there was clear evidence that the beneficiary’s funds were spent on others. The committee assigned the label of “uncertain/potential misuse” when there were few or no accounting records, SSA benefit amounts

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse significantly exceeded the beneficiary’s apparent immediate needs, or some very large expenses were claimed that could not be verified. ANNUAL ACCOUNTING FORM In addition to offering the targeting tool to detect misuse, the committee proposes revisions to the annual accounting form. As discussed above, the purpose of the annual accounting form is to allow SSA to monitor the payee performance and to detect misuse. Although accounting forms are to be completed annually by all payees, only about 60 percent of the accounting forms are returned by payees after the first contact and scanned into the system with no further action needed. The committee noted several other flaws with the accounting process. First, the process is not set up to yield data for research or analysis. For example, SSA does not calculate mail return rates, keep track of item non-response, nor use the data in any way for statistical analysis. Because only images of the forms are stored, no individual data items can be retrieved from the system. Second, there is no quality assurance program associated with the accounting system: no one checks the work of the clerks who enter the data. Third, the annual accounting forms that are sent back to field offices for follow-up are often not returned for storage in the SSA processing center (in Wilkes-Barre) when the cases are resolved. Consequently, any accounting forms that were initially problematic are not retrievable for future analysis. The IG’s report noted that about 28 percent of the forms requested were not available. Throughout our field site visits, SSA staff told us that the annual accounting form, in its current version, is not an effective tool for detecting misuse. It is too easy for representative payees to learn that if they just fill out the form with some plausible but not necessarily accurate information, there will be no follow-up or other consequences. Essentially, the current monitoring process is an “empty threat” that can easily be subverted. The committee concurs with the information it received from SSA staff and representative payees that the current annual accounting form is a useless, expensive administrative tool that does not yield the sort of data that is necessary to uncover misuse. Beyond meeting a 20-year-old court mandate to monitor all representative payees, in its present format the accounting form provides a very limited return for the time and money invested in handling the paperwork. CONCLUSION The current annual accounting form is of limited value in monitoring representative payees for potential misuse.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse RECOMMENDATION 5.4 The Social Security Administration should redesign the annual accounting form to obtain meaningful accounting data and payee characteristics that would facilitate evaluation of risk factors and payee performance. A preliminary attempt at redesign of the annual accounting form by the committee (but without cognitive testing) is presented in Appendix F. Our goal was to provide an example of what could be done to improve the form. We added questions that incorporate the characteristics of misuse that we have identified. We revised the form to omit providing to payee the total amount of benefits SSA has sent, thus reinforcing the requirement that payees keep (and consult) records. We added questions that reinforce the duties of the representative payee to avoid the policy violations that we discovered in our work. Most importantly, we propose that online entry be offered on the Web and that paper forms are scanned using optical character recognition to eliminate most clerical review of forms and to facilitate statistical analysis and data checking. We stress, however, that these suggested changes—or any others—need to be cognitively tested to make sure the language on the form is as clear as possible and suitable for payees of all educational levels. No form, by itself, is going to detect program misuse. However, if a form can be used to obtain information on characteristics of interest, it could then be combined with a rigorous program of audits such as the one the committee developed. BANK-ACCOUNT-LINKED DEBIT CARDS In 2002 the Social Security Advisory Board asked SSA’s IG to develop an issue paper on the use of stored value cards (SVC) by representative payees. The IG’s report (U.S. Social Security Administration, 2002) argued that there would be six potential benefits to the use of such cards for both the ease of distributing benefits and the straightforwardness of monitoring expenditures: Tracking representative payees’ purchases—an SVC would automatically keep an electronic record of most purchases. Timely identification of representative payee spending—SSA could obtain spending information from financial institutions on the type and amount of many payees’ expenses. This information could be available electronically and be reviewed at various intervals (weekly, monthly, and annually). Identification of questionable expenses—records from an SVC can be used to create exception reports, which can allow SSA to iden-

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse tify quickly instances of questionable expenses, unusual spending patterns, and program ineligibility. Merchant blocking could be used to prevent payees from making purchases with certain vendors, which is done in the food stamp program (and also includes prohibited items). Identification of conserved funds—tracking balances on SVCs would permit SSA to identify quickly Supplemental Security Income program ineligibility when balances exceed $2,000. Transferring funds when payees change—with an SVC, a beneficiary’s balance could be electronically transferred to a new payee; SSA would not have to wait for the former payee to return any balance to the SSA. Elimination of the paper accounting form—use of SVCs might provide administrative savings of the cost of mailing and processing the annual accounting forms. SSA did not accept the IG’s suggestion to carry out a test of the use of SVCs. However, it is now 5 years later, and there is experience with many other federal agencies using such cards successfully. Bank-account-linked debit cards can clearly provide protections and ease for representative payees for Social Security beneficiaries. In addition, legislation adopted in 1996 provides that low-income recipients of federal payments should be able to easily open and maintain bank accounts through direct deposits, and limits charges that the bank could impose.2 Although there are numerous types of stored value cards available in the market place (e.g., gift cards), most are not attached to bank accounts and as such, they do not offer the same types of consumer protections that bank accounts do under federal law. These types of bank-account-linked debit cards are also linked to congressionally established low-income bank accounts known as electronic transfer accounts (ETAs).3 An ETA account, as designed by the Treasury Department, ensures that individuals who receive federal payments electronically have access to an account at a reasonable cost and with the same consumer protections available to other account holders at the same financial institution. These protections, most important to beneficiaries and their representative 2 The Debt Collection Improvement Act of 1996 (DCIA), Public Law 104-134, Omnibus Consolidated Rescission and Appropriations Act of 1996, Chapter X, Sec. 31001 (amending 31 U.S.C. § 3332), outlines the duties of financial institutions designated as Financial Agents and ensures compliance with the ETA standards. 3 An ETA is a low-cost account that is made available by participating federally insured financial institutions to individuals who receive federal benefit, wage, salary, or retirement payments. The account allows recipients to receive federal payments electronically in accordance with the electronic funds transfer provision of the DCIA.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse payees, include: disclosure requirements, a dispute resolution mechanism, a requirement that charges be documented, protection from unauthorized withdrawals, an absolute barrier to attachment of the deposits coming from the federal government, and guarantees of limited fees on the account. Of particular interest for representative payees, the accounts must have the following characteristics: Be an individually owned account at a federally insured financial institution. Accept electronic federal benefit, wage, salary, and retirement payments and such other deposits as a financial institution agrees to permit. Be subject to a maximum price of $3.00 per month. Have a minimum of four cash withdrawals and four balance inquiries per month, to be included in the monthly fee, through any combination of proprietary automated teller machine transactions or over-the-counter transactions. Provide the same consumer protections that are available to other account holders at the financial institution. Allow access to the financial institution’s online point-of-sale network, if any. Require no minimum balance, except as required by federal or state law. Be either an interest-bearing or noninterest-bearing account, at the option of the financial institution. Provide a monthly statement. The beneficial elements outlined by the IG’s 2002 report would be present in ETA accounts that include a bank card with the additional consumer protections established with the Bank Act of 1996. Using these types of accounts would provide advantages for both the ease of distributing benefits and the straightforwardness of monitoring expenditures. If the SSA encouraged the development and expansion of ETAs for the use of payees who serve a single beneficiary, it is not unreasonable to foresee the day SSA could waive the costly and mostly useless annual reporting requirement and simply collect the monthly statements made available through banks. Nearly instant monitoring would be available, along with a database for statistical analyses to discover potential misuse. RECOMMENDATION 5.5 The Social Security Administration should conduct a test of bank-account-linked debit cards for representative payees.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse RESEARCH AND DEVELOPMENT STAFF The Representative Payee Program does not have a staff dedicated to research on new methodologies for detecting misuse or for the development of computer and database systems that would enhance the program and increase field staff efficiency. In the field offices, there are no staff whose priority job is to recruit, train, and monitor representative payees; to investigate potential cases of misuse; to train claims representatives in how to use the RPS; to systematically monitor accounting requirements and lump-sum payments; to monitor changes in custody of minor children; to serve as a resource for questions from payees and beneficiaries about payee responsibilities; or how to use criteria associated with misuse of funds by payees. If the identification of misuse is made easier—with a revised annual accounting form that helps identify misuse, or by bank-account-linked debit cards, program quality and cost-effectiveness would be enhanced. RECOMMENDATION 5.6 The Social Security Administration should initiate a research, development, and support function for the Representative Payee Program to promote quality and cost-effectiveness in its operations.