Auditors estimate $2.8B in improper payments at SSA, FEMA

IGs recommend fraud-mapping tools and LexisNexis to identify payments to ineligible people

In two new reports, federal investigators identified improper payments estimated at $2.8 billion distributed to ineligible disaster relief recipients following Hurricanes Katrina and Rita and to disability income beneficiaries with unreported wealth.

About $643 million was paid out improperly by the Federal Emergency Management Agency’s disaster relief program from 2007 to 2011, and $2.2 billion was wrongly disbursed by the Social Security Administration’s Supplemental Security Income program to people who failed to report ownership of second homes and other real estate, the reports indicate.

The federal auditors advised both agencies to step up using fraud mapping and data-mining software tools, including performing searches on the commercial LexisNexis databases, to reduce future improper payments and to recoup the improper payments.

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At the SSA, auditors examined a random sample of 350 people who received federal disability income. They qualified for those payments by exhibiting a disability along with a low income and small amount of assets. Ownership of real estate must be disclosed and may render a person ineligible for aid if asset limits are exceeded.

Of the 350 cases examined, 27 people were determined to have misreported how much real estate they owned and 16 would have been deemed ineligible for aid if the real estate was reported. The amount of improper payments to the 16 people was estimated at $112,000, according to the June 1 report by SSA Inspector General Patrick O’Carroll Jr.

Extrapolating that figure to cover the nation, the IG estimated $2.2 billion in estimated improper payments to about 321,000 people who likely would be deemed ineligible due to misreported real estate.

The SSA auditors determined that it cost $6,600 in LexisNexis expenses to recover $56,000, while the rest of the improper payments were deemed unrecoverable. Extrapolating those figures, it would cost $50 million to recoup $400 million in overpayments agencywide, the report state.

The report reaffirmed what the SSA auditors found in a 2009 report with supplementary income recipients’ misreporting of vehicle ownership. In that report, it was found that about 75,000 recipients improperly were paid $551 million because of misreporting.

The use of LexisNexis for identifying the real estate was “cost-effective,” O’Carroll concluded, adding that “we believe it is reasonable for SSA to take steps to use this tool as effectively as possible.”

However, he noted that the SSA was conducting a study to see if there is a more efficient software tool available.

The audit recommended that the SSA assess the costs and benefits of expanded LexisNexis use through a pilot study, and if the results were positive, proceed with the expanded use, among other steps. SSA officials agreed with the recommendations.

At FEMA, more than $643 million of potentially improper disaster assistance payments were identified in response to Hurricanes Katrina and Rita, as well other disasters, according to the June 6 report from the Homeland Security Department's Office of Inspector General.

FEMA overpaid for damages, made payments to people without proof of residency and didn't verify identification of the recipients, among other problems, the IG said. In 2007, as a result of a lawsuit challenging the recovery process, a federal district court judge ordered FEMA to stop the debt collection activities until FEMA made changes in the procedures, including providing written notice of the reasons for aid termination and opportunities for an appeal hearing. FEMA subsequently suspended the debt recovery activities, through the debts were not canceled.

In 2008, FEMA drafted a new recoupment procedure, which has not been approved by the FEMA administrator. In November 2010 the administrator began a new review of the 167,000 disaster assistance cases involved.

On March 17, 2011, a day after the IG's draft report was submitted to FEMA, the agency publicly announced it had begun the new recoupment process and said it had begun to notify debtors that it is recovering the improper payments, the report states.

About the Author

Alice Lipowicz is a staff writer covering government 2.0, homeland security and other IT policies for Federal Computer Week.


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