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Most Social Security ’Representative Payees’ Perform Duties Well, But Changes Needed to Better Prevent and Detect Misuse of Funds


WASHINGTON -- Although most people who receive and manage Social Security benefits on behalf of other individuals perform their duties well, the Social Security Administration’s “representative payee” program should take steps to better prevent and detect the misuse of funds, says a new report from the National Research Council. Currently the program requires reporting by representative payees, but the process does not appear to be effective at identifying cases in which benefits are misspent. The rate of misuse, although very low, is significantly higher than SSA’s official estimate, the report says. It offers a new method to aid the agency in identifying possible misuse, and recommends improved support for representative payees and closer tracking of their performance.

“Though the program is meeting the needs of most beneficiaries, the Social Security Administration is not obtaining the information it needs to detect misuse of benefits and provide the best service possible,” said Barbara Bailar, chair of the committee that wrote the report, and former senior vice president for survey research at the University of Chicago’s National Opinion Research Center.

More than 7 million recipients of Social Security benefits -- most of them children and disabled or elderly adults -- have a representative payee to receive and manage their funds; the representative can be an individual or an organization such as a group home. Each month, SSA distributes almost $4 billion to over 5.3 million representative payees. Following a request by Congress, SSA asked the Research Council to assess the extent to which representatives are performing their duties, evaluate whether the program’s policies are practical and appropriate, identify the types of representatives at highest risk of misusing benefits, and suggest ways to reduce the chances of misuse and protect beneficiaries better. The study looked at individual representative payees who served fewer than 15 beneficiaries, as well as organizations that served fewer than 50 beneficiaries and were not compensated for being representative payees.

A national survey conducted as part of the study found that almost 95 percent of beneficiaries are “satisfied” or “very satisfied” with their representative payees. And both representatives and beneficiaries understand representatives’ basic responsibilities, which include managing funds to help meet beneficiaries’ needs for food, clothing, and shelter. However, many representatives are unaware of SSA’s requirement that any unused funds must be placed in a special savings account for beneficiaries. SSA should enforce this requirement and encourage representative payees to conserve funds, the report says. Formal training also should be provided to representatives, along with better long-term support through field staff, toll-free telephone numbers to call for assistance, Web-based information, and other avenues.

Currently, SSA’s main tool for detecting misuse of funds is its annual accounting form, on which representative payees declare how much they spent in broad categories during the previous year. The agency also relies on beneficiaries and relatives to report misuse, as well as the auditing of a small, simple random sample of representatives conducted by the Office of the Inspector General. Based on these sources, SSA has reported the number of representative payees who misuse funds to be less than 0.01 percent of the payee population.

The methods SSA uses to detect misuse of benefits are not reliable, however, the committee found. The annual accounting form does not yield useful data, nor are the data stored in the agency’s computer systems for possible future statistical analysis. Although the annual accounting form may serve as a psychological deterrent to misuse, the current monitoring process is essentially an “empty threat” that can easily be subverted by a representative who fills out the form with plausible but inaccurate information.

The form should be redesigned to obtain meaningful accounting data and representative payee characteristics that would help SSA evaluate the risk of misuse, the report says; this information should be stored in a database suitable for analysis by agency staff and researchers. In addition, the agency should test a system in which representative payees would use special debit cards linked to accounts with beneficiaries’ funds -- an approach that would produce a continually updated electronic record of expenditures.

SSA also should establish protocols for handling accusations of representatives’ misspending made by beneficiaries or other concerned parties. Currently, local staff often respond to such allegations by finding a new representative without formally determining whether misuse took place. Those who are alleged to have misused funds are frequently not formally investigated and identified, and therefore could be reappointed as representatives in the future.

Most importantly, SSA should shift from auditing a random sample of representative payees to conducting more targeted audits of those most likely to misspend funds, the report says. In a small in-depth study of a specially identified sample of representatives, the committee found that those with certain characteristics -- for example, those who do not live with the beneficiary, who change residences frequently, or who have a felony conviction – tend to have higher rates of misuse. More than 40,000 representative payees have such characteristics, the report says. Using the committee’s analytic approach, audits of these individuals would probably reveal about 7,000 misusers and another 7,000 possible misusers. This would place the total rate of known misusers at about 0.2 percent of the payee population -- still a very small percentage, but substantially higher than SSA’s figure. The agency should establish specialized teams of auditors who can investigate samples of those at high risk of misusing funds.

The report adds that special scrutiny should also be given to recipients of large lump-sum payments -- retroactive benefits for many months that are awarded in one payment. Such payments are unmonitored and appear to be misspent more often than regularly received payments.

The report also recommends that SSA standardize the process for selecting representative payees, which currently varies across field offices. The agency should screen potential representatives, including organizations, for characteristics that raise the risk of misuse -- particularly credit problems and criminal backgrounds. And the committee’s in-depth study revealed that among the group of people SSA identified as misusers, a small number of them were still serving as representative payees. The agency should develop new policies and procedures that prevent the routine reappointment of such representatives, the report says.

It is difficult to find representative payees for certain populations of beneficiaries -- people with mental illness or substance abuse problems, for example, and those who are homeless. Professional payees who are compensated for their services might be better equipped to deal with the challenges these beneficiaries present, the report says. SSA should expand the fee-for-service part of its program to include small organizations and individuals. And to help mitigate the shortage of representatives, SSA should create a program to identify and train a pool of volunteers who can serve temporarily.

The study was sponsored by the Social Security Administration. The National Academy of Sciences, National Academy of Engineering, Institute of Medicine, and National Research Council make up the National Academies. They are private, nonprofit institutions that provide science, technology, and health policy advice under a congressional charter. The Research Council is the principal operating agency of the National Academy of Sciences and the National Academy of Engineering. A committee roster follows.


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