Improperly Titled Bank Accounts for Beneficiaries w/Rep Payees

OFFICE OF THE INSPECTOR GENERAL

SOCIAL SECURITY ADMINISTRATION

IMPROPERLY TITLED BANK ACCOUNTS FOR BENEFICIARIES WITH REPRESENTATIVE PAYEES

March 2011

A-01-09-19055

AUDIT REPORT

Mis s io n

By c o n d u c tin g in d e p e n d e n t a n d o b je c tive a u d its , e va lu a tio n s a n d in ve s tig a tio n s , we in s p ire p u b lic c o nfid e n c e in th e in te g rity a n d s e c u rity o f S S A's p ro g ra m s a n d o p e ra tio n s a n d p ro te c t th e m a g a ins t fra u d, wa s te a n d a b us e . We p ro vid e tim e ly, u s e fu l a n d re lia b le info rm a tio n a n d a d vic e to Ad m in is tra tio n o ffic ia ls , Co n g re s s a n d th e p u b lic .

Au th o rity

Th e In s p e c to r Ge n e ra l Ac t c re a te d in d e p e n d e n t a u d it a n d in ve s tig a tive u n its , c a lle d th e Offic e o f Ins p e c to r Ge n e ra l (OIG). Th e m is s io n o f th e OIG, a s s p e lle d o u t in th e Ac t, is to :

Co n d u c t a n d s u p e rvis e in d e pe n d e n t a n d o b je c tive a u d its a n d in ve s tig a tio n s re la ting to a g e n c y p ro g ra m s a n d o p e ra tio n s .

P ro m o te e c o n o m y, e ffe c tive n e s s , a n d e ffic ie n c y with in th e a ge nc y. P re ve n t a n d d e te c t fra u d , wa s te , a n d a b u s e in a ge n c y p ro g ra m s a n d

o p e ra tio n s . Re vie w a n d m a ke re c o m m e n d a tio n s re ga rd in g e xis tin g a n d p rop o s e d

le g is la tio n a n d re g u la tio n s re la tin g to a g e n c y p ro g ra m s a n d o p e ra tio n s . Ke e p th e a ge n c y h e a d a n d th e Co n g re s s fu lly a n d c u rre n tly in fo rm e d o f

p ro b le m s in a g e n c y p ro g ra m s a n d o pe ra tio n s .

To e n s u re o b je c tivity, th e IG Ac t e m p owe rs th e IG with :

In d e p e n d e n c e to d e te rm in e wha t re vie ws to p e rfo rm . Ac c e s s to a ll in fo rm a tio n n e c e s s a ry fo r th e re vie ws . Au th o rity to p u b lis h fin d in g s a n d re c o m m e n d a tio n s b a s e d o n th e re vie ws .

Vis io n

We s trive fo r c o n tin u a l im p ro ve m e n t in S S A's p ro g ra m s , o p e ra tio n s a n d m a n a g e m e n t b y p ro a c tive ly s e e kin g n e w wa ys to p re ve n t a n d d e te r fra u d , wa s te a n d a b u s e . We c o m m it to in te g rity a n d e xc e lle n c e b y s u p p o rtin g a n e n viro n m e n t th a t p ro vid e s a va lu a b le p u b lic s e rvic e while e nc o u ra g in g e m p lo ye e d e ve lo p m e n t a n d re te n tio n a n d fo s te rin g d ive rs ity a n d in n o va tio n .

SOCIAL SECURITY

MEMORANDUM

Date: March 31, 2011

Refer To:

To: The Commissioner

From: Inspector General

Subject: Improperly Titled Bank Accounts for Beneficiaries with Representative Payees (A-01-09-19055)

OBJECTIVE

Our objective was to determine whether beneficiaries with representative payees had benefits deposited in improperly titled bank accounts.

BACKGROUND

Some individuals are not able to manage their finances because of their youth or mental and/or physical impairment. As a result, Congress granted the Social Security Administration (SSA) the authority to appoint a representative payee who receives and manages benefits on behalf of the beneficiary.1

To protect the beneficiary's funds, SSA recommends that representative payees have benefits directly deposited into a bank account. The representative payee must title the bank account to establish the beneficiary's ownership of the funds but at the same time restrict the beneficiary's direct access to the funds.2 The title of the account must also show that the representative payee has only a fiduciary (not personal) interest in the funds. Proper account titling allows Federal Deposit Insurance Corporation (FDIC) protection with FDIC-insured financial institutions and protects beneficiary funds from claims by a representative payee's creditor.3

1 The Social Security Act ?? 205(j) and 1631(a)(2); 42 U.S.C. ?? 405(j) and 1383(a)(2).

2 SSA, POMS, GN 02402.055. Any form of account title that the bank recognizes as establishing the beneficiary's ownership of the funds but not direct access to them is acceptable.

3 In determining the amount of insurance available to each depositor, the FDIC shall presume deposited funds are actually owned in the manner indicated on the deposit account records of the insured depository institution. 12 C.F.R. ? 330.5.

Page 2 - The Commissioner

Each year, SSA asks representative payees to account for the use of benefits received on behalf of their beneficiaries on a form called the Representative Payee Report.4 These Reports disclose how the representative payees are using the beneficiaries' funds.

On the Report, the representative payee indicates any amount of savings for the beneficiary as of the end of the reporting period. If there are reported savings, the representative payee must answer the subsequent question asking, "How is the title of the account listed?" He or she can choose between the following options:

? Your Name for Beneficiary's Name ? Beneficiary's Name by Your Name ? Other

If the representative payee selects `Other,' then a subsequent question asks to "...show the title of the account..." by writing down how the account title appears.

To perform our review, we obtained a file of Old-Age, Survivors, and Disability Insurance (OASDI) beneficiaries and Supplemental Security Income (SSI) recipients with representative payees who were not relatives and whose benefits were directly deposited into a bank account as of August 2009. We selected a random sample of 250 from a single bank for detailed analysis.5 For each sampled case, we subpoenaed bank account title information. (See Appendix B for our scope, methodology, and sampling results.)

RESULTS OF REVIEW

Based on our review, we estimate about 30,822 OASDI beneficiaries and SSI recipients with non-relative representative payees have approximately $307 million in annual benefits (or nearly $26 million each month) directly deposited into improperly titled bank accounts. These improper titles (1) allow the beneficiaries to have direct access to their own funds, even though SSA determined they were incapable of managing their own finances; and/or (2) do not authenticate the beneficiaries' ownership of the funds, as well as the representative payee's non-personal interest of the funds. If the beneficiary is not restricted from accessing his/her benefits or allowing other individuals to access the funds, the representative payee may not be managing funds on behalf of the beneficiary's best interests. This may lead to a beneficiary's needs (such as food, clothing, shelter, and medical care) not being met.

4 SSA, POMS, GN 00605.001.

5 For purposes of this audit, we considered the characteristics and findings observed for the selected bank to be representative of any bank providing services to OASDI beneficiaries and SSI recipients with representative payees.

Page 3 - The Commissioner

From the 250 sample cases, we found situations where the bank account titles were not correct, according to SSA guidelines.6 Specifically,

? 68 accounts (27 percent) were improperly titled;7

Chart 1: Sample Results

Unable to Determine

34%

Improperly Titled 27%

? 98 accounts (39 percent) were correctly titled; and

? 84 accounts (34 percent) were unable to be determined.

Correctly Titled 39%

The 68 improperly titled accounts were set up in various ways based on ownership, as shown in Table 1.

Table 1: Improper Account Title Ownership

Ownership

Number of Beneficiaries

Total Beneficiaries With Account Access

21

Individual Account ? Beneficiary Only

4

Joint Account ? Beneficiary & Representative Payee

17

Total Beneficiaries With No Ownership

25

Individual Account ? Representative Payee Only

16

Joint Account ? Representative Payee & Third Party

9

Other8

22

Total Improper Accounts

68

Percent

31% 6%

25% 37% 24% 13% 32% 100%

6 SSA, POMS, GN 02402.055. Of the 166 total cases we were able to review, 41 percent was improperly titled.

7 Fifty-one (75 percent) of these improperly titled accounts involved beneficiaries with a mental disorder. In addition, six cases (9 percent) were adults over age 61, and five cases (7 percent) were children under age 19. See Table B-3 in Appendix B for more information.

8 For example, a case had a bank account title naming the representative payee and a third party as joint trustees for the beneficiary.

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