OFFICE OF THE INSPECTOR GENERAL
THE SOCIAL SECURITY
ADMINISTRATION’S UNPROCESSED ANNUAL EARNINGS
ENFORCEMENT SELECTION
August 2012

AUDIT REPORT
Introduction
This is a report of my audit on Social Security Administration’s Unprocessed Annual Earnings practice. The audit was conducted by Olayinka Olagundoye, of Houston, Texas Audit during August 2012.
Objective My audit was to (1) to assess Social Security Administration's (SSA) development in resolving 2.5 million earnings enforcement selections. (2) To determine the amount of improper payments to affected beneficiaries.
Background
The social security benefits objective is to give earnings to a person or family due to loses from reaching full retirement age. How much social security benefit one can qualify to receive annually and continue to receive monthly depends on the individual’s personal situation as follows: * To receive Social Security (SS) benefits during the year you become full retirement age which is age is 66. If one decides to work and reach full retirement age or older, the beneficiary may keep all benefits, regardless of earnings. * To receive Social Security (SS) benefits before the year one becomes full retirement age, the SSA must withhold $1 from your social security benefit for every $2 you earn over the annual limit. One must add earnings in all the 12 months Jan-Dec regardless of the month entitled to receive SS benefits for each $2 you earn above the limit until the month you reach full retirement age. In special cases, retired beneficiaries are given the opportunity to continue work while receiving Social Security benefits. The monthly earnings test is applied in the first year one has a month that you earn less than the “Monthly Earnings Test Limit” or have no earnings. If one earns $1.00 over the monthly limit, he/she can lose entire check for that month. If social Security can pay more checks using “Yearly Earnings Test Limit” they will revert to using the yearly earnings test.
Title II of the Social Security Act requires that SSA use of an Annual Earnings Test (AET) to measure the extent of beneficiaries’ retirement and determine the amount to deduct from their monthly benefits. Its purpose is to keep the retired out of destitution. The area I audited were the two earnings test provided by the Act, which are as follows * for beneficiaries under full retirement age; * for beneficiaries in the year they attain full retirement age.
To test if any erroneous amounts exist, I verified if the EEO program checked the amount of earnings that are used for the AET (called enforceable earnings). Section 203 of SSA- 131states unless SSA has prior notification that wages postings do not count in applying the AET, use the entire amount on the SSA record to initiate earnings enforcement actions resulting in incorrect benefit adjustments. SSA developed the SSA-131 for employers to report special wage payments, which gives SSA the information needed to pay benefits correctly. First, the EEO program is effective in conducting this audit because I was able to determine if enforceable earnings are greater than the annual exempt amount and different from the amount recorded on the Master Beneficiary Record (MBR). Second, if the records met qualification during my verification process of the EEO, then the records can go through the next stage of the process, which is the SSA’s Automated Job Stream (AJS 3) program. The AJS 3 makes changes as necessary to note if there is over- or underpayments to beneficiary records. In my audit, any EEO selections not handled by AJS 3 requires review and manual processing.

Scope and Methodology
In my audit, I covered beneficiaries identified by the Earnings Enforcement Operation (EEO) for the period January 1, 1996 to December 31, 2005. EEO, checks beneficiaries’ reported earning against earnings reported to employers to determine over-or underpayments that may have occurred during the year. To accomplish the objectives, I had to determine administration’s unprocessed annual earnings. I gathered information on the description of collections, paying particular attention for the presence of any possible system reliability and information integrity risk. I performed reconciliation of all SSA account, The SSA uses the information on the description of collection to prevent earnings related to overpayments and to avoid erroneous withholdings of benefits. Then I reviewed the applicable sections of the Social Security Act and the Social Security Administration’s (SSA) Program Operations Manual System to ensure the rules were applied. I verified all work history for a 27-month period (2002 through 2004) for all retirement beneficiaries who participated in the Annual Earnings Test (AET) required by the Act to report every $2 beneficiaries that earned over the annual exempt amount that required the SSA to deduct $1 in benefits. To ensure adhere to the rule of the use of AET provisions, I ran a system queries on all SSA forms filled by beneficiaries to verify allegations towards special payments, ensuring that no possible Hardware/Software risk existed. In the audit, I processed all employee supervision over the SS benefits in running the system query. The system query is to assist the audit in obtaining information of beneficiaries submitted to the IRS for review. against the SSA’s Master Beneficiary Record (MBR), Master Earnings File (MEF), and Payment History Update System to determine whether the agency properly adjusted benefits based on actual earnings. The method applied to conduct this audit was the use of the Earnings Enforcement Operation (EEO) to select beneficiary’s annual report whose earnings is greater than their MEF earnings.
I found that 165 beneficiary records were conducted by Office of Quality Performance (OQP) to determine the amount of any over or underpayments to the affected beneficiaries. Once every year, the SSA hands out over $700 billion in social security benefit payments to approximately 60 million people. Since the social security benefit payment is such a huge amount, any form of error in the process of disbursement can result to millions of dollars of over or under payments. To meet the audit objective; I examined the effectiveness of the application of EEO to decrease improper payments and increase overpayment recoveries. I conducted interviews from different staff members at various levels at the SSA’s Office of Quality Performance (OQP); a random sampling was selected out of 275 beneficiary records from the 2,493,034 records OQP removed from the EEO for Calendar Years (CY) 1996 - 2005; I reviewed all final conclusions made by OQP on the 165 beneficiary records in our audit sample. The total numbers of beneficiaries were all provided by OQP from the EEO CY 1996 -2005. I examined the effectiveness of the computer-processed data for sufficiency in producing reliable information for my use. I conducted all tests to determine the completeness and accuracy of the data. These tests allowed us to assess the reliability of the data and achieve our audit objectives.

FINDINGS
In my audit, it showed that SSA had not made progress to fix the problem with the backlog, which was about 2.5 million of the Earnings Enforcement selections. I found that the beneficiary records showed 2.5 million OQP was removed for Calendar Year (CYs) 1996 through 2005 with 425,354 records being processed. The Earnings Enforcement Selections outstanding at the time of previous audit pointed in the direction of SSA as having only 337,500 processed of that only 2.1 million beneficiary records assigned to the AET were not processed. There were also significant numbers of improper payments in the backlog for the beneficiaries who were affected. In my audit, I discovered beneficiaries under full retirement age for the year 2005 were $12,000.
Based on a random sample of 275 beneficiaries, I estimated that SSA
- overpaid about $956 million to 616,459 beneficiaries and
- underpaid about $245 million to 181,312 beneficiaries.
Once the Office of Systems identified the records subjected to enforcement, I discovered that (OQP) had approximately 37 percent of the selected records taken away from the process during CYs 1996 through 2005. The remaining records were sent back to the Office of Systems and processed. The OQP removed these records to figure out ways of automating the processing of EEO selections that would require to be entered manually. The OQP also ejected EEO selections that were prone to error if they were automatically processed by AJS 3. The number of beneficiary records OQP removed from the EEO and the number of beneficiary records still outstanding for CYs 1996 through 2005 records are identified by EEO as not processed is reflected in the table below.
Another beneficiary in the auditors sample was underpaid $761 because she overestimated her 2001 earnings. SSA deducted $761 of monthly benefits in 2001 because the beneficiary had estimated total earnings of $11,228, $548 more than the annual exempt amount. The beneficiaries’ actual earnings for 2001 were less than the annual exempt amount. The following table summarizes the number and amount of improper payments in our sample as follows: CY | Number of Overpayment | Amount of Overpayment | Number of Underpayment | Amount of Underpayment | 1996 | 1 | $ 442.00 | 2 | $ 442.00 | 1997 | 7 | $ 5,566.00 | 1 | $ 593.00 | 1998 | 3 | $ 5,695.00 | 3 | $ 663.00 | 1999 | 6 | $ 6,318.00 | 3 | $ 6,206.00 | 2000 | 11 | $ 10,688.00 | 2 | $ 702.00 | 2001 | 7 | $ 8,965.00 | 3 | $ 3,027.00 | 2002 | 8 | $ 6,959.00 | 0 | $ - | 2003 | 12 | $ 26,140.00 | 1 | $ 3,147.00 | 2004 | 6 | $ 19,302.00 | 3 | $ 5,678.00 | 2005 | 7 | $ 15,375.00 | 2 | $ 6,538.00 | Total | 68 | $105,432 | 20 | $26,996 |

RESULTS OF REVIEW
The workgroup involved SSA employees from the offices of Operations, Systems, and Policy. As a result of my audit conducted, the workgroup’s actions have resulted in a reduction in the backlog and adjustment to the current EEO. OQP showed on its annual report that it processed all the 2004 records and 151,445 of the records for CY 2005. However, OQP had not developed a plan in place for processing the 1.7 million backlogs remaining from the records for CYs 1996 through 2003. The main concern in the audit is that SSA backlogs may not be able to be automated, causing time lost to enter the backlogs manually, which apparently raises the cost. For the CY 2006 SSA reduce the number of EEO selections that is required for OQP review and increased the number of records that could be automatically processed by the AJS-3. Finally, OQP provided information that showed a 37 percent reduction in the number of records it ejected from the EEO in CY 2006 as compared to CY 2005.
CONCLUSIONS
In the audit, I noted that SSA failed to make progress in resolving the backlog of the 2.5 million beneficiary records that were subject to the AET. Based on my sample results, we estimate SSA overpaid about $956 million to 616,459 beneficiaries and underpaid about $245 million to 181,312 beneficiaries. These payment errors occurred because SSA did not process all beneficiary records identified by the EEO. We are confident that SSA has taken steps to decrease the backlog and improve the EEO. OQP staff ensured they processed all the Earnings Enforcement selections in the backlog for CY 2004 and about 73 percent of the selections for CY 2005. OQP also provided documentation, showing a 37-percent reduction in the number of records it removed from the EEO in CY 2006 as compared to CY 2005. On another note, OQP did not present a plan on how to rectify the beneficiary records outstanding. These unprocessed records represent about 67 percent of the total records OQP removed from the EEO for CYs 1996 through 2005.
RECOMMENDATION
I suggest OPQ construct a workgroup to evaluate options for addressing backlog and improving the EEO.
I recommend that SSA review and process all EEO selections outstanding in OQP since 1996 and develop a cost-effective plan to process the backlog of the Earnings Enforcement selections for CYs 1996 through 2005.
I suggest OPQ figure out if they should continue the practice of removing records selected by the EEO. If SSA determines OQP is effective, going forward should the practice be continued? Management oversight needs to be establishing of the workload to ensure it is accurately processed in a timely manner. Also, I recommend that management implement controls to test and monitor configurations on the mainframe to identify and address inherent security risks. This should include a comprehensive procedure to test new software and updates to existing software on the mainframe prior to implementation
Finally the auditor should determine whether it should revise the EEO to select beneficiaries whose annual report of earnings is greater than their MEF earnings.
We recommend that SSA management implement policies and procedures that require a periodic review of the content of all security profiles. These policies and procedures should enforce a consistent approach for profile review and should require auditable artifacts to evidence the completion of these reviews.
If designed appropriately and implemented effectively, management should be able to decrease the risk of personnel and contractors maintaining excessive access to transactions and data. We also recommend that management implement controls to test and monitor configurations on the mainframe to identify and address inherent security risks. This should include a comprehensive procedure to test new software and updates to existing software on the mainframe prior to implementation. Management must also implement procedures that require on-going monitoring of implemented mainframe configurations to identify and address security risks. More specific recommendations focused on the individual exposures we identified are included in a separate limited-distribution management letter, which also includes management’s response and their planned corrective actions.

Reference:
SSA's Performance and Accountability Reports(2009). Baltimore, Maryland. Social Security Online. Retrieved from http://www.ssa.gov/pgm/mail.htm
Office of the inspector General Social Security Administration (2009). San Francisco, California: About OIG. Retrieved http://oig.ssa.gov/sites/default/files/audit/full/pdf/A-09-08-18047.pdf
U.S. Equal Employment Opportunity Commission. About Title VII of the Civil Rights Act of 1964. Retrieved from http://www.eeoc.gov/laws/statutes/titlevii.cfm Supporting Statement for the SSA-131. About Employer Report of Special Wage Payments. Retrieved from http://www.reginfo.gov/public/do/DownloadDocument?documentID=195758&version=1