SOCIAL SECURITY ADMINISTRATION

EFFECTIVENESS OF THE
SOCIAL SECURITY STATEMENT IN
CORRECTING EARNINGS RECORDS

August 2008

A-15-07-17089

AUDIT REPORT

Mission

By conducting independent and objective audits, evaluations and investigations, we inspire public confidence in the integrity and security of SSA's programs and operations and protect them against fraud, waste and abuse. We provide timely, useful and reliable information and advice to Administration officials, Congress and the public.

Authority

The Inspector General Act created independent audit and investigative units, called the Office of Inspector General (OIG). The mission of the OIG, as spelled out in the Act, is to:

Conduct and supervise independent and objective audits and investigations relating to agency programs and operations.
Promote economy, effectiveness, and efficiency within the agency.
Prevent and detect fraud, waste, and abuse in agency programs and operations.
Review and make recommendations regarding existing and proposed legislation and regulations relating to agency programs and operations.
Keep the agency head and the Congress fully and currently informed of problems in agency programs and operations.

To ensure objectivity, the IG Act empowers the IG with:

Independence to determine what reviews to perform.
Access to all information necessary for the reviews.
Authority to publish findings and recommendations based on the reviews.

Vision

We strive for continual improvement in SSA's programs, operations and management by proactively seeking new ways to prevent and deter fraud, waste and abuse. We commit to integrity and excellence by supporting an environment that provides a valuable public service while encouraging employee development and retention and fostering diversity and innovation.

MEMORANDUM

Date: August 27, 2008 Refer To:

To: The Commissioner

From: Inspector General

Subject: Effectiveness of the Social Security Statement in Correcting Earnings Records (A-15-07-17089)

OBJECTIVE

Our objective was to assess the effectiveness of the annual Social Security Statements (Statement) in correcting individuals' earnings records.

BACKGROUND

Section 1143 of the Social Security Act requires that the Social Security Administration (SSA) send an annual Statement of potential Social Security benefits to Social Security numberholders aged 25 and older who are not yet in benefit status and for whom SSA can determine a current mailing address. The Statement contains

1. an estimate of potential monthly Social Security retirement, disability, survivor and auxiliary benefits and a description of benefits under Medicare;

2. the amount of earnings paid to the employee or income from self-employment; and

3. the aggregate taxes paid toward Social Security and Medicare.

The goals of the Statement are to:

1. Verify and ensure the accuracy of a worker's earnings record. The Statement provides workers with an easy way of determining whether their earnings (or self-employment income) are accurately posted on their Social Security record. This is important because the amount of worker's future benefits will be based on his or her earnings record.

2. Educate the public about Social Security programs. The Statement contains information about various benefits to which a worker may be entitled.

3. Assist in financial planning. The Statement contains information about planning for retirement. By reviewing this information, individuals can see if they are on track to meet their retirement goals.

The Statement instructs workers to call the SSA toll-free number to correct inaccurately posted earnings. SSA's policy requires that teleservice center (TSC) employees annotate the alleged earnings discrepancy on a computer screen and indicate whether the earnings corrections resulted from a Statement inquiry or for other reasons. The allegation is transferred electronically to a field office (FO) for development and resolution.

In Fiscal Year (FY) 2007, SSA spent about $42 million to mail about 147 million Statements to eligible workers. To assess the effectiveness of the Statements in correcting earnings records, we

1. contacted TSC and FO personnel to obtain their perspective on the effectiveness of the Statements;

2. analyzed a sample of earnings corrections to determine whether SSA documented the Statement was responsible for the correction; and

3. requested that FOs conduct a special study to provide us with a reason for the earnings correction.

We conducted our audit between November 2007 and March 2008 at Social Security Administration Headquarters; a TSC in Baltimore, Maryland; and the Wilmington, Delaware, FO.

RESULTS OF REVIEW

We were unable to determine whether SSA achieved one of its primary goals of the Statement, that is, to verify and ensure the accuracy of a worker's earnings records. SSA did not maintain information on the effectiveness of the annual Statement in correcting individuals' earnings records. This concern is further supported by a prior Government Accountability Office (GAO) report, which indicated that SSA did not have any way of knowing or reliably estimating how many of the reported earnings records were corrected as a result of the Statement. However, GAO did not make a recommendation to address this condition.

We contacted TSC and FO personnel who suggested that the Statements were responsible for 75 to 90 percent of all earnings corrections. Our preliminary analysis showed significantly fewer corrections resulting from the Statements. Our analysis of 50 transactions showed that 7 transactions (14 percent) were initiated as a result of a Statement inquiry. Four of these transactions resulted in $257,694 in additional wages being credited to the individuals' earnings records. The Statement was effective for correcting these four individuals' earnings records to ensure they receive the amount of future benefits to which they are entitled. The other three transactions were not fully developed because the numberholder did not provide the evidence requested by the FO. For the remaining 43 sample items (86 percent), we found no indication the Statements were responsible for initiating the requested corrections.

From this analysis, we determined that documentation was limited to a data collection screen that captures earnings correction information in narrative form that cannot be readily accessed and summarized. Also, TSC staff did not always comply with SSA's policy to indicate whether the earnings corrections resulted from a Statement inquiry, and there is no similar requirement for FO staff. This noncompliance was addressed in a June 2008 SSA bulletin that indicated TSC documentation was sometimes poor or nonexistent.

Given that the available data may not fully reflect the utility of the Statement for correcting earnings records, we requested the SSA Philadelphia Regional Office to conduct a 1-week study of earnings corrections. The results showed that of the 76 earnings corrections processed, 61 corrections (80 percent) were made because the Statement contained earnings that differed from the numberholder's records. The other 15 earnings corrections were due to claims inquiries (14) and an Internal Revenue Service notification (1).

In this instance, the study shows the Statements were effective in correcting earnings records. Although these results cannot be considered a nationwide representation of how the Statements impact earnings corrections, we believe the study shows there is value in collecting this information so the Agency can assess the Statement's effectiveness as it relates to earnings corrections.

Given that SSA spends about $42 million to issue 147 million Statements annually, information on the effectiveness of this investment would help SSA determine whether it is achieving its intended goals; if not, the Agency can evaluate additional measures that can be taken to optimize the utility of the Statement.

CONCLUSION AND RECOMMENDATIONS

The correction of inaccurate earnings is one of SSA's primary goals for the Statement. SSA does not have a process in place to accurately and reliably measure the effectiveness of the Statements in correcting earnings records. The screen that is annotated when earnings corrections are requested as a result of the Statement is narrative and does not allow SSA to collect usable statistical information. Therefore, SSA cannot determine the number of earnings corrections made as a result of individuals receiving their Statements.

To facilitate achieving its goal of verifying the accuracy of workers' earnings records, SSA should consider transitioning the narrative field to something that can be queried and measured. As such, we recommend SSA develop a process to document the reasons for earnings corrections and measure how effective the Statements are in correcting earnings records.

AGENCY COMMENTS

SSA agreed with the recommendation. The full text of the Agency's comments is included in Appendix D.

Patrick P. O'Carroll, Jr.

Appendices
APPENDIX A - Acronyms
APPENDIX B - Scope and Methodology
APPENDIX C - Sample of Social Security Statement
APPENDIX D - Agency Comments
APPENDIX E - OIG Contacts and Staff Acknowledgments

Appendix A
Acronyms

FO Field Office
FY Fiscal Year
GAO Government Accountability Office
OIG Office of the Inspector General
SSA Social Security Administration
Statement Social Security Statement
TSC Teleservice Center
U.S.C. United States Code

Appendix B
Scope and Methodology

To meet our objective, we performed the following steps.

Examined prior Government Accountability Office reports on Social Security Statements (Statement).

Interviewed staff at the Wilmington, Delaware, field office (FO); Baltimore, Maryland, Teleservice Center (TSC); and Division of Earnings Records Operations to discuss the earnings correction process.

Obtained a list of earnings corrections initiated in Fiscal Year 2007. This listing identified 569,751 corrections by Social Security number.

Selected a random sample of 50 initiated earnings corrections and reviewed the Earnings Modernization Item Correction System screen to determine whether the Report of Contact indicated the correction was the result of the Statement.

Reviewed the Earnings Modernization (2.8) Clearance Reports for the Philadelphia Region to identify FOs with the greatest number of earnings corrections.

Requested the Philadelphia Region conduct a special study of earnings corrections processed March 17 through 21, 2008. This study was performed by two FOs in each of the six area offices in the Region. The purpose of this study was to determine whether the corrections were the result of the Statement.

We conducted our audit between November 2007 and March 2008 at Social Security Administration Headquarters; a TSC in Baltimore, Maryland; and the Wilmington, Delaware, FO. The entities audited were the Office of Central Operations and the Deputy Commissioner for Systems. We found the data used for this audit were sufficiently reliable to meet our audit objective.

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.
Appendix C
Sample Social Security Statement

Appendix D
Agency Comments

SOCIAL SECURITY

MEMORANDUM

Date: August 18, 2008

To: Patrick P. O'Carroll, Jr.
Inspector General

From: David V. Foster /s/
Executive Counselor to the Commissioner

Subject Office of the Inspector General (OIG) Draft Report, "Effectiveness of the Social Security Statement in Correcting Earnings Records" (A-15-07-17089)-INFORMATION

We appreciate OIG's efforts in conducting this review. Attached is our response to the recommendation.

Please let me know if we can be of further assistance. Please direct staff inquiries to Ms. Candace Skurnik, Director, Audit Management and Liaison Staff, at (410) 965-4636.

COMMENTS ON THE OFFICE OF THE INSPECTOR GENERAL'S DRAFT REPORT, "EFFECTIVENESS OF THE SOCIAL SECURITY STATEMENT IN CORRECTING EARNINGS RECORDS" (A-15-07-17089)

Thank you for the opportunity to review and provide comments on this draft report. One of our goals for the Social Security statement is to verify and ensure the accuracy of a worker's earnings record. We encourage individuals to review their earnings history to avoid incorrect benefit payments in the future.

Recommendation 1

Develop a process to document the reasons for earnings corrections and measure how effective the statements are in correcting earnings records.

Comment

We agree. We will make changes in connection with our maintenance activity under Earnings Modernization, estimated for implementation in January 2009. These changes will allow us to measure the effectiveness of the Social Security statement by giving us the ability to determine the number of earnings corrections made as a direct result of individuals receiving their Social Security statements and contacting us about earnings discrepancies.

Appendix E
OIG Contacts and Staff Acknowledgments
OIG Contacts

Kristen Schnatterly, Acting Director, Financial Audit Division, (410) 965-0433

Steven Sachs, Acting Audit Manager, (410) 966-9738

Acknowledgments

In addition to those named above:

Richard Wilson, Senior Auditor

Brennan Kraje, Statistician

For additional copies of this report, please visit our web site at www.socialsecurity.gov/oig or contact the Office of the Inspector General's Public Affairs Staff Assistant at (410) 965-4518. Refer to Common Identification Number A-15-07-17089.

Overview of the Office of the Inspector General
The Office of the Inspector General (OIG) is comprised of an Office of Audit (OA), Office of Investigations (OI), Office of the Counsel to the Inspector General (OCIG), Office of External Relations (OER), and Office of Technology and Resource Management (OTRM). To ensure compliance with policies and procedures, internal controls, and professional standards, the OIG also has a comprehensive Professional Responsibility and Quality Assurance program.

Office of Audit
OA conducts financial and performance audits of the Social Security Administration's (SSA) programs and operations and makes recommendations to ensure program objectives are achieved effectively and efficiently. Financial audits assess whether SSA's financial statements fairly present SSA's financial position, results of operations, and cash flow. Performance audits review the economy, efficiency, and effectiveness of SSA's programs and operations. OA also conducts short-term management reviews and program evaluations on issues of concern to SSA, Congress, and the general public.

Office of Investigations
OI conducts investigations related to fraud, waste, abuse, and mismanagement in SSA programs and operations. This includes wrongdoing by applicants, beneficiaries, contractors, third parties, or SSA employees performing their official duties. This office serves as liaison to the Department of Justice on all matters relating to the investigation of SSA programs and personnel. OI also conducts joint investigations with other Federal, State, and local law enforcement agencies.

Office of the Counsel to the Inspector General
OCIG provides independent legal advice and counsel to the IG on various matters, including statutes, regulations, legislation, and policy directives. OCIG also advises the IG on investigative procedures and techniques, as well as on legal implications and conclusions to be drawn from audit and investigative material. Also, OCIG administers the Civil Monetary Penalty program.

Office of External Relations
OER manages OIG's external and public affairs programs, and serves as the principal advisor on news releases and in providing information to the various news reporting services. OER develops OIG's media and public information policies, directs OIG's external and public affairs programs, and serves as the primary contact for those seeking information about OIG. OER prepares OIG publications, speeches, and presentations to internal and external organizations, and responds to Congressional correspondence.

Office of Technology and Resource Management
OTRM supports OIG by providing information management and systems security. OTRM also coordinates OIG's budget, procurement, telecommunications, facilities, and human resources. In addition, OTRM is the focal point for OIG's strategic planning function, and the development and monitoring of performance measures. In addition, OTRM receives and assigns for action allegations of criminal and administrative violations of Social Security laws, identifies fugitives receiving benefit payments from SSA, and provides technological assistance to investigations.