Audit Report - A-09-96-51001

Review of Child Adoption Practices under Title II of the Social Security Act - A-09-96-51001 - 8/29/97

OBJECTIVE

This management advisory report responds to a request by the former Deputy Commissioner for Human Resources to determine the extent of Old-Age, Survivors, and Disability Insurance (OASDI) program abuse by beneficiaries receiving retirement benefits who adopt children to obtain additional benefits.

BACKGROUND

During May 1996, the former Deputy Commissioner for Human Resources visited the Atlanta Region and spoke to employees about potential areas of program abuse. A specific concern raised by field office (FO) staff involved alleged cases in which: 1) grandparents receiving retirement benefits adopted their minor grandchildren as dependents to obtain additional benefits; 2) the natural parents became the adopted children’s representative payee; and 3) the adopted grandchildren purportedly lived with, and were supported by, their natural parents.

Dependency requirements under the Social Security Act (the Act) allow this practice to occur. Section 10301 of the Omnibus Budget Reconciliation Act of 1989 amended section 202(d) of the Act by stating that a minor child (less than 18 years old) adopted after a worker becomes entitled to retirement or disability benefits would be eligible for child’s benefits regardless of whether he or she was living with, and dependent on, the worker prior to the worker’s entitlement. The legislative history showed that the congressional intent in enacting the amendments was to eliminate a disparity between the eligibility requirements for natural and adopted children.

Prior to the 1989 amendments, section 202(d) of the Act stated that a child adopted before a worker becomes entitled to retirement or disability benefits is eligible for child’s insurance benefits. A child (other than the worker’s natural or stepchild) adopted after a worker’s entitlement is ineligible for Social Security benefits unless he or she was living with, and dependent upon, the worker for one-half or more of his or her support for the year prior to the worker’s entitlement. In contrast, the natural child or stepchild of a disabled or retired worker is eligible for benefits regardless of when the relationship was established. Congressional intent behind enacting these dependency requirements was to prevent a beneficiary from adopting a child solely to supplement benefits.

We reviewed provisions of the Act and relevant procedures from the Program Operations Manual System to determine dependency requirements for adopted children. We spoke with OASDI program staff from the Social Security Administration (SSA) and obtained two legal opinions from the Office of Counsel to the Inspector General (OCIG). In addition, we obtained and analyzed a data extract from SSA’s Master Beneficiary Record (MBR) containing all identified adopted children (totaling 11,552) who had been awarded OASDI benefits as of October 1996.

RESULTS OF REVIEW

Existing SSA data does not contain sufficient information to determine the number of children adopted by OASDI beneficiaries for the purpose of increasing benefits. However, out of the 11,552 adopted children awarded OASDI benefits, we found 117 situations where: 1) the child was adopted the same year the beneficiary retired or after the beneficiary became eligible for retirement benefits; and 2) the child was reported as not living with the retired beneficiary. These combined factors could raise questions as to intent of the adopting beneficiary.

Furthermore, based on legal opinions from OCIG, SSA has no legal recourse even if the alleged program abuses had occurred. The law allows individuals entitled to OASDI benefits to increase the amount of benefits by adopting children who may neither live with nor be dependent on the individuals for support. Based on the 117 cases we labeled questionable, there is no evidence that this legal provision has resulted in a significant number of suspicious adoptions by OASDI beneficiaries.

CONCLUSIONS

Based on our preliminary review, we cannot conclusively say that OASDI grandparents are adopting children for the purpose of obtaining additional benefits. However, if SSA decides to further explore this specific area of concern, we suggest SSA develop criteria to help identify adoption cases that may potentially lead to OASDI program abuse. Once criteria are established, FO staff could annotate beneficiary records and the MBR of these suspicious cases. After sufficient additional data is gathered, SSA can then determine if there is a significant number of cases to warrant further study.

David C. Williams

APPENDICES

LIST OF CONTRIBUTORS

Office of the Inspector General

Bill Fernandez, Director, Program Audits (West)
Jimmie Harris, Auditor
Leigh Andrews, Auditor