Inspector General: SSA sitting on $134 million in uncashed checks

Tuesday - 7/24/2012, 7:58pm EDT

The federal government has made it a top priority to reduce the rate of improper payments that needlessly drain agency coffers.

But a new report indicates at least one agency has the opposite problem: Holding on to payments that should be disbursed to eligible recipients.

The inspector general for the Social Security Administration estimated the SSA is sitting on about $133.7 million in funds from benefit checks that recipients haven't cashed in at least a year and are subsequently returned to the agency.

The inspector general's report estimated as many as 140,977 recipients did not cash their checks but are still eligible for the payments. The report also said that the SSA should take additional steps to ensure the recipients receive the cash benefits.

In response to the report, the agency said tracking down those recipients or devising new methods to ensure they don't slip through the cracks wouldn't be cost-effective.

Corrective action lacking

If a recipient does not cash a Social Security check within a year, the Treasury Department returns those funds to the SSA. The agency then sends letters to the beneficiary inquiring about the uncashed checks. If the beneficiary responds and is still eligible for payment, the SSA will re-issue the check.

The report noted a number of reasons why recipients don't redeem those checks.

SSA does not always take corrective action when beneficiaries respond to the initial letter, the report found. In some of the cases the inspector general's office examined, the SSA did not reissue a check even though the recipient responded to the agency's letter.

And in other cases, the SSA never sent the required letter to inform the beneficiary that the check wasn't cashed, according to the report.

IG recommends new way to reissue payments

The report recommended the SSA take three steps:

  • Develop a cost-efficient way to reissue payments to the eligible beneficiaries who haven't cashed their checks.

  • Direct employees to contact beneficiaries who respond to the follow-up letter but who did not provide all the information needed to issue replacement checks.

  • Rethink how SSA contacts beneficiaries who don't cash their checks.

Overall, the report emphasized that personal contact with recipients is needed to address the problem.

"We found that personal contact with beneficiaries provided valuable information to resolve why beneficiaries had not cashed their checks," the report said.

Over the course of eight years, the SSA mailed 87 automated letters to one beneficiary alerting her that she had not cashed a check, all without answer. Still, the SSA took no other steps to contact the woman. Not until the agency directly contacted a relative, at the inspector general office's urging, did the agency learn the woman had died years before.

In another case, a disabled recipient who had been bedridden for five years was unaware of the more than $24,000 in benefit checks nor the agency's automated letters that were piling up at his home until an SSA employee directly contacted the recipient, the report said.

SSA calls proposed changes prohibitive

In response to the report, agency officials said making changes the inspector general recommended would not be cost-efficient, in large part because the SSA will stop mailing paper checks beginning next year.

A December 2010 rule issued by the Treasury Department requires SSA to switch to electronic-payment methods that will "dramatically reduce" the instances of uncashed checks, SSA Deputy Chief of Staff Dean Landis wrote in comments appended to the IG report.

Reissuing payments to the more than 140,00 beneficiaries with uncashed checks now would be "prohibitive" and would "divert scarce resources from other priority workloads," he added.

Landis also said making changes to the way SSA contacts beneficiaries — emphasizing personal contact as opposed to automated letters — "would result in an increased operational workload and require the commitment of resources that are not available."

The agency did agree to remind employees to contact beneficiaries who provide incomplete information in their responses to SSA's follow-up letter.

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