Monday, November 4, 2013

Why the Dead Get Government Checks

Agencies can't reliably tell who's alive so the checks keep coming.

This is not a new issue but apparently one that journalists resurrect from time to time. Auditors at GAO and other Federal Agencies have known of this issue for decades.  I recall attending a training session for IDEA software, an audit data analytic tool, in the 1990's. Auditors from GAO were in attendance and they referenced testing that they were doing where they matched their retiree database to the Death Index, a Social Security database of deceased persons to identify deceased retirees who were still receiving pensions.  State and local governments could request the Death Index from Social Security for a fee to run the same test on retiree data. Private companies could also subscribe to the index.

This type of testing is becoming a standard in many organizations as it allows the auditors to test large databases using automated techniques to identify anomalies in the data. The tests can be set up to automatically run against current data as a first step in detecting fraud and errors in systems.  The caveat in running these tests is the accuracy of the databases. If the Death Index includes names and social security numbers of those who are not dead then auditors must tread carefully in order to not reach erroneous conclusions.

The Washington Post article includes cases where relatives of deceased individuals collected social security and other benefits long after the beneficary had passed away. The sentences imposed on these individuals seemed rather light reinforcing the axiom that fraud does pay. I wonder if the federal government issued 1099-Misc for individuals that received these ill-gotten funds. Seems like another instance of fraud where the IRS could use the tax code to impose criminal and civil penalties.

The system for reporting deceased persons must be fixed. There should be reporting standards for federal, state and local governments. These systems must incorporate data from funeral homes, hospitals and other reporting entities.

Perhaps it was much easier in days past when we had more personal interaction. In the current environment much of our financial transactions take place without any personal or face to face contact. Electronic payments, online benefit applications and more have meant that we must rely on technology tools for internal controls. It is time that the federal government invests in technology to identify when things go awry.

Until these systems are fixed we will continue to see individuals that see the holes and take advantage of them at the expense of the taxpayer.

JK November 2013

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