Causes of the Problem and Attempts SSA Had Previous made IRS responsible for reconciling employers' reports and (2) SSA did not have enforcement authority, SSA was, until December 1985, unwilling to reconcile differences in these reports. Self-employed individuals report their earnings and pay their taxes, including Social Security taxes, to IRS; it shares the reported self-employment earnings data with SSA so that these individuals receive the proper credit for their earnings in their Social Security accounts. SSA must rely on IRS to provide these data because there is now no other way for SSA to obtain the data so that it can credit these individuals' earnings. In 1985, we reported that "The agencies' present methods for processing self-employment records do not ensure that all self-employed persons who have reportable earnings receive credit for them. We estimate that for returns processed in 1980, IRS did not provide SSA with information on about 2,600 tax returns with earnings totaling $20.5 million and SSA never processed an estimated 65,900 tax returns with earnings totaling about $237.5 million."2 In August 1983 we first told SSA officials about this crediting problem. SSA and IRS met on December 12, 1985, and again on March 21, 1986, to review the status of the corrective action we sought. At the March meeting, IRS agreed to provide the self-employment data in December 1986. However, an IRS official said subsequent staffing reductions required IRS to postpone delivery of the data until June 1987. On March 25, 1987, IRS told us it had to revise the delivery date again: "When the original meetings were held approximately two years ago, personnel were available to provide the support for a project of this magnitude. At the present time, the resources available to do this type of work are committed through late 1987. In addition, due to tax law changes to be implemented in 1988, we are expecting substantial changes to the reports we presently produce, as well as the need for new ones. Therefore, the earliest we could commit to this work would be sometime 2IRS and SSA Can Improve the Verification and Recording of Data Provided by Self-Employed Taxpayers (GAO/GGD-85-21, May 28, 1985). Causes of the Problem and Attempts after we have completed the updates to our 1988 reports, probably sometime in late 1988." As a result, SSA will not be able to (1) act on IRS-furnished data for these No SSA Action Despite In addition to its insistence that IRS reconcile all employers' reports, SSA IRS's Nonreconciliation did not take action to resolve the reports on the computer tapes IRS furnished, primarily because of internal conflicts concerning resources and organizational responsibility. Changes in leadership and the absence of a financial management focal point contributed to the problem. SSA had been told to resolve unreconciled employers' reports as early as 1982. Specifically, in a July 1982 report,3 the HHS Office of Inspector General addressed itself to the IRS-SSA reconciliation workload for 1978. The inspector general recommended that SSA expedite its review of the 1978 unreconciled employers' reports. SSA responded that "... priority attention will be directed toward appropriate resolution of these cases." However, as of October 1986, SSA had attempted to reconcile only 83,703 of the 580,000 unreconciled 1978 reports. SSA recognized the overall magnitude of the reconciliation workload and the resource requirements implicit in correcting hundreds of thousands of earnings reports. A July 1984 memorandum from the deputy commissioner, Programs and Policy, to other SSA deputy commissioners stated: "I am very much concerned that IRS records show SSA has failed to properly credit 3 Annual Wage Reporting Process, Office of Inspector General, Department of Health and Human Services, Audit Control no. 13-22642 (July 30, 1982). 4 As noted on pages 10-11, the suspense files had grown to $100.5 billion ($94 billion in wages and $6.5 billion in self-employment earnings) as of October 1986. Causes of the Problem and Attempts at Resolution records showing whose earnings they are may be impossible or very difficult to find. And the longer we wait to reconcile these reports, the more adverse reaction we can expect from the public and employers. "I am concerned about the resource requirements implicit in an effort by SSA to correct hundreds of thousands of wage reports. Yet, I can think of few other areas where a failure by SSA to take action could jeopardize the public's confidence in our administration of the Social Security program. The public must be assured that the work credits they have paid for are being accurately recorded on their earnings records." One reason for SSA's inaction was that different organizational components had different perspectives that worked against a united, coordinated approach to solving the problem. Two key SSA components had a direct interest in, but different responsibilities for, the reconciliation workload: Systems (responsible for processing the computerized information) and Operations (responsible for contacting employers to resolve the details behind the missing and discrepant reports and processing the employers' reports). Although these organizational components debated the mechanics of addressing the reconciliation workload, the obstacle to resolution was the additional resources that would be needed. The components could reach agreement on the work required, but did not have the resources to carry out the required work. Systems expected Operations to somehow fit this additional unprogrammed work into its existing workload without additional resources-and Operations refused. The acting associate commissioner for central operations expressed the problem in an April 1985 memorandum to the associate commissioner for systems requirements: "I was quite surprised to receive your subject memorandum which implies with certainty that the IRS/SSA reconciliation will definitely proceed after you have completed your plans and procedures. As we have discussed on numerous occasions, this is an unbudgeted workload estimated as requiring from 158 to 750 workyears depending upon the degree of systems enhancements. Since we have no [full-time equivalents] to complete this workload and since we recently took a substantial cut in our budgeted overtime for this year, I would suggest that you devote your resources toward initiatives we may be able to complete this year." Further, this dilemma could not be easily resolved by SSA's top management because, at the time of conflict, a deputy commissioner represented each of the components, so all viewpoints had strong support. Another balancing force against SSA's resolution was the interagency agreement itself, which generated internal SSA pressure to insist that IRS do what it had agreed to do. The 6-year reduction by 17,000 staff that Causes of the Problem and Attempts SSA announced in December 1985 created additional pressures for SSA to refrain from committing resources to address the problem. Despite a realization by SSA and IRS Staff at the operational levels that the unreconciled workload continued to grow, top management took no action to resolve the disagreement with IRS or initiate action on its own. Why did SSA's inaction continue for so long, especially in light of its awareness of the effect unreconciled cases could have on individuals and beneficiaries? 5 As indicated in our March 1987 report on SSA management, we believe several fundamental management shortcomings underlie SSA'S nonresponsiveness. First, frequent changes in leadership tended to cause changes in priorities and complicate efforts to correct longstanding problems. (Since 1978, SSA has had seven different commissioners or acting commissioners.) Second, SSA's organizational structure diffuses accountability, creating an environment that is not conducive to systematically addressing program-related problems; SSA's structure also lacked a high-level focal point for financial management, which hindered progress in resolving the reconciliation problem. SSA's establishment of a chief financial officer position in 1987 should contribute to remedying problems such as the unreconciled workloads. Such an officer is needed to work with program directors and high-level IRS Officials so that problems can be addressed within the context of responsible financial management and the best interests of beneficiaries and individuals. Finally, SSA did not have an effective decision-making process to ensure that important problems, such as the unreconciled workload, would surface and be addressed at the commissioner level. SSA Is Now SSA's November 1985 study of 8,000 employers who seemed to have not reported or underreported 1983 earnings showed the value of contacting employers to resolve differences. The results of the employer contacts are summarized in table 4.2. 5Social Security Administration: Stable Leadership and Better Management Needed to Improve Effectiveness (GAO/HRD-87-39, Mar. 18, 1987). "The early returns show that mail contacts with employers in the pilot study generate significant postings of wages that would not otherwise have been posted and produce information enabling SSA to reconcile a significant portion of the IRS/SSA discrepancies. “... it appears that mailings to both categories of employers [namely] those whose wage reports were missing and those who underreported wages, will probably prove to be cost effective." In December 1985, the acting commissioner of Social Security decided |