Here at MGC, we’ve been watching the U.S. government confront the massive issue of fraudulent payments. The IRS has been hemorrhaging money by issuing refunds to people without checking to see if the tax returns are truthful. The scope of this problem is staggering. See our post, “The Bottom Line on Tax Fraud? $5 Billion per Year,” from August 5th, 2012. Of that $5 billion, $415 million in potentially fraudulent returns were issued to dead people.
As the Washington Post showed in its November 3rd, 2012, infographic, the IRS receives a full list of the nation’s dead from the Social Security Administration’s Death Master File. The IRS simply wasn’t bothering to check tax returns against the DMF before they issued refunds. The U.S. Congress has been watching this situation and has called administrators in for questioning. Over the past two years, the IRS has made some progress in halting fraudulent payments, but perhaps not enough.
With this history in mind, it is not surprising to find that the issue is included in the new U.S. budget compromise. MGC vice president Sharon Sergeant alerted me to an online video from the Business Week people at Bloomberg news. In it, the reporters struggle to understand one of our old friends, the Death Master File, whose public face we call the Social Security Death Index. Sharon wrote:
Watch how Bloomberg video kind of ends with a question mark over the purpose and budget utility of the DMF closing.
My thanks to Jan Meisels Allen of the Records Preservation and Access Committee (RPAC) for sending an alert with a link to the budget text.
Section 203 starts on page 32
That section runs for ten pages and includes much of the text of the bills we’ve been following for two years. My first reading of the budget bill gives me these impressions:
All information on a person’s death (their name, residence location, and Social Security number) is withheld from everyone for three years.
The Secretary of Commerce must institute a completely new program that will “certify persons who are eligible to access” the Death Master File during the first three years.
The Secretary must also create a completely new program to audit those people for compliance.
Only people with the following concerns are allowed to be certified:
- Fraud prevention
- Implementing a government law, regulation, or fiduciary duty.
Only people who can guarantee safeguards to the information are allowed to be certified.
People who misuse the Death Master File information during the first three years can be fined $1,000 per instance, up to a total of $250,000 per calendar year.
The Secretary must also create a fee schedule to cover all the costs of putting the certification and monitoring programs together.
The Secretary of Commerce must also report annually the total fees collected to the Committee on Finance in the Senate and the Committee of Ways on Means in the House.
The Death Master File is exempted from the Freedom of Information Act. (This is the tool through which genealogists gained access to the SSDI.)
Any possible loopholes providing payments to people who are incarcerated are closed.
A few clauses present in earlier bills are missing from this version. One is the Sunset clause that would have ended a public version of the Death Master File completely in 2015. The other is the clause that permits genealogists working under contract to the Department of Defense to continue using this file in their efforts to repatriate the remains of soldiers lost in war. Those genealogists track down living descendants for DNA matching that will ensure proper identity for repatriation and burial of our heroes.
It would take an experienced economist to get underneath the government finance information to figure out how this will work in balancing the budget. I’m not that person, but I believe the following points are in order.
The fees to be imposed by the Secretary of Commerce are limited to those required to set up all the new programs for certification and audit. The costs of reporting the results to Congress are not covered in this text as far as I can see. There is nothing on the “plus” side for the budget there.
Fines for misuse of Death Master File information could range from $1,000 to $250,000 per year. Could this be helpful? The fines would have to be imposed by the Secretary of Commerce. Through what mechanism? How long does it take to discover and then prove that a person owes a fine? How is it investigated? What is the mechanism through which the person can protest against the fine? How long does that take? If the original fees are high enough to cover the creation of the expansion of government as required, will individuals pay them or will institutions pay them?
And, finally, by what mechanism has the government been losing money all along? Was it through public access to death information? Or was it through limiting or not using access to death information?
Sorry, the answer is that fraud happens when access is limited. More to follow.
Last modified on Thursday, 12 December 2013