The U.S. Government Accountability Office, an independent investigative agency that reports to Congress, issued the finding as part of a comprehensive report on the nearly $3 trillion in coronavirus relief spending approved by Congress in March and April. It said it had received the information from the Treasury Inspector General for Tax Administration in an accounting as of April 30.
The revelation comes as President Trump and some members of his administration advocate for another round of stimulus checks. The news that so much money has gone to the dead could add to reluctance from some Republicans to agree to more direct relief payments.
The GAO said that the payments to dead people came as Treasury and the IRS rushed to disburse some 160.4 million of these payments totaling $269 billion after the Cares Act was passed in March. The problem relates partly to the fact that, while the IRS has access to the Social Security Administration’s full set of death records, the Treasury Department and its Bureau of the Fiscal Service — which actually issue the payments — do not, the GAO said.
The report said that Congress should “provide Treasury with access to the Social Security Administration’s full set of death records, and require that Treasury consistently use it, to help reduce similar types of improper payments.”
The GAO also recommended that the IRS “should consider cost-effective options for notifying ineligible recipients how to return payments.” The IRS agreed with this recommendation in a response to the GAO.
The IRS has previously said that stimulus payments issued in the name of dead people have to be returned. But aside from announcing on its website on May 6 that stimulus payments made to dead or incarcerated individuals should be returned, the IRS does not have plans to take additional steps toward recouping the payments, the GAO said.
The report makes clear how, in the mad dash to pass legislation to prop up an economy in free-fall in the midst of an unprecedented pandemic, mistakes were made.
The Cares Act directed the stimulus payments to people who filed a 2018 or 2019 tax return. The payments went to people making up to $99,000 annually. According to the GAO, IRS officials raised questions with Treasury as the Cares Act was being drafted about the possibility that payments could go to people who filed tax returns but subsequently died. However, IRS counsel determined they did not have the legal authority to deny payments to people who had filed a return, even if they were deceased at the time of payment.
Also, Treasury officials noted that the Cares Act mandated delivery of the economic impact payments “as rapidly as possible.” To fulfill this mandate, they used procedures that had been put in place for stimulus payments issued in 2008, and as a result did not use death records as a filter. The GAO noted that in 2013 it had identified weaknesses in IRS procedures that allowed payments to go to dead people, and had recommended corrective action. IRS subsequently implemented a process to use death records to update taxpayers’ accounts to identify and prevent improper payments.
But this control was bypassed for the stimulus checks issued under the Cares Act, which “substantially increased the risk of potentially making improper payments to decedents,” the GAO said. It also said that according to a Treasury official from the Office of Tax Policy, Treasury had been unaware that payments might go to dead people. Upon learning this was happening in the initial three batches of payments — which accounted for 72 percent of the payments made as of May 31 — Treasury and its Bureau of the Fiscal Service took steps to prevent the practice, obtaining temporary access to Social Security death data from the IRS.
The direct payments have gone out in several ways, including direct deposit, prepaid debit cards and paper checks. In the case of some of the paper checks, according to several people who received them and shared images with The Washington Post, the dead recipients were clearly marked as such. The notation DECD, for “deceased,” was included after the person’s name on the check. The GAO did not address this particular issue, nor complaints from some that their attempts to return the checks were unsuccessful.
The GAO report includes a response from Thomas A. Brandt, IRS chief risk officer, who wrote in part: “We appreciate and agree with your recommendation that we consider cost effective options for notifying ineligible recipients on how to return payments. We are currently considering options in that regard.”
The nearly 400-page report is the first from the GAO under a requirement in the Cares Act for the agency to issue bimonthly reports on its efforts to monitor and oversee the coronavirus response. The report contains multiple findings and recommendations on a wide array of issues apart from the direct stimulus payments.
The GAO begins its report by stating that total federal spending data are not available because the Office of Management and Budget directed federal agencies that they didn’t have to report coronavirus expenditures and obligations until July — something that was not previously known.
“It is unfortunate that the public will have waited more than 4 months since the enactment of the CARES Act for access to comprehensive obligation and expenditure information about the programs funded through these relief laws,” the GAO wrote. It said that in the absence of comprehensive data, it collected information from agencies to the extent possible on expenditures through May 31.
“Consistent with the urgency of responding to serious and widespread health issues and economic disruptions, agencies have given priority to moving swiftly where possible to distribute funds and implement new programs,” the GAO said. “As tradeoffs were made, however, agencies have made only limited progress so far in achieving transparency and accountability goals.”
The GAO cited the Small Business Administration and its Paycheck Protection Program as an initiative that could be vulnerable to fraud because of lax controls, and also criticized the SBA for failing to provide information the GAO needed to conduct its review.
The PPP has pumped out more than $500 billion in forgivable loans to small businesses aimed at allowing them to keep workers on payroll. In the interest of speed, the program allows borrowers to self-certify their eligibility for the program, “raising the potential for fraud,” the GAO said.
“GAO recommends that SBA develop and implement plans to identify and respond to risks in PPP to ensure program integrity, achieve program effectiveness, and address potential fraud. SBA neither agreed nor disagreed, but GAO believes implementation of its recommendation is essential,” the report said.
The GAO also said that the SBA “has failed to provide information critical to our review, including a detailed description of data on loans made.”
In its response to the GAO, the SBA disputed this criticism, writing that, “Contrary to GAO’s claims, SBA produced 420 pages of documents to GAO in May,” including information on loan numbers and volume and the number and type of lenders participating in PPP.
Treasury Secretary Steven Mnuchin surprised many lawmakers when he declared at a recent hearing that the Treasury Department and SBA would not be revealing information on who got PPP loans. He backtracked under pressure, and the SBA is now promising to release this data publicly in the near term.
The GAO also raises a concern about the possibility that people are simultaneously getting wages from the PPP loans and enhanced unemployment benefits provided under the Cares Act. As of May, states had received more than 42 million unemployment claims, but the Labor Department has no mechanism to capture information on unemployment insurance claimants who may also be receiving wages under PPP, the report states. It recommends that the Labor Department, in consultation with Treasury and the SBA, immediately provide assistance to state unemployment agencies to help them address this issue.
On another matter, the GAO said that the Centers for Disease Control and Prevention had reported “incomplete and inconsistent data” from state and local health departments about the amount of testing occurring nationwide, making it difficult to paint a complete picture of the spread of infections. However, the GAO said that as of June 4 the Department of Health and Human Services had issued guidance to laboratories on how to collect and report data to CDC.
In recent days infections have been spiking in a number of states that moved fast to reopen their economies.
The GAO’s role is one of multiple coronavirus oversight mechanisms mandated by Congress, which in some cases are just beginning to get underway.
For example, a Congressional Oversight Commission created by the Cares Act in March still lacks a chair, which is supposed to be a joint appointment from House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Mitch McConnell (R-Ky.). The pair have struggled to agree on someone to fill the role, although they are eyeing former Joint Chiefs of Staff Joseph Dunford for the position and hope to make an announcement soon.
The GAO findings led Democrats to accuse Republicans and the Trump administration of a failure on oversight.
“We should be having far more robust oversight over what has happened,” said Senate Minority Leader Charles E. Schumer (D-N.Y.).
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