WASHINGTON, DC - MARCH 22: The U.S. Capital seen on March 21, 2019 in Washington, DC. Special counsel Robert Mueller has delivered his report on alleged Russian meddling in the 2016 presidential election to Attorney General William Barr.TASOS KATOPODIS/Getty Images
The Trump administration delivered more than one million stimulus payments worth about US$1.4-billion to dead people in a rush to pump money into the economy this year, the Government Accountability Office said Thursday.
The U.S. Treasury Department, working with the Internal Revenue Service (IRS), raced to deliver nearly US$270-billion in economic-impact payments to Americans this spring. But a chunk of the money ended up in the wrong places as a result of internal administration decisions, including failing to consult death records to ensure deceased people were not receiving funds.
The improper payments reflect some of the wasteful government spending that occurred in the wake of the rapid economic stabilization effort that was undertaken after Congress passed a US$2.6-trillion bailout package in March.
“The agencies faced difficulties delivering payments to some individuals, and faced additional risks related to making improper payments to ineligible individuals, such as decedents, and fraud,” the report said.
The Government Accountability Office (GAO), a non-partisan agency, said officials at the IRS and the Treasury Department were actually aware of the risk that payments could end up going to the deceased even as the legislation was being drafted in March. Lawyers at the IRS determined that they could not legally deny payments to people who filed their tax returns in 2018 or 2019, even if they had since died. The improper payments were sent in the first three batches of distributions that went out through the end of April.
Treasury officials told the GAO that because they were trying to deliver the payments “as rapidly as possible,” they were using operational procedures that were last used for sending out stimulus money in 2008. That system did not use death records as a filter to prevent money from going to the deceased.
The office noted, however, that the IRS had put in place a system in 2013 to update tax accounts with death records after concerns that tax refunds were improperly going to the dead. Because this control was bypassed to get the money out faster, “the risk of potentially making improper payments to decedents” increased.
Despite the fact that IRS officials notified Treasury about its initial concerns, a Treasury official in the Office of Tax Policy told the GAO that it was not aware that the money might go to the deceased. Lawyers at the agencies later determined that people should not get an economic-impact payment if they were dead at the time the payment was made. They determined that would be an “improper payment” under the Payment Integrity Information Act of 2019 and started removing those payments from the system for the fourth batch of money that was to be distributed.
It is not clear what action the administration can take to claw back the money, some of which was sent directly to bank accounts through direct deposit. Treasury Secretary Steven Mnuchin said in April that the heirs of the deceased who received stimulus money should give the funds back. The Treasury Department had no comment as to whether it might resort to litigation if heirs do not heed that advice.
Michael Graetz, a Columbia University law professor and former deputy assistant secretary for tax policy at the department, said government money improperly going to the dead is a continuing problem when it comes to tax refunds and Social Security payments. He said that while cashing a cheque that was sent to a dead person is illegal, the cost of trying to get back the money is most likely not worth it to recoup the US$1,200 payments.
Still, he noted that such mistakes were the unfortunate consequence of pushing money out so quickly. “It’s not chump change,” Prof. Graetz said. “A billion here, a billion there, and pretty soon it adds up.”
The accountability office called on the IRS to find ways to notify ineligible recipients of how to return payments, though it did not explain how that would work with regard to those who are deceased. It also suggested Congress ensure that Treasury and its Bureau of the Fiscal Service, which distributed the payments, gain full access to the Social Security Administration’s complete set of death records.
The IRS agreed with the recommendations, according to the report, and an IRS official said the agency was considering options for notifying ineligible recipients about how they can return the funds.
In recent months, people have been perplexed to receive money from the government marked for their dead relatives.
Sherry Phillips, 65, of Rochester, N.Y., noticed a deposit of US$1,200 in an account she held jointly with her mother, who died in 2018. She had left the account open to handle her mother’s remaining expenses and to file her 2019 returns.
Ms. Phillips received a signed letter from President Donald Trump in April notifying her of the payment with the letters “Decd” next to her mother’s name to indicate that she was dead.
“My mother is dead and does not need the money,” said Ms. Phillips, who is not sure what she is supposed to do with the payment. “I do not need the red tape this will undoubtedly create.”
The report comes as Congress and the Trump administration are discussing whether to fund another round of stimulus payments. Democrats seized on the report Thursday to argue that Mr. Trump has been mismanaging the money and to call for more oversight.
“The Government Accountability Office this morning announced that US$1.4-billion of relief cheques were sent to people who were dead. Where’s the Republican oversight?” said Chuck Schumer of New York, the Senate minority leader. “This is a US$3-trillion package. And every small bit of oversight that the Republicans have done has had to be pushed by Democrats.”
He added, “We should be having far more robust oversight over what has happened, as well as moving forward on a new bill.”
In its report, the GAO also warned that the US$660-billion Paycheck Protection Program was vulnerable to fraud because the Small Business Administration is relying on borrower certifications to determine whether the loans are needed and how they are being used. The accountability office called on the business administration to develop a system for identifying fraud associated with the program.
The GAO also expressed concern about potential overlap of people who were being paid unemployment insurance while also receiving proceeds from Paycheck Protection Program loans. Those loans go to businesses that are supposed to use most of the money to keep workers on the payroll. The report suggested that the Labour Department help state unemployment agencies determine whether there were improper payments made related to the loans.
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