Veterans' Pensions:

Verifying Income With Tax Data Can Identify Significant Payment Problems

HRD-88-24: Published: Mar 16, 1988. Publicly Released: Mar 16, 1988.

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In response to a congressional request, GAO assessed the Veterans Administration's (VA) Pension Program to determine: (1) how accurately it records beneficiary income; (2) the extent of overpayments in the program nationwide; and (3) whether program access to tax data was warranted.

GAO found that: (1) of the 1.4 million 1984 VA pension recipients, 549,000 had $947 million more income on their tax records than on the VA records; (2) because it did not include this income in its pension calculations, VA made potential overpayments of $182.5 million; (3) more than 26,000 recipients reported no earned income to VA, while tax data showed earnings of at least $1,000; (4) some recipients reported no earnings over several years while tax data showed significant earnings in those years; and (5) VA attributed about 60 percent of the overpayments to unrecorded interest and dividend income. GAO also found that: (1) VA could not identify about $157.2 million in potential overpayments because it lacked access to tax data; (2) since VA did not field-test its self-reporting questionnaires before using them, design weaknesses could have added to the inaccurate reporting; and (3) although allowing VA access to third-party-reported tax data would be the most practical way to verify income, the use of tax data for nontax purposes could intrude on personal privacy and erode public support of the nation's voluntary tax system.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Section 8051 of the Omnibus Budget Reconciliation Act of 1990 gave VA the authority to use Internal Revenue Service (IRS) and Social Security Administration (SSA) data to verify the income of certain compensation and pension beneficiaries and health care recipients. This authority expires September 30, 1992.

    Matter: Given the potential savings and the absence of data on potential adverse consequences to the tax system and taxpayer privacy, Congress should amend section 6103(1)(7) of the Internal Revenue Code to allow VA to access tax information so it can verify the income information that VA pension program beneficiaries report, investigate and resolve income differences, and prevent similar recurrences. In amending the law, Congress may wish to word it as follows: "Section 6103(1)(7) of the Internal Revenue Code is amended by: striking out the period at the end of subparagraph (A) and adding "or Title 38, United States Code" the reto; striking out the "and" at the end of subparagraph (d)(vi); striking out the period at the end of subparagraph (D)(vii) and adding ";and" at the end thereof; and adding the following new subparagraph (D)(viii): "(viii) benefits provided under the veterans pension program."

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: VA has revised its Eligibility Verification Report (EVR) instruction sheet, but has concluded that budgetary and logistical constraints preclude any changes to the EVR form itself.

    Recommendation: To attain better reporting of beneficiary income and asset information, the Administrator of Veterans Affairs should revise VA income questionnaires and the accompanying instruction sheet to eliminate current design weaknesses, including those GAO identified.

    Agency Affected: Veterans Administration

  2. Status: Closed - Not Implemented

    Comments: VA has concluded that budgetary and logistical constraints preclude changes to EVR at this time and that the current EVR has been sufficiently tested through use by the beneficiaries.

    Recommendation: To attain better reporting of beneficiary income and asset information, the Administrator of Veterans Affairs should pretest the revised documents with a sample of beneficiaries before program-wide implementation to ensure that the beneficiaries clearly understand each question and instruction.

    Agency Affected: Veterans Administration

 

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