US Sent $1.4 Billion to Dead People for Coronavirus Stimulus

US Sent $1.4 Billion to Dead People for Coronavirus Stimulus

iStockphoto/The Fiscal Times

The Trump administration sent almost 1.1 million coronavirus relief payments totaling nearly $1.4 billion to Americans who had died, the Government Accountability Office says in a report published Thursday.

In their rush to send out more than 160 million emergency “economic impact payments” worth $269 billion — and to meet the CARES Act requirement that the payments be sent out as “rapidly as possible” — the Treasury Department and Internal Revenue Service used many of the procedures developed to send stimulus checks in 2008. As a result, while the IRS typically uses data such as the Social Security Administration’s death records to prevent improper payments, the agency did not filter out people who had died from the first three batches of coronavirus relief, accounting for 72% of payments disbursed as of the end of May.

The IRS was aware that some payments may go to people who had died, according to the report, and officials raised questions about that possibility with Treasury while the CARES Act was being drafted. But IRS lawyers initially determined that it did not have the legal authority to deny payments to people who had filed their tax returns, even if they had since died, according to the report. Treasury officials told the GAO that, once they learned that payments had been made to dead people, the department and IRS determined that the deceased aren’t entitled to coronavirus relief money.

The government filtered out payments to the dead starting with the fourth batch, and the IRS announced in early May that payments to dead or incarcerated people should be returned. The GAO says that the IRS does not have a plan in place to notify ineligible recipients of how to return the payments and recommended that the agency “should consider cost effective options” for such notifications. The IRS agreed with the recommendation. GAO also recommended that Congress allow the Social Security Administration to share its death records with Treasury and its Bureau of the Fiscal Service, which distributed the payments.

Why it matters: “The number of economic impact payments going to decedents highlights the importance of consistently using key safeguards in providing government assistance to individuals,” the GAO report says.

But the political significance of the report goes beyond efforts to root out improper payments. It comes as the administration and Congress consider another round of coronavirus payments and could affect that decision: “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 Washington Post’s Erica Werner writes.

The prospect of such a backlash has some advocates for additional coronavirus stimulus concerned. “[T]here's going to be more scrutiny on the $1 billion that ended up going to recently deceased people than on the $500 billion that went to corporations, isn't there?” tweeted Michael Linden, a fellow at the left-leaning Roosevelt Institute.

Ernie Tedeschi, a former Treasury economist in the Obama administration, suggested that the broader context of the coronavirus relief effort really matters here. The improper checks amount to less than 1% of the total coronavirus relief payments. “This strikes me as a fairly *low* error rate, given that stimulus checks totaled almost $300 billion, and for the sake of speed were sent out automatically based on prior-year tax returns,” he tweeted.

Some low-income families got too little: “The report also includes new data showing that many low-income families were shortchanged on payments,” The Wall Street Journal’s Richard Rubin reports. “Some 450,000 households that used a special IRS online tool for people who typically don’t file tax returns didn’t get the $500 payments for children that they should have. According to GAO, IRS is working to get the money to those households by the end of July.”

PPP problems: The finding of $1.4 billion in improper payments is just one part of a sweeping 400-page report on the federal response to the pandemic. The GAO also warns that the $660 billion Paycheck Protection Program is vulnerable to fraud because the Small Business Administration (SBA), in an effort to streamline the loan process and get money out quickly, allowed borrowers to self-certify that they were eligible. GAO also raises the possibility that people may be getting wages paid from PPP loans and enhanced unemployment benefits provided under the CARES Act at the same time.

GAO warns that “the limited safeguards and lack of timely and complete guidance and oversight planning have increased the likelihood that borrowers may misuse or improperly receive loan proceeds.” The report calls on the SBA to develop plans to and address potential fraud in the small business rescue program. It also calls out the SBA for failing to provide critical information, including details of loan data, though the SBA pushed back on that criticism, saying it provided 420 pages of documents and made officials available for interviews with the GAO.

Waiting for spending data: GAO also says that total federal spending data on the $2.6 trillion appropriated for coronavirus relief efforts are not yet available because the White House Office of Management and Budget told federal agencies they did not have to report coronavirus-related obligations and expenditures until July. “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 report says.

The bottom line: The government sought to respond to the coronavirus pandemic with unprecedented speed and fiscal power. Transparency and accountability about those efforts still need more work, GAO says. “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 report says. “As tradeoffs were made, however, agencies have made only limited progress so far in achieving transparency and accountability goals.”