In addition to your comments on these specific areas, any other comments are welcome. I am happy to be here this morning, Mr. Chairman, and I thank you for the opportunity to be able to speak.

Senator NELSON. Thank you.

Go ahead, Mr. Ross.

Mr. Ross. Thank you, Mr. Chairman and members of the subcommittee. I am grateful for this opportunity to appear before you today to discuss the management and integrity of our social security programs. I brought with me today so that I would have them available to help answer your questions, Mr. Schutzman who is the Acting Associate Commissioner for Assessment; his Acting Deputy, Mr. McClernan; and Mr. Wheeler, who is in charge of our Office of Payment Eligibility Quality which is putting up this system to measure error which I will be describing in the course of my testimony.

What I would like to do, Mr. Chairman, is to have, with your permission, my entire statement entered into the record, then just summarize what I think are the major points, and then answer the questions that you and Senator Wallop or any other member of the subcommittee may have.

Senator NELSON. Your statement will be printed in full in the record. Mr. Ross. Thank you, sir.

STATEMENT OF STANFORD G. ROSS, COMMISSIONER, SOCIAL SECURITY ADMINISTRATION, ACCOMPANIED BY MR. SCHUTZMAN, ACTING ASSOCIATE COMMISSIONER FOR ASSESSMENT; MR. McCLERNAN, ACTING DEPUTY ASSOCIATE COMMISSIONER FOR ASSESSMENT; MR. WHEELER, ACTING DIRECTOR, OFFICE OF PAYMENT ELIGIBILITY QUALITY, SOCIAL SECURITY ADMINISTRATION

Mr. Ross. As I see it, Mr. Chairman, one of the most important challenges that I face as Commissioner is the challenge to detect, understand, explain, and eradicate errors in our society's foremost social program. I became Commissioner last October of an agency whose management has been, and continues to be, the target of many critical reviews, as you noted in your opening remarks.

Those reviews were seriously undermining the confidence of the American public in the social security program. Accordingly, I have spent much of my time during the first 6 months of my stewardship assessing the management of this vast agency, and I believe it is important that all Americans know what I have found.

SSA basically gets its job done well. The fundamental integrity of our programs is not to be doubted. The social security system itself is sound and reliable. The burden of what I would like to do today is to supply the reasons for that conclusion.

I think the true measure of the impressive achievements of SSA requires an appreciation of the enormous and complex task assigned us. We routinely pay benefits every month to some 39 million aged and disabled persons, and their survivors and dependents, most of whom need these amounts to pay for basic living expenses. We administer the trust-fund-financed retirement, survivors', and disability insurance programs with expenditures totaling over $100 billion in

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1979. We administer the general-revenue-financed supplemental security income program with Federal expenditures totaling $5.6 billion

in 1979.

We share administration with the States of the aid to families with dependent children program which is financed through a combination of general revenues and State funds, with annual Federal expenditures totaling $6.7 billion in 1979.

Senator NELSON. When you say in conjunction with the States you handle the AFDC payments, how long have you had that responsibility? Mr. Ross. This was a product of Secretary Califano's reorganization at the beginning of 1977 to consolidate in one place in HEW all of the cash payment programs so that we could better learn what techniques worked and were effective in our total management of income maintenance at the Federal level.

Senator NELSON. How are the administrative costs of the AFDC program paid for?

Mr. Ross. The administrative costs of AFDC are handled separately in a separate budget that is financed from general revenues. The accounting is kept separate from the basic social security program where the administrative costs are part of the trust fund money. Senator NELSON. The total cost of handling the AFDC program in cooperation with the States, none of it is paid for with social security trust funds?

Mr. Ross. That is correct, sir.

Senator NELSON. So one of the problems-I suspect that this is part of the problem-is increasingly Members of Congress are getting mail saying the problem with the social security program is that there are so many welfare programs in it. Until I realized you were administering the AFDC program, I was not certain to what these letters were referring.

Mr. Ross. I understand what you are saying.

Senator NELSON. It seemed to me it would have been wise, perhaps, to have created some kind of a department with an independent responsibility for the different needs. People see Social Security administering SSI funds and AFDC funds, then they assume that must be part of the social security program, do you not think?

Mr. Ross. There is that confusion. On the other hand, I have tried, as I go around the country speaking-and I know that Secretary Califano has to make it clear that the Social Security Administration, as an institution of Government, has this broad income-maintenance responsibility that involves administering not just the basic social security programs, but also AFDC, refugee assistance, and U.S. repatriate programs. [American citizens who must be repatriated.] We also, of course, have the supplemental security income program; we have a portion of the black lung program. Overall, the budget that we administer is about $130 billion for 1980, which represents almost a quarter of the Federal budget.

One of the ways I think we do get efficiency in income maintenance in the long run is to have one agency that specializes in these payment programs and works out methodologies and ways of keeping the costs down.

Now, overall, our administrative budget for all programs is about $2.3 billion, which is roughly 2 percent of program costs. We believe that that ratio of expense to funds being handled is a very favorable

ratio, one that compares favorably with any financial institution, public or private, that exists in the world-so I think there are efficiencies that come from one agency running all of these programs.

Senator NELSON. I would not quarrel with that. I was just saying if there were some way in which you identified by a different name that part of the Social Security Administration that is technically handling these other programs, then maybe there would not be the confusion that there is.

Mr. Ross. Well, we do that to some extent. We have the AFDC managed by our Office of Family Assistance, which is a separate unit, so we do attempt to give some separate status to that program.

Senator NELSON. You say that your overhead costs for administering all of the programs you administer is about 2 percent? Mr. Ross. Yes, sir.

Senator NELSON. How does that compare with what the Social Security overhead percentage costs were 20 years ago?

Mr. Ross. It is about the same. Historically, it has been at about 2 percent of program costs.

Senator NELSON. From the beginning?

Mr. Ross. Pretty much; yes, sir.

Senator NELSON. I have one more question. How many people are employed by the Social Security Administration?

Mr. Ross. We have somewhat over 80,000 people located in almost 1,400 district offices and communities across the United States, 10 regional centers, and our Baltimore headquarters.

In addition to these full-time people, we engage a number of parttime and temporary people, roughly maybe as many as 10,000, so that total number of staff years during the year would be approximately 90,000. Plus we finance 100 percent of the disability program which means that at the State level, another 10,000 State employees are fully paid for by us. So that overall, you get close to 100,000 staff person-years involved in our administration of these programs, quite apart from AFDC which is a State program and administered there. Just to finish explaining some of the tasks, we handle over 58 million transactions every month to process beneficiary claims and post wages and in addition to that routine, if you will, functioning, we stand prepared in emergencies to help our beneficiaries. For example, if recent events at the Three Mile Island Nuclear Power plant had developed into a situation requiring evacuation of the entire Harrisburg area, we had action plans ready to get monthly benefits to displaced social security beneficiaries.

It is this kind of service to the public, both in the routine cases and in the extraordinary cases that has guided and motivated this agency historically and with which, I feel, we have done a creditable job.

However, at the same time that we take credit for our achievements, let me be quick to add that SSA is moving to correct problems that we have and to become more efficient and effective in handling the taxpayers' dollars. It is my belief that we should not be afraid to discuss our shortcomings openly. The American public should know our weaknesses as well as our strengths, and the public should also know what we can and are doing to do a better job.

I believe this sense of openness and candor is something that must be present when you are dealing with one of the important agencies of Government that so deeply affects the entire American public.

One of the things that Secretary Califano and I did to try to improve our service to the public is that in January we reorganized the Social Security Administration. We put in a functional organization that will allow us to pursue our mission much more effectively.

Central elements have changed; for example, we consolidated fragmented systems offices into a single office of systems. An Associate Commissioner reporting to me will bring thrust and drive to our attempt to improve our computer and telecommunications processes, which is one of the ways in which you handle jobs as complicated and far-reaching as ours.

The second major aspect of our reorganization was to focus on operating policy in a way that will bring more coherence to our programs and enhance the relationship with our field operations. The real heart of the SSA organization is in the district offices that deal with the public. It is absolutely vital that the public that comes into personal contact with us in those district offices get a feeling of reliable, compassionate, and sensitive service, and that is an aspect that we are emphasizing in the reorganization.

Third, we brought together a number of fragmented quality assurance and other assessment type of activities into our own inspector general type operations. We now have a single office that pulls all of these activities together, and we hope that this will give additional thrust to our ability to ferret out mistakes and put in procedures to do an even better job in the years ahead.

One of the things that we did immediately following the reorganization was to charge the new Associate Commissioner for Assessment to construct a much more effective set of quality control systems designed to provide basic data on error rates.

The major aspect of this effort is the full implementation of a quality assurance system for the retirement, survivors, and disability insurance programs. This new system will give us the potential to pinpoint program errors and assist us in developing appropriate actions to correct them.

Similar quality assurance systems were installed previously for the SSI and AFDC programs and facilitated dramatic improvements and performance. In SSI, error rates have dropped from 11.5 percent in 1975 to the present 4.6 percent.

Senator NELSON. From 11.5 percent to 4 percent?

Mr. Ross. To 4.6 percent. We have halved it, if you will; more than halved it—not that we are content to stay at 4.6, but all the indications are that we are moving down the amount of error in the supplemental security income program.

Senator NELSON. What amount of that is related to State administration?

Mr. Ross. That is a federally administered program. There is a State supplementation which we also administer, but that is an overall error rate for the program.

Senator NELSON. Do you check on the State's supplementation? Mr. Ross. Yes; in those States that we administer that portion also, sir.

Senator NELSON. The States are not responsible for any of the error, you are saying, in the SSI program?

Mr. Ross. That is correct, because the error rate that we report on

includes those States where we administer the State supplementation, and we have to stand behind our administration of the State aspects also.

Senator NELSON. All right.

Mr. Ross. The first full results of the new system in the retirement and survivor insurance program will not be available until later this year. The data for the disability insurance program and the impact of the earnings test will become available during the following year. The difficulty and time involved in constructing this type of tem is not to my liking, but is inherent in this type of activity to make this system reliable and useful, we must move carefully to make certain that it considers all of the complex nuances involved in the

program.

However, let me be clear that we are not sitting still pending final results. We have been taking actions that should produce improvements.

I have launched Project Accuracy, the purpose of which is to live up to social security's traditional goal-the right amount to the right person on time-and this effort consists of a number of steps to achieve three things: to prevent payment errors whenever possible; to detect mistakes quickly when they do occur-this is highly important when you are dealing with economically vulnerable people, as we are, who have difficulty returning overpaid funds or who face undue hardship if benefit amounts are erroneously low-and third, to recover or settle payment errors swiftly.

What I would like to do now is to review with you what we do and do not know about the scope of error in the basic retirement, survivors and disability insurance programs.

The basic fact is that at present, we do not know with precision the extent of errors in these programs. This is an unacceptable situation and one of the reasons that we have put so much emphasis on the quality assurance system which I mentioned. Only when this basic data is available on a regular basis can we truly monitor our performance and fully identify those actions that will correct deficiencies.

The current state of our knowledge is reflected in some recent estimates, in some varying reports, which show a wide range of possible error rates. Thus the HEW Inspector General, in a report released recently, concluded that the error in these programs could range anywhere from $173 million to $866 million annually.

Senator NELSON. What is the definition of the kind of error that would be included within that $173 million to $866 million?

Mr. Ross. That would be error that involves erroneous payments; it does not fully take into account our ability to collect overpay

ments

Senator NELSON. That is what I was going to ask. Are these errors for which there has been no reimbursement, or are you just counting

:

Mr. Ross. Those would be payment error before you get the corrective action.

Senator NELSON. All right, but that is not a net loss to the fund? Mr. Ross. That is not a net loss, and that is one of the important points, Mr. Chairman, which is that there are ways to bring that down.