WASHINGTON — The Trump administration delivered more than 1 million stimulus payments worth about $1.4 billion to dead people in a rush to pump money into the economy this year, the Government Accountability Office said Thursday.
The Treasury Department, working with the IRS, raced to deliver nearly $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 that 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 $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 GAO, a nonpartisan agency, said that officials at the IRS and the Treasury Department were 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 accountability office that because they were trying to deliver the payments “as rapidly as possible,” they used operational procedures that were last used for sending out stimulus money in 2008. That system did not use death records to prevent money from going to the deceased.
The GAO noted, however, that the IRS had put in place a system in 2013 to update tax accounts with death records to address concerns that tax refunds were improperly going to the dead. Because this control was bypassed to get the stimulus 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 be sent 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. However, a Treasury spokeswoman noted that the IRS had provided instructions for returning that money.
A spokesman for the IRS did not immediately have data on how much, if any, of the money that went to the deceased had been returned.
Michael J. Graetz, a Columbia University law professor and former deputy assistant secretary for tax policy at the Treasury Department, said government money improperly going to the dead is a continuing problem when it comes to tax refunds and Social Security payments. In fact, improper payments for a broad range of expenses have been a long-term problem for the federal government. The GAO reported that from 2003 to 2017, estimates of improper payment totaled about $1.4 trillion cumulatively.
But retrieving the money can be more expensive than absorbing the loss. Graetz said that while cashing a check 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 $1,200 payments.
Still, he noted that such mistakes were the unfortunate consequence of pushing money out so quickly.
“It’s not chump change,” 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 that Congress ensure that the Treasury and its Bureau of the Fiscal Service, which distributed the payments, gain full access to the Social Security Administration’s 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 to 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, New York, noticed a deposit of $1,200 in an account that she held jointly with her mother, who died in 2019. She had left the account open to handle her mother’s remaining expenses and to file her 2019 returns.
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 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 Trump has been mismanaging the money and to call for more oversight.
“The Government Accountability Office this morning announced that $1.4 billion of relief checks were sent to people who were dead. Where’s the Republican oversight?” said Sen. Chuck Schumer of New York, the Senate minority leader. “This is a $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.”
The GAO report criticized the Trump administration’s handling of other aspects of the $2.6 trillion rescue effort in what was a sobering review of the largest bailout in the nation’s history.
A bipartisan oversight commission created to monitor the stimulus programs has been without a leader for months as Sen. Mitch McConnell, R-Ky., the majority leader, and House Speaker Nancy Pelosi, D-Calif., have failed to agree on a chairman. But on Thursday, they were in the final stages of vetting Joseph F. Dunford Jr., the former chairman of the Joint Chiefs of Staff, to lead the panel, according to people familiar with the process who spoke about it on the condition of anonymity.
In its typically understated language, the agency wrote that the federal government’s response was slow, disorganized and insufficient to protect the public, despite years of warnings that a pandemic was inevitable. The watchdog agency also noted that the White House’s Office of Management and Budget had not directed federal agencies to reveal how much money they had spent until July.
“It is unfortunate that the public will have waited more than four 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 said.
Among the programs flagged was the $660 billion Paycheck Protection Program, which the GAO said was vulnerable to fraud because the Small Business Administration was relying on borrower certifications to determine whether loans were needed and how they were being used.
The auditors noted that most federal agencies gave them access to the information they needed for their review, but singled out SBA, which by June 12 had processed $512 billion in loans under the Paycheck Protection Program, as uncooperative. They also said that the SBA’s lax oversight had increased the likelihood that borrowers may misuse or improperly receive loan proceeds.
That includes potential overlap of people who were being paid unemployment insurance while also receiving proceeds from Paycheck Protection Program loans. Those loans were intended to go to businesses that used most of the money to keep workers on the payroll. The report suggested that the Labor Department should help state unemployment agencies determine whether there were improper payments made related to the loans.
The report also criticized how the Centers for Disease Control and Prevention has counted coronavirus tests — combining tests for an active infection and those that detect antibodies. This practice inflates the percentage of Americans that appear to have been tested and gives an unreliable picture of the way the virus is spreading around the country, the report said. After the CDC was criticized last month for this practice, the agency promised to separate its testing figures. But as of June 9, it had still not resolved the issue, the office reported.
The CDC reported “incomplete and inconsistent data” from health departments, “making it more difficult to track and know the number of infections, mitigate their effects, and inform decisions on reopening communities,” according to the report.