Basic (06-10)

PR 07305.035 New York

A. PR 10-102 Allegation of Misuse of Title II Benefits by Representative Payee Who Was Also Number Holder's Legal Guardian Number holder - Connie B~ Representative Payee - Bernard M~

DATE: July 17, 2010


When a representative payee, who is also the legal guardian of the beneficiary, is determined to have misused the beneficiary’s funds, he is personally responsible for repaying that amount from his own funds and must also return any remaining conserved benefit payment amounts paid to him as the beneficiary’s representative payee.



Whether the former representative payee, who was also a legal guardian of the beneficiary, misused funds, and if so, what is his responsibility for the repayment of the misused benefits?


While further development could be useful, the evidence presented creates a strong presumption of misuse. If the former representative payee is determined to have misused the beneficiary's funds, he is personally responsible to repay that amount from his own funds and must also return any conserved benefit payment amounts paid to him as the beneficiary representative payee that he still may have. The Agency may also be responsible for restitution of benefits if the former representative payee (RP) served 14 beneficiaries or less and the Agency's negligent failure to investigate the former RP resulted in the misuse.


The facts we have are as follows:

The beneficiary in this matter, Connie B~ (beneficiary), is legally incompetent, and Bernard M~ (former RP) served as her legal guardian and RP from October 30, 2002 through November 23, 2009. Goldwater Hospital, Ms. B~'s institutional residence since at least 2001, became the beneficiary's RP on November 23, 2009.

The New York Regional Office (RO) received an email from the Office of Inspector General (OIG) concerning an allegation of misuse of benefits by the former RP, from Goldwater Hospital. Goldwater Hospital has provided a bill, dated May 2, 2007, in the amount of $11,130, and a bill dated October 15, 2009, in the amount of $123,746.58 for the beneficiary's care. The hospital alleges that the former RP misused benefits paid on the beneficiary's behalf because he has not paid for her care.

The former RP met at the RO at the Agency's request to discuss the alleged misuse on January 22, 2010. He provided no documentation, verbally indicated that he had $70,000 in saved funds, refused to sign any documents, and further stated that he would take the Agency to court. He acknowledged receipt of a correspondence from the Agency requesting that he return all conserved funds, but denied receiving any bills from Goldwater Hospital.

In a May 8, 2007 letter to Goldwater Hospital, the former RP stated that there were not enough funds in the account to pay the bills. In an August 20, 2008 letter to Goldwater Hospital, he stated that he was not the beneficiary's guarantor.

In an RP report covering the period of December 1, 2006 through November 30, 2007, the former RP indicated that he spent all of the benefits, totaling $10,462 on the beneficiary's food and housing. In an RP report covering the period of December 1, 2007 through November 30, 2008, the former RP indicated that he spent all of the benefits, totaling $10,697 on the beneficiary's food and housing. On both forms, the former RP stated that he spent no money on the beneficiary's clothing, education, medical expenses, or dental expenses. He also reported that he did not save any of the benefit payment amounts on both forms.

From late 2002 until late 2009, Ms. B~ received $71,964 in Title II benefits.


Under SSA RP regulations, a RP must use benefits for the beneficiary's "current maintenance" and "personal needs" only. 20 C.F.R. §§ 404.2035-404.2040; see POMS GN 00602.010 (distinguishing between "current maintenance" and "personal needs"). The RP determines what constitutes current maintenance by considering the beneficiary's best interests and consulting guidelines contained in SSA regulations. 20 C.F.R. § 404.2035. Although these guidelines provide that a beneficiary's "[c]urrent maintenance includes cost incurred in obtaining food, shelter, clothing, medical care, and personal comfort items," as well as the customary charges made by an institutional facility, they do not mandate a precise formula for budgeting benefits. See 20 C.F.R. § 404.2040.

The RP has "a considerable amount of discretion" in making the best interests determination. Representative Payment, 47 Fed. Reg. § 30,468 (July 14, 1982), "Changes We Did Not Make," § 3. Thus, where the RP determines that it would not be in the best interests of the beneficiary to prioritize the costs of institutional care over other items of current maintenance, the RP need not pay the institution. Id Accordingly, a RP may pay for room, board, and medical care but may also regularly withhold some of the beneficiary's SSA benefit for the beneficiary's personal use, despite outstanding debt to the institutional facility. 20 C.F.R. § 404.2040(a)-(b).

Although a RP has discretion, as discussed above, the RP must explain to the Agency, upon request, how benefits have been spent. A RP "should keep records of how benefits were used in order to make accounting reports and must make those records available upon our request." 20 C.F.R. § 404.2065. Here, after the beneficiary's institution, and current RP, complained that it had not received payment from the RP for the beneficiary's care, SSA properly contacted the payee for an explanation. POMS GN 00602.010.B.1. As stated, the fact that the institution had not been paid is not, in and of itself, proof of misuse. However, the former RP's failure to produce any documentation detailing his expenditures on the beneficiary's behalf and his providing of only very limited information can be considered evidence of misuse. See POMS GN 00604.020 ("If a payee reschedules your visit or appointment multiple times, refuses to cooperate or provide requested information, and no other evidence is available, the payee's refusal is considered evidence that misuse may have occurred.")

Also inconsistencies in records and information that you have provided create an inference of misuse. You have provided two RP reports where the former RP asserted that all of the benefits were spent on the beneficiary's food and housing. This statement is refuted by the institution's claim that it has not received payments for the beneficiary's care from the former RP. Further, the former RP alleged that he has never received bills from Goldwater Hospital. This statement cannot be considered credible because, first, the beneficiary appears to have lived at this facility since 2001, making it extremely unlikely that the former RP would not have received any bills from the facility and second, you have provided a copy of two letters sent from the former RP to Goldwater Hospital regarding billing issues.

In light of the evidence gathered thus far, a formal determination of misuse is warranted. "SSA must fully investigate and develop every reasonable allegation of misuse. A formal misuse determination documenting facts of each case and the decision about whether or not benefits were misused must be prepared." POMS GN 00604.001; see GN POMS 00604.005 (Overview-Misuse Process) and GN POMS 00604.030 (Preparing a Misuse Determination).

Regarding OIG, a finding of misuse may warrant a potential criminal violation. POMS GN 00604.001. In some circumstances, a referral to OIG may be necessary in order to make a formal misuse determination, if you should determine that further development is needed.

POMS GN 00604.001.

If misuse is established, the former RP is responsible for paying back the misused benefits. 20 C.F.R. § 404.2041(a); POMS GN 00604.060. The Agency will make every reasonable effort to obtain restitution and return the funds to the beneficiary. Id Any amount that was misused by the former RP and not refunded will be treated as an overpayment to the former RP. 20 C.F.R. § 404.2041(f).

The Agency's responsibility to pay back misused benefits varies depending on the number of beneficiaries the former RP serves. Whether or not the Agency has obtained restitution from the RP, the Agency will repay benefits in cases where it determines that the RP misused funds and the RP is an individual or institution serving more than 15 beneficiaries. 20 C.F.R. § 404.2041(b); POMS GN 00604.060. Payment will be made either directly to the beneficiary or to an alternative rep payee in an amount equal to the misused benefits less any amount collected from the misuser and repaid to the beneficiary. Id

Where the RP is an individual or institution serving 14 or fewer beneficiaries, the Agency will repay benefits only where the Agency's negligent failure to investigate the RP resulted in the misuse. 20 C.F.R. § 404.2041(c); POMS GN 00604.060. Negligent failure means that the Agency failed to investigate the RP or failed to follow established procedures while conducting the investigation. 20 C.F.R. § 404.2041(c). Examples of negligent failure include: failure to follow procedures when investigating, appointing, or monitoring an RP; failure to timely investigate an allegation of misuse; failure to take the proper steps to cease making payments to a an RP who was found to have misused benefits. 20 C.F.R. § 404.2041(d) (1)-(3). Accordingly, if the former RP is determined to have served less than 14 beneficiaries, the Agency must determine whether its own negligent failure, as defined in the regulations and policy, resulted in the misuse. If negligent failure is established, the Agency is responsible for repaying benefits.

Regarding your question as to whether the former RP is required to return all "conserved funds" to SSA, development as to the exact nature of the alleged remaining $70,000 is needed. If the alleged $70,000 is comprised from numerous sources of the beneficiary's income, and not merely SSA benefits, requiring the former RP to return all of those funds to the Agency would amount to penalizing the beneficiary for the former RP's malfeasance. At this point, the former RP has merely asserted that he has $70,000 in beneficiary funds. The source and origin of those funds is unknown. Assuming those funds are in existence, we are unaware of how much, if any, are SSA benefits and can be considered "conserved funds" for Agency purposes. Only those funds must be returned. Under the regulations, after a RP has used benefit payments consistent with the guidelines in the regulations, any remaining amount must be conserved or invested on behalf of the beneficiary. 20 C.F.R. § 404.2045(a). The RP must transfer any conserved or invested funds "to either a successor payee or to us, as we will specify." 20 C.F.R. § 404.2060. If the funds are returned to the Agency, they will be recertified to a successor payee or to the beneficiary. Id. Therefore, under the regulations, SSA is authorized to require the former RP to return any funds that are determined to be conserved benefit payments in addition to the RP's personal responsibility, from his own funds, to pay back misused benefits.

You have also asked whether the former's RP's prior status as legal guardian plays any role in this matter. As legal guardian, the former RP was required to use the beneficiary's property and financial resources for her maintenance and support. NY CLS 81.20(a) (iv). The former RP was required to file an annual report with the court which includes, among other things, an accounting of any moneys earned or received on behalf of the incapacitated person. NY CLS 81.31 (b)(8). Failure to report could result in the modification of compensation or removal of the guardian. NY CLS 81.32(c)(2). Such reports, if in fact filed by the former RP, would be of use in determining how benefits were used and therefore, would be of great assistance in supporting a formal determination on misuse. Also, it appears therefore that misuse of benefits would be a violation of the former's RP's guardianship duties under New York Law.

In a case involving misused SSA benefits by an institutional RP, who was considered the de facto guardian of two infants, a New York court has held that a RP is liable under common law for funds when "it is shown that the defendant breached his fiduciary duties by committing some wrongdoing in connection with the property entrusted to his care." In re Estate of Kummer, 93. A.D.2d 135, 863, 865 (N.Y. App. Div. April 4, 1983). The Court concluded that the RP may be held liable on a cause of action for an equitable accounting under the laws of New York which would allow the beneficiaries to recover improperly used benefits. Id at 875. Therefore, at least one New York court has held, in line with federal regulations, that a guardian, who was also an RP, is personally responsible for SSA benefits improperly expended. Therefore, even under State law, the former RP in the current matter, although also a former guardian, could be compelled to personally pay back any funds determined to have been misused, whether or not included in the alleged $70,000 held by the former RP.


The documentary evidence presented thus far, coupled with the former RP's failure to provide adequate information to explain an allegation of misuse of funds, creates a strong presumption of misuse. If you should determine it is necessary to develop the matter further, reports filed with the State Court as legal guardian, could be useful in determining how benefits were spent. If the Agency determines that misuse has occurred, the former RP is personally responsible for the payment of those misused funds. The Agency may also be responsible for repayment if the former RP served 14 beneficiaries or less and the misuse was the result of the Agency's negligent failure to investigate the RP. Regarding the alleged $70,000 of beneficiary funds maintained by the former RP, the Agency can only require repayment of any portion of that amount that represents SSA benefits, but may demand that the former RP repay the misused benefits from his own personal funds. If necessary, the Agency should enlist the assistance of OIG in the investigation and also consider the matter for referral to OIG for criminal investigation.

Please do not hesitate to contact the undersigned if you have any questions or wish to discuss this matter further.


Regional Chief Counsel

By: _____________

Benil A~

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PR 07305.035 - New York - 06/30/2010
Batch run: 04/25/2016