From the article it seems like these benefits were paid in cases where there were people without SSNs who were serving as representative payees, yes? Not paid directly to the people without SSNs? A representative payee is used in cases when a recipient of SS funds is unable to manage the funds on their own. So if a child is receiving (for example) Social Security death/disability benefits due to the death/disability of one parent or SSI benefits, the parent is (almost always) their representative payee. If an adult is so disabled that they cannot manage their own money, a representative payee can also be appointed for them. Money received by the representative payee must be used only for the beneficiary’s needs – the representative payee can’t spend it on themselves, etc.
Here is the list of preferences for representative payees. secure.ssa.gov/poms.nsf/lnx/0200502105
Notice that for children, the first preference is always their parent. For adults, the first preference is a spouse, parent or other relative.
So I can easily see why this happens. If you have US citizen children who are receiving SSI or OASDI (death/disability) benefits, and a parent is an undocumented immigrant, the laws establishing preferences for representative payees say that a parent with custody is the first choice of payee, and the law doesn’t say that a representative payee requires an SSN. Etc.
The bigger story here, I think, is that SSA wasn’t even following its own policies by keeping copies of the paper applications of all representative payees without SSNs. That oversight could lead to less ability to track the representative payees or their use of funds, I’d imagine.
Also of note from the report is that in many cases where the SSN wasn’t recorded in the Social Security computer system, the representative payee actually had a valid SSN but Social Security hadn’t recorded it. Of this group, there were many “representative payees” receiving money whom SSA had actually terminated or not selected as payees – an estimated $853 million in benefits wrongly sent to these people who weren’t actually representative payees (or weren’t any longer payees) and actually had valid SSNs.