This is a rush transcript from "On the Record," August 25, 2009. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Here's a novel idea. How about the government being competent? Especially when it comes to your money. Now, are you ready for this? The federal government mistakenly sent out stimulus checks to 1,700 prison inmates to the tune of $425,000. Now, how did this happen?

Joining us live is Laura Crimaldi, reporter for The Boston Herald. Laura, exactly how is it that 1,700 prison inmates got these stimulus checks?

LAURA CRIMALDI, BOSTON HERALD: In these cases, the Social Security Administration, which was charged with distributing some 52 million stimulus checks to people all across the country, were unaware that those individuals were, in fact, in prison.

VAN SUSTEREN: How much -- is it really true that $425,000 was paid out?

CRIMALDI: Yes, that would be the figure, if you take $250 and multiply it by 1,700 and you come to $425,000.

VAN SUSTEREN: How did you get wind of this?

CRIMALDI: We heard that some inmates in the Massachusetts prison system had received stimulus checks. We went to the Department of Corrections, which runs the state prison system in Massachusetts, and they did confirm that some 23 inmates in Massachusetts did, in fact, receive the checks.

VAN SUSTEREN: What happened to the checks?

CRIMALDI: Well, it turns out that some of the inmates who received the checks were entitled to them. The reason for that would be that some of them were free and out of prison some time between November of last year and January of this year. And under the American Recovery and Reinvestment Act, people who were lawfully drawing Social Security during that time were entitled to those benefits.

The other individual was a retiree from the railroad system, and there are no restrictions on railroad retirees collecting their benefits once -- if they turn up behind bars at some point in their life.

VAN SUSTEREN: Out of the...

CRIMALDI: And then the remaining...

VAN SUSTEREN: Oh, go ahead.

CRIMALDI: Well, just the remaining individuals who got the checks, we know that only five of them have sufficient funds now to be able to pay the restitution, so...

VAN SUSTEREN: All right. So out of the -- out of the 1,700 inmates who got these checks and the $425,000 that got paid out, how much got paid out unlawfully? And of that amount that got paid out unlawfully, how much did we get back?

CRIMALDI: Sure. Well, that figure, the 1,700 figure, is what the Social Security Administration is looking at right now. Because they did not have any record of the fact that those individuals were in prison, they are looking to see whether those inmates are actually entitled to the money or not.

Separately, the inspector general's office for the Social Security Administration is in the process of conducting an audit of those payments, which would look at whether payments were sent out to inmates, to people who were deceased, to fugitive felons, to people who are no longer living in the United States or no longer here lawfully.

VAN SUSTEREN: Do you get a -- do you have a profound sense that this Social Security Administration is well organized, or do you get a sense that this is just a nightmare?

CRIMALDI: Well, you have to keep in mind that some 52 million people are drawing Social Security checks in the United States. So relatively speaking, 1,700 is not the most significant figure in the world.

VAN SUSTEREN: Except for the fact -- I'll take you on a little bit on that -- $425,000 could do a lot for the unemployment, a lot of the unemployed people tonight who are listening. So they'll probably feel a little bit upset with that. But anyway, great reporting, Laura. Thank you very much.

CRIMALDI: Thank you for your time.


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