[TEXT ONLY]
This document is a summary of a printed document. The printed document may contain charts and photographs which are not reproduced in this electronic version. If you require the printed version of this document, contact the Freedom of Information Act Officer, Office of Inspector General, U.S. Department of Labor, Washington, DC 20210, or call (202) 693-5116.
This report reflects the findings of the Office of Inspector General at the time that the audit report was issued. More current information may be available as a result of the resolution of this audit by the Department of Labor program agency and the auditee. For further information concerning the resolution of this report's findings, please contact the program agency.
OIG has started using Acrobat 4.0 to prepare it's latest Audit reports. If you are experiencing problems downloading some of the larger PDF files, you may want to download the latest version of the Adobe Acrobat Reader by clicking the link provided below.
The Office of Workers Compensation Programs (OWCP) is charged with administering the Federal Employees Compensation Act (FECA), under which Federal employees who become disabled are paid wage loss compensation based on their former salaries and degree of disability.
OIG conducted an audit to determine: (1) Whether FECA claimants earned wages while receiving long-term total disability compensation; (2) Whether automated crossmatches with Federal or state wage records would provide an independent source of information which could assist OWCP in identifying potential claimant fraud or overpayments and in monitoring claimants continuing eligibility; and (3) Whether internal controls adequately ensured that claimant wages were detected and benefit amounts were adjusted accordingly.
Wages Earned by Totally Disabled FECA Claimants
To help determine whether totally disabled FECA claimants were earning wages, we conducted two crossmatches.
In the SSA crossmatch of about 27,000 totally disabled FECA claimants, we found that:
- 905 ( 3 percent) of the claimants had total earnings of $2.9 million; and
- almost 5 percent of the Social Security Numbers (SSNs) in our sample taken from OWCP's benefit payment system were incorrect.
Crossmatches with States Revealed Potential Fraud and Overpayments
We conducted the second automated crossmatch of 27,050 and 25,973 FECA claimants for CYs 1996 and 1997, respectively, with the wage records maintained by 6 cooperating states in order to identify which individual FECA claimants earned wages and to determine whether the wages were properly reported.
The 6-state crossmatch revealed a total of 33 potential fraud cases which were subsequently referred to the OIG Office of Investigations (OI). These cases represent a potential total of $6.1 million cost avoidance over 10 years (or an average of $187,000 per claimant). Even if the 33 claimants are not convicted of fraud, OWCP could establish overpayments for an additional $956,000 in compensation paid over the 15-month period covered by a falsified form CA-1032 (or an average of $29,000 per claimant).
Internal Control Weaknesses
Our audit of OWCP's internal control procedures for detecting wages of claimants and adjusting benefit amounts accordingly was conducted in five FECA district offices. We found that the staff in the district offices we visited (1) did not consistently follow policies and procedures to detect earnings of claimants and to determine the effect, if any, that earnings may have on their continuing entitlement to eligibility, resulting in payments being made to claimants who were either not entitled to compensation or were entitled to reduced compensation; (2) take appropriate action when there was documented evidence of earnings; and (3) declare overpayments when cases contained evidence of sporadic earnings.
As a result of our audit we concluded that the vast majority of FECA claimants in our sample proved to be honest in their dealings with OWCP. However, legislation to change the Internal Revenue Code (IRC) to provide OWCP routine access through the SSA to Internal Revenue Service (IRS) wage data could provide a cost-effective tool to ferret out the small number of dishonest claimants who, in the 6 states covered by our audit, may be bilking the FECA program out of an estimated $500,000 per year. Moreover, conducting automated crossmatches on an annual basis would be less expensive administratively and provide better assurance of claimants continuing eligibility. We estimate that, if an automated SSA crossmatch is conducted annually (as opposed to the current system of once every 3 years), OWCP's savings in SSA charges, clerical costs, and postage would be $347,000 in the first year and at least $359,000 in subsequent years. This totals a minimum of $3.6 million in reduced administrative expenses over 10 years. An annual crossmatch would also enable OWCP to better identify claimants who fraudulently conceal earnings and timely remove them from the disability rolls.
We recommend that the Assistant Secretary for Employment Standards ensures that the Director, OWCP:
- Continues to pursue legislation to change the IRC, Section 6103(1), to allow OWCP to conduct a computer crossmatch between the SSNs of FECA claimants on the periodic roll and earnings reported to SSA.
- Require staff to adhere to existing internal control policies and to take appropriate action(s) on all cases with earnings.
OWCP agreed with all our recommendations.
Report No.
03-00-008-04-431 (September 22, 2000)
