Federal Workers' Compensation
Better Data and Management Strategies Would Strengthen Efforts to Prevent and Address Improper Payments Gao ID: GAO-08-284 February 26, 2008In fiscal year 2006, the Federal Employees' Compensation Act (FECA) program paid over $1.8 billion in wage loss compensation to federal employees who were unable to work after being injured on the job. Under the Comptroller General's authority to conduct evaluations on his own initiative, GAO examined (1) how effectively the Department of Labor's (Labor) Office of Workers' Compensation Programs (OWCP) manages the risk of improper FECA compensation payments; (2) what vulnerabilities to improper payments, if any, exist in OWCP's procedures for making FECA wage loss payments; and (3) how well OWCP ensures the recovery of identified FECA overpayments. To address these issues, GAO reviewed OWCP documents, analyzed data obtained from OWCP, reviewed a random and projectable sample of FECA claims files, visited five OWCP district offices, and interviewed OWCP headquarters and district officials.
OWCP has not established an effective strategy for managing improper payments in the FECA program. The agency does not sufficiently emphasize preventing, detecting, and recovering improper payments. None of the performance goals for the program addresses improper payments. Further, OWCP does not collect the information it needs to accurately assess the FECA program's risk of improper payments, such as information on their magnitude and causes. Without such data, it cannot focus on the most vulnerable areas. The FECA program is vulnerable to improper payments for several reasons. First, OWCP relies on unverified, self-reported information from claimants that is not always timely or correct. From a review of a sample of claims files for overpayments identified by OWCP in 2006, GAO found that many occurred because claimants did not inform OWCP in a timely manner when they returned to work. Further, because OWCP generally does not require claimants' self-reported earnings to be verified and does not systemically match its data on FECA claimants with earnings data from other federal agencies, it may fail to identify cases of unreported earnings. An obstacle to conducting such matches, however, is that OWCP does not have the legal authority to access the database maintained by another federal agency with the most current earnings data. In addition, from GAO's file reviews, GAO found that both overpayments and underpayments were caused by OWCP errors and that many overpayments occurred when OWCP's payment-processing deadlines prevented payments from being quickly canceled when claimants returned to work or died. Finally, OWCP does not ensure that overpayments are collected in a timely manner and misses some opportunities for recovering overpayments, such as deducting them from claimants' subsequent FECA payments.
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
February 2008:
Federal Workers' Compensation:
Better Data and Management Strategies Would Strengthen Efforts to
Prevent and Address Improper Payments:
GAO-08-284:
GAO Highlights:
Highlights of GAO-08-284, a report to congressional committees
Why GAO Did This Study:
In fiscal year 2006, the Federal Employees‘ Compensation Act (FECA)
program paid over $1.8 billion in wage loss compensation to federal
employees who were unable to work after being injured on the job. Under
the Comptroller General‘s authority to conduct evaluations on his own
initiative, GAO examined (1) how effectively the Department of Labor‘s
(Labor) Office of Workers‘ Compensation Programs (OWCP) manages the
risk of improper FECA compensation payments; (2) what vulnerabilities
to improper payments, if any, exist in OWCP‘s procedures for making
FECA wage loss payments; and (3) how well OWCP ensures the recovery of
identified FECA overpayments. To address these issues, GAO reviewed
OWCP documents, analyzed data obtained from OWCP, reviewed a random and
projectable sample of FECA claims files, visited five OWCP district
offices, and interviewed OWCP headquarters and district officials.
What GAO Found:
OWCP has not established an effective strategy for managing improper
payments in the FECA program. The agency does not sufficiently
emphasize preventing, detecting, and recovering improper payments. None
of the performance goals for the program addresses improper payments.
Further, OWCP does not collect the information it needs to accurately
assess the FECA program‘s risk of improper payments, such as
information on their magnitude and causes. Without such data, it cannot
focus on the most vulnerable areas.
The FECA program is vulnerable to improper payments for several
reasons. First, OWCP relies on unverified, self-reported information
from claimants that is not always timely or correct. From a review of a
sample of claims files for overpayments identified by OWCP in 2006, GAO
found that many occurred because claimants did not inform OWCP in a
timely manner when they returned to work. Further, because OWCP
generally does not require claimants‘ self-reported earnings to be
verified and does not systemically match its data on FECA claimants
with earnings data from other federal agencies, it may fail to identify
cases of unreported earnings. An obstacle to conducting such matches,
however, is that OWCP does not have the legal authority to access the
database maintained by another federal agency with the most current
earnings data. In addition, from GAO‘s file reviews, GAO found that
both overpayments and underpayments were caused by OWCP errors and that
many overpayments occurred when OWCP‘s payment-processing deadlines
prevented payments from being quickly canceled when claimants returned
to work or died.
Figure: Estimated Causes of Overpayments Identified by OWCP in 2006:
This figure is a pie chart showing estimated causes of overpayments
identified by OWCP in 2006.
OWCP claims examiner errors: 32%;
Payment system limitations: 26%;
Untimely notification: 17%;
Miscellaneous: 17%;
Incorrect/unverified information: 8%.
[See PDF for image]
Source: GAO analysis of a sample of FECA claims files.
Note: We could not make similar estimated for OWCP's 2006 underpayments
due to data limitations.
[End of figure]
What GAO Recommends:
The Secretary of Labor should direct OWCP to, among other things,
develop a strategy to ensure that the agency‘s efforts to prevent and
monitor improper payments are properly balanced with its other
priorities, take steps to reduce the most common causes of improper
payments, and focus more attention on the recovery of overpayments. In
its comments, Labor disagreed with many of GAO‘s findings and
conclusions, but described several actions being taken by OWCP that are
consistent with the recommendations in the report.
To view the full product, including the scope and methodology, click on
[hyperlink, http://www.GAO-08-284]. For more information, contact
Daniel Bertoni at (202) 512-7215 or bertonid@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
OWCP Lacks an Effective Strategy for Managing the Risks of Improper
FECA Compensation Payments:
OWCP's Dependence on Unverified Information, Internal Errors, and
System Limitations Leaves FECA Vulnerable to Improper Payments:
OWCP Does Not Ensure the Recovery of FECA Overpayments:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: cope and Methodology:
Appendix II: Comments from the Department of Labor:
GAO's Response to Labor's Comments:
Appendix III: GAO Contact and Acknowledgments:
Tables:
Table 1: National and District Office Performance Goals for the FECA
Program:
Table 2: Initial Balances of Compensation-Related Overpayments
Identified in Fiscal Year 2006:
Table 3: Distribution of the Sample of Improper Payments Identified in
Fiscal Year 2006 by the Year in which the Payment Was Made:
Figures:
Figure 1: FECA Claims Process:
Figure 2: FECA Overpayment Process:
Figure 3: Estimated Percentage of Fiscal Year 2006 Overpayments by
Cause:
Figure 4: Status of Overpayments Listed on OWCP's Debt-Aging Report,
September 2007:
Figure 5: Estimated Recovery Status of Overpayments That OWCP Waived or
Pursued in Fiscal Year 2006:
Figure 6: Estimated Recovery Sources for 2006 Overpayments That Were
Repaid or Being Collected:
Figure 7: Initial Balances of All Wage Loss Compensation Overpayments
Identified in Fiscal Year 2006 and in Final Determination or Terminated
Status, as of March 13, 2007:
Abbreviations:
DFEC: Division of Federal Employees' Compensation:
DOD: Department of Defense:
FECA: Federal Employees' Compensation Act:
GS: General Schedule:
HHS: Department of Health and Human Services:
IPIA: Improper Payments Information Act of 2002:
Labor: Department of Labor:
OIG: Office of Inspector General:
OMB: Office of Management and Budget:
OPM: Office of Personnel Management:
OWCP: Office of Workers' Compensation Programs:
SSA: Social Security Administration:
SSN: Social Security Number:
Treasury: Department of the Treasury:
USPS: United States Postal Service:
VA: Department of Veterans Affairs:
United States Government Accountability Office:
Washington, DC 20548:
February 26, 2008:
Congressional Committees:
In fiscal year 2006, the Federal Employees' Compensation Act (FECA)
program paid over $1.8 billion in wage loss compensation to federal
employees who were unable to work because of injuries sustained while
performing their federal duties. Administered by the Department of
Labor's (Labor) Office of Workers' Compensation Programs (OWCP), FECA
covers over 2.7 million civilian federal employees in more than 70
different agencies, such as the U.S. Postal Service (USPS) and the
Department of Homeland Security. OWCP bills the agencies that employ
the injured workers for these wage loss compensation costs. The
Improper Payments Information Act of 2002 defines an improper payment
as any payment that should not have been made or was made in the wrong
amount (including both overpayments and underpayments).[Footnote 1]
According to Labor, the FECA program experienced a low rate of improper
payments in fiscal year 2006--0.04 percent. However, recent reports
from several federal agencies' Offices of Inspectors General have found
weaknesses in OWCP's internal controls that suggest the actual
percentage of improper payments may be much higher.[Footnote 2]
We addressed the following questions under the Comptroller General's
authority to conduct evaluations on his own initiative as part of a
continued effort to assist Congress in assessing OWCP's strategies for
preventing, detecting, and recovering improper payments: (1) How
effectively does OWCP manage the risks of improper compensation
payments? (2) What vulnerabilities to improper payments, if any, exist
in OWCP's procedures for making wage-loss-compensation payments under
FECA? (3) How well does OWCP ensure the recovery of identified FECA
overpayments?
To respond to these questions, we reviewed Labor's annual performance
and accountability reports, the FECA procedures manual and internal
controls, OWCP's accountability reviews, relevant agencies' Office of
Inspector General reports, and applicable laws and regulations as well
as interviewed officials at OWCP headquarters. We also reviewed the
methodology used by Labor to estimate its risk of improper FECA
payments and interviewed audit contractor staff who were involved in
developing these estimates. In addition, we requested data from OWCP on
the magnitude and causes of overpayments and underpayments. OWCP did
not have data on causes or the number of improper payments that
occurred in specific years, but it created a unique report for us that
included all debts, including overpayments, that OWCP identified in
fiscal year 2006. To assess the reliability of these data, we (1)
reviewed existing documentation related to the data sources; (2)
electronically tested the data to identify obvious problems with
completeness or accuracy, such as missing or inconsistent data; and (3)
interviewed knowledgeable agency officials about the data. We
determined that the data were sufficiently reliable for the purposes of
this report. We removed all debts that were not in final determination
or terminated status and that were not related to wage-loss-
compensation payments. We analyzed these data and reviewed the claims
files for a random, projectable sample of these overpayments, as well
as the 10 largest, to confirm whether they represented improper
payments and to determine their causes and final outcomes. Because we
discovered after reviewing these data that some of the debts included
in OWCP's report either (1) were not improper payments or (2) were
identified prior to fiscal year 2006, we excluded these debts from our
analysis. We used the results from our file review to estimate the
total dollar amount of improper overpayments identified by OWCP in
2006, and the percentage that were attributable to different causes.
Although OWCP could not identify underpayments, it identified a subset
of payments that included underpayments. We reviewed the claims files
for a random sample of these payments for fiscal year 2006 to identify
underpayments, estimate their dollar value, and obtain general
information on their causes. However, because of limitations in the
data, we could not develop estimates of the percentage of underpayments
attributable to different causes for all 2006 underpayments. Estimates
based on our claims file reviews are accurate to within plus or minus
10 percentage points at the 95 percent confidence level, unless
otherwise noted. We also conducted site visits at 5 of OWCP's 12
district offices: Boston, Cleveland, Dallas, San Francisco, and
Washington, D.C. We selected these offices based on variation in office
size, internal audit results, organizational structure, and geographic
location. Finally, we interviewed officials responsible for managing
the FECA program at 10 federal agencies with varying FECA caseload
sizes. We conducted our work between September 2006 and January 2008 in
accordance with generally accepted government auditing standards. See
appendix I for more detailed information on our scope and methodology.
Results in Brief:
OWCP lacks an effective strategy for managing the risks of improper
payments because it has not (1) emphasized preventing, detecting, and
recovering improper payments or (2) collected the information needed to
assess the program's risk of improper payments. None of the agency's
performance goals for the FECA program addresses improper payments.
Instead, they emphasize the timely processing of claims and quickly
returning claimants to work. While these are important goals, previous
GAO work has shown that the risk of improper payments increases when
agencies' goals and performance measures do not strike an appropriate
balance between service delivery and the need to ensure payment
accuracy. Further, OWCP program staff reported that detecting and
recovering improper payments are often lower priorities than processing
claims quickly. In addition, OWCP lacks useful information on the
magnitude of improper payments or their causes, making it difficult to
identify vulnerabilities that lead to payment errors or determine their
impact on program operations. While Labor estimated that the FECA
program made $703,000 in improper payments in fiscal year 2006 by
reviewing a sample of all payments made during the year, this estimate
provides OWCP with limited information to use in identifying and
managing the FECA program's risk of improper payments. For example,
this estimate does not capture all types of improper payments and it
does not include the improper payments that OWCP identified during the
year, which we estimated to be $13.3 million for 2006--$7.1 million in
overpayments and $6.2 million in underpayments. Without comprehensive
information on risks, OWCP may not be taking all of the precautions
necessary to focus on its most vulnerable areas.
The FECA program is also vulnerable to improper payments because OWCP
relies on self-reported eligibility information from claimants without
verifying it, makes internal payment errors, cannot stop certain
payments that OWCP knows to be in error, and receives inaccurate wage
and benefits information from claimants' employing agencies. OWCP
relies on claimants to inform it when they return to work, but our
review of a sample of overpayments identified by OWCP in fiscal year
2006 found that an estimated 11 percent of overpayments occurred
because claimants did not notify OWCP of their return to work in a
timely manner. Further, because OWCP does not generally require claims
examiners to verify claimants' self-reported earnings statements and
does not conduct systematic data matches with the Social Security
Administration's (SSA) wage records, it may fail to identify cases of
unreported outside earnings: a recent report by SSA's Office of
Inspector General found that nearly 7 percent of claimants OWCP found
to have no wage-earning capacity in 2004 actually had earnings that
were reported to SSA. In addition, we estimated that 6 percent of the
overpayments occurred when OWCP was not notified immediately after
claimants died. Despite the fact that OWCP conducts monthly data
matches with SSA's death records, we found instances in which the
agency continued to send FECA payments to a claimant or a claimant's
survivor for more than a year after the individual died. We also found
that both overpayments and underpayments were caused by OWCP errors,
such as when claims examiners made calculation errors, did not take
timely action to stop payments after being notified that a claimant had
returned to work or died, and or incorrectly reduced FECA payments. In
one instance, OWCP paid a claimant for nearly 13 years after he
returned to work, despite numerous notifications of the error by the
claimant. In addition, about 26 percent of overpayments OWCP identified
in 2006 occurred because limitations in its payment systems prevented
it from quickly canceling payments when eligibility changes occurred,
such as when claimants returned to work. In other instances, both
underpayments and overpayments occurred when claimants' employing
agencies provided inaccurate wage and benefits data to OWCP.
OWCP does not sufficiently ensure the recovery of FECA overpayments--
specifically, it does not always process overpayments in a timely
manner and misses opportunities for recovering them. Our analyses of
OWCP data confirmed that overpayments are not always processed within
OWCP's required 60-day time frame. For example, almost half of the
identified overpayments listed in OWCP's September 2007 debt report
were over 6 months old, but OWCP had not yet notified the claimants of
the overpayments. Claims examiners in several district offices we
visited told us that they sometimes delayed processing and recovering
identified overpayments to focus on other tasks, such as paying initial
claims quickly. OWCP cannot recover overpayments until the required
overpayment notices have been issued and past GAO work suggests that
overpayments are less likely to be repaid if they are not confirmed and
processed promptly. While OWCP does not track the recovery status of
overpayments, based on our review of 2006 overpayments that OWCP waived
or pursued, we estimated that about 71 percent were repaid or were in
the process of being collected. However, although many of them were
collected, claims examiners missed opportunities to recover other
overpayments. In one case, for example, a claims examiner made a
$29,000 payment to a claimant while a $10,000 overpayment that had been
discovered 12 months earlier was still pending. Claims examiners can
miss such opportunities when their focus on paying initial claims is
not adequately balanced with an emphasis on recovering overpayments,
when they are not completely familiar with OWCP's recovery processes,
or when OWCP's data system does not alert them to recover overpayments
from claimants' subsequent FECA payments.
We are making several recommendations to the Secretary of Labor to help
OWCP strengthen its efforts to prevent and address improper FECA
payments. Specifically, we recommend that the Secretary of Labor direct
OWCP to (1) develop a management strategy to ensure that preventing and
monitoring improper payments is properly balanced with the need to
quickly process and pay claims; (2) take specific steps to reduce the
most common causes of improper payments; (3) develop a legislative
proposal to obtain the legal authority to enter into a data-matching
agreement with the Department of Health and Human Services in order to
identify individuals who are receiving FECA payments and have earnings
reported in the National Directory of New Hires, and (4) focus more
attention on the recovery of FECA overpayments. In its comments, Labor
disagreed with many of GAO's findings and conclusions; however, the
agency described several actions being taken by OWCP that are
consistent with the recommendations in the report.
Background:
The FECA program provides wage loss compensation and payments for
medical treatment to federal employees who are injured in the
performance of their federal duties.[Footnote 3] During fiscal year
2006, OWCP made over $1.8 billion in wage-loss-compensation payments to
injured federal employees ("claimants") and processed approximately
20,000 new wage loss claims. At the end of fiscal year 2006, over
55,000 claimants were receiving regular monthly wage-loss-compensation
payments from OWCP.
Federal agencies use their own annual appropriations to reimburse Labor
for wage-loss-compensation payments made to their employees each year,
while most of the program's administrative costs are covered by direct
appropriations from the Congress. For fiscal year 2008, Labor requested
that the Congress provide $93.4 million in administrative funding for
the FECA program and sought an additional $52.3 million from certain
federal agencies for administrative purposes.[Footnote 4] In total,
this funding would provide 895 full-time equivalent positions for the
FECA program.
USPS pays more in FECA compensation than any other federal agency. In
2004, USPS paid approximately $852 million in wage loss compensation.
During this same period, the Departments of Navy and Army paid the
second and third highest amounts in FECA wage loss compensation to
injured civilian employees of their agencies, approximately $245 and
$177 million dollars, respectively.
Claims Management:
Claims examiners at OWCP's 12 district offices determine applicants'
eligibility for FECA benefits and process claims for wage loss
payments. FECA divides work-related injuries into two categories:
"traumatic injuries" and "occupational illnesses or diseases."
Traumatic injuries are wounds or other conditions that occur within a
single day or work shift, such as when an employee slips at work and
sprains his ankle. An occupational illness or disease is a physical
condition produced by the work environment over a period longer than
one workday or shift, such as carpal tunnel syndrome. In this report,
we use the term "injuries" to refer to both workers who have sustained
traumatic injuries and workers who have experienced an occupational
illness or disease.
FECA regulations specify complex criteria for computing compensation
payments. Using information provided by the employing agency and the
claimant on a claims form, OWCP calculates compensation based on a
number of factors, including the claimant's rate of pay, deductions for
health and life insurance benefits, the claimant's marital status, and
whether or not the claimant has dependents. In addition, claimants
cannot receive FECA benefits at the same time they receive certain
other federal disability or retirement benefits. For example, claimants
cannot receive both FECA wage-loss-compensation payments and disability
payments from the Department of Veterans Affairs (VA) for the same
injury. Further, claimants cannot receive federal retirement benefits
paid through the Office of Personnel Management (OPM) concurrently with
FECA benefits and must elect to receive one or the other.[Footnote 5]
However, a claimant can receive both FECA and SSA retirement benefits,
although the claimant's FECA wage-loss-compensation payments should be
reduced by the amount of SSA retirement benefits attributable to
federal service.[Footnote 6] Similarly, a claimant can receive both
FECA and SSA disability benefits, although SSA is required to reduce
the level of disability benefits it pays by the amount of FECA wage
loss compensation received by the claimant. Figure 1 details the
process for filing and calculating claims for wage loss compensation
under the FECA program.
Figure 1: FECA Claims Process:
This figure is a flowchart of the FECA claims process.
[See PDF for image]
Source: GAO analysis; Art Explosion.
[End of figure]
Based on various eligibility factors, the amount of wage loss
compensation OWCP pays claimants varies widely. For example, a claimant
who earned $2,500 per month ($30,000 a year), paid $67 a month for
health insurance benefits, and had no dependents would receive
approximately $1,600 a month in FECA wage loss compensation. A married
claimant who earned $8,500 per month ($102,000 a year) and paid $150 a
month for health insurance benefits would receive approximately $6,050
a month in FECA compensation.[Footnote 7]
Compensation payments are issued on a monthly or weekly basis.
Claimants who are expected to experience wage loss for longer than 3
months receive automatic monthly payments as long as their eligibility
for wage loss compensation continues. Alternatively, claimants who are
expected to recover more quickly and return to work within 3 months are
required to file new claims forms each payment cycle in order to prove
that they were off work and receive manually generated
payments.[Footnote 8] OWCP provides wage loss compensation until
claimants can return to work in either their original positions or
other suitable positions that meet medical work restrictions. If
claimants return to work but do not receive wages equal to that of
their prior positions--such as claimants who return to work part-time-
-FECA benefits cover the difference between their current and previous
salaries.[Footnote 9]
FECA regulations require claims examiners to verify annually that
claimants who are receiving automatic monthly compensation payments
remain eligible for compensation. This verification process relies
almost entirely on information provided by claimants on a form that
OWCP mails them each year. Claims examiners are responsible for
following up and taking necessary action to ensure that the forms are
completed and returned, and can suspend compensation payments if a
claimant fails to submit the form within the specified time period.
Once returned, claims examiners review the forms for indications that a
claimant's eligibility has changed and adjust the compensation payments
accordingly. For example, if a married claimant indicates that he
divorced his wife and does not have any other dependents, the claims
examiner should reduce his wage-loss-compensation payment from three-
quarters of his salary to two-thirds of his salary.
Improper Payments:
The Improper Payment Information Act enacted in 2002 requires the heads
of federal agencies to annually review all programs and activities they
administer, identify those that may be susceptible to significant
improper payments, and estimate and report the annual amount of
improper payments in those programs and activities. The Office of
Management and Budget (OMB) defines significant improper payments as
payments in any program that exceed both 2.5 percent of total payments
and $10 million annually. In addition, OMB has previously identified
other programs, including the FECA program,[Footnote 10] as being at a
high risk of improper payments because its total payments exceed $2
billion annually.[Footnote 11] Because of this high risk designation,
Labor must annually estimate the improper payment rate for the FECA
program and report this rate in its Performance and Accountability
Report, as well as identify the causes of improper payments and report
the corrective actions it plans to take to address them.
Overpayment Recovery:
Once an overpayment has been identified by OWCP, the actions taken to
recover it depend on the amount of the overpayment. Because of the
administrative costs associated with recovering overpayments, OWCP
allows claims examiners to waive overpayments less than $200 without
taking any action to recover them. For overpayments $200 or greater,
claims examiners must send a notice of the overpayment (called a
"preliminary notice") to the claimant within 30 days. The claimant then
has 30 days to respond to the preliminary notice and contest the
overpayment. If a claimant does not repay the overpayment or appeal the
overpayment decision within 30 days of the preliminary notice, claims
examiners must issue an additional notice (called the "final notice")
that provides a recovery strategy to the claimant, such as a suggested
repayment schedule. As shown in figure 2, the recovery options
available to claims examiners depend on whether the claimant continues
to receive FECA or other federal compensation payments, the amount of
the overpayment, and whether the claimant was found to be at fault in
the creation of the overpayment. If the debt is delinquent for 180 days
and the claimant has not responded to two additional letters from OWCP
demanding repayment, the claims examiner is required to refer the debt
to the Department of the Treasury (Treasury) for recovery.
Figure 2: FECA Overpayment Process:
This figure is a flowchart of FECA overpayment process.
[See PDF for image]
Source: GAO analysis.
[End of figure]
OWCP Lacks an Effective Strategy for Managing the Risks of Improper
FECA Compensation Payments:
OWCP has not established an effective strategy for managing improper
FECA payments. The agency does not sufficiently emphasize preventing,
detecting, and recovering improper payments. Program staff reported
that they focused on the aspects of the claims process that are
regularly tracked and measured by managers and said preventing,
detecting, and recovering improper payments are often lower priorities.
In addition, OWCP lacks the data needed to accurately assess the
program's risk of improper payments. The agency does not collect data
on the magnitude or causes of improper payments, making it difficult to
identify vulnerabilities that lead to payment errors, implement
procedures to prevent them, or evaluate their effectiveness.
OWCP Does Not Emphasize Preventing, Detecting, or Recovering Improper
Payments:
For the past 5 years, none of the national goals established for the
FECA program have addressed improper payments but have focused
primarily on improving service delivery. Two of the five national goals
set time frames for returning claimants to work; two focus on
minimizing medical and compensation costs, and the fifth goal addresses
improving customer service by quickly responding to claimant and agency
inquiries. Past GAO work has shown that emphasizing the prevention,
detection, and recovery of improper payments at the managerial level by
establishing goals for reducing improper payments is a key aspect of an
effective strategy for managing improper payments.[Footnote 12]
Similarly to the national goals, OWCP's performance goals for its
district offices emphasize timely case management, but do not focus on
payment accuracy. None of the 21 performance goals for district offices
contained in OWCP's fiscal year 2007 operational plan address
preventing or detecting improper payments, although one focuses on
recovering delinquent overpayments. As table 1 illustrates, the
majority of OWCP's performance goals for district offices either
support the national goals for the program or focus on quickly
adjudicating claims and processing payments. While one goal requires
district offices to quickly process wage-loss-compensation payments,
OWCP has not established a corresponding goal to ensure that these
payments are accurate. Although quickly processing claims and payments
are important goals, previous GAO work has shown that the risk of
improper payments increases when these goals are not balanced with an
emphasis on payment accuracy.[Footnote 13] In commenting on this
report, Labor reported that it has included a new measure on the
timeliness of processing overpayments in its 2008 operational plan for
the FECA program.
Table 1: National and District Office Performance Goals for the FECA
Program:
Strategic goal: National goals for the FECA program for fiscal years
2003-2008 (targets listed are for fiscal year 2007);
Reduce the consequences of work-related injuries: Return claimants to
work quickly: 1. For USPS claimants, achieve a lost-production-days
rate of 129.8 days; 2. For claimants from all other agencies, achieve a
lost-production-days rate of 49 days;
Reduce the consequences of work-related injuries: Minimize compensation
and medical costs; 3. Produce $8 million in savings by returning
claimants receiving long- term wage loss compensation to work; 4. Keep
the inflationary trend in FECA medical costs below the nationwide
trend;
Reduce the consequences of work-related injuries: Improve customer
service: 5. Achieve targets for 4 of 5 communications performance
areas, such as reducing average call response times.
Reduce the consequences of work-related injuries: Reduce the
consequences of work-related injuries: Reduce the consequences of work-
related injuries:
Strategic goal: District office workload and performance goals; (21
goals established for fiscal year 2007); Reduce the consequences of
work-related injuries: 3 goals for quickly returning claimants to work:
1. For claimants who have received wage loss compensation for 12
months, return them to work within 156 days, on average; 2. Of the
claimants assigned nurses to aid in their recovery, return 6,440 to
work; 3. For claimants unable to return to the jobs they held when
injured, return 550 to work by training them for new positions
Reduce the consequences of work-related injuries: 1 goal for
compensation cost savings: 1. Achieve resolutions (such as returning
claimants to work) in 2,342 claims for long-term wage loss
compensation;
Reduce the consequences of work-related injuries: 5 goals for providing
quality and timely customer service:
1. Authorize 95% of medical referrals within 3 days;
2. Review 95% of incoming mail within 3 days;
3. Respond to 90% of priority written inquiries within 14 days;
4. Respond to 90% of general written inquiries within 30 days;
5. Improve communications efforts, such as:
--Keep callers waiting for 3 min;
--Respond to 65% of telephone calls the same day;
Reduce the consequences of work-related injuries: 11 goals for
accepting claims and processing benefits quickly, including:
--Process 90% of claims for traumatic injuries within 45 days;
--Process 85% of claims for basic occupational illnesses within 90
days;
--Process 85% of wage- loss claims for payments within 14 days;
Reduce the consequences of work-related injuries: 1 goal focused on
collecting delinquent overpayments:
1. Resolve or refer to Treasury for collection 95% of debts that are
180 days delinquent.[A].
Source: GAO analysis of Labor data.
Note: We reviewed the following documents: Labor's fiscal year 2007
performance and accountability report, Labor's fiscal year 2008
performance budget, and OWCP's 2007 operational plan.
[A] In 2007, OWCP resumed measurement of and created a separate report
to identify and track delinquent overpayments that have been referred
to Treasury. However, data were not yet available to monitor the
success of these efforts at the time of our review.
[End of table]
Several district office staff we interviewed reported that they focused
most of their attention on aspects of the claims process that are
regularly tracked and measured by OWCP, whereas tasks such as
identifying and processing improper payments are given lower priority.
In a recent rep6ort by Labor's Inspector General, officials in one
district office stated that claims examiners' primary focus was to
process claims and that time constraints prevented examiners from
focusing on efforts to prevent and detect improper payments, such as
confirming claimant eligibility information on a regular
basis.[Footnote 14]
While OWCP officials monitor payment accuracy as part of their biennial
reviews of the district offices, the results are not incorporated into
Labor's annual assessment of the FECA program's risk of improper
payments, nor are they considered by outside auditors when they
evaluate the program's internal controls.[Footnote 15] Each OWCP
district office undergoes a review every other year, during which OWCP
officials review a sample of claims files to evaluate a comprehensive
range of district office operations--such as the appropriateness of
decisions to accept or deny claims and the accuracy of payments--
against program-wide performance standards. For example, a sample of
initial payments is reviewed to ensure that they are accurate, based on
the appropriate pay rate from the employing agency, and are properly
certified by a second claims examiner.
However, permissible error rates are high--the permissible error rate
for payment accuracy is 20 percent--and district offices with error
rates that exceed the acceptable rate are not always required to
implement corrective actions to address the identified
deficiencies.[Footnote 16] Five of the six district offices OWCP
reviewed in fiscal year 2006 failed to meet the standard because over
20 percent of their payments were either inaccurate or lacked
documentation to support the amount paid; one office had an error rate
of 43 percent.[Footnote 17] However, only three of the offices were
required to take corrective action to ensure that their future payment
calculations are accurate. OWCP officials told us that offices with
error rates slightly below the standard may not be required to develop
corrective action plans if they have already taken steps to address the
particular issue. They noted, however, that a corrective action plan is
required whenever an office misses the performance standard by a large
margin. Further, in commenting on this report, Labor also noted that
findings from several review items may be combined into a single
corrective action plan; as a result, formal remedies for payment
accuracy may be in place even though they were not specifically cited
in the reports reviewed by GAO.
OWCP Lacks the Information Needed to Accurately Assess the FECA
Program's Risk of Improper Payments:
OWCP lacks the information that it needs to accurately assess the FECA
program's risk of improper payments. Previous GAO work has shown that
agencies must know the magnitude of improper payments and the causes of
these errors in order to assess program risks and take actions to
address them.[Footnote 18] A risk assessment entails a comprehensive
review and analysis of program operations to determine where
vulnerabilities exist and what those vulnerabilities are and to measure
their potential or actual impact on program operations. Information on
the magnitude and causes of improper payments form the foundation upon
which management can determine the nature and type of corrections
needed and give management baseline information for measuring progress
in reducing improper payments. Without this information, a program is
vulnerable to improper payments because managers may not be taking all
of the precautions necessary to ensure that payments are accurate.
First, OWCP does not collect or use available data to determine the
magnitude of improper payments or their causes, making it difficult to
identify vulnerabilities that lead to payment errors and determine
their impact on program operations. For example, although the reports
OWCP uses to manage the program list the amount of debts--including
potential overpayments--for collection purposes, OWCP does not analyze
the data to identify the magnitude of improper overpayments that occur
during a particular year or whether they are increasing or decreasing
over time. In addition, OWCP does not collect data on the magnitude of
underpayments identified each year because of limitations in its data
systems. Further, although agency officials cited several potential
causes for improper payments, the agency does not collect aggregate
information on how frequently these errors occur. As a result, the only
way to determine why an overpayment or underpayment occurred is to
review the information in each claims file. While OWCP began using a
new data system in 2005 that has increased the amount and quality of
data available on improper payments, program officials told us that
they have no plans to collect data on the causes of improper payments.
Without accurate data on improper payment risks, OWCP cannot target its
resources towards preventing or reducing the errors that are the most
prevalent or costly, nor can it monitor the effectiveness of its
efforts to prevent such errors. In commenting on this report, Labor
stated that it is (1) developing codes to track the reasons for
overpayments and (2) considering a method to collect information on the
reasons for underpayments.
Further, while Labor is required to annually estimate the magnitude of
improper payments in the FECA program, its estimate provides OWCP with
limited information to identify and address program vulnerabilities.
Labor estimated that the FECA program made $703,000 in improper
payments in fiscal year 2006 based on a review of claims files for a
sample of all payments made during the year and determined that the
program had a low risk of improper payments because this estimate did
not exceed $10 million and 2.5 percent of program payments--the
threshold that federal guidance defines as high risk.[Footnote 19]
While Labor followed the required guidance in developing this estimate,
it may be understated because it does not include certain types of
improper payments that recent audits suggest may be fairly prevalent in
the program. For example, Labor's estimate would fail to catch improper
payments that occurred because the information in the claims files that
it reviewed--such as information on a claimant's work status--was
inaccurate. If a claimant returned to work but failed to notify OWCP,
this information would not be reflected in the claims file. A 2007 SSA
Inspector General audit of the FECA program found that claimants failed
to report approximately $12.6 million in wages to OWCP in 2004,
suggesting that they had returned to work and were no longer eligible
for wage loss compensation--but had not notified OWCP.[Footnote 20]
Labor is not required to include the amount of improper payments that
OWCP identified during the fiscal year in its estimate and OWCP does
not track these data.[Footnote 21] However, these data provide
comprehensive information on the FECA program's risk of improper
payments that is useful in managing the program. From our analysis of
potential overpayments and underpayments, we estimated that OWCP
identified $13.3 million in improper payments in fiscal year 2006 ($7.1
million in overpayments and $6.2 million in underpayments), some of
which occurred in prior fiscal years.[Footnote 22] From our review of
the claims files, we found that many of the improper payments spanned
multiple fiscal years and some were not identified until several years
after they occurred. Without comprehensive information on improper
payments identified each year or trends in these payments over time, it
is difficult for OWCP to identify vulnerabilities in the program that
can lead to improper payments.
OWCP's Dependence on Unverified Information, Internal Errors, and
System Limitations Leaves FECA Vulnerable to Improper Payments:
The FECA program is vulnerable to improper payments because OWCP relies
on unverified self-reported eligibility information from claimants,
makes internal payment errors, cannot stop certain payments, and
receives inaccurate wage and benefits information from claimants'
employing agencies. To identify the causes of improper payments and to
estimate the total dollar values of improper overpayments and
underpayments identified by OWCP in fiscal year 2006, we selected a
sample of overpayments and another sample of potential underpayments
and reviewed the selected claims files. Based on our overpayment file
review, we estimated the causes of all overpayments identified by OWCP
in 2006.[Footnote 23] We also collected information on the causes of
underpayments, but were unable to estimate their prevalence because of
limitations in OWCP's data.[Footnote 24] We found that overpayments
commonly occurred when claimants failed to notify OWCP in a timely
manner when they returned to work, or when family members did not
quickly notify OWCP that a claimant had died. In other instances,
overpayments occurred because claimants did not report earnings to
OWCP. Claims examiners created improper overpayments and underpayments
when they made payment calculation errors. They also overpaid claimants
when they did not promptly stop payments after being notified that a
claimant had returned to work or died. In addition, overpayments
occurred because OWCP's administrative payment processing deadlines
prevented claims examiners from quickly canceling some payments after
being notified of changes in claimants' eligibility status. Finally,
both overpayments and underpayments occurred when claimants' employing
agencies provided inaccurate wage and benefits data to OWCP. Figure 3
shows the causes we identified from our review of the claims files for
overpayments.
Figure 3: Estimated Percentage of Fiscal Year 2006 Overpayments by
Cause:
This pie chart is a pie chart showing estimated percentage of fiscal
year 2006 overpayments by cause.
[See PDF for image]
Source: GAO analysis of a sample off FECA claims files.
[End of figure]
OWCP Relies on Claimants to Provide Key Eligibility Information:
The FECA program is vulnerable to improper payments because it relies
on claimants to report key eligibility information, such as when they
return to work at their agencies or earn wages from other employment,
and does not verify that the data are timely or accurate.
Late or No Notice When Claimants Return to Work:
Some overpayments occur because OWCP relies on claimants--rather than
their employing agencies--to inform it when they return to work, and
claimants do not always do so in a timely manner. From our review of
claims files from a sample of the overpayments identified by OWCP in
2006, we estimated that about 11 percent of all of OWCP's 2006
overpayments occurred because claimants did not immediately notify OWCP
when they returned to work. In some of these instances, claimants did
not notify OWCP that they had returned to work at all--instead, their
employing agencies notified OWCP. Until 1999, OWCP required employing
agencies to submit a notification form when claimants returned to
work.[Footnote 25] However, OWCP discontinued use of this form, and
agencies are no longer required to notify OWCP when a claimant returns
to work. Officials from one employing agency told us that they would
like OWCP to reinstate use of the notification form in order to better
ensure that wage-loss-compensation payments are terminated when
claimants return to work.[Footnote 26] In commenting on this report,
Labor noted that it is working to allow agencies to use its online
system to notify OWCP electronically when a claimant returns to work.
Late or No Notice When Claimants or Their Survivors Die:
OWCP is also not always notified in a timely manner of the death of
claimants or their survivors who were receiving survivor benefits. From
our review of the claims files for OWCP's 2006 overpayments, we
estimated that about 6 percent of all overpayments occurred when a
claimant or survivor died but OWCP was not quickly notified. OWCP
relies on claimants' survivors to inform the agency when claimants die.
Among the overpayments we reviewed, survivors usually notified OWCP
within a few months of a claimant's death. However, in a few
situations, the claims examiners were never informed of the death but
became aware of it through other means, such as when the annual forms
they sent to the claimant were returned to OWCP as undeliverable or
after an investigation by the claimant's employing agency. In one claim
we reviewed, OWCP paid a claimant for more than a year after he died,
until a U.S. Postal Service investigation uncovered that the claimant
was dead, and the claimant's cousin had fraudulently accessed his bank
account and withdrawn the funds. In addition, OWCP is not always
notified in a timely manner of the death of survivors--such as a spouse
or eligible dependent of a deceased claimant--who received survivor
benefits.[Footnote 27] One of the 10 largest overpayments identified in
2006, which totaled over $130,000, occurred when the widow of a FECA
claimant died and OWCP was not notified. OWCP continued to
automatically deposit her FECA survivor benefit payments to her bank
account every month for more than 2 ½ years after her death.
A recent report by SSA's Inspector General found that nearly $2 million
in wage-loss-compensation payments were made in 2004 to claimants who
died in 2003 or earlier.[Footnote 28] OWCP headquarters officials told
us the agency conducts monthly data matches for all FECA claimants with
SSA's death records to prevent long-term overpayments to claimants who
died.[Footnote 29] However, they acknowledged that there had been a
recent 8-month lapse in these monthly data matches because OWCP's
contract with SSA for data matching services had temporarily expired.
In addition, OWCP officials told us that, because they do not collect
the social security numbers (SSNs) of claimants' spouses or other
eligible dependents who collect survivor benefits, they cannot conduct
matches of their records against SSA's death records for these
individuals. Because OWCP does not conduct death matches for claimants'
spouses or other dependents, it cannot use this information to identify
overpayments that occur when it is not notified that (1) a deceased
claimant's spouse or other dependent who was receiving survivor
benefits died or (2) when a claimant's spouse or dependents died--
making the claimant ineligible to receive a higher wage-loss-
compensation payment based on having a spouse or other eligible
dependents.
Unverified Self-Reported Data on Earnings and Other Federal Benefits:
OWCP also relies on claimants to report whether they earn wages, which
may affect their eligibility for wage loss compensation, but claims
examiners generally do not verify this information. Unlike other
federal agencies such as SSA and the Department of Veterans Affairs,
OWCP does not conduct a systemic data match of its records against
SSA's wage records to identify unreported earnings. Instead, OWCP
conducts these matches on an ad-hoc basis for individual claimants if a
claims examiner suspects that a claimant has unreported
earnings.[Footnote 30] Among claims in our sample of 212 overpayments,
claims examiners only verified about 22 percent of claimants' annual
earnings statements by comparing them to SSA's data between 2002 and
2007. Four of the seven cases of unreported earnings included in our
review were not uncovered by OWCP, but by fraud investigations
undertaken by the claimants' employing agencies. Further, a recent
report by SSA's Inspector General found that, in 2004, about 7 percent
of the approximately 1,800 claimants that OWCP determined to be unable
to work at all actually had earnings that were reported to
SSA.[Footnote 31]
Beyond the limitations associated with OWCP's ad-hoc verification of
individual claimants' earnings, the effectiveness of OWCP's
verification process is undermined by the fact that the data are not
current. OWCP officials told us that SSA's earnings data are about 2
years old. More current earnings data are available from another
federal database, the National Directory of New Hires, a database
maintained by the Department of Health and Human Services (HHS) to
assist states in locating parents and enforcing child support orders.
The database includes quarterly wage data for up to eight quarters,
which can be compiled into annual data for matching purposes. OWCP
could use these data to conduct systematic data matches with all of its
claimants to identify those with unreported earnings. Before
implementing such a match, OWCP and HHS would have to ensure that
claimants' privacy and personal information were protected. At present,
OWCP does not have legislative authority to access the database. In the
last several years, the Congress has authorized some expanded use of
this database, allowing other benefit programs to obtain the data. For
example, it has allowed SSA to use the database to establish
individuals' eligibility for Supplemental Security Income and the
Department of Education to use it to collect student loan repayments.
OWCP officials told us they have sought access to the National
Directory of New Hires, but did not provide us with any formal
legislative proposals requesting such authority.
Some overpayments also occur because OWCP does not regularly verify
whether claimants are receiving SSA retirement benefits. For FECA
claimants in the current federal retirement system (those hired after
1983) who are also collecting SSA retirement benefits, OWCP is required
to reduce their FECA payments by the amount of their SSA payments
attributable to their federal service.[Footnote 32] However, during our
interviews, some claims examiners reported that identifying these
claimants is difficult. The Department of Defense, which has undertaken
an initiative to ensure that FECA payments made to its former employees
are correctly reduced by the amount of their SSA retirement benefits,
has helped OWCP institute 230 of these reductions. However, in 2006,
fewer than 30 FECA claimants from all other employing agencies had
their payments reduced because of SSA retirement benefits. This small
number suggests that OWCP has not undertaken a serious effort to
identify and reduce the wage-loss-compensation payments of claimants
receiving SSA retirement payments as required. Because the number of
FECA claimants covered by the current federal retirement system will
substantially increase as time goes on, it is likely that the risk of
these improper payments will also substantially increase.
Errors by OWCP Claims Examiners Caused Overpayments and Underpayments:
OWCP does not sufficiently ensure that its claims examiners correctly
calculate payment amounts to claimants; promptly stop payments after
they have been notified that a claimant has returned to work or died;
make accurate decisions to deny, reduce, or terminate claimants' wage
loss payments; or ensure that claimants file their annual eligibility
and earnings statements.
Inaccurate Payment Calculations by Claims Examiners:
While OWCP requires an experienced claims examiner to certify the
accuracy of the first payment made on each claim before it is issued,
many errors are still undetected. According to a 2006 internal audit by
OWCP, about 14 percent of the initial payments sampled had calculation
errors, and an additional 14 percent could not be verified because the
claims file contained insufficient information to support the
calculations made by the claims examiner. From our review of the claims
files for OWCP's 2006 overpayments, we estimated that about 15 percent
of all overpayments occurred because claims examiners made payment
calculation errors; we also found that some underpayments were caused
by incorrect payment calculations.
Calculation errors we found in our reviews of overpayments and
underpayments included situations in which claims examiners incorrectly
withheld health or life insurance premiums, paid claimants for the
wrong amount of hours of lost wages, or paid claimants at the wrong
rate. For example, several overpayments we reviewed occurred when
claims examiners paid claimants twice for the same period. In addition,
both overpayments and underpayments resulted when claims examiners
withheld incorrect insurance premium amounts. For example, one
underpaid claimant spent 4 years trying to get OWCP to stop incorrectly
deducting premiums for family health insurance from the claimant's wage-
loss-compensation payments. The claims examiner then reimbursed this
claimant for the error twice--effectively overpaying the claim by more
than $14,000.
Some of these payment errors reflect the complicated nature of
accurately determining the amount of compensation to which a claimant
is entitled. For example, several overpayments and underpayments we
reviewed occurred because claims examiners incorrectly determined the
pay rate of a claimant who had returned to work and was later re-
injured. To correctly calculate payments in such cases, a claims
examiner must determine whether the claimant was working in a different
position when he or she was re-injured, compare this amount to what the
claimant would have earned in his or her original position, and use the
higher of the two values. Such errors underscore the need for adequate
training for claims examiners in calculating wage-loss-compensation
payments:
Untimely Termination of Payments to Claimants Who Return to Work or
Die:
Claims examiners do not always promptly stop payments when they are
notified that claimants have returned to work or died. From our review
of OWCP's 2006 overpayments, we estimated that about 17 percent
occurred when claimants returned to work or died but claims examiners
did not stop payments quickly after they were notified of these events.
We estimated that it took claims examiners an average of more than 5
weeks to stop these payments.[Footnote 33] In some cases we reviewed,
claims examiners had to be notified several times before finally
halting payments. For example, a $106,000 overpayment resulted when a
claimant continued to be paid wage loss compensation for nearly 13
years after returning to work, despite numerous notifications. In
another case, it took OWCP more than 2 ½ years after a claimant's death
to cancel wage-loss-compensation payments, even though the claims file
contained more than 20 letters from OWCP to the claimant that had been
returned as undeliverable.
Incorrect Decisions to Deny, Reduce, or Terminate Wage Loss Payments:
From our review of the claims files for potential underpayments, we
estimated that OWCP identified about $6.2 million in underpayments in
fiscal year 2006. Many large underpayments occurred because claims
examiners either inappropriately determined that compensation should be
denied, reduced, or terminated, or did not follow proper procedures
when decreasing benefits.[Footnote 34] In one case we reviewed, for
example, OWCP was required to pay one claimant over $29,000 in back
compensation because it did not provide a notice explaining the
claimant's due process rights when it proposed to terminate benefits.
In another case, OWCP underpaid a claimant by over $83,000 because a
claims examiner inappropriately terminated the claimant's benefits for
refusing a job offer from an employing agency. After the claimant
appealed the termination, it was determined that the claimant was
justified in refusing the job because it did not meet the physical
restrictions required by the injury.
Failure to Ensure That Claimants Submit Annual Eligibility Forms or
Follow Up on the Information on the Forms:
Finally, OWCP does not consistently ensure that claimants return their
annual eligibility forms or adjust benefits when the information
reported by claimants indicates a change in their eligibility.
According to OWCP's internal audits, 14 percent of the claims files the
agency sampled in fiscal year 2006 were either missing annual
eligibility forms entirely or contained forms with incomplete
information on which claims examiners failed to follow up. In addition,
4 percent of the sampled claims files contained information from
claimants indicating that they may have been collecting dual benefits,
had outside earnings, or had changes in their dependent status that
affected their payments, but the claims examiners did not follow up on
this information. In one claims file we reviewed, a claimant reported
the death of a spouse on two separate annual eligibility forms, but the
claims examiner never reduced the wage loss payments.
Some Overpayments Occur because of Limitations in OWCP's Payment
System:
Based on our review of the claims files, we estimated that about 26
percent of all of 2006 overpayments occurred because OWCP had already
processed payments or mailed checks before claims examiners were
notified of events affecting claimants' eligibility for wage loss
payments, such as a claimant's return to work or death. Because of
payment system limitations, claims examiners cannot cancel or make
changes to automated monthly payments for a 10-day period prior to the
end of each pay period. Therefore, if a claims examiner is informed
during this period that a claimant has returned to work or died, the
examiner cannot prevent an overpayment from being issued. Many OWCP
claims examiners we interviewed cited the payment processing deadline
as a frequent cause of overpayments in their caseloads. These
overpayments are for relatively short periods and tend to be smaller
than other overpayments; according to our estimates, these overpayments
averaged about $900 each in 2006.[Footnote 35] Although they tended to
be small, they occurred frequently and took time for claims examiners
to process.
Inaccurate Data from Employing Agencies also Lead to Improper Payments:
Some improper payments occur because claimants' employing agencies
provide inaccurate or incomplete wage and benefits data to OWCP. While
OWCP relies on these agencies to report claimants' wage and benefits
data on initial claims forms so that claims examiners can calculate
wage-loss-compensation payments, it does not require them to provide
evidence of their accuracy, such as by submitting copies of claimants'
pay stubs. In fact, claims examiners in each of the five district
offices we visited reported that the information provided by employing
agencies on claims forms was frequently incomplete or incorrect. They
also said that obtaining corrected information from employing agencies
could be difficult. In our reviews of OWCP's 2006 improper payments, we
found that both overpayments and underpayments were caused by
inaccurate pay rate information provided by claimants' employing
agencies. Underpayments also occurred because employing agencies failed
to provide complete data on claimants' pay rates. For instance, several
underpayments we reviewed occurred because employing agencies failed to
indicate that claimants were entitled to extra pay for working at night
or on Sundays.
While OWCP depends on employing agencies to help identify payment
errors, it does not provide them with sufficient tools to easily do so.
Some employing agency officials told us that they are less able to
monitor the accuracy of payments because they do not have ready access
to detailed compensation data needed to verify OWCP's payment
calculations.[Footnote 36] Employing agencies can track the total
amount being paid to a claimant by OWCP in an online system maintained
by OWCP; however, they are unable to view details used to calculate
payments, such as base and premium pay rates, the amount withheld for
health and life insurance premiums, and whether claimants have
dependents. If the employing agencies want to audit their employees'
claims and identify potential improper payments, they have to send
representatives to OWCP's district offices to review the claims files.
One of the ten largest overpayments identified in fiscal year 2006,
totaling nearly $127,000, was uncovered when an employing agency sent a
representative to OWCP to review claims files. The agency had
previously informed OWCP that it was paying the claimant based on an
incorrect pay rate. However, it was only during its claims file review
nearly 4 years later that the agency discovered that the correct pay
rate was still not being used. Recently, OWCP officials told us that
OWCP was revising its online system to include more detailed payment
information, which should be available by the spring of 2008.
OWCP Does Not Ensure the Recovery of FECA Overpayments:
OWCP does not sufficiently ensure the timely recovery of FECA
overpayments and misses some opportunities for recovering them.
Further, OWCP cannot identify how many overpayments are waived each
year or what percentage of overpaid dollars are repaid. As a result, it
cannot assess the success of its recovery efforts.
OWCP Does Not Ensure Timely Processing of Overpayments:
OWCP does not ensure that its claims examiners process overpayments of
wage loss compensation in a timely manner, which delays their recovery.
Before seeking recovery of an overpayment, OWCP requires a claims
examiner to (1) issue a preliminary notice within 30 days of
identifying the overpayment to explain the circumstances of the
overpayment and give the claimant an opportunity provide additional
information or contest the decision and (2) issue a final notice within
30 days of the preliminary notice.
Timely processing of overpayments is critical to recovering the amounts
owed. First, OWCP cannot attempt to recover overpayments until both the
preliminary and final notices have been sent to the claimants. Second,
prior GAO work has shown that successful recovery of overpayments is
directly related to the time it takes to confirm and process the
overpayment.[Footnote 37] Specifically, the longer it takes to process
an overpayment, the less likely it will be that a claimant will still
be receiving FECA benefits from which the overpayment can be recouped.
Finally, an overpayment that OWCP is unable to recover cannot be
transferred to Treasury for additional recovery efforts until a final
overpayment notice has been issued to the claimant. Treasury has
recovery tools not available to OWCP, such as deducting overpayments
from a claimant's federal tax refund or other federal payments. When
OWCP does not issue a final overpayment notice promptly, it results in
delays in transferring debts to Treasury and in applying these
additional tools.
Available data indicate that OWCP does not ensure that overpayments are
confirmed and processed within its required time frames. As shown in
figure 4, OWCP's September 2007 debt-aging report indicates many delays
in processing overpayments. Almost half of the identified overpayments
were more than 6 months old, and OWCP had not yet issued preliminary
overpayment notices to the claimants.[Footnote 38] Similar delays were
evident when OWCP assessed overpayment processing during its internal
reviews of the district offices. For the six district offices reviewed
in 2006, the district office had not issued a preliminary notice to
claimants for over one-third of the overpayments OWCP reviewed.
Further, based on our review of the 2006 overpayments, we estimated
that, on average, OWCP issued the final overpayment notice to claimants
64 days after the preliminary notice, with a range of 26 days to 470
days.[Footnote 39] In several district offices we visited, claims
examiners or district office officials told us that they sometimes
delayed issuing required overpayment notices to claimants because their
first priority is to pay claims. A claims examiner in one district
office, for example, told us about a backlog of overpayment cases for
which preliminary or final overpayment notices had not been sent to the
claimant.
Figure 4: Status of Overpayments Listed on OWCP's Debt-Aging Report,
September 2007:
This figure is a combination bar chart showing status of overpayments
listed on OWCP's debt-aging report, September 2007. The X axis
represents GAO analysis of OWCP data, and the Y axis represents the
percentage of overpayments in each status.
Pending overpayment: Less than 30 days: 27;
Pending overpayment: Over 180 days: 45.
Preliminary notice issued: Less than 30 days: 23;
Preliminary notice issued: Over 180 days: 36.
Final notice issued: Less than 30 days: 58;
Final notice issued: Over 180 days: 16.
[See PDF for image]
Source: GAO analysis of OWCP data.
Note: If a claimant appeals OWCP's preliminary overpayment decision,
the overpayment remains in preliminary status until an appeal decision
is issued. Some of the preliminary overpayments that were more than 6
months old could have been waiting for an appeal decision.
[End of figure]
We also found that some OWCP district offices experienced more delays
in processing overpayments than others. OWCP's fiscal year 2006
overpayments, for example, showed that most district offices had issued
preliminary notices by March 2007 for at least 90 percent of pending
overpayments. However, four offices had issued preliminary overpayment
notices for a lower percentage of overpayments, with one office issuing
preliminary notices for less than half of its pending overpayments.
While some cases we reviewed involved complicated issues and may have
required extra time for OWCP to confirm the existence and amount of the
overpayment before sending a preliminary overpayment notice to the
claimants, other claims files we reviewed had no readily apparent
reasons for the delays. In one case, for example, a postal worker
aggravated a pre-existing knee injury as a result of prolonged bending
and walking while delivering mail. The claimant subsequently returned
to work and was overpaid almost $700. However, the claims examiner did
not send out the preliminary overpayment notice for nearly a year after
being notified that the claimant had returned to work.
OWCP officials acknowledged that implementation of OWCP's new data
system had resulted in some unreliable data on the debt-aging report
and disrupted the program's ability to track overpayments for the past
few years. They told us that they are taking steps to improve the
reliability of the debt-aging report and to ensure that overpayments
are processed within OWCP's required time frames. For example, in 2007
OWCP directed its district offices to review the debt-aging report in
order to identify inaccurate data and outstanding overpayments that
required action. OWCP officials told us that the reliability of the
data has improved since this review, and the number of potential
overpayments listed on the report has been significantly reduced. They
confirmed that the data we analyzed from the September 2007 debt-aging
report should be reasonably reliable.
About 70 Percent of Overpayments Are Repaid, but OWCP Overlooks
Opportunities to Recover Overpayments:
While OWCP does not track the recovery status of overpayments, our
review of claims files for 2006 overpayments indicated that an
estimated 71 percent were repaid or being collected at the time of our
review.[Footnote 40] An additional 19 percent of the overpayments were
waived by OWCP, in most cases because the overpayment was less than
$700 and the cost of trying to recover the overpayment was expected to
be greater than the amount actually recovered. See figure 5 for the
recovery outcomes for our claims file sample. OWCP officials told us
that they planned to collect more information on the outcome of OWCP's
recovery efforts--such as whether overpayments are waived or repaid--by
the end of fiscal year 2008.
Figure 5: Estimated Recovery Status of Overpayments That OWCP Waived or
Pursued in Fiscal Year 2006:
This figure is a pie chart showing estimated recovery status of
overpayments that OWCP waived or pursued in fiscal year 2006.
Repaid: 61%;
Waived: 19%;
Being collected: 10%;
Delinquent: 6%;
Unknown: 3%;
Referred to Treasury: 2%.
[See PDF for image]
Source: GAO analysis of a sample of FECA claims files.
[End of figure]
Note: Percentages do not add to 100 due to rounding.
We estimated that about half of the overpayments that were repaid or
being collected were repaid directly by the claimant, while 21 percent
were withheld from the claimant's FECA payments (see fig. 6).
Figure 6: Estimated Recovery Sources for 2006 Overpayments That Were
Repaid or Being Collected:
This figure is a pie chart showing estimated recover sources for 2006
overpayments that were repaid or being collected.
Voluntary repayment: 58%;
Withholding from FECA payments: 22%;
Recoupment from deceased claimant's bank or estate: 17%;
Court mandated restitution: 3%;
Refund from OPM retirement benefits: 1%.
[See PDF for image]
Note: Percentages do not add to 100 due to rounding.
[End of figure]
Based on our review of the 2006 overpayments, we estimated that OWCP
waived about $118,000 (about 2 percent) of all 2006 overpaid dollars at
the time of our review. Given the potential costs of recovering an
overpayment, OWCP claims examiners may immediately waive any FECA
overpayments under $200 without notifying the claimant that an
overpayment has occurred. Claims examiners can also waive overpayments
under $700 after sending the claimant a preliminary overpayment notice
if the additional recovery costs are expected to exceed the amount to
be recovered. From our review of the 2006 overpayments, we estimated
that 77 percent of the overpayments $200 or under were waived, compared
with 38 percent of the overpayments between $200 and $700, and 1
percent of the overpayments that were $700 or greater.[Footnote 41]
Other benefit programs GAO has reviewed have established lower minimum
thresholds below which they will not seek recovery; in other words,
they seek to recover more overpayments than OWCP does. For example,
SSA's Supplemental Security Income program, which provides cash
assistance to certain categories of people who have limited income and
resources, waives overpayments of $500 or less if the recipient was not
at fault in the creation of the overpayment and cannot afford to repay
it. An SSA program official told us that, because most of its
overpayments are automatically generated, the program attempts to
recover most overpayments over $1.[Footnote 42] In addition, according
to the Director of the Veterans Affairs' (VA) Debt Management Center,
the VA's pension and disability compensation programs have totally
automated overpayment -processing systems, making it cost effective to
attempt recovery on small overpayments. The VA attempts to recover any
overpayment over $5. Because OWCP's data system does not automatically
generate overpayment notices, these waiver thresholds may not be cost-
effective for FECA at this time. However, OWCP implemented a new data
system in 2005 and is continuing to add new capabilities related to
tracking improper payments. As its overpayment processing capabilities
improve, OWCP may be able to reduce its waiver thresholds and seek to
recover more overpayments.
We found two cases during our review of the 2006 overpayments in which
the claims examiners waived the overpayments even when the claimant
indicated a willingness to pay back the amount. In one case, a claimant
had incurred a $430 overpayment and was sent a preliminary overpayment
notice. The claimant sent a letter to OWCP indicating that he wanted to
repay the overpayment in four installments. Instead, however, the
claims examiner waived the overpayment. Similarly, a claimant called
OWCP to establish a payment plan for her $575 overpayment, but the
claims examiner told her that the overpayment would be waived because
it was less than $700. For waivers of overpayments under $700, OWCP
procedures state that the claims examiner should consider such factors
as whether the claimant can be located, the likelihood of recovery, and
the potential costs of pursuing the case.
We also found instances when claims examiners missed opportunities to
deduct overpayments from other FECA payments, including wage loss
compensation and other types of payments from OWCP. In one case, for
example, a claims examiner made a $29,000 payment to a claimant with an
outstanding potential overpayment of almost $10,000. While the
claimant's FECA payments were stopped, the claims examiner did not
issue a preliminary overpayment notice to the claimant for over a year.
The claims examiner issued the final overpayment notice 2 months later,
in the same month that the $29,000 payment was made. At the time of our
review, the $9,940 debt had not been repaid and was considered
delinquent. In another case, the claimant incurred a $660 overpayment
because health and life insurance premiums had not been deducted from
his FECA payments. The overpayment was waived in July 2006 despite the
fact that the claimant continued to receive manually generated FECA
wage-loss-compensation payments until September 2006 and began
receiving automatic monthly payments in October 2006. These missed
opportunities may have occurred, in part, because OWCP's data system
does not easily identify when a claimant with an overpayment is also
receiving FECA payments. For example, one district office official
pointed out that when a claims examiner processes a new payment, the
system does not notify the claims examiner if the claimant has any
outstanding overpayments. Further, the debt-aging report does not
include a claimant's payment status, which could alert claims examiners
when a claimant with an outstanding overpayment begins receiving FECA
payments. In commenting on this report, Labor noted that it is planning
to create an automated prompt that will alert claims examiners
preparing a FECA payment that a claimant has an existing overpayment.
OWCP's relatively infrequent use of wage garnishment may also represent
a missed opportunity to recover overpayments, especially given the
large number of overpayments that occur when claimants return to work
at a federal agency. OWCP procedures identify wage garnishment as a
recovery option but do not include any detailed instructions on how to
implement it. Instead, claims examiners are encouraged to transfer
overpayments for which garnishment is an option to Treasury and have
that agency garnish the claimant's wages. Most claims examiners we
interviewed did not mention wage garnishment as a recovery option.
Further, none of the overpayments in the claims files we reviewed were
recovered through wage garnishment. Many overpayments created when
claimants return to work are small and may not be worth the effort of
arranging for wage garnishment with the employing agency. However, some
overpayments are large and could be recovered in this manner. OWCP
headquarters officials told us that wage garnishment is a viable
recovery option, but noted that it may be difficult for claims
examiners to identify the correct employing agency official who can
arrange for the claimant's wages to be garnished.
Claims examiners may miss these recovery opportunities for several
reasons. As noted earlier, they may be more focused on paying initial
wage loss claims than recovering overpayments. In addition, some claims
examiners we interviewed were not completely familiar with FECA's
overpayment recovery process, usually because they did not process
overpayments very often. For example, some claims examiners were unsure
about which overpayments were eligible to be waived; however, they said
they reviewed the FECA procedures manual when they had to process an
overpayment. While some claims examiners reported that they
aggressively pursued the recovery of overpayments from available
recovery sources, others said they were more limited in what they could
do. For example, one claims examiner told us that he could not recover
overpayments from a claimant's wage-loss-compensation payments, even
though the FECA procedures manual recommends that overpayments over
$200 be finalized and recovered from ongoing wage-loss-compensation
payments as quickly as possible. In one district office, two claims
examiners also told us that they were not allowed to use wage
garnishment to recover overpayments, although OWCP headquarters
officials told us that claims examiners can garnish wages to collect
overpayments.
Several claims examiners told us that it would be more effective to
assign responsibility to one person for recovering overpayments, rather
than expecting claims examiners to focus on recoveries in addition to
all their other responsibilities. Such an approach could reduce
instances when a claims examiner overlooks a potential recovery source
or unnecessarily waives an overpayment. One district office we visited
had recently implemented this approach, giving responsibility to a
staff person in the fiscal office to recover all overpayments once the
final overpayment notice was sent to the claimant. In dividing the
overpayment process, the district office manager said he hoped that
claims examiners would focus on processing overpayments more quickly,
while the fiscal staff member would specialize in the recovery process.
In another district office, a fiscal staff member provided assistance
to claims examiners by pointing out potential recovery sources for
overpayments, such as OPM retirement benefits. Fiscal staff in the
other three district offices we visited were not involved in the
recovery of overpayments.
Conclusions:
OWCP appropriately places a high priority on making timely wage-loss-
compensation payments to injured federal workers who might otherwise
face financial hardship while, at the same time, helping them return to
work when their injuries have been resolved. However, without a
counterbalancing emphasis on preventing and identifying improper
payments as well as recovering overpayments, claimants may not receive
all of the compensation to which they are entitled and program dollars
may be spent on ineligible claimants, threatening the overall integrity
of the program. To effectively address program vulnerabilities, OWCP
must first identify those vulnerabilities. The current process for
assessing FECA's risk of improper payments does not provide sufficient
information on the extent of improper payments. Further, because OWCP
lacks data on the causes of improper payments, it cannot focus its
efforts on preventing them before they occur or addressing those areas
that are at the highest risk for errors. It is unlikely that the
vulnerabilities we have identified will be addressed without a change
in OWCP's current management strategies with respect to improper
payments.
We recognize that determining eligibility for FECA wage-loss benefits
and calculating wage-loss payments is complicated and depends on
employing agencies to provide accurate information to OWCP, which
leaves the process at risk for errors. However, OWCP's own errors and
reliance on self-reported data with respect to when claimants return to
work and their earnings also contributes to the risk of improper
payments. Taking more proactive steps to reduce the number of improper
payments would allow OWCP to provide better customer service to
claimants because such action would decrease the considerable time it
takes to document, process, and recover overpayments. While OWCP can do
much on its own to reduce the risk of improper payments, its ability to
detect improper payments related to unreported earnings is hindered by
the cumbersome process it must use to verify claimants' earnings
through SSA and the outdated data produced by this process. While OWCP
does not have the legislative authority to access the more timely and
accurate earnings data available in the National Directory of New
Hires, Congress has recently expanded access to these data for other
programs to use in verifying individuals' eligibility for federal
benefits.
Similarly, OWCP can do more to focus on the recovery of overpayments.
With little data on the recovery status of overpayments, OWCP cannot
monitor the effectiveness of its recovery efforts or use this
information to improve these efforts. While our review indicates that
OWCP is recovering many overpayments, it also suggests that recoveries
could be increased if OWCP acts on the missed recovery opportunities we
identified.
Recommendations for Executive Action:
We recommend that the Secretary of Labor direct OWCP to develop a
management strategy to ensure that the program's emphasis on quickly
processing and paying FECA claims is balanced with the need for payment
accuracy. Specifically, the agency should take the following two
actions:
* revise its program performance measures to ensure increased emphasis
on payment accuracy, adequate internal controls, and overpayment
recoveries and:
* collect more detailed information on improper payments, such as the
causes of overpayments and underpayments, and use these data to better
identify improper payment risks and to address areas of high risk.
We also recommend that the Secretary direct OWCP to take steps to
reduce common causes of improper payments, such as:
* requiring agencies to report to OWCP when a FECA claimant returns to
work and provide incentives for agencies to notify OWCP quickly;
* ensuring that its data match with SSA's death records is conducted
regularly and consistently and that it includes individuals who are
receiving survivor death benefits;
* taking steps to ensure that wage-loss-compensation payments for
claimants covered by the current federal retirement system are
appropriately reduced by the amount of their SSA benefits that are
attributable to their federal service;
* considering ways to reduce the time it takes to process automated
monthly payments;
* determining what additional training claims examiners may need to
improve payment accuracy; and:
* exploring options for improving information sharing between OWCP and
employing agencies so that OWCP can make accurate payments and agencies
can help identify payment errors.
To allow OWCP to more effectively verify the earnings information
reported by FECA recipients and identify instances in which a claimant
receiving wage loss compensation has unreported earnings, we recommend
that the Secretary of Labor direct OWCP to develop a legislative
proposal seeking legal authority to enter into a data-matching
agreement with the Department of Health and Human Services to identify
FECA claimants who have earnings reported in the National Directory of
New Hires. Any such data-matching agreement would need to include
appropriate safeguards for protecting claimants' privacy and personal
information.
We further recommend that the Secretary direct OWCP to take steps to
focus attention on the recovery of FECA overpayments, such as:
* collecting more detailed information on how overpayments are resolved
in order to monitor the effectiveness of OWCP's recovery efforts;
* holding staff accountable to ensure that overpayments are processed
in a timely manner;
* considering reducing the dollar threshold for waiving overpayments as
OWCP's overpayment processing data system develops additional
capabilities;
* determining whether having fiscal staff dedicated to recovering
overpayments would increase their recovery; and:
* developing system modifications that would automatically identify
claimants who have outstanding overpayments in order to ensure that
debts are repaid from future benefit payments.
Agency Comments and Our Evaluation:
We provided a draft of this report to Labor for review and comment. The
agency provided comments, which are reproduced in appendix II. Labor
expressed some concerns about our findings and conclusions but did not
specifically comment on our recommendations. However, Labor also
indicated that it is taking a number of steps that are consistent with
our recommendations. In its comments, Labor stated that FECA
overpayments and underpayments should not be considered improper
because Labor adjusts them once additional information becomes
available. We used the definition of improper payments from the
Improper Payments Information Act: "any payment that should not have
been made or that was made in an incorrect amount." In addition, Labor
stated that our analysis of improper payments identified in 2006 does
not accurately reflect its performance in terms of managing improper
payments because it includes payments that occurred in previous years.
We determined, however, that using currently available data on improper
payments that occurred in 2006 would not have provided an accurate
assessment of the risk of the FECA program to improper payments because
OWCP does not identify some improper payments until a year or more
after they occur. As a result, we based our analysis on improper
payments that were identified in 2006 without respect to when they
occurred and describe in the report how our measure of improper
payments differs from Labor's. This analysis allowed us to demonstrate
the type of information that OWCP could collect to identify and address
the largest risks that lead to improper payments. Labor also stated
that system improvements and staff training have improved its data and
processing of overpayments. We acknowledge in our report that Labor's
data on improper payments have recently improved. We believe that the
improvements in Labor's performance in addressing improper payments
have resulted from its efforts to focus more attention on these
payments since our review began. This supports our assertion that the
risks of improper payments are reduced when agencies strike an
appropriate balance between service delivery and payment accuracy. We
continue to believe that our findings, conclusions, and recommendations
are sound. Labor's comments and our responses are reproduced in their
entirety in appendix II. In addition, we incorporated clarifications in
the report as appropriate.
We are sending copies of this report to the Secretary of Labor,
relevant congressional committees, and other interested parties. We
will make copies available to others upon request. In addition, the
report will be available at no charge on GAO's Web site at [hyperlink,
http://www.gao.gov].
If you or your staff have any questions or wish to discuss this report
further, please contact me at (202) 512-7215 or at bertonid@gao.gov.
Contact points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report. The major
contributors are listed in appendix III.
Signed by:
Daniel Bertoni:
Director, Education, Workforce, and Income Security Issues:
List of Congressional Committees:
The Honorable Edward M. Kennedy:
Chairman:
Committee on Health, Education, Labor, and Pensions:
United States Senate:
The Honorable Patty Murray:
Chairman:
Subcommittee on Employment and Workplace Safety:
Committee on Health, Education, Labor, and Pensions:
United States Senate:
The Honorable Joseph I. Lieberman:
Chairman:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Daniel K. Akaka:
Chairman:
Subcommittee on Oversight of Government Management, the Federal
Workforce, and the District of Columbia:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Joe Wilson:
Ranking Member:
Subcommittee on Workforce Protections Committee on Education and Labor:
House of Representatives:
[End of section]
Appendix I: Scope and Methodology:
To address our objectives, we requested data from OWCP on the volume,
causes, and recovery outcomes of improper payments it identified.
However, OWCP was only able to provide us with limited information on
overpayments, and could not provide us with any data on underpayments
because it could not separate them from other payment types. As a
result, we decided to review a sample of claims files containing
identified overpayments to learn more about their characteristics and
reviewed a sample of other claims files to look for underpayments and
estimate the total dollar value of underpayments OWCP identified in
fiscal year 2006. We used the data gathered through these file reviews
to estimate the magnitude of OWCP's improper payments. We also reviewed
results from OWCP's internal audits, called accountability reviews, to
learn more about risks OWCP identified. Additional information on how
we conducted our claims file reviews and other analyses are discussed
below. We conducted our review between September 2006 and January 2008
in accordance with generally accepted government auditing standards.
Review of Overpayments Identified by OWCP in Fiscal Year 2006:
OWCP collects limited information on overpayments, but was able to
create a report for us listing all FECA debts identified in fiscal year
2006. This data extract was run on March 13, 2007, and included basic
data on all 2006 FECA debts as of that date, including type, processing
status, and initial and current balances. This data source contained
records of both wage loss compensation overpayments and other types of
debts, such as medical provider debts and debts associated with legal
settlements. To assess the reliability of these data, we (1) reviewed
existing documentation related to the data sources, (2) electronically
tested the data to identify obvious problems with completeness or
accuracy, and (3) interviewed knowledgeable agency officials about the
data. We determined that the data extract was sufficiently reliable for
our purposes. Before selecting our sample, we removed all debt records
that did not appear to be related to wage-loss-compensation payments.
In addition, we removed all debts that had been voided. As shown in
table 2, the large majority of the remaining debt balance was due to
wage loss compensation overpayments, with smaller amounts related to
benefits fraud, employing agency overpayments, and miscellaneous
situations. Their initial balances totaled just over $14.7 million.
Table 2: Initial Balances of Compensation-Related Overpayments
Identified in Fiscal Year 2006:
Debt type: Wage loss compensation;
Pending: $2,067,950.82;
Preliminary: $2,244,362.57;
Final: $3,615,526.16;
Terminated: $4,522,698.35;
Suspended: $4,781.53;
Total: $12,455,319.43.
Debt type: Benefits fraud;
Pending: $201,010.26;
Preliminary: $78,212.21;
Final: $484,054.69;
Terminated: $220,625.29;
Suspended: $0.00;
Total: $983,902.45.
Debt type: Employing agency;
Pending: $0.00;
Preliminary: $0.00;
Final: $0.00;
Terminated: $10,614.75;
Suspended: $0.00;
Total: $10,614.75.
Debt type: Miscellaneous;
Pending: $202,561.11;
Preliminary: $12,717.80;
Final: $348,374.76;
Terminated: $699,456.67;
Suspended: $0.00;
Total: $1,263,110.34.
Debt type: Total;
Pending: $2,471,522.19;
Preliminary: $2,335,292.58;
Final: $4,447,955.61;
Terminated: $5,453,395.06;
Suspended: $4,781.53;
Total: $14,712,946.97.
Source: GAO analysis of OWCP data.
[End of table]
Before selecting our sample, we removed pending, preliminary
determination, and suspended overpayments from the universe in order to
avoid analyzing characteristics of overpayments that might later be
voided or overturned.[Footnote 43] All remaining overpayments were
either in final determination or terminated status. Final determination
overpayments had neither been waived nor overturned on appeal and were
being collected as of the date of the data run. Once final
determination overpayments are collected in full, they become
terminated. Overpayments may also be terminated if they are waived or
referred to Treasury because of non-repayment. OWCP groups all of these
overpayments together because it does not track how overpayments are
resolved.
The initial balances of the nearly 2,800 remaining final and terminated
overpayments totaled about $9.9 million. As seen in figure 7,
terminated overpayments made up the bulk of the universe; they
represented 82 percent of all records. Final determination overpayments
accounted for 18 percent of the universe and had a higher median dollar
amount--about $2,600 as compared to just over $600 for terminated
overpayments.
Figure 7: Initial Balances of All Wage Loss Compensation Overpayments
Identified in Fiscal Year 2006 and in Final Determination or Terminated
Status, as of March 13, 2007:
This figure is a combination bar chart showing initial balance of all
wage loss compensation overpayments identified in fiscal year 2006 and
in final determination or terminated status, as of March 13, 2007. The
X axis represents the overpayment amounts, and the Y axis represents
the number of claims.
Under $200: Final determination: 1;
Under $200: Terminated: 565.
$200-under $700: Final determination: 58;
$200-under $700: Terminated: 651.
$700-under $5000: Final determination: 282;
$700-under $5000: Terminated: 873.
$5000-under $10,000: Final determination: 63;
$5000-under $10,000: Terminated: 102.
$10,000 and over: Final determination: 91;
$10,000 and over: Terminated: 100.
[See PDF for image]
Source: GAO analysis of OWCP data.
[End of figure]
We selected a random sample of 331 overpayment records, stratified by
initial dollar value, from the universe of almost 2,800 final and
terminated overpayments. Some claims had multiple overpayment records,
but OWCP officials informed us that some claims examiners may have
incorrectly created separate overpayment records each time a claimant
submitted a repayment on a preexisting debt. As a result, we sampled
cases with multiple overpayments in separate strata and reviewed all
overpayments listed under each claim to better estimate the prevalence
of incorrectly recorded overpayments.
Once we selected our sample, we requested the electronic file for each
claim that had a sampled overpayment. We reviewed these files to
collect information including what caused overpayments, how long they
lasted, how long it took claims examiners to process them, whether they
were appealed or waived, whether they were repaid, and whether claims
files contained annual eligibility updates. A second person verified
the information collected. We only included overpayments that we
considered to be improper in our analysis. Debts that were not due to
improper payments, such as debts for copying expenses or overpayments
that occurred when claimants retroactively elected to join other
benefits programs, were excluded from our analysis. We also excluded
cases that should not have been included in the universe of 2006 debts.
(Some debt records were actually repayments on debts identified in
previous fiscal years.)
Using only the 212 overpayments records that remained after these
exclusions, we analyzed data on overpayment characteristics and made
projectable estimates to the universe of final determination and
terminated fiscal year 2006 overpayments. Unless otherwise noted,
estimates are accurate to within plus or minus 10 percentage points, at
the 95 percent confidence level. For instance, our estimate of the
total dollar value of improper payments has a much wider confidence
interval.
While OWCP's debt database was sufficiently reliable for our purposes,
there are some limitations to our analysis. First, because we excluded
overpayments that were in pending, preliminary, and suspended statues
from our analysis, our results are only projectable to the universe of
overpayments identified in fiscal year 2006 and placed in final
determination or terminated status by March 13, 2007. As a result, our
estimate of the dollar value of improper overpayments identified by
OWCP is low. Additionally, our estimates may capture characteristics
that are not representative of all overpayments. Since the overpayments
we reviewed had already been finalized or terminated, they could have
been processed faster by claims examiners, have fewer appeals by
claimants, or exhibit quicker repayment than the pending, preliminary,
and suspended overpayments we excluded from the universe. Further,
since we were only able to analyze recovery outcomes of overpayments
that had been terminated as of March of 2007, the proportions of all
2006 overpayments that were repaid, waived, or referred to Treasury for
recoupment may differ from our estimates.
Review of Potential Underpayments Identified by OWCP in Fiscal Year
2006:
OWCP does not track underpayments and was therefore unable to provide
us with data on the volume, dollar value, or causes of underpayments it
identified in fiscal year 2006. However, it was able to provide us with
an extract of all payments made through its payment override system,
called the "direct payment" system, which includes some underpayments.
The direct payment system allows claims examiners to issue payments in
special circumstances, such as when a claimant has already been paid
for a particular period, but is owed additional compensation.
Underpayment reimbursements are issued via direct payment if a claimant
was previously compensated for a particular period and was underpaid.
If a claimant was not originally compensated for a period, but should
have been, the underpayment reimbursement would then be issued through
OWCP's standard payment process--not the direct payment system. Other
instances in which payments must be issued through the override system
include when payments cover periods extending far into the future, when
payments are very large, and when payments are issued to nonclaimants,
such as survivors of deceased federal workers.
We used the data set provided to create an estimate of the total dollar
value of underpayments OWCP identified in fiscal year 2006. We limited
the universe to the type of payments most likely to contain
underpayments. First, we excluded payments to individuals other than
claimants because these payments must be made via direct payment. Then
we excluded payments coded as schedule awards because lump sum schedule
awards, whose payment periods extend into the future, must be issued as
direct payments. Finally, we excluded payments that had been canceled.
All remaining payments were coded as wage-loss compensation payments to
claimants.
We selected a random sample of the remaining records that was
stratified by dollar value. We selected the 90 claims with the highest
total dollar value of direct payments, and 110 additional claims for
review. These 200 claims had a total of 344 direct payment records
because some claims had multiple direct payments. We then reviewed each
payment in these claims files and collected information on whether the
direct payments listed were issued as reimbursement for improper
underpayments or whether they were issued for other reasons. We also
collected information on what caused each underpayment, who was
responsible for it, and who identified it. When OWCP made a direct
payment because a decision to deny or terminate payment was overturned
on appeal, we did not consider it an underpayment if the decision was
overturned based on new information that was not available when the
original decision was made. We did consider it an underpayment when the
denial or termination was overturned because of an error in judgment or
because a claims examiner did not follow appropriate FECA procedures. A
second person verified the information collected, as well as the
judgments made by the original reviewer. From our review, we determined
that 172 of the 344 payment records represented improper underpayments.
The key limitation of this data set was the fact that an unknown number
of underpayments were not included in the universe. However, because
sampling the direct payment universe was the only available way to
identify underpayments, we determined that it was sufficiently reliable
for our purposes. Since the universe does not include all underpayment
reimbursements, our estimate of the total dollar value of underpayments
identified in fiscal year 2006 is understated. Additionally, because we
designed our sampling methodology primarily for the purposes of
developing an estimate of the total dollar value of underpayments, we
were unable to estimate the prevalence of causes of underpayments with
sufficient precision.
Analysis of Labor's Improper Payment Risk Estimate:
We relied on the results from our claims file reviews of potential
overpayments and underpayments to develop an estimate of improper
payments identified by OWCP in 2006. As noted above, OWCP's data
systems do not collect information on improper underpayments. OWCP did
provide data on overpayments identified in 2006, including $9.9 million
for overpayments that were finalized or terminated by March 2007. In
reviewing a sample of these claims files, we found that not all
overpayments included on the list represented improper payments.
Consequently, we developed our own estimate of improper overpayments
based on the results from our file review. We estimated that OWCP
identified $13.3 million in improper payments in fiscal year 2006 ($7.1
million in improper overpayments and $6.2 million in improper
underpayments). The 95 percent confidence interval for this estimate
ranged from approximately $10.4 million to $16.2 million. This is an
estimate of the magnitude of improper payments that OWCP identified in
fiscal year 2006, not the magnitude of improper payments that OWCP made
in fiscal year 2006. Our estimate of $13.3 million includes some
payments made to claimants in previous fiscal years (such as fiscal
year 2004 or 2005) that OWCP discovered were improper in 2006. Table 3
provides information on the proportion of the sample of improper
payments we reviewed that were made in fiscal year 2006 and the
proportion made in prior fiscal years.
Table 3: Distribution of the Sample of Improper Payments Identified in
Fiscal Year 2006 by the Year in which the Payment Was Made:
Total improper payments;
Sample of overpayments: Number (% total): 212;
Sample of overpayments: Dollars (% total): $1,469,000;
Sample of underpayments: Number (% total): 172;
Sample of underpayments: Dollars (% total): $3,483,000.
Some or all of the improper payment was in fiscal year 2006;
Sample of overpayments: Number (% total): 162 (76.4%);
Sample of overpayments: Dollars (% total): $576,000 (39.2%);
Sample of underpayments: Number (% total): 104 (60.5%);
Sample of underpayments: Dollars (% total): $1,817,000 (52.2%).
Entire improper payment occurred prior to fiscal year 2006;
Sample of overpayments: Number (% total): 50 (23.6%);
Sample of overpayments: Dollars (% total): $892,000 (60.8%);
Sample of underpayments: Number (% total): 68 (39.5%);
Sample of underpayments: Dollars (% total): $1,666,000 (47.8%).
Source: GAO analysis of Labor data.
[End of table]
As previously discussed, this estimate likely understates the amount of
overpayments identified during the fiscal year for two reasons. First,
our estimate only includes overpayments that were finalized by March
2007, when OWCP provided us with its 2006 debt universe. An additional
$4.7 million in debts that had been declared by OWCP, but not yet
finalized, were not included in our universe. Additionally, our
estimate of improper underpayments is likely to be understated because
not all underpayments are issued as direct payments.
Analysis of OWCP's Accountability Reviews:
We used OWCP's biennial internal program audits, called accountability
reviews, to provide additional evidence about OWCP vulnerability to
improper payments. These reviews are conducted on a district office
basis, with samples drawn from each office's universe of claims files.
To aggregate these results across all six district offices evaluated in
fiscal year 2006, we weighted the errors that were identified in each
office to account for differences in the size of universes across
district offices. Specifically, we used the following formula to weight
the results in each district office: (number of errors in the district
office/sample size for district office) multiplied by (universe of
items reviewed for district office /universe of items reviewed across
all district offices).
[End of section]
Appendix II Comments from the Department of Labor:
Note: GAO comments supplementing those in the report text appear at the
end of this appendix.
U.S. Department of Labor:
Assistant Secretary for Employment Standards:
Washington, D.C. 20210:
February 8, 2008:
Mr. Daniel Bertoni:
Director, Education, Workforce, and Income Security Issues:
United States Government Accountability Office:
Washington, D. C. 20548:
Dear Mr. Bertoni:
Thank you for the opportunity to comment on the GAO draft report
entitled Federal Workers' Compensation: Better Data and Management
Strategies Would Strengthen Efforts to Prevent and Address Improper
Payments (GAO-08-284). The report resulted from a study in which you
reviewed the Office of Workers' Compensation Programs (OWCP) Division
of Federal Employees' Compensation (DFEC) benefit payments for
accuracy. Although we were pleased that the volume of improper payments
under the Federal Employees' Compensation Act (FECA) estimated by GAO
was very low (less than 0.75% of the more than $1.8 billion in wage
loss compensation payments made during the year studied), even though
erroneous payments made in other years were included in your estimate,
we do have some concerns with the findings and conclusions. I would
like to provide a few general comments on the overall report, followed
by our specific responses to the study's findings:
* It is the mission of the FECA program to promptly pay wage loss and
medical benefits to injured Federal employees in an effort to minimize
hardship. Accurate payments based on verified, complete, and accurate
data are essential. However, there are instances where payment may
result in over or underpayments, but these payments should not be
considered improper, since adjustments are made once additional
information becomes available.
(See response 1.):
* Unlike in prior GAO reviews,[Footnote 44] we were not provided case
names and numbers. This greatly limited our ability to comment or
verify the accuracy of the GAO's findings as they related to particular
cases or circumstances, including a determination as to whether a
payment was in fact improper. Our request for case numbers associated
with specific errors was declined. Additionally, without the case names
and numbers, we are unable to identify localized training needs based
on specific problems that may have been attributable to a single
office.[Footnote 45]
(See response 2.):
* As stated in the report, the GAO included erroneous payments
identified in the year studied, but actually made in prior years to
determine its estimate of the volume of improper payments under the
FECA during the year studied. We believe this approach is not an
accurate measure of the program's improper payment performance.
(See response 3.):
Notwithstanding the low volume of errors identified in the report and
our inability to examine the underlying data, the Department of Labor
(DOL) will follow up appropriately on the recommendations to better
analyze and track the causes of improper payments under FECA and
thereby further reduce their incidence.
Our comments on specific findings of the study follow the order
presented in the report.
GAO Item: 0WICP Lacks an Effective Strategy for Managing the Risks of
Improper FECA Compensation Payments
"OWCP Does Not Emphasize Preventing, Detecting, or Recovering Improper
Payments"
The report is correct in its assertion that the FY 2007 program plan's
twenty-one (21) performance goals established for the district offices
"emphasize timely case management, but do not focus on payment
accuracy." While these performance goals specifically address
timeliness measures, OWCP's staff training, payment procedures (which
require payment review and certification), and subsequent internal
accountability review processes provide controls to ensure the
prevention, timely detection, and recovery of improper payments.
Additionally, the DOL's A-123 Reviews and the DOL Office of the
Inspector General's annual audits further address qualitative issues,
including a test of our internal control processes.
(See response 4.):
The DFEC Operational Plan for 2008 (presented in draft in September
2007) did include a new measure of the timely processing of identified
overpayments (both pending and preliminary), in keeping with the other
timeliness measures found in the plan (which addresses a concern raised
later in the report).
(See response 5.):
The report indicates that DOL does not use the results of the DFEC
accountability review findings in its assessment of the program's risk
of improper payments. We do not concur with this finding in that the
independent auditors for both the DOL OIG SAS-70 audit and the DOL's A-
123 Review incorporate our accountability reviews in their assessment
of the agency's internal controls. The effectiveness of the
accountability review process is assessed during the course of the
audits. Results of our accountability reviews are referenced in the
audit reports and serve as a basis for findings and recommendations of
the audit entity. For FY 2007, FECA received an unqualified audit
opinion.
(See response 6.):
The GAO states that the accountability review's permissible error rate
for initial payments is high (20%). However, the accountability review
definition of errors is not comparable to the GAO's, thus the GAO's
interpretation of the accountability review error rate is inaccurate.
In the accountability review, an error is not only an incorrect
payment, but also a procedural error. Thus, a single payment may have
multiple errors attributed to it in the accountability review process,
even if the payment was correct. Procedural factors may include
incomplete documentation or certification of an otherwise proper
payment. Therefore, error rates in the accountability reviews do not
only reflect errors for actual payments.
(See response 7.):
The report stated that the program had failed to require some district
offices to form corrective action plans when the accountability review
revealed an initial payment rate below the acceptable standard. There
are two explanations for this. First, it should be noted that there is
always a meeting immediately after every accountability review between
the National and district office upper management. This meeting is
conducted to analyze the findings and to determine what corrective
action plans are needed. In these meetings, 'management reviews other
extraneous factors that may have seriously impacted the error rate -
factors which may obviate the need for a corrective action on a failed
item. For instance, district office management may have recognized a
problem in the course of the review year and already implemented
corrective measures. Secondly, findings from several items may be
combined into a single corrective action plan, instead of creating an
individual plan for each one. So, formal remedies may be in place,
although not directly noted in the Initial Payments section of the
final accountability review report. We will undertake more
comprehensive documentation of corrective actions and the basis for
establishing corrective action plans.
(See response 8.):
"OWCP Lacks the Information Needed to Accurately Assess the FECA
Program's Risk of Improper Payments"
We believe that the detailed internal accountability review process
provides a good basis to assess the types and frequency of payment
errors. In addition the statistical sampling performed for the annual
improper payments reporting requirement also provides data as to
payment errors. To further improve this process, we are developing ways
to collect information in the Integrated Federal Employees'
Compensation System (iFECS) for the analysis of potential erroneous
payments. In the realm of overpayments, we are developing reason codes
in the system so that we can track the various types of overpayments
that occur, and the reasons for them. As for underpayments, one of the
DFEC district offices is already conducting an audit of potential
erroneous payments. The program plans to evaluate this audit and
consider implementing it on a national level. Analysis of both
underpayments and overpayments will be used to identify training needs
in an effort to improve performance. With the availability of this
data, we will consider establishing performance goals in this area.
(See response 9):
SSA Audit Report:
The report cited a 2007 audit report from the Social Security
Administration (SSA) Inspector General that found that "claimants
failed to report approximately $12.6 million in wages to OWCP in 2004."
What is not indicated in the GAO report is that in making this finding,
the SSA/OIG did not review case files to determine if the wages in
question did in fact create improper payments by the DFEC. SSA/OIG
simply ran the DFEC payment system's case status codes against their
database to identify apparent matches. However, their methodology did
not take into account legitimate earnings or coding errors, which could
only be determined by case review. For this reason, the SSA/OIG
indicated that the $12.6 million was a universe of "potential"
overpayments, and not an assertion of actual improper payments. The
SSA/OIG audit was performed at the request of another agency and DFEC
was not given the opportunity to review the data in detail or provide
comment.
(See response 10):
Improper Payments Identified in 2006:
The GAO has estimated a total of $13.3 million in improper payments
identified in 2006, spanning multiple fiscal years. This figure was
derived from a review of known underpayments and overpayments and not
from random sampling of all payments. The report speculates that this
figure is probably understated, since there were frequent delays in
creating overpayment records in the system. We do not believe this
statement is reflective of the current status of DFEC overpayments. The
overpayments reviewed by the GAO spanned FY 2004, FY 2005, and FY 2006.
During that period DFEC made extensive system changes, including the
inception of the new iFECS in FY 2005. As a result of the normal
problems associated with a system start-up, there were difficulties in
identifying and tracking overpayments, resulting in longer than usual
delays in creating overpayment records. However, most of these problems
were corrected by the end of FY 2006, which has allowed the DFEC to
shorten this timeframe. In fact, since iFECS now automatically
identifies and tracks many types of overpayments (in particular,
overpayments attributable to prior returns to work), this enables OWCP
to act more promptly than before the new system was implemented.
(See response 11):
GAO Item: 0WCP 's Dependence on Unverified Information, Internal
Errors, and System Limitations Leaves FECA Vulnerable to Improper
Payments.
"OWCP Relies on Claimants to Provide Key Eligibility Information"
Claimant Notification of Return to Work:
The report indicates that the DFEC relies on claimants themselves
reporting their return to work, allowing for improper payments to be
created. GAO is correct in that DFEC does take action when claimants
report their return to work. However, DFEC obtains return to work
information from injury compensation coordinators in employing agencies
as well as nurses and vocational rehabilitation staff. Injury
compensation specialists at the employing agencies report claimant
returns to work directly to the DFEC (as noted in the report on page
21). In addition, return to work status is monitored and reported by
OWCP's field nurses and vocational rehabilitation specialists whose
principal role is to assist with return to work. In the late 1990's
OWCP began a two-pronged nurse intervention program that contracts with
nurses to contact injured workers to facilitate medical care and assist
with return to work issues. For claimants in vocational rehabilitation,
rehabilitation professionals will have firsthand knowledge of a
claimant's return to work. Both nurses and vocational rehabilitation
contractors provide notification when an employee has returned to work
or scheduled a return to work.
(See response 12.):
Further, the DFEC is working on creation of an electronic version of
the discontinued Form CA-3. The program envisions an interactive
component in the Agency Query System (AQS) where the employer can
quickly report the return to work without requiring a paper form and
mailing. The previously-used manual form was completed by employing
agencies to formally notify DFEC when a claimant returned to work, but
was discontinued because it was frequently not completed, or submitted
too late to be of use. Until the implementation of the electronic
process, the employing agencies will continue to rely on their injury
compensation coordinators to report returns to work directly to the
DFEC District Office.
(See response 13.):
Claimant or Beneficiary Deaths:
As the report notes on page 22, there was a lapse in the SSA Death
Match agreement that allows the DFEC to utilize SSA data to identify
claimant deaths. That problem has since been rectified and matches were
later conducted for some of the six month lapsed period, allowing the
program to track claimant deaths in a timelier manner. The report also
cites a finding in the same SSA/OIG study mentioned earlier that nearly
$2 million in wage loss benefits were paid to deceased claimants in FY
2004. Again, the SSA/OIG report acknowledges that the study was limited
to a computer match which neither verified the beneficiaries' deaths
nor included reviews of the individual cases to verify that
overpayments actually occurred. We believe that the match included
cases where we terminated compensation payments but erroneously failed
to change our case status. As a result, we believe that the reported
amount is overstated. As for tracking the death of survivor
beneficiaries to avoid improper payments, the program has previously
pledged to begin to collect these beneficiaries' Social Security
Numbers and to input these into our system to enable crossmatch with
the SSA death listings for these individuals. OWCP has been authorized
by Congress (Public Law 103-333, 108 Stat. 2539, September 30, 1994) to
require persons who file notices of injury and or claims for
compensation under the FECA and its extensions to disclose SSNs.
Consequently, applicable regulations concerning the filing of a notice
of injury and claim for compensation, including 20 C.F.R. § 10.100
(traumatic injury), 10.101 (occupational disease), and 10.105 (death),
now expressly require the reporting of the injured worker's SSN. For
death claims, the survivor must also disclose the SSNs of all survivors
for whom benefits are claimed.
(See response 14.):
(See response 15.):
Failure to Send Wage Data Requests on Every Claimant:
In addition, the DFEC has also made recent efforts, not noted in the
report, to improve the number of FERS offset deductions being made for
Social Security benefits attributable to Federal service. A new process
is being implemented to speed up the response time from SSA on FERS
data requests made by the district offices. In addition, a project is
now underway with the United States Postal Service to review their
claims that may be eligible for FERS reductions.
(See response 16.):
"Errors by OWCP Claims Examiners Caused Overpayments and Underpayments"
CE Errors/ Incorrectly Denied Payments:
It is difficult to assess the magnitude of this problem, since,
contrary to past practice, the DFEC has not been given the opportunity
to view cases in which the GAO is citing errors. Without knowing for
certain if these cases are in fact errors, or what type of error
patterns may exist, a specific response is impossible. This is
especially true in the analysis of "incorrectly denied payments."
Reviewing a denied claim is a very technical undertaking, and one that
the DFEC only gives to its more experienced and expert employees. In
addition, assessment of such cases is subject to an interpretation of
the current evidence, which may not be reflective of the circumstances
of a case at the time the initial decision was done.
(See response 17.):
Nevertheless, the program is intent on improving claims examiner
performance, and is creating new training modules to that end. One of
the planned modules will deal specifically with establishing pay rates
and initial payments, with the goal of improved accuracy. The modules
will cover many aspects of the claims process, and will be available on-
line for either initial claims training or for updating the training of
existing examiners.
Lack of Eligibility Forms:
It should be noted that the GAO review of this subject was based on the
2006 internal accountability reviews conducted by the DFEC. The reviews
focus on the work in a given district office over the prior twelve
months, meaning that they would include cases from early 2005 through
mid 2006. In a system update on March 5, 2006, the DFEC implemented
substantial improvements to its Periodic Entitlement Review (PER)
system. This is the application that is used to track claimant
entitlement and ensure that the annual eligibility forms have been
issued and tracked. As a result, the 2007 Financial Audit, conducted by
Labor/OIG, showed considerable improvement in this area. We are
confident that continued use of this tracking system will be an
effective tool to reduce this type of improper payment.
(See response 18.):
"Some Overpayments Occur Because of Limitations in OWCP's Payment
System"
The payment process schedule that the DFEC has established with the
U.S. Treasury was created to allow the Treasury to issue DFEC payments
in a timely manner. To avoid claimant hardship, the Treasury schedules
its check releases so that they arrive within a couple of days of the
date of issuance. To accomplish this, the Treasury established the
timeline that is currently followed. Recent discussions with Treasury
on this matter indicate that we could only move back the schedule a
single day if we still wish to release the claimant's payments in a
timely manner equivalent to present service. However, if we did move
the schedule back a day (allowing claims examiners one more day to
react to a return to work) there would be a danger that a transmission
or processing problem with the payment schedules (without a back up
day) would create severe delays in payment issuance for all of our
claimants. In the interest of having a fail-safe day, the program
intends to leave the current schedule in place.
(See response 19.):
"Inaccurate Data From Employing Agencies Also Leads to Improper
Payments"
The OWCP has already discussed with the GAO its plans to provide
employing agencies with more detailed compensation calculation
information that would allow them to identify errors resulting from
incorrect pay rate information. Specifically, the DFEC has agreed to
accelerate a planned enhancement to the iFECS/Agency Query System,
which will allow employing agency staff to access all the details of a
given payment online. This should allow the agencies the ability to
monitor payments and discover any flaws in the data they have
submitted. It should be noted that agencies have always been provided
the pay rate information on form CA 1049, but will now have the ability
to cross check this against actual pay history in real time.
(See response 20.):
GAO Item: OW/CP Does Not Ensure the Recovery of FECA Overpayments "OWCP
Does Not Ensure the Timely Processing of Overpayments"
We believe that this finding unfairly characterizes the program's
current debt performance. As the concept of an automatic identification
of a potential overpayment ("pending" debts) was newly introduced to
the program with the inception of the iFECS system in 2005, claims
personnel were unfamiliar with it and failed to make proper use of this
aspect of the system. Though the report notes that during the period of
review nearly half of the program's pending debts were over 180 days
old (page 29), that figure is currently down to 26% and steadily
improving. Although we note again that we are unable to comment on the
particular cases reviewed by the GAO because the GAO declined to
identify the specific cases they reviewed, we would note that many of
the aged pending debts that we reviewed proved to be duplicates upon
review. Because of the system changes, there were longer than usual
delays in debt processing for 2005 and part of 2006. However, training
with the district offices and continued improvements in the iFECS
system have greatly improved the program-wide performance.
(See response 21):
"About 70 Percent of Overpayments Are Repaid, but OWCP Overlooks
Opportunities to Recover Overpayments"
Waiver:
Despite the fact the SSA and the Department of Veterans Affairs (VA)
use a much lower threshold for writing off small overpayments, lowering
the current amount may not be feasible for DFEC. The waiver limits are
set in an effort to weigh the costs associated with pursuing the
overpayment against the potential benefits received. As the FECA
statute requires a finding of whether the individual is with or without
fault and thus FECA regulations require that a fault finding be made at
the preliminary decision stage, we cannot automate the process. As a
result, our overpayment process requires more up-front analysis by a
claims person than may be needed by the other agencies cited. The
current dollar amounts for waiver are set because of this need for
early human intervention.
(See response 22):
Missed Opportunities on PR Payments:
The program already has scheduled an enhancement to the iFECS
compensation system that will prompt the user when a payment is being
made on a claim that has an existing overpayment. There will also be a
prompt if the claimant being paid has an overpayment in a separate
case. The effect of these prompts will be to warn the claims staff to
consider collection of outstanding overpayments, and should greatly
reduce any missed opportunities for these types of collections.
(See response 23):
Wage Garnishment:
The DFEC Procedure Manual outlines the various types of collection
strategies that should be pursued when trying to collect on an improper
payment. Specifically, PM §6-100-3(f) states that although wage
garnishment is an available collection opportunity, it is preferable
for the debt to be referred to the U.S. Treasury for servicing. Since
the Treasury conducts both wage garnishment and the offset of any
outgoing federal payments, they are better equipped to make these
collections on behalf of the DFEC.
(See response 24):
OWCP is committed to continual improvement in payment accuracy and
overpayment collection, while recognizing our priority of prompt
payment of wage loss compensation to avoid hardship. We believe we have
effective systems in place and enhancements being developed to ensure
an even higher degree of payment accuracy. We will give your
recommendations full consideration and we will continue to work to
improve our automated systems and our employees' performance.
Again, we appreciate the opportunity to review and comment on the
report.
Sincerely,
Signed by:
Victoria A. Lipnic
GAO's Response to Labor's Comments:
The following are GAO's responses to the Department of Labor's comments
on our draft report as outlined in Labor's February 8, 2008, letter.
1. Labor commented that FECA's mission is to promptly pay wage loss and
medical benefits to injured federal employees to minimize hardship,
noting that accurate payments are essential. Labor also noted that,
while payments can result in overpayments or underpayments, they should
not be considered improper because adjustments are made once additional
information becomes available. As stated our report, we used the
definition of improper payment in the Improper Payment Information Act:
any payment that should not have been made or was made in the wrong
amount. We continue to believe that Labor needs to ensure that it
strikes the appropriate balance between processing claims quickly and
preventing improper payments.
2. Labor asserted that its ability to comment on or verify the accuracy
of GAO's findings with respect to specific cases was limited because we
did not provide the case names and numbers associated with specific
categories of improper payments. Because it is GAO's policy not to
release our work papers before a review is completed, we did not
provide the requested information to Labor. The previous review cited
in Labor's comments involved a different set of circumstances in which
GAO identified errors during its review of case files and worked with
OWCP to confirm the errors. GAO also did not provide its work papers to
Labor for that study. To verify the findings of our current report,
OWCP could have reviewed the case files it provided to us for our
review.
3. Labor stated that we reviewed all improper payments identified in
2006 without regard to when they actually occurred, describing our
methodology as an inaccurate measure of the program's performance with
regard to improper payments. In conducting our analysis, we determined
that reviewing available data on improper payments that occurred in
2006 would not provide an accurate assessment of the risk of the
program to improper payments because OWCP does not identify some
improper payments for a year or more after they occur. As a result, we
focused on improper payments that were identified in 2006 without
respect to when they occurred. We described the specific methodology we
used in the report and detailed how our measurement of improper
payments differs from Labor's. Further, while Labor's random sample of
payments is consistent with OMB's guidance for developing an improper
payment rate, it provides little information on the magnitude and
causes of improper payments. Our review of improper payments identified
by Labor in a particular year provides much more qualitative
information on the magnitude and causes of improper payments that the
agency can use to reduce the incidence of improper payments. We
continue to believe that Labor should use its existing data and collect
additional data on the causes of improper payments to use in
identifying and addressing the most common causes of FECA improper
payments.
4. While OWCP has payment procedures, provides training to staff, and
conducts biennial reviews to determine how well district offices follow
established procedures, the lack of performance measures for payment
accuracy leaves the FECA program at risk of improper payments. As we
noted in the report, previous GAO work has shown that the risk of
improper payments increases when payment timeliness goals are not
balanced with an emphasis on payment accuracy. Further, some OWCP staff
told us that they focused more on claims processing tasks that are
tracked by OWCP, while placing a lower priority on processing improper
payments. We continue to believe that the agency should establish
performance goals related to payment accuracy.
5. Labor did not provide us with its fiscal year 2008 Division of
Federal Employees' Compensation (DFEC) Operational Plan during our
review. In response to this comment, we asked for a copy of the plan
and Labor provided it. We added the information about the new
performance measure to the report.
6. Labor's Office of Inspector General's (OIG) SAS-70 audit for 2006
assessed the FECA program's internal controls. As part of this audit,
the OIG inspected OWCP's accountability reviews with respect to payment
accuracy and determined that the reviews were properly conducted.
However, the OIG's SAS-70 audit and Labor's A-123 review did not
incorporate the results of the accountability reviews with respect to
payment accuracy into their findings.
7. We added language to the report to recognize that OWCP's
accountability reviews include procedural errors that may not result in
an improper payment. We separately reviewed payment and procedural
errors and found that 14 percent of the payments sampled in OWCP's 2006
accountability reviews had calculation errors rather than procedural
errors. Further, if district offices are not following the agency's
payment procedures in over 20 percent of its cases, the program is
still at risk of improper payments, even if some procedural errors do
not create an improper payment.
8. During our review, OWCP officials did not tell us that findings from
several review items could be combined into a single corrective action
plan. We added this information to our report.
9. Labor's statistical sampling is intended to develop an improper
payment rate and provides little useful information about the program's
risks of improper payments. While the results from its accountability
reviews could potentially provide data on program risks, OWCP officials
gave us no indication that that they using the results for this
purpose. While OWCP officials did not share with us during our review
their plans to develop reason codes for improper payments, we support
the steps they are proposing to better track improper payments, steps
that are consistent with our recommendations. We also encourage OWCP to
develop performance goals for reducing improper payments based on these
improved data.
10. While the SSA OIG did not review individual cases to verify that an
improper payment occurred, it focused on a specific population of FECA
payment recipients who should not be earning any wages--individuals who
were totally disabled for the entire year. Conducting automated data
matches is an important internal control for means-tested benefit
programs and a critical first step in the process of identifying
potential improper payments that should be further investigated.
Without such data matches, Labor cannot begin to identify overpayments
made when claimants do not report earnings. In addition, if the
information that the SSA OIG reviewed was inaccurate because OWCP
improperly coded some of its claims, OWCP should take steps to ensure
that all claims are properly coded.
11. In our report, we note that OWCP's new data system provides better
data for tracking the status of overpayments and that OWCP has taken
steps to address data reliability issues that arose during the initial
implementation of the new system. We agree that the new system should
more quickly identify some overpayments, such as those that occur when
claimants return to work. However, from our reviews of the claims
files, we found other types of overpayments that can take a long time
to identify--such as errors in the wage rates provided by the
claimants' agencies to OWCP--that will not be identified by the new
system. Further, OWCP data and interviews with some claims examiners
indicated that significant delays occurred in processing overpayments
after they were identified. As noted in our report, managing
overpayments has not been a priority for OWCP in the past. However, we
believe that improvements in OWCP's performance are the result of its
recent increased emphasis on improper payments.
12. We clarified in the report that nurses and vocational
rehabilitation staff can also notify OWCP that a FECA claimant returned
to work. However, because nurses or vocational rehabilitation staff are
not assigned to every claim, we believe the employing agency is in the
best position to notify OWCP when a claimant returns to work, and OWCP
should require agencies to do so in a timely manner.
13. Although, during our review, OWCP officials did not tell us about
their plan to be notified electronically when claimants return to work,
we support OWCP's efforts to develop systems to facilitate timely
notification when claimants return to work. We recognize, however, that
agencies may not always provide this information promptly to OWCP. As a
result, we recommended that OWCP provide incentives for agencies to
notify it quickly. For example, OWCP tracks how quickly agencies submit
required claims forms and could similarly track how quickly agencies
notify it when claimants return to work.
14. While we recognize that the SSA OIG did not review individual cases
to verify that an improper payment occurred, some of these cases may
represent actual overpayments. However, without conducting regular data
matches with SSA's death records for all individuals receiving FECA
payments, OWCP cannot easily identify such overpayments. As with
matches of earnings data, conducting automated data matches with death
records is an important internal control and a critical first step in
the process of identifying potential improper payments that should be
further investigated. In addition, if the information that the SSA OIG
reviewed was inaccurate because OWCP improperly coded some of its
claims, OWCP should take steps to ensure that all claims are properly
coded.
15. Because OWCP officials told us during our review that the FECA
program does not collect the SSNs of individuals receiving survivor
death benefits, we contacted an OWCP official to discuss this comment.
He clarified that the form survivors use to apply for death benefits
does not request their SSNs. As a result, OWCP cannot currently include
survivors in its data match with SSA's death records. However, the
official also stated that, when the death benefit application form
expires in 2010, OWCP plans to propose that the form be revised to
include the survivor's SSN, a proposal subject to OMB approval. We
continue to believe that OWCP should take all needed steps to include
survivors who claim death benefits in its monthly data matches with
SSA's death records.
16. OWCP officials told us the agency is taking steps to improve the
number of FERS offset deductions being made for Social Security
benefits but the specific steps being taken were not completely clear.
We requested a copy of a letter that the officials told us they had
prepared related to this initiative, but OWCP did not provide it to us,
so we could not confirm the steps being taken. OWCP officials also
mentioned that the agency was taking steps to obtain FERS information
more quickly from SSA. While this is a useful step, our concern is that
some claims examiners may not be aware of this issue or how to
implement a FERS offset deduction.
17. We agree that making determinations about claims files requires
some judgment and interpretation. To ensure that appropriate and
consistent interpretations were used, GAO took the following steps in
reviewing case files. First, we established case file review protocols
with specific criteria about how to treat different types of
circumstances. For example, in reviewing underpayments created when a
denied claim was overturned on appeal, the protocol instructed
reviewers not to consider it an underpayment if the decision was
overturned based on new information that was not available when the
original decision was made. We pretested the protocol and revised it in
response to the pretest results. Our protocol also called for a second
GAO analyst to independently verify the case file responses recorded by
the initial analyst. If the two analysts did not agree, they discussed
the case until they came to consensus on the appropriate response. In
addition, GAO supervisors and technical staff reviewed the results of
the analysts' work. Finally, we support OWCP's plans to develop a
training program to improve payment accuracy, plans that are consistent
with our recommendations.
18. We based our findings on the most recent data and reports available
at the time of our review. We believe that Labor's efforts to ensure
that claimants submit annual eligibility forms will help decrease the
risk of improper payments.
19. Given the large number of overpayments created by the current
payment schedule established by OWCP, we continue to believe that OWCP
should look for opportunities to reduce the time needed to process its
automated monthly FECA payments.
20. In our report, we describe OWCP's plans to provide employing
agencies with more detailed FECA payment information. We support OWCP's
efforts in this area, which are consistent with our recommendations.
21. We used data from OWCP's September 2007 debt aging report, which
was the most recent data we could incorporate into our report and that
OWCP officials told us was reasonably reliable. If more recent data
indicate that OWCP's performance in processing overpayments is
improving, we commend OWCP for its efforts. As stated previously, we
believe that OWCP's performance may be improving because of its
increased emphasis on managing improper payments, and we encourage the
agency to continue these efforts.
22. We recognize that agencies use different computer systems and that
the FECA program has different requirements from the programs
administered by SSA and VA. However, as OWCP continues to improve its
overpayment processing capabilities, we believe that it should review
the thresholds used by these and other agencies to identify potential
opportunities to reduce its waiver thresholds.
23. OWCP officials did not inform us of these planned enhancements to
their data system during our review. We added this information to our
report. We support the steps OWCP is proposing to improve its debt
collection activities, steps that are consistent with our
recommendations.
24. In our report, we describe OWCP's policy and procedures with
respect to wage garnishment. We agree that Treasury may be better
equipped to garnish the wages of FECA claimants with overpayments,
especially if claims examiners process claims quickly and refer them to
Treasury as soon as possible. However, if OWCP does not process and
finalize overpayments quickly, opportunities to garnish wages may be
lost since a claimant may no longer be working at a federal agency by
the time the overpayment is referred to Treasury. We encourage OWCP to
continue its efforts to process overpayments more promptly and refer
uncollected overpayments to Treasury as quickly as possible.
[End of section]
Appendix III: GAO Contact and Acknowledgments:
GAO Contact:
Daniel Bertoni, Director, (202) 512-7215, bertonid@gao.gov:
Staff Acknowledgments:
Revae Moran, Assistant Director, and Michelle St. Pierre, Analyst-in-
Charge, managed this assignment, and Jordan H. Holt and M. Ellen Phelps
Ranen made key contributions throughout the assignment. In addition,
Carla Craddock and Keith Howey assisted with the audit work; Carla
Lewis provided advice on financial audit requirements and improper
payment issues; Daniel Schwimer provided legal assistance; Charles
Willson provided writing assistance; and Laurie Hamilton, Jean McSween,
Karen O'Conor, and Beverly Ross assisted with the methodology and
statistical analyses.
Footnotes:
[1] Pub. L. No. 107-300, (2002).
[2] For example, see (1)Department of Labor, Office of Inspector
General, Mechanisms Used to Identify Changes in Eligibility Are
Inadequate at the FECA District Office in Jacksonville, Florida, 04-07-
004-04-431 (Washington, D.C.: Sept. 28, 2007) and (2) Social Security
Administration, Office of the Inspector General, Federal Employees
Compensation Act: A Nationwide Review of Federal Employees Who Received
Compensation for Lost Wages for Periods When "Earned Wages" Were
Reported on the Social Security Administration's Master Earnings File,
A-15-06-16037 (Baltimore, Md.: May 18, 2007).
[3] 5 USC §8101, et seq.
[4] Several mixed-ownership government corporations, such as USPS and
the Tennessee Valley Authority, are required to provide additional
funds to cover their "fair share" of the costs for administering the
program for their employees. See 5 USC §8147(c).
[5] FECA claimants are not required to retire at a certain age and can
continue to receive FECA wage-loss-compensation payments for as long as
they remain eligible.
[6] For claimants covered under the Civil Service Retirement System,
none of their SSA retirement benefits are based on federal service.
Therefore, their FECA benefits are not reduced by the amount of SSA
retirement benefits that they receive. However, for FECA claimants
covered under the Federal Employees Retirement System, a portion of
their SSA retirement benefits is based on their federal service. The
Civil Service Retirement System was replaced by the Federal Employees
Retirement System, and almost all federal employees hired after 1983
are covered by the Federal Employees Retirement System.
[7] Minimum and maximum monthly payments are set by law (5 USC
§8112(a)). The minimum monthly FECA payment is 75 percent of the basic
monthly pay for a GS-2, step 1 employee ($18,700 per year as of Jan. 1,
2007). The maximum monthly FECA compensation payment cannot exceed 75
percent of the basic monthly pay for a GS-15, step 10 employee
($121,000 per year as of Jan. 1, 2007).
[8] OWCP refers to claimants who receive automatic monthly payments as
being on the "periodic roll" and those who receive manually generated
payments as being on the "daily roll."
[9] In general, OWCP continues to pay claimants the difference between
their current salary and the salary they were earning at the time of
their injury for as long as this difference exists and their medical
work restrictions remain the same. OWCP would not continue to pay this
difference for claimants who quit their job without good cause (for
example, if they quit because they did not like the work hours).
[10] Office of Management and Budget, OMB Circular No. A-11 (2002),
Appendix C, "Section 57-5." However, OMB Circular No. A-123 provides
that agencies with this high-risk designation are not permanently
subject to the improper payment reporting requirements if the program
has documented a minimum of 2 consecutive years of improper payments
that are less than $10 million annually.
[11] In fiscal year 2006, the FECA program made over $1.8 billion in
wage-loss-compensation payments and paid $668 million for claimant
medical and rehabilitation services, for a total of approximately $2.5
billion in benefits.
[12] GAO, Executive Guide, Strategies to Manage Improper Payments:
Learning from Public and Private Sector Organizations, GAO-02-69G
(Washington, D.C.: October 2001).
[13] GAO, Executive Guide, Strategies to Manage Improper Payments:
Learning from Public and Private Sector Organizations, GAO-02-69G
(Washington, D.C.: October 2001).
[14] Department of Labor, Office of Inspector General, Mechanisms Used
to Identify Changes in Eligibility Are Inadequate at the FECA District
Office in Jacksonville, Florida, 04-07-004-04-431 (Washington, D.C.:
Sept. 28, 2007).
[15] Labor's assessment of the FECA program's risk of improper payments
is based on a statistical estimate of the amount of improper payments
made by the program during the fiscal year. When evaluating the
program's internal controls, outside auditors verify that OWCP
conducted accountability reviews but do not factor the results of the
reviews into their evaluation.
[16] In reviewing initial payments, a sampled payment that was not
properly certified would be considered an error, even if the actual
payment was correct.
[17] For three of these district offices, virtually all of the errors
were payment calculations. For one office, one-third of the errors were
payments calculations, while most of the remaining errors involved
discrepancies between the pay rate provided by the employing agency and
the pay rate used for the FECA calculations. For the last office,
almost all the errors were due to the fact the case file lacked
sufficient information to determine if the payment was calculated
correctly.
[18] GAO, Executive Guide, Strategies to Manage Improper Payments:
Learning from Public and Private Sector Organizations, GAO-02-69G
(Washington, D.C.: October 2001).
[19] The Improper Payment Information Act requires federal agencies to
annually estimate the amount of improper payments in programs that
agencies have identified as susceptible to improper payments. OMB
guidance requires agencies to obtain this estimate using statistically
valid techniques. Labor based its estimate on a review of a sample of
102 wage-loss-compensation payments made that year in which it found 1
overpayment that totaled $228. From this review, Labor projected that
the FECA program made $703,000 in improper payments in fiscal year
2006. This estimate is intended to be a gross total of overpayments and
underpayments in the program. In fiscal year 2007, Labor estimated that
the FECA program made $2.6 million in improper payments.
[20] Social Security Administration, Office of the Inspector General,
Federal Employees Compensation Act: A Nationwide Review of Federal
Employees Who Received Compensation for Lost Wages for Periods When
"Earned Wages" Were Reported on the Social Security Administration's
Master Earnings File, A-15-06-16037 (Baltimore, Md.: May 18, 2007).
[21] To ensure consistency in the error rates reported by the agencies,
OMB requires agencies to provide an improper payment rate based on a
statistical sample of payments projected to the universe of payments
made that year. OMB does not require agencies to include the amount of
improper payments identified each year in their estimates. Following
federal guidance, Labor's 2006 estimate is of the dollar value of
improper payments made during the fiscal year and does not include any
payments from previous fiscal years (such as 2004 or 2005) that OWCP
identified as improper in fiscal year 2006.
[22] In reviewing claims files from OWCP's list of the $9.9 million in
overpayments identified and finalized by OWCP in 2006, we found that it
included overpayments that we did not consider to be improper, as well
as overpayments from time periods outside our purview. Therefore, in
order to estimate the magnitude of improper overpayments identified by
OWCP in 2006, we reviewed the claims files for a sample of potential
overpayments that it identified that year. Similarly, because OWCP's
data systems do not have the ability to distinguish underpayments from
other payments made, we reviewed the claims files for a sample of
potential underpayments in order to estimate the magnitude of improper
underpayments identified by the agency that year. Based on the results
of both of these reviews, we estimated that OWCP identified
approximately $13.3 million in improper payments in 2006. The 95
percent confidence interval for this estimate ranged from $10.4 million
to $16.2 million. Whereas Labor estimated the magnitude of improper
payments that OWCP made in fiscal year 2006, we estimated the magnitude
of improper payments that OWCP identified during the fiscal year.
[23] OWCP provided a list of all debts identified in the FECA program
in fiscal year 2006, which included potential overpayments. From the
information provided, we excluded debts that (1) were not in final
determination or terminated status or (2) were unrelated to wage-loss-
compensation payments. From this revised data, we selected a random
sample of wage loss compensation overpayments and reviewed the claims
file for each debt to identify the cause of the overpayment and its
recovery status. After reviewing the claims files, we excluded
overpayments that (1) were not improper payments or (2) were repayments
of debts identified prior to our fiscal year 2006 time frame. After
completing our analysis, we estimated the total dollar amount of
improper overpayments identified by OWCP in 2006, and the percentage of
improper overpayments that were attributable to different causes. See
appendix 1 for additional information on our methodology.
[24] Because OWCP was unable to identify its universe of underpayments,
we sampled from a universe of different types of payments, including
reimbursements when claimants were underpaid. Given this limitation in
the universe, we could not estimate both the magnitude of underpayments
and the frequency of different causes using a reasonable sample size.
We designed a sampling methodology to allow us to develop a total
dollar value estimate of underpayments and were therefore unable to
estimate the prevalence of causes of underpayments with sufficient
precision. See appendix I for additional information on our
methodology.
[25] Although the OWCP headquarters officials we interviewed were
unsure when this form was discontinued, a DOD official told us OWCP
stopped using the form in 1999.
[26] OWCP also assigns nurses and vocational rehabilitation staff to
work with certain claimants and these staff can also notify OWCP when a
claimant returns to work.
[27] If a claimant dies as a result of a work-related injury or
illness, certain survivors, such as the claimant's spouse, children,
and dependent parents, are eligible for FECA compensation (known as
death benefits). The law specifies the percentage of a claimant's
monthly salary that is due to each eligible survivor, but monthly
payments for all survivors cannot exceed 75 percent of the claimant's
monthly salary.
[28] Social Security Administration, Office of Inspector General,
Federal Employees' Compensation Act: A Nationwide Review of Federal
Employees Who Received Compensation for Lost Wages for Periods When
"Earned Wages" Were Reported on the Social Security Administration's
Master Earnings File, A-15-06-16037 (Baltimore, Md.: May 18, 2007).
Because the SSA Inspector General did not review the specific cases to
confirm that an improper payment had been made, it described these
cases as potential overpayments.
[29] In fiscal year, 2007, this data match identified 847 FECA
claimants who were listed in SSA's death records.
[30] Without a systemic data match, OWCP must obtain a release from the
claimant and send this release to SSA along with a request for earnings
statements for the period covered in the release--a cumbersome and time
intensive process.
[31] Social Security Administration, Office of Inspector General,
Federal Employees' Compensation Act: A Nationwide Review of Federal
Employees Who Received Compensation for Lost Wages for Periods When
"Earned Wages" Were Reported on the Social Security Administration's
Master Earnings File, A-15-06-16037 (Baltimore, Md.: May 18, 2007).
Because the SSA Inspector General did not review the specific cases to
confirm that an improper payment had been made, it described these
cases as potential overpayments.
[32] As of fiscal year 2004, 70 percent of civilian federal employees
were enrolled in the Federal Employees Retirement System, which covers
employees hired since 1984. Thirty percent were enrolled in the Civil
Service Retirement System, which covers employees hired prior to 1984.
[33] The 95 percent confidence interval for this estimate ranged from
26 to 55 days.
[34] Because of the manner in which payments are recorded, we did not
capture some underpayments that occurred when OWCP inappropriately
denied or terminated wage loss payments. Our estimate only pertains to
the underpayments we were able to identify. See appendix I for more
information on the methodology for reviewing underpayments.
[35] The 95 percent confidence interval for this estimate ranged from
$660 to $1,162.
[36] Employing agencies receive copies of letters sent by OWCP to
claimants after their first automatic monthly payment has been issued.
These letters list the amount of insurance premiums deducted but do not
include specific information about how claimants' pay rates are
calculated. Further, after this initial letter, agencies do not receive
copies of subsequent benefits statements sent by OWCP to claimants.
[37] GAO, Welfare Benefits: Potential to Recover Hundreds of Millions
More in Overpayments, GAO/HEHS-95-111 (Washington, D.C; June 20, 1995)
and GAO, Benefit Overpayments: Recoveries Could Be Increased in the
Food Stamp and AFDC Programs, GAO/RCED-86-17 (Washington, D.C.: Mar.
14, 1986).
[38] When a potential overpayment is first identified, OWCP categorizes
it as a pending overpayment. Once its existence and amount has been
confirmed, a preliminary notice is sent to the claimant and the
overpayment is then categorized as a preliminary overpayment. OWCP
officials told us that most pending overpayments are confirmed as
actual overpayments.
[39] This is based on our review of 27 overpayments in which (1) OWCP
issued both a preliminary and final overpayment notice to the claimant,
and (2) the claimant did not request an appeal in response to the
preliminary overpayment notice. The confidence interval for our
estimate of the mean days between the preliminary and final notice is
44 days to 85 days.
[40] The claims files we reviewed were only those that OWCP had waived
or finalized, i.e., issued both the preliminary and final notices of
overpayment to claimants. We do not know the recovery status of
overpayments that OWCP had not finalized at the time of our review.
These overpayments may involve more complicated issues and therefore
may have different recovery outcomes.
[41] The confidence interval for the $200 and under category is 66
percent to 87 percent, while the confidence interval for overpayments
between $200 and $700 is 27 percent to 49 percent.
[42] For those few cases in which an overpayment notice is manually
generated, the Supplemental Security Income program attempts to collect
any overpayment over $10.
[43] We excluded preliminary overpayments because they could have
outstanding appeals and might be overturned. We excluded pending
overpayments because of concern that some should be voided. (Pending
overpayments may be automatically generated by OWCP's computer system.
OWCP officials informed us that some claims examiners did not know how
to process these overpayments, and may have created and processed
duplicate records.) Suspended overpayments were excluded because they
are associated with pending legal action.
[44] See GAO-03-158R Postal Service Workers' Compensation Claims,
Letter of Shelby Hallmark, pp 25-26. [hyperlink,
http://www.gao.gov/new.items/dO3158r.pdf.]
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