Federal Employees' Compensation Act
Preliminary Observations on Fraud-Prevention Controls
Gao ID: GAO-12-212T November 9, 2011
This testimony provides information on fraud-prevention controls for the Federal Employees' Compensation Act (FECA) program. According to the Department of Labor (Labor), in fiscal year 2010 about 251,000 federal and postal employees and their survivors received wage- loss compensation, medical and vocational rehabilitation services, and death benefits through FECA. Administered by Labor, the FECA program provides benefits to federal employees who sustained injuries or illnesses while performing their federal duties. Employees must submit claims to their employing agency, which are then reviewed by Labor. For those claims that are approved, employing agencies reimburse Labor for payments made to their employees, while Labor bears most of the program's administrative costs. Wage-loss benefits for eligible workers-- including those who are at, or older than, retirement age--with total disabilities are generally 66.67 percent of the worker's salary (with no spouse or dependent) or 75 percent for a worker with a spouse or dependent. FECA wage loss compensation benefits are tax free and not subject to time or age limits. Labor's Office of Workers' Compensation Programs (OWCP) estimated that future actuarial liabilities for governmentwide FECA compensation payments to those receiving benefits as of fiscal year 2011 would total nearly $30 billion (this amount does not include any costs for workers added to the FECA rolls in future years). In 2010, the United States Postal Service (USPS) Office of Inspector General reported that USPS alone had more than $12 billion of the $30 billion in estimated actuarial FECA liabilities. In April 2011, the USPS Inspector General (IG) testified that USPS had removed 476 claimants from the program based on disability fraud since October 2008 and recovered more than $83 million in judgments. Given the significant projected outlays of the governmentwide FECA program and prior USPS IG findings of fraud, this statement provides preliminary observations on our ongoing work examining FECA fraud-prevention controls and discusses related prior work conducted by us and other federal agencies. We will continue to review the identified issues and report on our findings at a later date.
Our work to this point has identified several promising practices that could help to reduce the risk of fraud within the FECA program. The promising practices link back to fraud-prevention concepts contained in GAO's Fraud Prevention Framework and Standards for Internal Control in the Federal Government, and include agencies' use of full-time staff dedicated to the FECA program, periodic reviews of claimants' continued eligibility, data analysis for potential fraud indicators, and effective use of investigative resources. These promising practices have already resulted in successful investigations and prosecutions of FECA-related fraud at some agencies, and could help to further enhance the program's fraud- prevention controls. However, our preliminary work has also identified several potential vulnerabilities in the program's design and controls that could increase the risk for fraud. Specifically, we found that limited access to necessary data is potentially reducing agencies' ability to effectively monitor claims and wage-loss information. In addition, agencies' reliance on self-reported data related to wages and dependent status, lack of a physician selected by the government throughout the process, and difficulties associated with successful investigations and prosecutions all potentially reduce the program's ability to prevent and detect fraudulent activity. Labor and employing agencies generally agreed with the preliminary findings presented in this statement and provided technical comments, which were incorporated into this statement. We plan to follow up on the promising practices and potential vulnerabilities as part of our ongoing work.
GAO-12-212T, Federal Employees' Compensation Act: Preliminary Observations on Fraud-Prevention Controls
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United States Government Accountability Office:
Statement for the Record to the Committee on Homeland Security and
Governmental Affairs, U.S. Senate:
For Release on Delivery:
Expected at 10:00 a.m. EST:
Wednesday, November 9, 2011:
Federal Employees' Compensation Act:
Preliminary Observations on Fraud-Prevention Controls:
Statement of Gregory D. Kutz, Director:
Forensic Audits and Investigative Service:
Chairman Lieberman, Ranking Member Collins, and Members of the
Thank you for the opportunity to provide information on fraud-
prevention controls for the Federal Employees' Compensation Act (FECA)
program. According to the Department of Labor (Labor), in fiscal year
2010 about 251,000 federal and postal employees and their survivors
received wage-loss compensation, medical and vocational rehabilitation
services, and death benefits through FECA. Administered by Labor, the
FECA program provides benefits to federal employees who sustained
injuries or illnesses while performing their federal duties. Employees
must submit claims to their employing agency, which are then reviewed
by Labor. For those claims that are approved, employing agencies
reimburse Labor for payments made to their employees, while Labor
bears most of the program's administrative costs. Wage-loss benefits
for eligible workers--including those who are at, or older than,
retirement age--with total disabilities are generally 66.67 percent of
the worker's salary (with no spouse or dependent) or 75 percent for a
worker with a spouse or dependent. FECA wage loss compensation
benefits are tax free and not subject to time or age limits.
Labor's Office of Workers' Compensation Programs (OWCP) estimated that
future actuarial liabilities for governmentwide FECA compensation
payments to those receiving benefits as of fiscal year 2011 would
total nearly $30 billion (this amount does not include any costs for
workers added to the FECA rolls in future years). In 2010, the United
States Postal Service (USPS) Office of Inspector General reported that
USPS alone had more than $12 billion of the $30 billion in estimated
actuarial FECA liabilities. In April 2011, the USPS Inspector General
(IG) testified that USPS had removed 476 claimants from the program
based on disability fraud since October 2008 and recovered more than
$83 million in judgments. Given the significant projected outlays of
the governmentwide FECA program and prior USPS IG findings of fraud,
this statement provides preliminary observations on our ongoing work
examining FECA fraud-prevention controls and discusses related prior
work conducted by us and other federal agencies. We will continue to
review the identified issues and report on our findings at a later
To provide these preliminary observations on governmentwide FECA fraud-
prevention controls, 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. We
interviewed officials at OWCP headquarters and officials responsible
for managing the FECA program at six federal agencies that employ FECA
claimants: USPS, United States Navy (Navy), Department of Veterans
Affairs (VA), United States Army (Army), Department of Homeland
Security (DHS), and United States Air Force (Air Force). We selected
these employing agencies because they had the highest total amount of
FECA expenditures in fiscal year 2010 among federal agencies.
Combined, these employing agencies represent 73 percent of total FECA
program future liabilities as of September 30, 2011. Because these
employing agencies are not representative of the entire FECA program,
our findings cannot be generalized beyond these six agencies. This
statement's findings are primarily based on document reviews and
discussions with agency officials. As such, we have not validated
whether controls discussed in this statement are actually being
consistently followed or are effective.
We conducted this portion of our ongoing performance audit from June
2011 through November 2011, in accordance with generally accepted
government auditing standards. Those standards require that we plan
and perform the audit to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and conclusions based on
our audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit
Our work to this point has identified several promising practices that
could help to reduce the risk of fraud within the FECA program. The
promising practices link back to fraud-prevention concepts contained
in GAO's Fraud Prevention Framework and Standards for Internal Control
in the Federal Government,[Footnote 1] and include agencies' use of
full-time staff dedicated to the FECA program, periodic reviews of
claimants' continued eligibility, data analysis for potential fraud
indicators, and effective use of investigative resources. These
promising practices have already resulted in successful investigations
and prosecutions of FECA-related fraud at some agencies, and could
help to further enhance the program's fraud-prevention controls.
However, our preliminary work has also identified several potential
vulnerabilities in the program's design and controls that could
increase the risk for fraud. Specifically, we found that limited
access to necessary data is potentially reducing agencies' ability to
effectively monitor claims and wage-loss information. In addition,
agencies' reliance on self-reported data related to wages and
dependent status, lack of a physician selected by the government
throughout the process, and difficulties associated with successful
investigations and prosecutions all potentially reduce the program's
ability to prevent and detect fraudulent activity. Labor and employing
agencies generally agreed with the preliminary findings presented in
this statement and provided technical comments, which were
incorporated into this statement. We plan to follow up on the
promising practices and potential vulnerabilities as part of our
The FECA program covers over 2.7 million civilian federal and postal
employees in more than 70 agencies, providing wage-loss compensation
and payments for medical treatment to employees injured while
performing their federal duties.[Footnote 2] FECA claims are initially
received at the employing agency, then forwarded to Labor's OWCP where
eligibility and payment decisions are made. Every year, employing
agencies reimburse OWCP for the amounts paid to their employees in
FECA compensation during the previous year. Certain government
corporations and USPS also make payments to Labor for program
administrative fees.[Footnote 3] Figure 1 displays the standard
process for FECA claims reviews and payments by OWCP.
Figure 1: FECA Claims Process:
[Refer to PDF for image: illustration]
Injured federal employee files claim with OWCP:
Claim accepted; or;
- Claimant can appeal denial.
Employee and agency file initial wage-loss claim (CA-7).
OWCP calculates initial payment based on:
1) Pay rate:
* Date of injury;
* Date disability began;
* Date disability recurred;
* Plus extra pay for working Sundays, holidays and nights;
* Deductions for health and life insurance benefits.
2) Dependency status:
Married or at least one dependent: Receive 75% of wages;
Single: Receive 66 2/3% of wages.
3) Receipt of other federal retirement or disability benefits:
* VA benefits;
* OPM retirement benefits;
* SSA retirement benefits for FERS covered employees.
Determine potential return to work date:
1) Manual Generated Payments:
* Claimant will return to work within 3 months;
* Claimant files new claim form to receive additional compensation.
Return to work:
Full-time: Compensation stops;
Part-time: Compensation reduced accordingly.
2) Automatic Payments:
* Return to work date is over 3 months away;
* Receives automatic payments every 28 days;
* Claimant does not file additional claim forms;
Annually verify eligibility:
* Other earnings;
* Other federal benefits.
Return to work:
Full-time: Compensation stops;
Part-time: Compensation reduced accordingly.
Source: GAO analysis; images: Art Explosion.
[End of figure]
OWCP is the central point where FECA claims are processed and
eligibility and benefit decisions are made. Claims examiners at OWCP's
12 FECA district offices determine applicants' eligibility for FECA
benefits and process claims for wage-loss payments. FECA laws and
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, 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, or must have benefits reduced to eliminate duplicate
payments. For example, Social Security Administration (SSA) disability
benefits are reduced if an individual is also receiving FECA payments.
According to OWCP officials, initial claims received from employing
agencies are reviewed to assess the existence of key elements. The
elements include evidence that the claim was filed within FECA's
statutory time requirements, that the employee was, at the time of
injury disease, or death, an employee of the United States, and that
the employee was injured while on duty, and that the condition
resulted from the work-related injury. If the key elements are in
place, OWCP will approve a claim and begin processing reimbursements
for medical costs. After initial claim approval, additional reviews
are done while a claim remains active if the claim exceeds certain
dollar thresholds. Once a claim is approved, payments are sent
directly to the claimant or provider. An employee can continue to
receive compensation for as long as medical evidence shows that the
employee is totally or partially disabled and that the disability is
related to the accepted injury or condition. OWCP considers claimants
who are not expected to return to work within 3 months to be on its
periodic rolls for payment purposes.[Footnote 4] OWCP officials review
medical evidence annually for claimants on total disability receiving
long-term compensation who are on the program's periodic rolls, and
every 3 years for claimants on the periodic rolls who have been
determined to not have any wage-earning capacity. Claimants are also
required to submit an annual form (CA-1032) stating whether their
income or dependent status has changed. The form must be signed to
acknowledge evidence of benefit eligibility and to acknowledge that
criminal prosecution may result if deliberate falsehood is provided.
If questions arise about medical evidence submitted by the claimant,
OWCP can request a second medical examination be performed by a
physician of its choosing.
Observations from Preliminary Work Identify Promising Practices and
Our preliminary observations indicate that employing agencies and
Labor have instituted some promising practices that may help reduce
fraudulent FECA claims, yet potential vulnerabilities continue to
exist. We plan to determine the effect of these practices in our
future work. GAO's Framework for Fraud Prevention, Detection, and
Prosecution, developed during previous program audits, emphasizes that
comprehensive controls are necessary to minimize fraud, waste, and
abuse within any federal program, including FECA.[Footnote 5] GAO's
Standards for Internal Control in the Federal Government[Footnote 6]
also outlines key control practices that are integral parts of an
effective control environment. The promising practices and potential
vulnerabilities below relate to issues raised in these guidelines.
We have identified several promising practices that employing agencies
and Labor have implemented that may help to reduce fraudulent FECA
claims. We are planning to look further into these practices as part
of our ongoing work.
Dedicated Full-Time Staff:
Three employing agencies informed us that they employed dedicated,
full-time FECA program staff including injury compensation specialists
and other staff, which, according to officials, helps staff gain
program knowledge and expertise. It also allows program staff to
specialize in FECA claims and reviews without having to perform
additional duties. Agencies with full time staff may be able to
dedicate resources to training them in fraud prevention, which is a
positive practice noted in GAO's fraud-prevention framework. GAO's
Standards for Internal Control in the Federal Government[Footnote 7]
also specifically mentions that appropriate, competent personnel are a
key element to an effective control environment. Officials from one
employing agency with this structure stated that having dedicated and
experienced FECA staff allows them to conduct more aggressive
monitoring of long-term workers' compensation cases. Labor officials
agreed that agencies that can devote dedicated full time resources are
positioned better to manage the program. Examples include the
* FECA staff in one Navy region reported having an average of 15 years
of program experience, which they said helps them to identify specific
indicators of potential fraud.
* According to the Air Force, it has specific teams that specialize in
reviewing FECA claims at different phases of the claims process.
* USPS officials also stated they assign staff full time to manage
In addition, in 2008, we recommended that the Secretary of Labor
direct OWCP to take steps to focus attention on the recovery of FECA
overpayments, such as determining whether having fiscal staff
dedicated to recovering overpayments would increase its recovery.
[Footnote 8] Labor stated that it carefully evaluated having fiscal
staff dedicated to recovering overpayments. However, given the
integral involvement of claims examiners in overpayment processing,
the unavailability of fiscal staff to undertake this specialized
activity, and expected continued budget constraints, Labor believes
that keeping this function with claims examiners is the most cost-
effective debt-collection strategy.
Officials at five employing agencies and Labor have instituted
periodic reviews of active FECA claims, which may improve overall
program controls. Specifically, several agencies reported that annual
reviews of FECA case files were used to help increase program
officials' awareness of potential fraudulent activities. These
controls fall within the detection and monitoring component of GAO's
fraud-prevention framework and could help to validate claimants'
stated medical conditions, income information, and dependent
information. GAO's Standards for Internal Control in the Federal
Government also states that monitoring activities, such as comparisons
of different data sets to one another, can help to encourage continued
compliance with applicable laws and regulations. Agency officials
stated that these types of reviews assist with identifying claimants
who are not eligible to continue to receive FECA benefits. According
to agency staff:
* Labor requires long-term claimants to submit updated claim
documentation about wages earned and dependent status for annual
reviews. While much of the information provided on the CA-1032 is self-
reported, the requirement for annual submissions can help identify
necessary changes to benefits. In addition, Labor officials stated
they also perform regular medical-claim reviews depending on the
status of a case.
* Staff at one Navy regional office send annual questionnaires to
claimants to determine if information, including income and dependent
status, is consistent with annual documentation submitted to Labor.
* A DHS component agency sends periodic letters to claimants asking
about their current status. If DHS determines that action should be
taken, DHS then sends a letter to Labor requesting the claim be closed.
* Under DOD policies, Air Force, Army, and Navy staff are required to
conduct an annual review of selected long-term claim files and medical
documentation to determine whether claimants are receiving
compensation benefits they are entitled to and identify claimants who
are fit to return to work.
* The Air Force has developed quarterly working groups to review all
paid compensation benefits.
* USPS performs periodic reviews of claimant data. USPS IG officials
identified a claimant who fraudulently claimed $190,000 in mileage
reimbursements for travel to therapy almost every day for 5 years,
including weekends and holidays.[Footnote 9]
Officials from employing agencies and Labor stated that their program
staff conducted data analysis, such as comparisons of mileage claims
to medical bills, to verify information submitted by claimants.
Agencies also reported using available data sources to verify whether
claimants should continue to receive FECA benefits. Similar to the
periodic reviews previously discussed, these controls fall within the
monitoring component of GAO's fraud-prevention framework and could
help to validate claimants' self-reported income and medical-condition
information. Data sources reviewed ranged from federal-agency data to
other publicly available information. Agencies also conduct reviews of
claimant physician and prescription-drug payments to identify fraud.
Specifically, according to agency officials:
* Labor gives each employing agency access to its Agency Query System
(AQS), which allows agencies to electronically review information on
FECA claims, including current claims status, wage-compensation
payment details, and medical-reimbursement details.
* Labor officials also stated they provide at least quarterly, and for
some employing agencies weekly, extracts from their data system that
give employing agencies information on wage compensation payments,
medical-billing payments, and case-management data.
* The Navy reviews pharmacy bills, medical-diagnosis codes, and
mileage-reimbursement details from the AQS system on a case-by-case
basis to determine whether physician claims are related to the injury
sustained by the claimant and to identify whether mileage for
physician visits was reimbursed on days when the claimant did not
visit a physician.
* Navy officials use publicly available state-government information
to identify claimants who owned and received income from their own
businesses. For example, one public-records search found that a FECA
claimant was an active owner of a gentleman's club while he was
fraudulently receiving FECA wage-loss benefits.
* Officials from employing agencies and Labor stated that they
reviewed SSA's Death Master File periodically to identify benefits
erroneously dispersed to deceased individuals' survivors.
Specifically, Labor said it conducts monthly data matches with SSA's
Death Master File records and plans to revise the forms used in
survivors' claims to gather Social Security numbers for survivors and
beneficiaries, enabling Labor to match all FECA payees with SSA death
* VA has developed a process that allows the agency to track
prescription-drug usage claims and identify anomalies.
Agency Utilization of Investigative Resources and Prosecutions:
Four employing agencies reported that using investigative resources by
investigating potential fraud cases helped to increase program
controls. The Navy FECA component has assigned responsibilities to
staff that investigate and help prosecute fraudulent FECA claims,
while the Air Force has designated staff that refers allegations to
its Office of Special Investigations. USPS program officials reported
that they refer potential fraud cases internally to USPS IG officials
for investigation and prosecution. The investigation and effective
prosecution of claimants fraudulently receiving benefits is a key
element in GAO's fraud-prevention framework. While these activities
are often the most-costly and least-effective means of reducing fraud
in a program, the deterrent value of prosecuting those who commit
fraud sends the message that fraudulent claims will not be tolerated.
Examples of the effective integration of investigative resources
provided by these employing agencies include the following:
* The Air Force discussed its plan to hire staff in early fiscal year
2012 to conduct background investigations and surveillance of
claimants to determine whether they are entitled to receive FECA
* The USPS IG reported that since October 2008 it identified and
facilitated terminating benefits for 476 claimants who were committing
workers' compensation fraud, and recovered over $83 million in medical
and disability judgments.
* Navy officials stated that their internal investigators' work at one
region led to 10 convictions from 2007 to 2011 and an $8.6 million
cost-avoidance to the agency.
- One individual received monthly workers' compensation payments after
falsely denying that he had outside employment and outside income
while claiming total disability that prevented him from working.
Interviews with former employers uncovered that this claimant had been
employed and been paid over $100,000 per year while he was receiving
benefits. This individual was sentenced to 18 months in prison, 3
years supervised probation, and $302,380 in restitution for making a
false statement to obtain FECA benefits.
- Another individual collected FECA benefits made out to his father
for 4 years after his father was deceased. This individual was
sentenced to 5 years of probation and full restitution in the amount
* DHS officials within the Transportation Security Administration
stated they have successfully used an internal affairs unit consisting
of seven staff members to examine and respond to fraud, waste, and
abuse cases and make referrals to investigators. The investigators
then conduct video surveillance and examine data to find potential
* A recent Labor IG testimony cited numerous Labor IG investigations
that have been conducted over the years focusing on FECA claimants who
work while continuing to receive benefits, and on medical or other
service providers who bill the program for services not rendered.
Our preliminary observations also identified potential vulnerabilities
in the FECA program fraud-prevention controls that could increase the
risk of claimants receiving benefits they are not entitled to. Again,
we plan to examine these potential vulnerabilities as part of our
Limited Access to Data:
We found that management of the FECA program could be affected by
limited access to necessary data. Specifically, agency officials
stated the program lacked proper coordination among federal agencies
and that there was limited or no access to data sources that could
help reduce duplicate payments. For example, Labor does not have
authority to compare private or public wage data with FECA wage-loss
compensation information to identify potential fraud. This prevents
agencies from verifying key eligibility criteria submitted by
claimants, such as income. GAO's fraud-prevention framework emphasizes
effective monitoring of continued compliance with program guidelines,
and outlines how validating information with external data can assist
with this process. Specific potential vulnerabilities identified in
the area included the following:
* Program officials at Labor and the employing agencies do not have
access to payroll information included in the National Directory of
New Hires (NDNH) and federal employee payroll data, which could help
reduce duplicate payments by identifying unreported income.[Footnote
10] In a previous report, we recommended that Labor develop a proposal
seeking legislative authority to enter into a data-matching agreement
with the Department of Health and Human Services (HHS) to identify
FECA claimants who have earnings reported in the NDNH.[Footnote 11]
However, Labor officials stated that they investigated using NDNH and
communicated with HHS, but determined that this would not be an
effective solution due to cost issues, limited participation by
employers in the NDNH, and the likelihood that illegitimate earnings
would not be listed. As an alternative, Labor recently provided
testimony proposing legislative reforms to FECA that would enhance its
ability to assist FECA beneficiaries. As part of this reform, OWCP
sought authority to match Social Security wage data with FECA files.
OWCP currently is required to ask each individual recipient to sign a
voluntary release to obtain such wage information. According to Labor,
direct authority would allow automated screening to assess whether
claimants are receiving salary, pay, or remuneration prohibited by the
statute or receiving an inappropriately high level of benefits. It
would be important to assess whether access to Social Security wage
data is an effective alternative to access to NDNH data, and we plan
to assess this as part of our ongoing work.
* Navy and Air Force officials cited difficulty coordinating with VA
to determine whether individuals are receiving disability benefits for
the same conditions related to FECA claims. This information is key
for employing agencies to assess whether claimants received duplicate
benefits for the same injuries under both VA disability benefits and
FECA benefits. VA commented that privacy concerns related to providing
beneficiary data to external agencies has affected coordination.
* An employing agency official stated that Labor does not provide them
with remote access to the claimant's annual certification form CA-
1032, which would be useful for their periodic review efforts.
However, Labor does allow employing agency officials to view the CA-
1032 forms if the officials come to a Labor district office. The CA-
1032 form contains information on a claimant's income and dependent
status, which is useful when employing agencies review claims files
for continued eligibility. We raise this issue because, as stated
above, the Navy utilizes information submitted to Labor as part of its
periodic review efforts.
* A 2010 SSA IG audit found individuals receiving duplicate benefits
for SSA and FECA. According to the SSA IG, development of a computer-
matching agreement with Labor and its FECA payments database would
allow SSA to reduce the number of duplicate SSA payments by verifying
the accuracy of payment eligibility. According to the SSA IG report,
the agreement has not been finalized with Labor due to changes in
personnel at SSA.
Reliance on Self-Reported Data:
Our preliminary observations identified program processes that relied
heavily on data self-reported by claimants that is not always verified
by agency officials. Not verifying information concerning wages earned
and dependent status reported by claimants creates potential
vulnerabilities within the program. For example, individuals who are
working can self-certify that they have no other income, and continue
to remain on the program while their statements are not verified.
Prior reports by GAO and Labor's IG have shown that relying on
claimant-reported data could lead to overpayments. For example:
* A 2008 GAO report found that Labor relied on unverified, self-
reported information from claimants that was not always timely or
correct.[Footnote 12] Specifically, the annual CA-1032 forms submitted
to Labor to determine whether a beneficiary is entitled to continue
receiving benefits relies on statements made by the claimant that are
* A 2007 Labor IG report also found that an OWCP district office did
not consistently ensure that claimants returned their annual form CA-
1032 or adjust benefits when the information reported by claimants
indicated a change in their eligibility.[Footnote 13] Labor agreed
with the findings of this report.
* During fiscal year 2004, claimants and beneficiaries continued to
receive compensation payments even though they had not provided
required timely evidence of continuing eligibility.
* In one case, the claimant's augmented payment rate was not reduced
even though the claimant reported that his spouse was no longer a
According to Labor officials, a new case-management system was
deployed after the Labor IG audit field work was conducted, which
addresses some of the issues raised in the Labor IG report.
Physicians Selected by the Government Not Present at Key Control
Our preliminary observations found that FECA program regulations allow
claimants to select their own physician, and also requires examination
by a physician employed or selected by the government only when a
second opinion is deemed necessary by the government. We found this
could result in essential processes within the FECA program operating
without reviews by physicians selected by the government. This
potential vulnerability affects key control processes outlined in
GAO's fraud-prevention framework in two areas: first, the lack of
reviews when assessing validity of initial claims and second, the lack
of the same when monitoring the duration of the injury. However, the
addition of a government physician into the process does not
necessarily mitigate all risks and costs associated with additional
medical reviews would need to be considered. For example, there may be
difficulties in successfully obtaining information from physicians
representing the government's interest. Specifically, a prior GAO
report found challenges in obtaining sound or thorough evidence from
physicians approved by Labor in Black Lung Benefits Program claims for
miners.[Footnote 14] Our report also noted that physicians stated that
guidance provided by Labor for effectively and completely documenting
their medical opinions was not clear, which resulted in the challenges
in providing useful information to Labor concerning Black Lung claims.
Details of this potential vulnerability include the following:
* Labor, not the claimant's employing agency, determines if a second
opinion is necessary. Employing-agency officials, including officials
from DHS and USPS stated that there have been instances where Labor
failed to respond to their requests to have a second-opinion
examination performed at the employing agencies' request even though
the costs would be borne by their agencies. We did not verify these
claims. Labor officials stated that its claims examiners are trained
to review files and make the appropriate case-management decision on
the need for a second opinion. In addition, they stated that resources
associated with second opinions include significant time and effort
for a claims examiner to review a file, document the need for a second
opinion, and determine the specific issues to be reviewed by the
physician. Finally, Labor officials noted that numerous requests by
employing agencies for second opinions can put a strain on the limited
number of physician staff it uses for these examinations.
Difficulties Associated with Investigations and Prosecutions:
Officials at multiple employing agencies covered in our work to date
stated that they faced difficulties successfully investigating and
prosecuting fraud. GAO's fraud-prevention framework states that
targeted investigations and prosecutions, though costly and resource-
intensive, can help deter future fraud and ultimately save money. We
plan to follow up with agency IG and United States Attorney officials
to gain their perspective on FECA fraud cases as part of our ongoing
work. Details offered by employing-agency program officials included
* Officials at DOD stated that their investigative units do not
normally invest resources in FECA fraud cases because national
defense, antiterrorism, and violent-crimes cases are higher priorities.
* USPS officials also stated that, in their experience, limited
resources at United States Attorneys offices means that those
attorneys will often not prosecute cases with an alleged fraud of less
than $100,000. According to these officials, many of their strong
allegations of fraud and abuse fall below this amount when estimating
the cost of fraud that has already occurred.
* In addition to the challenges noted above related to fraud
investigations, in 2008, we recommended that OWCP take steps to focus
attention on recovering FECA overpayments. Specifically, we
recommended considering reducing the dollar threshold for waiving
overpayments as OWCP's overpayment processing data system develops
additional capabilities. With respect to reducing the waiver
threshold, Labor disagreed to consider reducing the dollar threshold
while their current processing data system was developing additional
capabilities to recover overpayments.
GAO's Plans to Further Assess Controls and Perform Data Analysis as
Part of Ongoing Work:
We plan to follow up on these promising practices and potential
weaknesses as part of our ongoing review of FECA fraud-prevention
controls. We will also attempt to develop case studies of specific
examples of duplication of benefits and other problems within the FECA
program to determine whether these and other potential program
vulnerabilities may have contributed to specific cases of fraud and
abuse. In addition to our fraud-prevention work in the FECA program,
we are conducting two other program-related engagements. Those
engagements focus largely on issues related to retirement-age FECA
beneficiaries. The results of that work will also be reported at a
Chairman Lieberman, Ranking Member Collins, and Members of the
Committee, this concludes my statement for the record.
For additional information regarding this statement, please contact
Gregory D. Kutz at (202) 512-6722 or firstname.lastname@example.org. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this statement.
[End of section]
 GAO, Hurricanes Katrina and Rita Disaster Relief: Prevention Is
Key to Minimizing Fraud, Waste, and Abuse in Recovery Efforts,
[hyperlink, http://www.gao.gov/products/GAO-07-418T] (Washington,
D.C.: Jan. 29, 2007); and Internal Control: Standards for Internal
Control in the Federal Government, [hyperlink,
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.:
 5 U.S.C. §8101, et seq.
 Mixed-ownership government corporations such as the Federal
Deposit Insurance Corporation are required to provide additional funds
to cover their share of the costs of administering the program for
their employees. See 5 U.S.C. §8147(c).
 Employees on the periodic rolls have total disabilities or
injuries that have lasted or are expected to last for prolonged
 [hyperlink, http://www.gao.gov/products/GAO-07-418T].
 [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
 [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
 GAO, Federal Workers' Compensation: Better Data and Management
Strategies Would Strengthen Efforts to Prevent and Address Improper
Payments, [hyperlink, http://www.gao.gov/products/GAO-08-284]
(Washington, D.C.: Feb. 26, 2008).
 United States Postal Service, Office of the Inspector General,
Postal Service Workers' Compensation Program Audit Report, HR-AR-11-
007 (Washington, D.C.: Sept 30, 2011)
 NDNH is a national directory of employment information that
contains, among other data, quarterly wage data on individual
employees and is maintained by the Department of Health and Human
 [hyperlink, http://www.gao.gov/products/GAO-08-284].
 [hyperlink, http://www.gao.gov/products/GAO-08-284].
 U.S. Department of Labor, Office of Inspector General--Office of
Audit, 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).
 GAO, Black Lung Benefits Program: Administrative and Structural
Changes Could Improve Miners' Ability to Pursue Claims, [hyperlink,
http://www.gao.gov/products/GAO-10-7] (Washington, D.C.: October 30,
[End of section]
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