FEDERAL 

EMPLOYEES’ 

COMPENSATION ACT

Preliminary 

Observations on 

Fraud-Prevention 

Controls

Report to Congressional Committees

January 2012

GAO-12-402

United States Government Accountability Office

GAO
Page i GAO-12-402 Federal Employees' Compensation Act 

Letter 1 

Results in Brief 3

Background 4

Observations from Preliminary Work Identify Promising Practices 

and Potential Vulnerabilities 7

GAO’s Plans to Further Assess Controls and Perform Data Analysis 

as Part of Ongoing Work 16

Agency Comments and Our Evaluation 17

Figure

Figure 1: FECA Claims Process 5

Contents

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Page 1 GAO-12-402 Federal Employees' Compensation Act 

United States Government Accountability Office 

Washington, DC 20548

January 25, 2012

Congressional Committees

According to the Department of Labor (Labor), in fiscal year 2010 about 

251,000 federal and postal employees and their survivors received wageloss compensation, medical and vocational rehabilitation services, and 

death benefits through the Federal Employees’ Compensation Act 

(FECA) program. 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) Inspector General (IG) reported that USPS alone 

had more than $12 billion of the $30 billion in estimated actuarial FECA 

liabilities. In April 2011, the USPS 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, you asked us to provide preliminary 

observations on our ongoing work examining FECA fraud-prevention 

controls and discuss related prior work conducted by us and other federal 

agencies. We will continue to review the identified issues and report more 

fully on our findings at a later date.
Page 2 GAO-12-402 Federal Employees' Compensation Act 

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 

report’s findings are primarily based on document reviews and 

discussions with agency officials. As such, we have not validated whether 

controls discussed in this report are actually being consistently followed 

or are effective. On November 9, 2011, we issued a statement for the 

record to the Senate Committee on Homeland Security and 

Governmental Affairs detailing our preliminary observations on FECA 

fraud prevention controls.1

We conducted this portion of our ongoing performance audit from June 

2011 through January 2012, 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 objectives.

 We also discussed our key findings with 

agency officials and incorporated their comments into the statement

where appropriate. Those findings and comments are included in this 

report.

 

1

GAO, Federal Employees’ Compensation Act: Preliminary Observations on FraudPrevention Controls, GAO-12-212T (Washington, D.C.: Nov. 9, 2011).
Page 3 GAO-12-402 Federal Employees' Compensation Act 

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,2 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 fraudprevention 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 report and provided technical 

comments, which were incorporated into this report. We plan to follow up 

on the promising practices and potential vulnerabilities as part of our 

ongoing work, although our progress has been slowed by difficulties in 

accessing certain databases. 

 

2

GAO, Hurricanes Katrina and Rita Disaster Relief: Prevention Is Key to Minimizing Fraud, 

Waste, and Abuse in Recovery Efforts, GAO-07-418T (Washington, D.C.: Jan. 29, 2007); 

and Internal Control: Standards for Internal Control in the Federal Government, 

GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999).

Results in Brief
Page 4 GAO-12-402 Federal Employees' Compensation Act 

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.

3 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.4

 

3

5 U.S.C. §8101, et seq. 

Figure 1 

displays the standard process for FECA claims reviews and payments by 

OWCP.

4

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).

Background
Page 5 GAO-12-402 Federal Employees' Compensation Act 

Figure 1: FECA Claims Process
Page 6 GAO-12-402 Federal Employees' Compensation Act 

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.5

 

5

Employees on the periodic rolls have total disabilities or injuries that have lasted or are 

expected to last for prolonged periods. 

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 
Page 7 GAO-12-402 Federal Employees' Compensation Act 

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. 

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.6 GAO’s Standards for Internal Control in the 

Federal Government7 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.

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 Government8

 

6

also specifically mentions that appropriate, 

competent personnel are a key element to an effective control 

GAO-07-418T. 

7

GAO/AIMD-00-21.3.1. 

8

GAO/AIMD-00-21.3.1. 

Observations from 

Preliminary Work 

Identify Promising 

Practices and 

Potential 

Vulnerabilities

Promising Practices

Dedicated Full-Time Staff
Page 8 GAO-12-402 Federal Employees' Compensation Act 

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 following:

• 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 FECA 

cases. 

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.9

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.

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.

 

9

GAO, Federal Workers’ Compensation: Better Data and Management Strategies Would 

Strengthen Efforts to Prevent and Address Improper Payments, GAO-08-284

(Washington, D.C.: Feb. 26, 2008).

Periodic Reviews
Page 9 GAO-12-402 Federal Employees' Compensation Act 

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.10

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 

 

10United 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). 

Data Analysis
Page 10 GAO-12-402 Federal Employees' Compensation Act 

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, wagecompensation 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-bycase 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 records.

• VA has developed a process that allows the agency to track 

prescription drug usage claims and identify anomalies.

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 

Agency Utilization of 

Investigative Resources and 

Prosecutions
Page 11 GAO-12-402 Federal Employees' Compensation Act 

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 benefits.

• 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 

of $53,410.

• 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 fraud.

• 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 

Potential Vulnerabilities
Page 12 GAO-12-402 Federal Employees' Compensation Act 

claimants receiving benefits they are not entitled to. Again, we plan to 

examine these potential vulnerabilities as part of our ongoing work.

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.11 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.12

 

11NDNH 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 Services (HHS).

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 

12GAO-08-284. 

Limited Access to Data
Page 13 GAO-12-402 Federal Employees' Compensation Act 

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 CA1032, 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.

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 selfcertify that they have no other income, and continue to remain on the 

program while their statements are not verified. Prior reports by us and 

Labor’s IG have shown that relying on claimant-reported data could lead 

to overpayments. For example:

Reliance on Self-Reported Data
Page 14 GAO-12-402 Federal Employees' Compensation Act 

• A 2008 GAO report found that Labor relied on unverified, self-reported 

information from claimants that was not always timely or correct.13

• 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.

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 not 

verified.

14

• During fiscal year 2004, claimants and beneficiaries continued to 

receive compensation payments even though they had not provided 

required timely evidence of continuing eligibility.

Labor agreed with the findings 

of this report.

• In one case, the claimant’s augmented payment rate was not reduced 

even though the claimant reported that his spouse was no longer a 

dependent.

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.

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 fraudprevention 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 

 

13GAO-08-284. 

14U.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). 

Physicians Selected by the 

Government Not Present at Key 

Control Points
Page 15 GAO-12-402 Federal Employees' Compensation Act 

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.15

• 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.

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:

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 the following:

• 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.

 

15GAO, Black Lung Benefits Program: Administrative and Structural Changes Could 

Improve Miners’ Ability to Pursue Claims, GAO-10-7 (Washington, D.C.: Oct. 30, 2009).

Difficulties Associated with 

Investigations and 

Prosecutions
Page 16 GAO-12-402 Federal Employees' Compensation Act 

• 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 declined to consider reducing the dollar threshold 

while their current processing data system was developing additional 

capabilities to recover overpayments.

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 determine whether duplication of benefits and other 

problems within the FECA program may have contributed to specific 

cases of fraud and abuse or other program vulnerabilities and develop 

illustrative case studies as appropriate. To complete this work, we have 

attempted to obtain access to NDNH data. However, HHS has denied 

access to the NDNH database because they assert that we do not have 

authority to obtain NDNH data, despite the fact that we have a broad right 

of access to all federal agency records.16

In addition to our fraud-prevention work in the FECA program, we are 

conducting two other program-related engagements. Those engagements 

HHS’ denial of access has 

slowed the progress of this engagement reviewing federal beneficiary 

fraud and abuse and has limited our ability to assess the potential 

vulnerability of the FECA program to fraud and abuse at a national level.

Although we have been able to obtain some of the data from a number of 

states, we have not received complete data from all states contacted. 

Legislation that is currently pending in the House and Senate (H.R. 2146, 

S. 237) would refute HHS’ erroneous interpretation of our statutory 

access rights and would ensure that we have access to the NDNH and 

can complete our congressionally requested work in a timely manner. 

 

16 31 U.S.C. § 716(a). 

GAO’s Plans to 

Further Assess 

Controls and Perform 

Data Analysis as Part 

of Ongoing Work
Page 17 GAO-12-402 Federal Employees' Compensation Act 

focus largely on issues related to retirement-age FECA beneficiaries. The 

results of that work will also be reported separately.

On November 9, 2011, we issued a statement for the record to the 

Senate Committee on Homeland Security and Governmental Affairs

detailing our preliminary observations on FECA fraud prevention 

controls.17 At that time, we discussed our key findings with Labor and 

officials at the six employing agencies. Labor and the employing agencies 

generally agreed with the preliminary findings and provided technical 

comments, which were incorporated into the statement. Those findings 

and associated technical comments are included in this report.

We are sending copies of this report to the Secretaries of Labor, Defense,

Homeland Security, Veterans Affairs, the Postmaster General, and 

interested congressional committees. In addition, this report is also 

available at no charge on the GAO website at http://www.gao.gov. If you 

have any questions concerning this report, please contact Gregory D. 

Kutz at (202) 512-6722 or kutzg@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. 

Gregory D. Kutz

Director

Forensic Audits and Investigative Service

 

17GAO-12-212T. 

Agency Comments 

and Our Evaluation
Page 18 GAO-12-402 Federal Employees' Compensation Act 

List of Congressional Committees

The Honorable Susan M. Collins

Ranking Member

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Thomas R. Carper

Chair

Subcommittee on Federal Financial Management, Government 

Information, Federal Services, and International Security

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Claire McCaskill

Chair

Subcommittee on Contracting Oversight

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Tom Coburn

Ranking Member

Permanent Subcommittee on Investigations

Committee on Homeland Security and Governmental Affairs

United States Senate

The Honorable Darrell Issa 

Chairman

Committee on Oversight and Government Reform

House of Representatives

(192407)
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