Federal Employees' Compensation Act: Case Examples Illustrate Vulnerabilities That Could Result in Improper Payments or Overlapping Benefits
Published: 2013-04-03T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In fiscal year 2012, the FECA program made more than $2.1 billion in wageloss compensation payments to claimants. FECA provides benefits to federal employees who sustained injuries or illnesses at work.
GAO was asked to examine whether examples of improper payments, potential fraud, or overlapping benefits could be found in the FECA program. This report identifies examples of these issues, what factors may contribute to these issues, and how, if at all, Labor could address them. GAO matched QW and unemployment files from five selected states with FECA payment files for the period of July 2009 to June 2010. GAO identified 530 individuals who received concurrent FECA compensation payments and wages of at least $5,000 between July 2009 and June 2010. GAO also identified 50 individuals who received concurrent FECA compensation and UI benefits of at least $5,000 each during the same period. GAO randomly selected up to seven recipients from each state for an in-depth review, for a total of 32 QW and 19 UI cases, respectively. These examples cannot be generalized beyond those presented. GAO also reviewed Labor's policies, guidelines, and procedures for managing claims.
section_title: What GAO Found
paragraphs: GAO found examples of improper payments and indicators of potential fraud in the Federal Employees' Compensation Act (FECA) program, which could be attributed, in part, to oversight and data-access issues. GAO found examples of claimants' receiving overlapping FECA and unemployment insurance (UI) benefits, which may be allowable under certain circumstances, but could also be erroneous. GAO also found that FECA program requirements allow claimants to receive earnings, and earnings increases, without necessarily resulting in adjustment of FECA compensation. For example, of the 32 FECA case files reviewed, GAO found five instances where an individual's wage-earning capacity (WEC), which is used to determine FECA benefits, was not adjusted even though the individual earned substantially more than the wage that was originally used to calculate the WEC. In addition, two FECA claimants continued to receive privateemployment salaries that were not subject to their WEC calculation. This is because, as currently written, program procedures allow claimants to receive increases in earnings, in certain circumstances, without adjustments to FECA compensation, and current law allows for claimants' earnings from dissimilar concurrent private employment at the time of injury to be exempt when determining FECA compensation. As discussed below, GAO identified challenges related to oversight and data access, which could result in improper payments or overlapping benefits.
GAO found that the Department of Labor (Labor) did not conduct a timely review of the medical activity reports of 4 of the 32 FECA claimants and did not complete a timely review of the employment activity reports of 2 claimants, which could potentially result in an improper payment or be an indicator of potential fraud in one case where a claimant did not respond to repeated Labor requests for the employment activity reports. Labor has taken some steps to enhance oversight of the program, such as developing measures to improve the periodic review of claimants' documentation.
GAO found that 8 out of 32 claimants underreported employment wages in comparison to the state's quarterly wage (QW) reports. Labor does not have authority to directly access Social Security Administration (SSA) wage data to verify claimants' reported income; consequently, it relies on periodic selfreporting of income. GAO has previously identified this as a potential vulnerability that could increase the risk of claimants receiving benefits they are not entitled to. To address this, Labor proposed legislation allowing the agency to match SSA wage data with FECA files, but the proposal is still pending.
GAO identified 19 cases where claimants were receiving overlapping UI and FECA benefits totaling over $1.3 million. Four of these 19 claimants received more income from combined UI and FECA benefits than they would have received from their federal salary alone. Four of the five selected states in our review require the offset of UI benefits against FECA compensation payments. Because Labor does not have a process to share necessary data with states to identify overlapping FECA and UI payments, a mechanism to share FECA information with the states would help provide reasonable assurance that payments are being made properly.
section_title: What GAO Recommends
paragraphs: GAO recommends that the Secretary of Labor develop an effective mechanism to share FECA compensation information with states to help identify whether claimants are inappropriately receiving overlapping UI and FECA payments. In addition, Congress should consider granting Labor the additional authority it is seeking to access wage data to help verify claimants reported income and help ensure the proper payment of benefits. Labor agreed to study the feasibility of sharing compensation information with the states.

section_title: Letter
paragraphs: The Federal Employees’ Compensation Act (FECA) program provides  workers’ compensation coverage to approximately 2.8 million federal and  postal employees for work-related injuries and illnesses. Benefits include  wage-loss benefits, medical benefits, vocational-rehabilitation benefits,  and survivors’ benefits. In fiscal year 2012, the FECA program made  more than $2.1 billion in wage-loss compensation payments to claimants.  The program, administered by the Department of Labor (Labor), provides  benefits to federal employees who sustained injuries or illnesses while  performing their federal duties. 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.
Labor’s Office of Workers’ Compensation Programs (OWCP) estimated  that future actuarial liabilities for government-wide FECA compensation  payments to those receiving benefits as of fiscal year 2012 would total  over $34 billion (this amount does not include any costs for workers  added to the FECA rolls in future years); the U.S. Postal Service  represents over 40 percent (approximately $14.4 billion) of these  estimated liabilities. Federal agencies’ Offices of Inspector General (IG)  have identified programmatic deficiencies at the employing department  and at Labor that may make the program vulnerable to fraud and abuse.  For these reasons, you asked us to investigate the oversight mechanism  Labor has in place to prevent waste, fraud, or abuse in the FECA  program. This report is a follow-up to our January 2012 report identifying  potential vulnerabilities in the program’s design and controls that could  increase the risk for fraud and promising practices that could help to  reduce the risk of fraud within the FECA program. This report addresses  the following question:  What examples, if any, of improper payments, potential fraud, or  overlapping benefits can be found in the FECA program, what factors  may contribute to these issues, and how, if at all, could Labor address  these factors?
To answer this objective, we determined whether individuals potentially  received improper payments, potentially committed fraud, or received  overlapping payments by comparing FECA data to quarterly wage (QW)  and unemployment insurance (UI) data from selected states. To do this,  we drew a nonprobability sample from five selected states: California,  Florida, Maryland, New York, and Virginia. To identify instances in which  individuals received both FECA and QW benefits, we matched selected  states’ QW files with FECA beneficiaries for the period of July 2009 to  June 2010. We then applied a minimum threshold of $5,000 to the  amount of both FECA benefits and QW earnings in order to identify a  sample for further review. The threshold of $5,000 was chosen in order to  identify a sample that was significant and that would allow for in-depth  analysis. Individuals may be allowed to receive concurrent FECA and QW  earnings if a person is on partial disability, however in some cases receipt  of concurrent payments may be improper. We identified 530 individuals  who had received concurrent FECA wage-loss compensation payments  and wage payments of at least $5,000 for the 1-year period (i.e., July  2009 to June 2010) We then randomly selected up to seven claimants  from each of the five states for an in-depth review, for a total of 32 cases.  Of the five states, California, Maryland, and New York had seven  individuals selected randomly, Florida had six individuals, and Virginia  had five individuals that met the criteria for selection. For these  beneficiaries, we reviewed QW files from the selected states and FECA  files from Labor. The specific findings from the selected cases cannot be  generalized to other, or all, FECA claimants who also received quarterly  wages.
To identify FECA claimants who concurrently received UI benefits, we  obtained and analyzed UI files from the same selection of states. Under  certain circumstances, individuals can legitimately receive FECA and UI  concurrently, but claimants could also be receiving these overlapping  benefits erroneously, which could signal potentially improper or fraudulent  payments. We matched these claimants with the FECA files for this same  period. As in our QW analysis, we then applied a minimum threshold of  $5,000 to the amount of both FECA and UI benefit payments. We  identified 50 individuals who received concurrent FECA wage-loss  compensation payments and UI benefits that exceeded the minimum  threshold. We chose the $5,000 threshold in order to identify a sample  that was both significant and would allow for in-depth analysis. We then  randomly selected up to seven claimants from each of the five states for  an in-depth review, for a total of 19 cases. For these beneficiaries, we  reviewed UI files from the selected states and FECA files from Labor. The  findings from these specific cases cannot be generalized to other, or all,  FECA claimants who also received UI benefits.
In addition, we conducted investigations of 3 of the 51 (19 UI and 32 QW)  individual cases. We selected these cases through a two-stage process.  First, we selected 8 cases for further investigation, 4 from California and 4  from Virginia. The cases were selected on the basis of the number of  cases from each state, geographical proximity to Washington, D.C., and  potential for fraud stemming from an initial file review.that 3 required further investigations on the basis of a lack of supporting  details in the FECA case files. The other five case files contained  information that made it clear why the discrepancy occurred.
To identify factors that may have contributed to potentially improper or  overlapping benefits, and how, if at all, Labor could address these factors,  we conducted interviews with officials from Labor’s OWCP and  Employment and Training Agency (ETA), and reviewed prior Inspector  General (IG) and GAO reports. We also reviewed Labor’s oversight  mechanisms, which establish policies, guidelines, and procedures for  adjudicating and managing claims under the FECA program and  compared them with those outlined in the Standards for Internal Control in  the Federal Government.
To determine the reliability of the FECA and state QW and UI data we  received, we reviewed documentation related to these databases and  interviewed officials responsible for compiling and maintaining relevant  data. In addition, we performed electronic testing to determine the validity  of specific data elements in the databases that we used to perform our  work. We also reviewed detailed FECA and UI case files for the  nongeneralizable selection of individuals who received concurrent FECA  and QW or UI benefits. On the basis of our discussions with agency  officials and our own testing, we concluded that the data elements used  for this report were sufficiently reliable for our purposes.
We performed our work from June 2012 through March 2013 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 conducted our related  investigative work in accordance with standards prescribed by the Council  of the Inspectors General on Integrity and Efficiency.
subsections: section_title: Background
paragraphs: Within Labor, the Division of Federal Employees’ Compensation in the  OWCP administers the FECA program, which provides wage  replacement and medical benefits to federal employees who suffer partial  or total disabilities resulting from work-related injuries and occupational  diseases. OWCP is the central point where FECA claims are processed  and eligibility and benefit decisions are made. Claims examiners (CE) 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 criteria for computing compensation  payments. Using information provided by the employing agency and the  claimant on a claims form, OWCP calculates compensation on the basis  of a number of factors, including the claimant’s rate of pay, the claimant’s  marital status, and whether or not the claimant has dependents. Eligible  disabled employees generally receive 66-2/3 percent (or 75 percent if  married or with dependents) of their basic salary, tax-free, plus medical- related expenses. When an injury results in partial disability, and the  employee suffers a wage loss because of the disability, the claimant is  entitled to monthly monetary compensation equal to 66-2/3 percent (or 75  percent if married or with dependents) of the difference between the  claimant’s monthly pay and his or her monthly wage-earning capacity  (WEC).
According to OWCP officials, initial claims received from employing  federal agencies are reviewed by claims examiners to assess the  existence of key elements. (See fig. 1.) 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; 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 bills for  medical costs. After initial claim approval, additional reviews are done  while a claim remains active to determine whether the claimant can  continue to receive wage-loss compensation. Once a claim is approved,  payments are sent directly to the claimant or provider. An employee can  continue to receive wage-loss 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. Specifically, a  medical review is required annually for employees receiving temporary  total-disability payments, every 2 years for claimants earning loss of WEC  payments, and every 3 years for claimants on the periodic rolls who have  been determined to not have any WEC. Employees receiving  compensation for partial or total disability must advise OWCP  immediately if they return to work, either part-time or full-time.
Claimants are required to self-report all employment wages, whether  salaried or not, and self-employment. OWCP requires that all individuals  on the periodic roll (both partial and total disability) complete Form CA- 1032 on a yearly basis stating their income or whether their dependent  status has changed. A new employer may also be requested to provide  information regarding a claimant’s employment and earnings. Labor can  use this form to adjust the amount of FECA compensation. Employees  must report even those earnings that do not seem likely to affect their  level of benefits, such as concurrent income that an employee was  receiving prior to his or her injury that was not directly related to the  employee’s federal employment. While earning income will not  necessarily result in a reduced compensation, the FECA statute and  implementing regulations stipulate that failure to report income may result  in forfeiture of all benefits paid during the reporting period. To help verify  income levels, Labor requests that FECA claimants provide it with their  consent to access their Social Security Administration (SSA) earnings file;  however, claimants are not required to provide Labor with their consent,  and authorization to obtain such information is not required to receive  compensation. In instances where Labor is authorized to collect  earnings information from SSA by claimants, according to OWCP  officials, SSA’s earnings data may be as much as 2 years old,may hinder timely adjustments to compensation benefits.
subsections: section_title: FECA and UI Benefits
paragraphs: Established by the Social Security Act of 1935, the federal-state UI  program generally temporarily and partially replaces the lost earnings of  those who become unemployed through no fault of their own. To be  eligible for UI benefits, unemployed workers must meet eligibility  requirements established by state laws that conform to federal law,  including that they have worked recently, are involuntarily unemployed,  and are able and available for work. Whereas federal statutes and  regulations provide broad guidelines on UI eligibility, the specifics of UI  eligibility are determined by each state. According to Labor’s Employment  and Training Agency, all states require that a claimant must have earned  a specified amount of wages, worked a certain number of weeks in  covered employment, or must have met some combination of the wage  and employment requirements within his or her base period. To be  eligible for benefits, claimants must also be free from disqualification for  acts such as voluntarily leaving without good cause, discharge for  misconduct connected with the work, and refusal of suitable work.
However, the specific eligibility requirements regarding an applicant being  “able and available for work” vary among the states. For example, a few  states specify that a worker must be physically able, or mentally and  physically able, to work. Likewise, while some states require that a worker  must be available for work, other states require that a worker must be  available for suitable work; still other states may find an individual able  and available for work so long as any limitation due to illness, injury, or  presence in the usual labor market does not constitute a withdrawal from  the labor market. In addition to being able and available for work, all  states require by law or by practice that a worker be actively seeking work  or making a reasonable effort to obtain work. According to ETA, some  states permit payment of benefits to sick or disabled individuals under  certain circumstances, but there is nothing in their laws that prohibit a  denial of benefits in those circumstances.
section_title: Examples of Improper Payments, Overlapping Benefits, and Potential Fraud Highlight the Importance of Data Sharing to Verify Benefit Eligibility
paragraphs: We found examples of improper payments, overlapping benefits, and  potential fraud in the FECA program, which could be attributed, in part, to  factors such as oversight and data-access issues. OWCP has taken  some steps to enhance oversight of the FECA program; however, Labor  lacks authority to directly access wage data, which limits its ability to  verify self-reported wage information. In addition, OWCP does not have a  process to access data needed to identify the extent that claimants are  receiving overlapping FECA and UI benefits and does not report FECA  claimant information to states, which increases the risk that FECA  claimants are receiving overlapping benefits improperly.
subsections: section_title: Labor Is Taking Steps That Could Enhance Oversight of Eligibility Information
paragraphs: OWCP has designed additional oversight mechanisms to better monitor  claimants’ eligibility, which could help identify improper payments and  potential fraud. To determine a claimant’s eligibility for FECA, claimants  who suffer partial or total disabilities resulting from work-related injuries  are required to submit medical evidence to OWCP so it can determine the  nature and extent of disability resulting from this condition and any  changes to their condition that could affect continuing entitlement.  Specifically, a CE is required to conduct a medical review annually for  claimants on total disability receiving long-term compensation who are on  the program’s periodic rolls, every 2 years for claimants earning loss of  WEC payments, and every 3 years for claimants who have been  determined to not have any WEC. OWCP bears the burden of justifying  the termination or modification of compensation benefits. Accordingly,  OWCP must have medical evidence in order to support any change in  compensation to a claimant. Without up-to-date medical reports for  claimants, OWCP lacks the necessary evidence to change compensation  levels.
In addition, claimants are also required to submit an annual form (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 from deliberate  falsehood. OWCP’s review of this annual form is especially important for  claimants who are deemed to not have any WEC and, therefore, have  less frequent medical reviews.
Our review of a nongeneralizable sample of 32 individual cases identified  four claimants who were on partial disability, receiving payments for loss  of WEC, but did not have evidence that OWCP obtained or reviewed the  required medical reports every 2 years, as required. These individuals  continued to receive FECA compensation benefits without evidence that  their medical condition has not improved, which potentially could result in  an improper payment.
For the 28 cases that had medical reports, we found that 14 cases did not  include the Work Capacity Evaluation (OWCP-5c) form, which is not a  mandatory form but is to be completed by a medical professional.  According to OWCP, a narrative medical report may be more informative  than the OWCP-5c and more helpful in determining a claimant’s ability to  earn wages. The purpose of the OWCP-5c form is to help clarify whether  a claimant is capable of fulfilling his employment duties by identifying a  claimant’s specific work-tolerance limitation, where the accepted condition  is musculoskeletal in nature. Without this form, it can be difficult to  determine whether the claimant is capable of performing the job and  whether employers can readily accommodate the medical condition. For  all 14 cases, the claimant did suffer a musculoskeletal injury.
Our review identified 2 out of our sample of 32 FECA claimants who did  not have evidence in their FECA file that OWCP reviewed their  employment activity annually, as required. These two claimants  continued to improperly receive higher FECA compensation benefits than  warranted during our period of review because a timely adjustment was  not made to their disability compensation. In addition, one claimant failed  to submit the income certification, and OWCP did not promptly terminate  benefits.
Labor and IGs from employing departments and agencies have  consistently reported similar FECA program-management challenges and  have linked increased program costs to improper payments. For example,  Labor’s oversight of the FECA program has been identified as a  management challenge in prior work. beginning with its 2004 Performance and Accountability Report, and  every year since, Labor has indicated that adequately overseeing the  FECA program was one of its chief management challenges, citing  verifying beneficiaries’ eligibility as one of the oversight difficulties that it  faces. Moreover, IGs from employing agencies that participate in FECA  have reported that certain policies and procedures did not exist, or when  they did exist, they were not always followed by employing agencies.  Most often these deficiencies were related to a lack of controls that would  have enabled staff to verify beneficiaries’ continued eligibility.
For example, see 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. performance measures. Finally, OWCP officials stated that they are in  the process of establishing quality-assurance reviews of PER processing.  As such, Labor will convene Accountability Review teams of program  specialists to evaluate the quality of workload processing in its district  operations. These evaluations are to scrutinize processed work, such as  elements relating to fiscal and operational integrity. Accountability Review  findings are to be reviewed by the relevant OWCP program director and  corrective action plans will be developed, as necessary. In addition,  according to OWCP officials, two new Quality Measures have been  implemented in fiscal year 2013 to rate the accuracy of compensation  benefit payments, and whether the factual and medical evidence of  record supports the current level of benefits provided. According to Labor  officials, OWCP plans to start conducting these reviews by the end of  fiscal year 2013. In 2012, we reported that periodic reviews of FECA case  files are a promising practice and can be used to help increase program  officials’ awareness of potential fraudulent activities. Further, these  controls are consistent with the detection and monitoring component of  GAO’s fraud-prevention framework, and could help to validate  claimants’ eligibility including medical conditions and income information.  If implemented properly, these steps will assist OWCP in identifying  cases for return-to-work potential and referral to vocational rehabilitation.  In addition, verification of proper and accurate benefit levels will also  support FECA program fiscal integrity.
section_title: Labor Lacks Authority to Directly Access Wage Data, Which Limits Its Ability to Identify Improper Payments and Potential Fraud
paragraphs: As we have previously reported, because Labor does not have statutory  authority to directly access private or public wage data that is reported to  SSA and the Department of Health and Human Services’ (HHS) National  Directory of New Hires (NDNH) database, OWCP relies heavily on  claimants’ self-reporting of earnings on the annual Form CA-1032 to  identify potential fraud. For example, while OWCP requests that FECA  claimants provide it with consent to access their SSA earnings file,  claimants are not required to provide OWCP with consent, and  authorization to obtain such information is not required to receive  compensation.
Our review of a nongeneralizable sample of 32 individual cases identified  eight FECA claimants who had significantly underreported employment  wages in comparison to the wages reported in the state’s QW reports for  the same period. We also found that three claimants did not provide  authorization to OWCP to access their SSA earnings file.
GAO-12-402. the SSA.that they studied whether to use NDNH and communicated with HHS, but  determined that this would not be an effective solution because of cost  issues, limited participation by employers in NDNH, and the likelihood that  unreported earnings would not be listed. For example, OWCP officials  stated that it would cost about $1 million to implement an automated  process for verifying wage information with NDNH. To help address the  issue, OWCP officials reported ongoing negotiations over several years  with SSA to develop a formal agreement that includes regular data  matching to verify wage data so that Labor does not have to rely on  obtaining consent to access SSA wage data from the claimant. A current  agreement is being developed, though officials stated that these  negotiations were still in the early stages.
In response to our recommendation, OWCP officials stated  Labor has also proposed legislative reforms to FECA that would enhance  its ability to assist FECA beneficiaries and also enhance program  oversight. As part of this reform, OWCP sought authority to match SSA  wage data directly with FECA files. According to Labor OIG officials, to  enhance its FECA program oversight, Labor OIG has also requested  changes to legislation that would allow Labor to easily and expeditiously  access NDNH wage records, so that its investigations can be more  efficient and effective. However, at this time, Labor does not have direct  access to the NDNH or SSA wage data. Having access to these data  sources would allow Labor to verify claimants’ self-reported employment  income and better position the agency to identify potential fraud.
section_title: Some FECA Program Regulations and Policies Introduce Challenges to Identifying and Mitigating Potential Fraud and Waste
subsections: section_title: FECA Program Requirements Allow Claimants to Receive Earnings and Earnings Increases without Necessarily Resulting in Adjustment of FECA Compensation
paragraphs: Because of case law and regulatory requirements, once OWCP  calculates an individual’s WEC, it remains in place unless the evidence  establishes that there is a material change in the nature and extent of the  injury-related condition; the claimant has been retrained, or otherwise  vocationally rehabilitated; or it is established that OWCP’s original  determination was erroneous. As a result, claimants could be earning  more money than they were originally determined capable of earning but  never have the WEC adjusted to account for the increase in wage earning  capacity. According to program procedures, OWCP can modify the WEC  if the claimant is earning 25 percent more than the current pay of the job  for which the beneficiary was originally rated. However, to adjust the  WEC, OWCP must demonstrate that customary criteria for modification is  met such as the claimant is rehabilitated or self-rehabilitated, or evidence  shows that the claimant was retrained for a different job. Of the 32 cases  we reviewed, we found five instances where an individual’s WEC was not  adjusted even though the individual earned substantially more (at least 25  percent) than what was originally calculated as their WEC. While this  situation is allowable under FECA program requirements, it could be an  indicator of potential waste in the FECA program.
In addition, two FECA total-disability claimants continued to receive  private-employment salaries that were not subject to the WEC. Earnings  received from dissimilar private employment at the time of injury may not  be used by Labor when determining an injured employee’s pay rate for  compensation purposes, and earnings from that same employment  cannot be considered in determining the employee’s WEC. Thus,  claimants are allowed to receive income, in some cases substantial  income, while also receiving FECA compensation benefits.
The FECA program statute allows claimants to select their own  physician, which we reported in 2012 to be a potential vulnerability. The  regulation also requires examination by a physician employed or selected  by the government only when a second opinion is deemed necessary by  the government. As a result, as we previously reported, essential  processes within the FECA program could be operating without a review  conducted by a physician 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. Out of the 32 individual cases that  we reviewed, 12 did not have a second opinion from a medical  professional assessing the injury and possible work restrictions, and a  physician selected by the government was not involved in making the  disability determination. Without a second opinion, the federal  government must rely on the physician of the claimant’s choosing, which  is a potential vulnerability in assessing the validity of the claim.
section_title: Labor Lacks a Process to Identify Overlapping FECA and UI Benefits and Does Not Report FECA Claimant Information to States
subsections: section_title: Overlapping Benefits
paragraphs: While FECA claimants can be eligible to receive state UI benefits in  addition to FECA benefits, Labor lacks a process to share the necessary  data with states to determine whether FECA claimants may be improperly  receiving overlapping benefits. Individuals may be eligible for both FECA  and UI depending on the applicable state laws regarding UI eligibility, and  federal law does not authorize an automatic reduction or potential  elimination of benefits if a claimant receives both. For example, under  FECA, an individual is encouraged to return to work. Upon returning to  work, the individual’s FECA compensation payment is supposed to be  reduced or terminated. In certain circumstances these individuals may  have returned to the workforce, for example, with partial disability, and  subsequently been involuntarily terminated. These individuals may also  meet the states’ “able and available for work” criteria and thus also be  eligible for UI benefits. As a result, some individuals may have a disability  under federal law but still be able and available for work under state law,  and thus are eligible to receive concurrent UI and FECA benefits.
However, claimants may be not eligible to receive both types of payments  because their disability, especially for those receiving compensation for  total disability, may render them unable and unavailable to work. In  February 2012, the Middle Class Tax Relief and Job Creation Act was  enacted, which amended federal law and included a requirement that  individuals claiming UI benefits be actively seeking work as a condition of  some eligibility.  In addition, certain states, for example four of the five  selected states in our review, require the offset of UI benefits against  certain workers’ compensation payments, including FECA.
Labor officials acknowledged that they do not have a process to share the  necessary data to identify overlapping payments, which would help the  ETA and the states identify the extent to which overlapping payments are  not being offset. As previously reported, we have found that processes  that rely heavily on self-reported data by claimants create potential  vulnerabilities within the program. Without the ability to verify self-reported  information on the receipt of other benefits, Labor may make overlapping  payments contrary to the regulations governing the program.
Our review of a nongeneralizable sample of 19 individual cases identified  claimants who received overlapping UI and FECA benefits totaling over  $1.3 million from January 2008 to June 2012. Four claimants who resided  in states that require UI payments to be offset received more income from  the combined UI and FECA benefits than they would have received from  their federal salary alone. Some of these claimants were former FECA  claimants who attempted to return to the federal agency to perform work  within their medical restrictions. However, the claimants were  subsequently discharged because they did not meet the federal agency  requirements for continuing employment. As such, these claimants were  entitled to their FECA benefits and they also applied for and received UI  benefits that were not offset by their respective states.
According to OWCP officials, Labor does not systematically report  information on claimants receiving FECA benefits to states, which would  help states identify overlapping FECA and UI payments as well as UI  payments that might need to be offset. Currently, states must rely on  obtaining this information either directly from the UI applicant or UI  applicant’s recent employers. As previously discussed, certain states  use the workers’ compensation amount, such as FECA, to reduce or  eliminate the UI benefit amount. States utilize this information to  determine whether the individual is actually “able and available for work.”  As such, all states must require claimants to certify that they are still  meeting all UI eligibility criteria such as changes in employment status.
Labor is not required to and thus does not report FECA payments to  NDNH, which is a primary mechanism that some states use to verify  employee wage levels, because NDNH was established as a depository  for wage reporting that, among other things, enables state child-support  agencies to be more effective in enforcing child-support orders. Were  Labor to report FECA payments to this database, states would more  easily be able to identify such payments in their review. Our review of a  nongeneralizable sample of 19 individual cases identified nine claimants  who potentially committed fraud or improperly obtained UI benefits  because they did not properly disclose their FECA benefits to the state on  their UI application, which could have potentially reduced or eliminated  the UI benefit amount.
As previously discussed, limited access to necessary information is a  potential vulnerability. Without information on individuals who are  receiving federal workers’ compensation payments, it is difficult for the  states to identify those individuals and reduce or terminate the UI  payments to them. As a promising practice we previously reported, Labor  provides quarterly data extracts to employing agencies on wage- compensation payments, medical billing payments, and case- management data. Similarly, if OWCP reported FECA compensation data  to the states (either directly or through NDNH), this could help federal and  state agencies coordinate benefits and reduce the risk of overlapping  payments.
We have previously reported on the importance of interagency  collaborative mechanisms, such as sharing information across  organizational boundaries, to achieve crosscutting program goals.  Further, although not a requirement, the value of greater information  sharing between federal and state entities is demonstrated by the actions  of some states that check the NDNH to determine if an applicant is  working. For example, by cross-matching UI claims against NDNH data,  states can better detect overpayments to UI claimants who have gone  back to work. While our sample of individuals who have received  overlapping FECA and UI benefits cannot be generalized to the entire  population of FECA claimants, we did identify some claimants who  potentially committed fraud or improperly obtained UI benefits because  they did not properly disclose their FECA benefits to the state on their UI  application. Thus, establishing a mechanism to share FECA  compensation information with states to help identify whether claimants  are inappropriately receiving overlapping UI and FECA payments, to the  extent that it is cost-effective, could help provide ETA with greater  assurance that individuals are receiving benefits in accordance with  statute. We discussed this proposal with OWCP program officials in  January 2013 and they agreed that sharing compensation data with the  states may be beneficial, although they stated that they have never been  asked to provide FECA compensation information previously.
section_title: Conclusions
paragraphs: With estimated future actuarial liabilities for government-wide FECA  compensation payments at over $34 billion as of fiscal year 2012, and in  an era of scarce government resources, it is vital that Labor ensures  effective stewardship of those resources. FECA and UI provide an  important safety net for workers who have lost their income because of  workplace injuries or unemployment. However, Labor and the states must  continually monitor these claimants to ensure that they continue to be  entitled to these benefits and that the benefits are adjusted to account for  changes in claimants’ wage earnings and for overlapping state UI  payments. While in certain circumstances receiving concurrent UI and  FECA benefits may be allowable, the cases we identified where claimants  received concurrent UI and FECA benefits without Labor’s knowledge  could be an indicator of improper payments. A cost-effective mechanism  to share FECA compensation information with states to help identify  whether claimants are inappropriately receiving overlapping UI and FECA  payments could help determine the extent that improper payments or  potential fraud are occurring, which could help save taxpayer dollars. In  addition, without the authority to access wage data, which both OWCP  and Labor’s OIG have sought, Labor’s reliance on claimants’ self-reported  employment information limits the agency’s ability to identify potential  fraud.
section_title: Matter for Congressional Consideration
paragraphs: Congress should consider granting Labor the additional authority it is  seeking to access wage data to help verify claimants’ reported income  and help ensure the proper payment of benefits.
section_title: Recommendation for Executive Action
paragraphs: We recommend that the Secretary of Labor assess the feasibility of  developing a cost-effective mechanism to share FECA compensation  information with states, such as reporting information to NDNH, to help  identify whether claimants are inappropriately receiving overlapping UI  and FECA payments.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to Labor for comment on February 28,  2013. Labor provided written comments on the draft, which can be found  in appendix I. Labor agreed with the recommendation to assess the  feasibility of developing a cost-effective mechanism to share FECA  compensation information with the states, such as reporting information to  NDNH, to help identify whether claimants are inappropriately receiving  overlapping UI and FECA payments.  Labor stated that it will undertake a  review to determine whether such data sharing and reporting is feasible.  However, Labor expressed concerns regarding the cost-effectiveness of  such an approach.  We agree that it will be important for Labor to assess  the cost-effectiveness of such an approach when conducting its review.   As stated in the report, some states check the NDNH database to verify  employee wage levels.  Thus, establishing a mechanism, such as  reporting FECA compensation to NDNH, could provide a cost-effective  way for states to identify whether claimants are inappropriately receiving  overlapping UI and FECA payments, and could help provide ETA with  greater assurance that individuals are receiving benefits in accordance  with statute.
In its response, Labor also stated that since FECA contains no offset for  UI benefits, a claimant may be entitled to receive both FECA and UI  benefits under a particular state law, which would not be classified as  receiving improper payments.  We recognize, as stated in this report, that  there may be certain situations where individuals are entitled to the  concurrent receipt of FECA and UI benefits.  However, it is also important  to note that, as discussed in the report, claimants may not be eligible to  receive both types of payments in some cases.  For example, some  claimants are not able to meet the “able and available” requirement for UI  benefits because their disability, especially for those receiving  compensation for total disability, may render them unable and unavailable  to work. In addition, certain states, such as four of the five selected states  in our review, require the offset of UI benefits against certain workers’  compensation payments, including FECA.  In addition, Labor stated that  one of our examples cited in our report—example 5—should not be  classified as an improper payment because FECA program procedures  allow a claimant to receive wages from two different employers and not  have those wages affect the claimant’s WEC or ability to receive FECA  benefits.  We agree that this is not an improper payment and did not  classify it as such. As stated in the report, claimants are allowed to  receive such income, in some cases substantial income, while also  receiving FECA compensation benefits.
Labor also provided technical comments, which we incorporated as  appropriate.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date.  At that time, we will send copies of this report to the  Secretary of Labor, and other interested parties. In addition, the report will  be available at no charge on the GAO website at http://www.gao.gov.
If you or your staff has questions about this report, please contact me at  202-512-4379 or LordS@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report.
section_title: Appendix I: Comments from the Department of Labor