FEDERAL EMPLOYEES' COMPENSATION ACT: Preliminary Observations on Fraud-Prevention Controls
Released: 2012-01-25T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: 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 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, Congress 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.

section_title: What GAO Found
paragraphs: 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 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.

section_title: Letter
paragraphs: 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 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.

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. 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.

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.
subsections: section_title: Background
paragraphs: 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. 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. Figure 1  displays the standard process for FECA claims reviews and payments by  OWCP.

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. 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.

section_title: Observations from Preliminary Work Identify Promising Practices and Potential Vulnerabilities
subsections: section_title: Promising Practices
paragraphs: 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 Governmentcompetent personnel are a key element to an effective control   also specifically mentions that appropriate,  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.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.

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 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  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.

section_title: Potential Vulnerabilities
paragraphs: 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 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. 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.  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.

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 us 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.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.

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. 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  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 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. 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.

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.

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.

section_title: GAO’s Plans to Further Assess Controls and Perform Data Analysis as Part of Ongoing Work
paragraphs: 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.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.

HHS’ denial of access has  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 separately.

section_title: Agency Comments and Our Evaluation
paragraphs: 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. 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.


Question-summary annotations: questions: question: What do the promising practices to reduce risk of fraud within FECA include?
answer: 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.
child_questions: question: How have these practices already been beneficial?
answer: 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.

question: What vulnerabilities have been found in FECA's design?
answer: 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.

question: How did labor and employing agencies feel about the findings in this report?
answer: Labor and employing agencies generally agreed with the preliminary findings presented in this report and provided technical comments, which were incorporated into this report.

question: Why has progress in the next step been slowed?
answer: 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.

questions: question: What did federal and postal employees receive through FECA?
answer: 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 the Federal Employees’ Compensation Act (FECA) program.

question: What is the purpose of FECA?
answer: Administered by Labor, the FECA program provides benefits to federal employees who sustained injuries or illnesses while performing their federal duties.
child_questions: question: How does FECA work?
answer: 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.

question: What are wage-loss benefits?
answer: 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.

questions: question: What did the OWCP estimate regarding future actuarial liabilites for FECA compensation payments?
answer: 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).
child_questions: question: Why did USPS remove claimants from the OWCP?
answer: 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.

question: Why did Congress ask for preliminary observations to be provided?
answer: Given the significant projected outlays of the governmentwide FECA program and prior USPS IG findings of fraud, Congress 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.