Federal Workers' Compensation:

Better Data and Management Strategies Would Strengthen Efforts to Prevent and Address Improper Payments

GAO-08-284: Published: Feb 26, 2008. Publicly Released: Feb 26, 2008.

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In fiscal year 2006, the Federal Employees' Compensation Act (FECA) program paid over $1.8 billion in wage loss compensation to federal employees who were unable to work after being injured on the job. Under the Comptroller General's authority to conduct evaluations on his own initiative, GAO examined (1) how effectively the Department of Labor's (Labor) Office of Workers' Compensation Programs (OWCP) manages the risk of improper FECA compensation payments; (2) what vulnerabilities to improper payments, if any, exist in OWCP's procedures for making FECA wage loss payments; and (3) how well OWCP ensures the recovery of identified FECA overpayments. To address these issues, GAO reviewed OWCP documents, analyzed data obtained from OWCP, reviewed a random and projectable sample of FECA claims files, visited five OWCP district offices, and interviewed OWCP headquarters and district officials.

OWCP has not established an effective strategy for managing improper payments in the FECA program. The agency does not sufficiently emphasize preventing, detecting, and recovering improper payments. None of the performance goals for the program addresses improper payments. Further, OWCP does not collect the information it needs to accurately assess the FECA program's risk of improper payments, such as information on their magnitude and causes. Without such data, it cannot focus on the most vulnerable areas. The FECA program is vulnerable to improper payments for several reasons. First, OWCP relies on unverified, self-reported information from claimants that is not always timely or correct. From a review of a sample of claims files for overpayments identified by OWCP in 2006, GAO found that many occurred because claimants did not inform OWCP in a timely manner when they returned to work. Further, because OWCP generally does not require claimants' self-reported earnings to be verified and does not systemically match its data on FECA claimants with earnings data from other federal agencies, it may fail to identify cases of unreported earnings. An obstacle to conducting such matches, however, is that OWCP does not have the legal authority to access the database maintained by another federal agency with the most current earnings data. In addition, from GAO's file reviews, GAO found that both overpayments and underpayments were caused by OWCP errors and that many overpayments occurred when OWCP's payment-processing deadlines prevented payments from being quickly canceled when claimants returned to work or died. Finally, OWCP does not ensure that overpayments are collected in a timely manner and misses some opportunities for recovering overpayments, such as deducting them from claimants' subsequent FECA payments.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: The Secretary should direct OWCP to take steps to focus attention on the recovery of FECA overpayments, such as collecting more detailed information on how overpayments are resolved in order to monitor the effectiveness of OWCP's recovery efforts; holding staff accountable to ensure that overpayments are processed in a timely manner; considering reducing the dollar threshold for waiving overpayments as OWCP's overpayment processing data system develops additional capabilities; determining whether having fiscal staff dedicated to recovering overpayments would increase their recovery; or developing system modifications that would automatically identify claimants who have outstanding overpayments in order to ensure that debts are repaid from future benefit payments.

    Agency Affected: Department of Labor

    Status: Closed - Implemented

    Comments: In November 2010, the Department of Labor (Labor) reported that it implemented the system changes to collect data on overpayment resolutions and to identify outstanding debts. The agency developed codes in iFECS to allow analysis of OWCP's recovery effort. In addition, iFECS now alerts claims examiners when a claimant has a pending debt. With respect to holding staff accountable, Labor believes they are held accountable through individual performance standards, district office accountability reviews, and program plan goals. The agency noted that the data presented by GAO was not a fair representation of performance because it was collected during a period of functionality problems associated with the deployment of its new IT system. With respect to reducing the waiver threshold, Labor reported that its overpayment processing data system is developing additional capabilities. Furthermore, the cost associated with the manual review of overpayments required to determine fault, as well as required appeal mechanisms might be more than the additional recoveries to be gained. Labor also stated that it carefully evaluated having fiscal staff focus on recovering overpayments. The agency determined that the most cost effective debt collection strategy would be to keep this function with claims examiners, 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.

    Recommendation: The Secretary should direct OWCP to take steps to reduce common causes of improper payments, such as requiring agencies to report to OWCP when a FECA claimant returns to work and provide incentives for agencies to notify OWCP quickly; ensuring that its data match with Social Security Administration's (SSA) death records is conducted regularly and consistently and that it includes individuals who are receiving survivor death benefits; taking steps to ensure that wage-loss-compensation payments for claimants covered by the current federal retirement system are appropriately reduced by the amount of their SSA benefits that are attributable to their federal service; considering ways to reduce the time it takes to process automated monthly payments; determining what additional training claims examiners may need to improve payment accuracy; or exploring options for improving information sharing between OWCP and employing agencies so that OWCP can make accurate payments and agencies can help identify payment errors.

    Agency Affected: Department of Labor

    Status: Closed - Implemented

    Comments: The Department of Labor (Labor) agreed with most of the options outlined in this recommendation and reported that it is planning several efforts to implement them. As of January 2012, for example, the agency reported that it: (1) has developed an electronic form to allow agencies to electronically notify Labor when claimants return to work and began allowing all agencies to use the form as of 2/09; (2) continues to conduct monthly data matches with SSA's death records and has revised several forms used in survivors' claims to gather Social Security Numbers for survivor beneficiaries, enabling Labor to match these beneficiaries with SSA death records; (3) has implemented a system-generated automated request to be sent to SSA when a claimant achieves retirement eligibility age to identify cases in which FECA payments should be reduced due to SSA benefits; (4) has modified its agency query system as of 8/2008 to allow agencies to see details of all payments made to claimants and verify pay rates, premium pay additions, dates and hours paid, insurance deductions, and compensation rates; and (5) developed and deployed a new training module on payment accuracy in FY 2011.

    Recommendation: The Secretary of Labor should direct OWCP to develop a management strategy to ensure that the program's emphasis on quickly processing and paying FECA claims is balanced with the need for payment accuracy. Specifically, the agency should collect more detailed information on improper payments, such as the causes of overpayments and underpayments, and use these data to better identify improper payment risks and to address areas of high risk.

    Agency Affected: Department of Labor

    Status: Closed - Implemented

    Comments: The Department of Labor (Labor) reported that it developed codes to identify reasons for improper payments and that its data system is collecting data on the causes of improper payments. In reviewing the data, Labor found a wide variety of debt reasons, with no single reason occurring more frequently than any other. The agency reports that it will continue to monitor the results and take appropriate future actions as needed.

    Recommendation: The Secretary of Labor should direct OWCP to develop a management strategy to ensure that the program's emphasis on quickly processing and paying FECA claims is balanced with the need for payment accuracy. Specifically, the agency should revise its program performance measures to ensure increased emphasis on payment accuracy, adequate internal controls, and overpayment recoveries.

    Agency Affected: Department of Labor

    Status: Closed - Not Implemented

    Comments: In 2008, the Department of Labor (Labor) stated that it planned to enhance its IT support systems to gather more information about improper payments. Specifically, it planned to develop reason codes for the causes of overpayments and underpayments in its data system by 9/30/09. This would allow the agency to evaluate its performance measures to determine what revisions could be made to further improve performance and accountability. Once data on reason codes became available, Labor planned to complete its analyses March 2010 and develop improvement measures by September 2010. As of November 2010, Labor reported that its system can now collect data on the causes of improper payments, but provided no additional information on whether or how it had revised its program performance measures. In FY12, Labor reported that its review of 2010 data identified a wide variety of debt reasons, with no single reason or cause occurring more frequently than any other. The agency concluded that since no specific reason or process could be identified that could be targeted and because existing program reviews address improper payments, a program measure in the Operating Plan was not appropriate. The agency will continue to monitor the results of payment processing reviews and refine the reason codes to determine if a revision of program measures becomes appropriate in the future.

    Recommendation: To allow OWCP to more effectively verify the earnings information reported by FECA recipients and identify instances in which a claimant receiving wage loss compensation has unreported earnings, the Secretary of Labor should direct OWCP to develop a legislative proposal seeking legal authority to enter into a data-matching agreement with the Department of Health and Human Services to identify FECA claimants who have earnings reported in the National Directory of New Hires. Any such data-matching agreement would need to include appropriate safeguards for protecting claimants' privacy and personal information.

    Agency Affected: Department of Labor

    Status: Closed - Implemented

    Comments: The President's FY 2012 Budget included a legislative proposal for data matching with SSA. The Department of Labor (Labor) reports that it has investigated the National Directory of New Hires (NDNH) and communicated with HHS. Based on its findings, Labor determined that this would not be an effective solution due to: 1) limited participation by employers in the NDNH and 2) the fact that workers not reporting earnings to SSA would also not likely be listed on the NDNH (as legitimate employment).

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