Audit Report

This report reflects the findings of the Office of Inspector General at the time that the audit report was issued. More current information may be available as a result of the resolution of this audit by the Department of Labor program agency and the auditee. For further information concerning the resolution of this report's findings, please contact the program agency.

Report Number:  03-98-003-04-431

Issue Date:  March 31, 1998
 
The OIG audited uncollected excess payments under the Federal Employees' Compensation Act (FECA) program. Excess payments are compensation benefit payments issued subsequent to a FECA recipient's death. We found that, in most cases, excess payments were made because FECA had not been timely notified of a claimant's death. However, in 19 percent of the cases, additional excess payments resulted because FECA failed to promptly terminate compensation benefit payments. Additionally, we found that FECA's district offices were not following existing procedures for recovering excess payments. While the FECA Procedure Manual states ". . . [the] Fiscal Officer should immediately notify the U.S. Treasury of each erroneous payment via Standard Form 1184 (Unavailable Check Cancellation) . . . ," our audit disclosed that a Standard Form 1184 had not been sent to Treasury for 63 percent of the excess payments we reviewed. Moreover, FECA's district offices did not track or account for excess payments to ensure that all excess payments were recovered. And lastly, FECA's procedures did not fully address all of FECA's responsibilities for recovering excess payments. As a result, we project that about $439,086 in excess payments made during calender years 1995 and 1996 remained uncollected as of September 30, 1997.

We recommended the Assistant Secretary for Employment Standards direct the Division of Federal Employees' Compensation (DFEC) to: (1) strengthen internal controls to ensure that compensation benefit payments are immediately terminated upon notification of the death of a FECA recipient; (2) ensure that Standard Form (SF)-1184s have appropriate Stop Reason Codes and are timely submitted to Treasury; (3) record the date and amount of excess payments and track their recovery; and (4) revise current excess payment recovery procedures to ensure that they properly delineate FECA's responsibilities in recovering outstanding excess payments including prompt notification to financial institutions and survivors/estates.

The Employment Standards Administration (ESA) agreed to strengthen internal controls to ensure that compensation benefit payments are immediately terminated upon notification of death and complete and accurate SF-1184s are timely submitted to Treasury.

While ESA accepts some responsibility under Treasury's procedures to collect outstanding compensation payments, it maintains that excess payments are not subject to its overpayment collection procedures. To fulfil its stewardship responsibility over FECA funds, we believe that ESA should follow Treasury's procedures so that every reasonable effort is made to recover excess payments.

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On March 3, 1998, the OIG issued a one-page Management Letter Report No. 03-98-005-04-431, Division of Federal Employees' Compensation's (DFECs) Crossmatch Excludes Some Individuals. The Management Letter reported the results of our examination of certain recipients on the periodic roll, widows/widowers and beneficiaries, and the Social Security Administration (SSA) Death Master File. The recipients received compensation during Calendar Year 1995 as a result of a federal employee's death.  DFEC excluded these recipients from the routine monthly crossmatch, and we found that excess payments had been made to some of these recipients.  In addition, some of the excess payments had not been recovered as of February 1998.  The error rate of this crossmatch was within an acceptable range.

The new automated system(s) DFEC is developing will capture the Social Security Numbers (SSNs) of the excluded recipients, and we suggested that DFEC include them when performing routine monthly crossmatches against the SSA Death Master File.  Further, we believe DFEC should continue taking action to recover the excess payments made, and we provided DFEC staff detailed information on the excess payments we identified.

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