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:  12-98-001-04-431

Issue Date:  January 9, 1998
 

The Federal Employees' Compensation Act Special Benefit Fund, was established by the Federal Employees' Compensation Act to provide income and medical cost protection worldwide for job-related injuries, diseases, or deaths of civilian employees of the Federal Government and certain other designated groups. The U. S. Department of Labor, Employment Standards Administration (ESA), Office of Workers' Compensation (OWCP), has the responsibility to provide actuarial liability and benefit payment data to the 24 Chief Financial Officers (CFO) Act agencies in regard to the Federal Employees' Compensation Act (FECA) future workers' compensation benefits.

The report describes audit testing and agency operating procedures. The report includes a complete discussion of the FECA program, the sampling methodology used, specific procedures performed (both statistical and non-statistical) and the detailed results of those procedures. We tested 261 compensation and 290 medical statistically selected payment items. Additionally, we tested non-statistical items in regard to potential duplicate payments, multiple claim compensation payments, third party payment cases, gross override cases and high dollar compensation and medical payments.

Report Results

• Benefit Payments - We projected that compensation and medical bill payments (for the sampling period, October 1, 1996 to May 31, 1997) are understated by as low as $2.8 million, but overstated as high as $18.2 million. This overstatement is within the materiality limits established by the sampling plan.

• Our procedures disclosed 39 medical bill payments (out of 290 statistically selected sample items tested) paid in error or that represented duplicate payments for a total overstatement of $35,999. For the sampling period, we are 90 percent confident that such medical bill payments are overstated as low as $4 million, but as high as $16 million, which is within the materiality limits established by the sampling plan.
 

• Our procedures disclosed 27 compensation payments (out of 261 statistically selected sample items tested) paid in error for a total overstatement of $13,450. For the sampling period, we are 90 percent confident that such compensation payments are understated as low as $4 million, or overstated as high as $6 million, which is within the materiality limits established by the sampling plan.
 

• Documentation required by FECA policy to establish continuing eligibility was not obtained as required in 13 of 63 instances. For the sampling period, we are 95 percent confident, using a one-sided confidence level, that the projected deviation rate could be as high as 22 percent. These cases involved injuries which were well established, documented and long standing. While these errors are procedural problems, they did not impact the eligibility of the claimants.
 

• Information contained in the ACPS such as addresses and chargeback codes were not updated. For the sampling period, we are 95 percent confident, using a one-sided confidence level, that the projected deviation rate would be no more than 7 percent. We determined that these errors did not result in payment errors or an incorrect agency being charged.
 
• EDP General Controls and Security - FECA's electronic data processing systems were not sufficiently documented, an appropriate disaster plan was not in place, user IDs and passwords were not safeguarded, and Year 2000 changes within the chargeback system had not yet been made. We did not identify any errors or incorrect payments as a result of these weaknesses.