U.S. Department of Labor Office of Inspector General

Audit Report

LONGSHORE AND HARBOR WORKERS' COMPENSATION ACT AND
DISTRICT OF COLUMBIA WORKMEN'S
COMPENSATION ACT SPECIAL FUNDS

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Report Title: Longshore and Harbor Workers' Compensation Act and
District of Columbia Workmen's Compensation Act Special Funds

Report Number: 12-98-004-04-432--Longshore
12-98-005-04-432--D.C. Workmen's Comp.

Issue Date: May 14, 1998

The Longshore and Harbor Workers' Compensation Act (LHWCA), enacted in 1927, establishes a federal compensation system for longshore and other specific classes of workers whose injuries occur upon navigable waters of the United States or adjoining facilities like piers and dry docks. The Employment Standards Administration (ESA), Division of Longshore and Harbor Workers' Compensation (DLHWC) has direct responsibility for administration of the Fund. T he Fund provides compensation, and in certain cases, medical care payments to employees disabled from injuries which occurred on the navigable waters of the United States, or in adjoining areas used for loading, unloading, repairing, or building a vessel.

The original LHWC Act was extended to cover employees under the District of Columbia Workmen's Compensation Act (DCCA) Special Fund. This Fund offers compensation, and in certain cases, medical care payments to District of Columbia employees for work-related injuries or death for cases with dates prior to July 26, 1982. The ESA/DLHWC also administers this special Fund.

Our annual audit of these two special Funds identified weaknesses in DLHWC's internal controls for reporting and authorizing payments to rehabilitation service providers. These control weaknesses within the rehabilitation payment process contributed to the fraudulent payment of more than $500,000 to fictitious rehabilitation vendors over a 4-year period. As a result, we recommended changes to the internal control over the payment process. DLHWC agreed with the recommendation and is developing an automated system to increase existing controls. There were no recommendations in the DCCA report.

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