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AUTOMATED CROSSMATCHES WITH SSA WOULD RESULT IN PROGRAM SAVINGS
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] OIG conducted an audit to determine: (1) Whether FECA claimants earned wages
while receiving long-term total disability compensation; (2) Whether automated
crossmatches with Federal or state wage records would provide an independent
source of information which could assist OWCP in identifying potential claimant
fraud or overpayments and in monitoring claimants continuing eligibility; and
(3) Whether internal controls adequately ensured that claimant wages were
detected and benefit amounts were adjusted accordingly.
Wages Earned by Totally Disabled FECA Claimants
To help determine whether totally disabled FECA claimants were earning wages,
we conducted two crossmatches.
In the SSA crossmatch of about 27,000 totally disabled FECA claimants, we
found that:
Crossmatches with States Revealed Potential Fraud and Overpayments
We conducted the second automated crossmatch of 27,050 and 25,973 FECA
claimants for CYs 1996 and 1997, respectively, with the wage records maintained
by 6 cooperating states in order to identify which individual FECA claimants
earned wages and to determine whether the wages were properly reported.
The 6-state crossmatch revealed a total of 33 potential fraud cases which
were subsequently referred to the OIG Office of Investigations (OI). These cases
represent a potential total of $6.1 million cost avoidance over 10 years (or an
average of $187,000 per claimant). Even if the 33 claimants are not convicted of
fraud, OWCP could establish overpayments for an additional $956,000 in
compensation paid over the 15-month period covered by a falsified form CA-1032
(or an average of $29,000 per claimant).
Internal Control Weaknesses
Our audit of OWCP's internal control procedures for detecting wages of
claimants and adjusting benefit amounts accordingly was conducted in five FECA
district offices. We found that the staff in the district offices we visited (1)
did not consistently follow policies and procedures to detect earnings of
claimants and to determine the effect, if any, that earnings may have on their
continuing entitlement to eligibility, resulting in payments being made to
claimants who were either not entitled to compensation or were entitled to
reduced compensation; (2) take appropriate action when there was documented
evidence of earnings; and (3) declare overpayments when cases contained evidence
of sporadic earnings.
As a result of our audit we concluded that the vast majority of FECA
claimants in our sample proved to be honest in their dealings with OWCP.
However, legislation to change the Internal Revenue Code (IRC) to provide OWCP
routine access through the SSA to Internal Revenue Service (IRS) wage data could
provide a cost-effective tool to ferret out the small number of dishonest
claimants who, in the 6 states covered by our audit, may be bilking the FECA
program out of an estimated $500,000 per year. Moreover, conducting automated
crossmatches on an annual basis would be less expensive administratively and
provide better assurance of claimants continuing eligibility. We estimate that,
if an automated SSA crossmatch is conducted annually (as opposed to the current
system of once every 3 years), OWCP's savings in SSA charges, clerical costs,
and postage would be $347,000 in the first year and at least $359,000 in
subsequent years. This totals a minimum of $3.6 million in reduced
administrative expenses over 10 years. An annual crossmatch would also enable
OWCP to better identify claimants who fraudulently conceal earnings and timely
remove them from the disability rolls.
We recommend that the Assistant Secretary for Employment Standards ensures
that the Director, OWCP:
OWCP agreed with all our recommendations.
[
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] 30 pp {61 k}
The Office of Workers
Compensation Programs (OWCP) is charged with administering the Federal Employees
Compensation Act (FECA), under which Federal employees who become disabled are
paid wage loss compensation based on their former salaries and degree of
disability.
Report No. 03-00-008-04-431 (September 22, 2000)
REPORTS BY FISCAL YEAR
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