	Background

The FECA program covers over 2.7 million civilian federal and postal  employees in more than 70 agencies, providing wage-loss compensation  and payments for medical treatment to employees injured while  performing their federal duties. Every year, employing agencies reimburse  OWCP for the amounts paid to their employees in FECA compensation  during the previous year. Certain government corporations and USPS  also make payments to Labor for program administrative fees. OWCP is the central point where FECA claims are processed and  eligibility and benefit decisions are made. The  elements include evidence that the claim was filed within FECA’s  statutory time requirements, that the employee was, at the time of injury  disease, or death, an employee of the United States, and that the  employee was injured while on duty, and that the condition resulted from  the work-related injury. GAO’s Standards for Internal Control in the  Federal Government also outlines key control practices that are integral  parts of an effective control environment. Promising Practices

We have identified several promising practices that employing agencies  and Labor have implemented that may help to reduce fraudulent FECA  claims. Agencies with full time staff may be able to dedicate resources to training  them in fraud prevention, which is a positive practice noted in GAO’s  fraud-prevention framework. Similar to the periodic reviews  previously discussed, these controls fall within the monitoring component  of GAO’s fraud-prevention framework and could help to validate  claimants’ self-reported income and medical-condition information.   The USPS IG reported that since October 2008 it identified and  facilitated terminating benefits for 476 claimants who were committing  workers’ compensation fraud, and recovered over $83 million in  medical and disability judgments.   A recent Labor IG testimony cited numerous Labor IG investigations  that have been conducted over the years focusing on FECA claimants  who work while continuing to receive benefits, and on medical or other  service providers who bill the program for services not rendered. Potential Vulnerabilities

Our preliminary observations also identified potential vulnerabilities in the  FECA program fraud-prevention controls that could increase the risk of  claimants receiving benefits they are not entitled to. We found that management of the FECA program could be affected by  limited access to necessary data. For example, Labor does not have authority to  compare private or public wage data with FECA wage-loss compensation  information to identify potential fraud. Specific potential vulnerabilities identified in the area included the  following:    Program officials at Labor and the employing agencies do not have  access to payroll information included in the National Directory of New  Hires (NDNH) and federal employee payroll data, which could help  reduce duplicate payments by identifying unreported income. The CA-1032 form  contains information on a claimant’s income and dependent status,  which is useful when employing agencies review claims files for  continued eligibility. Labor agreed with the findings  of this report. Our preliminary observations found that FECA program regulations allow  claimants to select their own physician, and also requires examination by  a physician employed or selected by the government only when a second  opinion is deemed necessary by the government. Officials at multiple employing agencies covered in our work to date  stated that they faced difficulties successfully investigating and  prosecuting fraud. According to these officials, many of their strong allegations of fraud  and abuse fall below this amount when estimating the cost of fraud  that has already occurred. GAO’s Plans to Further Assess Controls and Perform Data Analysis as Part of Ongoing Work

We plan to follow up on these promising practices and potential  weaknesses as part of our ongoing review of FECA fraud-prevention  controls. In addition to our fraud-prevention work in the FECA program, we are  conducting two other program-related engagements. Those engagements  focus largely on issues related to retirement-age FECA beneficiaries. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this statement.
Why GAO Did This Study

This testimony provides information on fraud-prevention controls for the Federal Employees' Compensation Act (FECA) program. According to the Department of Labor (Labor), in fiscal year 2010 about 251,000 federal and postal employees and their survivors received wage- loss compensation, medical and vocational rehabilitation services, and death benefits through FECA. Administered by Labor, the FECA program provides benefits to federal employees who sustained injuries or illnesses while performing their federal duties. Employees must submit claims to their employing agency, which are then reviewed by Labor. For those claims that are approved, employing agencies reimburse Labor for payments made to their employees, while Labor bears most of the program's administrative costs. Wage-loss benefits for eligible workers-- including those who are at, or older than, retirement age--with total disabilities are generally 66.67 percent of the worker's salary (with no spouse or dependent) or 75 percent for a worker with a spouse or dependent. FECA wage loss compensation benefits are tax free and not subject to time or age limits. Labor's Office of Workers' Compensation Programs (OWCP) estimated that future actuarial liabilities for governmentwide FECA compensation payments to those receiving benefits as of fiscal year 2011 would total nearly $30 billion (this amount does not include any costs for workers added to the FECA rolls in future years). In 2010, the United States Postal Service (USPS) Office of Inspector General reported that USPS alone had more than $12 billion of the $30 billion in estimated actuarial FECA liabilities. In April 2011, the USPS Inspector General (IG) testified that USPS had removed 476 claimants from the program based on disability fraud since October 2008 and recovered more than $83 million in judgments. Given the significant projected outlays of the governmentwide FECA program and prior USPS IG findings of fraud, this statement provides preliminary observations on our ongoing work examining FECA fraud-prevention controls and discusses related prior work conducted by us and other federal agencies. We will continue to review the identified issues and report on our findings at a later date...

What GAO Found

Our work to this point has identified several promising practices that could help to reduce the risk of fraud within the FECA program. The promising practices link back to fraud-prevention concepts contained in GAO's Fraud Prevention Framework and Standards for Internal Control in the Federal Government, and include agencies' use of full-time staff dedicated to the FECA program, periodic reviews of claimants' continued eligibility, data analysis for potential fraud indicators, and effective use of investigative resources. These promising practices have already resulted in successful investigations and prosecutions of FECA-related fraud at some agencies, and could help to further enhance the program's fraud- prevention controls. However, our preliminary work has also identified several potential vulnerabilities in the program's design and controls that could increase the risk for fraud. Specifically, we found that limited access to necessary data is potentially reducing agencies' ability to effectively monitor claims and wage-loss information. In addition, agencies' reliance on self-reported data related to wages and dependent status, lack of a physician selected by the government throughout the process, and difficulties associated with successful investigations and prosecutions all potentially reduce the program's ability to prevent and detect fraudulent activity. Labor and employing agencies generally agreed with the preliminary findings presented in this statement and provided technical comments, which were incorporated into this statement. We plan to follow up on the promising practices and potential vulnerabilities as part of our ongoing work.