Federal Employees' Compensation Act: Preliminary Observations on Fraud-Prevention Controls

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...