GAO: DOL Workers' Comp Program Made $13M in Improper Payments

The Department of Labor's Office of Workers' Compensation Programs (OWCP) mismanaged $13.3 million in improper payments in 2006, according to a Feb. 26 report released by the Government Accountability Office (GAO).

GAO alleged that OWCP failed to fulfill its duty of managing improper payments in the Federal Employee Compensation Act (FECA) program. GAO pointed out that none of OWCP’s performance goals addressed the issue and the agency did not “sufficiently emphasize preventing, detecting and recovering improper payments.”

In fact, GAO reported that OWCP only emphasized processing claims in a timely manner and quickly returning claimants to work. GAO said it was important to strike a balance between service delivery and ensuring payment accuracy.

The Labor Department estimated that the FECA program administered $703,000 in improper payments in FY 2006. But the estimate “does not capture all types of improper payments and it does not include the improper payments that OWCP identified during the year,” which GAO estimated to be 13.3 million for 2006 – $7.1 million in overpayments and $6.2 million in underpayments.

Program Remains Vulnerable Due to Unverified Data

The program remained vulnerable to improperly processed payments for a number of reasons, according to GAO. First, GAO said the agency relies on unverified, self-reported information from claimants that is not always timely or correct. From a review of a sample of claims files for overpayments identified by OWCP in 2006, GAO found that many occurred because the recipients did not inform the agency when they returned to work.

Furthermore, because OWCP doesn't require verification of the recipients' self-reported earnings and doesn't match the data received with other earnings data from other federal agencies, it is unable to identify cases of unreported earnings. GAO also found that both overpayments and underpayments were caused by OWCP errors and that many overpayments occurred when OWCP’s processing deadlines prevented payments from being quickly canceled when claimants returned to work or died.

The Labor Department disagreed with GAO's findings, claiming that the report included “erroneous payments” that actually were made in previous years to determine the number of improper payments in FY 2006. The department also argued that it was never provided with case names and numbers, “which greatly limit our ability to comment or verify the accuracy of GAO's findings.”

The Labor Department, however, described several OWCP actions that are consistent with some of the report's recommendations, which includes Secretary of Labor Elaine Chao ordering OWCP to:

  • develop a strategy to ensure that the agency’s efforts to prevent and monitor improper payments are properly balanced with its other priorities;
  • take steps to reduce the most common causes of improper payments; and
  • focus more attention on the recovery of overpayments.

“OWCP is committed to continual improvement in payment accuracy and overpayment collection, while recognizing our priority of prompt payment of wage loss compensation to avoid hardship,” wrote Victoria Lipnic, assistant secretary for employment standards at the Department of Labor, in the department's response. “We believe we have effective systems in place and enhancements being developed to ensure an even higher degree of payment accuracy.”

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