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Department of Labor

Recommendations and Actions

DOL20: Reduce Federal Employees' Compensation Act Fraud

Background

The Federal Employees' Compensation Act (FECA) provides income replacement and medical benefits to civilian employees of the United States who became disabled due to personal injury sustained while in the performance of duty. The Act also provides compensation for employment-related disease.

Several people have been convicted of defrauding the FECA program in recent years. However, the law requires the Department of Labor (DOL) Office of Workers' Compensation Programs (OWCP) to continue to pay benefits to these convicted individuals. As the law is currently written, the government cannot terminate benefits based only on a conviction for defrauding the program.

This provision of law undermines the success of agencies like DOL's Office of Inspector General (OIG), Office of Investigations; the Postal Inspection Service; and the Tennessee Valley Authority, which have aggressively pursued alleged fraud. DOL's Inspector General reviewed the records of 63 claimants who had been convicted of defrauding the program during fiscal years 1990 and 1991. Over half of the claimants continued to receive benefits from the very program they had defrauded.(1)

A former program analyst with the Department of the Treasury's Bureau of Public Debt allegedly failed to report that he was working while receiving FECA benefits. An investigation revealed that the individual had, in fact, made false statements to OWCP and fraudulently received almost $200,000 in FECA benefits. To further his scheme, the individual allegedly hired someone to murder the key witness who had supplied information that he was not totally disabled and actually was the owner or operator of four different corporations while receiving FECA benefits.2 Despite the fact that he was convicted in federal court on these charges, under the current statute, OWCP could not terminate compensation benefits based solely on his conviction for making false statements to obtain FECA benefits.

Actions

1. The FECA and section 1920 of title 18, United States Code, should be amended to make it a felony to knowingly and willfully make a false or misleading statement or representation in connection with the application for or receipt of FECA benefits.

2. Section 8102(a) of title 5, United States Code, should be amended to provide that an individual convicted of a violation under the amended statute, or other fraud related to FECA, forfeits all entitlement to any benefits as of the date of conviction.

3. Section 8116 of title 5, United States Code, should be amended to provide no benefits to an individual confined in a jail, prison, or other penal institution or correctional facility if that individual's conviction constituted a felony under applicable law.

During a period of incarceration, the dependents of the incarcerated individual would receive a percentage of the benefits that would have been payable to the individual.

Implications

The recommended statutory changes will help reduce benefits to persons who filed fraudulent claims. As a result, the federal government will achieve a cost savings by not providing benefits obtained through fraud and by removing the administrative costs connected with these benefits.

Fiscal Impact

The 63 convictions identified during the FECA assessment represents a small portion of the 53,000 claims that comprise the average OWCP periodic roll inventory. However, the FECA payments to these claimants totaled approximately $1.2 million per year. Although OIG has not developed evidence of epidemic fraud, it has determined that some claimants (more than half of those included in the assessment) continue to draw FECA benefits after being convicted of defrauding the FECA program.

 Budget Authority (BA) and Outlays (Dollars in Millions) 
 *******************************************************
 Fiscal Year
        1994     1995     1996     1997     1998     1999     Total
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
 BA    -$3.3    -$3.4    -$3.7    -$3.8    -$4.1    -$4.3     -$22.6

Out- lays -$3.3 -$3.4 -$3.7 -$3.8 -$4.1 -$4.3 -$22.6

Change in FTEs 20 20 20 20 20 20 20

Endnotes

1. U.S. Department of Labor, Office of the Inspector General, Office of Investigations, Assessment of Actions Taken Against FECA Claimants Convicted of Defrauding the Program in Fiscal Years 1990 and 1991 (Washington, D.C., June 30, 1992).

2. U.S. Department of Labor, Office of the Inspector General, Semiannual Report (Washington, D.C., October 1, 1991-March 31, 1992), p. 50.

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