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IG frustrated by OPM's handling of improper payments to dead retirees

May. 9, 2013 - 06:00AM   |  
By STEPHEN LOSEY   |   Comments
Patrick McFarland, Office of Personnel Management inspector general, left, and Kenneth Zawodny, OPM associate director of retirement services, testify before the House Oversight and Government Reform subcommittee on federal workforce. OPM is failing to chase down suspected pension fraud in its quest to speed up pension processing, McFarlan said Thursday.
Patrick McFarland, Office of Personnel Management inspector general, left, and Kenneth Zawodny, OPM associate director of retirement services, testify before the House Oversight and Government Reform subcommittee on federal workforce. OPM is failing to chase down suspected pension fraud in its quest to speed up pension processing, McFarlan said Thursday. (Thomas Brown / Staff)

The Office of Personnel Management is failing to chase down suspected pension fraud in its quest to speed up pension processing, the agency’s inspector general testified Thursday.

IG Patrick McFarland told the House Oversight and Government Reform subcommittee on the federal workforce that he is troubled that OPM is referring fewer cases of possible retirement fraud in recent years. And even when OPM does refer cases to the IG, it is usually long after the statute of limitations has expired and the IG can take no action.

“There are ... a carload of frustrations that we have dealing with” retirement fraud, McFarland said.

In 2010, OPM referred 92 cases of suspected retirement fraud — when a federal retiree dies and someone continues to cash his pension checks — to the IG’s office, McFarland said. In 2011, the number fell to 30. And on a single day the following year — March 19, 2012 — OPM referred 30 cases of suspected pension fraud to the IG. But the IG could not prosecute any of those 30 cases because the agency had already stopped sending out pension checks more than five years beforehand, which is the statute of limitations.

McFarland also said that in 24 of those 30 cases, OPM didn’t ask the Treasury Department to try to reclaim those overpayments within the required 120 days.

McFarland’s office alerted OPM to its concerns last July, but he said he hasn’t seen any improvement. Between July 2012 and March 2013, 20 of the 25 suspected fraud cases OPM reported to the IG had statute of limitations problems.

McFarland acknowledged that OPM’s rate of improper payments is quite low compared to other large government programs. But McFarland said that while OPM’s reported improper payment amounts seem to be declining — from $145 million in fiscal 2007 to $103 million in fiscal 2012 — he cannot be sure that is because there are fewer improper payments. It may be because OPM can’t effectively identify all the improper payments it is making, he said.

“I’m not saying it should be a top priority” of OPM’s retirement services division, McFarland said. “But the person on the street paying taxes, they certainly believe it should be a priority to take care of improper payments and not waste taxpayer dollars.”

Ken Zawodny, OPM’s associate director of retirement services, said the agency recovers roughly 72 percent of its improper payments. When OPM cannot recover improper payments, it is usually because the person illegally cashing a dead retirees’ checks is in jail or has himself died, he said.

McFarland criticized a lack of leadership at OPM for the inattention to improper payments, and said it is the “missing link” needed to fix the problem.

OPM’s efforts to stop improper payments were already weak, McFarland said, and the intense focus on solving the pension backlog worsened the situation.

But McFarland said OPM “may be well on its way” to eliminating the pension backlog — though he cautioned its recent overtime cuts may complicate those efforts — and he praised Zawodny’s work to solve the decades-old problem.

Since January 2012, OPM has cut its backlog of unprocessed claims from 61,108 to 30,080. But Rep. Lacy Clay, D-Mo., said that during that period, the number of unprocessed disability retirement claims and court-ordered payments has increased. Disability retirement claims have increased from 5,611 to 6,536, and retirement claims with court-ordered payments have more than doubled, from 3,483 to 7,618.

Zawodny said OPM is hiring and training more staff to handle those more-complicated cases. He said OPM is now training some of its specialists who process pension claims to handle disability cases, and has hired paralegals to review retirement cases involving divorces, bankruptcies, garnishments or other court-ordered payments.

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