From Postcom: “Join PostCom President Gene Del Polito and Postal Regulatory Commission Chairman Ruth Goldway in a discussion of a number of wide-ranging topics including: the PRC’s recent five-day decision, the Annual Compliance Determination, the PRC’s complaint process, difficulties with service performance measurement, and more.”

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The USPS Office of the Inspector General has released IG David C. Williams’ prepared testimony ahead of tomorrow’s hearing before Darrell Issa’s House Oversight Committee. In it, Williams says the system is prone to abuse, and that the Department of Labor has failed to manage it properly:

Mr. Chairman and members of the subcommittee, thank you for the opportunity to discuss workers’ compensation issues and reform. The Federal Employees Compensation Act (FECA) requires federal agencies to participate in the Department of Labor’s (DOL) FECA program. DOL bills each agency annually for compensation paid and non-appropriated agencies also must pay DOL an annual administrative fee.

Eligible disabled employees receive 66 2/3 percent (or 75 percent with dependents) of their basic salary, tax-free plus, medical-related expenses. Also, FECA places no age limit on receiving benefits. This is substantially more than other employees receive when they retire. Though unintended, FECA has become a lucrative retirement plan.

The Postal Service is the largest FECA participant, paying more than $1 billion in benefits and $60 million in administrative fees annually, creating a long-term liability of $12.6 billion. As of February 2011, the Postal Service had about 15,800 disabled employees. Over 8,700 were at least age 55, about 3,100 were at least age 65, and about 900 were between age 80 and 98.

Certain aspects of the program make it susceptible to fraud:

• The claimant’s ability to change their story until their claim qualifies;

• The claimant’s ability to hire a physician rather than use a plan physician to assess their injuries and condition;
• The program incentivizes DOL to collect larger fees if they approve more claims and lose budget dollars if they deny them;
• The lack of effective DOL case management; and
• Employers not being allowed to present or respond to evidence at hearings.

DOL has some fraud detection responsibility, but it’s unclear to what extent. They advise agencies to actively manage their own programs, while still charging administrative fees. There is not a clear delineation of responsibility between (1) agency program managers and (2) their OIGs and (3) DOL and (4) its OIG in detecting fraud. Accordingly, there is significant risk that program oversight will be duplicative or not done.

Since October 2008, we have removed 476 claimants based on disability fraud, recovered $83.5 million in medical and disability judgments, and halted significant future losses. In one investigation, a fraudulent claimant received $142,000 in benefits while she was working as a real estate agent, and we had pictures of her hiking and bungee jumping. She even bought a boat named “Free Ride.” Other investigations have found fraudulent claimants working as martial arts instructors, landscapers, hairdressers and mechanics.

Working with DOL is difficult. They control needed documents, but are often not responsive when we investigate cases. Additionally, they do not take timely action when told that a claimant no longer qualifies for benefits. Even when a claimant is convicted, DOL is slow to terminate benefits.

• We gave DOL an investigative report in 2006 which found a claimant was exceeding his limitations. Even though the employee was willing to return to work, DOL did not reduce his benefits until 2011.

• Fourteen months ago we gave DOL an investigative report containing evidence of fraud by a disability claimant and a subsequent medical exam confirmed the claimant was able to return to work with no restrictions. Despite requests, DOL has taken no action and continues to pay benefits.
• Over a 5-year period one claimant submitted $190,000 in unsupported mileage reimbursements that DOL paid without question.

Stress claims in particular are at high risk for fraud. If a doctor sees a correlation between stress and a claimant’s work, the claim is often approved. In one instance, a claimant’s emotional reaction to a change in work schedule was enough for DOL approval.

The OIG also investigates medical providers involved in criminal matters, including disability fraud and we have recovered $78.5 million since FY 2009. Unfortunately, DOL provides no standardized billing guidelines for doctors, making it difficult to hold them accountable for fraudulent billings. If DOL instituted a system similar to Medicare’s, prosecutors would be more inclined to take these cases. From our reviews, the Postal Service would benefit from having its own workers’ compensation program. Savings would be in the areas of reduced administrative fees, accurate assessment of claims by plan physicians, buyout options, mandatory retirements, immediate access to records, and improved accountability over case management.

FECA is in need of significant reform. Such reform could reduce the substantial risk for fraud and improve program efficiency and effectiveness, while protecting reasonable benefits for legitimate claimants.

Columbia, SC—–United States Attorney Bill Nettles announced the indictment of five additional United States Postal Service employees. Mr. Nettles added that these indictments follow five indictments from the Florence area and are part of an ongoing sweep targeting fraud by Postal workers in claiming unemployment benefits.

Lisa Hawkins, age 46, of Eutawville, Felecia Mack, age 35, of Bowman, Emma Talford, age 42, of Blackstock, Eulinda Willis, age 39, of Bowman, and Kimberly Watkins, age 40, of Vance were each charged with two counts of theft from the United States government, a violation of Title 18, United States Code, Section 641 and false statement on an application for unemployment insurance benefits, a violation of Title 18, United States Code, Section 1919. The maximum penalty each could receive is 10 years imprisonment.

“These indictments represent a collaborative effort between the South Carolina Employment Securities Commission, the Department of Labor Inspector General, and the Postal Service’s Office of Inspector General (OIG),” according to Joanne Yarbrough, Special Agent in Charge of the OIG’s regional office. “The Postal Service prides itself in its dedicated and professional employees and their ability to provide the service our customers have come to expect. The employees identified today are a very small percentage of the thousands of South Carolina postal workers entrusted with processing and delivering the public’s letters and parcels every day.”

Mr. Nettles stated that the charges in these Indictments are merely accusations and that the defendants are presumed innocent until and unless proven guilty.

“There are three kinds of lies: lies, damned lies, and statistics.”

On Sunday I mentioned Darrell Issa’s claim that the US Postal Service has an attrition rate of about one percent. I pointed out that the most recent annual numbers showed the postal service losing 3.8% of its career employees in the course of a year. So was Issa just making it up as he went along?

No. Issa was probably using statistics compiled by the Congressional Research Service for its new report, U.S. Postal Service Workforce Size and Employment Categories, 1990-2010, a copy of which appears below. The report accurately states that “USPS’s workforce size has dropped by 171,576 employees (20.3%) in the past 20 years”. Bingo! If the USPS has 20% fewer employees than it had 20 years ago, it has an annual attrition rate of 1%!

Not so fast- latching onto this seemingly obvious number ignores the facts. To start with, in the first half of that time period the USPS, like the US economy, was growing. From 1990 to 2000, the report shows that USPS total complement went from 843,263 to 901,238, an increase of almost 7%! From 2000 to 2010 the USPS began to see declines from electronic diversion, the impact of 9/11, and finally the Great Recession. As volume and revenue plummeted, it stopped hiring and started shedding employees. From 2000 to 2010, total complement went from 901,238 to 671,687, a drop of 25%. Yes, that means you could use the same report to support an attrition rate of either 1% or 2.5%, depending on the time span you select. Look at just the last five years, and the rate is 3.3%. And if you look at just the final two years of that period, the report tells you

“From the end of FY2008 through FY2009, the size of USPS’s workforce declined 7% (53,006 employees), the largest decline in more than 20 years.” and “USPS had 40,395 (6.0%) fewer employees at the end of FY2010 than it did at the end of FY2009″.

So the most recent complete fiscal year numbers reflect an attrition rate of 6%, not 1%. While that number was increased by early out offers, recent attrition still reached 3.8% without significant incentives. Using a 20 year average to estimate attrition is obviously misleading. It’s like telling an investor that the stock market has a reliable 13.4% annual growth rate because the S&P index is 268% higher than it was 20 years ago, even though today’s S&P index is just about where it was in April 1999!.

Beware politicians bearing statistics!

U.S. Postal Service Workforce Size and Employment Categories, 1990-2010

From the Akron Beacon Journal:

COLUMBUS: The owner of an Akron heating and ventilation company was sentenced last week in federal court to two years probation and fined $40,000 for bribing a U.S. Postal Service worker in exchange for construction contracts.

Ronald R. Bassak, owner of Meccon Inc., had previously admitted that he paid a postal architect/engineer about $100,000 to secure work for the company over a four-year period.

Bassak told investigators that postal architect/engineer Ashvin Shah had solicited bribes in return for construction contracts for Meccon. Shah committed suicide at his Westerville home.

More: Ohio.com – Local news briefs – April 10.