Stopping Improper Payments to Deceased Annuitants in Washington, D.C.

Published by the Office of Personnel Management, Office of Inspector General on 2011-09-14.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                              U.S. OFFICE OF
                                         PERSONNEL MANAGEMENT

                                         OFFICE OF THE
                                      INSPECTOR GENERAL

                                        IMPROPER PAYMENTS
                                           TO DECEASED

      Theodore Roosevelt
U.S. Civil Service Commissioner

                                  SEPTEMBER 14, 2011
Page Intentionally Left Blank
OPM OFFICE OF THE INSPECTOR GENERAL                                                        SEPTEMBER 2011

                           EXECUTIVE SUMMARY


    The overarching reason for this report is to demonstrate the need to stop the flow of improper
    payments from the Federal Government’s Civil Service Retirement and Disability Fund (CSRDF)
    to deceased annuitants and survivors (annuitants), averaging $120 million annually over the
    last five years. While we are concerned with all post-death improper payments, our paramount
    concern is with the improper payments resulting when an annuitant’s death is not reported or
    detected and payments continue, sometimes for many years.

    This report gives the current status of the prior recommendations we have made in this area, but
    most importantly reemphasizes our concern that sufficient funds and resources of the U.S. Office
    of Personnel Management (OPM) be focused on this serious matter in order to bring about a full
    measure of success. Director John Berry and I agree that it is time to stop, once and for all, this
    waste of taxpayer money.

    Based on our recommendations, OPM has taken positive steps to address this issue. Regular
    meetings over the last three years between subject matter experts in OPM’s Retirement Services,
    Retirement Policy, the Office of the Chief Financial Officer, and the Office of the Inspector
    General (OIG) have led to enhancements in procedures.

    As a result of the efforts of this working group, a number of improvements have been achieved
    since the original OIG paper (July 2005), and our last paper (January 2008) with respect to the
    goal of reducing improper payments. In retrospect, however, these improvements were clearly
    only partial remedies at best. These improvements include:

      •	 Death Master File Match. Retirement Services committed to performing, in addition
         to the weekly match, an annual computer match between its annuity roll and the Social
         Security Administration’s (SSA) death records. The annual match was performed in 2005,
         2009, and 2010, and is scheduled to be performed again in the Fall of 2011;

      •	 Over 90 Project. OPM sampled the annuity roll population over 90 years old (Over
         90 Project) in September 2009, which at that time totaled 125,000, to confirm that the
         annuitants are still alive and appropriately receiving an annuity from the CSRDF. The
         sample consisted of 4,400 annuitants. Of this sample, six were determined to be deceased
         but were not identified during prior computer matches with SSA. In addition, as of the
         December 2010 report on this project, 144 annuitants in the sample had not responded
         to letters of inquiry from OPM and their annuities were placed in a suspended payment
         status. OPM is determining how best to proceed on these cases;

OPM OFFICE OF THE INSPECTOR GENERAL                                                     SEPTEMBER 2011

                              EXECUTIVE SUMMARY

      •	 Internal Revenue Service (IRS) Form 1099R. These forms are mailed out annually to
         annuitants and report taxable annuity income received. As of May 2011, OPM received
         approximately 33,000 returned 1099Rs from the January 2010 mailing and Retirement
         Services is analyzing the forms to determine whether the annuitant has a new address that
         has not been reported to OPM, or is no longer living;

      •	 Automated Check Reclamation System. In January 2010, OPM implemented an
         Automated Check Reclamation System to streamline the reclamation process, thereby
         saving significant time and resources. A reclamation is an action taken by the Government
         to recover improper post-death payments from financial institutions. The automated
         system ensures that all annuitants removed from the active annuity roll because of death
         are processed through OPM’s Death Data Reporting System, which automatically initiates
         a reclamation action through the U.S. Department of Treasury (Treasury);

      •	 Treasury Denied Reclamations. Due to Treasury regulations and procedures, not all
         requests submitted to Treasury for reclamation of post-death payments are sent to the
         financial institutions for recovery. Financial institutions are not liable for the return
         of post-death payments made more than six years prior to the date of the request for
         reclamation. Therefore, at our suggestion, a process was implemented by OPM to reach
         out to financial institutions for reclamations denied by Treasury; and,

      •	 Improving Death Reporting. To improve the timeliness of death reporting, OPM
         enhanced communications with annuitants and their family members through changes
         to mass mailings, the creation of video messages for the OPM Website, and recorded
         telephone messages activated while placed on hold by OPM Call Center representatives.

    Despite these positive developments, there remains a high probability that egregious loss of
    monies from the CSRDF will continue and require strategic corrective actions. Each year new
    cases are identified which support this concern, such as an annuitant’s son who continued to
    receive benefits until 2008, 37 years after his father’s death in 1971. The improper payment in
    this case exceeded $515,000 and was reported to OPM when the son, who fraudulently received
    the payments, died. The improper payment was not recovered.

    When compared to other Federal benefits programs, the improper payment rate is arguably
    low; however, the amount of post-death improper payments is consistently $100-$150 million
    annually, totaling over $601 million in the last five years. In addition, the balance due the
    Government related to these improper post-death payments during the last five years has risen
    much faster (70%) than total annuity payments (19%), and stronger steps must be implemented
    by OPM to identify and recover improper payments.

OPM OFFICE OF THE INSPECTOR GENERAL                                                      SEPTEMBER 2011

                              EXECUTIVE SUMMARY
    The Administration and Congress have determined that the amount of improper payments
    Government-wide is unacceptable and as such, efforts must be made to identify the root causes
    of the improper payments and put in place a corrective action plan to reduce them. Even though
    the Office of Management and Budget has not placed the CSRDF in the high risk category
    because its improper payments fall below 2.5% of the fund’s total disbursements, OPM must
    pursue aggressive and effective strategies for the integrity of the CSRDF, and especially for the
    sake of the taxpayer.

    							                                               Patrick E. McFarland
    							                                               Inspector General

Page Intentionally Left Blank
                                  Table of Contents
Executive Summary....................................................................................................... i

Status of Efforts to Reduce Improper Payments to
Deceased Annuitants ...............................................................................................1
  Background . .........................................................................................................................1
  OIG Recommendations.....................................................................................................4
  Matching with SSA’s Death Master File ....................................................................5
  Sampling of Annuitants Over 90 Years Old...............................................................6
  Tracking Undeliverable IRS Form 1099Rs................................................................7
  Capitalizing on RSM Technology. .................................................................................8
  Establishing a Working Group to Improve Program Integrity..........................8
  Recovering Funds Held in Inactive Accounts with Financial Institutions
   which Remain Unclaimed/Escheatment of Monies to the States...................10

Conclusion ......................................................................................................................11

AVL	 	   Address Verification Letter
CSRDF	   Civil Service Retirement and Disability Fund
FEHBP	   Federal Employees Health Benefits Program
HCDW	    Health Claims Data Warehouse
IPERA	   Improper Payments Elimination and Recovery Act of 2010
IRS		    Internal Revenue Service
OCFO		   Office of the Chief Financial Officer
OMB		    Office of Management and Budget
OPM		    United States Office of Personnel Management
RSM		    Retirement Systems Modernization
SSA		    Social Security Administration
                                                 OPM OFFICE OF THE INSPECTOR GENERAL

        Status of Efforts to Reduce Improper Payments to
                      Deceased Annuitants


Over the last few years, the subject of improper payments by Federal agencies has received
increasing attention from elected officials. This has led to a number of executive orders,
presidential memoranda, and laws to attempt to reduce the amount of improper payments.

In Fiscal Year (FY) 2010, the U.S. Office of Personnel Management (OPM)
was listed by the Office of Management and Budget (OMB) as having
one of the 79 programs, at 18 agencies, that are susceptible to significant
improper payments. While OMB has not designated OPM’s Civil Service
                                                                                          payments have
Retirement and Disability Fund (CSRDF) as a “high-error” program (because
improper payments are less than 2.5 percent of total disbursements), the
                                                                                           $120 million
CSRDF continues to incur high amounts of improper payments, consistently
                                                                                           annually for
totaling between $100 and $150 million annually (an average of $120 million
                                                                                          the last 5 years
annually over the last 5 years). Additionally, the accounts receivable balance
resulting from improper payments made to deceased annuitants and survivors
(annuitants) has increased significantly.

At the end of FY 2006, total receivables resulting from payments to deceased annuitants totaled
$66 million. By the end of FY 2010, the total receivables totaled $113 million, an increase of 70
                   Improper Payments & Related Accounts Receivable
                                            (in millions)

          $115.0                                     $114.9                    $116.8
                                                                                        $113.1   Improper

$100.0                              $98.0                     $98.1                              Accounts
                                                                                                 (as of
                                                                                                 (as of 9/30)


             2006             2007             2008              2009             2010


The Administration and Congress have recently taken additional steps to curb wasteful spending
and streamline Government processes, including the Improper Payments Elimination and
Recovery Act (IPERA), signed into law by the President on July 22, 2010. IPERA is designed to
cut fraud, waste, and abuse by Federal Government agencies due to improper payments.

In April 2011, OMB issued guidance to agencies on the implementation of IPERA, which
is contained in Parts I and II of Appendix C of OMB Circular A-123. Under this guidance,
agencies are required to perform the following for FY 2011 reporting:

   1) Review all programs and activities and identify those that are susceptible to significant
   improper payments. Significant improper payments are defined as gross annual improper
   payments in the program exceeding (1) both 2.5 percent of program outlays and $10 million
   of all program payments made during the fiscal year or (2) $100 million (regardless of the
   improper payment percentage). The CSRDF meets the criteria for significant improper
   payments, with such payments exceeding $100 million annually.

   2) Obtain a statistically valid estimate of the annual amount of improper payments.

       • 	 All programs and activities susceptible to improper payments will ensure that their
           sampling methodologies are approved by OMB prior to conducting their sampling

       • 	 In addition, agencies should incorporate refinements to their improper payment
           rate methodologies based on recommendations from auditors (such as their agency
           Inspector General, the Government Accountability Office, or private auditors).

   3) Implement a plan to reduce improper payments.

       •	 Agencies shall identify the reasons their programs are at risk of improper payments and
          put in place a corrective action plan to reduce them.

       •	 Agencies shall set reduction targets for future improper payment levels and a timeline
          within which the targets will be reached. Reduction targets must be approved by the
          Director of OMB.

       •	 In addition, agencies must ensure that their managers and accountable officers
          (including the agency head), programs and program officials are held accountable for
          reducing improper payments.

                                               OPM OFFICE OF THE INSPECTOR GENERAL

   4) Reporting

       •	 Agencies shall report in their annual Agency Financial Report and Performance and
          Accountability Report estimates of the annual amount of improper payments and
          progress in reducing them.

       •	 For estimates greater than $10 million, agencies shall discuss the causes of the improper
          payments, actions planned or taken, and the results of the actions taken to address those

         ▫▫ Part of the discussion shall include the portion of improper payments attributable to
            insufficient or lack of documentation;

         ▫▫ Agencies need to also address the amount of actual improper payments the agency
            expects to recover and how it will go about recovering them;

         ▫▫ Agencies must include a statement on internal controls; and,

         ▫▫ Agencies must include a description of the steps to hold managers accountable.
            Managers should be accountable through annual performance appraisal criteria for
            meeting applicable reduction targets and establishing and maintaining sufficient
            internal controls to prevent improper payments from occurring, and if they occur, to
            promptly detect and recover them.

Another component of IPERA is the use of payment recapture audits, a process of identifying
and recovering improper payments. OMB Memorandum M-11-04, issued November 2010,
provides agencies with instructions on intensifying and expanding payment recapture audit
reviews. Agencies were required to submit to OMB their payment recapture audit plan
by January 14, 2011. With respect to the CSRDF, OPM has controls in place that serve as
payment recapture audits, such as its weekly consolidated death match with the Social Security
Administration (SSA). This activity, along with the Death Master File match and the Over 90
Project that we recommended, meets the criteria for the payment recapture audits as they are a
detective control and a corrective control activity designed to identify and recapture improper
payments, and is an OPM management function and responsibility.

What OPM does not have in place are annual recovery targets that
will drive their annual performance. The targets should be based on             OPM lacks annual
the rate of recovery (amount of improper payments recovered divided              recovery targets
by the amount of improper payments identified). Since the recovery                that drive their
of the improper payments is often difficult, it may therefore be very         annual performance
challenging to set a target. Per OMB, agencies shall strive to achieve
annual recapture targets of at least 85 percent within three years (with
2011 as the first reporting year). If an agency cannot meet this target, it must seek approval from
OMB before setting a lower recapture target. For FY 2010, OPM recovered only 46 percent of
the improper payments to deceased annuitants.


   OIG Recommendations

   In our last paper on this subject, dated January 25, 2008, we provided OPM with 14
   recommendations related to improper annuity payments to deceased annuitants. In the last three
   years, our office participated in a working group with staff from OPM’s Retirement Services,
   Retirement Policy, and the Office of the Chief Financial Officer (OCFO) in an effort to identify
   ways to minimize improper payments.

   We are encouraged by the cooperation demonstrated by these program offices and feel that with
   the added support of OPM management, they have carried out substantial work to address many
   of these recommendations. In addition, the implementation of programmatic changes suggested
   by these recommendations has brought about a newfound commitment to more aggressively
   detect and stop payments to deceased annuitants.

   During ongoing meetings, staff representatives from the OIG and the affected program offices
   have carefully reviewed the 14 recommendations to clarify their understanding of the intent
   and discuss the feasibility of accomplishing tasks required to implement each recommendation.
   These meetings have been a very positive learning experience for all involved. With the direct
   contact between the working group members, it became easy to obtain immediate feedback and
   set goals through mutual discussion and agreement. Many of the annuity roll processes proved to
   be complicated. Group members, while knowledgeable in specific areas, often lacked a complete
   overview of the various processes used in the identification and tracking of deceased annuitant
   debt, detection tools such as computer matching, and the reclamation/collection of post-death
   annuity payments. As a result, the learning process derived from the group meetings allowed the
   participants to obtain the broader understanding of the processes and systems required to meet
   the goals of the recommendations and understand the need to improve on existing practices.

                            To date, significant actions have been taken by Retirement Services
OPM Working group           and the OCFO on 10 of the 14 recommendations. The program
     has closed             offices have demonstrated to the OIG that specific steps, such as the
    10 of the 14            strengthening of computer programs designed to detect potential fraud
        OIG                 and facilitate the collection of debt, improvements in communicating
 recommendations            with the annuitant population and their family members, and “overseas
                            proof of life exercises,” indicate that sufficient progress has been made
                            to close the recommendations.

   The following is a summary of the open and closed recommendations that the working group has
                                 OPEN RECOMMENDATIONS

    •	 Original Recommendation #1 - Tracking Undeliverable IRS Form 1099Rs
    •	 New Recommendation #1 - Capitalizing on Retirement Systems Modernazation 		

                                                       OPM OFFICE OF THE INSPECTOR GENERAL

 •	 New Recommendation #4 - Establishing a Working Group to Improve Program 			
 •	 New Recommendation #8 - Recovering Funds Held in Inactive Accounts with Financial
    Institutions which Remain Unclaimed/Escheatment of Monies to the States

                                  CLOSED RECOMMENDATIONS

 •	 Original Recommendation #2 - Reconciliation of Issued Form 1099Rs to Total Payments
 •	 Original Recommendation #3 - Matching with the SSA’s Death Master File
 •	 Original Recommendation #4 - Matching of Annuitants’ Social Security Numbers with SSA
 •	 Original Recommendation #5 - Validating Changes to the Annuitants’ Personal
 •	 Original Recommendation #6 - Conducting Overseas Proof-of-Life Exercises
 •	 New Recommendation #2 - Sampling Annuitants Over 90 Years Old
 •	 New Recommendation #3 - Improving Timeliness of Notification of Death to OPM
 •	 New Recommendation #5 - Improving Referrals of Deceased Annuitant Fraud to the OPM
 •	 New Recommendation #6 - Improving Untimely Reclamation of Post-Death Annuity
 •	 New Recommendation #7 - Recouping Partial Reclamation of Funds Held in Deceased
    Annuitants’ Bank Accounts
Recently, the ongoing work performed in computer matching, along with the commitment by
Retirement Services to continue the Death Master File match on an annual basis, has prompted
the closing of original Recommendation #3. Other key projects used to identify improper
payments to deceased annuitants include the tracking of undeliverable IRS Form 1099Rs and
targeting samples of the annuitant population over 90 years old on a routine basis to verify if they
are still living.

What follows is a brief summary of the results of the Death Master File match and the Over 90
Project, as well as the status of the four remaining open recommendations.

Matching with SSA’s Death Master File

A weekly computer match is performed comparing annuitant identifiers on active annuity rolls
with current SSA death records. However, we also recommended in 2005 that Retirement
Services perform an annual match against SSA’s Death Master File1 to identify those deaths
which may have gone undetected in prior weekly death matches.
1.  The Death Master File from SSA contains over 87 million records of reported death.


Retirement Services performed the match in 2005, 2009, and 2010, and going forward has
committed to perform the match annually. The match is scheduled to be performed again in the
Fall of 2011; however, we have recently learned that the staff performing both the weekly match
and the annual Death Master File match, among other duties, has been reduced from 12 to 6,
including the loss of two subject matter experts and a supervisor. We are very concerned about
the negative impact this will have on the effectiveness and efficiency of this valuable work, as
well as the integrity of the results gained. These matches are critical in reducing the amount of
improper payments and such a reduction in staff responsible for them is extremely alarming.

The inherent value of such a two-phased approach (weekly matches and the annual Death Master
File match) is evidenced by the Death Master File matches performed in 2005 and 2009, which
successfully identified significant numbers of unreported deaths resulting in improper annuity
payments. These improper payments fall into one of two categories: OPM was never notified
of the death, or the death was identified in prior death matching activities but was wrongly
judged to be an erroneous match, with no action taken to stop
the annuity payments. This often happened after a fraudulently
                                                                            Match with SSA’s
returned OPM Address Verification Letter (AVL) indicated the
                                                                           Death Master File
annuitant was still alive.
                                                                          improper payments
We feel the detection of 24 previously deceased annuitants from
                                                                              of $1.2 million
the match with SSA’s Death Master File performed in 2009
                                                                              to a deceased
clearly supports the need to continue this match annually. In
one instance, a deceased annuitant was identified as having
received improper payments of over $1.2 million.

We recommend that OPM perform these matches annually and include an analysis of the results
to determine the weaknesses in their processes that allow some deaths to go undetected for many

Sampling of Annuitants Over 90 Years Old

Based on past experience in investigating fraudulent payments to deceased annuitants, it is clear
that one characteristic that many share is that Retirement Services does not have any ongoing
interactive communications with much of this population. For example, correspondence where
the program office requests a periodic reply from the annuity recipient is relatively rare. Since
most annuitants receive their payments via electronic funds transfer to a bank account, the only
annual mailings from OPM are those announcing a cost of living increase, a change in deduction
for health benefits costs, or the annual open season for health insurance. For these mailings, no
one is specifically obligated to return anything back to OPM. Needless to say, there appear to
be numerous annuitants who have not had contact with OPM for many years. In addition, the
annuitants’ addresses of record are sometimes no longer valid and mail is returned to OPM.

At our request, OPM began surveying the over age 90 population of the annuity roll in
September 2009. At that time, there were over 125,000 annuitants over the age of 90 on the
annuity roll. In the Over 90 Project, Retirement Services reached out to a sample of 1,000

                                                        OPM OFFICE OF THE INSPECTOR GENERAL

of the annuitant peopulation between ages 90 and 99, and all annuitants over the age of 100
(approximately 3,400), and requested that an AVL be signed and returned to OPM. Unreturned
forms were noted and a second mailing was sent requesting a response, or suspension of
payments would occur. The project was completed in the summer of 2010 with the following

     •	 No response to the AVL’s was received for 144 annuitants in the sample, resulting in
        suspension of their annuity payments.

     •	 Six unreported deaths were discovered, of which three are suspected to involve fraud and
        have been referred to the OIG investigators.

     •	 In 866 cases, follow-up was required because the returned AVL was signed by someone
        other than the annuitant without having a Representative Payee2 on file.

We applaud the program’s commitment to this project and see it as a step towards establishing
more frequent interaction with the annuitant population. We believe such contact and interaction
is critical to ensuring that OPM has correct contact information, especially addresses for
annuitants, and OPM should continue to explore other ways to efficiently increase contacts.

Tracking Undeliverable IRS Form 1099Rs

The IRS Form 1099R contains information on taxable annuity amounts which is mailed annually
to each annuitant who received annuity benefits the preceding calendar year. The information
contained on this form is also shared with the IRS as notification of a potential taxable annuity,
along with identifiers, such as the social security number and name of the recipient. Based on
the importance of this form, we felt that verification of delivery is a significant indicator that the
annuitant has supplied their correct address for official OPM correspondence, and that they are
alive and receiving mail at that address. Even if they died within the preceding calendar year,
information supplied on the 1099R is of importance in the settlement of their estate. Therefore,
when 1099Rs are returned as undeliverable it would indicate a breakdown in communication
between OPM and the annuitant which needs correction, and/or the potential for an unreported
death of an annuitant.

The recommendation to analyze all returned 1099Rs has been accepted by Retirement Services
and the returned 1099Rs from the January 2010 mailing have been collected for further
evaluation and processing. Although staff availability and the cost of this project have been cited
as potential roadblocks to its completion, Retirement Services has committed to proceed with an
analysis of these returned forms.

2.  A Representative Payee is an individual appointed to receive and manage the annuity payments in the event the
annuitant needs assistance handling their financial affairs.


  While progress towards completion of this project has been slow,
  and the setting of a targeted completion date has remained vague,                            Analysis
  we are encouraged by the program office’s plans to determine why                          continues into
  approximately 33,000 of these forms were returned in 2010. A                            reasons for 33,000
  similar project, conducted in 2007, proved cost effective in detecting                   IRS Form 1099Rs
  unreported deaths and halting the improper annuity payments. As                             returned as
  with the Death Master File match, we believe this project should be                        undeliverable
  conducted annually.                                                                           in 2010

  Capitalizing on RSM Technology

  While the Retirement Systems Modernization3 (RSM) effort has slowed and is being
  re-examined, we continue to believe that there are opportunities in many of the steps being
  taken in moving towards a modernized environment to insert new procedures and controls to
  reduce instances of fraud, waste, and abuse of the retirement trust fund. In addition, many
  legacy processes, such as the death matches and surveys, will certainly need to be redefined in an
  automated retirement annuity environment.

  For example, we believe OPM should actively explore the capabilities of any automated solution
  to flag records and produce management reports for anomalies or suspect activity, such as
  multiple address or bank account changes in a short time period. We also recommend that OPM
  ensure that the development process for any new procedures or comprehensive solution consider
  the impacts on current controls and procedures, such as the weekly and annual death matches,
  and make sure that they are able to continue as effectively as they are now.

  Establishing a Working Group to Improve Program Integrity

  We believe that one of the most important recommendations included in our previous papers,
  which is still unresolved, is the recommendation to establish a working group to improve
  program integrity. The recommendation calls for OPM to establish a group comprised of subject
  matter experts to explore risk areas and develop data mining programs to look for anomalies
                             in the annuity roll that could indicate possible improper payments
                             or fraud. As required by the OMB’s Circular A-123, Management’s
     OPM must                Responsibility for Internal Control, OPM has the responsibility to
continually review design controls to protect the integrity of program data. We do not
 and analyze data            believe OPM can carry out this responsibility effectively unless it is
      from the               continually reviewing and analyzing data from the active annuity roll,
    annuity roll             and related sources, to identify potential weaknesses, flaws, and errors
                             in its operations, programs, and data.

  Coincidentally, OPM is currently in the early stages for the development of a Health Claims Data
  Warehouse (HCDW), which would include health claims information for a large percentage of

  3.  Retirement System Modernization is an OPM strategic initiative to automate the retirement calculations using
  modern technology to ensure annuitants are paid correctly.

                                                 OPM OFFICE OF THE INSPECTOR GENERAL

the enrollees in the Federal Employees Health Benefits Program. The purpose of the HCDW
would be to analyze claims information in an attempt to discern ways to more effectively design
benefit structures for health plans, to both reduce the cost of health care and to achieve healthier
outcomes for enrollees.

The potential benefits that can be achieved from the HCDW are clear. We believe that our
recommendation for the Retirement Services working group is along exactly the same lines
(using a large store of data for analysis in order to make program improvements and protect
integrity) as the HCDW effort, but it would take much less time and money to implement. The
annuity roll data is already in OPM’s possession. With management support and dedication to
the project, all that needs to be done is identify the funding and the subject matter experts, and
permit them to start sooner rather than later. This staff might need to be engaged 10 – 20 percent
of their time initially, but could theoretically grow to a full-time job for a small number of staff.
By virtue of such a first time permanent group arrangement, discussions of their concerns and
ideas regarding ways to identify improper payments should reduce the amount of such payments.
Some examples of ideas that could be explored are:

    •	 The development of management reports which identify worker errors that result in
       improper payments.

    •	 The creation of reports on annuity roll transactions that identify unusual anomalies that
       indicate either profound worker error or possible internal fraud.

    •	 The establishment of annuity roll data snapshots which can be manipulated in a data base
       to identify potential areas where the data should be questioned with respect to types of
       payment actions, address validity questions, frequent changes in payment addresses, and
       unusual annuity payment increases.

    •	 The continuation of ongoing meetings with other benefit paying agencies to share
       knowledge and advancements in the early detection of improper payments.

    •	 The continued validation of annuitant information with respect to correct social security
       numbers and correspondence addresses.

    •	 The establishment of data bases which can be shared with other Government benefit
       programs that allow the communication of valid information on the status of our
       annuitant population.

With 2.5 million annuitants and the disbursement of over $60 billion annually, there is an
enormous amount of data in OPM’s annuity roll to be studied. This data should have certain
characteristics, trends, and patterns, and it is OPM’s responsibility to ensure the integrity of this
data is protected.


Recovering Funds Held in Inactive Accounts with Financial Institutions which
Remain Unclaimed/Escheatment of Monies to the States

Several years ago, proactive investigations by our criminal investigators into determining if
annuitants were deceased or alive led to a working relationship with the local Wells Fargo Bank.
One of our investigators assigned to that region determined that Wells Fargo was maintaining
accounts that had been inactive for several years, with the exception of electronic funds transfer
deposits of Federal annuity payments into the accounts. Wells Fargo was not able to verify if
the account holders were deceased and in most cases would turn the money over to the State of
California. As a result of our efforts, we were able to identify
deceased OPM annuitants, recover funds from inactive accounts,
                                                                         OPM should expand
and return over $800,000 to the CSRDF. In addition, this action
                                                                             their working
stopped future OPM funds from being deposited into these
                                                                        relationship with the
inactive accounts. We subsequently recommended that OPM
                                                                         banking community
expand their working relationship with financial institutions to
                                                                                to uncover
uncover inactive annuitant accounts, as well as explore ways to
                                                                           inactive accounts
proactively recover improper payments that have been escheated
to the States.

OPM was able to expand their working relationship with Bank of America through participation
in a quarterly forum, including the U.S. Treasury Department (Treasury) and other financial
institutions, discussing reclamation issues and questions. In addition, OPM sent letters to seven
other financial institutions largely used by the annuitant population inviting representatives to
participate in a quarterly forum. The OCFO reported that they did not receive responses to the
additional letters. Managers committed to reducing improper payments in the programs they
manage should think strategically to determine the next course of action instead of doing nothing
about the setback. Therefore, we continue to recommend that OPM take aggressive actions to
establish working relationships with more financial institutions.

                                              OPM OFFICE OF THE INSPECTOR GENERAL


We would like to recognize that OPM has made strides over the last few years in attempting to
reduce improper payments from the CSRDF, as well as increasing the chances of identifying
and recovering improper payments after they have been made. The willingness of Retirement
Services and the OCFO staff to examine procedures and explore alternatives is encouraging. In
addition, we would like to thank OPM Director John Berry for his full support.

Our bottom line is that OPM must establish a working group of subject matter experts to
improve program integrity, and to be successful must devote additional funding and resources.
We believe that innovative thinking is needed, with new ideas that can bring these efforts to
completion. If not, hundreds of millions of dollars in improper payments will continue to be
made, much of which will have little chance of ever being returned to the CSRDF.

   Office of the Inspector General
         Theodore Roosevelt Building
        1900 E Street, N.W., Room 6400
          Washington, DC 20415-1100

          Telephone: (202) 606-1200
             Fax: (202) 606-2153

          Website: www.opm.gov/oig