oversight

Assessing the Internal Controls Over the U.S. Office of Personnel Management's Retirement Services' Retirement Eligibility and Services Office

Published by the Office of Personnel Management, Office of Inspector General on 2015-04-13.

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

         U.S. OFFICE OF PERSONNEL MANAGEMENT 

            OFFICE OF THE INSPECTOR GENERAL 

                     OFFICE OF AUDITS 





          ASSESSING THE INTERNAL CONTROLS OVER 

               THE U.S. OFFICE OF PERSONNEL 

           MANAGEMENT ' S RETIREMENT SERVICES' 

           RETIREMENT ELIGIBILITY AND SERVICES 

                           OFFICE 

                                            Rep o rt Number 4A-RS-00-1 3-033 

                                                      Aprilt 3, 2015 




                                                              --CAUTION -­
This audit r epot·t has been distributed to Federal officials who are n sponsible for the administration of the audited program. T his audit report may
contain pt·opl'ietat·y data which is protected by Federal law (18 U.S.C. 1905). Therefot·e, while this audit report is available undet· the Freedom of
Information Act and made available to the public on the OIG webpage (http:lhmmv.opm.govl our-iuspector-geuernl), caution needs to be exer cised
before releasing the t·epot·t to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.
             EXECUTIVE SUMMARY 

         Assessing the Internal Controls Over the U.S. Office of Personnel Management’s 

                  Retirement Services’ Retirement Eligibility and Services Office 

Report No. 4A-RS-00-13-033                                                                        April 13, 2015

Why Did We Conduct the Audit?           What Did We Find?

The objective of our audit was to       We determined that OPM needs to strengthen its controls over its
obtain reasonable assurance that        survey and match processes, which are intended to confirm
Retirement Eligibility and Services     eligibility for benefits. Our audit identified four areas requiring
(RES) has effective controls in place   improvement, as follows:
to maintain the integrity of the
federal retirement annuity roll.        1.	 Federal Employees Retirement System (FERS) Annuity
                                            Supplement Surveys and Matches Not Completed
What Did We Audit?                           Retirement Services (RS) has not conducted the 2013
                                               FERS Annuity Supplement Survey and has not performed
The Office of the Inspector General            an annual Annuity Supplement Match since 2009.
(OIG) has completed a performance       2.	 Weak Internal Controls over the Disability Earnings Survey
audit on Assessing the Internal             (DES) Process
Controls over the U.S. Office of             RS was unable to provide a listing that detailed the 548
Personnel Management’s (OPM)                   annuitants who responded to the DES in 2012 and could
Retirement Services’ Retirement                not provide 1 of the 25 annuitant’s case files we sampled
Eligibility and Services Office. Our           for review. We also determined that no supervisory
audit fieldwork was conducted from             reviews occurred for the 24 cases we reviewed.
June 9 through August 21, 2014 at       3.	 Weak Internal Controls over the Death Match Process
OPM headquarters and RES’ Union             	 RS made improper payments of $41,748 to nine deceased
Square office, located in                      annuitants who were identified in the Consolidated Death
Washington, D.C.                               Match but were not dropped from the annuity roll. In
                                               addition, RS does not have internal controls in place to
                                               ensure the accuracy of benefit determinations made on
                                               behalf of retired annuitants and their survivors.
                                        4.	 Weak Internal Controls over the Disability Earnings Match
                                            (DEM) Process
                                             RS made improper payments of $15,385 to one annuitant
                                               identified in the 2011 DEM who was not dropped from the
                                               annuity roll. In addition, RS does not have procedures in
                                               place for the selection methodology used to review
                                               disability earnings cases of annuitants that earned $100,000
                                               or less.




                                                      i
          ABBREVIATI()NS 




BS       Benefits Systems
CDM      Consolidated Death Match
CFR      Code of Federal Regulations
CSRS     Civil Service Retirement System
DEM      Disability Earnings Match
DES      Disability Earnings Survey
DMF      Death Master File
FERS     Federal Employees Retirement System
FY       Fiscal Year
GAO      U.S. Government Accountability Office
lAG      Internal Audits Group
LAS      Legal Administnttive Specialists
MLE      Minimum Level of Earnings
MRA      Minimum Retirement Age
OCIO     Office of the Chief Information Officer
OIG      Office of the Inspector General
OPM      U.S. Office of Personnel Management
RES      Retirement Eligibility and Services
Rl       Retirement Inspections
RIM      Retirement Inspections Manual
RS       Retirement Services
RSS      Retirement Surveys and Students
SICFG    Standards for Internal Control in the Federal Government
SSA      Social Security Administration
SSN      Social Security Number
u.s.c.   United States Code
VAMS     Validated Agency Match System




                        ii
                                TABLE OF CONTENTS


                                                                                                                                      Page 

       EXECUTI VE SUMMARY ................................................................................ ......... i 


       ADBREVIATIONS ........................... .......................................................................... ii 


I.     BACK GROUND ............................. ... ...... ..... .......... .. .. ... ...... ........................................ 1 


II.    OBJECT IVE, SCOPE, AND METHODOLOGY ....................................................5 


III.   AUDIT FI NDINGS AND RECOMME NDATIONS ............................................ .... 8 

       1. 	 Federal Employees Retirement System Annuity Supplement 

            Surveys and Matches Not Completed ......................................................................8 

       2. 	 Weak Internal Controls over the D isability Earnings Survey 

            Process ..................................... ......................... .......................................................9 

       3. 	 Weak Internal Controls over the Death Match Process ......................................... 10 

       4. 	 Weak Internal Controls over the Disabili ty Earni ngs Match 

            Process ................ ...... .. ....................... .................................................................... 13 


IV.    MAJOR CONTRIBUTORS T O THIS REPO RT .................................................. 15 


       APPENDIX (Retirement Senrices' response to our draft report, dated 

       December 17, 2014) 


       REPORT FRAUD, WASTE, AND MISM ANAGEMENT 

                                                                                  -




                               I.    BACKGROUND 

                                                                              -       -   -




This final audit report details the findings , conclusions, and recommendations resulting from our
performance audit on Assessing the Internal Controls Over the U.S. Office of Personnel
Management's (OPM) Retirement Services ' Retirement Eligibility and Services Office. The
audit was performed by OPM's Office of the Inspector General (OIG), as authorized by the
Inspector General Act of 1978, as amended. This is our first audit assessing Retirement
Eligibility and Services ' (RES) internal controls.

This audit was initiated and conducted based on the results of the Retirement Services' (RS) risk
assessment performed in fiscal year (FY) 2012 by the OIG's Internal Audits Group (lAG). The
purpose of the risk assessment was to understand RS' operations and determine areas of high
risk. We identified RES as a high-risk program area within RS for the following reasons:

   1. 	 RES is responsible for maintaining the integrity of and safeguarding the Civil Service
        Retirement System (CSRS) and the Federal Employees Retirement System (FERS)
        annuity rolls .
   2. 	 Manual and labor intensive processes within RES increase the risk of errors and improper
        payments to annuitants.
   3. 	 Limited resources within RES may hinder its ability to carry out its responsibility for
        maintaining the integrity of and safeguarding the CSRS and FERS annuity rolls.

Under CSRS and FERS, OPM pays monthly annuities to eligible retired employees and
survivors. RES ' Retirement Surveys and Students (RSS) and Retirement Inspections (RI) offices
are responsible for conducting surveys and matches to determine annuitants ' continued
entitlement to benefits and researching allegations of retirement benefit fraud and misuse for
potential referral to the OIG Office of Investigations.

Retirement Su rveys a nd Students

RES' Retirement Surveys and Students office is responsible for administering annual surveys of
FERS Annuity Supplement and Disability Earnings . ­

FER S Ann uity Supp lement Survey- The FERS Act allows the payment of a supplement to
FERS annuitants to bring their annuities up to the level of pensions received by Social Security
pensioners. FERS annuitants are eligible to receive the FERS annuity supplements from their
Minimum Retirement Age (MRA) to their 62nd birthday. In order to comply with the FERS Act,
RSS ' Legal Administrative Specialists (LAS) generate and send survey letters to annuitants from
their MRA to their 62nd birthday in the following circumstances:



                                                 1	                         Report No. 4A-RS-00-13-033
    • 	 Annuitant voluntarily retired at the minimum retirement age with at least 30 years of
        service, and
    • 	 Annuitant voluntarily retired at age 60 or more with at least 20 years of service.

Surveys are mailed each April requesting that annuitants respond if allowable earnings were
more than the Social Security Administration (SSA) exemption amount for the corresponding
year or if their supplement was reduced in a previous year. LAS' determinations and
adjustments to annuitants' benefits are made by July 1st in order for changes in benefit payments
to occur by August P1•

The most recent FERS Annuity Supplement Survey was completed by RES in 2012. RES
received 4,531 out of38,325 FERS Annuity Supplement Surveys mailed.

Disability Earnings Survey- RSS administers the Disability Earnings Survey (DES) to comply
With the CSRS Law and FERS Act, which provide disability annuities to retirees under the age
of 60, as long as they do not earn 80 percent or more of their current basic pay 1• In addition,
Title 5, Code ofFederal Regulations (CFR) 831.1209 mandates that an annuitant receiving a
disability retirement annuity shall be examined under the direction of OPM at the end of one year
from the date of the disability retirement and annually thereafter until he/she becomes 60 years
of age.

The DES is conducted from January through June. Surveys are mailed to disabled annuitants
beginning the last week of January until the first week of February. This is an affirmative
response survey, meaning the annuitant need not respond unless they worked or were self­
employed and have earned income to report. Returned surveys are scanned into a database by
OPM staff in Macon, Georgia by June 30th. Any additional forms and correspondence provided
by the annuitant are mailed to LAS' located in Washington, D.C. for additional review and
processing through October.

RES reported that they mailed 70,518 Disability Earnings Surveys (14,455 CSRS and 56,063
FERS) to annuitants in 2012. RES received 548 responses and dropped 82 of those from the
annuity roll.

Retirement Inspections

RES' Retirement Inspections office performs annual computer matches ofFERS Annuity
Supplement and Disability Earnings, as well as weekly Consolidated Death and annual Death



1 Current   basic pay is defmed as the current grade and step for the position from which the annuitant retired.



                                                            2	                               Report No. 4A-RS-00-13-033
Master File matches using SSA data files . Legal Administrative Specialists in RI are responsible
for making annuity benefit determinations based on the results of the matches.

FERS Annuity Supplement Match - The FERS Act is also applicable for the FERS Annuity
Supplement Match. However, instead of mailing surveys to annuitants, RI's LAS' receive and
match the SSA ' s annual earnings file, of amounts reported on FERS annuitants' W-2 forms,
against the annuity roll to identify annuitants whose earnings have exceeded the SSA Minimum
Level of Earnings (MLE) while receiving a FERS Annuity Supplement.

If the annuitants ' earnings are identified on the FERS Annuity Supplement Match as being over
the MLE, RI calculates the annuitants ' earnings to determine the amount they have been
overpaid. The annuitants ' annuity supplement is then reduced or terminated depending on the
amount of the overpayment. Overpayment letters are mailed to the annuitants notifying them of
the overpayment amount, the collection schedule2, and due process 3 •

The match timeframe is from July of the match year through June of the following year. The
most recent FERS Annuity Supplement Match was completed by RES to verify annuitants' 2009
reported earnings. The 2009 FERS Annuity Supplement Match contained 1,243 matches (cases
in which the annuitant's earnings exceeded the MLE and a reduction in the payment was
necessary).

Disability Earnings Match - The LAS request and receive earned income data, as reported by
the SSA, from Benefits Systems (BS) for each disabled annuitant receiving retirement benefit
payments for the match year under review. RES ' 2012 Disability Earnings Match (OEM)
contained 1,863 records indicating the annuitant exceeded the 80 percent earnings limit.

BS segments the population into four quadrants, consisting of:

    •   Annuitants that earned $100,000 and above,
    •   Annuitants that earned $75 ,000 to less than $100,000,
    •   Annuitants that earned $50,000 to less than $75 ,000, and
    •   Annuitants that earned $0 to less than 50,000.




2
  Overpayments are recovered by reducing the monthly supplement amount paid to the annuitant if the monthly
overpayment amount identified by RI in the collection schedule is less than the monthly annuity. If the monthly
overpayment amount is more than the monthly annuity, the supplement stops until the year in which the annuitant is
under the MLE.
3
  Annuitants have the opportunity to respond to the letter within 30 days with proof of income information if they
believe the overpayment is incorrect.



                                                        3                               Report No. 4A-RS-00-13-03 3
The LAS reviews 100 percent of annuitants with earned income of $100,000 and above.
However, RES does not have procedures in place to determine the methodology used in testing
disability earnings cases for annuitants that earned less than $100,000. The Retirement
Inspections Manual (RIM) states that once the LAS determine the audited amount is over the 80
percent earnings limit, a secondary review is performed to verify the determinations made by the
LAS.

Consolidated Death Match- The Consolidated Death Match (CDM) is performed to ensure
that the annuity roll does not include deceased annuitants. Each week, OPM receives a data file
from the SSA of deaths reported to the SSA the previous week. The SSA data file is matched
against the annuity roll to identify retirees with social security numbers that SSA has noted as
deceased. The February and March 2014 CDMs contained a total of 7,179 matches.

The following reports of matches are produced for follow-up action by RI's LAS based on the
type of match identified:

   • 	 Valid Match Report - Report of annuitant cases that have been verified and all criteria
       (i.e., name, social security number, and claim number) matches.

   • 	 Invalid Match Report - Report of annuitant cases that have been verified and the name
       and date of birth do not match.

   • 	 Multiple Claim Number Report - Report of annuitant cases that have been verified, all
       criteria matches (i.e., name, social security number, and claim number), and multiple
       claim numbers are identified.

   • 	 Suspends Report - Report of suspended annuitant cases that are automatically generated
       by CDM for the Annuity Roll Daily Cycle System.

Death Master File- The Death Master File (DMF) is a match that is also completed to ensure
that the annuity roll does not include deceased annuitants. Each year, OPM receives a DMF data
file from SSA consisting of millions of Social Security Numbers (SSN). The SSA data file is
matched against the annuity roll to identify retirees with social security numbers that SSA has
noted as deceased. For the 2013 DMF, RES identified 361 records.

As discussed previously under the Consolidated Death Match, reports of matches are produced
for follow-up action by RI' s Legal Administrative Specialists.




                                                4	                         Report No. 4A-RS-00-13-033
   II. OBJECTIVE, SCOPE, AND METHODOLOGY


Objective
The objective of our audit was to obtain reasonable assurance that RES has effective controls in
place to maintain the integrity of the federal retirement annuity roll. The recommendations
included in this final report address this objective.

Scope and Methodology
We conducted this performance audit in accordance with generally accepted government
auditing standards as established by the Comptroller General of the United States. These
standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and conclusions based on our audit objective.

The scope of our audit covered the following matches and surveys performed by RES:
       • 	 2013 Death Master File,
       • 	 February 2014 Consolidated Death Matches,
       • 	 March 2014 Consolidated Death Matches (Valid Hits only),
       • 	 June 2012 Completed Disability Earnings Match for 2011 , and
       • 	 June 2013 Completed Disability Earnings Survey for 2012.

We did not select samples from the FERS Annuity Supplement Survey because RES could not
provide us with a universe of records identified in the most recent FERS Annuity Supplement
Survey completed by RES in 2012. RES stated that they only maintained totals of surveys
received and did not maintain a listing of identifying information, such as annuitants ' names and
claim numbers.

Additionally, we did not test the FERS Annuity Match because the last match conducted for
2009 was not completed until2011. RES did not conduct matches for 2010 through 2012 due to
information technology and automation issues.

We performed our audit fieldwork from June 9 through August 21 , 2014 at the OPM
headquarters and RES ' Union Square office, located in Washington, D.C.

To accomplish our audit objective noted above, we sampled annuitants' case files to determine
if:

   • 	 RES is verifying that disabled annuitants should be receiving benefits.
   • 	 RES is conducting yearly death matches to ensure that annuitants identified as deceased
       are removed from the annuity roll.


                                                 5	                         Report No. 4A-RS-00-13-033
   • 	 RES is conducting weekly consolidated death matches to ensure that annuitants identified
       as deceased are removed from the annuity roll.

In planning our work and gaining an understanding ofthe processes over RES ' surveys and data
match activities, we considered, but did not rely on, RES' internal control structure to the extent
necessary to develop our audit procedures. These procedures were mainly substantive in nature.
We gained an understanding of management procedures and controls to the extent necessary to
achieve our audit objective. The purpose of our audit was not to provide an opinion on internal
controls, but merely to evaluate controls over the processes that were included in the scope of
our audit.

Our audit included such tests and analysis of RES ' supporting documentation provided for the
surveys and matches as we considered necessary under the circumstances. The results of our
review and tests indicate that with respect to the items tested, RES needs to strengthen its
controls over the FERS annuity supplement survey and match, disability earnings survey and
match, and death match processes.

In conducting the audit, we relied to varying degrees on computer-generated data. Due to the
nature of the audit, we did not verify the reliability of the data generated by the systems
involved. However, nothing came to our attention during our audit testing utilizing the
computer-generated data to cause us to doubt its reliability. We believe that the data was
sufficient to achieve our audit objective.

In performing our audit work, we used IDEA Data Analysis software to randomly select samples
for testing in order to accomplish our audit objective. Our sampling methodologies consisted of:

   • 	 For the annual DES, we randomly selected 25 out ofthe 82 dropped 2012 DES cases
       received by RES.

    • 	 For the annual DMF, we randomly selected 25 out of the 354 matches identified in the
        2013 DMF.

    • 	 For the weekly Consolidated Death Match, we randomly selected 135 out of7, 179
        matches. Specifically, we randomly selected:
            • 15 out of 4,265 matches from the February 2014 Valid Match Report,
            • 	 25 out of959 matches from the March 2014 Valid Match Report, .
            • 	 15 out of 427 matches identified in the February 2014 Invalid Match Report,
            • 	 25 out of595 identified in the February 2014 Suspends Report,
            • 	 35 out of758 matches identified in the February 2014 Follow-up Report, and




                                                 6	                          Report No. 4A-RS-00-13-033
           • 	 20 out of 175 matches identified in the February 2014 Multiple Claims Number
               Report.

   • 	 For the annual DEM, we randomly selected 40 out of 1,796 active annuitants identified in
       the 2011 DEM.

The samples selected during our review were not statistically based. Consequently, the results
from our samples were not projected to the populations.

The preliminary results of our audit were discussed with RS officials at an exit conference held
on August 21 , 2014 and were presented in a draft audit report, dated November 20, 2014. RS'
comments in response to the draft report were considered in preparing our final report and are
included as an Appendix.




                                                7	                         Report No . 4A-RS-00-13-033
  III. AUDIT FINDINGS AND RECOMMENDATIONS 



1. 	 Federal Employees Retirement System Annuity Supplement Surveys and Matches Not
     Completed

   RS needs to strengthen its controls over the safeguard ofFERS annuity supplement benefit
   payments. We found that RS has not conducted the 2013 FERS Annuity Supplement Survey and
   has not performed an Annuity Supplement Match since 2009, despite the fact that each is
   required by law to be performed annually.

    FERS Annuity 
         5 United States Code (U.S.C.) Section 8421a requires the reduction of
     Supplement 
          FERS Annuity Supplement benefits based on an individual's excess
     Surveys and 
         earnings. The section defmes an annuitant's supplement benefits
   Matches to Reduce 
     entitlement period as 12 months. It also states that an annuitant' s
   Benefit Payments 
      earnings and applicable exemption amounts must be determined in a
    Not Conducted 
        manner consistent with section 203 of the Social Security Act, which
     Annually, as 
        determines earnings in a taxable year.
   Required by Law 

                            The U.S. Government Accountability Office's (GAO) Standards for
   Internal Control in the Federal Government (SICFG) states that, "Internal control should
   generally be designed to assure that ongoing monitoring occurs in the course of normal
   operations. It is performed continually and is ingrained in the agency's operations."

   RS states that a lack of staffing is the primary cause for the FERS Annuity Supplement Surveys
   and Matches not being performed as frequently as required. By not ensuring that annual surveys
   and matches are conducted, there is an increased risk that annuitants' are receiving benefit
   payments to which they are not entitled.

   Recommendation 1

   We recommend that RS strengthen its internal controls over the FERS Annuity Supplement
   Survey and Match processes to ensure that benefit payments are made only to eligible annuitants,
   and FERS Annuity Surveys and Matches are conducted annually to implement the required
   annual reductions to benefits, as required by 5 U.S.C. 8421a.

   RS' Response:

   RS concurs with this recommendation.




                                                  8	                         Report No. 4A-RS-00-13-033
   "RI has developed an internal tool for determining amendments to the annuity supplement
   benefit by eliminating most of the manual computation." However, given the current resources,
   it will take another two years to complete the 2010 through 2012 FERS Supplement matches.

   "RES is working with [the Office of the Chief Information Officer (OCIO)/Benefit Systems] to
   automate the FERS Supplement match going forward .. . . By automating the process, RES/RI
   will be able to provide reliable reporting [and] consistency in work processes. RES/RI will
   [also] review the Retirement Inspection Manual to ensure the guidance is consistent with
   applicable procedures, processes, and timelines."

2. 	 Weak Internal Controls over the Disability Earnings Survey Process

   RS needs to strengthen its internal controls over the DES. RS was unable to provide a listing
   that detailed the 548 annuitants who responded to the Disability Earnings Survey in 2012 and
   could not provide 1 of the 25 annuitant case files we sampled for review.

   We also determined that no supervisory reviews occurred for the 24 cases we were able to
   review.

                                                                                    No Internal
   The GAO 's SICFG states that, "Internal control and all transactions and
                                                                                 Controls over the
   other significant events need to be clearly documented, and the
                                                                                 Disability Earning
   documentation should be readily available for examination. . . . All
                                                                                 Survey in Current
   documentation and records should be properly managed and
                                                                                      Polic:ies
   maintained." In addition, internal controls should be designed to assure 

   that ongoing monitoring occurs in the course of normal operations, 

   which includes regular management and supervisory activities. 


   36 CFR 1222.22, Creation And Maintenance OfFederal Records, provides Federal agencies
   with details on the creation and maintenance of Federal records to provide for the adequate
   documentation of agency business. Federal agencies must prescribe the creation and
   maintenance of records that:

       • 	 Make possible a proper examination by Congress or other duly authorized agencies of the
           Government.
       • 	 Document the creation and execution of basic policies and decisions and the taking of
           necessary actions, including all substantive decisions and commitments reached orally or
           electronically.




                                                   9	                           Report No. 4A-RS-00-13-033
   The lack of controls over the DES process, specifically record retention and the supervisory
   review of actions taken by the LAS' , incre~ses the risk that RS may be unable to ensure the
   accuracy of determinations made by LAS ' in the DES process.

   Recommendation 2

   We recommend that RS update its policies to include internal controls over record retention and 

   the supervisory review of actions taken by the LAS ' in the DES process. 


   RS' Response: 


   RS concurs with this recommendation. 


   "RESIRI will review the Retirement Inspection Manual to ensure the guidance is consistent with 

   applicable procedures, processes, and timelines." 


   OIG Comment: 


   RS should ensure that its corrective actions include requirements for ongoing supervisory 

   monitoring in the course of normal operations, as stated by GAO.

3. 	 Weak Internal Controls over the Death Match Process

   RS needs to strengthen its internal controls over the weekly and annual death match processes.
   Specifically, we found that:

      • 	 Two deceased annuitants identified in the February 2014 Follow-Up and Multiple Claims
          Number Consolidated Death Match Reports were not dropped and remained active on the
          annuity roll as of July 2014;

      • 	 Seven annuitants identified in the weekly and annual death matches were not timely
          suspended;

      • 	 Five annuitants identified in the February 2014 Follow-Up Consolidated Death Match
          Report were not dropped within 120 days after suspension from the annuity roll, as
          required by RS ' processes;

      • 	 No internal controls are in place to track the manual Address Verification Letters sent and
          received for death match cases with multiple claim numbers;




                                                   10 	                       Report No. 4A-RS-00-13-033
   • 	 RS does not have procedures in place to document a supervisory review of actions taken
       by LAS ' ; and

   •   No supervisory reviews occurred for all of the sampled cases we reviewed.

The details of our finding were presented to RES separate from this report.

                        RES ' Retirement Inspections Manual states, "If a response to the
  Nine d~eased          [address verification] letter is not received within 30 days, a resolution
 annuitants were        to suspend (HOI) is processed [in the Validated Agency Match System
paid S41,748 after      (VAMS)] and a letter is sent to the financial institution. ...The LAS
matches confirmed       determines which letters to send and what procedures to follow based on
   their deaths         the response received (if any)." If no response is received, RS'
                        management stated that the case is left in suspend status and dropped
after 120 days.

The GAO's S/CFG states that "Control activities are the policies, procedures, techniques, and
mechanisms that enforce management's directives .. .. " Control activities occur at all levels and
functions of the entity and include management reviews at the functional or activity level.
Internal controls should be designed to assure that ongoing monitoring occurs in the course of
normal operations, which includes regular management and supervisory activities.

As a result of ineffective controls over the CDM and DMF processes, RS made $41,748 in
improper benefit payments to deceased annuitants.

Recommendation 3

We recommend that RS drop two deceased annuitants still active on the annuity roll as of July
2014 and initiate efforts to recover $28,978 in improper payments.

RS' Response:

RS concurs with this recommendation.

"RS has taken corrective action to terminate the annuity benefits of the two deceased annuitants
and evidence [has] been previously provided ...The reclamation process has been initiated and
evidence to support this will be provided."




                                                11 	                          Report No. 4A-RS-00-13-033
OIG Comment:

RS provided us with evidence to support that they dropped the two deceased annuitants from the
annuity roll as of September 30, 2014. We will await documentation during the resolution
process to support reclamations ofthe $28,978.

Recommendation 4

We recommend that RS continue its efforts to recover $12,770 in improper payments made to
seven annuitants.

RS' Response:

RS concurs with this recommendation.

"RS has taken action to recover the improper payments [of$12,770] made to the seven
annuitants. Evidence will be forthcoming. "

Recommendation 5

We recommend that RS strengthen its controls over the death match process to ensure that
determinations of continued eligibility for benefits made on behalf of retired annuitants and their
survivors by RES staff and management are accurate and deceased annuitants are not receiving
benefit payments.

RS' Response:

RS concurs with this recommendation.

"RES will continue to review and improve its processes." The handling of the full VAMS report
has been adversely impacted by the lack of resources, especially with the handling of the
Multiple Claim listing. Through an overtime effort, RESIRI reviewed 1,865 claim numbers
identified on the January through July 2014listing. "After conducting the death verifications for
each case, 26 annuitants remained active on the rolls and 1,846 annuitants terminated for death;
the reclamation process was initiated in these cases."

RI is onboarding a LAS to support the overall death matching process and will serve as the lead
for handling the Multiple Claim listing, which will take at least one year to fully train. In the
interim, RESIRI will continue to process this workload through the use of overtime as long as it
is available.



                                                12                          Report No. 4A-RS-00-13-033
   "RESIRI will review the Retirement Inspection Manual to ensure the guidance is consistent with
   applicable procedures, processes and timelines. We will schedule a future meeting with in
   OCIO/BS to discuss requirements for further automation of the VAMS."

   OIG Comment:

   In addition to the corrective actions outlined by RS, they should also ensure that corrective
   actions include requirements for ongoing supervisory monitoring in the course of normal
   operations, as stated by GAO. Since determinations made by LAS are part of RS' normal
   operations, supervisory monitoring should occur.

4. 	 Weak Internal Controls over the Disability Earnings Match Process

   RS needs to strengthen its internal controls over the DEM process. Specifically, we determined
   that:
                                                                                      Improper
      • 	 No procedures are in place for the selection methodology used to           Payments of
          review disability earnings cases of annuitants that earned less        $15,385 were made
          than $100,000, and                                                       to an Ineligible
                                                                                      Annuitant
      • 	 One annuitant identified in the 2011 DEMas exceeding the 80
          percent earnings limit was not dropped from the annuity roll.

   Title 5 CFR 831.1209, Termination ofDisability Annuity, states that "If a disability annuitant is
   under age 60 on December 31 of any calendar year and his or her income from wages or self­
   employment or both during that calendar year equal at least 80 percent of the current rate of
   basic pay of the position occupied immediately before retirement, the annuitant's earning
   capacity is considered to be restored. The disability annuity will terminate on June 30 after the
   end of the calendar year in which earning capacity is restored."

   The GAO' s SICFG states that internal controls should be clearly documented and "designed to
   assure that ongoing monitoring occurs in the course of normal operations .... It includes regular
   management and supervisory activities, comparisons, reconciliations, and other actions people
   take in performing their duties."

   As a result of ineffective controls over the OEM process, RS made improper payments of
   $15,385 to one annuitant not dropped from the annuity roll.




                                                    13 	                       Report No. 4A-RS-00-13-033
Recommendation 6

We recommend that RS drop the annuitant from the annuity roll and recover $15 ,385 in
improper payments.

RS' Response:

RS concurs with this recommendation.

"Annuity payment [was] terminated effective September 1, 2014 and recovery action initiated.
Evidence will be forthcoming."

Recommendation 7

We recommend that RS strengthen its internal controls over the DEM process, including the
development of a written methodology for the DEM case review process.

RS' Response:

RS concurs with this recommendation.

"RES/RI is working with Quality Assurance to explore other methodologies that are consistent
and repeatable . Automating the DEM process will also aid in strengthening controls over the
process."




                                              14                         Report No. 4A-RS-00-13-033
 IV. MAjC)R CC)NTRIBUTOH.S 1'0 THIS REPORT


INTERNAL AUDITS GROUP

         Auditor

           Auditor

          Lead Auditor

           Auditor-in-Charge




          , Senior Team Leader

                   Group Chief




                                 15   Report No. 4A-RS-00-13-033
                                           APPENDIX 



                          UNITED STATES OFFICE OF PERSONNEL MANAGEMENT
                                                WtshinJIDil, DC 2041 S



Rdirement Senices
                                                   DEC 1 '1 ZOM

     MEMORANDUM FOR: 

                                                          Group
                                   Office of the Inspector General                     ~-
     FROM:                         KENNETH]. ZAWODNY, Jr~~~
                                   Associate Director
                                   Retirement Services

     SUBJECT:       Inspector General Report No. 4A-RS..()()()..13-033 Assessing the Internal Controls
                    over the U.S. Office ofPersonnel Management's Retirement Services' Retirement
                    Eligibility and Services


     This memorandwn is to acknowledge receipt ofthe Draft Audit Report of Assessing the
     Internal Controls over the U.S. Office ofPersonnel Management's Retirement Services'
     Retirement Eligibility and Services (Report No. 4A-RS-OOO-l 3-033). Retirement Services
     appreciates the opportunity to provide comments on the draft report Our responses to your
     recommendations are below.

     Recommenda tion 1
     We recommend that RS strengthen its internal controls over the FERS Annuity Supplement
     Survey and Match processes to ensure that benefit payments are made only to eligible annuitants.

    Mana&ement Response
    Effective June 30, 2014 amendments to the Annuity Supplement benefit survey resulted in
    savings of$104,823 .00 to Federal government. Concerning the FERS 20 10-2012 Supplement
    Match, over 25,000 bits were identified. Rl has developed an internal tool for determining
    amendment'! to the annuity supplement benefit by eliminating most ofthe mBnual computBtion .
    To date, we have made adjustments to 311 annuities resulting in savings of $4,340,428 .00 to
    Federal government. Given the current resourees of I FTE processing this worlcload, it will take
    another 2 years to complete the 201()..2012 FERS Supplement matches.

    RES is working with OCIO/BS to automate the FERS Supplement match going forward. While
    it is imperative to have the automation in place sooner rather than later, RES recognizes that
    OCIOIBS has other workload demands that impact development and implementation. However,
    on November 21, 2014, RES representatives met with OCIO/BS to review the requirements. A
    foUow-up meeting is scheduled for January 16, 2015. By automating the process, RESIRI wiU be
    able to provide reliable reporting as weU as consistency in work processes. RESIRJ will review
    the Retirement Inspection Manual to ensure the guidance is consistent with applicable
    procedures, processes, and timelines.




                                                   16                               Report No. 4A-RS-00-13-033
 Historically, senior LASs reviewed the work products ofjunior LASs and this method was 

 effective. Currently, the senior LASs are processing the surveys and matches due to resource 

 shortages. Supervisors ensure procedures are followed and are requiring staff members to 

 complete action plans documenting steps and timelines for conducting surveys and matches. 


 Recommendation l
 We recommend that RS update its policies, such as the Retirement Inspection Manual, to include
 internal controls over the DES process.

 Management Resnonse
 RESIRI will review the Retirement Inspection Manual to ensure the guidance is consistent with
 applicable procedures, processes, and timelines.                                              ·

 Recommendation 3 

 We recommend that RS drop two deceased annuitants still active on the annuity roll as of July 

 2014 and initiate efforts to recover $28,978 in improper payments. 


 Management Response
 RS has taken corrective action to terminate the annuity benefits of the two deceased annuitants
 and evidence was been previously provided and referenced in this report. It should be noted that
 the cases in question were dropped as of September 15,2014. The reclamation process has been
 initiated and evidence to support this will be provided.

  Recommendation 4
· We recommend that RS continue its efforts to recover $12,770 in improper payments made to
  seven annuitants.

 Management Response 

 RS has taken action to recover the improper payments made to the seven annuitants. Evidence 

 will be forthcoming. 


 Recommendation 5
 We recommend that RS strengthen its controls over the death match process to ensure that RES
 staff and management are held accountable for benefit determinations made on behalfofretired
 annuitants and their survivors.

 Management Responses
 RES will continue to review and improve its processes. The handling ofthe full VAMS report,
 specifically the handling ofthe Multiple Claim listing, has been adversely impacted by the lack
 ofresources. However, through an overtime effort, RESIRI reviewed 1,865 claim numbers
 identified on the January - July 2014 listing. After conducting the death verifications for each
 case, 26 annuitants remained active on the rolls and 1,846 annuitants terminated for death; the
 reclamation process was initiated in these cases.




                                                 17                               Report No. 4A-RS-00-13-033
RI is onboarding a LAS who will support the overall death matching process and will serve as
the lead for handling the Multiple Claim listing. It will take at least 1 year to fully train the new
LAS. In the interim, RES/RI will continue to process this workload on overtime as long as
overtime is available.


RES/RI will review the Retirement Inspection Manual to ensure the guidance is consistent with
applicable procedures, processes, and timelines. We will schedule a future meeting with in
OCIO/BS to discuss requirements for further automation of the VAMS.

With respect to VAMS, the system accurately matches all active accounts against those reported
as deceased by SSA. RES/RI receives a monthly follow-up report that allows the staff to resolve
any discrepancies concerning the living status of annuitants identified on this report.

Recommendation 6
We recommend that RS drop the annuitant from the annuity roll and recover $15,385 in 

improper payments. 


Management Response 

Annuity payment terminated effective September 1, 2014 and recovery action initiated. 

Evidence will be forthcoming. 

Recommendation 7 

We recommend that RS strengthen its internal controls over the DEM process, including the 

development of a written methodology for the DEM case review process. 


Management Response 

RES/RI is working with Quality Assurance to explore other methodologies that are consistent 

and repeatable. Automating the DEM process will also aid in strengthening controls over the 

process. 



In conclusion, RS agrees to take action to strengthen controls over the surveys and matches by 

continuing discussions with OCIO/BS concerning automating the processes as much as possible, 

updating our Retirement Inspection Manual and budget allowing, hiring of additional resources. 





                                                 18                                 Report No. 4A-RS-00-13-033
                                       Report Fraud, Waste, and 

                                           Mismanagement 

                                                  Fraud, waste, and mismanagement in
                                               Government concerns everyone: Office of
                                                   the Inspector General staff, agency
                                                employees, and the general public. We
                                              actively solicit allegations of any inefficient
                                                    and wasteful practices, fraud, and
                                               mismanagement related to OPM programs
                                              and operations. You can report allegations
                                                          to us in several ways:


                     By Internet: 	                http://www.opm.gov/our-inspector-generallhotline-to­
                                                   report-fraud-waste-or-abuse


                         By Phone: 	               Toll Free Number:                             (877) 499-7295
                                                   Washington Metro Area:                        (202) 606-2423


                           By Mail:                Office of the Inspector General
                                                   U.S. Office ofPersonnel Management
                                                   1900 E Street, NW
                                                   Room6400
                                                   Washington, DC 20415-1100




                                                             --CAUTION-­
This audit report has been distributed to Federal officials who are responsible for the administration of the audited program. This audit report may
contain proprietary data which is protected by Federal law (18 U.S.C. 1905). Therefore, while this audit report is available under the Freedom of
Information Act and made available to the public on the OIG webpage (http://www.opm.govlour-inspector-general), caution needs to be exercised
before releasing the report to the general public as it may contain proprietary information that was redacted from the publicly distributed copy.

                                                                         19 	                                  Report No. 4A-RS-00-13-033