BEFORE THE
SUBCOMMITTEE ON LABOR, HEALTH AND HUMAN
SERVICES, EDUCATION AND RELATED AGENCIES
OF THE COMMITTEE ON APPROPRIATIONS
U.S. HOUSE OF REPRESENTATIVES
TESTIMONY OF THE INSPECTOR GENERAL OF THE
RAILROAD RETIREMENT BOARD

April 29, 1999

Mr. Chairman and Members of the Subcommittee:

My name is Martin J. Dickman, Inspector General of the Railroad Retirement Board (RRB). I would like to thank you, Mr. Chairman, and the members of the committee for their support for the Office of Inspector General. I am here to present our Fiscal Year (FY) 2000 appropriations request and to summarize our planned activities.

The Office of Inspector General requests funding of $5.4 million to ensure the continuation of its independent oversight of the RRB at the current staffing level. The agency is responsible for managing benefit programs which paid $8.2 billion in retirement and survivor benefits to approximately 772,000 beneficiaries in FY 1998 and an additional $88 million in railroad unemployment and sickness insurance benefits to 31,000 claimants. The RRB also administers Medicare Part B, the physician services aspect of the Medicare program, for qualified railroad retirement beneficiaries. Through this program, the agency pays annual Medicare benefits of $671 million to approximately 688,000 beneficiaries.

In FY 2000, the Office of Inspector General will assign a high priority to monitoring the RRB’s actions to meet the goals in its Annual Performance Plan and to reviewing the agency’s first program performance report. We will continue to work with agency management to identify ways to improve operations. We will also continue our efforts to identify, investigate and refer for prosecution and monetary recovery action, cases of waste, fraud and abuse in RRB benefit programs.

I will now summarize our audit and investigative priorities.

OFFICE OF AUDIT

In FY 2000, the Office of Audit (OA) will focus its activities in those areas with the highest impact on agency operations. Audit priorities for FY 2000 include:

Financial Statement Audits. We will continue the audit of the RRB's 1999 financial statements and perform preliminary work for the 2000 financial statements. Since their initiation in 1993, all financial statement audits have included a disclaimer of opinion. The recently completed audit of the FY 1998 financial statements also included a disclaimer of opinion related to the financial interchange, the annual funds transfer between the RRB and the Social Security Administration and a major funding source for the agency.

Auditors continue to cite two additional areas as weaknesses: the RRB’s overall control environment and the lack of sufficient information to verify the accuracy of railroad tax deposits to the RRB trust funds. We will continue to work with agency management to ensure all deficiencies are addressed to increase the likelihood of an unqualified opinion in the FY 1999 audit of the financial statements.

Government Performance and Results Act Compliance. We will continue to monitor the RRB’s actions to meet the requirements of the Government Performance and Results Act. We will evaluate agency performance measures and targets, and data used for measurement to ensure its reliability. We will perform a review of the agency’s report due on March 31, 2000. As in FY 1999, we will focus our audits on those program and operations issues that will assist us in evaluating the RRB’s progress in meeting its strategic goals.

We will also conduct internal reviews of OIG actions to meet established performance goals and will ensure all measures are appropriate.

Agency Information Systems. A special audit group established to monitor Year 2000 compliance has reported that the RRB is on schedule. Conversion of all mission critical systems (any computer systems that relate to benefit payments) was completed as of January 12, 1999. All non-mission critical system conversions are targeted to be completed by September 30, 1999. The agency is investigating the possibility of contracting with an outside firm to conduct an independent verification and validation of selected mission critical systems. We will review the statement of work and the testing results. We will also conduct oversight activities concerning the resolution of any Year 2000 compliance issues that must be addressed after January 1, 2000.

In FY 2000, we will conduct reviews to monitor the RRB’s implementation of its Strategic Information Resources Plan as well as automation expenditures to ensure conformance with the agency Information Technology Capital Plan.

The agency plans to expand its electronic records systems in FY 2000. We have been participating in the planning discussions and will continue to work closely with the Chief Information Officer and other appropriate managers concerning this endeavor.

Integrity of the Trust Funds. The audit of the 1998 financial statements again cited the RRB's inability to verify the accuracy and timeliness of railroad payroll taxes as a weakness. We will evaluate agency efforts in using the new electronic deposit systems (RRBLINK, the Electronic Federal Tax Payment System, and enhanced Fedwire) and will review the 1998 reconciliations which the RRB has scheduled for completion in June 2000.

We will continue our evaluations of the agency’s Investment Committee and its practices and policies. The failure of the Committee to remedy serious deficiencies in its current operations is of great concern. We have recommended that consideration be given to allow the Department of the Treasury to manage the RRB trust funds which currently exceed $17 billion.

Benefit Payment Accuracy. The payment of accurate and timely benefits is the primary mission of the agency. Each financial statement audit for five consecutive years has contained a disclaimer of opinion related to this area. We will continue to conduct audits in this critical area and provide management with recommendations to reduce the number of administrative and adjudicative errors.

Debt Collection Activities. Debt collection will remain a priority. As of December 31, 1998, the RRB's outstanding receivables totaled $58.4 million. We believe our continued emphasis on debt collection activities has increased management awareness of potential problems in this important area. We continue to focus on the avoidable causes of benefit overpayments. We will provide recommendations to agency management for implementing changes to improve the timely collection of debts and deposit of monies to the trust funds.

OFFICE OF INVESTIGATIONS

The Office of Investigations (OI) identifies, investigates and presents cases for prosecution. In FY 2000, OI will continue to focus its resources on the investigation of cases with the highest fraud losses. OI currently has about 800 active investigations involving fraudulent benefit payments and fraudulent reporting with fraud losses of approximately $7.8 million. These cases involve all RRB programs that provide sickness and unemployment insurance benefits to injured or unemployed workers, retirement benefits, and disability benefits for workers who are disabled.

We will continue our investigations of railroad employers and unions which submit fraudulent reports to the RRB and do not submit payroll contributions as required. These investigations have a direct and significant impact on the RRB’s trust funds as well as the benefits available to railroad workers and retirees. We will work closely with the RRB’s Audit and Compliance Section to identify cases in which there is an indication of criminal violations in connection with the filing of fraudulent reports.

We will continue to coordinate investigations with other Inspectors General and law enforcement entities whenever possible. We will also continue to work with agency management to ensure all fraud matters are appropriately referred to our office.

In FY 2000, we will continue to use the Department of Justice Affirmative Civil Enforcement (ACE) program for those cases which do not meet the criminal guidelines of U.S. Attorneys. This program has proven successful in obtaining civil judgements which return monies to the RRB.

SUMMARY

Our goals remain unchanged: to assist RRB management in the identification and elimination of operational weaknesses; to improve the delivery of service to RRB beneficiaries; and to ensure the integrity of the RRB trust funds.

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