The objective of our audit was to assess the effectiveness of controls over paid tort claims in the Capital and Houston districts.
A tort is a wrongful act, injury, or damage, not involving a breach of contract, for which a civil lawsuit may be brought. Postal Service tort claims are claims for damage to or loss of property, or claims for personal injury or death to non-Postal Service personnel caused by the negligent or wrongful act or omission of an employee acting within the scope of his or her employment.
In fiscal year (FY) 2017, the Postal Service made more than 12,000 tort claim payments totaling almost $80 million. Under the Federal Tort Claims Act, payment decisions should be based on whether the Postal Service is legally responsible for the accident in question or if there was a negligent or wrongful act or omission by an employee. In FYs 2016 and 2017, the Capital and Houston districts paid about $1.2 million for 576 tort claims, which includes 31 claims, for payments over $5,000, requiring National Tort Center adjudication.
We selected the Capital and Houston districts for audit based on the highest number and cost of tort claim payments of the high-risk districts in FYs 2016 and 2017.
What the OIG Found
Management controls over tort claims paid in the Capital and Houston districts were not always effective. Based on our analysis of a statistical sample of 151 tort claims payments totaling about $296,000, in FY 2016 and 2017, we determined that none of the claims were processed correctly. We found the following deficiencies:
- Fifty-four of the 151 payments (36 percent) totaling $105,514, were not supported with evidence of the damages.
- All 151 tort claim files (100 percent) contained missing and/or incomplete forms and documentation required to be in the file.
- Eighty-nine of the 151 tort claim files (59 percent) were inaccurately recorded in the Tort Claims System.
In addition, tort claim coordinators (TCC) in the Capital and Houston districts settled and paid 545 claims for up to $5,000, totaling about $981,346, without second-level management approval, although management did not require second-level approval in their district.
These conditions occurred because district management did not provide sufficient oversight to manage the tort claim payment process and avoid potential risks to the Postal Service. Specifically:
- District management did not ensure TCCs consistently followed Handbook PO-702, Tort Claims.
- TCCs were not always trained prior to adjudicating claims, or required refresher training on tort claim processes.
- TCCs were unaware of the required forms in the tort claim files. In addition, postal facilities did not complete required accident investigation forms or did not forward them to the TCCs.
- TCCs did not consistently update the Tort Claim System as additional information was obtained, or actions were taken on the claim.
- District management had not established adequate oversight and controls over payments authorized by the district TCCs to conform to the Postal Service’s internal control standards.
Improved management controls and oversight could reduce the potential for errors and fraud associated with tort claims payments. As a result, we estimated the Capital and Houston districts incurred unsupported questioned costs of about $211,000 annually for improperly adjudicated tort claim payments.
What the OIG Recommended
We recommended management:
- Conduct periodic management review of the tort claim process to ensure TCCs are adjudicating claims in accordance with Handbook PO-702.
- Ensure employees processing or reviewing tort claims are trained prior to adjudicating claims and receive periodic refresher training on claim processing.
- Direct managers to ensure postal facilities are completing all required accident investigation forms and develop a checklist/guide to ensure district TCCs include all required documents and forms in the tort claim files.
- Reinforce the importance of recording accurate information in the Tort Claims System and updating the system with accurate data with the TCCs.
- Establish a second-level approval of tort claim payments authorized by TCCs.