The objective was to assess the effectiveness of controls over paid tort claims in the Western Area.
A tort is a wrongful act, injury, or damage, not involving a breach of contract, for which a civil lawsuit may be brought. U.S. 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.
Tort claims are initially processed at the district level, where district managers and their designees have the authority to pay up to $5,000 to resolve tort claims locally. Claims that cannot be settled locally, but demand less than $50,000 are handled by the Accounting & Control Specialists from the St. Louis Accounting Service Center. Claims from any accident that include demands of $50,000 or greater should be sent to the National Tort Center.
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 due to a negligent or wrongful act or omission by an employee, while in the scope of their employment.
The Western Area and its 12 districts paid $12.8 million for about 3,500 tort claims in FYs 2016 and 2017. The majority of the claims were for motor vehicle accidents. We selected the Western Area for audit based on the high number and cost of tort claim payments in FYs 2016 and 2017.
What the OIG Found
Management controls over tort claims paid in the Western Area were not always effective. Our analysis of a judgmental sample of 113 tort claim payments totaling about $400,000 identified only 10 of the claims had been processed correctly. We found the following deficiencies:
- 26 of the 113 payments (23 percent) for about $97,000 were not supported by evidence of the damages upon which the settlements were based.
- 99 of the 113 tort claim files (88 percent) contained missing and/or incomplete forms and documentation required to be in the file.
- 52 of the 113 tort claim files (46 percent) were inaccurately recorded in the Tort Claims System.
In addition, six district tort claim coordinators (TCC) settled and paid about 1,500 claims for up to $5,000, without any second level management approval.
These conditions occurred because district management did not ensure TCCs consistently followed Handbook PO-702, Tort Claims to manage the tort claim process. Also,
- District management did not adequately review and oversee the tort claim process and related payment decisions.
- TCCs were not always trained, or required refresher training on tort claim processes.
- 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.
Improved management controls and oversight could reduce the potential for errors and fraud associated with tort claim payments. In addition, the Western Area incurred questioned costs of $48,705 annually for the 26 unsupported tort claims.
What the OIG Recommended
We recommended management:
- Issue a directive instructing districts to ensure tort claim payments and related supporting documentation are reviewed periodically.
- Ensure employees processing or reviewing tort claims receive adequate training on claim processing.
- Direct all districts to ensure their TCCs include all required documents and forms in the tort claim accident investigation report.
- Reinforce to all districts the importance of recording accurate tort claim information in the Tort Claims System.
- Require the Central Plains, Dakotas, Hawkeye, and Portland districts to establish a second level approval of tort claim payments authorized by the TCC.