A federal probe has uncovered that employees at the Transportation Department were exploiting remote work arrangements, claiming extra pay for high-cost locations while teleworking from more affordable areas.

The investigation, released Wednesday by the Office of Special Counsel, also found that some staff at the Federal Railroad Administration (FRA) flouted requirements to appear at their Washington, D.C., offices and bypassed drug testing policies.

The findings highlight a loophole that exempted teleworkers from mandatory drug tests if they were stationed more than three hours away from a testing facility. Investigators confirmed that while FRA employees avoided screenings, this practice did not violate agency policy.

One case revealed an employee fraudulently declared residency in the New York City metro area to receive a higher locality-based salary while living in Dunmore, Pennsylvania.

The individual, Brian Francis Reilly, was convicted of misdemeanor theft of government funds, sentenced to three years of probation, and ordered to repay $123,641.32, plus a $5,000 fine.

Other employees also worked outside their declared locations, but investigators found no intent to defraud. Instead, they had entered these arrangements to manage personal obligations, believing their agreements complied with federal regulations.

The Transportation Department’s acting general counsel stated there was no evidence that supervisors knowingly approved unlawful practices.

Whistleblowers first raised alarms over both pay abuses and the FRA’s handling of drug tests. While the probe confirmed that some employees avoided testing, the exemption policy was in place, making it technically permissible.

The report adds fuel to the ongoing debate over federal telework policies. Critics, including Sen. Joni Ernst, argue that remote work has made it easier for employees to exploit locality-based pay adjustments, costing taxpayers millions. Ernst emphasized that bringing employees back to the office would eliminate these abuses.

The issue of inflated locality pay is widespread. A 2023 Commerce Department review found that nearly 25% of remote employees were overpaid due to incorrect location claims. At the Architect of the Capitol, a legislative agency, the overpayment rate soared to 68%.

As the government re-evaluates remote work policies, the revelations from this investigation underscore the financial and oversight challenges posed by telework.

With growing scrutiny on fraud and pay discrepancies, reforms may be on the horizon to close loopholes and ensure accountability.

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