In response to the terrorist attacks of September 11, 2001, Congress passed the Air Transportation Safety and Stabilization Act, Public Law No. 107-42 (the Act). This legislation, enacted on September 22, 2001, established the September 11 Victim Compensation Fund of 2001 (VCF or the Fund) and designated the Attorney General to administer it. Congress declared that the purpose of the VCF was "to provide compensation to any individual (or relatives of a deceased individual) who was physically injured or killed as a result of the terrorist-related aircraft crashes of September 11, 2001." Victims of September 11 who only experienced economic harm, such as the loss of employment or property damage, are not entitled to recovery from the VCF under the Act.

On November 26, 2001, the Attorney General, in accordance with the Act, appointed Kenneth Feinberg as the Special Master. In conjunction with the Civil Division of the Department of Justice (DOJ), he is responsible for administering the VCF and promulgating the rules necessary for the program. VCF officials finalized regulations on March 13, 2002 and developed internal procedures for implementing the regulations.⁹ Mr. Feinberg is a Washington, DC attorney specializing in mediation, arbitration, and negotiation. He previously served as Special Counsel to the Senate Committee on the Judiciary, worked as an Assistant U.S. Attorney in New York City, and served as Special Settlement Master involving Agent Orange litigation. Several of the Special Master's partners and staff members from his mediation firm are also working for the VCF, providing eligibility determinations, verifying original documents, approving Fund distribution plans, and researching legal questions. Mr. Feinberg and two employees of his mediation firm who are involved in the VCF are providing their services without compensation. An additional employee is compensated as a special government contract employee. The Department is paying for their expenses.

On January 9, 2002, the DOJ Civil Division contracted with PricewaterhouseCoopers (PwC) to assist the Special Master with the administration of the VCF. As part of the contract, PwC operates a Claims-Processing Center (CPC) in Arlington, Virginia, for the intake of claims, review of eligibility factors, procurement and maintenance of necessary documentation, recommendation to the Special Master of the claimant's eligibility status, and computation of presumptive awards using calculation models.¹⁰ The PwC personnel do not conduct award hearings; only the Special Master or his designee conducts hearings and makes final award determinations. The PwC contract and other Fund administrative expenses are paid by the Civil Division, and not from VCF appropriations.

When the Special Master and the Civil Division formulated the regulations for the Fund, they created a website that provides information on the Fund, claim forms, information on how to file a claim, and a method for the public to comment on the Fund. Starting in January 2002, VCF staff members began an outreach program by holding meetings in major Northeast cities, as well as in Los Angeles, London, and Australia; sending letters and full claim packets to prospective claimants on numerous occasions; running advertisements in newspapers; and setting up nine claim assistance centers in the Northeast and Arlington, Virginia, to help claimants file their claims. The VCF began processing advance benefits to eligible claimants after December 20, 2001, and issued the first final award letters in August 2002.

We reviewed various aspects of the Fund to determine how claims were being processed, including the number of claims filed, the amounts paid, the consistency and timeliness of the processing, the adherence of the VCF personnel to the regulations developed in accordance with the Act and procedures for processing claims developed by PwC and the Special Master's office, and controls in place to identify fraud. We also reviewed the adequacy of the funds budgeted to pay victims and the preparations for the deadline for filing a claim on December 22, 2003. The details of our audit objectives, scope, and methodology are contained in Appendix I.

9. These regulations are codified in at 28 CFR Part 104 (March 13, 2002) at 11233.
10. See Appendix II for definitions of commonly used terms and Appendix III for an explanation of the claim process.