Improper payments are down, but there is still room to improve


Policy Fellow Matt Rumsey wrote this post. 

Last Tuesday, a House Subcommittee held a hearing to discuss improper payments by the federal government. The House Committee on Oversight and Government Reform Subcommittee on Government Organization, Efficiency, and Financial Management heard testimony that Federal agencies identified at least $115 billion in improper payments in FY2011. That is down an estimated $5.3 billion from FY 2010 levels.

The hearing was divided into two panels. First, Senator Tom Carper (D-DE) highlighted legislative steps to address the issue of improper payments. Second, representatives of GAO, OMB, and the Recovery Accountability and Transparency Board discussed measures the executive branch has taken to reduce improper payments and covered some barriers standing in the way of further progress.

Panel 1 – Senator Carper

Senator Carper testified in favor of the Improper Payments Elimination and Recovery Improvement Act of 2011 (S.1409), which he introduced with Senator Susan Collins (R-ME). The bill was reported out of the Committee on Homeland Security and is awaiting a vote from the full Senate. Carper testified in favor of his bill and spoke about the importance of reducing improper payments. He argued that executive branch willingness and congressional action have helped reduce improper payments even as more federal agencies are meeting reporting requirements. One such action, the Improper Payments Elimination and Recovery Act of 2010, (pdf) requires agencies to report improper payments, instructs them to recover lost funds, and evaluates managers on how well they comply with the law.

However, there is still progress to be made. Carper stressed three areas primed for reform. First, it is necessary to focus on better coordination, communication, and information sharing between agencies. Databases and computer systems should be upgraded and important information needs to be more accessible on an inter-agency basis. Second, specific solutions need to be identified to limit improper payments to deceased individuals. Finally, the government needs to do more to ensure that improper payments are recovered once they are discovered.

Carper also highlighted the Medicare and Medicaid FAST Act (S. 1251), and its House companion H.R. 3399. The legislation, based on GAO and IG recommendations, intends to fight fraud, abuse, and improper payments in the two programs. Medicare and Medicaid are two of the largest sources of improper payments.

Panel 2 – OMB, GAO, RATB Representatives

The Obama Administration’s efforts to combat and limit improper payments were the focus of testimony by Daniel Werfel, Controller at the Office of Management and Budget. He stressed the need for a centralized framework and single point of entry for agencies to find eligibility data before making payments. He noted that, government-wide, error rates fell between 2009 and 2011, preventing over $20 billion in improper payments. Additionally, the administration is on course to surpass its goal of recovering $2 billion in overpayments to contractors between FY2010 and FY2011. He also highlighted as a step towards transparency in payment accuracy.

Michael Wood, executive director of the Recovery Accountability and Transparency Board, testified that lessons learned by the Government Accountability and Transparency Board while analyzing implementation of the Recovery act should be applied across government spending with the underlying assumption that transparency drives accountability. Currently, a lack of standardized data and a general hesitancy among federal agencies to share their data because of privacy concerns stands in the way of full realization of the Recovery Accountability and Transparency Board’s goals. To address some of these issues, the board has developed fraud prevention tools that are being tested across the government using their portal. Wood argued that, with Congress’ help, the government could standardize data, provide open access to databases, and foster communication between agencies.

Beryl Davis, director of financial management and assurance at the Government Accountability Office, focused her remarks on steps that can be implemented to fight improper payments. First, the root causes of improper payments must be identified and analyzed. This will allow effective preventative controls to be put into place. Finally corrective controls aimed at recovering lost funds can be identified and implemented.