Feds making fewer improper payments

The White House and federal agencies have made progress in reducing improper payments, but only half of the agencies have tried to figure out why they're making the payments in the first place, officials said at a House subcommittee hearing on Feb. 7.

Improper payments dropped to $115 billion in fiscal 2011, down from $121 billion the year before, Beryl Davis, director of financial management and assurance for the Government Accountability Office, testified at the hearing.

Federal improper payments are payments for the wrong amount, to the wrong person, or for the wrong reason. The figures are generally given as estimates.

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However, it should be noted that the current totals for improper payments reflect some modifications, including a reduced estimate for the fiscal 2010 improper payments, Davis said. Without those changes, the decrease would have been greater because the original estimate for 2010 was $125 million. Also, the fiscal 2011 figure reflects totals from nine additional programs not included in previous years, she added.

Looking at the big picture, improper payments have been falling in the last two years while federal outlays were rising. As a result, the governmentwide payment error rate was decreasing, said Daniel Werfel, controller for the Office of Management and Budget, who also testified.

“Building upon a number of discrete steps that have been taken in conjunction with Congress since 2009, our results demonstrate critical and significant progress in this area,” Werfel said at the hearing.

“Most notably, the governmentwide error rate declined from over 5.4 percent in 2009 to 4.7 percent last year. Without this decline, the government would have made over $20 billion in additional improper payments,” Werfel said.

However, only half of the 79 federal programs with improper payments reported root causes to OMB using the required categories for fiscal 2011, Davis added. Only 42 programs evaluated and reported the root causes in the three required categories.

But even if all the reporting had been completed, Davis said more detailed information is needed to hone in on the problems because the three categories offer only a “general” description.

“Additional information and analysis on the root causes of improper payment estimates would help agencies target effective corrective actions and implement preventive measures,” Davis said.

In addition, under a 2010 law to reduce improper payments, federal inspector generals will be required to submit reports by March on whether their agencies are complying with key provisions in the law.

The hearing was sponsored by the House Oversight and Governmental Reform Subcommittee on Governmental Organization, Efficiency and Financial Management.

“Improper payments occur for a variety of reasons, but they are all the result of poor financial management., said Rep. Todd Russell Platts (R-Pa.) subcommittee chair. “Programs are particularly vulnerable to improper payments when agencies fail to maintain effective internal controls, adequate financial management systems, or sufficient oversight.”

Last year OMB identified 11 high-error programs, which made up about 94 percent of the improper payments, including Medicare and Medicaid, which accounted for over about half. Other high-error programs include unemployment insurance, Social Security, and the Earned Income Tax Credit.

Sen. Tom Carper (D-Del.) said he and Sen. Tom Coburn (R-Okla.) have introduced legislation to identify and combat fraud and abuse in Medicare and Medicare. The provisions address specific issues including physician identify theft, the need for improved fraud data sharing between the federal government and state agencies, and quicker identification of improper payments to medical providers, Carper said.