Financial Management
Challenges in Meeting Requirements of the Improper Payments Information Act Gao ID: GAO-05-417 March 31, 2005Fiscal year 2004 marked the first year that federal agencies governmentwide were required to report improper payment information under the Improper Payments Information Act of 2002 (IPIA). The increasing scope of reporting over the past several years has demonstrated that improper payments are a significant and widespread problem in federal agencies, and in the past a limited number of agencies reported in their Performance and Accountability Reports (PAR) annual payment accuracy rates and estimated improper payment amounts. Because of your continued interest in addressing the governmentwide improper payments issue, you asked GAO to report on (1) the extent to which agencies have performed the required assessments to identify programs and activities that are susceptible to significant improper payments and (2) the annual amount estimated for improper payments by the agencies.
The federal government made progress in identifying programs susceptible to the risk of improper payments in response to the new IPIA requirements. The fiscal year 2004 PARs for 29 of 35 federal agencies that are significant to the U.S. government's consolidated financial statements show that even with the enhanced emphasis on improper payment reporting fueled by the new legislation, 6 agencies reported that they did not perform risk assessments of all their programs. The magnitude of the governmentwide improper payment problem is still unknown, because agencies have not yet prepared estimates of improper payments for all of their programs. In the 29 agency PARs included in GAO's fiscal year 2004 review, 17 agencies reported over $45 billion of improper payments in 41 programs governmentwide. This represented almost a $10 billion, or 27 percent, increase in the amount of improper payments reported by agencies in fiscal year 2003. This increase was primarily attributable to changes in the method for estimating and reporting improper payment amounts in one major program. Looking forward, future estimates are likely to trend higher because the governmentwide estimate did not include 12 programs with outlays of $248.7 billion in fiscal year 2004 that were required to annually report improper payments under OMB Circular No. A-11 during the past 3 years. This included some of the largest risksusceptible federal programs, such as the Department of Health and Human Services' Medicaid Program, with outlays exceeding $175 billion annually, or the Department of Education's Title I Program, with outlays of over $10 billion annually.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
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Report to the Chairman, Subcommittee on Government Management, Finance,
and Accountability, Committee on Government Reform, House of
Representatives:
March 2005:
Financial Management:
Challenges in Meeting Requirements of the Improper Payments Information
Act:
GAO-05-417:
GAO Highlights:
Highlights of GAO-05-417, a report to the Chairman, Subcommittee on
Government Management, Finance, and Accountability, Committee on
Government Reform, House of Representatives:
Why GAO Did This Study:
Fiscal year 2004 marked the first year that federal agencies
governmentwide were required to report improper payment information
under the Improper Payments Information Act of 2002 (IPIA). The
increasing scope of reporting over the past several years has
demonstrated that improper payments are a significant and widespread
problem in federal agencies, and in the past a limited number of
agencies reported in their Performance and Accountability Reports (PAR)
annual payment accuracy rates and estimated improper payment amounts.
Because of your continued interest in addressing the governmentwide
improper payments issue, you asked GAO to report on (1) the extent to
which agencies have performed the required assessments to identify
programs and activities that are susceptible to significant improper
payments and (2) the annual amount estimated for improper payments by
the agencies.
What GAO Found:
The federal government made progress in identifying programs
susceptible to the risk of improper payments in response to the new
IPIA requirements. The fiscal year 2004 PARs for 29 of 35 federal
agencies that are significant to the U.S. government's consolidated
financial statements show that even with the enhanced emphasis on
improper payment reporting fueled by the new legislation, 6 agencies
reported that they did not perform risk assessments of all their
programs.
The magnitude of the governmentwide improper payment problem is still
unknown, because agencies have not yet prepared estimates of improper
payments for all of their programs. In the 29 agency PARs included in
GAO's fiscal year 2004 review, 17 agencies reported over $45 billion of
improper payments in 41 programs governmentwide. This represented
almost a $10 billion, or 27 percent, increase in the amount of improper
payments reported by agencies in fiscal year 2003. This increase was
primarily attributable to changes in the method for estimating and
reporting improper payment amounts in one major program. Looking
forward, future estimates are likely to trend higher because the
governmentwide estimate did not include 12 programs with outlays of
$248.7 billion in fiscal year 2004 that were required to annually
report improper payments under OMB Circular No. A-11 during the past 3
years. This included some of the largest risk-susceptible federal
programs, such as the Department of Health and Human Services' Medicaid
Program, with outlays exceeding $175 billion annually, or the
Department of Education's Title I Program, with outlays of over $10
billion annually.
Number of Agencies and Amounts of Improper Payments Reported (Fiscal
Years 1999-2004):
Fiscal year: 1999;
Number of agencies reporting improper payments[A]: 8;
Reported amounts of improper payments (in billions): $20.7.
Fiscal year: 2000;
Number of agencies reporting improper payments[A]: 8;
Reported amounts of improper payments (in billions): $19.6.
Fiscal year: 2001;
Number of agencies reporting improper payments[A]: 8;
Reported amounts of improper payments (in billions): $20.9.
Fiscal year: 2002;
Number of agencies reporting improper payments[A]: 7;
Reported amounts of improper payments (in billions): $19.5.
Fiscal year: 2003;
Number of agencies reporting improper payments[A]: 13;
Reported amounts of improper payments (in billions): $35.7.
Fiscal year: 2004;
Number of agencies reporting improper payments[A]: 17;
Reported amounts of improper payments (in billions): $45.4.
Source: GAO.
[A] Other agencies acknowledged making improper payments in their PARs
but did not disclose dollar amounts.
[End of table]
What GAO Recommends:
GAO is making three recommendations to the Office of Management and
Budget (OMB) to help ensure successful implementation of the IPIA
requirements. OMB commented that its management emphasis and inspector
general oversight offer sufficient incentives to ensure agencies meet
IPIA requirements.
www.gao.gov/cgi-bin/getrpt?GAO-05-417.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact McCoy Williams at (202)
512-6906 or williamsm1@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Progress Made but Challenges Remain in Assessing Programs for Risk of
Significant Improper Payments:
Magnitude of Improper Payments Is Still Unknown:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendixes:
Appendix I: Scope and Methodology:
Appendix II: Agencies and Related Programs for Which OMB Circular No. A-
11 Required Erroneous Payment Information:
Appendix III: Agencies and Related Programs Included in Our Review of
Fiscal Year 2004 PARs:
Appendix IV: Improper Payment Estimates Reported in Agency Fiscal Years
2003 and 2004 PARs:
Appendix V: Comments from the Office of Management and Budget:
Appendix VI: GAO Contacts and Staff Acknowledgments:
Table:
Table 1: Programs Required to Report under A-11 and Projected Year of
Improper Payment Estimates:
Abbreviations:
CFO: Chief Financial Officer:
IPIA: Improper Payments Information Act of 2002:
MD&A: Management Discussion and Analysis:
OMB: Office of Management and Budget:
PAR: Performance and Accountability Report:
PMA: President's Management Agenda:
Letter March 31, 2005:
The Honorable Todd R. Platts:
Chairman:
Subcommittee on Government Management, Finance, and Accountability:
Committee on Government Reform:
House of Representatives:
Dear Mr. Chairman:
Federal agencies expended a record $2.3 trillion through thousands of
programs and activities to address the needs of the American people in
fiscal year 2004. As the steward of taxpayer dollars, the federal
government is accountable for how its agencies and grantees spent this
money, including the safeguarding of federal funds from improper
payments. Our work over the past several years has demonstrated that
improper payments are a significant and widespread problem in the
federal government, with only a limited number of agencies reporting in
their Performance and Accountability Reports (PAR) the annual payment
accuracy rates and estimated improper payment amounts. Fiscal year 2004
marked the first year that federal agencies governmentwide were
required to report improper payment information under the Improper
Payments Information Act of 2002 (IPIA).[Footnote 1] The IPIA raised
improper payments to a new level of importance by requiring agency
heads, based on guidance from the Office of Management and Budget
(OMB),[Footnote 2] to identify programs and activities susceptible to
improper payments, estimate the amount of their improper payments, and
report on the amount of and their actions to reduce their improper
payments.
An improper payment is defined by the IPIA as an amount that should not
have been paid or was paid for an incorrect amount. Specifically,
improper payments include inadvertent errors, such as duplicate
payments and calculation errors; payments for unsupported or
inadequately supported claims; payments for services not rendered or
rendered to ineligible beneficiaries; and payments resulting from fraud
and abuse. The OMB implementation guidance requires that estimates, and
if applicable, a corrective action report, be included in federal
agencies' PARs beginning with fiscal year 2004.
Prior to the IPIA, OMB Circular No. A-11, Preparation and Submission of
Budget Estimates, Section 57, "Information on Erroneous
Payments,"[Footnote 3] required 46 programs in 15 agencies to annually
report improper payment information. Last year we testified on the
federal agencies that reported under OMB Circular No. A-11.[Footnote 4]
We noted that federal agency fiscal year 2003 PARs typically contained
limited amounts of improper payment information. Historically,
relatively few federal agencies and their components have publicly
reported improper payment information. Estimates reported for fiscal
year 2003 were about $36 billion annually for major federal benefit
programs required to report under OMB Circular No. A-11. These programs
managed payments in excess of $1.2 trillion annually. Importantly, this
estimate did not account for payments made by all federal programs and
activities, which totaled over $2.1 trillion in fiscal year 2003. Not
only did the enactment of the IPIA expand the range of agencies, it
also expanded the programs agencies are required to assess for improper
payments to include all federal programs and payments.
Because of your continued interest in addressing the governmentwide
improper payments issue, you asked us to report on the progress being
made by agencies in complying with certain requirements of the IPIA.
This report summarizes (1) the extent to which agencies have performed
the required assessments to identify programs and activities that are
susceptible to significant improper payments and (2) the annual amount
estimated for improper payments by the agencies.
To respond to your request, we conducted a review of improper payment
information reported by agencies in their fiscal year 2004 PARs. We
further reviewed OMB guidance on implementation of the IPIA and its
report on the results of agency-specific reports, significant findings,
agency accomplishments, and remaining challenges. We did not assess the
effectiveness of the agencies' efforts or independently validate the
data that they or OMB reported. The results of our review are detailed
in this report. We conducted our work from November 2004 through
February 2005 in accordance with U.S. generally accepted government
auditing standards. Appendix I contains further details on our scope
and methodology. OMB provided written comments on a draft of this
report that are reprinted in appendix V.
Results in Brief:
In response to the new IPIA requirements, agencies overall made
progress in identifying programs susceptible to the risk of improper
payments. At the same time, our reviews of the fiscal year 2004 PARs
for 29 of 35 federal agencies[Footnote 5] that are significant to the
U.S. government's consolidated financial statements show that even with
the enhanced emphasis on improper payment reporting fueled by the new
legislation, certain agencies did not perform risk assessments of all
their programs. Specifically, 23 of the 29 agencies we reviewed
reported that they had completed risk assessments for all programs and
activities.
The magnitude of the governmentwide improper payment problem is still
unknown because, in addition to not assessing all programs, the
agencies had not yet prepared estimates of significant improper
payments for all of the programs that they determined were susceptible
to the risk of improper payments. In the 29 agency PARs included in our
fiscal year 2004 review, 17 agencies reported over $45 billion of
improper payments in 41 programs. This represented almost a $10
billion, or 27 percent, increase in the dollar amount of improper
payments reported by agencies in fiscal year 2003. However, we
determined that this increase was primarily attributable to changes in
the method for estimating and reporting improper payment amounts in one
program. Further, the governmentwide estimate did not include 12
programs with total outlays of $248.7 billion in fiscal year 2004 that
were required to annually report improper payments under OMB Circular
No. A-11 during the past 3 years. This included some of the largest
risk-susceptible federal programs, such as the Department of Health and
Human Services' Medicaid Program, with outlays exceeding $175 billion
annually, or the Department of Education's Title I Program, with
outlays of over $10 billion annually. Eight of these 12 programs
reported that they would be able to estimate and report on improper
payments sometime within the next 4 years, but the remaining 4 were
silent as to when they would report estimates in the future.
We are making three recommendations to OMB to help ensure successful
implementation of IPIA requirements. In its comments, OMB emphasized
that in fiscal year 2004, federal agencies established a strong
foundation for measuring improper payments, identifying and
implementing the necessary corrective actions, and tracking success
over time. OMB also pointed out that there are already procedures in
place for the 15 federal agencies under the new President's Management
Agenda (PMA) initiative to meet the objectives of our recommendations
and sufficient incentives and disincentives for ensuring that agencies
meet the necessary IPIA requirements. However, our recommendations
focus on all federal agencies meeting the IPIA requirements and are
directed at any agency that does not do so or agencies that may benefit
from incentives such as gain sharing to fund efforts to reduce improper
payments.
Background:
The PMA issued in 2001 targeted improper payments as an area with
opportunities for improvement. The PMA included five governmentwide
initiatives--one of which is improved financial management, which
expressly addresses improper payments as a priority. This initiative
called for the administration to establish a baseline on the extent of
erroneous payments. Under it, agencies were to include in their 2003
budget submissions to OMB information on improper payment rates,
including actual and target rates where available, for benefit and
assistance programs over $2 billion. The PMA also noted that using this
information, OMB will work with agencies to establish goals to reduce
improper payments identified in their programs.
In July 2001, as part of its efforts to advance the PMA initiative, OMB
revised Circular No. A-11 to require 16 federal agencies (15 of the
then 24 Chief Financial Officer's (CFO) Act agencies and the Railroad
Retirement Board) to submit improper[Footnote 6] payment data,
assessments, and action plans for about 50 programs to OMB with their
initial budget submissions. Specifically, the circular required that
agencies submit information including estimated improper payment rates,
target rates for future reductions in these payments, the types and
causes of these payments, and variances from targets or goals
established. In addition, agencies were to provide a description and
assessment of the current methods for measuring the rate of improper
payments and the quality of data resulting from these methods. Agencies
were to first include this improper payment information in their
initial fiscal year 2003 budget submissions. A June 2002 revision to
the circular removed the Agency for International Development from the
list and reduced the number of programs for which improper payment
information was required to 46. (App. II lists the agencies and
programs.)
In November 2002, the Congress passed the IPIA. The law requires agency
heads to annually review all programs and activities that they
administer and identify those that may be susceptible to significant
improper payments.[Footnote 7] Once agencies identify their susceptible
programs, the act requires them to estimate and report on the annual
amount of improper payments in those programs and activities. For
programs for which estimated improper payments exceed $10 million,
agencies are to report annually to the Congress on the actions they are
taking to reduce those payments. The report is also to include a
discussion of the causes of the improper payments identified, actions
taken to correct those causes, and the results of the actions taken to
address those causes.
The act further requires OMB to prescribe guidance for federal agencies
to use in implementing the act. OMB issued this guidance in Memorandum
M-03-13 in May 2003. It requires use of a systematic method to annually
review and identify those programs and activities that are susceptible
to significant improper payments. OMB guidance defines significant
improper payments as annual improper payments in any particular program
exceeding both 2.5 percent of program payments and $10 million. The OMB
guidance then requires agencies to estimate the annual amount of
improper payments using statistically valid techniques for each
susceptible program or activity. For those agency programs determined
to be susceptible to significant improper payments and with estimated
annual improper payments greater than $10 million, the IPIA and related
OMB guidance require each agency to report the results of its improper
payment efforts in the Management Discussion and Analysis (MD&A)
section of its PAR for fiscal years ending on or after September 30,
2004. The IPIA requires the following information in their reports:
* a discussion of the causes of the improper payments identified,
actions taken to correct those causes, and results of the actions taken
to address those causes;
* a statement of whether the agency has the information systems and
other infrastructure it needs in order to reduce improper payments to
the agency's targeted levels;
* if the agency does not have such systems and infrastructure, a
description of the resources the agency has requested in its most
recent budget submission to obtain the necessary information systems
and infrastructure; and:
* a description of the steps the agency has taken and plans to take to
ensure that agency managers (including the agency head) are held
accountable for reducing improper payments.
OMB's guidance in M-03-13 requires that three additional things be
included in the report:
* a discussion of the amount of actual erroneous payments that the
agency expects to recover and how it will go about recovering them;
* a description of any statutory or regulatory barriers that may limit
the agency's corrective actions in reducing erroneous payments; and:
* provided the agency has estimated a baseline erroneous payment rate
for the program, a target for the program's future erroneous payment
rate that is lower than the agency's most recent estimated error rate.
On July 22, 2004, OMB, working with the CFO Council's Improper Payments
Committee, issued a standardized reporting format, or framework, for
reporting IPIA information. This framework was included as Attachments
2 and 3 to OMB Memorandum M-04-20, "Fiscal Year 2004 Performance and
Accountability (PAR) and Reporting Requirements for the Financial
Report of the United States Government." To satisfy the reporting
requirements of the IPIA for fiscal year 2004, the framework instructed
agencies to provide a brief summary of both what they have accomplished
and what they plan to accomplish in the MD&A portion of the fiscal year
2004 PAR. All other required reporting details are to be included in an
appendix to the PAR. The framework for the information reported in the
appendix incorporates the requirements set forth in the law and further
illustrates the reporting format required in OMB's implementation
guidance. Under accelerated financial reporting requirements of the
PMA, agency fiscal year 2004 PARs were due November 15, 2004.
Accordingly, the first set of reports representing the results of
agencies' assessing improper payments for all federal programs in
accordance with the IPIA and OMB guidance were due in November 2004.
In August 2004, OMB established Eliminate Improper Payments as a new
program-specific initiative.[Footnote 8] With this new program
initiative, agencies are to measure their improper payments annually,
develop improvement targets and corrective actions, and track the
results annually to ensure the corrective actions are effective. This
initiative is also to have its own scorecard requirements and rating
beginning with fiscal year 2005. With the establishment of this new
program-specific initiative, agency efforts to address improper payment
issues will no longer be tracked under the governmentwide initiative,
Improved Financial Performance.
In our December 2004 report on the U.S. government's consolidated
financial statements for the fiscal years ended September 30, 2004 and
2003, which includes our associated opinion on internal control, we
reported that while most agencies acknowledged the IPIA reporting
requirements in their PARs, they did not always indicate whether they
had completed agencywide assessments, and they did not estimate
improper payments for all of their susceptible[Footnote 9] programs.
Progress Made but Challenges Remain in Assessing Programs for Risk of
Significant Improper Payments:
In response to the new requirements of the IPIA, agencies overall made
progress in identifying programs susceptible to the risk of improper
payments. At the same time, our reviews of the fiscal year 2004 PARs
for 29 of 35 federal agencies[Footnote 10] that are significant to the
U.S. government's consolidated financial statements suggest that even
with the enhanced emphasis on improper payment reporting fueled by the
new legislation, certain agencies have not yet performed risk
assessments of all their programs. Appendix III lists the agencies
included in this review.
In its guidance on implementing the IPIA, OMB required agencies to
institute a systematic method of inventorying all programs and
activities and identifying those the agency believes are susceptible to
the risk of significant error. OMB further instructed agencies to
describe, in their PARs, the risk assessments performed.
We determined that 23 of the 29 agencies reviewed reported that they
had completed risk assessments for all programs and activities. Of the
15 agencies with prior reporting requirements under OMB Circular No. A-
11, 12 reported that they had performed comprehensive inventories and
assessed the risk of improper payments for all their programs and
activities. Three of the 15 agencies stated that their risk assessments
were not complete for all programs and activities. Of those 14 agencies
without prior reporting requirements, 11 agencies reported that they
had completed risk assessments for all programs and activities, whereas
3 agencies reported that they had not.
Recognizing weaknesses in agency risk assessments, three agency
auditors cited noncompliance with the IPIA in their annual auditor's
reports included in the agency PARs. For example, two agency auditors
each reported that their agency's risk assessment did not consider all
payment types or programs. Another auditor reported the agency did not
institute a systematic method of reviewing all programs and identifying
those it believed were susceptible to significant erroneous payments.
Magnitude of Improper Payments Is Still Unknown:
Once agencies have identified programs that may be susceptible to
significant improper payments, developing statistically valid estimates
of the amounts of improper payments for their programs and activities
has been a further challenge. Appendix IV lists the 29 agencies and 70
programs for which we reviewed fiscal year 2004 PARs for improper
payment reporting. In the 29 agency PARs included in our review, 17
agencies reported over $45 billion of improper payments in 41 programs.
This represented almost a $10 billion, or 27 percent, increase in the
dollar amount of improper payments reported by agencies in fiscal year
2003. However, we determined that this increase was primarily
attributable to changes in the method for estimating and reporting
improper payment amounts in the Department of Health and Human
Services' Medicare Program. The 24 agency programs with no prior
reporting requirements reported improper payment estimates that did not
significantly increase the governmentwide total.
As discussed earlier, OMB Circular No. A-11 has required certain
agencies to report selected improper payment information on 46 programs
to OMB beginning 3 years ago with their fiscal year 2003 budget
submissions. We found that for 34 of the programs, agencies reported
estimates in their fiscal year 2004 PARs or stated that improper
payment amounts were insignificant.
As shown in table 1, the governmentwide estimate did not include the
remaining 12 programs with total outlays of $248.7 billion in 2004.
This included some of the largest risk-susceptible federal programs,
such as the Department of Health and Human Services' Medicaid Program,
with outlays exceeding $175 billion annually, or the Department of
Education's Title I Program, with outlays of over $10 billion annually.
Table 1: Programs Required to Report under A-11 and Projected Year of
Improper Payment Estimates:
Program: Department of Agriculture-Agriculture Marketing and
Assistance;
Fiscal year 2004 outlays (in billions): $8.8;
Target fiscal year for estimate: 2005.
Program: Department of Health and Human Services-Foster Care-Title
IV-E;
Fiscal year 2004 outlays (in billions): $4.7;
Target fiscal year for estimate: 2005.
Program: Department of Health and Human Services-State Children's
Insurance Program;
Fiscal year 2004 outlays (in billions): $4.6;
Target fiscal year for estimate: 2005.
Program: Department of Health and Human Services-Child Care and
Development Fund;
Fiscal year 2004 outlays (in billions): $4.8;
Target fiscal year for estimate: 2005.
Program: Small Business Administration-7(a) Business Loan Program;
Fiscal year 2004 outlays (in billions): $.7;
Target fiscal year for estimate: 2005.
Program: Department of Health and Human Services-Medicaid;
Fiscal year 2004 outlays (in billions): $175.3;
Target fiscal year for estimate: 2006.
Program: Department of Agriculture-School Programs;
Fiscal year 2004 outlays (in billions): $8.4;
Target fiscal year for estimate: 2007.
Program: Department of Agriculture-Women, Infants, and Children
Program;
Fiscal year 2004 outlays (in billions): $4.8;
Target fiscal year for estimate: 2008.
Program: Department of Labor-Workforce Investment Act;
Fiscal year 2004 outlays (in billions): $3.1;
Target fiscal year for estimate: Did not report.
Program: Department of Education-Title I;
Fiscal year 2004 outlays (in billions): $10.3;
Target fiscal year for estimate: Did not report.
Program: Department of Health and Human Services-Temporary Assistance
for Needy Families;
Fiscal year 2004 outlays (in billions): $17.7;
Target fiscal year for estimate: Did not report.
Program: Department of Housing and Urban Development-Community
Development Block Grant;
Fiscal year 2004 outlays (in billions): $5.5;
Target fiscal year for estimate: Did not report.
Total;
Fiscal year 2004 outlays (in billions): $248.7;
Target fiscal year for estimate: 2005: 5;
Target fiscal year for estimate: 2006: 1;
Target fiscal year for estimate: 2007: 1;
Target fiscal year for estimate: 2008: 1;
Did not report: 4.
Sources: Cited agencies' fiscal year 2004 PARs and OMB.
[End of table]
The table further shows that of these 12 programs, 8 reported that they
would be able to estimate and report on improper payments sometime
within the next 4 years, but could not do so now. The other 4 programs
in 4 agencies did not estimate improper payment amounts for their
programs and were silent as to whether they would report estimates in
future reports. As a result, improper payments for several large risk-
susceptible programs will not become transparent for several or an
undetermined number of years, although these agencies were required to
report such information since their fiscal year 2003 budget
submissions. Moreover, by only looking at those agencies significant to
the U.S. consolidated financial statements, this estimate does not
include all of the agencies subject to the IPIA.
OMB reported that in certain risk-susceptible programs, agencies were
unable to determine the rate or amount of improper payments due to
measurement challenges as well as time and resource constraints, which
OMB expects to be resolved in the future. Although OMB reported that
the $45 billion in improper payments will be used as a baseline on
which short-and long-term program improvements and strategies will be
based, it recognizes that fiscal year 2005 reductions in improper
payments will be affected by outlay changes as well as the
identification of new improper payments as additional programs are
measured and methodologies for currently measured programs are
enhanced.
Conclusions:
Measuring improper payments and designing and implementing actions to
reduce or eliminate them are not simple tasks. The ultimate success of
the governmentwide effort to reduce improper payments depends, in part,
on each federal agency's continuing diligence and commitment to comply
fully with the requirements of the act and the related OMB guidance.
The level of importance each agency, the administration, and the
Congress place on the efforts to implement the act will determine its
overall effectiveness and the level to which agencies reduce improper
payments and ensure that federal funds are used efficiently and for
their intended purposes. Without such efforts, the likelihood of
designing and implementing actions governmentwide to reduce or
eliminate improper payments is doubtful. Fulfilling the requirements of
the IPIA will require sustained attention to implementation and
oversight to monitor whether desired results are being achieved.
Recommendations for Executive Action:
We are making three recommendations to help ensure the successful
implementation of the Improper Payments Information Act of 2002 and its
goal of enhancing the accuracy and integrity of federal payments.
Specifically, we recommend that the Director of OMB:
* Require those agencies that did not address the IPIA requirements or
did not perform risk assessments of all of their programs and
activities to establish time frames and identify resources needed to
perform risk assessments and satisfy reporting requirements.
* Develop a plan to address the resource needs of those agencies that
did not perform risk assessments or satisfy reporting requirements.
* Consider as part of the budget process, for any agency that OMB deems
to have not taken the IPIA requirements seriously or that has lagged
behind, the feasibility of disincentives for poor performance, such as
reductions in funds for the program involved or adding incentives such
as gain sharing for making substantive progress.
Agency Comments and Our Evaluation:
In its written comments on a draft of this report, which are enclosed
in appendix V, OMB emphasized that in fiscal year 2004, federal
agencies established a strong foundation for measuring improper
payments, identifying and implementing the necessary corrective
actions, and tracking success over time. OMB's response further
discussed key findings included in its report, Improving the Accuracy
and Integrity of Federal Payments, which was issued on January 25,
2005.
With regard to our first recommendation that agencies establish time
frames and identify resources needed to perform risk assessments and
satisfy reporting requirements, OMB stated that pursuant to the PMA
initiative called Eliminate Improper Payments, federal agencies are
already required to submit relevant time frames and account for the
resources necessary to complete planned actions. Further, OMB stated
that the remaining risk assessments to be completed correlate to
programs with relatively small outlays. While we view the PMA
initiative as a positive action, it applies to 15 agencies, 3 of which
we found had not yet assessed all their programs. Three other agencies-
-the Farm Credit System Insurance Corporation, the National Credit
Union Administration, and the Pension Benefit Guaranty Corporation--
which are not included in the PMA initiative and therefore are not
required to establish time frames and account for needed resources,
have outlays that are significant to the U.S. government's consolidated
financial statements and were silent with respect to IPIA requirements
in their fiscal year 2004 PARs. In addition to these three agencies,
the PMA initiative would also not cover those agencies that while not
significant to the U.S. government's consolidated financial statements,
are subject to the IPIA. Our recommendation is directed to the broader
range of agencies.
Regarding our second recommendation that OMB develop a plan to address
resource needs of agencies that did not perform risk assessments or
satisfy reporting requirements, OMB stated that agency plans for
addressing IPIA reporting requirements are closely considered in
identifying agency resource needs and preparing the President's Budget.
While we agree with OMB on that point, as discussed in our response to
OMB's comments on the first recommendation, certain agencies are not
required to submit plans that include time frames and resource needs to
OMB. As a result, resource needs may not be addressed in the budget
process.
With respect to our third recommendation that it consider using
incentives and disincentives, as applicable, for quick and timely
action for meeting the IPIA requirements, OMB offered the view that the
requirements of the PMA and inspector general reviews of agency IPIA
activities provide sufficient incentive for ensuring that agencies meet
the necessary requirements. We agree that these requirements will help
ensure that agencies take the IPIA seriously. Our recommendation is
directed at any agency that does not do so or agencies that may benefit
from incentives such as gain sharing to fund efforts to reduce improper
payments. Again, as discussed above, while the major 15 agencies are
covered by the PMA, 3 of these had not yet assessed all their programs
and a number of agencies not covered under the PMA initiative, but
significant to the U.S. government's consolidated financial statements,
were silent with respect to the IPIA requirements.
OMB's written comments and our evaluation of one comment not addressed
above are presented in appendix V.
As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
from its date. At that time, we will send copies of the report to
interested congressional committees. We will also be sending copies to
the Director of the Office of Management and Budget and the heads of
the agencies included in our scope of review. We will make copies
available to others upon request. In addition, the report will be
available at no charge on the GAO Web site at [Hyperlink,
http://www.gao.gov].
Should you or your staff have any questions on matters discussed in
this report, please contact me at (202) 512-6906 or [Hyperlink,
williamsm1@gao.gov]. Additional contacts and major contributors to this
report are provided in appendix VI.
Sincerely yours,
Signed by:
McCoy Williams,
Director, Financial Management and Assurance:
[End of section]
Appendixes:
Appendix I: Scope and Methodology:
This report is based on our review of agency fiscal year 2004
Performance and Accountability Reports (PAR). We reviewed the fiscal
year 2004 PARs of 29 of 35 agencies[Footnote 11] that are significant
to the U.S. government's consolidated financial statements to obtain
information on the status of their implementation of the Improper
Payments Information Act of 2002 (IPIA) and the related Office of
Management and Budget (OMB) implementation guidance. We paid particular
attention to the 15 agencies with prior improper payment reporting
requirements for 46 of their programs under OMB Circular No. A-11,
Section 57. A list of the agencies with prior reporting requirements is
presented in appendix II. In addition, we reviewed relevant agency
documents, including strategic plans, agency performance plans and
reports, agency audit reports, and reports from agency program
partners.[Footnote 12]
We completed reviews of fiscal year 2004 PARs for 29 agencies
identifying 70 key programs. Appendix III lists the agencies and
programs included in this review. To supplement our review and
analysis, we contacted agencies to clarify responses, requested
additional information, and updated the initial responses. We did not
determine the validity of representations made or the documentation
provided.
We performed our work in Washington, D.C., from November 2004 through
February 2005 in accordance with U.S. generally accepted government
auditing standards.
[End of section]
Appendix II: Agencies and Related Programs for Which OMB Circular No.
A-11 Required Erroneous Payment Information:
Agency: 1. Department of Agriculture;
Program or Activity: 1. Food Stamps.
Agency: 1. Department of Agriculture;
Program or Activity: 2. Commodity Loan Program.
Agency: 1. Department of Agriculture;
Program or Activity: 3. National School Lunch and Breakfast .
Agency: 1. Department of Agriculture;
Program or Activity: 4. Women, Infants, and Children.
Agency: 2. Department of Defense;
Program or Activity: 5. Military Retirement.
Agency: 2. Department of Defense;
Program or Activity: 6. Military Health Benefits.
Agency: 3. Department of Education;
Program or Activity: 7. Student Financial Assistance.
Agency: 3. Department of Education;
Program or Activity: 8. Title I.
Agency: 4. Department of Health and Human Services;
Program or Activity: 9. Head Start.
Agency: 4. Department of Health and Human Services;
Program or Activity: 10. Medicare.
Agency: 4. Department of Health and Human Services;
Program or Activity: 11. Medicaid.
Agency: 4. Department of Health and Human Services;
Program or Activity: 12. Temporary Assistance for Needy Families.
Agency: 4. Department of Health and Human Services;
Program or Activity: 13. Foster Care-Title IV-E.
Agency: 4. Department of Health and Human Services;
Program or Activity: 14. State Children's Insurance Program.
Agency: 4. Department of Health and Human Services;
Program or Activity: 15. Child Care and Development Fund.
Agency: 5. Department of Housing and Urban Development;
Program or Activity: 16. Low Income Public Housing.
Agency: 5. Department of Housing and Urban Development;
Program or Activity: 17. Section 8 Tenant Based.
Agency: 5. Department of Housing and Urban Development;
Program or Activity: 18. Section 8 Project Based.
Agency: 5. Department of Housing and Urban Development;
Program or Activity: 19. Community Development Block Grants .
Agency: 6. Department of Labor;
Program or Activity: 20. Unemployment Insurance.
Agency: 6. Department of Labor;
Program or Activity: 21. Federal Employee Compensation Act.
Agency: 6. Department of Labor;
Program or Activity: 22. Workforce Investment Act.
Agency: 7. Department of the Treasury;
Program or Activity: 23. Earned Income Tax Credit.
Agency: 8. Department of Transportation;
Program or Activity: 24. Airport Improvement Program.
Agency: 8. Department of Transportation;
Program or Activity: 25. Highway Planning and Construction.
Agency: 8. Department of Transportation;
Program or Activity: 26. Federal Transit-Capital Investment Grants.
Agency: 8. Department of Transportation;
Program or Activity: 27. Federal Transit-Formula Grants.
Agency: 9. Department of Veterans Affairs;
Program or Activity: 28. Compensation.
Agency: 9. Department of Veterans Affairs;
Program or Activity: 29. Dependency and Indemnity Compensation.
Agency: 9. Department of Veterans Affairs;
Program or Activity: 30. Pension.
Agency: 9. Department of Veterans Affairs;
Program or Activity: 31. Insurance Programs.
Agency: 10. Environmental Protection Agency;
Program or Activity: 32. Clean Water State Revolving Funds.
Agency: 10. Environmental Protection Agency;
Program or Activity: 33. Drinking Water State Revolving Funds.
Agency: 11. National Science Foundation;
Program or Activity: 34. Research and Education Grants and Cooperative
Agreements.
Agency: 12. Office of Personnel Management;
Program or Activity: 35. Retirement Program (Civil Service Retirement
Systems and Federal Employees Retirement System).
Agency: 12. Office of Personnel Management;
Program or Activity: 36. Federal Employees Health Benefits Program.
Agency: 12. Office of Personnel Management;
Program or Activity: 37. Federal Employees' Group Life Insurance.
Agency: 13. Railroad Retirement Board;
Program or Activity: 38. Retirement and Survivors Benefits.
Agency: 13. Railroad Retirement Board;
Program or Activity: 39. Railroad Unemployment Insurance Benefits.
Agency: 14. Small Business Administration;
Program or Activity: 40. (7a) Business Loan Program.
Agency: 14. Small Business Administration;
Program or Activity: 41. 504 Certified Development Companies.
Agency: 14. Small Business Administration;
Program or Activity: 42. Disaster Assistance.
Agency: 14. Small Business Administration;
Program or Activity: 43. Small Business Investment Companies.
Agency: 15. Social Security Administration;
Program or Activity: 44. Old Age and Survivors' Insurance.
Agency: 15. Social Security Administration;
Program or Activity: 45. Disability Insurance.
Agency: 15. Social Security Administration;
Program or Activity: 46. Supplemental Security Income Program.
Source: GAO.
[End of table]
[End of section]
Appendix III: Agencies and Related Programs Included in Our Review of
Fiscal Year 2004 PARs:
Agency: 1. Agency for International Development;
Program or activity: 1. All programs and activities.
Agency: 2. Department of Agriculture;
Program or activity: 2. Marketing Assistance Loan Program (previously
Commodity Loan Program).
Agency: 2. Department of Agriculture;
Program or activity: 3. Food Stamp Program.
Agency: 2. Department of Agriculture;
Program or activity: 4. School Programs.
Agency: 2. Department of Agriculture;
Program or activity: 5. Women, Infants, and Children.
Agency: 2. Department of Agriculture;
Program or activity: 6. Child and Adult Care Food Program.
Agency: 2. Department of Agriculture;
Program or activity: 7. Wildland Fire Suppression Management.
Agency: 2. Department of Agriculture;
Program or activity: 8. Rental Assistance Program.
Agency: 2. Department of Agriculture;
Program or activity: 9. Federal Crop Insurance Corporation.
Agency: 2. Department of Agriculture;
Program or activity: 10. Farm Security and Rural Investment.
Agency: 3. Department of Commerce;
Program or activity: 11. All programs and activities.
Agency: 4. Department of Defense;
Program or activity: 12. Military Retirement Fund.
Agency: 4. Department of Defense;
Program or activity: 13. Military Health Benefits.
Agency: 5. Department of Education;
Program or activity: 14. Student Financial Assistance.
Agency: 5. Department of Education;
Program or activity: 15. Title I.
Agency: 6. Department of Energy;
Program or activity: 16. Payroll and Vendor Payments.
Agency: 7. Environmental Protection Agency;
Program or activity: 17. Clean Water State Revolving Funds.
Agency: 7. Environmental Protection Agency;
Program or activity: 18. Drinking Water State Revolving Fund.
Agency: 8. Farm Credit System Insurance Corporation;
Program or activity: 19. All programs and activities.
Agency: 9. Federal Communications Commission;
Program or activity: 20. Universal Service Fund‘s Schools and
Libraries.
Agency: 9. Federal Communications Commission;
Program or activity: 21. High Cost Support Programs.
Agency: 10. General Services Administration;
Program or activity: 22. All programs and activities.
Agency: 11. Department of Health and Human Services;
Program or activity: 23. Medicaid.
Agency: 11. Department of Health and Human Services;
Program or activity: 24. Medicare.
Agency: 11. Department of Health and Human Services;
Program or activity: 25. Head Start.
Agency: 11. Department of Health and Human Services;
Program or activity: 26. Temporary Assistance for Needy Families.
Agency: 11. Department of Health and Human Services;
Program or activity: 27. Foster Care”Title IV-E.
Agency: 11. Department of Health and Human Services;
Program or activity: 28. State Children‘s Insurance Program.
Agency: 11. Department of Health and Human Services;
Program or activity: 29. Child Care and Development Fund.
Agency: 12. Department of Homeland Security;
Program or activity: 30. All programs and activities.
Agency: 13. Department of Housing and Urban Development;
Program or activity: 31. Low Income Public Housing.
Agency: 13. Department of Housing and Urban Development;
Program or activity: 32. Section 8 Tenant Based.
Agency: 13. Department of Housing and Urban Development;
Program or activity: 33. Section 8 Project Based.
Agency: 13. Department of Housing and Urban Development;
Program or activity: 34. Community Development Block Grant (Entitlement
Grants, States/Small Cities).
Agency: 13. Department of Housing and Urban Development;
Program or activity: 35. FHA Single Family Acquired Asset Management
System.
Agency: 14. Department of the Interior;
Program or activity: 36. All programs and activities.
Agency: 15. Department of Justice;
Program or activity: 37. All programs and activities.
Agency: 16. Department of Labor;
Program or activity: 38. Unemployment Insurance.
Agency: 16. Department of Labor;
Program or activity: 39. Federal Employees‘ Compensation Act.
Agency: 16. Department of Labor;
Program or activity: 40. Workforce Investment Act.
Agency: 17. National Aeronautics and Space Administration;
Program or activity: 41. All programs and activities.
Agency: 18. National Credit Union Administration;
Program or activity: 42. All programs and activities.
Agency: 19. National Science Foundation;
Program or activity: 43. Research and Education Grants and Cooperative
Agreements.
Agency: 20. Nuclear Regulatory Commission;
Program or activity: 44. All programs and activities.
Agency: 21. Office of Personnel Management;
Program or activity: 45. Retirement Program (Civil Service Retirement
System and Federal Employees Retirement System).
Agency: 21. Office of Personnel Management;
Program or activity: 46. Federal Employees Health Benefits Program.
Agency: 21. Office of Personnel Management;
Program or activity: 47. Federal Employees Group Life Insurance.
Agency: 22. Pension Benefit Guaranty Corporation;
Program or activity: 48. All programs and activities.
Agency: 23. Railroad Retirement Board;
Program or activity: 49. Retirement and Survivors Benefits.
Agency: 23. Railroad Retirement Board;
Program or activity: 50. Railroad Unemployment Insurance Benefits.
Agency: 24. Small Business Administration;
Program or activity: 51. 7(a) Business Loan Program.
Agency: 24. Small Business Administration;
Program or activity: 52. 504 Certified Development Companies.
Agency: 24. Small Business Administration;
Program or activity: 53. Disaster Assistance.
Agency: 24. Small Business Administration;
Program or activity: 54. Small Business Investment Companies.
Agency: 25. Social Security Administration;
Program or activity: 55. Old Age and Survivors‘ Insurance.
Agency: 25. Social Security Administration;
Program or activity: 56. Disability Insurance.
Agency: 25. Social Security Administration;
Program or activity: 57. Supplemental Security Income Program.
Agency: 26. Department of State;
Program or activity: 58. International Narcotic and Law Enforcement
Affairs-Narcotics Program.
Agency: 26. Department of State;
Program or activity: 59. International Information Program-U.S. Speaker
and Specialist Program.
Agency: 26. Department of State;
Program or activity: 60. Vendor Payments.
Agency: 27. Department of Transportation;
Program or activity: 61. Airport Improvement Program.
Agency: 27. Department of Transportation;
Program or activity: 62. Highway Planning and Construction.
Agency: 27. Department of Transportation;
Program or activity: 63. Federal Transit”Capital Investment Grants.
Agency: 27. Department of Transportation;
Program or activity: 64. Federal Transit”Formula Grants.
Agency: 28. Department of the Treasury;
Program or activity: 65. Earned Income Tax Credit.
Agency: 29. Department of Veterans Affairs;
Program or activity: 66. Compensation.
Agency: 29. Department of Veterans Affairs;
Program or activity: 67. Dependency and Indemnity Compensation.
Agency: 29. Department of Veterans Affairs;
Program or activity: 68. Education Programs.
Agency: 29. Department of Veterans Affairs;
Program or activity: 69. Pension.
Agency: 29. Department of Veterans Affairs;
Program or activity: 70. Insurance Programs.
Source: GAO.
[End of table]
[End of section]
Appendix IV: Improper Payment Estimates Reported in Agency Fiscal Years
2003 and 2004 PARs:
Agency: 1. Agency for International Development;
Program or activity: 1. All programs and activities;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: Yes;
Will estimate within the next 6 years: No.
Agency: 2. Department of Agriculture;
Program or activity: 2. Marketing Assistance Loan Program (previously
Commodity Loan Program);
Improper payments reported: 2003: (in millions): $153.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Yes.
Agency: 2. Department of Agriculture;
Program or activity: 3. Food Stamp Program;
Improper payments reported: 2003: (in millions): $1,419.0[A];
Improper payments reported: 2004: (in millions): $1,613.4;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 2. Department of Agriculture;
Program or activity: 4. School Programs;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Yes.
Agency: 2. Department of Agriculture;
Program or activity: 5. Women, Infants, and Children;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Yes.
Agency: 2. Department of Agriculture;
Program or activity: 6. Child and Adult Care Food Program;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: No;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Yes.
Agency: 2. Department of Agriculture;
Program or activity: 7. Wildland Fire Suppression Management;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: No;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Yes.
Agency: 2. Department of Agriculture;
Program or activity: 8. Rental Assistance Program;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0[B];
A-11: No;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Unknown.
Agency: 2. Department of Agriculture;
Program or activity: 9. Federal Crop Insurance Corporation;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $125.0;
A-11: No;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 2. Department of Agriculture;
Program or activity: 10. Farm Security and Rural Investment;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0[B];
A-11: No;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Unknown.
Agency: 3. Department of Commerce;
Program or activity: 11. All programs and activities;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: Yes;
Will estimate within the next 6 years: No.
Agency: 4. Department of Defense;
Program or activity: All programs and activities;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 4. Department of Defense;
Program or activity: 12. Military Retirement Fund;
Improper payments reported: 2003: (in millions): $33.1;
Improper payments reported: 2004: (in millions): $34.1;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 4. Department of Defense;
Program or activity: 13. Military Health Benefits;
Improper payments reported: 2003: (in millions): $33.2[A];
Improper payments reported: 2004: (in millions): $100.1;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 5. Department of Education;
Program or activity: All programs and activities;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 5. Department of Education;
Program or activity: 14. Student Financial Assistance;
Improper payments reported: 2003: (in millions): $482.5;
Improper payments reported: 2004: (in millions): $797.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 5. Department of Education;
Program or activity: 15. Title I;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0[B];
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Unknown.
Agency: 6. Department of Energy;
Program or activity: 16. All programs and activities;
Improper payments reported: 2003: (in millions): $13.7[A];
Improper payments reported: 2004: (in millions): $20.3;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 7. Environmental Protection Agency;
Program or activity: 17. Clean Water State Revolving Funds;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $10.3;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 7. Environmental Protection Agency;
Program or activity: 18. Drinking Water State Revolving Funds;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0[C];
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 8. Farm Credit System Insurance Corporation[D];
Program or activity: 19. All programs and activities;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: No;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Unknown.
Agency: 9. Federal Communications Commission;
Program or activity: All programs and activities;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 9. Federal Communications Commission;
Program or activity: 20. Universal Service Fund's Schools and
Libraries;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: No;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: Yes;
Will estimate within the next 6 years: No.
Agency: 9. Federal Communications Commission;
Program or activity: 21. High Cost Support Programs;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: No;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: Yes;
Will estimate within the next 6 years: No.
Agency: 10. General Services Administration;
Program or activity: 22. All programs and activities;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: Yes;
Will estimate within the next 6 years: No.
Agency: 11. Department of Health and Human Services;
Program or activity: All programs and activities;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 11. Department of Health and Human Services;
Program or activity: 23. Medicaid;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Yes.
Agency: 11. Department of Health and Human Services;
Program or activity: 24. Medicare;
Improper payments reported: 2003: (in millions): $11,600.0;
Improper payments reported: 2004: (in millions): $21,700.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 11. Department of Health and Human Services;
Program or activity: 25. Head Start;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $255.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 11. Department of Health and Human Services;
Program or activity: 26. Temporary Assistance for Needy Families;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0[B];
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Unknown.
Agency: 11. Department of Health and Human Services;
Program or activity: 27. Foster Care--Title IV-E;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Yes.
Agency: 11. Department of Health and Human Services;
Program or activity: 28. State Children's Insurance Program;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Yes.
Agency: 11. Department of Health and Human Services;
Program or activity: 29. Child Care and Development Fund;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Yes.
Agency: 12. Department of Homeland Security;
Program or activity: 30. All programs and activities;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: Yes;
Will estimate within the next 6 years: No.
Agency: 13. Department of Housing and Urban Development;
Program or activity: All programs and activities;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 13. Department of Housing and Urban Development;
Program or activity: 31. Low Income Public Housing;
Improper payments reported: 2003: (in millions): $650.0;
Improper payments reported: 2004: (in millions): $356.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 13. Department of Housing and Urban Development;
Program or activity: 32. Section 8 Tenant Based;
Improper payments reported: 2003: (in millions): $1,215.0;
Improper payments reported: 2004: (in millions): $840.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 13. Department of Housing and Urban Development;
Program or activity: 33. Section 8 Project Based;
Improper payments reported: 2003: (in millions): $662.0;
Improper payments reported: 2004: (in millions): $511.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 13. Department of Housing and Urban Development;
Program or activity: 34. Community Development Block Grant (Entitlement
Grants, States/Small Cities);
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0[B];
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Unknown.
Agency: 13. Department of Housing and Urban Development;
Program or activity: 35. Federal Housing Administration's Single Family
Acquired Asset Management System;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $26.1;
A-11: No;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 14. Department of the Interior;
Program or activity: 36. All programs and activities;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: Yes;
Will estimate within the next 6 years: No.
Agency: 15. Department of Justice;
Program or activity: 37. All programs and activities;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: Yes;
Will estimate within the next 6 years: No.
Agency: 16. Department of Labor;
Program or activity: All programs and activities;
Improper payments reported: 2003: (in millions): $[Empty];
Improper payments reported: 2004: (in millions): $[Empty];
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 16. Department of Labor;
Program or activity: 38. Unemployment Insurance;
Improper payments reported: 2003: (in millions): $4,225.0;
Improper payments reported: 2004: (in millions): $3,861.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 16. Department of Labor;
Program or activity: 39. Federal Employees' Compensation Act;
Improper payments reported: 2003: (in millions): $9.1;
Improper payments reported: 2004: (in millions): $6.4;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 16. Department of Labor;
Program or activity: 40. Workforce Investment Act;
Improper payments reported: 2003: (in millions): $3.1;
Improper payments reported: 2004: (in millions): $0.0[B];
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Unknown.
Agency: 17. National Aeronautics and Space
Administration;
Program or activity: 41. All programs and activities;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: Yes;
Will estimate within the next 6 years: No.
Agency: 18. National Credit Union Administration[D];
Program or activity: 42. All programs and activities;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: No;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Unknown.
Agency: 19. National Science Foundation;
Program or activity: 43. Research and Education Grants and Cooperative
Agreements;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $4.4;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 20. Nuclear Regulatory Commission;
Program or activity: 44. All programs and activities;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: Yes;
Will estimate within the next 6 years: No.
Agency: 21. Office of Personnel Management;
Program or activity: All programs and activities;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 21. Office of Personnel Management;
Program or activity: 45. Retirement Program (Civil Service Retirement
System and Federal Employees Retirement System);
Improper payments reported: 2003: (in millions): $177.3;
Improper payments reported: 2004: (in millions): $197.7;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 21. Office of Personnel Management;
Program or activity: 46. Federal Employees Health Benefits Program;
Improper payments reported: 2003: (in millions): $28.2;
Improper payments reported: 2004: (in millions): $86.1;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 21. Office of Personnel Management;
Program or activity: 47. Federal Employees Group Life Insurance;
Improper payments reported: 2003: (in millions): $0.4;
Improper payments reported: 2004: (in millions): $2.1;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 22. Pension Benefit Guaranty Corporation[D];
Program or activity: 48. All programs and activities;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0;
A-11: No;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Unknown.
Agency: 23. Railroad Retirement Board;
Program or activity: All programs and activities;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 23. Railroad Retirement Board;
Program or activity: 49. Retirement and Survivors Benefits;
Improper payments reported: 2003: (in millions): $168.3;
Improper payments reported: 2004: (in millions): $172.8;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 23. Railroad Retirement Board;
Program or activity: 50. Railroad Unemployment Insurance Benefits;
Improper payments reported: 2003: (in millions): $2.8;
Improper payments reported: 2004: (in millions): $3.3;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 24. Small Business Administration;
Program or activity: All programs and activities;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 24. Small Business Administration;
Program or activity: 51. 7(a) Business Loan Program;
Improper payments reported: 2003: (in millions): $13.0;
Improper payments reported: 2004: (in millions): $0.0[B];
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: Yes.
Agency: 24. Small Business Administration;
Program or activity: 52. 504 Certified Development Companies;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.0[E];
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 24. Small Business Administration;
Program or activity: 53. Disaster Assistance;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $1.1;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 24. Small Business Administration;
Program or activity: 54. Small Business Investment Companies;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $129.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 25. Social Security Administration;
Program or activity: All programs and activities;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 25. Social Security Administration;
Program or activity: 55. Old Age and Survivors' Insurance;
Improper payments reported: 2003: (in millions): $600.0;
Improper payments reported: 2004: (in millions): $1,707.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 25. Social Security Administration;
Program or activity: 56. Disability Insurance;
Improper payments reported: 2003: (in millions): $340.0;
Improper payments reported: 2004: (in millions): $0.0[C];
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 25. Social Security Administration;
Program or activity: 57. Supplemental Security Income Program;
Improper payments reported: 2003: (in millions): $2,740.0;
Improper payments reported: 2004: (in millions): $2,639.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 26. Department of State;
Program or activity: All programs and activities;
Improper payments reported: 2003: (in millions): $[Empty];
Improper payments reported: 2004: (in millions): $[Empty];
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 25. Social Security Administration;
Program or activity: 58. International Narcotic and Law Enforcement
Affairs-Narcotics Program;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $1.7;
A-11: No;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 25. Social Security Administration;
Program or activity: 59. International Information Program-U.S. Speaker
and Specialist Program;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $1.4;
A-11: No;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 25. Social Security Administration;
Program or activity: 60. Vendor Payments;
Improper payments reported: 2003: (in millions): $0.0;
Improper payments reported: 2004: (in millions): $0.8;
A-11: No;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 27. Department of Transportation;
Program or activity: All programs and activities;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 27. Department of Transportation;
Program or activity: 61. Airport Improvement Program;
Improper payments reported: 2003: (in millions): $14.0;
Improper payments reported: 2004: (in millions): $0.0[F];
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 27. Department of Transportation;
Program or activity: 62. Highway Planning and Construction;
Improper payments reported: 2003: (in millions): $1.4;
Improper payments reported: 2004: (in millions): $0.0[E];
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 27. Department of Transportation;
Program or activity: 63. Federal Transit--Capital Investment Grants;
Improper payments reported: 2003: (in millions): $32.0;
Improper payments reported: 2004: (in millions): $0.0[E];
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 27. Department of Transportation;
Program or activity: 64. Federal Transit--Formula Grants;
Improper payments reported: 2003: (in millions): $64.0;
Improper payments reported: 2004: (in millions): $0.0[E];
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 28. Department of the Treasury;
Program or activity: All programs and activities;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 28. Department of the Treasury;
Program or activity: 65. Earned Income Tax Credit;
Improper payments reported: 2003: (in millions): $10,500.0;
Improper payments reported: 2004: (in millions): $9,650.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 29. Department of Veterans Affairs;
Program or activity: All programs and activities;
A-11: No;
Agency reported it had assessed all programs: Yes;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 29. Department of Veterans Affairs;
Program or activity: 66. Compensation;
Improper payments reported: 2003: (in millions): $256.0[A];
Improper payments reported: 2004: (in millions): $238.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 29. Department of Veterans Affairs;
Program or activity: 67. Dependency and Indemnity Compensation;
Improper payments reported: 2003: (in millions): $0.0[C];
Improper payments reported: 2004: (in millions): $0.0[];
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 29. Department of Veterans Affairs;
Program or activity: 68. Education Programs;
Improper payments reported: 2003: (in millions): $52.0[A];
Improper payments reported: 2004: (in millions): $55.0;
A-11: No;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 29. Department of Veterans Affairs;
Program or activity: 69. Pension;
Improper payments reported: 2003: (in millions): $284.0;
Improper payments reported: 2004: (in millions): $262.0;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Agency: 29. Department of Veterans Affairs;
Program or activity: 70. Insurance Programs;
Improper payments reported: 2003: (in millions): $0.3;
Improper payments reported: 2004: (in millions): $0.4;
A-11: Yes;
Agency reported it had assessed all programs: No;
Programs that the agency reported were not susceptible to significant:
improper payments: No;
Will estimate within the next 6 years: No.
Totals;
Improper payments reported: 2003: (in millions): $35,772.4;
Improper payments reported: 2004: (in millions): $45,407.5;
A-11: 46;
Agency reported it had assessed all programs: 23;
Programs that the agency reported were not susceptible to significant:
improper payments: 10;
Will estimate within the next 6 years: 10.
Source: GAO's analysis of cited agencies' fiscal year 2004 PARs.
[A] Fiscal year 2003 estimates were updated to the revised estimates
reported in the fiscal year 2004 PARs.
[B] Agency did not report an annual improper payment estimate.
[C] Agency combined with the above program.
[D] Agency did not address improper payments or the IPIA requirements
for this program in its fiscal year 2004 PAR.
[E] Agency reported that its annual improper payment estimate was zero.
[F] Agency reported an annual improper payment estimate, but it was an
insignificant amount that rounded to zero for purposes of this table.
[End of table]
[End of section]
Appendix V: Comments from the Office of Management and Budget:
EXECUTIVE OFFICE OF THE PRESIDENT:
OFFICE OF MANAGEMENT AND BUDGET:
DEPUTY DIRECTOR FOR MANAGEMENT:
WASHINGTON, D.C. 20503:
MAR 25 2005:
Mr. McCoy Williams:
Director:
Financial Management and Assurance:
Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Williams:
Thank you for the opportunity to comment on the GAO draft report
entitled, "Financial Management: Challenges in Meeting Requirements of
the Improper Payments Information Act" (GAO-05-417).
Eliminating improper payments in the Federal Government continues to be
a central focus of this Administration. Through the government-wide
efforts to improve financial management under the President's
Management Agenda (PMA), as well as the new PMA Eliminating Improper
Payments initiative in particular, we are striving to eliminate
improper payments within all agency programs and activities. GAO
remains an integral partner in this endeavor, and we appreciate the
ongoing feedback and guidance that you have provided.
In Fiscal Year (FY) 2004, Federal agencies established a strong
foundation for measuring improper payments, identifying and
implementing the necessary corrective actions, and tracking success
over time. These agency efforts are detailed in the OMB report,
Improving the Accuracy and Integrity of Federal Payments, which was
issued on January 25, 2005. The report on improper payments represents
a critical step in meeting the goals of the Improper Payments
Information Act (IPIA) of 2002, as it establishes a baseline from which
short-and long-term program improvement strategies and priorities will
be based.
Several of the key findings of the OMB report include the following:
* Federal agencies determined that 60% of all Federal outlays in FY
2004 ($1.4 trillion out of $2.3 trillion) were risk susceptible for a
significant level of improper payments;
* Federal agencies were able to establish improper payment rates (and
amounts) for programs that account for more than 80% of risk
susceptible dollars;
* Seven programs alone account for approximately 95% of the improper
payments reported in FY 2004; and:
* The improper payments total reported in FY 2004 is expected to
decline when reported in FY 2005, based on agency established reduction
targets supported by process and control improvements to the payment
process.
This OMB report may be found at
http://www.whitehouse.gov/omb/financial/fia/ipia_gov-wide_report.pdf
With regard to the GAO draft report, OMB has the following comments:
* OMB recognizes that a small number of risk assessments are not
complete and that improper payment measurements are needed for certain
programs. However, it is important to note that the remaining risk
assessments to be completed:
correlate to programs with relatively small outlay amounts that, if
found to be risk susceptible, are not expected to add significantly to
the government-wide total. Moreover, Federal agencies reported an
improper payment amount for 80% of risk susceptible dollars. Once an
improper payment amount is reported for Medicaid-which is expected to
begin with the FY 2005 reporting cycle-Federal agencies will then be
reporting an improper payment amount for 94% of risk susceptible
dollars.
* While improved detection methods may raise the government-wide
improper payments estimate in future years, OMB notes that Federal
agencies are actively implementing control and process improvements. It
is expected that these actions will result in corresponding reductions
for those improper payments already identified.
* Pursuant to the PMA Eliminating Improper Payments initiative, Federal
agencies are currently required to submit completed risk assessments
and error measurement plans for OMB review and approval. Such
deliverables must include relevant timeframes and account for the
resources necessary to complete planned actions. Agency plans for
addressing IPIA reporting requirements are closely considered in
identifying agency resource needs and preparing the President's Budget.
* While it is recommended that OMB consider using disincentives (such
as reduced program funding) in cases where agencies fail to meet IPIA
reporting requirements, the requirements of the PMA, in addition to the
Inspector General review of agency IPIA activities, currently provide
sufficient incentive for ensuring that agencies meet the necessary
requirements.
* OMB notes that the Environmental Protection Agency and the National
Science Foundation completed risk assessments in FY 2004.
OMB will continue to work with Federal agencies, as well as the Chief
Financial Officer's Council, to direct the necessary attention and
resources toward efforts to eliminate improper payments.
Thank you for the opportunity to review and comment on your draft
report on this important issue.
Sincerely,
Signed by:
Clay Johnson III:
The following is GAO's comment on OMB's letter dated March 25, 2005.
GAO Comment:
1. In our review of these agencies' fiscal year 2004 PARs, we
determined that assessments were not completed for all programs and
activities.
[End of section]
Appendix VI: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Carla Lewis, (202) 512-6915;
Alana Stanfield, (202) 512-3197:
Acknowledgments:
In addition to those named above, Lisa Crye, Bonnie McEwan, and Donell
Ries made important contributions to this report.
(195060):
FOOTNOTES
[1] Pub. L. No. 107-300, 116 Stat. 2350 (Nov. 26, 2002).
[2] OMB Memorandum M-03-13, "Improper Payments Information Act of 2002
(Public Law 107-300)," May 21, 2003.
[3] Section 57 was eliminated from OMB Circular No. A-11. See OMB
Circular No. A-11, Transmittal Memorandum #77, July 25, 2003. App. I
lists the 15 agencies and 46 programs previously cited in Section 57.
[4] GAO, Financial Management: Fiscal Year 2003 Performance and
Accountability Reports Provide Limited Information on Governmentwide
Improper Payments, GAO-04-631T (Washington, D.C.: Apr. 15, 2004).
[5] See Treasury Financial Manual, vol. 1, part 2, ch. 4700, for a list
of the 35 agencies. Six of the 35 agencies had not issued PARs as of
our fiscal year 2004 audit report on the U.S. government's consolidated
financial statements, dated December 14, 2004; therefore, these
agencies were not included in our review.
[6] OMB's guidance uses the term erroneous payments rather than
improper payments. We consider the terms synonymous.
[7] The law defines "payment" as any payment (including a commitment
for future payment, such as a loan guarantee) that is (1) made by a
federal agency, a federal contractor, or a governmental or other
organization administering a federal program or activity and (2)
derived from federal funds or other federal resources or that will be
reimbursed from federal funds or other federal resources. The law
defines an "improper payment" as (1) any payment that should not have
been made or that was made in an incorrect amount (including
overpayments and underpayments) under statutory, contractual,
administrative, or other legally applicable requirements and (2) any
payment to an ineligible recipient, any payment for an ineligible
service, any duplicate payment, payment for services not received, and
any payment that does not account for credit for applicable discounts.
[8] The PMA issued in 2001 included nine program initiatives, including
reform of food aid programs. When OMB issued this August 2004 report to
federal employees, the reform of food aid program initiative was the
only initiative not carried forward from the 2001 PMA. OMB also added
two new program initiatives--(1) Strengthen Real Property Management
and Optimize the Use of Federal Property and (2) Eliminate Improper
Payments. As a result to these changes, 10 program-specific initiatives
are currently in place under the PMA.
[9] In determining which programs are susceptible to significant
improper payments, OMB defines significant erroneous payments as those
annual erroneous payments in a program exceeding both 2.5 percent of
program payments and $10 million.
[10] See Treasury Financial Manual, vol. 1, part 2, ch. 4700, for a
list of the 35 agencies.
[11] See Treasury Financial Manual, vol. 1, part 2, ch. 4700, for a
list of the 35 agencies. Six of the 35 agencies had not issued PARs as
of our fiscal year 2004 audit report on the U.S. government's
consolidated financial statements, dated December 14, 2004; therefore,
these agencies were not included in our review.
[12] Program partners can include other agencies or intermediaries
responsible for carrying out different aspects of the program and might
include federal agencies, states or localities, grant recipients,
participating financial institutions, regulated bodies, and
contractors.
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